Eliminating the business tax is costing Regina residents about $8.3 million in lost tax revenue.
The business tax was charged to all businesses, not just commercial property owners. When city council began the business tax phase-out in 1998, it was banking on the province increasing grants paid in lieu of property taxes to make up the lost income. That didnt happen. Between 1997 and 2000 provincial grants-in-lieu increased by $1.5 million a long way from replacing the business tax.
At the same time, other provincial funding sources were drying up. Between 1996 and 1997, provincial revenue-sharing grants to the city dropped from $11.4 million to $5.5 million down from a high of $15.6 million in 1987. Grants have remained at around 1997 levels ever since.
Residential property owners in Regina contribute a much higher proportion of total property tax revenues than other western cities. In Regina, 59 per cent of property tax revenues come from residential sources, compared to 39 per cent in Calgary and Vancouver.
Most western Canadian cities have a business tax. Calgarys business tax generated about $140 million in 2001 11 per cent of the citys budget.
In 1997, the last year before Reginas business tax phase-out began, the business tax brought in $8.3 million, which represented 4.2 per cent of total revenues.
Even with the business tax still partially in place, Regina was a cost-effective place to do business. A 1999 study done by the accounting firm KPMG ranked Regina first out of 11 western cities in North America in having the lowest operating costs for business.
Proponents of the tax elimination argued it would keep Eatons from closing its Regina store. Eatons closed its doors in 1999.
Adding to the taxation pressure is provincial downloading of education funding. In 1981, property taxes covered 52 per cent of the cost of education in Regina, while provincial grants covered 44 per cent. By 1996, provincial grants had dropped to cover just 26 per cent of school board costs, with property taxes covering 67 per cent. School board taxes went up more than 40 per cent between 1985 and 1996.