Municipal taxes are not going up 20 per cent
Re: “There should be no 2018 municipal tax increase”, (Citizen, Jan. 5)
Unfortunately, David Gee’s letter that erroneously leaves the impression that the municipalities in the Cowichan Valley are raising taxes more than 20per cent illustrates that most people do not understand BC Property Assessments and property taxation.
Mr. Gee says that because assessments have risen 20 per cent there should be no property tax increase. To clarify, however, average assessments in most of the Cowichan Valley have increased 16-18 per cent, with only the Town of Lake Cowichan increasing an average of 22 per cent; but, that is not why I write this.
There are three separate parts that make up your property tax bill.
1. The municipality creates its budget for the year based on the needs of the community, including infrastructure. At this point your assessment has no bearing on the process. Cowichan municipalities have increased their budgets by three to four per cent, I’m told.
2. All the properties within the respective municipality are assessed. The mechanics of this are too involved for this letter to go into, but this is where Mr. Gee is incorrect. The end result is that the budget for each municipality is divided into the total assessed values in that area. This creates a mill rate. To simplify my explanation lets assume there are just 100 properties in the Cowichan Valley. Each property has a value of $1. The budget is $100. Divide the $100 budget by 100 properties and each property would be taxed at $1.
Lets assume the next year the same 100 properties now have a value of $100 each and the municipal budget is still $100. Each property would still only pay $1 in tax even though the value of the property has increased significantly. That is because the budget is divided by 100 properties times 100 in value, or one cent for each dollar of value. This is just one area that is often misunderstood as it was by Mr. Gee.
3. The last part is the application of the mill rate to the individual property assessment. This creates your property’s tax bill.
Therefore, if all items are equal, the tax bill will increase by the amount of the municipal budget increase. That increase can be mitigated by increasing the tax base (ie: adding properties to the tax roll is one way to do this.
However, your property tax bill may increase more than the increase in the municipal budget if your individual property assessment is greater than the average in your area. For example, and using Mr. Gee’s 20 per cent number for an average assessment increase, if his individual assessment was, say 25 per cent more than last year, his tax bill will be greater than the average. That is why every homeowner should verify that their assessment is correct.
Peter D. Morris
Co-author of How to Successfully Appeal You BC Property Assessment