Amendments to Municipal Financial Plans and Revitalization Tax Exemptions
Circular No. 07:14
ARCS File#: 195-20
June 1, 2007
To: All Municipal Financial Administrators
Re: Amendments to Municipal Financial Plans and Revitalization Tax Exemptions
This circular deals with changes to the Community Charter in relation to the following:
- Part A: financial plan (Section 165) & annual property tax bylaw (Section 197)
- Part B: revitalization tax exemptions (Sections 226 & 227)
Part A: Financial Plan: New Revenue Policy Disclosure Requirements
As added by Bill 35 (Miscellaneous Statutes
Amendment Act (No.2) 2007), Section 165(3.1) of the Community Charter requires municipal five-year financial plans to
include a more explicit form of revenue and tax policy disclosure. This requires municipalities to include in the five-year
financial plan, the objectives and policies regarding each of the following:
- the proportion of total revenue that comes from each of the funding sources described in Section 165(7)
of the Community Charter;
- the distribution of property taxes among the property classes; and
- the use of permissive tax exemptions (such as revitalization tax exemptions).
In addition, before adopting annual property tax rate bylaws, all municipalities must, under Section 197(3.1)
of the Community Charter, consider the proposed tax rates for each property class in conjunction with the
objectives and policies as set out under Section of 165(3.1)(b) [the distribution of property taxes among property
classes] of the Community Charter.
Parallel changes to the Vancouver Charter also require the City of Vancouver to undertake a more explicit form
of revenue and tax policy disclosure.
What is the purpose of these revenue policy disclosure requirements?
These new revenue and tax policy disclosure requirements are intended to further enhance municipal
accountability to the public by requiring all municipalities to develop and publicly disclose their objectives
and policies in relation to their municipal taxes.
The development and disclosure of objectives and policies will assist municipalities in making more considered
and meaningful decisions regarding their revenue and tax policies, while ensuring that the public continues to
have an opportunity (through public consultation requirements for five-year financial plans), to provide input into
the municipal financial decision making process.
When do the new revenue policy disclosure requirements come into force?
Although revenue and tax policy disclosure requirements will be effective for the 2008 tax year, the full scale
of the requirements is not immediate. Transitional provisions have been developed to allow municipalities adequate
time to adjust to the new requirements.
In 2008, municipalities will have to include explicit statements about: the proportions of revenue proposed to
come from various funding sources; the distribution of property taxes among property classes; and the use of
permissive tax exemptions. In 2009, municipalities will have to go further by developing explicit objectives and
policies in the financial plans in relation to these matters.
What is required for 2007 Financial Plans?
For the 2007 fiscal year, the obligations for additional revenue and tax policy disclosure within financial plans
and the consideration of the financial plan prior to the adoption of annual property tax bylaws do not apply. This
means that no changes are required to 2007 financial plans or to 2007 annual property tax bylaws.
However, as a first step towards full revenue and tax policy disclosure, municipalities will need to begin
thinking about their revenue and tax policies in preparation for the development of 2008 and 2009 financial
plans. For example, municipalities could begin reviewing bylaws, formal policy documents or past meeting minutes
to determine what revenue policies already exist within the municipality or, in cases where formal revenue
policies do not already exist, municipal staff could begin discussions with their councils regarding such policies.
What will be required for 2008 Financial Plans?
For the 2008 fiscal year, the obligations for revenue and tax policy disclosure are met by a municipality’s
five-year financial plan including explicit statements about each of the following: the proportions of revenue
proposed to come from various funding sources; the distribution of property taxes among property classes; and the
use of permissive tax exemptions. So, in 2008, municipalities should focus on describing what choices their
councils have made (e.g. what proportions of their revenues come from property taxes) and why that is the case.
In 2008, municipalities should focus on assessing their current situation, for example, in relation to the
distribution of property taxes among property classes. In carrying out such an assessment, municipalities could
ask themselves questions like:
- What choices have led us to the current distribution of property tax rates?
- Why have these choices been made?
- What impact are our current choices having?
- Are we happy with the current situation?
- Is our current situation acceptable or sustainable, or does it require change?
- How do we want to change?
- What will this change look like?
These questions, for instance, may lead a municipality to conclude that its current business property tax rate
does not proportionately correlate with the actual use of services by the business property class, and does,
therefore, not promote a business-friendly environment within the municipality. This may lead the municipality to
begin thinking of better ways of correlating property tax rates with the actual use of services (such as by
reducing the business property tax rate).
Generally, the 2008 planning year will provide municipalities with an opportunity to reflect upon and assess
their current revenue policies, while providing a basis for thinking about future revenue policies (such as in
relation to the distribution of property tax rates among the property classes within the municipality).
The consideration of the financial plan prior to the adoption of a municipality’s property tax bylaw is
met by the council considering the bylaw in light of these explicit statements.
What will be required for 2009 Financial Plans?
Full revenue and tax policy disclosure will be required for the 2009 fiscal year. In 2009, municipalities will
need to build on the explicit statements that were developed for the 2008 financial plan and develop explicit
objectives and policies regarding each of the following: the proportions of revenue proposed to come from various
funding sources; the distribution of property taxes among property classes; and the use of permissive tax
exemptions. For the 2009 fiscal year and beyond, municipalities will be required to provide more detail about
their purposes in making choices on these matters, the direction that they are heading and how they are going to
In 2009, municipalities should build on the thinking done in 2008 regarding the current situation of their
revenue and tax policies and objectives. Municipalities should build on their 2008 financial plans by developing
a long-term vision of where they are headed and why, and how they are going to get there. For example, because of
its desire to better correlate property taxes with the actual use of services, a municipality’s long-term
objective may be to move towards closing the gap between the share of property tax paid by a municipality’s
non-residential property class and that of its residential property class. A corresponding policy may be to
annually reduce the non-residential property tax rate by 1 percent for the next 5 years, while carrying out
annual reviews to ensure that property tax rates reflect the actual use of services by each property class.
