Assessment Sticker Shock

BC Assessment recently issued its annual notice of property assessments.  Some homeowners are still in shock over the increase in assessed value of their properties. 

Property assessments are intended to reflect the "market value" of property as of July 1st of the previous year.  Property prices have been rising dramatically in recent years in BC, no more so than in the Lower Mainland where year over year increases have been as much as 20% or more.

It is understandable that property assessments would catch up to the market place. 

Many of my clients have contacted me wondering if their municipal taxes would be rising to the same extent as their properties have increased, i.e. if assessed value increases 25%, will municipal taxes increase by 25%?

In order to answer that question, it’s important understand a few basics about property assessment and municipal tax planning.

What is "market value"?

As we are discussing BC Assessments here, let's use their definition:

"Market value is the price an unencumbered property would sell for on July 1 of the preceding year, if a reasonable amount of time is allowed to find a purchaser."

How does a property assessment notice relate to this year's municipal property tax bill?

If we accept that "market value" is the fairest measure of distributing the property tax burden, then it follows properties of a similar value in a given area would contribute (tax) at a similar amount and properties of a higher value would contribute a higher amount.

BC Assessment has a professional appraisal staff and an extensive database that is periodically updated with information gathered through appraisal inspections.  Municipal and provincial agencies inform BC Assessment of land title changes, building permit approvals and zoning adjustments.  BC Assessments also considers a property's unique characteristics, including location, size, layout,shape, age, finish, quality, carports, garages, sundecks and condition of buildings.

BC Assessment issues a Property Assessment Notice to the homeowner, and prepares an aggregate list of property values, called the "Tax Roll" and provides this information to the taxing authority, (municipalities and districts), who in turn use the Tax Roll as the basis for determining how much property tax will be levied to cover annual budget expenditures in the jurisdiction.

The municipality uses a multiplier factor, known as a "mill rate" which is applied to the assessed value of all properties in order to generate enough tax revenue to meet municipal budget requirements for the year.

How much will taxes go up this year?

Tax increases are based on the amount of revenues required to operate a municipality or district including the provision of services, infrastructure improvements, equipment, and operating costs.

Property Tax is a key element of the revenue stream.  Specific increases will vary by area coinciding with budgeted operating expenses and forecasted direct and indirect tax revenues, levies, fines, and grants, etc.

Generally, tax increases should be in line with municipal or district year over year planned expense increases.  However, if property values in a given area within the municipality or district have risen above the average, then taxes in that particular area can be higher than the average.  This can be caused by rapidly increasing values driven by recent property sales, new construction and renovation for example.

Can I Appeal A Property Assessment?

Absolutely!  But you must formally advise BC Assessments of your intention to appeal by midnight, January 31st of the Tax Year in question.

How can I find out more about BC Assessments and the appeal process?

Visit the web site at www.bcassessment.bc.ca for all the details!

What is the effect of rising property values on the BC Homeowners Grant?

At present the BC Home Owner Grant can reduce property taxes by as much as $570.  The grant is reduced by $5 dollars for each $1,000 of assessed value over $780,000, and is eliminated on homes assessed at $894,000 or more.

With the increase in property assessments, a substantial number of homeowners stood to lose out on this grant.

BC Finance Minister Carole Taylor announced on January 12th that recognizing the substantial rise in property values, the government will be raising the property value threshold at which homeowners may be eligible to receive the full grant to $950,000 in assessed property value, up from $780,000.

The Home Owner Grant Program reduces the burden of residential property taxes for eligible homeowners. The basic grant entitles a homeowner to a maximum reduction in residential property taxes of $570. An additional grant of $275 is available if the owner is over 65, or permanently disabled, or eligible to receive certain war-veteran allowances.

Visit the Home Owner Grant web site for details at www.sbr.gov.bc.ca/hog

Anita Schmitt, Realtor Royal LePage Northshore

This communication is not intended to cause or induce breach of an existing agency agreement.