The City of Merritt is relying less on major industrial properties and more on residential, utility and business classes to shoulder its tax load.

The finance department is forecasting the heavy industry class will make up just 12 per cent of the tax base this year, dropping from 15 per cent in 2017, primarily due to the Tolko mill closure.

“It appears that the growth in Merritt is in the residential and business classes for the next bit,” financial director Sheila Thiessen told the Herald via email, adding that it would take just one large heavy industry project to cause a shift.

Heavy industry was paying about 20 per cent of the tax base between 2014 and 2016, according to stats presented at a Feb. 6 budget meeting.

“[In] 2017 they dropped to 15 per cent, but that was because of the increase in utilities, it wasn’t because we lost any of the heavy industry at that time,” Thiessen told city council at the meeting.

The utility class, which contains just six folios, spiked that year due to the construction of the Merritt Green Energy plant (MGE).

The utility class went from making up a little more than six per cent to a forecasted 11 per cent in 2018.

That will bring in more than $870,000 in tax revenue, most of which comes from MGE which contributed more than $700,000 last year.

While heavy industry’s share of the tax base is dropping about three per cent this year, growth in the real estate market has increased the residential class from 43 to 45 per cent and business class from 29 to 30 per cent of the tax base to even things out.

“It’s a little bit more in residential [and] another per cent in business, so it’s spread out across the whole assessment base,” Thiessen told council, adding that she’s not recommending there be any changes to the tax structure.

Further losses could follow if Tolko decides to dismantle mill

While things are balanced out now, the city is facing a loss of $1.8 million in tax revenue over the next four years as MGE’s revitalization tax exemption kicks in come 2019. The tax break will drop the utility class portion of the tax base again, but only temporarily. The exemption starts at 100 per cent and shrinks by a quarter each year until 2023 when MGE is paying its municipal taxes in full.

The Merritt Green Energy project will receive a tax exemption beginning in 2019, which decreases until 2023. (Herald files).

Thiessen told council that while the city could bump up heavy industry to shoulder 20 per cent of the tax base once again, it would mean charging the few businesses under that class a lot more.

“When you only have only few people in a pool, it’s just not feasible. I wouldn’t recommend it for sure as it would just cause unnecessary hardship,” Thiessen told council.

She told the Herald the city plans to use surplus dollars to offset that loss.

“Either that or we would have to start cutting services, but we do have a fairly healthy surplus that should cover that,” Thiessen told the Herald.

Additional losses could come in the future if Tolko Resources further dismantles its Merritt mill. This year’s drop in heavy industry’s portion of the tax base is due primarily to the company filing for a shutdown allowance after shuttering the mill in December of 2016.

“If they start dismantling the [Tolko] mill further adjustments in the assessment would occur,” Thiessen told council. “Ultimately if the mill’s totally taken down the property will be changed from [heavy] industry class to business class.”

This will drop the heavy industry portion the tax base again, but Thiessen said she hopes the increase to residential and business classes will continue to offset that loss.