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Tax problems in low-income areas
By provincial law, the City of Winnipeg reassesses real-estate property values every two years.
The 2016 reassessment process has started. As of April 1, 2014, real estate sales will be used for the 2016 implementation of the new reassessment values.
In 2010, the city election and property tax bills revealed a huge problem for people living in older, poorer neighbourhoods. My office receives many calls of concern every reassessment implementation year with people facing not only the budget increase but large increases due to reassessment.
City council has passed the 2014 budget, and school divisions just had their property tax-related budgets passed. Your 2014 property tax bills will be coming in the mail in about a month. My office has already received calls from residents in the Mynarski Ward startled by large increases in their 2014 tax instalment plan payments due to large increases in their homes’ values.
What is the problem? For market reasons, inner-city and other lower-income areas are seeing prices that are going up far more than the average city-wide increase, which was about 12.05 per cent for the 2014 reassessment. New home buyers purchase homes according to their income, but people who bought years earlier, based on their income, face a condition I call "asset wealthy, cash poor."
Many will say sell your house then and realize the profit, but where will they live then? House prices keep going up, apartment rents are getting higher, and there’s a shortage of housing options for renters and seniors.
Given this serious problem, I undertook a study of the City’s assessment data from 2009 to 2014, which includes three reassessments. Every real-estate property shares a small piece of the property tax pie. Because it is the percentage increase or decrease that determines how big the piece of pie you need to pay, fluctuations above and below the average will create either a increase or decrease in how much you pay.
The bar chart "Percent Change for Each Residential Market Area’s Share Of 2009’s $428M Property Tax Budget" gives a big picture look at the problem. Residential Market area 4 — Inner City shows a 31 per cent increase, while Residential Market Area 10 — New St. Boniface & St. Vital has decreased by 2.68 per cent. Over the last five years, the Mynarski Ward is picking up a much bigger portion of the property tax pie.
Consider the reassessment problem for 2014 by comparing taxes from 2013 to 2014. The table "Effects Of The 2014 Property Reassessment On Property Tax For Select Blocks" demonstrates that blocks in higher income neighbourhoods have below-average changes in their property values, resulting in lower tax increases if not a reduction in property taxes.
For example, Algonquin Avenue and Park Boulevard South have an average increase in property value of 8.01 per cent and 8.17 per cent respectively, as compared to the 12.05 per cent city average increase. Their block’s city property taxes are going down approximately one per cent. Meanwhile, blocks in older neighbourhoods are getting city property tax increases of around six per cent to 10 per cent, while council only raised the property tax budget by 2.95 per cent.
You will note the block-by-block analysis in the table shows some school division’s property taxes are smaller increases or decreases, despite high city tax increases. The reason goes back to the Residential Market Area’s (RMA) boundaries. In Old and West Kildonan, the boundaries basically follow the Seven Oaks School Division’s boundaries. School divisions only apply their mill rate within their boundaries. So, the higher average increase in property values in RMA 3, and new properties being added in Amber Trails and other neighbourhoods, offset the share of the pie. Winnipeg School Division’s boundaries see very low new properties being added to the property tax assessment, as demonstrated in RMA 4 percentages. On a city-wide basis, the new properties are too little to have a big effect like in the Seven Oaks School division.
This issue is complicated and sometimes hard to follow. There are ways to fix this problem for those people who can not afford to pay larger pieces of the property tax pie. In fact, while gathering the data for the table, I can tell you every block in RMA 4 has several properties in property tax arrears for over three years. Following are three ideas to fix this problem:
• Change the province’s Municipal Assessment Act to only reassess land values which do not fluctuate as much — call your MLA;
• Apply a formula to either lower property values in problem neighbourhoods to the city-wide average or apply the formula to all properties, bringing the values to the city-wide average — call the mayor, make it a 2014 election issue;
• Remove the education property tax off of residential properties instead of just for senior citizens — call your superintendent and MLA.
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