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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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and the water works a profit of $4,113.70. The street railway, however,
showed a deficit of $19,664.83. In addition, the city owns a hospital, a
market, and a cemetery. The net loss on all six of these enterprises
amounted to only $2,962.97. The telephone system is owned by the
province.

The total receipts in 1913 from the millage rate and from frontage
taxes was $1,022,383.70. The corresponding sum for 1912 was $692,328.44;
and for 1911, $419,296.74. The receipts of the public utilities in 1913 were
$698,168.10, and in 1912 they were $291,508.64. The net sum realized
from the sale of bonds in 1913 was $1,706,493.03; in 1912, $1,860,898.14;
and in 1911, $1,071,206.91. A poll tax brings in small amounts. (1) In 1913
the receipts from this source were $3,561; in 1912, $4,491; and in 1911,
$705. In 1913, licenses yielded $29,689.30, and dog taxes $1,574.

The expenditures for local improvements in 1913 amounted to $824,-
683.94; in 1912, $1,109,724.08; and in 1911, $248,121.40. The debt pay-
ments, including the payments to the sinking fund, in 1913 were $127,504.75 ;
1912, $75,636.60; 1911, $59,681.09. The debt limit of the city is twenty
per cent, of the assessed value of taxable property and when a reduction
is made in the assessment of buildings, a reduction automatically results
in the borrowing power of the city. The outstanding authorized debenture
debt on December 31, 1911, was $3,254,021 ; 1912, $5,916,842.81 ; and 1913,
$8,280,137.52. The debt situation on the first day of July, 1914, is shown in
the following table :

(1) A poll tax is levied on all males over twenty-one years of age, who have
resided in the city for more than three months and whose names do not appear upon
the assessment lists.



57

STATEMENT OF DEBENTURE INDEBTEDNESS— JULY 1, 1914

Local
Improvement
Public ( Special

Total. Utility. Assessment). General.

Total Debentures

authorized.. $8,825,779.43
Less Margins. 1,333.33



,824,446.10 $3,469,762.27 $2,274,036.29 $3,080,647.54
Less Debentures unsold 1,214,482.46 311,942.47 503,047.15 399,492.84



Balance— Debentures issued.. $7,609,963.64 $3,157,819.80 $1,770,989.14 $2,681,154.70
Less Sinking

Fund $427,484.28

Repayment... 4,188.81

431,673.09 97,774.08 222,745.70 111,153.31



Balance— Net Debenture Debt $7,178,290.55 $3,060,045.72 $1,548,243.44 $2,570,001.39



As will be seen, at this date the net debenture debt for all purposes
amounted to $7,178,290.55. The statement of general revenues and expendi-
tures shows that the interest on the sinking fund and charges on the general
debentures alone amounted in 1911 to $168,078. A sinking fund of $427,-
484.28 has been accumulated by July 1, 1914, against the outstanding debt.
The statement made at the end of 1913 shows that the city has taken
advantage of approximately fifty per cent, of its borrowing power. The
loans made in 1911 were placed at 95.8 per cent.; those made in 1912, at
95.5 per cent. In 1913, when debentures were issued to the face value
of $1,988,812.25, $1,706,493.03 was realized from the sale. The rate of
interest on the outstanding debentures varies from four and one-half to five
and one-half per cent.

THE TAX SYSTEM

The total tax levied in Saskatoon in 1913 was $1,217,692.44. Of this
sum, local improvement rates yielded $203,024.75. The general municipal
rate produced $759,435.75; the public library rate, $11,250.89; and the
various school rates, $243,981.05.

As in Regina, local improvements are expensive, because of the distance
from the necessary raw materials and the low temperatures sometimes
present. The standard lot in Saskatoon is twenty-five feet in width. The
owners of real estate are subjected to a charge for water and sewer mains
on a frontage basis. For a twenty-five foot lot this annual charge amounts
to $7.70. In case pavements and sidewalks were placed in front of the house,
the annual local improvement charge against the abutting property would
amount to $18.69.

Saskatoon operates under the provisions of the Saskatchewan City Act,
which has been analyzed above. (1) In 1911, the assessment of buildings
in Saskatoon was reduced to fifty per cent. In 1912 the assessment was

(1) Cf. supra, p. 37.



