It happens every five years - the dreaded property assessment of your home. Unfortunately, most homeowners don't understand how assessment is done - particularly when they have made little to no changes to their property, yet the tax bill increases year after year. One culprit for increased property taxes are the school boards, who have shown no willingness to find savings, the other is municipal assessment.

Assessment is the estimation of a property's probable market value. Properties are assessed so that local governments can levy property taxes. The market creates the value, Manitoba Assessment reports it, and the municipal corporations set the required tax rates based on a number of factors including assessed values. Each property owner's share of property taxes is determined by their assessment. Taxes paid do not necessarily reflect the amount of services a property owner uses - they are related to the value of the property. To determine a property's assessment, an assessor takes into account the local market conditions during a reference year. Put simply, the assessment is the assessor's best estimate of the most probable selling price for a property had it been for sale in the reference year.

Location, size, age, and replacement cost are some of the elements that affect market value. Property Information collected by assessors, along with statistical analysis of typical selling prices in the reference year, form the basis of most assessments. The assessed value may not be exactly the same as the selling price if your property sold in the reference year, as assessments only reflect typical values of comparable properties. The purpose of assessment is not to directly reflect one sale price but to assess all similar properties at a similar value so that taxation is shared fairly.

While assessors determine the value of most properties by analysing real estate transactions, some building assessments are measured by calculating their replacement cost less an amount for depreciation. This approach is taken in the case of properties that do not typically sell such as schools, hydro generating plants and manufacturing plants. For some properties, examining their income is the best way of establishing their value. Properties like hotels, apartments and commercial buildings that are leased out generate income for their owners. It is this rental income that attracts a buyer and determines the selling price. Assessors use an accounting/valuation procedure called "capitalization" to determine the appropriate value of such properties. To do so, income and expense information is required from the owners. This information is treated with the strictest of confidence.

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 that determines the taxes levied on a property. Municipal and school budgets establish the total amount of taxes to be collected -- assessments only determine how the taxes are distributed among properties.

Next column - How do Assessments Relate to Property Tax