Inflation always used at tax time
Published February 7, 2007
In the December 27th, 2006 edition of this paper, Mr. Darren Lowe commented upon the County budget as it relates to inflation and assessed value of homes. He commented that with the increase in assessment of homes, there would be no need for a tax hike. He poses an excellent question that does need clarification, as on the surface, his question makes perfect sense.
Until I became a Councillor, I did not totally understand the relationship between assessment and property taxes. To clarify this point, I sought out the advice of our Administration.
The assessment that was in place for the 2006 tax year was based on 2005 market values. The assessment in place for the 2007 tax year is based on 2006 market values. The average residential property assessment in place for the 2007 tax year has increased by approximately 30% as a result of an increase in market values. The 30% increase in assessment, as a result of an increase in market value, does not generate additional municipal property tax revenue. The municipal tax rates are adjusted downward as a result of the inflationary market value increase in the assessment. If the tax rates were not adjusted downward, the average residential municipal property tax dollar increase for 2007 would be 30% (or $397) instead of the 6.96% (or $92) increase included in the 2007 municipal budget. The 6.96% tax dollar increase is required to offset a portion of the inflationary increase in the cost of providing services to property owners.
What in effect happens is that when the assessed value of a property increases due to changes in market value, the County reduces the municipal tax rate by an equivalent amount. This is the principle of "revenue neutrality", which Council confirms as part of the annual business plan and budget process. Reducing the tax rate protects the property owner from inordinate tax increases simply based on increases in assessed value due to changes in market value.
The amount of municipal property tax revenue required on an annual basis is determined by the business plan and budget process. The new homes (and other new properties) that are being built in the County (ie - real growth) generate additional property tax revenue. The property tax revenue that is generated by the new properties is used to help pay for the services that they receive.
I can assure all, that Administration and Council take great pain in trying to achieve a prudent balance between budgetary requirements and the burden on the homeowner. I trust this explanation has provided some insight.
Councillor, Ward 4
Last updated: Tuesday, March 23, 2010
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