What you need to know about your Town of Okotoks assessment.
- No. It is a popular misconception that an increase in assessed value directly equates to a proportionate tax increase.
- Property tax might increase, but it is not because of an increased assessment.
- It is a fact that assessors have no authority to levy tax. Only Town Council has authority to levy municipal tax.
- Tax levy is dependent on and is a function of Town Operating Expense Budgets and Provincial Request for Education funding.
- Tax will increase because of increased Town operating budget and, or, increased requisitions from the Province for education funding.
- The assessed value only allocates each property's proportionate share slice of the total tax pie.
No change in tax, all other things being equal, meaning the same Town operating budget as the previous year. If the Town operating budget and Province's request for education funding stay the same the tax will remain the same as last year even if assessments increase. In such an event where there is no increase in operating costs, tax may even drop if more buildings are constructed in the Town.
If your assessed value increases less than the average increase your tax levy will drop, assuming the Town operating budget remains the same, and the Provincial request for education funding stays the same as the previous year.
- No, because the value of all properties in the community will have dropped so the distribution of the total Town tax would still be allocated the same. Each property would retain its same share sliver of the total tax pie.
- The tax level is a function of the total tax revenue required to operate the Town.
- The assessed value only allocates each property's share of the total Town tax requirement.
This is a Province wide statutory requirement which allows all assessors across the Province to annually analyze all market and sales data, draw conclusions, and conduct valuations prior to mailing Assessment Notices each year. All properties are assessed with the same effective date so all assessments are uniformly updated at the same time.
The market value standard is a legislated and regulated valuation standard based on the premise that the amount of tax a property can pay is directly proportionate to the value it is worth. The concept is that the greater the amount that can be paid for a property, the greater the amount that can be paid on municipal tax. The resulting tax is a type of tax on wealth. Wealth measured in terms of property value.
The intent of reassessing properties is to retain the competitive placement of each property in the assessment hierarchy. The reassessments ensure that all properties are assessed and paying tax on an equitable basis when compared to each other. Reassessments adjust assessments to reflect differing rates of value change between various property types and areas. The intent is to ensure each property retains its relative competitiveness and contribution to the total assessment pie. Certain property types or neighbourhoods can experience value changes at differing rates. The reassessment reflects differing value change rates to ensure all properties are retaining their respective share slice of the entire Town assessment pie.
To quickly reflect shifting values relative to the norm or each other. To ensure no given property type or area is penalized with assessments too high when its value may have dropped or not have increased to the extent of other properties.
Other assessment jurisdictions have varying reassessment cycle periods and it is noted the annual tax levies do not remain the same each year between the valuation dates. For reference and to place some scope around this matter, other assessment cycles are as follows:
Saskatchewan: 4 years
Manitoba: 2 years (had been 4 years until 2008)
Ontario: 4 years
British Columbia: Yearly with a July 1 valuation date
In Alberta prior to the mid 1990's and prior to implementation of the Municipal Government Act the reassessment cycle was once every seven years. While the assessed values stayed the same for seven years, tax levies did not. Tax levies are always adjusted to the requirements of Municipal revenue requirements.
The objective is to provide a basis for distribution or allocation of tax required to operate the Town and for the Municipality to pay the Provincial for education funding requisition. The assessment system provides a consistent, open, accountable and equitable basis for levying municipal tax. The assessment system provides a basis for dividing up the total tax pie. Each property assessment value represents the proportionate sliver size that each property contributes to the total municipal tax pie.
- The assessment roll is available for anyone's review and values are posted on the Town website.
- The assessment roll is submitted every year to the Province for independent review and audit.
- Every property owner can see and compare its assessment to others and has a right of appeal.
- The assessed value is not an arbitrary number but a value tied to a tangible standard that owners can directly relate to. Property owners can draw on their own independent information for comparison and, or hire independent appraisers for objective comparisons.
To develop an equitable basis for distribution of Municipal tax.
The assessed value should not be viewed as an absolute number. Values are not developed in a laboratory or clinical type of controlled environment. The valuation of real estate does not work that way. Real estate valuation is based on market observations and comparisons. The market is an imperfect environment and not a controlled structured setting.
