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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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obviously temporary buildings designed for the purpose of bringing in some
revenue in order to meet taxes. One local wit went so far as to name
his flimsy building " The Paetax." Within a radius of two blocks of the
post-office, fifty-one such buildings were counted.

The movement toward the building of apartment houses has only
just begun in Regina. At the present time, according to the estimate of
Mr. F. J. James, there are some fifty apartment buildings of various types
in the city, including those whose lower floors are used for business purposes.

Since July, 1912, there has been in force in the city a restriction on the
heights of buildings. Buildings may not be constructed more than ten
stories, or 130 feet, in height. There are no buildings in Regina which
exceed this limit.

Land Values

There is little definite evidence to show that the change in the tax
system has had an unfavorable effect upon land values in Regina. It was
authoritatively stated, however, that the owner of a 640-acre tract in the
outskirts of the city, part of which lies within and part without the city
limits, considers the part which lies outside the limits more valuable than
that which lies within, blaming the heavy land taxes within the city for the
lower selling value of the land(l)

Credit Conditions

Mr. A. F. Angus, manager of the Bank of Montreal, and Mr. Joseph
Campbell, commissioner of the Trust and Loan Company of Canada, ex-
pressed the opinion that the present tax system had had absolutely no
effect upon credit conditions or the sources of loanable funds. The funds
for building operations in Regina come from three main sources: the life
insurance companies ; the loan and mortage companies, which sell bonds in
the East and abroad and loan the money for building purposes; and
private sources. In the opinion of Mr. F. J. James, the money for building
purposes in Regina comes from these three sources in almost equal pro-
portions. A very conservative policy is followed by those who extend
loans for building purposes; practically no money may be borrowed upon
the security of vacant land. Loans are usually restricted to an amount
between forty and fifty per cent, of a conservative valuation of the land and
the buildings. In valuing buildings as security for loans, the fact that
conditions are very volatile is taken into consideration, and lenders feel
that they must protect themselves against the possibility that buildings in
the future, with which the buildings under construction must compete, may
be built at a lower cost than obtains at present.

(1) Mr. J. K. Maclnnis: case cited by W. L. McTavish.



46



Rents



The rental situation in Regina has been highly abnormal. In the
words of Mr. W. J. Allison, a real estate broker, conditions have been such
that owners could " get pretty near what they asked." The rapid growth
of the population made it impossible to supply sufficient houses to meet
the demand. Recently there has been a slight decrease in rents, estimated
вАҐ by Mr. James at five per cent. This decrease is attributed by Mr. Allison
to extension of street car facilities.

Congestion

According to the estimate of Assessor Lennox, approximately forty per
cent, of the land within the city limits is built upon. The typical lot in
Regina is very small, twenty-five foot frontage ; usually a house is twenty
feet in width, leaving only a five-foot space between houses. The high
cost of land and the necessity of being served by local improvements has
operated to cause Regina to be less scattered than is the case in some other
western cities. Granting a population of 50,000, there are in the city 5.9
persons per acre of area (total area, 8,640 acres).

Home Ownership

According to estimates of Mr. W. J. Allison and Mr. F. J. James, the

(percentage of houses which are occupied by their owners is approximately
sixty-five. Secretary McDonald of the Board of Trade estimates the
number of home owners at an even higher rate. Exact statistics are lacking.

Employment

The employment situation in Regina was very acute during the summer
|.i of 1913. It was reported in June that sixty per cent, of the trade unionists

|1 in the city were out of employment. The " Bureau of Public Welfare "

reported that, in the month of May, 639 applications for employment had
ri been received. The situation is explained by some on the ground that the

f) immigration propaganda has been carried too far, that the present influx

is the result of good reports sent out from those who arrived in this region
some time ago when times were more prosperous. But not merely newly
arrived immigrants are out of employment. The decrease in building activity
and the difficulty of the city in obtaining funds to carry on its schemes of
local improvement have contributed to make the situation difficult for
persons who have resided in Regina for some time.

