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Robert Murray Haig.

The exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York online

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The statement does not take into account the financial operations of the
publid utilities. It will be noted that the debt service for the general and
local improvement debt alone cost the city $730,992.56 in 1913.

REVENUE ACCOUNT FOR YEAR ENDED DECEMBER 31, 1913

Receipts

General Assessment $2,498,1^ 68

Less Cancellations $9,954 35

Discount 203,057 62 213,011 97

$2,285,169 71

Local Improvement Assessment $387,207 87

Less Water Frontage Assessment 90,475 45

296,732 42

Fees —

Sundry licenses $83,706 65

Poll tax 11,375 40

Market and Pound 8,745 95

Building Permits '. 4,796 71

Plumbing Permits 3,219 10

Electric Wiring Permits 7,458 38

Isolation Hospital 10,908 75

Miscellaneous 12,464 ZZ

142,675 27

Miscellaneous 56,593 28



$2,781,170 68



112

Expenditures

General Executive and Finance $194,137 90

Public Works Department 335*729 87

Publicity Department \2,^7 03

Miscellaneous 734,640 81

^ $1,276,915 61

Grants —

Public Schools $350,000 00

Separate Schools 40,779 00

Public Library 20^000 00

Holy Cross Hospital 14,706 75

General Hospital 26,761 15

'■ 452,246 90

Bank Interest 86,608 39

Debenture Charges —

General Interest $256,240 75

Sinking Fund 175,365 93

Local Improvements, Interest 171,016 07

Local Improvements, Sinking Fund 128,369 81

. 730,992 56

Miscellaneous 56,589 32

$2,603,352 78
Surplus carried to Net Revenue Account 177,817 90



$2,781,170 68



Section 166 of the city charter provides that the indebtedness of the
city shall be limited to " twenty per cent, of the value of the property in the
city according to the revised assessment roll." But this limitation does
not apply to debt incurred for school purposes or for local improvements.
This section is so interpreted as to involve the reduction of the borrowing
power of the city when the assessment of buildings is diminished. The city
debt has increased enormously during the last few years. From the state-
ment which follows it will be seen that the outstanding debentures in 1913
were nearly twenty times the amount outstanding in 1905. The greatest
increase was made in 1912 when the indebtedness was practically doubled
within a year.

OUTSTANDING DEBENTURES, 1905-1913 (a)

Local
Improvements. Total.

1905 $176,126 00 $649,876 00

1906

1907 158,126 00 2,108,076 00

1908 360,126 00 2,814,076 00

1909 859,700 16 4,033,650 16

1910 1.205,952 86 6.069.902 86

1911 1,501.846 19 6.384,069 52

1912 3,042,929 80 11,482,095 85

1913 3,145,927 80 12,523,608 30

(a) The figures are for December 31st of each year.



113

The distribution of the debentures outstanding in 1913 was as follows:

General $4,226,467 89

Local Improvements 3,145,929 80

Electric Light and Power 1,307,000 00

Street Railway 1,530,210 61

Water Works 2,314,000 00

$12,523,608 30

Calgary has made considerable use of the plan of financing by short-
term notes. At the end of 1913 there were outstanding treasury bills to the
amount of $5,864,333.34.

The anual charge for interest and sinking fund occasioned by the total
debt amounted in 1913 to $1,065,771.40. The sinking fund accumulated for
the payment of the city debt had resources at the end of 1913 amounting to
$1,272,944.22. About half of this sum, $679,353.95, is invested in loans
secured by real estate in the city. Application is made to the finance com-
mittee of the council. It is the custom not to lend more than fifty per cent,
of the value of the property as determined by experts appointed by the
committee. The rate on these loans was formerly six per cent. As a rule
the loans made recently have been placed at seven per cent. The other
resources of the sinking funds are in the hands of the banks.

