Provincial Government Intervening on City’s Property Tax Assessments / How Are They Formed Anyway?

The review is happening because, in most areas of the province, taxpayers saw an increase in their 2016 property assessments.

“Property assessments issued for the 2016 taxation year caused concern for many residents in municipalities throughout the province,” said Minister Joyce this morning, “and our government made a commitment to initiate a review of the legislation.” He’s referring to the Assessment Act, 2006, which has not been significantly reviewed in a decade.

Property tax assessments are the responsibility of the City of St. John’s (in St. John’s) and the Municipal Assessment Agency outside of town, meaning the City of St. John’s has the authority to set mil rates on residential and commercial property. As Joyce says, “The level of concern among property owners indicates there may be room for improvement.”

Sidebar: How is My Property Value Assessed & Property Tax Derived?

A property assessment represents the hypothetical price your property would sell for this year. To assess your property’s value, The City of St. John’s Assessment Division compiles data about sales, construction, market conditions, and other relevant information about the location, condition, size, age, and other features of your home or commercial space. To calculate your property tax, you simply multiply the assessed value of your property by the mil rate of the city you live in. If a property owner believes that their property has been assessed at an inaccurate value, they can request a reassessment. The high volume of speculation of property value assessments this year is what sparked this government intervention.

Sidebar 2: What is a Mil Rate and How is it Calculated?

Mil Rates are how a municipal Government milks your property for tax money to pay its yearly projected costs like city staff salaries, snowclearing, etc. A municipality sets its annual mil rate by:
1.) Calculating the sum of all assessed properties in town
2.) Setting its annual budget
3.) Dividing the sum of all taxable assessments in the municipality, by how much its budget amount needs to be raised, and multiplying by 1000. For example: if the amount a budget is to be raised is $200,000, and the total taxable assessment is $50,000,000, that is:  $200,000 / $50,000,000 X 1000 = 4 Mills.

Numerically, it is a figure representing the amount per $1,000 of the assessed value of property. Right now, for residential properties with water & sewer services, the Mill Rate in St. John’s is 7.8 (this is actually historically low), while the commercial mil rate is way up to 25.2: prior to 2013, Commercial mil rates were 18.7 or below as far back as 1982 (when they were merely 11). Different valuation approaches are used for residential and commercial properties.

What’s the Plan for This Review?

The review will address things like “property assessment criteria and implementation of the associated mill rate.” It will also review how assessments are conducted for special purpose properties, which are commercial properties for which assigning a market value is difficult as there is little comparable data.

The review is happening because, in most areas of the province, taxpayers saw an increase in their 2016 property assessments. Given the economic conditions in Newfoundland and Labrador, this caused concern among both municipalities and taxpayers. So government is reviewing the Assessment Act, 2006 to “determine whether it could be better meeting the needs of individuals, businesses, and municipalities in this province.”

Public Encouraged to Weigh In

Municipalities Newfoundland and Labrador will be contacting municipal representatives in the coming days to solicit input on potential changes to the act. A webpage has been established to provide information on the review, and to outline the means by which the public can provide input. It can be viewed at: www.ma.gov.nl.ca/review/review.html. The deadline for submissions is September 16, 2016.

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1 Comment

  • The problem with government assessed values was they were always assumed to be lower than what the market may indicate, almost always much lower than what a person actually paid for their home – and these days, when people are trying to decide if they can afford the home, they are not thinking about the total purchase price, they are thinking about the monthly payment, and the annual property taxes – so people would buy a bigger home, because they assume they will be able to afford this tax, which is a false assumption. Then, when government tries to align market values with assessed values, people moan to the government about having to pay more this year – making life more expensive – when in reality they couldn’t afford their home in the first place, even though it appeared that they could. Everyone treated their homes as a commodity and an investment, instead of a necessity – buying a home assuming it would always be more valuable the following year – which is a classic debt trap. If you’re banking on home equity being your nest egg, you’re asking for trouble in a speculative market.

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