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 Alberta .
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 Crowsnest
Pass
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 EDO
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.