58

further reduced to thirty-five per cent., and in 1913 to twenty-five per cent.,
at which figure it now stands. (1) Until 1914 a tax was levied on income,
but the incomes subject to assessment were so small as to make this class
extremely unimportant. (2) In 1914 the tax on income was not levied but
in 1915 it was reintroduced. A business tax is imposed on a floor-space
basis. The assessed value per square foot varies from ten cents in the case of
wood yards to $7.50 in the case of banks. The business tax meets with
very general approbation, although some complaint is found with the prac-
tice of assessing upper floors of a business establishment at the same rate
as the lower floors. Some business men complained also that the rate of
two dollars per square foot on general business was too high, but these, of
course, are minor details.

In the table which follows are given the assessed values of taxable
property in Saskatoon from the time of its incorporation as a village :

ASSESSED VALUE OF TAXABLE PROPERTY

Buildings Gross Net

Land. and Im- Business. Income. Assess- Exemp- Assess-
provements. ment. lions. ment.



1903








• • • •






$325,380


1904














447,321


1905








• • • •






743,002


1906








• • • •






2,517,145


1907














6,479,202


1908








• . • •







7,205,285


1909


$6,076,660


$1,520,015


$l,130,197(a)


$3,800


$8,730,672


$574,315


8,156,357


1910


8,639,760


2,047,590


791,610(a)


12,800


11,491,760


920,545


10,571,215


1911


21,525,758


2,575,070


1,1 17,072 (a)


3,200


25,221,100


1,826,555


23,394,545


1912


35,471,415


2,899,395


1,576,693


2,000


39,949,503


3,052,005


36,897,498


1913


54,463,930


3,573,980


2,003,346


7,120


60,048,376


3,793,879


56,254,497


1914


54,461,350

V


3,920,505

>


2,091,164




60,473,019


3,833,435


56,639,584



1915 $49,727,875



(a) These figures apparently include the sum of $35,640, which was the assessed
value of the franchise of a telephone company.

It will be noted that, in 1911, in spite of the fact that the assessment
on improvements was reduced ten per cent., the value of the buildings
assessed increased from $2,047,590 to $2,575,070. In 1912, in spite of a
further decrease in the assessed value of fifteen per cent. ; the assessment
figures showed a further increase of some $300,000. In 1913 again, when
another ten per cent, was taken oflf, the assessed value of buildings leaped
from $2,899,395 to $3,573,980. It appears that, in the period during which
the assessment of buildings was reduced from sixty to twenty-five per cent.,

(1) There is some consideration being given in Saskatoon at present to a pro-
posal to increase the assessment on buildings.

(2) The receipts in the treasury in 1913 from the income tax amounted to only
$129.60.



S9



the tax base showed no decrease, but on the contrary increased from
$10,571,215 to $56,254,497. For, not only did the assessed value of build-
ings show no decline, but during the same period the assessment on land and
on business increased enormously.

According to the statement of Assistant Assessor Smith, land values in
Saskatoon have never been assessed at their full cash value. In 1913 he
estimates that the assessment approximated ninety per cent, of the fair
cash value of the land. During the three years before 1913, however, the
assessment was only about eighty per cent, of the full cash value of the land.
Before 1910 the assessment figures represent about ninety per cent, of the
fair cash value. When one examines the assessment figures for particular
pieces of land through this period of years, he can readily see how a careful
assessor would be likely to drop his figures behind his general advance in
values. The remarkable increase of land values during these years is
plainly shown in the table given above. From 1910 to 1913 the assessed
values of land increased from $8,639,760 to $54,463,930. Many individual
pieces of property trebled in value in these four years. It is, of course,
extremely difficult to ascertain fair cash values in a town which is growing
as rapidly as Saskatoon was growing during those years. The 1913 assess-
ment figures for land were allowed to remain practically unchanged in
1914.(1) Recently Saskatoon has been affected by the severe depression
which obtains all through the Canadian Northwest and the assessment
returns indicate that there has been a substantial contraction in values since

1913. The 1915 figures are approximately fifteen per cent, below those for

1914. The 1914 figures probably are somewhat high.

As is to be expected, in view of the increase in the tax base, it was

found unnecessary to increase the tax rate. Indeed, in 1911, a reduction

of three mills was made, and in 1914 a further slight reduction was found

possible. (2)

TAX RATES



















Total














Total




(Separate












Separate


(Public




School




General


Public


High


Public


(Catholic)


School




Sup-




Municipal.


Library.


School.


School.


School.


Supporter).


porter).








^




1 V






i


1906




Y






18.




1907


14.5






s.s






20.




1908


13.2






5.






18.2




1909


17.5






2.5






20.




1910


16.4






4.6






21.




1911


13.






5.






18.




1912


14.




.5


3.5


^ f

5.


18.




19.5


1913


13.5


.2


.2


4.1


4.5


18.




18.4


1914


12.