General Prosperity

In the following statement is shown the population of Regina as given
in the Municipal Manual. Attention should be called to the fact that the
figure given in 1901 is not the same as that given by the Dominion census.
Instead of 2,645, the Dominion census gives 2,249 as the population in that
year. The figures are in most cases the roughest of estimates, based upon



49

such facts as can be gathered from the city directory and the school enroll-
ment. It is charged that Regina's estimated present population of 50,000 is

open to suspicion.

POPULATION (a)

1882 200

1883 400

1891 2,000

1901 2,645

1902 2,700

1903 3,000

1904 4,000

1905 5,500

1906 7,550

1907 9,000

' 1908 10,000

1909 12,000

1910 15,500

1911 (Dominion Census) 30,210

1912 45,000

1913 50,000

(a) Municipal Manual, 1914, p. 39.

SCHOOL ENROLLMENT



1906
1907
1908
1909
1910
1911
1912
1913
1914





Collegiate




blic(a).


Institute (b).


Separate (c)


734






902






1,036


....




1,118






1,477






1,851


225


371


2,476


298


444


3,064


371


574




465


566



(a) These statistics were very kindly furnished by Mr. T. E. Perrett, superin-
tendent of the Regina public schools. They represent the total enrollment in the
month of October.

(b) This information was furnished by Mr. Norman McMurchy, principal of
the Collegiate Institute, and represents the enrollment in September for the years
1911-1914; the time of year represented by the figure for the earlier j^ears is not
specified.

(c) The figures for the Catholic school are furnished by Mr. F. M. Smith, and
are for the month of September in each case.

BANK CLEARINGS (a)

1910 $50,739,159

1911 73,032.088

1912 115.727,648

1913 132,087,457

1914 (6 months) 48,402,699

(a) This data was furnished by Mr. A. J. Merrix, secretary of the Regina
Clearing House. The clearing house was established late in 1909.



RECEIPTS FROM STAMP SALES

Year ending March 31, 1909

" " 1910

" " 1911

" " 1912

" " 1913



$69,344 23
82,066 90
102,141 30
124,639 28
173,351 20



so

GROSS POSTAL REVENUE(a)

Year ending June 30, 1900 $8,260 60

" " 1901 9,082 80

" " 1902 11,627 98

" " 1903 15,673 98

" " 1904 20,736 52

" " 1905 28,455 65

" " 1906 37,510 53

Nine months ending March 31, 1907 35,925 25

Year ending March 31, 1908 61,000 04

1909 71,662 39

1910 83,570 72

1911 103,566 n

1912 127,633 63

1913 177,420 91

(a) Data taken from the reports of the Postmaster-General.

These statistics indicate that 1911 and 1912, the years when reductions
were made in the assessment of buildings, were years of phenomenal
prosperity.

STATUS OF PUBLIC OPINION

Summaries of Interviews

A high city official :

The present assessment of buildings (30 per cent.) is " a pretty
fair figure under present conditions." If another real estate boom
should come, we might make a further reduction. One factor in the
local situation is the necessity for protecting our borrowing power.
Some tax should be levied on buildings, for they are the direct occasion
of considerable expense. There seems to have been no eflfect traceable
to the tax system upon speculation, land values or rents.

A high city official :

The plan of under-valuing improvements is a good one in a period
of optimism, but in a time of depression it is a very useful thing to
be able to fall back upon a tax on improvements. Land values are
inflated, and when times are slow, people have difficulty in paying their
taxes. Much land is forfeited for taxes in such periods, and the city
is likely to find itself in financial straits. It is not wise to prophesy
as to the future of the system in Regina. Certainly the tax on buildings
should not be further reduced for another ten years at least.

A city official:

The present rate of assessment on buildings of thirty per cent,
is very satisfactory. There is no prospect of any immediate reduction.
Probably the assessment on buildings will never be entirely swept away.
It is unfair that a $300,000 structure like the McCallum-Hill building
should be entirely exempted from taxation. Among the factors which
operate to prevent further reduction is the fact that " once you go down
you cannot go back up." Another is the anxiety lest the tax base
become so restricted as to make necessary a high rate of taxation.
This must be avoided because of its bad advertising effect. Specula-
tion seems not to have been affected by the change in our system. The
reduction seems to have operated as a stimulus to building.

