Scam of the year: BC Government property tax assessment freeze

[Jodie]

I'm wondering why this has received so relatively little media attention. Shouldn't people be outraged by this?

The BC Govt has declared a freeze on assessed property values. In other words, the tax assessed value of your property will remain the same as it was in 2007.

We all know property prices have dropped, yet our property taxes won't. In fact, for many people, they will actually go up because property tax rates are increasing as a percentage of the assessed value.

BTW, this was billed as a "break" for taxpayers...

Wonder what they're going to do next year when values are down as much as 20-25%?

The cities and the province have become accustomed to the windfall that expensive property values bring. The provincial land transfer tax has been a boon to the BC Govt over the past 5 years, but they have assumed that this province will always be prosperous and have not planned for the leaner years. Now that this revenue source is on the decline, I wonder how they will compensate?

 

[Thatotherguy]

The BC Govt has declared a freeze on assessed property values. In other words, the tax assessed value of your property will remain the same as it was in 2007.

We all know property prices have dropped, yet our property taxes won't. In fact, for many people, they will actually go up because property tax rates are increasing as a percentage of the assessed value.

OK, I could be wrong on this, but I thought that annual property tax wasn't based some sort of percentage of the value of your home, but that it was based on the relative value of your home compared to the average home value in the region. In other words, instead of saying "everyone has to pay 1% of the assessed value of their homes," they decide how much money the municipality needs to gather from property tax, figure out the average amount that each home needs to pay from that, and then charge people based on their deviation from the average home value. Sort of like how a strata figures out how much to charge each individual owner for the monthly maintenance fees based on a projected budget.

Anyway, if I'm right about how the annual property taxes are charged, then it shouldn't matter whether your home's assessed value is too high - it should only matter if the assessed value of your home is too high relative to the assessed values of the other homes in your municipality.

BTW, this was billed as a "break" for taxpayers...

Yeah, I don't get that either.

 

[Ray]

It's my understanding that this freeze was implemented so the construction industry wouldn't come to a grinding halt.

Otherwise, how could you finance the building of a new project if the finished product was worth 30% less that what you had initially projected.

Property taxes are based on municipal budgets, and go up and down according to how much the municipality is projected to spend in that budget year.

The cost is then distributed to the homeowners, everyone paying the same ratio in increase or decrease.


http://www.bcassessment.bc.ca/2009_assessment_roll_info/index.asp

 

[Sit_on_my_face]

MOst places that hold events like The olympics, expos etc, end up in a large deficit afterwords. These higher up people are assuming that BC will not be affected by the global financial crisis. Ya right!!

Like we are carrying the world. If the higher ups here are pulling shit like this now.....whats gonna happen 2 -3 yrs after the olympics are gone and out come the expenses and losses ( should there be) ??

They better hope that this financial crisis is long over by the time the events are here, otherwise attendance figures could be well below and you know what that means!

Funny how no one has assumed that.

JODI.....vancouver housing prices dropping 20 -25%.....I dunno. Thats pretty steep dont you think??

You really think prices could drop that much?? I could see maybe 10 - 12% from the peak.

 

[Thatotherguy]

Thatotherguy has the basics correct.

Well, that's got to be a first!

 

[mimi]

My property tax has gone up and down in the last 12 years relative to the real estate market. There was a small correction in the market, was it two years ago?..and it fell by a whopping ten dollars per month. I challenged it the year later when the market rose and they send me a list of all the properties comparable to my own and what they recently sold for...well, the prices are dropping all around me and I am sure hoping for a nice reduction this year!

 

[island-guy]

The property tax values used are based on the values 'last year' in July.

From July 2007 to July 2008, just about all house values in BC went UP but then they wend DOWN after July 2008.

So the government is going to use the LOWER July 2007 values instead of the HIGHER July 2008 values because most people's houses are now at a value somewhere between the July 2007 and July 2008 values.

