|
Effect of
Changes in Current Value Assessment (CVA)
on the
Distribution of Bluewater Property Taxes
Who pays Bluewater’s taxes? (Data
Source: Municipality of Bluewater 2004 budget)
• The
portion of total Bluewater tax revenue from “Residential”
properties has increased to
82.5 %;
“Farmlands”
– 9.65 %; “Commercial”
– 4.96%; “Industrial”
– 1.69%.
•
Of Bluewater’s total “Residential”
tax revenue:
•
Hay
West
and Stanley West
represent
46.5 %
•
Hay
West,
Stanley West and Bayfield
represent
68.1 %
the
other 4 wards combined represent only
31.9 %
Which segment of Bluewater has seen the largest CVA increases?
•
Bluewater’s
lakefront
property assessments have
increased by 75.19 % from 1999-2003.
(Data
source: MPAC via WRAFT)
•
This is by far the largest increase within the “Residential”
tax class.
Have other Tax Classes experienced similar effects?
•
“Residential”
properties have increased more than any other Bluewater tax
class over this time period.
•
Higher selling prices for some Huron County farms, partially
driven by “offshore” purchasers, have resulted in increased CVA
of “Farmlands”, but
to a lesser degree than lakefront property.
What factors contribute to this increase in Lakefront CVA?
•
Obviously there is a limited
supply of waterfront property in existence.
•
Population demographics indicate a significant
increase in demand,
by the “baby boomer” generation.
•
Value of the
Canadian Dollar vs. US Dollar
Over the last
several years, Ontario property values have been relatively
cheap for prospective American purchasers. It can be documented
that this has contributed to inflated selling prices and results
in higher CVAs for all lakefront properties.
What is the effect when CVA increases are much greater in one part of the
Municipality?
•
The distribution of the entire municipal tax
burden shifts to the geographic area or tax class that
experienced the greater rise in assessed values.
•
As a result, most
Bluewater lakefront properties
experienced tax increases in 2004 of 25 – 50 %,
addition to significant tax increases in 2003.
What is wrong with this?
The fundamental
principles of any fair taxation system are that taxes should be
distributed equitably among taxpayers on the basis of either
services provided or ability to pay.
“Current
Value Assessment”, as the basis of distribution for
taxes, reflects neither. Indeed, for the higher taxes that
result from increased CVA, there are not more services provided
to the three wards with lakefront properties. Nor can it be
assumed that there is a greater ability to pay simply because
the CVA of one’s residence has increased. The only gain
accruing from higher property value occurs if you sell and move
away, or die and the higher value becomes part of one’s estate.
For the lakefront resident who desires to continue living there,
a higher CVA is of no benefit; rather it is a liability
throughout one’s lifetime since, under the present
circumstances, it leads to higher taxes.
Simply put,
lakefront properties
in Hay West, Stanley West and Bayfield now
bear a disproportionate share of
the entire municipal tax burden – Bluewater, Huron
County, and Education – as a result of dramatic increases in the
CVA of waterfront properties since Bluewater was created.
Conversely, all
other Bluewater ratepayers now pay a disproportionately smaller
share of the tax load.
I’m not a lakefront ratepayer – Why should I worry?
The market value of
Bluewater lakefront properties could be reduced by factors such
as higher lake levels, higher Canadian dollar, overpricing,
reduced demand, or changes in Canadian tax/estate laws.
Bluewater levies
$3.765 million in taxes to finance its current operations.
However, if Bluewater lakefront CVA were to fall by only the
amount it increased in the last reassessment,
all other Bluewater ratepayers
would face tax increases in the range of 20-40% to
produce the same tax revenue in the subsequent year.
Are individual residents being hurt by the spike in property assessment?
Yes. The following
examples illustrate the hardship being experienced by some
lakefront property owners:
•
Some individuals on fixed incomes are no longer
able to retain the lakefront property that has been in their
family for years; e.g., a widow who would have preferred to keep
the “family” cottage where her grandchildren love to visit, but
cannot afford the sharply increased property taxes.
•
Some families with relatively modest incomes feel
they can no longer afford to retain their lakefront cottage in
light of their other expenses (principal residence, children’s
college expenses, etc.). Although they prefer not to rent their
cottage, in particular during the months of July and August,
they feel forced to do so to offset the cost of rising taxes
resulting from increased assessment.
•
The reassessment-driven tax increases in 2003 and
2004 have reduced the discretionary income of all residents that
could otherwise be spent within Bluewater.
Isn’t this a Provincial Government problem?
Organizations such
as WRAFT (“Waterfront
Residents After Fair Taxation ”) are working to
ensure that provincial officials recognize both the scope and
unfairness of the current situation.
Although resolving
the underlying problem on a province-wide basis will require
correction at the provincial level, there are actions that a
local municipal council could take to alleviate the extreme
fluctuations with the resultant instability of property taxes.
What could Bluewater Council do to minimize the negative effect of major
changes in CVA?
Bluewater will never become a true unified
community unless there is a more equitable sharing
the Municipal tax burden among all its ratepayers.
There are a number
of ways that Bluewater Council could alleviate the negative
effects of the current situation. These include:
•
Limiting the % by which change in CVA can change Bluewater
residential property taxes
This technique may
be the simplest and most effective way of eliminating major
swings in individual property taxes as a result of
reassessment. Although it does not prevent the eventual shift
of tax burden to areas where CVA has increased relative to the
balance of the Municipality, it does have the effect of slowing
the rate of change.
Following extensive
consultation, Nova Scotia this year enacted such legislation for
the purpose of capping assessment increases for residential
properties (see attached). The capped value will be escalated
at a percentage per annum to be determined later this year by
Nova Scotia Regulation.
To implement such a
measure in Bluewater would require some modifications to
computer tax notice software; however, such modifications are
relatively simple programming changes.
•
Introducing “Area Rating” by Ward
An alternative
method to distribute the cost of operating the municipality on a
basis that is equitable for
all its ratepayers
would be to:
This
would reduce the unfairness of the current system which results
in:
|