A city official :

The thirty per cent, assessment of buildings is certainly low
enough. The fear of an increased tax rate is the chief reason why the
assessment of buildings has not been carried lower. The scheme has
certainly had no effect upon speculation.



51

A city official :

The present rate of assessment on buildings is as low as it should
be; it will never be reduced below this figure. The reduction of the
tax on buildings, beyond a doubt, is due to the influence of real-estate
men. At the present time fully eighty per cent, of the council is made
up of men whose chief interest is in the real estate business. The plan
has not affected speculation.

A city official:

The reduction of the tax on buildings seems to put the city in the
position of weakening the security underlying its debenture issues.
The plan has probably retarded the increase in land values somewhat,
but it has also decreased speculation. Ultimately the tax on buildings
will be eliminated entirely.

A distinguished jurist :

The present system is in force because the people were driven to
it by the conditions present in these regions. Some method had to be
devised to encourage the practice indulged in by speculators of holding
large areas unimproved. On the whole the system has had little effect,
however, because the people have not calculated what it means.

A high provincial official:

In general I favor the land tax. But I do not favor the exemption
of large buildings in cities where big business districts are developing.

A business man ; formerly a member of the council :

The decrease in assessments of buildings was made because it was
felt that it was unjust that a vacant lot should be allowed to increase
in value because of the erection of a building upon an adjoining lot
without contributing more in the way of taxes than it would be com-
pelled to pay under the old system. Much land at this time was held
by speculators and non-residents. The changed system has had the
effect of forcing men to build. The heavier land tax, however, does
not have the effect of causing a lower selling value of the land. There
has really been no noticeable effect, however, upon the amount of
speculation in the city. In addition to stimulating building, the system
lacks a fault possessed by the old scheme: formerly a man hesitated
to build a piazza, or to make improvements which would add attractive-
ness to his property, for fear of a heavier assessment. The cause for
this hesitation is largely removed by the present scheme. The present
plan, moreover, must be credited with responsibility for the compact
manner in which Regina has been built up. The reason that further
reductions were not made in the last two years in Regina is because
of the fear lest such action would involve an increase in the tax rate,
which would be bad advertising. There is no direct connection between
the growth in population and the tax system. Settlers who write,
inquiring for information seldom inquire about the tax system ; of
course, the business man does inquire specifically. On the whole, it
can be said that the present system gives absolute satisfaction all
around.

A conservative banker :

There is no way of telling whether or not the tax system has had
an adverse effect upon land values. No such effect is noticeable on
the surface of things, but this should not be taken to mean that there
has been no effect; for the change has come gradually, and it cannot



52

be expected that the effects would be clearly defined. There has
certainly been no noticeable effect upon credit.
An oflficial in a mortgage corporation:

It is certainly true that there is less speculation in real estate at the
present time than there was before the tax system was imposed, but
whether this is due to the tax system is hard to say. The change from
the old system to the new came at a time of great activity, and the
effects are not easily isolated.

An official in a trust and loan company :

The present system is not satisfactory because it over-stimulates
building. Too many buildings are built, and this over-building is
disastrous. Moreover the pressure upon the owners of vacant property
causes them to build an undesirable type of building, such as the " tax-
payers." There is no discernable effect upon speculation or upon the
sources of loanable capital. The tax system is not much discussed,
but it is a noticeable fact that the thoughtful people of the community
are the ones who are opposed to it.

