A drop in assessment values for non-residential property in mid-2020 may require the city to access $830,000 more than expected in reserve funds to make good on a promised zero-per-cent tax increase this year, officials tell the News.--NEWS PHOTO COLLIN GALLANT
cgallant@medicinehatnews.com@CollinGallant
Final adjustments to keep property tax rates at 2019 levels this year will go to council for approval Monday, but the effort to maintain “a zero” may require $832,000 more than expected to be spent from reserves.
That would account for what city finance officials say is the short-term effect in mid-2020 of the pandemic on property prices, which make up half the assessment calculation.
Basically, while there was new construction and property improvements last, sales prices dragged the total assessment slightly down.
If left unaddressed, the tax rate would have to rise to bring in the same amount of money.
“We did see assessment growth but (total) assessment is lower because the test of fair market value is July 2020,” said Dennis Egert, the city’s managing director of corporate services.
“There’s three months of impacted prices (April, May and June in 2020). A large part of that is the effect of COVID.”
Information presented to Tuesday’s meeting of council’s corporate services committee states the assessment base grew by $47 million due to new construction, weighted to new single-family homes. However, cumulative property values fell by a total of $72 million, heavily weighted to commercial property.
Multiplied by tax rates, the net difference is $832,000, or 1.1 per cent, less revenue, that administrators suggest should come from a stabilization reserve and show up as a “neutralization credit” on bills that would otherwise shoulder part of the dip. The difference would be $21 for the owner of a median single-family home, or $165 for the owner of a business property valued at $1 million.
“We’re proposing to find that (lost revenue) from the tax stabilization reserve,” said Egert. “We believe the effect (on property values) is temporary, and we’ll recover those values next year.”
Last fall council approved a plan by finance officials to slash city expenses and improve non-tax revenue to bring in no general tax increase this year and permanently cancel an increase that was postponed in 2020.
The total amount of money required from property tax this year is $78.4 million, the same amount required in 2019 for municipal purposes, but that is only half the equation.
The average assessment for a median home residential did not change, though specific assessment values may have changed leading to an increase or decrease in tax owing. Finalized assessments will be mailed May 7, and taxes are due June 30.
Education hike
An increase to provincially-set education tax rate will likely see all bills rise, a backgrounder on the upcoming tax bylaw states, by $24 for homeowners and $400 for businesses valued at $1 million.
While the municipal portion may remain the same, the education requisition for taxpayers in Medicine Hat increases $837,000, or 3.4 per cent, to $24.6 million. That difference, which comes after the province froze rates in 2020 as pandemic relief, is applied against the entire assessment as would add $24 to the bill for a median home, or $248 for a million-dollar commercial property. A 2.7 per cent rise for the Cypressview Foundation would add $1 to average homeowners bill.
