Property Assessments, Mill Rates and Taxes 101

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Published on Friday, 06 January 2012 22:21

This past week many of us have received our property assessment notices from the finance department of whichever city we live in. In New Westminster many people have been surprised at the steep rise in their assessments. We have seen headlines in the local papers trumpeting these significantly increased assessments.

I know from my days as a member of City Council that the issue of how  property tax rates are determined is one that is not clearly understood by many of our residents and taxpayers. During previous occasions where these same, or similar, circumstances presented themselves, I was contacted by many people who were ready to light their hair on fire because they thought that financial doom in the form of property tax increases was waiting right around the corner.  

Today, for the first time in this particular goaround,  I read an article, an editorial that actually tries to explain how the tax structure works. It shows that an increased property assessment does not, by necessity, lead to increased municipal tax rates.

Rather than me trying to explain why this is so, I would like to bring forward the Editorial in The Vancouver Sun,   http://tinyurl.com/76cvcc8 which I think is very helpful in explaining the factors that play a part in determining municipal tax rates. The other piece of information is one produced by M.C. Lount and Associates Ltd. http://mycitytaxes.com/docs/reviews.html 

Piece the information in these two items together, and I am optimistic that it will go a long way towards helping people understand just how municipal tax rates are determined.

Municipal tax rates generally increase every year to offset the costs of inflation. If the increase in a homeowners assessment is consistant with the average general increase, then, chances are that that homeowners tax increase will be indicative of the costs of inflation.

What can change tax rates across the board, however is if a municipality experiences significant budget increases as a result of an aggressive capital expenditure program - roads, parks, recreation facilities etc. Where these increases are particularly painful  is for the commercial and industrial sectors (class) in a city. They already pay 4 to 5 times the tax rates that are assigned to the residential class. This is called the class multiple. As one can see from the editorial, Vancouver is in the process of reducing the class multiple to the commercial sector by 1/2% per year. This is being done to put Vancouver into a more competitive situation relative to surrounding cities. Where you have cities with a small commercial or industrial tax base, the cost of operating is borne largely by the residential sector. That is why cities such as West Vancouver, White Rock and New Westminster generally lead the pack in tax rates.

In New Westminster, approximately every $500,000 in expenditure increase translates into a 1% tax increase, unless of course, those monies are raised from other sources. That is why so many cities are eager to densify, expand and grow, because it leads to increased revenue sources. The flip side of the coin, however, is that it also , over time, leads to increased expenditure to service the growth. It is a bit of a vicious cycle. 

I'd like to hear from you if these two articles are helpful or if they still leave lingering questions on the issue. For comments please go to the Contact Me section of the website.