A conservative financial agent and real estate man :

The tax system has thus far had no effect upon the sources of
loanable capital, but it probably will have an effect when the significance
of the system becomes better known. Moreover, there has been no
effect upon rents traceable to the system. The system will also doubt-
less have an effect upon speculation in the future. Increases in value
will not be so great as they have been in the past, and heavy
carrying charges will operate to deter individuals from investing in land
on the same scale that investments have been made in the past. The
weight of the tax system is already being felt. There is no doubt
but that the scheme operates to force the owner of vacant land either
to build or to get rid of it. The elimination of the last thirty per cent,
of the building assessment would probably force too much building.
On the whole, it would be a good thing for Regina to remain at thirty
per cent. The system works out to the advantage of the small house-
holder in a town of this kind and has operated to encourage building
of the little improvements about the property which add to its beauty
and attractiveness. Reductions in the assessment on buildings must be
carefully made if disastrous consequences are to be avoided. In a
community like New York it would seem to me that two and a half
per cent, a year would be a speedy enough reduction. Our experience
must be accepted with a grain of salt, for here our values are increasing
rapidly, and our loans are very conservatively secured.

A real estate broker who specializes in renting property:

The system as it stands at present is very satisfactory. It seems
just that a small tax on buildings should be retained. Thus far no effect
on speculation can be traced to the tax system, but doubtless there
will be effects in the future. The plan acts as an incentive to building,
but the recent drop in rents cannot be attributed to it at all.

A successful real-estate operator who sold out on the rising market before
the present reaction came:

Most of the cities in this region have just trailed along, adopting
the single tax because someone else did, without giving any thought
or consideration to remote effects. " Everybody is too busy out here
to study and the fools didn't know what they were doing." " Invest-
ments in city lands in this province were attractive to me when less



S3

than ten per cent, of the population of the province lived in the cities ;
but when the proportion of city dwellers rises to thirty per cent., it's
time to get rid of city real estate." Too large a proportion of the
residents of the city are engaged in building the city. The compro-
mise arrangement in force here is entirely satisfactory. " My observa-
tion is that it has a tendency to restrict speculation." This is because
of the heavier carrying charge. The system also stimulates building.
" There have been no adverse effects upon land values thus far, but
you can see them coming. People are finding it necessary to melt their
insurance to pay taxes." The reason that further reductions have not
been made in the assessment of buildings is because of the fear that
people would not be able to pay their taxes. The man who owns a
building can pay his taxes, but you cannot be sure that the other man
will be able to do so. " The system has worked all right here thus far,
but it has not yet stood the acid test."

A prosperous young real estate man :

The idea underlying the present tax arrangement is to get things
" improved." But after all, the tax is not much of a bonus and is
usually not taken into account. It has some influence, however, and
doubtless a number of the " tax-payers " which have been built have
been due to the pressure exerted by the system. The thirty per cent,
assessment on buildings will probably be retained indefinitely. The
change in the system has had no perceptible effect upon the value of
land or upon the security underlying mortgages.

A prominent merchant ; a former mayor of the city :

The present system is a good one because it reaches the owner of
vacant property. There has been too much speculation in Regina.
There is no doubt but that the system stimulates building. The policy
of the city council in the last two years in refusing to reduce the assess-
ment on buildings still further is an expression of the real estate interest
in the town. The professional real estate men who are carrying vacant
property are not eager to increase their burdens at present.

A clerk and a small property owner :

The system seems to favor the owner of the small piece of prop-
erty. It would not be wise to change it, even though it meant a con-
siderable exemption for a large number of large buildings in the down-
town section. It has been a force in accelerating building operations in
Regina.

A teacher and small property owner :

The system is a fine thing for the small land owner. What the
effect will be upon the interests of the small property owner when the
number of large business blocks in the down-town section increases
is somewhat uncertain. It does not seem entirely fair that a building
like the McCallum-Hill building should go untaxed. It stimulates,
business, but does not seem to effect speculation.

A minister of broad sympathies :

Part of the building expansion here in Regina is due to the tax
system. Speculation also has probably been somewhat lessened by the
system. The heavy tax on land is a cause operatirtg to force owners
of vacant land to sell. Because of the heavy carrying charges, the
members of my church, for instance, feel that they must sell a vacant
lot which they own. The rent of houses and the price of rooms have



54

dropped considerably in the last year ; the tax system has probably had
something to do with this. " From my general observation, I have
come to the conclusion that the system is a good one for the rank and
file of the people."

A reporter; a property owner:

The system in force has had no effect upon speculation, but it
stimulates building. The tax on buildings will probably not be reduced
below thirty per cent, because of the anxiety lest the tax base should
prove inadequate.

