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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 Local Improvement Districts

Before the passage of the Rural Municipalities Act of 1912 the usual
form of local government in the rural sections was the local improvement
district. The revenues for the support of this type of government came
from a small land tax levied on the acreage basis by the local authorities. ( 1 )
The tax varied from one to seven and one-half cents per acre. The law has
been so changed as to make it impossible for additional local improvement
districts to be organized. All local governments to be organized in the rural
districts hereafter will come under the operation of the Rural Municipality
Act.

Provisions were inserted in 1913 in the Town Act, the Village Act and
the Rural Municipality Act changing the minimum amount of taxes payable
by individual property owners. Under the Act as it stood previous to this
time the minimum amount of taxes payable by each person was two dollars
for municipal purposes and two dollars for school purposes. Because of diffi-
culties of administration a change was made which provided that the mini-
mum tax for each lot or tract or portion thereof should be fixed at one
dollar for municipal purposes and one dollar for school purposes, or two
dollars in all. This change is causing some apprehension in the rural munici-
palities where there are many lots assessed at as low a figure as ten dollars
apiece. In such cases an annual payment of two dollars on each lot is
clearly out of the question and it is feared that the enforcement of the law
will result in the wholesale confiscation of land.

Opinions of Land Value Taxation from the Provincial Point of View

A high provincial official :

The efficacy of the single tax system as applied in these western
provinces cannot be statistically demonstrated. Attempts to do so have
resulted in the gross misuse of statistics. Building operations, for
instance, are not due entirely to the single tax. People have built out
here because there was a great opportunity for profit. Indeed, until
the last year or two, taxes have not been taken into consideration. A
good many people are now taking their taxes into consideration, how-
ever.

The tax system was imposed too suddenly upon the small towns
in the province. It results in the small towns in a fairly restricted tax
base, and this involves strict economy unless the tax rate is to be put
on a high level. The imposition of a like system in New York would
have little effect, on the whole ; it might effect some individuals unfa-
vorably. There is a question of ethics involved when a disturbance of
present values is contemplated ; but property owners are always urging
questions of ethics.
A high provincial official :

" I do not particularly believe in the single tax, but I thought it
would be interesting to try an experiment with it, and that this would

(1) Chapter 11, Statutes of Alberta, 1907 (assented to March IS, 1907), as
amended by chapter 20, 1908 (assented to March 5, 1908), chapter 5 of 1909 (assented
to February 25, 1909), chapter 2 of 1910 (2d session) (assented to December 16, 1910),
and chapter 4 of 1911-12 (assented to February 16, 1912). 1913 amendments, chapter
9, "An Act to Amend the Statute Law" (assented to March 26, 1913).



84

be a good place to do it." On the whole, it is a good thing, when a
country is new and where capital is scarce, where everybody owns land
and there is a scarcity of buildings. But when a town has reached its
normal development it should go back to taxing buildings and other
things as well. The system was put into operation too suddenly in
the towns, and some of them, particularly the mining towns, were em-
barrassed. The act was passed in 1912, because it was thought that
would be something novel which would attract attention to Alberta.

An administrator in the provincial service :

When speculation is brisk, the exemption of buildings from taxa-
tion seems to have no effect upon it, but during slow times the heavy
carrying charges make the practice of speculation unattractive. In
Edmonton rents are going down, and there is some connection between
this phenomenon and the tax system. The supply of buildings has
increased, and some of the building that has been done is undoubtedly
due to the stimulus of the tax system. The whole system has worked
very well. Its operation has, of course, been accompanied by a won-
derful increase in realty values.

The following letter was received from Mr, John Perrie, Deputy
Minister of Municipal Affairs, under date of July 11th :

With reference to your enquiry as to whether or not the system of
taxation on land values only is working out successfully in this province,
I may say that as far as our rural municipalities are concerned the
question of changing from taxation of land values to taxation of lands,
personal property and improvements has never been raised, and any
such move would be strongly opposed by our rural population. With
reference to villages and towns I may say that at the last two conven-
tions of the Urban Union of Alberta Municipalities, the question has
come up in the shape of a resolution to revert to the system of taxing
personal property and improvements as well as land, but on each occa-
sion it has been voted down. At the last convention there were only
three votes cast in favor of the resolution referred to.

With reference to our cities, it might be noted that each of our
cities carries on business under its own special charter granted by the
legislature. The provisions of these charters are amended from time to
time and the general tendency of late has been for the cities to ask for
amendments reducing taxes on personal property and improvements,
there being less revenue raised by our cities from taxation of personal
property and improvements than ever before.



s.



85
1. Edmonton

THE CITY

In the city of Edmonton there is the closest approach to the single tax
to be found in any large city in Canada. The city is, of course, subject to
the various provincial and Dominion taxes, but practically all of the city
revenues for ordinary purposes are raised from a tax on the land.