By the way, I was reading a story in the news this morning that said that house values in BC were actually still UP for the year 2008, just not by as much as they had been earlier in the year. ie: The values now are still HIGHER than they were in January 2008, which was HIGHER than they were in July 2007.

That said, it all becomes meaningless, here's why:

Suppose the expenses of the city are 100 million dollars, basically what they do is they add up all the property values, say they get 10 billion dollars. Then they divide the expenses by the property values (in this case getting 0.01) and that is the tax percentage (1%).

I've oversimplified things but that's basically how it works. The money they collect isn't based on the property values so much as it is based on what they already decided to spend for the year. The 'rate' varies depending on their budget so that if all property values are up, the rate goes down.

Now, with the homeowner grant and all that 'left coast' commie stuff it is all biased to make people with nicer houses pay more and people with little downtown condos pay less (they seperate out the building from the land values and play with the numbers), because there are more people voting who have little downtown condos etc...

But in a nutshell, property values going up doesn't have to mean extra property taxes for everyone, what causes the property taxes to go up is when the city government SPENDS MORE MONEY (like bailing out olympic village developers for $100 million).

 

[kafka555]

I think it's largely irrelevant, except if you own a property that doesn't rise and fall in lockstep with everyone else's property. If you owned a property with a greater than average increase in value between July of '07 and July of '08, then you are benefitting, because you would otherwise be paying a higher share of the taxes for the class of property you own. If you owned a property with a less than average increase (ie it is impaired for some reason), you're getting screwed.

There was an article in the Sun this weekend talking about how the big beneficiaries of the freeze were the owners of major office buildings, as they increased in value at a greater than average rate.

The bottom line is that municipal councils vote to spend what they think they can get away with spending, and then massage the tax rates to raise enough money, irrespective of the values of people's property.

 

[bcneil]

My property assesment was actually less than what properties around me were selling for and still is. So I personally can't complain. Not sure how many others are in the same situation?

I fall into this, the guy in the condo 2 floors down from mine, has the exact same place, just 2 floors down. He sold his place in June, for roughly 30% more than my property assessment.

Every year my assessment has always been quite abit lower than what I would expect my place to sell for. So I figure if i bitched about this new rule, they could get even, by doing a more accurate assessment, and I don't want that

 

[kafka555]

^
It's the policy of the Assessment Authority to be very very conservative in their assessments, because they don't want a bunch of appeals. Therefore, in a rising market, 20-30% below market is usual.

 

[average]

The cities and the province have become accustomed to the windfall that expensive property values bring. The provincial land transfer tax has been a boon to the BC Govt over the past 5 years, but they have assumed that this province will always be prosperous and have not planned for the leaner years. Now that this revenue source is on the decline, I wonder how they will compensate?

From licences, parking, fines, and taxes from evaders people like bitches and complainers I wonder is Revenue Agency aware of this site BTW don't forget to vote

 

[Jodie]

The property tax values used are based on the values 'last year' in July.

From July 2007 to July 2008, just about all house values in BC went UP but then they wend DOWN after July 2008.

So the government is going to use the LOWER July 2007 values instead of the HIGHER July 2008 values because most people's houses are now at a value somewhere between the July 2007 and July 2008 values.

It depends whose statistics you reference. I have seen considerable data suggesting the market peaked in February 2008. So the question is, how far did values fall in the five months following? I do believe you're right, though, in that year over year values from July 2007 to July 2008 were higher.

That said, it all becomes meaningless, here's why:

Suppose the expenses of the city are 100 million dollars, basically what they do is they add up all the property values, say they get 10 billion dollars. Then they divide the expenses by the property values (in this case getting 0.01) and that is the tax percentage (1%).

I've oversimplified things but that's basically how it works. The money they collect isn't based on the property values so much as it is based on what they already decided to spend for the year. The 'rate' varies depending on their budget so that if all property values are up, the rate goes down

Thanks for the explanation But saying that, did everyone here not pay considerably more property taxes in 2007 than in 2002? Sometimes I think budgets grow and shrink to fill the predicted revenue...

