Thursday, November 6, 2014

Taxes, Taxes, Taxes

There seems to be a lot of chatter about tax rates, tax gaps and how Cranbrook sits in the whole scheme of things going on right now. This is great discussion in the election lead up. It has been stated Cranbrook sits in the middle as far as rates go and it has been stated Cranbrook sits close to the top in communities of similar size. Both statements have been correct depending on whether the tax gap or taxes rates are being discussed.

A more important question to ask might be why are Cranbrook rates high and have they always been some of the highest in their category? It is interesting to look at the rates for 2005 compared to 2014. (see below). It can be seen Cranbrook's rates have actually declined substantially in that time. Of course the tax bill is higher but that is because property values have gone up.

Cranbrook 's lack of maintenance to its infrastructure over many years combined with considerable downloading of responsibility from the Federal and Provincial Governments produced the situation that the City is now recovering from. There is a plan and it is being followed but recovery will not happen over night. Saving money might sound easy but it is doubtful residents would want to see Western Financial Place, which costs the city $3 million per annum closed. It is doubtful residents would want to see the grants/fees for service to organisations such the Museum of Rail Travel or Chamber of Commerce removed. Relatively small sums of money (relative to the total budget) might be saved by doing away with small investments that might make our city more attractive to some but it is not the finishing touches that cost the large sums of money. Some City blocks can cost up to a million dollars to replace all the infrastructure. All the grants to organisations might equal one city block of road. Those values and what they contribute to a community need to be weighed carefully.

It would be useful to voters if those who speak of frivolous spending would actually be explicit about where they would cut spending.

For interest:

http://www.fcm.ca/Documents/reports/The_State_of_Canadas_Cities_and_Communities_2012_EN.pdf

http://www.civicgovernance.ca/wordpress/wp-content/uploads/2014/09/Whos-Picking-Up-the-Tab-FULL-REPORT.pdf

Mill Rate Calculation

http://www.maa.ca/property/millrate.html

Each year, council, during its budgetary process, approves the amount of revenue required to operate the municipality. From this amount they subtract the known revenues, such as grants, licences, permits and soon. The remainder represents the amount of money to be raised by property taxes. The amount to be raised is divided by the total value off all the property in the municipality and multiplied by 1,000 to decide the tax rate also known as the “mil rate.” The calculation expressed as an equation is as follows:

amount to be raised

total taxable assessment

X 1,000 = Mil Rate

The word “mil” is derived from the Latin word for one thousand (1,000). In tax terms, one mil is equal to 1/1000 of a dollar or one dollar ($1.00) in tax for every one thousand dollars ($1,000) of assessment.
A sample calculation:
A town needs $30,000 to balance its budget. The total taxable assessment for all properties is $5,000,000.

$30,000 (amount to be raised)

$5,000,000 (total taxable assessment)

X 1,000 = 6 = Mil Rate

The mil rate must be applied uniformly throughout the community, although certain properties, such as churches and schools are exempt from real property tax. Council, itself, may exempt certain property owners from paying property tax. That is why the mil rate is calculated on the total taxable assessment.

Property Tax Calculation

he amount of municipal tax payable by a property owner is calculated by multiplying the mil rate by the assessed value of a property and dividing by 1000.

Mil Rate x Assessed Value

1,000

= Property Tax Bill

Using 6 as the Mil Rate, a taxpayer with a property valued at $55,000 would be sent a tax bill for $330.

6 x $55,000

1,000

click to enlarge