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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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lay between the other two, was taxed on the basis of the council's valuation
and paid nearly three times as much as the other lots which were of exactly
the same real value. (1) Cases of this type were frequent.

When the court had completed its hearing of appeals, the council's total
assessment had been reduced from $313,455 to $229,935. This figure con-
stituted the tax base in 1912. The rate levied was forty-five and one-half
mills, made up as follows : the maximum legal rate for general purposes,
twenty mills, plus six and one-half mills for general debentures, plus seven-
teen mills for school purposes and two mills for school debentures. This
amounts to a tax of approximately four and one-half per cent, upon a value
at least fifty per cent, above the selling value of the land, or what the selling
value of the land had been before the tax was imposed.

The change in the town act made in 1912 which legalized over-assess-
ment by directing that no change should be made in assessed values upon
appeal, provided only the assessments were in substantial accord with those
of the neighboring lands, enabled Ponoka to raise the land assessment still
further in 1913. According to Assessor Thomas Hutchison, " If it were
not for this clause, the town would have to shut up shop." The assessed
values of lands were increased nearly $73,000, to $302,874. In 1914 prac-
tically no change was made in the assessment ; lands were valued at $302,849.
The increased assessment made possible a reduction of the tax rate in 1912
to thirty mills. In 1914 it was raised to thirty-four mills.

The following tables will aid in making clear the situation in Ponoka :

ASSESSED VALUES OF TAXABLE PROPERTY
A. In the Town

Personal
Land. Buildings. Property. Total.

1909 $287,035

1910 294,610

1911..'.;!! 139,733 135,630 83,140 358,503

1912 229,935 229,935

1913 302,874 302,874

1914 302,849 302,849

(1) Cited in article of Mr. Harold Moore. Cf. supra, p. 142, note 4.



151

B. In That Part of Ponoka School District Which Lies Outside the Corporation

Limits







Land.


Personal
Improvements. Property'.


Total.










" 8,375




1909

1910

1911

1912

1913

1914


'.'.'.'.'. $130,017

237,930

236,654


Y

208,4i6


$172,222
184,179
216,791
130,017
237,930
236,654


TAX RATES
(Mills)




Municipal.


School.

A






General.


Debenture.


General.


Debenture.


Total.


1909

1910

1911

1912(a)


, 17.5

13.5

, 11.

20.


5.

J


7.5
6.5
7.
17.
8.

8.


""2.
2.

2.


25.
20.
18.

45 S


1913


IS.


30.


1914




24.


34.



(a) Tax on land values went into effect in 1912.

RECEIPTS FROM TAXATION



Municipal.



School (a).



General.



Debenture. General.



Debenture. Total.



1911 $1,104 50

1912 4,436 39

1913 3,694 42(b)



$583 62
816 12



$2,100 77
3,862 02
3,841 85(b)



$1,255 40
688 49



$3,205 27

10,137 43

9,040 88



(a) The property lying within the town limits is subject to both school and
municipal rates: that lying outside, to the school rate only. The figures given above
include the receipts from all the rates levied, both within and without the town limits.
The municipality acts merely as the agent for the school board in collecting the tax.

(b) Includes arrears paid into the treasury.

RECEIPTS AND EXPENDITURES



Receipts.



Expenditures.



Balance.



1911
1912
1913



$7,345 71
15,865 92(a)
19,784 43(a)



$4,745 05
14,879 76
19,739 60



$2,600 66
3,586 82
3,631 65



(a) Excludes the balance from the preceding year.