.15


.4


5.


5.


17.55


17.55



(1) The 1913 assessment was made the legal assessment for 1914 by an act of the
legislature. This was done to facilitate the introduction of a semi-annual collection
system,

(2) These statements apply to the tax rate paid by public school supporters,
rate paid by separate school supporters showed an increase in 1912.



The



60

The separate school rate in Saskatoon appUes to only a very small part
of the tax base. In 1913 the public school rate applied to a base of
$51,999,467, and the separate school rate to a base of $4,336,904.

The tax levies in Saskatoon for each year from 1908 to 1914 are given
in the following table:

TAX LEVIES

General. School. Library. Total.

1908 $95,109 76

1909 142,736 25

1910 176,277 68

1911 304,129 05 $116,972 73 $421,10178

1912 516,564 83 150,251 79 666,816 62

1913 759,435 75 243,981 05 $11,250 89 1,014,667 69

1914 678,692 57 305,854 13 8,490 39 993,037 09



The item of unpaid taxes in Saskatoon, on December 31, 1912, was
$321,635.21. By the same date, 1913, this amount had increased to
$576,933.97.

Compared with the size of the tax levy, these amounts are indeed
exceedingly large. In 1913 approximately 1,500 lots were sold for taxes.
Practically all of these were redeemed, however, before the redemption
period expired, on December 1, 1914.

The testimony of the citizens of Saskatoon is that because of the great
depression of the real estate market, and because of the large amount of
vacant land which is held for speculative purposes, considerable distress has
been experienced in paying taxes. The burden on the man of small means
may be gathered from the following statement: the typical lot is twenty-
five by one hundred and forty feet ; such lots can be secured in fairly good
neighborhoods from $900 to $1,000. The house which would be put up by
a man in modest circumstances would probably cost about $1,500; assessed
at twenty-five per cent, of its value, plus the value of the lot, and at the
1914 tax rate, this means the taxes would amount to approximately $22.
In addition he would be subject to a special assessment charge, which would
vary from approximately $8 to $19, depending upon the number of local
improvements.

DATA FOR JUDGING THE EFFECTS OF THE SYSTEM

Building Operations

In Saskatoon no building permit is issued for work which involves the
expenditure of less than $100. The figures include, however, permits
issued for removals as well as for construction of new buildings. In 1914
fully one-third of the permits issued were for removals. The following
table shows the building operations in Saskatoon since 1907:



61

BUILDING OPERATIONS



No. of
Permits. Value of Buildings.



1907 70 $377,21100

1908 62 115,635 00

1909 255 1,002,055 00

1910 433 2,817,771 00



1911 791 5,111,306 00

rjan $13,880 00

Feb 69,700 00

Mar 206,525 00

Apr 1,485,700 00

May 1,257,195 00

June 1,601,000 00

19121 July 930,895 00

Aug 1,130,550 00

Sept 363,905 00

Oct 323,145 00

Nov 175,910 00

Dec 82,125 00

7,640,530 00

1 783

Jan ' . . $58,220 00

Feb 62,000 00

Mar 251,685 00

Apr 559,170 00

May 679,050 00

June 249,310 00

1913 1 July 374,300 00

Aug 100,550 00

Sept 76,150 00

Oct 118,350 00

Nov 21,400 00

Dec 3,700 00

2,553,885 00

854

Jan $2,200 00

Feb 9,550 00

Mar 22.700 00

19141 Apr 96,250 00

I May 64,550 00

I June 106,700 00

301,950 00

309

The years of the reductions, 1911, 1912 and 1913, were years of great
activity in building.

Of the 854 permits issued in 1913, 686 were for residences, and sixteen
were for buildings of a value of more than $10,000.

The movement toward apartment building has not yet become very
great, although several are now being built. At the present time there are,
according to the estimate of the building inspector, about twelve buildings
devoted exclusively to apartments. Until last year the board of health did
not permit the use of the upper floors in business buildings for living pur-
poses. The dull times which have recently descended upon Saskatoon have
influenced the board of health to abolish this restriction, so that at the pres-
ent time there are a number of business buildings whose upper floors are
being used for apartment purposes.

Under the provisions of a law passed April 2, 1913, the heights of build-



62

ings in Saskatoon are limited to ten stories.(l) At the present time the
highest building is eight stories. There are some twenty reinforced con-
crete buildings over five stories high.

