The ABCs of Property Assessment - Part 2 of 3


How do Assessments Relate to Property Taxes

An increase or decrease in assessment may not result in a corresponding change in your taxes. This is because assessed value is only one of the factors determining property tax bills. Municipal and school board budgets establish the total property tax to be collected -- assessments only determine how the taxes are distributed among all properties in a community.

In the Spring of each year, municipalities, school divisions and the Department of Education determine the amount of property taxes to be raised. Rates are set for each by dividing budget requirements by the total assessment in the taxing jurisdiction (municipality, school division or province as the case may be). The municipal rate, expressed as thousandths of the total assessment, also known as the "mill rate." For the purpose of calculating mill rates and taxes, municipalities use "portioned" assessment. Portioning was introduced with the amendments to assessment legislation in 1990. When Manitoba began market value assessment, it became apparent that various types of property had increased in value at different rates over the years.

Bringing assessments up to current market values all at once would have resulted in very large tax increases for some property owners. To phase in the changes, nine property tax classes were created with each class being assigned, initially, the same share of taxes that each had paid before market valuation began. Through annual adjustment of the portion percentages assigned to each class of property, a so-called "equitable" sharing of taxes was achieved.

The municipal mill rate is applied to your "portioned" assessment. For instance, if your single family residence is valued at $100,000, its portioned assessment is $45,000. The mill rate is then applied to this figure. Again, an increase in assessment will not necessarily mean higher taxes. Only properties that see above average increases are likely to see an increase in taxes. In other words if your property increased in value by 10% and the average increase of all properties in the municipality was 5%, your tax bill may rise (depending on how municipal and education budgets have changed). If your property increased in value by 4% and the average increase was 5%, you would not likely have a higher tax bill (depending on the taxing authority's requirements).

The Byzantine property tax system seems almost tailor made for the "not our fault" syndrome that often affects government. Municipalities and school boards blame assessment changes for higher property taxes - so we have been programmed to dread assessment growth.

Taxation on a particular property should not be allowed to rise any faster than the rate of inflation, as a maximum. If city council and school boards want a larger increase, they should have to ask taxpayers for permission in a referendum. And taxpayers should have the right to place tax reduction proposals on the ballot for consideration by their fellow citizens.

Next column: A sound solution.

-- Adrienne Batra
Provincial Director, Manitoba
Canadian Taxpayers Federation


1 http://www.gov.mb.ca/ia/programs/property_assessemtn_faq.html