Edmonton is not a good place to study the effects of a transition to the
single tax system, however, for the plan of entirely exempting improvements
from taxation was adopted very early — when the community received its
charter as a city in 1904. At this time the population was only 7,500. Its
population in 1914 was 72,516. It should be remembered, however, that
not all of this increase is due to the natural growth of Edmonton itself.
In February, 1912, Strathcona, a municipality with a population of 6,000,
lying across the river from Edmonton, was absorbed. The statistics of
Edmonton have often been used without taking this fact into consideration
and contrasts drawn between the Edmonton which existed before the
amalgamation and that which exists to-day.

The site on which the city now stands was selected in the eighteenth
century by the Hudson's Bay Company for a trading post. When the com-
pany surrendered its sovereignty it retained 3,000 acres contiguous to Fort
Edmonton,(l) a fact which has a very close connection with the single-tax
history of Edmonton in late years. The city had no development beyond
the fur-trading stage until very recent times. In the eighties it began to
receive a share of the immigration brought west by the newly constructed
Canadian Pacific Railway about two hundred miles to the south. Its growth
since that time has been truly remarkable.

Edmonton is located on the Saskatchewan River, a stream which is
navigable for small steamers, and is served by three railways : The Canadian
Pacific, Canadian Northern, and the Grand Trunk Pacific. The agricul-
tural land surrounding the city is rich and the farmers are devoting much
of their energy to mixed farming with very satisfactory results.

To the north of Edmonton lies the Peace River Valley, a great tract of
40,000,000 acres, rich in timber, mineral and agricultural resources, which
is now being rapidly settled and which looks to Edmonton as its natural
outlet.

The city, of course, owes its chief importance to its agricultural hinter-
land. Most of the industries which have been established are directly
dependent upon it. The chief advantage which Edmonton offers the manu-
facturer is a large supply of cheap coal. The city is underlaid with a great
bed of lignite and some thirty mines are operated in the immediate vicinity.
Coal of low quality can be supplied for seventy-five cents a ton. The best

(1) Single Tax Review, Sept.-Oct., 1911, p. 31 et seq.



86

coal for domestic use sells, however, for $4.50 a ton. The coal deteriorates
rapidly when exposed to the weather, which, of course, limits its market
radius; but excellent results are claimed for it when used on the ground.

The list of the industries of Edmonton furnished by the industrial
commissioner includes 125 concerns. The largest and most important of
these are the Edmonton City Dairy, which employs 225 men and has a
monthly output of $150,000; the lumber mill of John Walters, Ltd., employ-
ing 375 men, with a monthly product of $80,000; and two packing plants,
which together employ 815 men and have a total output valued at approxi-
mately $160,000.

Until recently it was possible for a manufacturer who intended to locate
at Edmonton to secure valuable concessions and bonuses. A number of
the concerns which are carrying on business in Edmonton at present were
given some substantial encouragement to aid in their establishment. Under
the provisions of the city charter as it stood before 1913 it was possible,
by obtaining the consent of two-thirds of the burgesses voting, to grant
bonuses to business concerns in the form of cash gifts from the city treas-
ury, of subscriptions to stock, guarantees of debentures, or otherwise. ( 1 )
The services of the public utilities could be given at a reduction or absolutely
free for a period of five years without a vote of the burgesses. In 1913,
however, the provincial legislature passed an act forbidding such practices.
As the law at present stands, the city can grant no direct bonuses. It may
sell the services of its public utilities at cost, however, and may sell or lease
industrial sites at a price which will cover the cost of such sites to the
city plus six per cent, interest. The city owns lands which are suitable for
factory sites and is in a position to take advantage of this provision. (2)

The city established an industrial department in 1912, whose function
it is to disseminate information concerning the city and induce settlers and
manufacturers to locate in Edmonton. The city grants approximately
$21,000 a year to this department.

The enormous growth of Edmonton in the last few years is clearly
reflected in the finances of the city. The following statement shows the
receipts from taxes for selected years from 1901 to 1912: (3)

RECEIPTS FROM TAXATION

1901 $32,622.69

1904 65,312.56

1906 161,766.86

General Taxes Special Frontage
(Gross) (a). Taxes.

1909 $419,522.97 $62,953.40

1911 572,990.08 94,295.05

1912 1,358,850.64 127,584.31

(a) This figure includes school taxes.

(1) City charter, sees. 224, 277.

(2) Ibid., sec. 15.

(3) Several years are unavailable for comparative purposes because the reports
are drawn for irregular periods, e. g., 1907 for eleven months, and 1913 for fourteen
months. Reports of some of the earlier years are not obtainable.