A newspaper editor :

The system thus far has had no effect on speculation or rents. It
would seem that in the long run the heavier carrying charge must have
an effect in discouraging speculation. It has already probably had some
effect in retarding an advance in land values. Recently there has been
a reaction in the sentiment toward the tax system, and there will
probably never be a further reduction in the assessment on buildings;
there will certainly be no further reduction until another boom comes.
There is considerable anxiety lest the tax base be seriously impaired,
making necessary an increase in the tax rate. To reduce the assess-
ment on buildings further under present conditions would operate as
a hardship on heavy owners of real estate, and the real estate interests
are strong enough in the council to dominate the situation.

A newspaper editor :

The general sentiment in the city is in favor of ultimately
eliminating entirely the tax on buildings. The action which has been
taken thus far by the city council must be accepted as being passed
at the behest of the real estate interests; for years back the profes-
sional real estate interests have had control of the council.



55



2. Saskatoon

THE CITY

Saskatoon is a typical prairie city, surrounded by great stretches of
fertile wheat fields. It is a rival of Regina with which city it has many
characteristics in common. But it is a mucl^i younger municipality than
Regina. In 1903, when it received its first charter as a town. Saskatoon
was a hamlet with only 113 inhabitants. By 1906, when it was incorporated
as a city, the population had increased to 3,011. No exact enumeration has
been made for some time and estimates of the present population vary con-
siderably. It is probable, however, that there were in 1914 approximately
28,000 people in the city.

Like Regina, Saskatoon is largely dependent for its prosperity upon its
ability to serve the farmers as a marketing place for selling their grain and
produce and for purchasing their machinery and supplies. The Canadian
Pacific, the Canadian Northern and the Grand Trunk Pacific railways enter
the city. Strategically located almost midway between Winnipeg and Ed-
monton in a region poorly supplied with towns. Saskatoon has been able
to develop a distributing business claimed to be second in importance only
to that of Winnipeg.

The importance of the city as a grain center was recognized when it was
selected as the location for an enormous elevator, the first of a proposed
chain of elevators to be built under the direction of the Dominion Govern-
ment. Although power must be generated by steam, some types of factories
are beginning to develop. ( 1 ) Some substantial encouragement was given to a
garment company for locating in Saskatoon, and the city incurred an indebt-
edness of $85,000 to secure the location of a Quaker Oats plant. (2) More-
over, a by-law was passed in 1913, authorizing the city to borrow $100,000
for the purpose of purchasing industrial sites. (3) By the end of 1913,
$43,799.02 had been spent for this purpose. (4) As additional evidence
of artificial stimulation of growth, it should be noted that it has been the
custom of the city to grant $20,000 a year to the Board of Trade for publicity
purposes.

The extremely rapid development of Saskatoon is indicated by the
following table of total receipts and disbursements:

(1) Among the concerns of importance which have located in the city may be
mentioned a tent and mattress factory, a garment factory, a gasoline tractor concern,
a number of foundries, a large brewery and a branch plant of the Quaker Oats Com-
pany, of Chicago.

(2) By-law 521.

(3) By-law 480.

(4) Auditor's Report, Financial Statement, 1913, p. 40.



56



TOTAL RECEIPTS AND DISBURSEMENTS (a)

Total Total

Receipts. Disbursements.

1903 $6,885.97 $6,551.64

1904 29,931.15 24,674.95

1905 28,870.16 25,472.19

1906 179,632.58 174,703.95

1907 170,516.00 173,338.12

1908 653,874.97 642,511.10

1909 747,509.29 761.308.67

1910 1,065,939.58 892,147.68

1911 2,075,833.12 1,886,821.67

1912 5,350,391.73 5,314,573.45

1913 6,446,543.15 6,692,468.35

(a) The figures given include receipts from public utilities and from loans.

The city owns practically all of its public utilities, including street
railway, electric light and power companies, and the water works. In
1913 the electric light company yielded a favorable balance of $30,555.17,



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 5 of 31)