Property tax plan sleight of hand By: Dan Lett Posted: 4:55 PM CDT Thursday, Oct. 11, 2018

Opinion

Hey there, time traveller!
This article was published 11/10/2018 (2522 days ago), so information in it may no longer be current.

It’s hard to know exactly how to react to Winnipeg mayoral candidate Jenny Motkaluk’s property tax plan, unveiled Thursday after much delay and speculation.

On the one hand, Motkaluk promised to keep annual property tax increases for owner-occupied homes to just 1.16 per cent which is, not coincidentally, half of what incumbent Mayor Brian Bowman has pledged (2.33 per cent).

Motkaluk said her proposal would make property taxes more predictable and fair. As well, it would not punish homeowners for investing their hard-earned money to expand or significantly renovate their homes — actions that, at present, typically result in a bump to property value and taxes.

On the other hand, for her plan to work, Motkaluk has to employ some legal and mathematical gymnastics that feature an extremely high degree of difficulty.

In essence, Motkaluk has identified what she believes is a loophole in provincial legislation governing municipal property assessment and taxation. Those laws require every municipality to do a reassessment of property values every two years, and then employ that data in the calculation of property taxes.

In the Motkaluk proposal, a reassessment would still be performed every two years — as required by law — but the results would essentially be ignored when it’s time to calculate annual property taxes. Instead, homeowners would only be responsible for paying an additional 1.16 per cent on total tax bill from the previous year. This would continue as long as they continue to own and occupy the home.

To make it appear assessment data is still being employed — another legal requirement — a separate calculation would be made on each home in Winnipeg to keep the tax increase to 1.16 per cent. When pressed, Motkaluk agreed her plan would, in essence, render the results of any reassessment “moot” for property tax purposes.

It should be said Motkaluk is not wrong on some of her core assertions.

The current assessment system is perfectly imperfect. The city monitors home sales data and uses it as a barometer on which to estimate the market value of similar or surrounding properties.

The end results are, as you might expect, hilariously inaccurate. There is simply no way a handful of sales can provide accurate estimates of value on hundreds of thousands of other homes. That said, there is also no clear consensus on what a better system looks like.

Property taxes should be based on property value and, in lieu of doing a separate appraisal of all 220,000 registered properties in Winnipeg (an impracticable task), this is the best system we have.

Unfortunately, rather than proposing a better way of establishing market value, Motkaluk is just removing it from the equation. The end result is a flat property tax that benefits Winnipeggers who own the largest and most valuable properties by allowing them to improve or expand without fear of paying higher taxes.

However, there is another, more important concern in Motkaluk’s tax proposal. No matter how you spin it, it will provide less revenue to the City of Winnipeg than Bowman’s proposal.

Some of the revenue shortfall will be made up, Motkaluk said, by eliminating the costly process of arbitrating appeals of assessment values. However, she clearly has not accounted for the cost of performing separate calculations for every home in the city to make it seem like she’s setting taxes on reassessment data.

How will she make up the remaining revenue shortfall? Remember, Bowman’s 2.33 per cent is dedicated to roads and bus rapid transit projects. Motkaluk won’t have to worry about one of those if she’s elected Oct. 24 — she promised to kill any future development of rapid transit.

As for roads, Motkaluk said she would simply build them better, cheaper and longer-lasting through “efficiencies.”

In this, we see the biggest flaw in her otherwise intriguing proposal. Whenever a politician wants to cut, freeze or hold tax increases to levels below the joint impact of inflation and population growth, the word “efficiencies” arises.

Fellow mayoral hopeful Tim Diack, a veteran police officer, has promised to freeze property taxes and increase spending on roads through a “line-by-line” audit to identify efficiencies across the civic government.

It’s a promise we’ve heard many times before.

The word “efficiencies” is wielded by politicians as code for: “We can give you the same or better service for less money.” However, what they’re really saying is: “I really want to do ‘x,’ but don’t know how to pay for it.”

The city has been the subject of numerous audits and studies about its overall efficiency. Winnipeg is, by the standards of other Canadian centres, pretty lean. It keeps hundreds of jobs unfilled to control costs. It holds non-infrastructure expenditures to a low level.

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There is, no doubt, more waste, but it’s not going to add up to millions of dollars. Efficiencies would have to be blended with service reductions to make Motkaluk’s fiscal math work.

On the whole, Motkaluk was clever to avoid pledging a freeze or cut to taxes, which is bad policy for a growing city and too easily assailed by Bowman.

However, her proposal is, in the final analysis, more sleight of hand than a true reform of property taxes.

It’s a calculated wager, come election day, voters will remember her tax proposal calls for increases half of what Bowman is proposing. And that they won’t ask too many questions about whether it’s practical or legal.

dan.lett@freepress.mb.ca

Dan Lett
Columnist

Dan Lett is a columnist for the Free Press, providing opinion and commentary on politics in Winnipeg and beyond. Born and raised in Toronto, Dan joined the Free Press in 1986.  Read more about Dan.

Dan’s columns are built on facts and reactions, but offer his personal views through arguments and analysis. The Free Press’ editing team reviews Dan’s columns before they are posted online or published in print — part of the our tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.