There is a transaction zone to every real estate deal. There is a range in price purchasers will offer and a range in price that sellers will accept. So there is a transaction zone for every property transaction. Differing property types will have varying tolerances to an actual deal. Add to those tolerances for individual deals the fact that assessed values are generated on a mass basis indicates the precision to an assessed value is a great deal less than 100%.
Provincial Audit standards require that the Average Assessment within a competitive group is to be within 5% either higher or lower to the Average sale price within that group, and the range of differences can well exceed 10%.
Generally Assessment Complaint tribunals will not consider adjusting an assessment where the request is for anything less than 5%.
For scope of tax influence on a 10% assessment range consider the following example:
$500,000 assessment last year x 0.75% tax rate = $3,750 tax
Say 10% difference to
$550,000 assessment last year x 0.75% tax rate = $4,125 tax
Difference $375 per year or $31/month
For comparison 5% difference equates to $188 per year or $16/month
In addition to the variance inherent in the transaction zone, as previously explained, the assessed value does not attempt to value every person's individual personal preferences, requirements, or access to capital. Assessed value reflects the most probable transaction price from the perspective of the most probable buyer as evident by an average price indicated by a comparison of the transaction prices of a number of similar properties. Some assessments will be higher and some will be lower, but on average the median assessment is expected to be on the median sale price of similar properties. A lower purchase price at time of the effective date of the assessment may indicate a good buy when compared to its competitive group.
Although members of the Calgary Real Estate Board have access to good sales data through the multiple listing services (mls) there are a significant number of properties that do not sell through the MLS system and which are included in the assessment analysis.
Agents are exactly that, professional facilitators with vested interests in the wellbeing of their clients. Agents are hired for the function and roll of representing their clients and client interest to the best of their ability in putting together purchase and sale agreements. See Canadian Real Estate Association Code of Ethics and Standards of Business Practice Section 3 "A Realtor shall protect and promote the interests of his or her Client." As well as the Alberta Real Estate Act Part 2 Division 2 Section 57 (a)"...and to promote the interests of the seller;"as well as Section 58(a)"...and generally to promote the interests of the buyer;"
The functions and purposes of real estate agents conflict, and do not align, with assessment purpose of objectively preparing mass appraisal based assessment values focused on fairness and equity for the entire community subject to Provincial assessment quality standards and audit. Agents are not bound by any assessment standards or appraiser responsibilities and reporting requirements. See Alberta Real Estate Act Part 2 Division 4.
Check the purpose and function of the report, the effective date of the valuation, interest valued, and Limiting Conditions regarding use of the report. If those match assessment parameters, with an effective date close to July 1, then it would be appropriate to send a copy of that report to the assessors for discussion.
If there have been no significant improvements to the property such as additions, or a garage added, etc., an increase greater than the norm indicates the reassessment objective is working. Updated property sale data indicates that market participants are now prepared to pay proportionately more for your property type, and, or, location compared to others.
$500,000 +5% = $525,000 x 0.75% = $3,938
$500,000 +10% = $550,000 x 0.75% = $4,125
Tax Difference $187 = 4.7% marginal tax increase over last year
Last year 3,938
- The ratio of tax to value is extremely low.
- Many improvements will not increase the assessed value.
- It takes a great deal of capital expenditure to increase an assessed value.
- The improvements must be significant to that of adding space or increasing the building class.
- The cost of making improvements to an existing building will not add proportionately dollar for dollar to assessment value, as the assessment is based on comparisons of sale prices of similar property in the area.
To illustrate the influence of the low tax to value ratio consider a very major improvement cost of $100,000 and further assume all of that expense proportionately increases value, the following illustrates the tax implication:
$100,000 added value x 0.75% tax rate = $750 additional tax
The amount of property tax allocated to each property is correlated with the amount of property value. Municipal tax is exactly that - a tax. It is not a fee for services rendered on each individual property. It is a tax levied in relationship to value. Municipal tax paid is akin to federal income tax paid, which has no direct relationship, to services rendered for each taxpayer. Municipal tax paid is in relation to the property value and is not an accounting of services rendered to each individual property.
There are over 12,000 properties assessed each year.