The city of Port Coquitlam is exploring ways of levelling out business property tax increases in an effort to avoid large fluctuations in rates associated to changes in assessed land value.
Often, the city tax rates call for a tax increase of only a few per cent but if land values see dramatic increases taxes can rise exponentially, making it difficult for businesses to plan their budgets.
"It hurts them a lot," Mayor Greg Moore said during Monday's finance and intergovernmental affairs committee meeting. "You really can't predict it."
Fluctuations in assessments can result from one business overpaying for a piece of real estate, he added. The inflated land cost is then taken into account when BC Assessment rates the value of neighbouring land.
One of the methods the city is considering is three-year assessment averaging. Under such a system, the average land value over a three-year period would be used when establishing mill rates - i.e., the price per thousand dollars of assessed value - smoothing out the sharp increases that can occur in property values in a given year.
But while three-year averaging gives a certain degree of cost certainty to local businesses, there are downsides.
A ratepayer on the lower end of the tax scale could potentially end up paying more to average out the businesses on the higher end of the scale that would be paying less.
"Numerically, that is what can happen," said Jackie Gorton, the city's chief financial officer. "It is not a given because ratepayers are averaged out within their property class."
Still, the potential for smaller businesses to end up paying more had one councillor questioning whether he could support the initiative during Monday's meeting.
Coun. Dean Washington said that even for lower ratepayers, taxes are already too high. Council should be careful when considering a tax scheme that could potentially reduce the rate for larger businesses while increasing rates for smaller companies in the same property class, he said.
"Small businesses, we are already hurting," he said. "I would be very cautious about moving in that direction."
Numerous steps lie ahead should PoCo decide to adopt a three-year assessment average for its business tax class.
Staff would have to report to a full council meeting and public consultations would then take place. The city would likely have to apply to the Ministry of Community, Sport and Cultural Development for permission to make the changes.
There are also legal ramifications, according to Gorton, who told councillors the strategy could contravene section 8 of the Community Charter, which outlines the fundamental powers of a municipality. A legal opinion would have to be sought before the city could move ahead with the proposal.