The consideration of the financial plan prior to the adoption of a municipality’s property tax bylaw, in
2009 and beyond, is met by the council considering the bylaw in light of these explicit objectives and
Will municipalities receive any support in implementing these new requirements?
Municipalities will be given assistance in making more thoughtful revenue and tax policy decisions. For example,
municipalities will have access to a website with information on municipal tax rates and other financial
indicators. As a start, municipalities can begin accessing key financial information, such as municipal tax
rates, at the following sites:
Efforts are also currently underway to determine how to best work with local government partners to develop an
informative and practical guide to assist municipalities in making more considered and meaningful revenue and
tax policy choices.
Part B: Broadened Revitalization Tax Exemption Tool
As amended by Bill 35 (Miscellaneous
Statutes Amendment Act (No.2) 2007), Section 226 of the Community Charter enables municipalities to use a broader
tax exemption tool to encourage many forms of revitalization within their communities. These changes build on the existing
municipal tax revitalization tax exemption authority, but broaden it in a number of ways, including by:
- eliminating the restriction that the exemption can only be on an increase in value resulting from
construction or alteration of an improvement;
- enabling municipalities to take into account different circumstances and activities that distinguish a
property and make it eligible for a tax exemption;
- changing the maximum term for an exemption from 5 years to 10 years; and
- eliminating the limit that such an exemption can only be provided in a designated area of the municipality.
Changes to Section 226 of the Community Charter also require municipalities to consider revitalization tax
exemption program bylaws in conjunction with objectives and policies as set out under Section 165(3.1)(c) of the
Community Charter. The consideration of these objectives and policies during the development of revitalization
tax exemption program bylaws is intended to ensure that municipalities consider overall policies in relation to
permissive tax exemptions, when exercising revitalization tax exemption powers.
Some additional changes have also been made to the notice requirements under Section 227 of the Community
Charter. These changes reflect the updated content requirements of revitalization tax exemption program bylaws
under Section 226.
Under Section 98(2)(b) of the Community Charter, municipalities are still required to disclose, in the annual
report, the amount of foregone revenue from each tax exemption provided (i.e. for each revitalization tax
exemption, the amount of foregone municipal property tax).
Parallel changes to the Vancouver Charter also now provide the City of Vancouver with a similar revitalization
tax exemption tool.
What kinds of “revitalization” could a municipality pursue under the broadened revitalization
tax exemption tool?
A key goal of the broadened revitalization tax exemption tool is to enable municipalities to use the tool to meet
the social, economic, environmental or other needs of their communities. This could mean:
A municipality may choose to do some or all of these things in different parts of the municipality.
- a municipality using a tax exemption to revitalize its economic base by partially exempting the pulp mill
from disproportionately high industrial taxes, thereby supporting the pulp mill’s reinvestment in the
community and helping keep jobs;
- a municipality choosing to support the revitalization of a brownfield site, by exempting the property while
it is being cleaned up, thereby hastening its redevelopment;
- a municipality wanting to revitalize the affordable housing stock in the community, by providing exemptions
to commercial buildings that convert their upper floors to rental units;
- a municipality revitalizing its waterways, by exempting adjacent developments that use “green”
approaches to managing storm water drainage, thereby protecting the waterways from pollutants;
- a municipality adding to the scope of a more traditional downtown revitalization, by exempting aging
business properties that are reconstructed or otherwise reinvigorated.
What should municipalities consider when developing revitalization programs under the broadened revitalization
tax exemption tool?
A municipality considering the development of a revitalization tax exemption program should carefully consider
both the immediate and long-term implications of such a program on:
- its community (i.e. what are the community’s revitalization needs and will the revitalization program
help fulfill these needs?);
- the municipality (i.e. how will the revitalization program impact the municipality’s fiscal
- on the municipality’s larger operating environment (i.e. is the revitalization program consistent
with the BC/Alberta Trade, Investment and Labour Mobility Agreement under which investment distorting subsidies
When does the broadened revitalization tax exemption tool come into force?
The broadened revitalization tax exemption tool comes into force for the 2008 tax year. Municipalities wanting to
provide revitalization tax exemptions for the 2008 tax year must have revitalization program bylaws in place,
agreements with property owners signed, and certificates issued, by October 31, 2007.
What about existing revitalization tax exemption program bylaws and their corresponding agreements and
certificates that have already been issued?
Transitional provisions are in place to ensure that all existing revitalization tax exemption program bylaws, and
their corresponding agreements and certificates, can continue. If a municipality chooses to amend its
revitalization program bylaw (to, for example, expand the scope of the types of property that could be exempted),
it must comply with the requirements under the new, broadened Section 226.
Will municipalities receive any support in using the broadened revitalization tax exemption tool?
The Ministry is working on updating the current guide entitled Revitalization Tax Exemptions: A Primer on the
Provisions in the Community Charter. An updated version of this publication should be available shortly.
Local Government Infrastructure and Finance Division