–Britt Santowski, SPN
Wanna do some math?
As announced on January 2 on SPN, property values from BC Assessment have been mailed out. In most cases, property tax values are up. In Sooke, property values are up an average of 17%; we’ve seen reports of some going much, much higher than that.
We are hearing concerns about possible increases in the property taxes that will be due July 1, 2018. On reading that their property value is up (say) 17% (and we have heard one case of an assessment increase of 300%), people may make the seemingly logical mental leap that their property taxes will increase by the same amount.
While that mental leap may seem logical, the assumption is inaccurate.
The real answer is: It’s complicated … but not really if you understand it. It’s the last part of that sentence that we’ve been working through, and by George I think we’ve got it.
Understanding Property Tax calculations
Property taxes are determined by various inputs: The assessed value (which is in the mail) determined by the province, and the “Mil Rate” (mil.= Rate per 1,000) determined by the District of Sooke and the various other tax collectors who are added into the property tax collection umbrella (CRD, Hospital, Schools, etc). You, the third player, pay the bill.
The calculation, demonstrated in the spreadsheet image below, is:
(Assessed Value × Mil Rate) ÷ 1000 = Your Property Tax.
Assuming an Assessed Value of $400,000 (we made this number up), the final calculations based on the 2017 Mil Rate would look like this (we looked at only residential and business rates):
Mil Rates vary, depending on the class of your property. In the above example, we look at two hypothetical scenarios each with a different class (residential, business), each with a different Mil Rate, and each with the same assessed value.
How the tax collectors determine Mil Rates
A detailed explanation of establishing the tax rates is provided by Sooke’s Director of Finances, Brent Blackhall. We’ve printed that in full, below. For the purposes of brevity, we’ll keep it simple here; for those who want the nitty gritty, Blackhall’s information is incredibly valuable.
Every year, Council decides how much money it must raise to balance the annual budget through property taxes. How much money it must raise is determined by the annual budget, which is yet to be compiled.
Once a budget is established and the financial needs are known (from the District as well as the other tax gathering agents), the rates are set and the District then passes an Annual Property Tax Rate bylaw. Contained in that bylaw are the Mil Rates.
Looking at the Total Residential Mil Rate (including those from the District and the various other collection agencies), you can see how that Mil Rate number fluctuates over the years:
- Total Residential Mil Rate 2014: 7.00044
- Total Residential Mil Rate 2015: 7.11044
- Total Residential Mil Rate 2016: 6.94079
- Total Residential Mil Rate 2017: 6.43524
As you see, the Mil Rate has actually gone down overall over the past four years. When combined with higher assessed property values and calculated as above, your out-of-pocket amount can go up. This allows for the “complicated truth” of the statement that the “mil. rate” has gone down, while you personally look with confusion at the slightly higher (but not by 17%) tax bill you hold in your hands.
Bottom line here is, if the District has determined they need a 5.58% increase (as they did in 2017), a property assessment increase equal to that year’s average increase sees a 5.58% increase in the tax bill. If the increase is higher, the calculations will return a higher-than-5.58%-percent increase in their tax bill; if it’s lower it will return a lower-than-5.58%-percent increase.
Playing with the numbers
If you wish to play with the numbers, here is the Excel Spreadsheet we built to calculate (and come to understand) the above numbers. You can enter your property value in the green spaces and Mil Rates in the yellow. Keep in mind, though, that the 2018 Mil Rates have not yet been set. When they are, we at SPN will let you know!
Other things to keep in mind are the various grants and deferred payment options, which can help you reduce your final bill on your primary home, and/or otherwise reduce your payments.
Property taxes are due annually on July 1.
The Tax Rate Breakdown from Sooke’s Director of Finances, Brent Blackhall:
“The municipal general property tax rate is determined once we have the current annual budget from the Council, approved Five Year Financial Plan, and also the final property assessment information from BC Assessment (not received until April).
“The property assessment information is broken down into different property classes (for example Class 1 is Residential), and the Council-approved tax ratios are applied to the overall property assessment for each property class to ensure the final result is the amount of the budget requirement for property tax revenue.
“The tax ratios can be found in the Revenue, Tax and Budget Policy, 2008 on our website.
“The revenue from property taxes that is required to balance the budget is compared to the same figure from the year before to arrive at the % change (for example for 2017 it was a required increase of 5.58%).
“That new required revenue amount from property taxes is applied to the assessment information and tax ratios to arrive at a tax rate for each property class that will result in the required overall revenue (for 2017 the property tax revenue requirement was $7,182,518).
“Property owners in 2017 who had an assessment increase equal to the average would have seen their property taxes increase by the percentage increase of our budget requirement (5.58%).
“Note that the property tax rates for the Library, CRD, School District, CRD Regional Hospital District, BC Assessment, MFA and BC Transit are either set directly by that authority (School Tax for example) or are determined from their approved budgets and application of the property assessments (CRD and Library for example).”
Below are the bylaws from the four previous years, from 2014 to 2017 inclusive.
This SPN Public Service Announcement has been brought to you by the letter eh (as in, “As clear as mud, eh?”) and the number equivalent to your 2018 tax bill [insert sound of The Count laugh-counting].
- How property taxes are calculated
- How does your property tax rate compare? Grumpy Taxpayers launches comparison spreadsheet
- Property value assessments are now available for 2018
- 2017 Property tax assessments now available
- Provincial programs help with property taxes
- Sooke 2016 property tax notices have been mailed
- Sooke’s COW (Committee of the Whole) meeting introduces 5-year financial projections