87

The accounts for 1913 are for fourteen months, the fiscal year having
been changed. In this period, ending December 31, 1913, special frontage
taxes yielded $413,690.74; the general taxes amounted to $2,982,176.23;
and the special water levy yielded $72,073.31 In 1904, when Edmonton
became a city, the total annual receipts, including capital and revenue receipts,
amounted to less than $300,000. The corresponding sum for the fourteen
months ending December 31, 1913, was approximately $15,250,000. The
great size of this is due to the fact that the city owns practically all of its
utilities, including the water works, the electric light and power plant, the
street railway, and the telephone system. The following table gives a sum-
mary of the financial situation of the various departments of the city gov-
ernment in Edmonton in 1912 and 1913:



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The General Fund (revenue and expenditure account) for the period
ending December 31, 1913, shows a grand total of $2,853,311.40, Of this
sum approximately five-sevenths came from taxes on land. Approximately
one-seventh more was received from frontage taxes. The remaining sums
came from varied sources.

The figures of indebtedness tell a story of enormous development.

CITY DEBT
I

General. Special. (a) Public Utilities. Total.

1901 $70,126 57 $21,953 96 $92,080 53

1904 177,305 36 61,677 91 238,983 27

1906 411,065 01 91,137 31 502,202 32

1909 1,356,979 22 726,316 93 $2,072,116 42 4,155,412 57

1911 3,074,834 19 1,057,381 25 3,475,328 90 7,607,544 94

1912 5,438,081 18 1,160,851 75 5,373,869 07 1 1,972,802 00

1913 8,468,418 35 4,332,423 16 9,450,655 28 22,251,496 79

(a) Only local improvement debentures are included in this item.

The outstanding debentures of the city on December 31, 1913, are
classified more fully as follows :

OUTSTANDING DEBENTURES, DECEMBER 31, 1913(a)

General $8,468,418 35

Electric Light and Power. 767,267 95

Waterworks 1,902,046 19

Street Railway 2,992,398 82

Power Plant 1,988,548 52

Telephone 1,800,393 80

Local Improvements 4,332,423 16



$22,251,496 79
(a) Annual Reports, 1913, p. 23.

The legal limitation upon the amount of debt which the city may incur
is fixed in the charter at " twenty per cent, of the total amount of the
assessment in respect of lands and special franchises according to the last
revised assessment roll."(l) It will be recalled that there are no special
franchises in Edmonton. The amount of the resources held by the sink-
ing fund and local improvements loans, to the extent to which they are
secured by special -assessments, may be deducted when calculating for this
purpose the total amount of debenture debt outstanding. (2)

The total charges for debt service, during the fourteen month period
ending December 31, 1913, amounted to $1,745,660.84.

The great majority of the debentures outstanding against the city
are to be redeemed by means of a sinking fund. The exceptions are a
few issues of the earlier years which were made payable in equal annual
installments on the annuity plan. The total resources of the sinkmg fund
on December 31, 1913, amounted to $867,397.33. Eighty per cent, of the

(1) City charter, sec. 291.

(2) Ihid., sees. 292, 406 (c).



90

sinking fund is invested in mortgages on real estate, $350,000 being invested
in one loan, secured chiefly by a large business block. Most of the remainder
of the sinking fund is invested in the city debentures or deposited in the
bank.

In 1914, because of the difficulty in securing loans upon favorable
terms, resort was made to short-term notes. Edmonton, in common with
the other cities of the Canadian Northwest, has felt the effects of the finan-
cial stringency and has been somewhat embarrassed in her efforts to finance
her various undertakings.

THE TAX SYSTEM

As has been seen above, the great bulk of the revenue of the city for
general purposes comes from the tax on land, the levy in 1913 amounting to
$2,982,176.23. The source second in importance is the special frontage tax
which, in the period ending December 31, 1913, yielded $413,690.74, not
counting the $72,073.31 from a special water levy.

Special assessments and frontage taxes are used to pay for the cost,
in whole or in part, of street pavements, sidewalks, curbs, gutters, boule-
vards (including shade trees and lawns in connection therewith), street
lighting, sewers and water mains. The city pays from general funds the
cost of improving the intersections of streets and contributes a fraction
varying from one-fifth to one-third of the remaining cost of pavement. The
cost of local improvements is approximately the same in Edmonton as in
Regina and Saskatoon. The charge for a full complement of improve-
ments involves the imposition of an annual charge of $27.30 upon the
owner of a thirty-three-foot lot.

The history of the tax system in Edmonton is a story of steady progress
toward the plan of taxing land values only. In this history, according to
the testimony of the citizens of the town, too much importance cannot be
attached to the influence of the land policy of the Hudson's Bay Company
in the city. Starting with an original tract of 3,000 acres, the company has
always been a predominant factor in the real estate situation. Even until
the present day the Hudson's Bay Company's holdings remain an incentive
to the city to pursue a policy of heavy taxation of land. Until 1912 the
company held unsubdivided a tract in the heart of the city approximately
a mile and a half long by a mile wide, using the land only as pasturage for a
herd of cattle. The assessor valued this land at the same rate as the land
surrounding it, in spite of the continued protests of the company, and his
assessments were regularly sustained. Finally, in 1912, the land was subdi-
vided and 1,500 lots sold. It is claimed that approximately $4,000,000 was
realized from the sale of these lots. The entire tract at the time was
assessed at $2,500,000. The 1,500 lots were a mere fraction of the total
tract, only two lots in a block being disposed of, the rest being retained
by the company for further expected increases.