THE TAX SYSTEM

If the commercial ventures of the city be disregarded, Calgary may be ]
said to have received in 1913 more than four-fifths (82.2%) of its income /
from taxes on property— $2,285,169.71 out of a total income of $2,781,- V
170.68.(1) Local improvement assessments yielded $296,732.42, the greater /
part of the remainder. The income from the water frontage assessment
amounted to $90,475.45. Various licenses and fees yielded $131,299.87 and ,
a poll tax o f $3.00 upon a restricted class netted $11,375.40.

The system of taxation in Calgary has been subject to many changes
in recent years. Certain classes of personal property have always been
subject to taxation, but always undervalued one-third. Previous to 1911
an attempt was made to tax income, but the experiment resulted so unsatis-
factorily that in that year it was abandoned. An initial exemption of
$1,000 was allowed. Calgary has never had a business tax, but that part of
the personal property tax which falls upon stock-in-trade amounts to very
much the same thing. There is a movement on foot at present to substitute
a business tax apportioned on the rental basis for this part of the personal
property tax.

Before 1909 both land and buildings were assessed at approximately
one hundred per cent, of their value. The first discrimination in favor of
land seems to have been made in 1909, when buildings were assessed at
eighty per cent, of their value. In 1910, through action of the council, the
assessment of land was reduced to ninety per cent. The following year
lands continued to be assessed at ninety per cent., but the assessment of

(1) Almost nine-tenths (88.9%) of the property taxed consisted of land.



114

buildings dropped to fifty per cent. Authorization for the reduction of the
tax on buildings was secured through an amendment to the city charter. (1)
The amended section provided that buildings and improvements should be
assessed at fifty per cent, of their value with this proviso : " That the
council may by by-law provide that the said percentage of actual value at
which buildings and improvements are to be assessed shall be reduced each
year by at least ten per centum of such actual value until all such assess-
ments on buildings and improvements shall have been extinguished." Thus
Calgary was committed to a program of the total exemption of improve-
ments and it was confidently expected that the city would be entirely on a
single-tax basis within a few years. The council in 1912, however, instead
of reducing the assessment of buildings only ten per cent, struck off one-
half of the remaining value of buildings, bringing the assessment down to
twenty-five per cent., and at the same time raised the assessment on land
to one hundred per cent. In 1913, however, the council experienced a
change of heart. Instead of reducing the assessment on buildings still
lower, as they were bound to do by the terms of the charter, they held the
assessment of buildings at twenty-five per cent, and went to the legislature
for an amendment to the charter. The proposed charter amendment
did not meet with the entire approbation of the Liberal Government and
the measure which was finally passed (2) permitted Calgary to continue to
tax buildings and improvements at twenty-five per cent, for more than
one year, relieving the city of the compulsory ten per cent, annual
reduction. But the legislature insisted that if the tax on buildings and
improvements was to be increased, the consent of the majority of the rate-
payers must first be secured. (3)

Special assessments and frontage taxes are levied to pay part of the
cost of pavements, sidewalks, curbs and gutters, sewers and water mains.
The city pays from general sources one-half the cost of street improve-
ments and sewers, and in addition gives special aid to the owners of corner
lots. Sand and gravel are very reasonable in price at Calgary, as compared
with Regina and Saskatoon, but on the other hand considerable heavy
grading is necessary. The cost of a complete set of improvements to the
owner of a twenty-five-foot lot, in spite of the unusual share assumed by
the city, is not lower than in other cities, the annual charge being, at the
lowest, $17.90.

Before 1911 the charter of Calgary contained a provision which made
it impossible to assess agricultural lands within the city limits at more than
fifty dollars per acre. The definition of agricultural land was indefinite
and the clause operated to encourage the practice of holding large tracts
out of use for a rise in value. For example, one tract of seventy-five acres
about a mile and a half from the post office was claimed to be agricultural



(1) Statutes of Alberta, 1911, c. 63, s. 3 (charter, s. 29, sub. 9).

(2) Ibid., 1913, c. 35, s. 29.

