Taxation: Market Value Assessment

Here's my first of a series of blogs on municipal taxation.  I am writing these to address a concern by a citizen at last Monday's Town Hall Meeting.

The biggest source of income for all municipalities in Alberta is property taxation.  Every year, each municipality goes through a complicated procedure to figure out how much each property holder in that municipality will pay in property taxes.  Here are the steps;

Assessment:  First, the municipality must establish how much each property is worth so it may be taxed accordingly.  A few years ago, the Alberta provincial government insisted that the municipalities go to a system called "Market Value Assessment" aka MVA.  That means that each property would be assessed based on what the owner might get, if he were to sell it on the market today.

That works in larger municipalities, where many properties are bought and sold each year - but for small communities like ours, assessors must rely on a formula based on the selling price of similar properties in other similarly sized communities.  I think this system is seriously flawed --because finding a municipality exactly like ours is next to impossible.

Another problem with the MVA is the hardship it creates with seniors on a fixed income.  In Calgary, middle-class homes purchased in the 1950s and 1960s are now considered "inner city," and are assessed at millions of dollars!  Their assessments are so high, that those seniors who bought those homes 50 years ago can't afford the $500/month in property taxes.  They are priced out of their own homes and forced to move!

Larger municipalities can afford to have a "tax department," which can assess properties and handle any appeals.  Smaller communities like Beiseker have to hire an assessment company to do our assessments.

Every property owner will receive a assessment notice, usually in the spring of each year.  Property owners can appeal their assessment -- although there is a fee to do that. Property owners cannot appeal their taxes, only their assessments.

After all the assessments are completed, the assessors send the municipality a Total Assessment figure.  That represents what they think the total worth of the municipality.

Stay tuned tomorrow to find out how the municipality uses that figure to decide how much you pay in property taxes.

Excellent Turnout at our Spring Town Hall Meeting!

I was very impressed with the number of citizens who came out to our Spring Town Hall Meeting!  It was good to see!  After a short regular meeting of Council we opened the floor for questions from those assembled.  Topics addressed included streets, frost boils, the Bassano Station, storm water drainage, taxes, illegally parked vehicles, cluttered laneways, sidewalk construction, and house numbers.  I think we on council answered the questions fairly and accurately. 

One ratepayer had a question about mill-rates, assessments,  and taxes.  I realized that he might not be alone in his misunderstanding of that relationship.  We will try to clarify that issue before our tax notices come out, later this spring.

I was impressed by the numbers of citizens who came to Beiseker's defense when one citizen told us that our village was a terrible place to live.  Us five councilors and our village staff members  were moved by those positive comments that followed, and the applause they generated.  I think now we'll work harder to make our village an even better place to live.

I'm looking into some of the other inquiries made last night, and I will try to provide answers to you here, on Facebook, or in the Mainline Express newsletter.

Thank you all for coming!

Taxes!

Yesterday morning (Saturday, June 2) the Council of the Village of Beiseker met to discuss the 2012 budget and start the process of setting a mill rate for this year.  

We had an excellent meeting.  Our Chief Administrative Officer (CAO) had drawn up a proposed budget.  It was up us to go through it line by line and recommend changes.  Our CAO will then take our changes back, work them into the budget figures and bring them back to council at our next regular council meeting.  At that time we will either accept the changes and declare a mill rate or send it back for more modifications.  By law we have to declare a mill rate by the end of June.

Something alarming is that our Overall Assessment has dropped more than three million dollars!  That means that if we all sold all of our Beiseker properties today, we would receive three million bucks less than we would have last year!

Some properties were assessed higher and others assessed lower, many remained close to their 2011 assessments.  It's all based on formulas created by a mysterious process called Market Value Assessment (MVA).  It basically declares that if a similar property in a similar place sold for a certain amount, that's what my property is worth! 

Yes, I know that there are flaws in that logic, but that's what the provincial government says we have to do.  Municipal politicians from all over Alberta have complained to Municipal Affairs about this MVA system for years to no avail.

Council must estimate as closely as possible, how much money our municipality will need to operate for one year.  We must then set a mill rate to raise that amount of money based on a one dollar tax for every $1000.00 of assessed value.  Another provincial rule says that a municipality cannot submit a deficit budget.

We pored over the figures for more than two hours and made some important decisions.  Our Overall Assessment has dropped but the cost of operating our municipality has increased!

I hope we gave our CAO enough guidance so that she might work out our budget and enable us to declare a mill rate at our next regular council meeting.  That's about all I can tell you right now because nothing has been officially decided beyond that. 

Our next meeting of council will be held on Monday, June 11, 2012.

Taxation

Municipal property taxes are based on two things: The total assessment and the mil rate.
Each year the value of every property within the municipality is calculated. This calculation is based on the sale of similar properties elsewhere in the municipality. This new way of calculating the value of your property is called Market Value Assessment (MVA). This process was introduced by the provincial government a few years ago. Every Alberta municipality has to use it, they have no choice!

After that process is completed, all those assessments are added up to get the municipality's Total or Overall Assessment.

After going over the proposed budget in great detail, the municipality decides how much money it needs to operate over the next year. It then looks at its Total Assessment to assign the Mil Rate.

The Mil Rate refers to the number of dollars and cents each property owner must pay per thousand dollars of their MVA.

Beiseker's Village Council has steadfastly refused to raise the mil rate. Each year our total assessment goes up as new homes and businesses are built and sold. By keeping the mil rate the same and relying on the increase of the total assessment, taxes are kept at a consistent level year to year.

Studies have shown that Beiseker's property taxes are below the provincial average for a municipality of our size.

Some individual property taxes will increase while others will decrease. Others will stay the same.  Overall on average we have managed to keep taxes down.  The mil rate is based on the overall total assessment, not on individual property assessments. 
Over the next three years I will continue to make sure the people of Beiseker get the "best BANG for their tax buck!".

I am also working on a proposal to allow municipalities to reduce the burden of the MVA on long term homeowners on a fixed income.