152

RECEIPTS FOR THE YEAR ENDING DECEMBER 31, 1913

Cash on Hand, January 1, 1913 $3,586 82

Taxation —

Current Taxes, Municipal $3,265 30

Current Taxes, School 3,442 60

Arrears, Municipal 1,245 24

Arrears, School 1,087 74

9,040 88

Special Assessments —

Frontage Tax 201 37

Business Enterprises —

Sale of Electric Current 5,472 49

Loans —

School Debenture 3,957 43

Subvention —

Provincial Government for Drainage 382 00

Licenses —

Liquor 400 00

Other 95 00

495 00

Miscellaneous 235 26

$23,371 25

As will be seen from the table of receipts, the tax on land is the
only source of revenue of any consequence utilized for meeting ordinary
expenses. The town's licensing powers were not employed to the full extent
of their revenue-producing power even before 1914, when they were seri-
ously abridged by the province. Moreover, Ponoka did not petition for
permission to levy a business tax under the relief act passed by the pro-
vincial legislature in 1913. It is claimed by some of the citizens that the
council at that time was made up of business men who were not eager to
increase their own tax burdens by adding a business tax. In 1914 the council
did request that it be allowed to tax businesses, but the request was refused
by the provincial authorities on the ground that a business tax was unneces-
sary in view of the fact that the legal limitation on the tax rate had been
removed !

There seems to be no doubt but that the business men of Ponoka have
profited under the single tax at the expense of the owners of residence
property. All land is over-assessed, but business lots seem not to be so much
over-assessed as residence lots. While the average business lot is assessed at
about $1,500, very few would be offered for sale at half this price. On
the other hand the average residence lot is assessed at $300 and will not
sell for more than $100. The assessor testifies that " the single tax is all
right for the banks and business men." One bank, for instance, was taxed
on approximately $2,000 under the new system as compared with $15,000
under the old. ( 1 )

It is frankly admitted both by officials and private citizens that over-
assessment exists. The assessor points out that, as a matter of fact, the
land values in the town have not increased at all in the last five years. Yet

(1) That the effects of the imposition of the plan can be greatly affected by the
attitude of the business men is strikingly shown by a comparison of Ponoka with
Leduc. Cf. supra, pp. 146-147.



153

the tax rolls show a real estate assessment to-day of nearly three times the
assessment in 1911. Assessor Hutchison testifies that a number of the lots
are assessed at $700 which could not be sold for $200. The Hudson's Bay
Company has subdivided lots which are for sale at $100 a piece; they are
assessed at $275 each. Its unsubdivided tract is assessed at $125 an acre.
A small part of it was actually sold in the summer of 1914 at $75 an acre,
a high price, according to local opinion. One citizen stated that he would
glady accept $400 for his lot, which is assessed at $1,300.

All agree that the change to the land tax has had a depressing effect
upon real estate activity and values. A large property owner claims that
the tax has almost completely destroyed the value of his investments in land.
" Nobody will buy a lot under present conditions," he complains. Mayor
Durkin states that it is much more difficult to sell property than it was be-
fore and that sales are made only when the land is to be put to actual use.

Ponoka, on a land tax basis, is evidently not an attractive spot for the
prospective land speculator. However, the system in force has not yet
operated to force the surrender of present holdings on a large scale. At
first there were violent protests against the assessments. There were many
threats. Both the Hudson's Bay Company and the Canadian Pacific Rail-
way told the town officials that they would allow the town to take their
lands before they would submit to taxation on the inflated basis. At the
last moment, however, both companies sent in checks for their taxes, much
to the relief of the officials. As one of them expressed it, " We wouldn't
know what to do with the lots after we got them. There was no market
for the property."

How long the owners of non-revenue producing property will continue
to hold it is a disputed question. Some state that they are paying taxes
from year to year only in the hope that some legislative change will be made
to afford them relief from the heavy charges or that some market change
will make it possible for them to dispose of their real estate without too
heavy a sacrifice.

Ex-Mayor George Gordon charges the tax system with responsibility
for part of the difficulties of the town in borrowing money for needed public
improvements. Although the outstanding indebtedness is not great, the
attempts to float new debentures have not been entirely successful.

Mayor Durkin says a good word for the present system in describing
its effect upon improvements. He points out that the individual need not
hesitate to improve the appearance of his store or residence because of
the danger of provoking a higher assessment. But Ex-Mayor Gordon as-
serts that this is of slight consequence and that a stimulus to building is not
needed in Ponoka, where there are already eight or ten vacant houses seelc-
ing tenants. There is no reason to build, he says.

