That stadium design will be one of the major issues discussed at tonight’s council meeting (5:30 pm, everyone is welcome). When the clerk’s office posted the agenda on Friday, there were 14 delegations coming out to speak on the subject (the vast majority are opposed to it). And I read on Twitter that the city clerk had extended the deadline for people to request to speak before council, so it’s possible that number will grow. Even if it doesn’t, that’s a lot of people. So, not only will the stadium discussion take up the bulk of council’s time tonight, it’ll probably dominate my post-council wrap-up.
As such, how about I devote today’s This Week At City Hall to something else that’s on the agenda? Specifically, the Mosaic Corporation’s property tax exemption.
The Mosaic property tax exemption has been percolating for a long time. Council originally approved it in late December of 2010.
What’s happening is the city has an Economic Development Incentive program that’s designed to attract businesses to the city by giving out property tax exemptions. The more jobs you’re going to provide, the higher wages you’re going to offer, the more sustainable and the higher your tech, then the bigger the tax exemption you’ll be given and the longer it will go on for. Companies can be approved for up to a 100 per cent property tax exemption for a maximum of five years.
And that’s what Mosaic is getting: five years, property-tax free in their new digs in Hill Tower III. Tonight, having approved the deal in 2010, council is passing the bylaw that makes it official. I imagine it’s waited so long because the tower has been under construction all this time. Mosaic’s offices should be ready to go right about now.
I’ve written about this deal before so apologies if I’m starting to sound like a broken record. (Here’s the piece I did on the blog back in 2010.) But I do find it a little… shall we say, “interesting” that Mosaic got the deal it did. Because they aren’t technically eligible for it.
According to the Economic Development Incentive program, Mosaic only qualifies for a five-year 75 per cent property tax exemption. Not 100 per cent.
Here’s what was in the original report (CR10-141):
Under the policy approved by City Council, [Mosaic] would qualify for a five year 75 per cent property tax exemption. RROC advises it also considered further factors, beyond the existing policy, and is recommending a five year exemption. The additional factors are related to economic benefit of the relocation and the history and philosophy of commitment to community.
In the appendix to the report, the process is further broken down. Companies that apply for this tax exemption are graded by RROC (Regina Regional Opportunities Commission) on various attributes. It’s RROC who makes a recommendation to council on how much of an exemption the company qualifies for. This is what RROC’s Larry Hiles had to say of Mosaic:
Our analysis and the corresponding points allocated total to 81.5 which is very close to the 100 points needed to attain a recommended exemption level of 5 years at 100%. Given the great economic benefit provided by high income professionals and the fact that Mosaic and its employees have exhibited exemplary service to Regina’s arts and cultural community, RROC management recommends that Mosaic be offered a 100% exemption for 5 years.
Okay. Fair enough. But the bit I find jarring is Hiles’ claim that Mosaic’s 81.5 points “is very close to the 100 points needed to attain a recommended exemption level of 5 years at 100%.” The number of points you need to get the 75 per cent exemption for five years is 75. And based on subtraction, 81.5 may be “close” to 100 but it is considerably closer to 75. What’s more, the actual policy says,
The number of points a business receives during the evaluation process determines it’s eligibility for a Property Tax Exemption; which may be for a period of up to 100% for up to 5 years. If the number of points received is between any two numbers provided in the table below, the lower of the two numbers determines the amount and term of the tax exemption.
So, not only is Mosaic’s score closer to the cut off for a 75 per cent tax exemption, the policy states explicitly that you round the number of points earned down.
No matter how you gussy it up, RROC and council cut Mosaic a special deal here.
And I actually remember the discussion at council over this and there was an acknowledgement that the rules were — they wouldn’t say “bent” but I will — that the rules were being bent in this case. But the argument went that the Economic Development Incentive program was going to be reviewed shortly and doubtless a company’s contributions to the community would be added to the list of point-earning things; so, it’s all good, Mosaic is getting a special deal but only because it soon wouldn’t be a special deal but rather the normal deal for everybody.
It was a decision lauded by some on council as an example of how council can be flexible.
Well, flash forward nearly another year later to November of 2011 and, as it turns out, the Economic Development Incentive program was reviewed. Sort of.
Here’s what the report on the review of the Economic Development Incentive program had to say,
While this review commenced, the administration became aware that the Province is conducting a review of the authority for property tax exemptions as well as other aspects of property taxation that impact the education portion of taxes. It is prudent to await the outcome of the provincial review which could impact the authority and structure of property tax exemptions.
Translation, the province is looking at whether these property tax exemptions are a good idea considering they cut back on the amount of money available for education purposes, so until we, as a city, know if we’re even allowed to continue offering these exemptions, we can’t really change the policy too much.
What city hall did end up doing was offering a property tax exemption to developers who build office space in downtown Regina. But those exemptions don’t stack with the office-relocation exemption that Mosaic qualified for, so that kind of falls outside this discussion.
Anyway, I guess what I’m getting at is Mosaic got a special deal on their property taxes because the rules were supposed to be changing right away. But here we are more than two years later and as far as I can tell, not only have the rules not changed that much, but the whole question of property tax exemptions is still up in the air.
And personally, I’ll be curious to see if there ever is a more thorough discussion of them. I get that council wants to have some kind of instrument that they can use to attract business to the city. But the fact is these exemptions reduce the pool of money that we have available to build and maintain the city. Plus, it would seem they reduce the amount of money available to schools and libraries, organizations that don’t have a say in how these exemptions get applied. That seems a little off to me.
And what seems even more off to me is how flexible and accommodating RROC and council seem to be when handing them out. The whole point of having rules that designate how much money a company doesn’t have to pay in taxes is so that corruption can’t develop in the system. The last thing we want is major corporations using their influence to bully the city into giving them tax breaks. And we certainly don’t want council or a commission doling out tax breaks to their pals or associates. The rules are there to stop that sort of thing happening.
So the fact that the rules were bent here (again, my word) should be treated with suspicion even though it only represents a loss of about $150,000 dollars to the city over five years.
And, as an aside, all of this isn’t to say that I think city hall can’t ever be flexible in the way they apply the rules. But I think that’s something that should be reserved for very special circumstances where the community benefit is overwhelming and the beneficiary of council’s flexibility is a comparatively underpowered group. In other words, I’m generally okay when council cuts an underdog a break, someone who doesn’t have an excess of influence to peddle.
The example I keep going back to is Souls Harbour Mission who, back in 2010 (around the same time Mosaic got their special deal), requested a tax break on a building they’d purchased that had an outstanding property tax bill attached to it. They were opening up a youth centre in a defunct church and it would have made their job considerably easier if they didn’t have to pay back the $112,858 debt the old property owner had run up. They were turned down by the council of the day and forced to pay the bill because there was no policy in place that allowed for such tax abatements. I even recall one councillor saying council’s “hands were tied.”
And yet they didn’t seem so bound at the wrist when Mosaic came a’knockin’, eh?
Anyway, I’ve written about all this several times. I’m just getting it all down here for review purposes. This screed won’t do anyone any good as Mosaic’s tax break is getting passed as a bylaw tonight and there isn’t a thing anybody can do about it.
So I’m going to wrap this TWACH up now. I have a lot to say on the changes to the transit system that are getting passed tonight. And I’d like to use a report on the waste plan as an excuse to gripe about that as well. But I suspect 90 per cent of the people who started reading this bailed on it long before this paragraph. And besides, I’ll be at the meeting tonight and will be writing a wrap-up report when it’s done. So I can maybe discuss everything else then.
If you want to read the council agenda for tonight you can find it on the city’s website.