The Calgary Journal
The Calgary Journal

Business analyst says it could take 20 years to judge levy's success

thumb eastvillagecentreSince 2007, the City of Calgary has invested approximately $108-million to improve infrastructure in the Rivers District.

The district is bounded on the north by the Bow River, on the east and south by the Elbow River, and on the west, generally by 1st Street S.E., but also includes 58-story Bow building.

What makes this redevelopment story unique is the funding mechanism. Calgary was the first city in Canada to implement a Community Revitalization Levy, or CRL, which sees the portion of taxpayers' property taxes that results from increasing property assessments funneled back into community upgrades.

The levy will remain in place for 20 years at which point all property taxes from the Rivers District will once again flow back to the city and province.

Some say Canadian CRL funding lacks key test

The CRL resembles Tax Increment Financing, which has been used for financing community revitalization projects in the United States.

In the American models, however, the "but for" test must be met. In Tax Increment Financing, redevelopment of a district would not occur "but for" the tax scheme. In other words, private investors would never get involved in development without help from the special tax scheme.

The "but for" test is absent in the Alberta and newer Manitoba versions of this enabling legislation.

Without such a test and stringent criteria to make such a determination, critics, such as the Canadian Centre of Policy Alternatives, argue that the private sector may be best poised to profit from such public infrastructure investments.

However, supporters of CRL funding in the Rivers district suggest commercial development of the area was hampered by the fact that the Rivers lies within the flood plain of the Bow River.

The special levy was needed to encourage development, according to Sheryl McMullen, who leads Strategy and Social Projects for the Calgary Municipal Land Corporation, the subsidiary corporation of the City of Calgary.

eastvillagecentreCalgary's East Village is part of the Rivers District, which is being redeveloped through a Community Revitalization Levy.

Photo by Katherine Camarta
Critics speak out

Scott Hennig of the Canadian Tax Federation is on record opposing the use of a CRL to fund arena infrastructure in Edmonton. Hennig's post at www.taxpayer.com notes that the CRL leads to "a loss in revenue for the city that means property taxes across the city would have to go up to cover the shortfall for core services."

Despite opposition, some point to the implementation in Edmonton of two separate Community Revitalization Zones. The Belvedere Community Revitalization Levy Area was created on Jan. 30, 2012. It is used to fund, according to the Belvedere Community Revitalization Levy Area Plan, a "significant face lift to the Belvedere community in northeast Edmonton, an area originally developed with a strong focus on the meat packing industry which declined significantly through the 1990s."

A look at the numbers

Initial sales of large-scale residential developments proposed for the area have met pre-sale targets, according to McMullen.

Cathy Davis, communications advisor for Customer and Governance Services, Assessment with the City of Calgary provided the following information highlighting the increase in assessed property values since the original 2007 property assessments.

Summary of 2008 and 2013 Rivers District Assessment Roll
Assessment Roll Year 2008 2013
Assessment Valuation Date July 1, 2007 July 1, 2012
Assessment Physical Condition Date December 31, 2007 December 31, 2012
Total Assessment Roll in Rivers District* 4,182,000,000 5,082,000,000

*Rounded to the nearest million

A review of the enabling bylaws showed that the amount of the Community Revitalization Levy was approximately $5.1-million in 2008 but that in 2011 it has grown to just over $16-million in tax revenue. Transportation consulting firm Steer Davies and Gleave notes that detractors argue that such tax levies " simply redirect investment from one location to another, and promote competition for investment between neighbours."

Has the levy been successful?

Calgary writer and business analyst Richard White notes that the city took a "calculated strategic risk" with the Rivers re-development and that the idea of the CRL was "innovative."

He said that, although it will be at least 20-25 years before it is possible to judge the success of the redevelopment, the city is currently executing its original plan, "doing a good job."

He notes that only time will tell if the area will attract the diverse population, which he considers vital to a true urban village.

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Community Revitalization Levy