No one was found who would give the system a general recommenda-
tion. The mayor, although he felt that the single-tax system might be a
good system under some circumstances, declared that it had not worked



154

satisfactorily in Ponoka. The ex-mayor thought the system might be ap-
plied in a big city, but insisted that it would never do in a small town be-
cause it was impossible to secure the necessary revenue without great dis-
tress. Alderman Batson testified that there was simply not enough land
value in the town to justify the single tax. Alderman Alexander pointed
out that it could not be applied successfully where the community was not
growing rapidly. All agreed that their three-year trial in Ponoka was any-
thing but satisfactory in its results.

It is evident that thq imposition of the land tax in Ponoka caused a
violent wrench. In order to finance itself under the new plan, it was neces-
sary for the town to increase the tax rate on land from eighteen to forty-
five and one-half mills and to over-assess land values very greatly. At the
same time the change relieved buildings and personal property from taxation.
Just such results developed as might be expected from a consideration of
abstract economic principles. Land values have been adversely affected.
Some classes in the community have been benefited at the expense of others
— in this case, the business class at the expense of the owners of residential
land. The owners of unimproved property have been hard hit and are in
some cases seriously considering the advisability of surrendering their hold-
ings. There has been no discernible effect upon building activity, because
the town is already adequately supplied with buildings so far as numbers
are concerned. The system has not yet been in force long enough to yield
evidence as to the effect upon the quality of the new buildings which may
replace the old as they are abandoned. Fiscal difficulties have been encoun-
tered by the town government, but as pointed out above(l) the town was in
a particularly bad situation financially to make the change. By a high tax
rate and by a triple assessment of land values, Ponoka has managed to
make ends meets. The experience of the town shows conclusively that under
certain conditions the change to the land tax can be made only at the risk of
considerable friction and economic disturbance.



(1) Cf. supra, p. 149.



155



4. Lloydminster.

Lloydminster lies on the border between the provinces of Saskatchewan
and Alberta. Part of the community operates under the tax system of
Alberta, which exempts buildings from taxation,(l) while the remainder
operates under the Saskatchewan statutes and taxes improvements at the
maximum permitted by the law, vis., sixty per cent, of their value.

The experience of such a community might be expected to yield valu-
able evidence as to the effects of the policy of untaxing buildings, and
Lloydminster has, indeed, received her full share of attention from those who
are interested in the problem. Even official commissions have used it as an
object lesson. Thus in a report of the Minnesota Tax Commission is to be^
found the following statement: (2)

An interesting example of the working of the two systems of
taxation — taxing land and improvements and taxing land only — was
exemplified in the city of Lloydminster, half of which is in Saskatche-
wan and half in Alberta. That part of the city which is in Sas-
katchewan levied a tax on buildings and improvements as well as on v
lands, while the part in Alberta taxed the land only. The result was V
that the Alberta side forged ahead of the Saskatchewan side, and
while most of the retail business was done in the latter, all the better
class of residences were built on the Alberta side. j

y^ An investigation of the situation fails to reveal an adequate basis for \
rthe statements made in the extract quoted. Indeed the evidence warrants a |
n fJl _]^^^^^^ contradiction of some of the statements. The Alberta side has not I
Ir^^SS^"'^" forged ahead of the Saskatchewan side " and " all the better class of resi- 1
•dences " have not been built on the Alberta side. The results which perhaps V
might normally be expected have not developed because there are peculiar /
forces in the local situation which prevent them from developing. It ia
tihierefore necessary to make a survey of the local conditions. /

/ To the visitor Lloydminster presents an aspect somewhat more attractive
I than that of the ordinary prairie town of a thousand inhabitants. The
] houses are better designed and the business buildings more pretentious.
/ There is, however, the usual lack of local improvements : no paving, no per-
1 manent sidewalks and no sewer or water system. A^public well back of
the building which shelters the town's fire apparatus furnishes drinking
water at public expense for those who care to carry it and suffices to fill the
\ tank which constitutes the water supply of the community in case of fire.
Lloydminster is laid out in the usual rectangular fashion. The north
and south street which passes through almost the heart of the settlement
marks the position of the 110th meridian, the boundary line between the
two provinces. The fact that the meridian coincides with this particular
street rather than the one a few hundred feet to the east serves in itself to

(1) The tax for school purposes should be noted as a slight exception to this
statement. Cf. infra, p. 158.