(3) Ibid., c. 41, s. 5.



115

land because the owner used it as pasture for polo ponies. In 1911 the
legislature struck out the fifty-dollar valuation clause.

Calgary operates under a special charter granted in 1893 and amended
at various dates since. Section 38 of this charter states that all land and
personal property in the city shall be liable to taxation. The list of exemp-
tions, however, includes one-third of the value of all personal property
belonging to any person assessed.(l) Household effects are also exempt,
as is the property of churches, including land up to the limit of one-half an
acre, and, in part, the property of schools. (2) An attempt is made to list
all personal property except that specifically exempted; but the assessor
meets with little success in his efforts. The chief items which find their
way to the tax roll are automobiles and stock in trade. Stock is assessed
at its fair average value. A poll tax of three dollars is imposed tipon all
male inhabitants of the city between the ages of twenty-one and sixty
whose names do not appear upon the assessment rolls as being subject to
taxation on property amounting to at least $150. An application is now
(1914) before the legislature asking for the abolition of this tax.

The work of assessing property usually occupies from August to
December, but often the tax bills are not sent out until June, so that the
collections are not made until nearly a year after the property has been
assessed. The city council, acting as a court of revision, meets in January
or February. An appeal from the decision of the court of revision may be
had to a judge of the district court, whose decision is final. A loophole
for over-assessment seems to be provided by the charter clause which
reads : " No assessment shall be changed by the Court of Revision or Judge
which appears to be in practical uniformity in regard to value throughout
the city." (3) In case taxes on personal property are unpaid the property
may be seized by the sheriff, but in fact no personal property has ever been
sold for taxes. Land must be in arrears two years before it can be sold,
and for thirteen months and a day after the sale the land can be redeemed
upon the payment of the taxes and costs, plus ten per cent, interest. The
last tax sale was held in 1911.

The following table gives the assessed value of land, buildings, per-
sonal property, and income for a number of years back :

ASSESSED VALUE OF TAXABLE PROPERTY (a)

Percentage Percentage Percentage Total

of of Personal of Tax

Year. Land. Full Value. Buildings. Full Value. Property. Full Value. Income. Base.

1885 . . . . $386,863

1886 .. ..

1887 ..

1888 ..



(1) Charter, s. 38.

(2) Before 1914, a very liberal exemption was given to schools. An amendment
in that year required that the property "be exclusively used and occupied by the
school," and refused the exemption privilege to certain types of educational institu-
tions.

(3) Ibid., c. 33, s. 39 (1).



116







Percentage


Percentag


^


Percentage




Total






of




of


Personal


of




Tax


Year.


Land.


Full Value


Buildings.


Full Value


. Property.


Full Value.


Income.


Base.


1889..
















1,324,050


1890..
















1,821,000


1891..


$1,904,285


80%


with land


80%


with land




$7,456


1,911.735


1892..


2,454,504


"


"


"


$252,750


66 y%


33,300


2,740,554


1893..


2,153,190


"


"


"


257,000


78,500


2,488,690


1894..


1,733,106


**


$655,435


"


308,774






2,782,687


1895..


1,509,388


"


724.835


"


249,500






2,076,530


1896..


1,043,050


"


833,830


"


180,100




19,600


2.076.480


1897..


1,014,445


"


788,475


"


161,250




29,350


1,993.530


1898..


1,067,465


"


675,995


"


171,650




22,200


1,937,760


1899..


1,059.745


"


688.745


"


250,050




19,600


2,018,140


1900..


1,059,005


"


744,515


"


288,700




73,300


2,165,520


1901..


1,042,660


"


824,315


"


347,150




92,915


2,307.040


1902..


1,035,635


"


911,300


"


343,850




92,540


2,383,325


1903..


1,508,560


"


1,270,059


"


420,430




22,500


3,221,549


1904..


2,140,488


100%


1,436,399


100%


495,250




27,300


4,099,437


1905..