Credit Conditions

According to the estimate of Mr. George Martin, of the firm of Martin
& Hargraves, financial agents and real estate dealers, the loan companies
which sell bonds abroad and loan money on western real estate furnish ap-
proximately sixty-five per cent, of the loanable funds available for building
purposes in Saskatoon. Next in importance to the loan companies as a
source of such funds are the financial agents representing private individuals
seeking investments for their capital ; approximately twenty per cent, of the
funds comes from this source. The remaining fifteen per cent, is secured
from the life insurance companies. In placing permanent loans on im-
proved property, the lender is accustomed to restrict his advance to from
forty to fifty per cent, of a conservative valuation of the land and to the
same percentage of the cost of the building. Loans on unimproved real
estate may be secured only at extremely high rates of interest and only for a
very small percentage of the apparent value of the property. Instances
were quoted of ten and twelve per cent, interest being paid for loans re-
stricted to one-fifth of a conservative valuation of the land. The residents
of Saskatoon attach no significance to the tax system as a cause for the high
security and high interest rates demanded for loans. Everyone of whom
inquiry was made testified that there had been no effect upon sources of
loanable funds due to the tax system. (2)

Thus far the citizens of Saskatoon seem to have had no difficulty in
meeting the loans which they have placed upon their property. Mr. Hugh
Smith, the assistant assessor, states that he has never heard of a mortgage
foreclosure upon land in Saskatoon.

Land Values

From material already introduced, (3) it has become evident that the
extremely rapid rise in land values in Saskatoon has been certainly arrested
and perhaps changed recently into a decline. Few persons in Saskatoon
attach any importance to the tax system as a cause for the present state of
the real estate market. Several, however, spoke of the heavy carrying
charge on land, due to the tax burden, as a factor operating to render land
an unattractive form of investment.

Rents

The testimony of the citizens of Saskatoon is unanimous to the effect
that the rent situation has been highly abnormal in that city. Until recently,
Mr. A. H. Hanson testifies, a man with a building to rent could ask about

(1) "No building shall hereafter be erected or altered to exceed ten stories in
height."

(2) Among those consulted on this point where Mayor Harrison, Mr. George
Martin, Mr. Hugh Smith, and Mr. A. H. Hanson.

(3) Cf. supra, p. 59.



63

what he chose since there was a great under-supply of buildings of all kinds.
Recently rents have taken a great tumble. In the business district they
have dropped approximately fifty per cent., and in the residence district
the drop has been almost as large. Alderman MacMillan feels that the
tax system is partly responsible for this drop, in that it stimulated building
and thus increased the supply of available quarters. Most of the citizens
approached with regard to this matter, however, could see no connection
between the tax system and the course which rents have taken.

Congestion

There are 50,262 parcels of real estate assessed in Saskatoon. Assist-
ant Assessor Smith believes that this figure represents approximately the
number of building sites available in the town. Building Inspector Harri-
son estimates that there are between 7,000 and 8,000 buildings covering
between 8,000 and 9,000 lots. These figures would indicate that approxi-
mately five-sixths of the land within the city limits is at present unimproved.

There are 8,480 acres within the city limits. If the population is
28,000, there are approximately 3.3 persons to the acre.

The building regulations provide that a house may not be made more
than twenty feet in width when placed upon a twenty-five foot lot.

Home Ownership

Building Inspector Harrison estimates that two-thirds of the houses in
the town are occupied by their owners. Assistant Assessor Smith places
the figure at sixty per cent., and in this estimate he is supported by Mr.
George Martin.

Speculation

The fact that five-sixths of the land within the city limits is not in
use, would indicate a large degree of speculation in the city. Here, as else-
where, the custom of men of modest income investing in an extra lot or
two as a speculation is quite common. Even in the poor residence districts,
the assessment officials state, approximately one man in every twelve or
fifteen owns a piece of vacant real estate which he is holding in the hope of
a rise in value. Thus far the system of taxation seems not to have pre-
vented practices of this sort. What the experience of the speculative in-
terests during this time of depression may have upon the future cannot be
accurately foretold.

General Prosperity
POPULATION

1903 113 1909 9,000

1904 1910 12,383

1905 1911 18,096(a)

1906 3,011 1912 27,527

1907 4,500 1913 30,000(b)

1908 6,650 1914 28,000(b)

(a) The data upon which this figure is based was collected in October. It is
not the Dominion census figure, (b) Estimated.



64



SCHOOL ENROLLMENT (a)



Public School. Separate School.



1910 1,325

1911 1,738

1912 2,508

1913 3,192



75
130
190



(a) The data in this table was very kindly furnished by Mr. H. H. Smith, superin-
tendent of the schools of Saskatoon.



BANK CLEARINGS



1911.



1912.



1913.



1914.