(2) Third Annual Report of the Minnesota Tax Commission, 1912, p. 171.



156

ruin Lloydminster as an object lesson of the effects of the single tax, for
the street was a boundary line of great economic importance before the fact
became known that it marked the division line between Alberta and Sas-
katchewan. The story of its importance harks back to the beginning of the
settlement.

Lloydminster was founded in 1903 by the " Barr Colony," a group
of English settlers. At that time there was no railroad and the company
of approximately 1,000 people walked two hundred miles from Saskatoon
to this spot, which they chose for their settlement. Farms were selected
and a square mile of the prairie was subdivided into a town plot.

The original settlers were eager that their colony should retain its unity
and that the community should remain entirely English. The feeling against
Americans and Canadians was so strong that the proprietors of the town
site refused to sell centrally located lots to any but English people. One of
those who was refused a favorable location was Mr. R. W. Miller, at pres-
ent the reeve of Lloydminster, Alberta. Some time later it became known
that the Canadian Northern Railroad was to pass through the town, and
it was rumored that the railroad company intended to subdivide an addi-
tional square mile immediately to the west. Mr. Miller purchased a corner
lot just across the street from the limits of the old town site and opened a
general store. The centre of the community to-day is nqt far from this
point.

It was not until 1905 that the boundary line was found to be coincident
with the street which bounds the west side of the original town site. This
showed that the old town site was in the province of Saskatchewan and the
new town site in the province of Alberta. That part of the community
which lies in Saskatchewan has been organized as the Town of Lloydminster,
and that part which lies in Alberta as the Village of Lloydminster. Two
complete systems of local government have been established and public
business is carried on by distinct sets of officers in the two municipalities.

There still remains a distinct racial difference betwen the inhabitants of
the town and the inhabitants of the village. The town is extremely English ;
the village is made up largely of Americans and Canadians. This difference
in nationality appears to lie at the bottom of the amusingly exaggerated
local jealousy which characterizes their relationships. The villagers approve
of nothing the townspeople do, and vice versa. The townspeople predict
that the village is on the road to financial ruin and point to the new $10,000
hall recently erected by the village government as an example of how ex-
travagance has run riot. The villagers across the street point to the town's
$30,000 indebtedness and predict disaster for the town's finances.

It is extremely difficult for the town and village to cooperate in any
enterprise. Local improvements which could be much more economically
constructed through joint action are delayed or not constructed at all be-
cause of the inability of the two parties to agree upon a plan of action. For
example, in the summer of 1914 there was an agitation for a system of fire
protection, the proposal being to construct a water tank and street hydrants.



157

It would obviously be much cheaper to install one system to protect the
property on both sides of the meridian street than to install two systems.
The village, however, insisted that the cost should be apportioned on the
basis of assessed valuation of property. Since the village does not assess
buildings it would of course escape with a smaller proportion of the cost.
The town not only objected to this scheme of apportionment, but insisted
that the hydrants which were to be placed along the meridian street should
all be on the town side, and, moreover, that the town's share of the total
project should be the first to be completed. Because of the unwillingness of
either side to compromise, the whole proposal was delayed and seems likely
to go by the board. Several attempts have been made to end this absurd state
of affairs by amalgamating the town and the village, but the mutual jealousy
and distrust have thus far proved to be too strong to be overcome.

It is not easy to discover any substantial basis for the pessimism with
which both the town and the village view the future of each other. The
town's indebtedness of approximately thirty thousand dollars is not stagger-
ing, particularly since the liability for fifteen thousand of it has been assumed
by the flour mill company, for whose benefit it was incurred. The village
indebtedness of approximately eight thousand was incurred in erecting the
hall. But the hall is not a mere luxury. It is the source of a substantial
revenue. One floor is leased to a secret society and the auditorium is
rented upon all occasions which demand accommodations for large gather-
ings.