2,289,655


"


2,327,264


"


769,300




47,250


5,433,469


1906..


3,758,341


"


3,011,290


"


968,690




43,600


7,781,921


1907..


. • 7,861,171


"


3.716,575


"


1,263,700




51,050


12,892,496


1908..


10,282,068


"


6,060,485


"


1,550,875




48,250


17,941,678


1909..


12,597,808


"


5,612,935


80%


1,539,585




74,650


19,824,978


1910..


22,433,417


90%


5,747,315


"


2,469,360




146,000


30,796,092


1911..


40,924,800


80%


7,299,895


50%


4,522,905






52,747,600


1912.,


. 102,260,915


100%


5,203,405


25%


4,133,815






111,598,135


1913..


. 120,801,558


"


7,293,090


"


4,928,970






133,023,618


1914..


. 119,842,255




9.308,525




5,735,645






134,886,425



(a) The detailed figures for 1894-1898 are approximate only, the changes made
by the Court of Revision not being included. This explains the discrepancies between
the sums of the items and figures given as the " Total Tax Base."

The reduction of the tax on buildings in 1909, 1911 and 1912 did
not have the effect of decreasing the tax base. On the contrary, the tax base
shows a steady increase.

The assessor believes that the assessment of land closely approaches
its actual value. By actual value he has in mind a fairly conservative value.
Some real-estate men, however, feel that the " actual value " in the mind of
the assessor is considerably above the price which could be gotten in cash
to-day for land. One real-estate man cited three lots which were assessed
for $6,300 each which were offered for sale at $2,500. It was suggested
by one citizen that property near the center of the city was assessed at a dis-
proportionately high figure compared with the property in the outskirts.
It was his belief that the city does not care to take the risk of assessing this
remote property at the same proportion of its value because it is feared,
since much of the land is unoccupied, that the owners would give up
the property. The persons who have buildings on their lots, therefore, bear
a heavier share of the burden than would appear. If this is true, it would
of course operate to counterbalance to some extent the undervaluation of
buildings as compared with land.

The tax limit for general purposes in Calgary is twenty mills,(l) but
in addition the city has power to levy all necessary rates for interest, sinking
fund, debt, and school purposes. One mill may be levied for hospital pur-
poses. (2) Three-fourths of a mill may be levied for park purposes.



(1) Charter, s. 42.

(2) Statutes of Alberta, 1913, c. 35, s. 21.



117

The following table gives the tax rates levied annually for a number

of years :

TAX RATES.

(Mills)

Deben-
Total. General. School. Hospital. Library. Parks. tures.

1885 10

1886

1887 20

1888 16. 13. 3.

1889 15

1890 15. 8.5 2. 4.5

1891 18. 12. 2. 4.

1892 13. 9. 2. 2.

1893 IS. 9. 4. 2.

1894 12. 8. 4.

1895 16. 9. 4. 3.

1896 20. 10. 6. 4.

1897 20. 10. 5. 5.

1898 20. 10. 5. 5.

1899 18. 8. 5. 5.

1900 19. 10. 5. 4.

1901 20. 10. 5. 5.

1902 21. 10. 6. 5.

1903 20. 10. 6. 4.

1904 22. 10. 6.5 5.5

1905 22. 10. 7.5 4.5

1906 22. 10. 6. 6.

1907 18. 9. 5. 4.

1908 18. 9. 5. .5 3.5

1909 21.5 10. 7.25 .5 3.75

1910 15. 7.125 4.5 .25 3.125

1911 14.5 7.316 3.5 .25 .333 .6 2.5

1912 12.5 7.41 2.6313 .2266 .1550 .375 1.7021

1913 18.75 10.2885 3.0298 .5634 .5418 .1505 4.1760

1914 2 0.75 9.129 5.61 1.0567 .1854 .7376 4.0313

It will be noticed that the reduction of the tax on buildings to eighty
per cent, in 1909 was accompanied by an increase in the tax rate from
eighteen mills to 21.5 mills. The reduction from eighty per, cent, to fifty
per cent, of the tax on buildings in 1911 was accompanied by a reduction
in the tax rate from fifteen mills to 14.5 mills. A further reduction of the
tax on buildings in 1912 was accompanied by a decrease in the tax rate of
two mills. Substantial increases were made in the rate in 1913 and 1914.

