City of Powell River’s finance committee recently discussed the mechanics of how municipal taxation is arrived at, and the need to articulate that for the community as a whole.
At the committee’s meeting on Thursday, July 25, councillors reviewed email letters from Jim Blom and Sherry Burton outlining their 2019 property taxes. The couple wrote council indicating they had a 15.825 per cent tax increase from 2018 to 2019.
Councillor Jim Palm said when the 4.4 per cent average increase this year is factored in and there’s a 15 per cent increase, he knows it is compounded by a number of entities. He said if the city is looking at increases of similar magnitude across the board over the next four years, these individuals, whose taxes went up $717 from 2018 to 2019, will not be facing a pretty number down the road when they have to come into city hall to pay their yearly tax bill.
“What we have to do, obviously, is work very diligently and hard at reduction in overall expenses and increases in revenues,” said Palm. “For the next four years, what we have to do until we do get an increase in revenue is look at every means possible to reduce costs and not have the taxpayer pay the bill in $500 to $700 increases.
“It’s a sad state of affairs where we are at. We have escalating labour costs, along with all the rest that is coming down the road, plus liquid waste treatment if that materializes shortly. It’s going to be batten down the hatches time for this council.”
Councillor Cindy Elliott said this couple’s taxes went up considerably more than the average for Powell River. She said she thinks the city needs to spend more time explaining how assessments work and how taxes are assessed. She said taxpayers should also know about contesting assessments when they come out in January.
Elliott said there also needs to be information about the way taxes are calculated using the assessments.
“What we could do as a city is perhaps spend a little more time talking to the citizens about the effects assessments have on their taxes, so if they have a really high assessment value, they could contest it,” she added.
Councillor Maggie Hathaway said everybody agrees the assessed value of a house may not be a fair way for municipal taxation but there doesn’t seem to be an alternative.
“In all these years no one has come up with a different method of calculating municipal taxes,” said Hathaway. “It’s a provincial matter and outside our jurisdiction.”
Hathaway said when she worked for the MLA she directed a number of people to appeal and most won.
“It’s a flawed system but there is no other alternative,” she added. “What we decide, when we put together our budget, has nothing to do with anyone’s assessed value. We are figuring out what we need to provide for services in the coming year and their share is based on their assessed value.”
Hathaway said she would encourage anyone who thinks their house is valued more than it should be to appeal.
Mayor Dave Formosa said the issue Elliott brings up is a good one and the city can use its communications department and possibly its chief financial officer and put an item on the city’s website that explains how the taxation really works. The mayor said he had spoken with the staff in the finance department and this was the worst year for complaints about taxation.
Formosa said when assessments rise, the city does not necessarily take the taxpayers’ taxes up that high.
“We need to be able to say that in easy language,” said Formosa. “I’ve had so many people tell me that assessments go way up and 'my taxes go through the roof,' and I say, ‘no, we don’t do that.’”
Formosa said he pays a lot of taxes in this community, both for his home and for his commercial properties.
“I feel the pain, believe me, but I believe in Powell River and invest in Powell River,” he added.
Councillor Rob Southcott said in a survey of the Organization of Economic Cooperation and Development, representing the most affluent countries in the world, of those, only four determine municipal taxation the way that occurs in BC.
“There are other ways other countries pursue,” said Southcott. “This is a federal position but it’s not like there isn’t another way.”
Palm asked chief financial officer Adam Langenmaier what would happen to taxation if assessments dropped significantly. Palm asked if residential prices were to decline, would the city maintain its present tax base by shifting the mill rate in order to make sure taxes remain consistent.
Langenmaier said that would be the appropriate action. If the assessments overall dropped, the mill rate would be adjusted to tax the amount required to operate the city, he added.
“If assessments fall drastically, it wouldn’t hamper our ability to levy our required amount of taxes,” said Langenmaier.
Councillor George Doubt, chair of the financial committee, said he has read both email letters, which have a variety of interesting things to say. He said there is a fundamental misunderstanding of how the city arrives at its taxation.
Doubt said councillors and staff go through a process preparing the city’s budget. The city decides what kind of services it wants to provide and what the total cost is going to be as a whole. Then, the city looks at the tax assessment, which determines what share a taxpayer will pay of the tax burden.
“The assessment doesn’t determine the tax base,” said Doubt. “It starts around this table with the finance committee and city council itself, making budget decisions. Then, the assessment rate apportions those taxes to each individual taxpayer.”
Doubt said the city has to spend time between now and next May, when the city’s taxes are determined, determining what services it needs to provide and what the taxpayers are willing to pay for.
“The assessment rate isn’t where it starts from,” said Doubt.
The finance committee voted to receive the letters from Blom and Burton.