 

[island-guy]

Sometimes I think budgets grow and shrink to fill the predicted revenue...

Actually they pretty much ignore the predicted revenue because they know that they can just raise the property taxes by however much they need to.

Look at the example with Vancouver gifting the olympic village developer with $100 million of property tax cash and they didn't even want anyone to find out...

 

[slacker]

Yeah when I heard this news I was thinking WTF?!

Indeed this shouldn't affect overall tax rates. However, I wonder how it affects new property assessments in relation to existing properties. I guess they can maybe average those down.

I can see how it could save some tax money if it costs money to perform assessments every year. The fact that this is happening right now when values are dropping fast for the first time in a long time really stinks of political wankerism to me though. I'm guessing an election is coming soon and they don't want us to be all depressed that our net worths are going to hell?

The only thing that pisses me off personally is I use the assessed value to keep track of my net worth and now it's going to be way out of whack.

 

[hunsperger]

Well explained...

OK, I could be wrong on this, but I thought that annual property tax wasn't based some sort of percentage of the value of your home, but that it was based on the relative value of your home compared to the average home value in the region. In other words, instead of saying "everyone has to pay 1% of the assessed value of their homes," they decide how much money the municipality needs to gather from property tax, figure out the average amount that each home needs to pay from that, and then charge people based on their deviation from the average home value. Sort of like how a strata figures out how much to charge each individual owner for the monthly maintenance fees based on a projected budget.

Anyway, if I'm right about how the annual property taxes are charged, then it shouldn't matter whether your home's assessed value is too high - it should only matter if the assessed value of your home is too high relative to the assessed values of the other homes in your municipality.

you are absolutely correct...

it was explained to her previously...

she either does not understand or refuses to understand...

I could explain it to her over coffee, but if it took me an hour she would charge me $150...

 

[island-guy]

it was explained to her previously...

she either does not understand or refuses to understand...

Looks like she understood perfectly well to me.

If she was on the island, I'd spend that $150, and I'd pay for lunch, too.

 

[Thatotherguy]

you are absolutely correct...

OK, this is getting weird. That's 2 people who have told me I'm right in this thread! I'm not used to this kind of treatment, and it's freaking me out!

 

[Jodie]

Interesting turn of events...

http://www.canada.com/vancouversun/news/business/story.html?id=a4eea8e1-e2e4-4da5-8c07-7ff941535f97

From today's Vancouver Sun:

Province fixes the big flaw in assessments
Don Cayo, Vancouver Sun
Published: Friday, November 14, 2008

Property assessment notices next January will have two numbers -- the value as of July 1, 2007, and as of July 1, 2008 -- and taxpayers can choose whichever is most advantageous as the basis for their 2009 property tax bill.

Why is this so important? Because the decision to change the assessment process for one year was based on average or on median changes in sales prices. Both these measures indicate prices peaked in May of this year. So, by July 1, 2008, normally the date that assessments for 2009 property tax bills would be based on, these prices were just starting to slide.

But few properties perform in lock-step with the average or the median. Most are either above it or below.

Krueger conceded a central point of my earlier critique -- that residential price declines start first with condos and first in urban areas, then spread to other kinds of property if an economic downturn continues.

I concluded from this that many properties -- I'm guessing a few hundred thousand -- would be valued higher in July '07 than in July '08. This could -- except for his decision to disclose the '08 valuations and give homeowners a choice -- have lead to so many appeals it might have brought B.C.'s assessment system to its knees.

 

[hunsperger]

what is the definition of advantageous...

 

[Jodie]

what is the definition of advantageous...

ad⋅van⋅ta⋅geous 
[ad-vuhn-tey-juhs]

–adjective
providing an advantage; furnishing convenience or opportunity; favorable; profitable; useful; beneficial: an advantageous position; an advantageous treaty.