Your Property Taxes versus Your Property Value

I got an email last week from a person who's concerned about their property taxes and what happens now that many of us are suddenly living in houses worth approaching a million dollars. Houses we sure did not pay a million dollars for! 

If your house is now valued at a million dollars, but currently assessed at 300,000, does that mean you're suddenly going to have to pay three times as much in property taxes? 

 

Happily, no.

 

I thought maybe the person who wrote me isn't the only one with this specific concern, so here's what I wrote back (and I checked it with the Treasurer, so it's legit): 

 

I can guarantee you, you’re not going to have a doubled tax bill if your house is suddenly worth twice as much. Property taxes work very differently than sales tax or income tax. 

Here’s how Collingwood’s budget process worked the last two years that I’ve been on Council: The Treasurer and other staff come to council with a rough number of how many dollars the town needs if we’re going to continue offering all the services we currently have. Then, we councillors send the staff away with another rough number: what we’re willing to accept as an increase or decrease in spending. After that, staff return with a proposed budget, which incorporates Council’s number and any new or additional services the council has told them the town needs or wants. We debate and discuss, cut some stuff, keep some other stuff and then, that’s the budget, and the tax rate flows from there.

Last year, the final number of dollars needed came to around 30 million raised from property taxes. Here’s the important part: The approximately 30-million is then collected from among all the taxpayers, based proportionally on their MPAC assessment. 

(Just fyi, the town’s whole budget is actually about 100-million dollars, but the rest comes from other sources, like the feds and province and interest and fees and Development Charges.)

(To add another complication, the town collects your taxes on behalf of the County and the School Board, so, if your tax bill is 5,000 dollars, only about 2900 comes to the town. The County and the School Board set their own taxation rate, which the town has no say in. This year, the County has set a target of 2% for its increase. The school board is likely to have a small decrease. (I may have already heard what was in their budget, but I can’t remember offhand…))

Collingwood taxpayers have seen lower than cost-of-living property tax increases the last several years (about 1%), because of how many new people are moving here. The Treasurer can’t know exactly how many new properties will start getting tax bills each year, because of delays in construction etc., but the Treasurer does come up with an estimate, with help from the building and planning departments, and includes that estimate in the total number of dollars to be collected. Some years, the estimates are a might bit conservative, and we end up with a surplus that we put, by policy, into reserves. Some people don’t like this policy. 

Wow, that was a really long answer to your question, which was, ‘has there been any thought put into this?’, and the shorter answer is a definite, ‘yes’.  Lots of thought, for sure. You can rest assured your property taxes will not double even if your house price doubles, because everyone else’s house price is also going up, and the property taxes are based on the town’s needs, divided among all the taxpayers, proportionate to the value of their property.

 

So, if you, like me, are planning to leave your house 'feet first', I hope this clarification helps ease your mind a little. Oh, and a further clarification: the town does actually have a say in the County's taxes since we send two people to County Council: the Mayor and Deputy Mayor and sometimes me, since I'm the alternate. Also, the Treasurer tells me MPAC offers input for the estimates of new homes in town, while tax policy advisors hired by the county additionally give the town's Treasurer input on the estimates.