January $3,321,645 00

February 3,509,684 00

March 3,853,317 00

April 3,729,268 00

May 4,746,743 00

June 4,678,342 00

July 5,086,121 00

August 5,401,743 00

September 5,456,902 00

October 6,561,005 00

November 9,059,092 00

December 8,687,086 00



$7,010,084 00

7,028,056 00

8,403,431 00

9,307,095 00

10,598,108 CO

8,958,087 00

9,018,003 00

9,122,020 00

9,643,007 00

11,430,785 00

13,238,717 00

12,141,084 00



$9,096,067 46
7,210,415 83
7,677,047 58
8,916,740 34
9,342,785 94
7,466,978 31
7,484,875 25
6,136,479 20
6,429,519 74
8,597,272 60
9,261,521 n
8,415,019 25



$6,385,692 57
4,430,814 30
5,119,383 75
5,486,916 13
4,921,951 69
5,110,060 68



$64,090,948 00 $115,898,477 00 $96,034,723 27 $31,454,819 12



RECEIPTS FROM STAMP SALES



Year ending March 31, 1906.

" 1907.

" 1908.

<( « (< « 1909

" 1910.'

" 1911.

" 1912.

" 1913.



Apr $10,834 00

May 10,959 00



Year ending March 31, 1914



June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.



10,424 00

10,020 00

9,086 00

10,340 00

12.585 00

11,864 00

14,060 00

9,870 00

8,800 00

10,300 00



Apr $10,480 00

May 10,151 00

June 9,844 00



$9,985 00
11,950 00
20,480 00
25,544 00
34,204 00
58,346 00
81,355 00
118,646 00



129,142 00



30,475 00



cs

GROSS POSTAL REVENUE (a)

Year ending June 30, 1900 $442 82

" " 1901 245 80

" " 1902 666 34

" " 1903 2,055 57

" " 1904 4,195 45

" " 1905 6,335 44

" " 1906 9,985 76

Nine months ending March 31, 1907 11,619 82

Year ending March 31, 1908 19,711 21

" 1909 25,344 80

" 1910 37,204 04

" 1911 59,829 26

" 1912 84,119 61

" 1913 127,328 22

(a) The data in the above statement is taken from the reports of the Postmaster
General.

The data presented above indicate that the reductions in the assessment
of improvements in 1911, 1912 and 1913 had no serious immediate effects
upon general economic prosperity.

STATUS OF PUBLIC OPINION

Summaries of Interviews
A high city official :

The system in force offers an inducement to build and has a tend-
ency to lower rents. There have been no noticeable effects upon specu-
lation. The system is now beginning to operate to the disadvantage of
the man who owns unimproved real estate. The present rate of assess-
ment on buildings is too low. It would be better to raise it to at least
thirty-five per cent.

A city official :

The system stimulates building but seems to have no effect upon
rents. It has not the slightest effect upon speculation. The present
rate of twenty-five per cent, on buildings is fairly satisfactory and the
council will not reduce this rate.

A city official :

The plan in force stimulates building and on the whole has a tend-
ency to retard speculation.

A city official:

The system stimulates building but has not had any effect upon
speculation. The rent situation is abnormal in Saskatoon. During
recent years the demand has been so great for buildings that exceedingly
high rents were obtainable. The reduction in the rate of assessment on
buildings has not proceeded further than twenty-five per cent, because
land values have ceased to expand. To reduce further the assessment
of buildings would, under these conditions, involve an increased tax rate
which is very undesirable from the point of view of advertising and
publicity. Anyway, buildings should be taxed on at least twenty-five
per cent, valuation, for they require special service such as fire and
police protection.

A city official :

The plan of underassessing buildings is a good one. It stimulates
building. It has thus far, however, had no effect upon speculation. But



66

people until recently have not taken taxes into consideration. Here-
after the effect upon speculation may be expected to become apparent.

A city official :

It seems just that buildings should be assessed at a somewhat lower
rate than land; and twenty-five per cent, seems a fairly satisfactory
figure. Although formerly a single taxer I do not favor a further
reduction in Saskatoon. There is no evidence of any desire on the
part of the people of the community to return to a higher assessment
of buildings. It is difficult to say whether the system has really had any
particular effect in stimulating building. It probably has retarded
speculation somewhat.

An alderman ; a large merchant :

The system in force was primarily a real estate movement at the
beginning. No ill effects have developed and the whole tax on buildings
will probably be taken off later. The system operates to encourage
building and to lower rents. Rents of store rooms have dropped from
about $300 to $175 a month. This drop is traceable to some extent



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 6 of 31)