The debate rages in the Crowsnest Pass about potential 7.5% tax increases, created by the surprise announcement April 8th that the Assessment Base had dropped 5.2% instead of the 2% that Council and Administration had been working with for the last six months.
Time to clarify things I have had a number of discussions since Monday with people that assume a 7.5% mill rate increase means a 7.5% tax increase. It does not, most people struggle to understand how our municipal taxes are determined in
The mill rate is only half of the equation the other half is the assessed value, they are both very significant to the process but have to be measured together to determine the real
rate of taxation.
Take an average residential home in the
valued at $200,000 the
municipal portion of the mill rate last year was 5.87. Crowsnest
The simplest way to look at that would be for every $1,000 in value you would pay $5.87 in property tax to the municipality. ( 200 x $5.87 equals $1174)
Council throughout their much vaulted tri annual budget process took a position that the mill rate would increase by 2.5% a year. They boxed themselves into a corner, I am surprised that nobody in either Council or Administration figured this out.
Why? If they had stated there would not be a tax increase of more than 2.5% each year we would not be sitting here today having this discussion.
A closer look at their problem the mill rate going up 2.5% would have increased it from 5.87 to 6.02 which on that same $200,000 home would have raised the taxes 2.5% to $1204.
Nobody from either Council or Administration asked the question (at least not while I was there) what happens if the Assessment Base drops? (say 5%)
Now the tax on that same home that was valued at $200,000 last year at a mill rate of 5.87 even with a 2.5% increase in the mill rate this year, will be taxed at a rate of $1144 a drop of $30 from last year. (190 x 6.02 equals $1144)
Imagine a much worse case scenario if the Assessment Base had gone up 10% that $200,000 home last year hit with a 2.5% mill rate increase you would now be paying $1324 an increase of $150 over last year or a 15% increase, this is exactly why a commitment to a set mill rate increase does not work. Set Tax Rate absolutely.
While this is good news for the taxpayers, what will council do next year if the Assessment base drops another 5% or even more. This mistake on the Assessment base and the fixation on not increasing the mill rate more than 2.5% has created a $300,000 shortfall this year.
What does Council do now? Well they can go back on their pledge, one of the fundamental planks of their tri annual budget and increase the mill rate 7.5%, the other suggestion which I feel is even a worse option would be to take $295,000 out of reserves.
I agree with Councilor Saindon’s motion to find 4% fat in the system and reduce it. It will be very interesting to see what recommendations administration comes back with. The $300,000 shortfall could be made up very quickly by looking at the level of administration we have built and the dollars we pay to maintain them. Let us hope Council does not reduce service levels and programs such as recreation when we are running a very expensive bureaucracy.
Other options I am sure are many. Maybe we do not need to send four members of our council to conventions or our Mayor to an Economic Development Conference when the
is going to be working under the CAO, maybe
our Weed Control person could survive one more year without a new pickup. Maybe
the Public Relations consultant will not be receiving any more tax dollars from
the Crowsnest Pass.
Five key points to my post today:
· This could have been avoided if the 5.2% assessment base had been projected much earlier in the budget process.
· If Council/Administration had been aware that a 2.5% mill rate is not the same has a 2.5% tax increase
· Committing to a tax rate increase of a certain amount works, committing to a set mill rate does not, this is one of the down sides to a three year budget.
· If council sticks to its 2.5% mill rate increase we will get a tax break, not due to them making a brilliant strategic move here, more because they got caught with their pants down on the assessment base. It could hurt the taxpayers much more when home values begin to rise we got lucky this time.
· The devil is in the details, if Council makes $300,000 in cut’s where they are made is the most important issue to the public. Little Johnnie’s mom will not be happy if her boy can not play Lacrosse on a Friday night, but two brand new pickup's are running all over town.