A rebate of ten per cent, is given if taxes are paid before October 1st.
The full tax is charged until December 1st, after which date a penalty of
six per cent, per annum is added.

Such evidence as is available seems to indicate that the residents of
Calgary are finding tax paying increasingly difficult. The city accounts for
1913 show that on December 31st, the collection roll debtors owed the city
the sum of $527,544.38. It is true, however, that it has never been found
necessary to sell personal property for taxes and that such land as has been
sold for taxes has always been redeemed. Appeals from the assessment
are quite numerous. It is reported that the appeals numbered 480 in
1912.(1) In 1913 there were 246 appeals. Of these approximately fifteen

(1) Canadian Municipal Journal, VIII, p. 21 (June, 1914).



118

per cent, were successful in securing reductions. Many of the appeals were
against the assessment of personal property.

The assessor testifies that the man of moderate income owns a lot
which is worth about $450 and a building which is worth from $1,200 to
$2,000. The taxes on property of this type, at the 1914 rate, amount to
$21.48. To this should be added the local improvement charge of about
eighteen dollars.

Just at present there is considerable distress caused by the depression
in the real estate market. A very large proportion of the residents of the
city own real estate which they purchased for speculative purposes. A con-
siderable number are " land poor." There is no way, however, of measuring
accurately the amount of distress.

DATA FOR GAUGING THE EFFECTS OF THE SYSTEM

Building Operations

The building statistics of Calgary include not only new construction
but repairs and alterations as well. Cancellations are not removed but they
are few in number. Building permits for less than one hundred dollars are
not issued. The amount of the fees to be paid depends upon the value of
the proposed structure, with the result that undervaluation is present to a
considerable degree. In the opinion of the building inspector at least twenty
per cent, should be added to the valuation as given in the statistics of build-
ing permits to secure the sum which approximates the true values. The
following table shows the number and value of building permits issued from
1904 to date : . i

BUILDING STATISTICS. 1904-1914(a)

No. of
Permits. Value.

1904
1905
1906
1907
1908
1909

Jan.



1910



Feb. .

Mar.

Apr.

May

June

July

Aug.

Sept.

Oct.

Nov.

Dec.










$880,193.00








838,829.00




..




1,097,136.00




605




2,094,264.00




423




1,004,520 00




777




2,420,450.00


49




$106,500.00




55




169,800.00




148




415,800.00




189




603,930.00




156




525,066.00




162




573,846.00




133




520,098.00




124




449,988.00




100




720,372.00




165




568.290.00




158




590,604.00




80




354,300.00






1,519




5,598,594.00



(a) Statistics for the period 1904-1909 are taken from the Municipal Manual, 1914,
p. 109; for 1910-1914 from the records of the building inspector. Several discrepancies
appear : the total value for 1910 appears in the Municipal Manual as $5,589,594 ; the
number of permits in 1910 is given as 1,499; in 1912 as 3,483; and in 1913 as 2,078.



119



No. of
Permits.



Value.