There is no just cause for pessimism in the general economic conditions
and outlook. It is true that the population has not increased materially in
several years. In spite of the Board of Trade estimate of 1,300, the popu-
lation of the whole community is probably not more than 1,000. Of this
number, approximately one-third live in the village and two-thirds in the
town. The population, it is claimed, is nearly twice as large as is justified
or supported by the business done in Lloydminster, a very unusual situation
in a western town. The original group of settlers contained many persons
of independent means, and a considerable number of these still remain, sup-
ported by their income and taking no active part in the economic life of the
place.

The community has no industries except a creamery and a flour mill.
It is primarily a distributing and marketing centre for a fairly large and rich
agricultural community. Its practically undisputed trading territory
stretches twenty-five miles to the south, eighteen miles to the west, twenty-
two miles to the east, and indefinitely to the north.

The soil of the surrounding country is, for the most part, a deep black
loam, with a clay subsoil, and seems particularly well adapted to the growing
of grain. Nevertheless, until recently, the prosperity of the farmers has not
been great. During the past two years, instead of raising only wheat and
oats, much attention has been paid to dairying and live stock and this type of
mixed farming has proved to be very profitable.



158

The tax situation in Lloydminster is not simple, and the difference in
the policy of taxing buildings is not the only difference between the sys-
tems of the town and village. These additional differences complicate the
situation and modify the tendencies which might be expected to develop
from the opposing plans of building taxation.

In the first place, some attention should be given the apparently op-
posed policies of taxing improvements. The Town of Lloydminster, being
organized under the Saskatchewan law, cannot assess buildings at more
than sixty per cent., although it may assess them at any lower percentage it
chooses. (1) Nominally the town assesses buildings at the highest frac-
tion permitted by the provincial law, sixty per cent. In actual practice, how-
ever, buildings are assessed at a somewhat smaller percentage of their value.
This operates to reduce the difference between the town and the village.

The Village of Lloydminster, on the other hand, when organized in 1905,
petitioned the Alberta legislature and secured permission to exempt all build-
ings from taxation for municipal purposes. (2) The village, however, forms
a part of the larger school district, and for raising the necessary funds for
school purposes not only land is assessed, but also improvements and stock in
trade. (3) For this purpose they are valued at about two-thirds of their
full value. The town is in a similar school district, but the school rate is
levied within the town on the same base as the other taxes. The following
table shows the tax rates in both town and village for a number of years :







TAX RATES










v




(Mills)
The Town














General.


School.


Total.






1907...


8












1908...














1909...


8




7


15






1910...














1911...


10




7


17


1




1912...


16




7


23






1913...


16




7


23






1914...


16




7


23




The Village






General. Schoo'


. Special (a). Total.




1908.




12


8




20




1909.




15


8




23




1910.




17


10




27




1911.




20


16




36




1912.




18


12




30




1913.




18


8




6 32




(a) This levy was to


provide for the debt incurred


in building the public


hall.



(1) Provided that not more than fifteen per cent, of the value may be eliminated in
any one year.

(2) The Alberta law, as it existed at that time, provided for such exemptions
only when a petition was submitted.

(3) There seems to be some doubt as to whether this practice is strictly regular.



159

It will be noticed that in 1913, for instance, buildings in the town were
taxed seven mills for schools on a valuation of probably fifty per cent, of
their value while buildings in the village paid a school tax of eight mills on a
valuation of two-thirds of their value. This operated, of course, to reduce
still further the difference between the town and the village.

Of even greater importance is the complication caused by the imposi-
tion of a business tax in the town. In residence property generally in the
community, the value of the building greatly exceeds the value of the land.
In some cases the proportion is as high as ten to one. The opposite is true
of business property. Here the land usually exceeds the building in value.
Other things remaining the same, a condition like this would tend to
encourage the business man to locate where buildings as well as lands are
taxed — as in the town — for he would pay a smaller proportion of the total



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 16 of 31)