Whitehorse City Council is again considering changes to how much of a break non-profit organizations and similar groups get on their property taxes.
City officials insist the move is all about transparency and equality.
But non-profits say that even a small increase to the taxes they pay is far too significant to their tight budgets.
A formula for calculating how much tax abatement an organization can receive is scheduled for a vote on Monday.
Trying to understand the amount of tax relief an organization gets from the city is a confusing prospect. That’s part of the problem, according to the city.
Some organizations have all of their property taxes covered thanks to individual resolutions passed decades ago. Others have the promise of tax help written into their leases, and still others have to apply to the city every year asking for a grant to cover some or all of their property tax.
City manager Christine Smith said this “ad hoc” way of managing things needs to be updated.
“We’re moving the government into a modern era. Governments now are meant to be transparent, fair, open and accountable,” she said.
The proposed new formula would apply to every organization that wants some amount of its property taxes waived.
It uses a group’s revenue combined with its “current assets” to determine what level of tax break they qualify for. That could range from 100 per cent coverage to 50 per cent.
“Current assets” is a term used in the accounting world to describe assets that are expected to be used within the year. It means things like cash, GICs, accounts receivable and inventory. It does not include fixed assets like land and buildings.
The changes wouldn’t take affect until January, so it’s difficult to say exactly what the dollar amount would look like for individual groups.
But some of them are worried.
Early estimates suggest the MacBride Museum will have to pay about $5,000 a year.
For decades the entire property tax cost for the downtown museum – about $27,000 – has been waived.
Board chair Keith Halliday said a $5,000 increase doesn’t look like a lot on paper, but it is a lot for an organization the size of MacBride.
“That’s a significant amount for an organization with core funding of about $110,000,” he said.
MacBride uses that core to grow its annual budget to about $500,000. It does that by paying staff to run events and do front-of house sales and by applying for grants that require them to match the cash.
“Our biggest expense is staffing and any tax impacts will force us to reduce staff hours, which will force cuts to operations that are yet to be determined,” according to a letter to the city from the board.
The letter suggests the museum is being penalized because it has a fiscal year that ends in December, not March.
“We have cash on hand on Dec. 31 to tide us over until the end of the territorial fiscal year on March 31st. This inflates our current assets and triggers more tax,” the letter reads.
Halliday questioned whether it is a good idea for the city to reduce this “quite modest expense” when groups are doing such good work.
That’s a sentiment shared by Challenge executive director Rick Goodfellow.
The organization, which helps Yukoners with disabilities, gets part of its property taxes covered by the city.
Under the new formula, it’s estimated Challenge would owe about $2,500 more annually.
“Really honest and for true, it’s one of those things where you go, how much is that $2,500, how much difference is that going to make in the city’s budget, is that really going to make such a big deal?” he said.
But it would be a big deal to the organization, he said.
Goodfellow said Challenge usually runs a deficit and counts on income from its Career Industries woodshop to make up the difference.
In all it costs about $740,000 a year to run the organization.
But the portion used for the building is much smaller and costs like heat and electricity rise every year, he said.
“When we’re talking about a $75,000 O and M budget for our building, $2,500 doesn’t sound like much. But when we’re running a deficit already it just adds to it. It’s a big deal to us.”
In all, about 30 groups a year apply for this type of help from the city, director of corporate services Robert Fendrick said. The pot is usually set at $140,000.
Last year it received a one-time bump of $20,000 and the decision on this new formula was deferred until consultations with service groups were done.
Many of those organizations will not see a difference in the money they get.
Of the organizations that were looked at, Fendrick estimates the total difference is only about $23,000.
Having reserve cash in the bank is important for any well-run city, Smith said.
“Because they basically have to look at all the infrastructure that you see around you when you look around Whitehorse. Think about what’s underground as well. We have to be able to replace that, anytime.”
She said the city is prepared to make this a phased-in approach, if it is approved, meaning the reductions could happen over a few years.
“We don’t want it to hurt anybody. We just want everybody to know how to deal with the City of Whitehorse when they get their grant.”
The City of Whitehorse allocates just over $1 million annually in multiple grant pools.
The city is planning on reviewing all grant-related policies eventually.
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