191H



1912-^



1913^



1914



Jan 11

Feb 110

Mar 219

Apr 329

May 306

June 314

July 214

Aug 286

Sept 268

Oct 288

Nov 138

Dec 110

Jan 86

Feb 227

Mar 288

Apr 427

May 409

June 374

July 315

Aug 357

Sept 314

Oct 348

Nov 235

Dec 110

Jan Id

Feb 97

Mar 192

Apr 375

May 281

June 230

July 224

Aug 168

Sept 173

Oct 144

Nov 92

Dec 66

Jan

Feb

Mar 715

Apr 168

May 233

June 178



2,619



3,490



2,118



1,294



$296,040.00

333,660.00

1,012,260.00

1,127,256.00

3,616,812.00

1,826,220.00

817,980.00

927,540.00

903,210.00

803,160.00

545,340.00

698,160.00



$381,784.00
938,724.00
1,086,210.00
1,708,380.00
2,215,392 00
2,210,580.00
1,350,516 00
1,799,280.00
4,170,360.00
1,595,490.00
1,903,944.00
1,033,560.00

$134,760.00

152,100.00

252,365.00

1,560,430.00

886,210.00

1,498,620.00

1,164,618.00

1,083,530.00

362,480.00

748,300.00

439,740.00

336,500.00



$574,800.00
223,500.00
540,600.00
305,200.00



12,907,638.00



20,394,220.00



8,619,653.00



1,644,100.00



The years of the tax changes, 1909, 1911 and 1912, were banner years
in the building trade.

Among the buildings constructed in 1909 were included fifty-two busi-
ness blocks valued at $561,594, fifteen warehouses worth $278,640, four
schools valued at $148,800, five elevators and grain tanks, $178,400, and
six hundred and seventeen private residences worth $1,033,350. The returns
in 1910 include one thousand residences constructed at a cost of over
$2,000,000. An analysis of the permits issued in 1911 shows that eighty-



120

two buildings were constructed which were valued at figures between
$10,000 and $100,000 each, fourteen buildings between $100,000 and
$1,000,000 and two buildings of over $1,000,000. A more detailed state-
ment of the character of the buildings erected during 1912 and 1913 follows :

CLASSIFICATION OF BUILDING PERMITS, 1912-1913
Number. Value.



1912.


1913.


109


33


52


25


243


122


2,173


1,171


44


20


12


3


\2


3


4




3


7


4


6


9




4


6


1


2


813


680



1912. 1913.



Business buildings $4,402,920.00 $552,000.00

Warehouses and factories 3,271,200.00 1,595.700.00

Residences over $4,000 1,099,200.00 1,251,600.00

Residences, $1,000 to $4,000 4,744,900.00 2,742,000.00

Apartment houses 1,243,200.00 573,600.00

Schools 885,100.00 367,000.00

Canadian Pacific Railroad shops 2,247,787.00

Churches 253,200.00 38,400.00

Fire halls etc 107,520.00

Government and civic buildings 276,000.00 665,000.00

Theatres and theatre alterations 384,000.00 180,000.00

Livery stables 104,360.00

Garages 67,200.00 37,000.00

Hospitals 21,600.00 100,000.00

Small buildings, alterations and small

extensions 452,620.00 517,353.00

. . Miscellaneous 33,345.00

The height of buildings is restricted by the following section of the
building code :(1) " No buildings or other structures hereafter erected, other
than buildings heretofore approved by the Superintendent, except a church
spire, smoke stack, water tower, hose tower, shall exceed 130 feet in height.
Said height shall be measured from street level to the highest point of
parapet, and no storey of such building shall measure less than ten feet from
ceiling to floor." (2) Thus far no building more than ten stories high has
been constructed. There is one building ten stories high, one nine stories,
three eight stories, and fifteen six stories. The typical business block in
Calgary, however, is not more than four or five stories in height.

There is a strong movement in Calgary toward the building of apart-
ment houses. At the present time, according to the estimate of an official
in the building inspector's office, there are approximately 400 such buildings,
almost all of which have been constructed since 1909. In addition there are
a number of living apartments in the upper floors of business blocks.

Credit Conditions

The change in the tax system in Calgary has had no discernible effect
upon the sources of loanable funds for building. It was estimated by a

(1) Building Ordinances, By-law No. 1366, sec. 90(a).

(2) The superintendent referred to is the superintendent of the department of



Online LibraryRobert Murray HaigThe exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York → online text (page 12 of 31)