It was by way of an effort to shift the burdens of taxation to the



91

Hudson's Bay Company and other non-resident owners of land that the
charter adopted in 1904 contained a provision exempting improvements
entirely from taxation. At that time provision was made for a poll tax,
an income tax, a business tax and a series of licenses. Gradually these
have been taken away until only a few licenses imposed for regulation
purposes remain.

The poll tax was done away with in 1910. This was a charge of $2
levied upon all men who were not property owners and who had resided in
the city three months.

In 1910 moreover the city abandoned the income tax. The attempt
had been made to place all incomes in excess of $1,000 upon the tax roll
where they were made subject to the regular tax rate.

The business tax was abolished in 1911. There is general agreement
that this tax worked admirably during the seven years it was in force but
was swept away in the general movement toward the single tax. The tax
was apportioned on the basis of floor space and character of the business,
the assessment per square foot varying from twenty cents, in the case of
factories and florists, to $4,121/^, in the case of loan and financial institu-
tions. The assessment thus arrived at was added to the regular base against
which the general city rate was extended. ( 1 )

By 1912 nothing but the licenses and land taxes remained. Licenses
had been applied to those businesses which needed regulation and those
which could not well be dealt with under the business tax provisions. In
1912 the licenses began to be materially reduced so that at present scarcely
any are imposed. The income from this source for the fourteen months
ending December 31, 1913, was only $32,876.80. The expenses connected
with the administration of the license department amounted to $7,009.42,
the net revenue being $25,867.38.

Under the provisions of section 319 of the city charter as it stands at
present the assessment in Edmonton is restricted to land and special fran-
chises. As there are no special franchises the entire assessment consists of
the land. The exemptions are fairly narrow. (2) In addition to the land
which belongs to the Crown, province and city, church lands are exempted
only to the extent of one acre and lands belonging to institutions of learning,
only to four acres. The rule of valuation is that " land shall be assessed
at its fair actual value, exclusive of the value of any buildings thereon."(3)
In reaching this valuation " regard may be had to its situation and the pur-
poses for which it is used or for which, if sold by the owner, it can, and
probably would be used in the next succeeding twelve months." Over-
assessment is made possible by a provision similar to that included in the
town and village acts. (4)

(1) Credit is given to Winnipeg for the original suggestion of a business tax.
But the floor-space plan, it is claimed, is an Edmonton product, developed without
assistance.

(2) Sec. 320.

(3) Sec. 321.

(4) Cf. supra, pp. 81, 82.



92

The work of assessment begins early in the calendar year and the assess-
ment rolls must be completed by April 30.(1) The tax rate is usually
struck about September 1.

The table which follows shows the assessed value of taxable property
in the city for each year from 1892 to date. Buildings, during the period
when they were taxed, were assessed at 75 per cent, of their real value.

ASSESSED VALUES OF TAXABLE PROPERTY, 1892-1914

Buildings
, , , and Total Net

Land, Exemp- Land, Improve- Assess-

Gross. tions. Net. ments. Business. Income. ment.

1892 $673,694

1893 964,005

1894 988,950

1895 1,131,780

1896 914,761

1897 768,630

1898 1,030,858

1899 1,188,249

1900 $393,081 $500,600 $323,150 $27,900 1,244,731

1901. 569,282 448,830 341,125 36,675 1,395,912

1902 815,255 493,945 367,650 47,570 1,724,420

1903(a) 1,986,710 668,565 535,600 17,255 3,208,130

1904 2,127,963 1,170,585 631,600 29,500 3,959,648

1905 5,314,405 1,248,880 57,700 6,620,985

1906 15,268,347 1,654,071 124,380 17,046,798

1907 19,544,155 2,251,710 189,835 21,985,700

1908 19,803,230 2,484,420 247,560 22,535,210

1909 $23,954,660 $1,165,650 22,789,010 2,516,860 279,120 25,584,990

1910 29,052,660 1,531,660 27,521,000 2,217,970 366,140 30,105,110

1911 47,089,130 2,517,380 44,571,750 1,922,990 46.494,740

1912 132,950,400 9,475,330 123,475,070 123,475,070

1913 202,858,590 14,319,480 188,539,110 188,539,110

1914 209,065,180 17,781,210 191,283,970 191,283,970

(a) There is evidently an error of thirty dollars in one of the items for 1903.



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