I was hoping someone with some expertise would do exactly what Kevin Schroeder did this week.
The Chilliwack Realtor posted an Instagram video responding to a perennial misunderstanding about how property assessments affect property taxes.
It’s sort of an “Assessments and Property Taxes for Dummies” all wrapped into a three-minute-and-33-second video.
I, no expert, tried to explain this to someone on Twitter myself after they responded to a Tweet about large increases in values of some random properties I had looked up in the Chilliwack area.The Tweet response suggested that increased assessments meant, cringe, property taxes are going up.
Someone else Tweeted that their property in Chilliwack increased in value by 43 per cent. “Will be interesting to see how the city deals with property taxes this year. With the amount of value that has gone up I would hope the city won’t get greedy!”
Not true. Quite simply put, if your property increased in value that has no connection to whether your property taxes will go up. Just as if your property goes down in value your property taxes are not related.
“Don’t panic,” Schroeder says. “Just because your property assessment increased it does not automatically mean that your taxes will increase. Here’s a short explanation on how the taxes are calculated.”
Schroeder’s Instagram video starts with a tiny fictional B.C. municipality with a city budget of $65,000 and a property tax roll of $7 million, to keep it simple. (I know, these are very small numbers. Chip Wilson’s garage?)
How a municipality decides your property tax bill is by using a mill rate, a figure that represents the amount per $1,000 of the assessed value of the property. (“Mill” is derived from the Latin word for thousandth: millesimum.)
So as Schroeder explains, the mill rate is calculated by dividing the budget by the tax roll and multiplying by 1,000. So in our tiny town’s case, 65,000 divided by 7,000,000 multiplied by 1,000, which equals 9.2857.
If a home in this village is worth $300,000 the taxes are that price times 9.2857, divided by 1,000, which equals $2,785.71. That was last year.
If, again to keep the numbers simple, the total tax roll for our little community went up by 10 per cent this year, that means it would be $7.7 million. So if the city budget stays the same (I know, I know, it never does but that’s not the point for this math) at $65,000, then we do 65,000 divided by 7,700,000 multiplied by 1,000, which equals 8.4415, our new mill rate.
If our theoretical home went up by that exact 10 per cent to $330,000, then we have 330,000 times 8.4415 divided by 1,000.
The answer? You guessed it, the same as the year before: $2,785. (Do the math yourself, yes, it’s off by two cents but that’s because we rounded the mill rate to four decimal points.)
Every year since 2016 when property values started to skyrocket up, and even before that, there was a lot of misunderstanding on social media about how property taxes are calculated. I’m hoping my explanation here in print of Schroeder’s Instagram video doesn’t muddy the waters.
There are also a couple of caveats to all of this, one is the bad news.
Firstly, most properties in Chilliwack almost certainly increased in value, as the entire property roll increased by a staggering 35 per cent. In Schroeder’s theoretical example, the individual house went up by the exact amount as the entire property roll.
But if your property value increased by, say, 43 per cent like the person who contacted me, and even if city hall adopted the same budget as last year, your property tax bill would go up slightly because the property increased in value more than the 35 per cent city-wide.
And the bad news? Well inflation and discretionary changes to the city hall budget means we will see a property tax increase. In fact, at city council’s meeting on Tuesday, they gave first and second reading to a budget with a proposed tax increase of 2.99 per cent, 1.27 per cent inflationary and non-discretionary (out of their hands), and 1.68 per cent for additional service levels (government choices, which includes three additional RCMP members).
Check out Schroeder’s Instagram post @kevinschroederrealtor to see the video embedded in this story above.
RELATED: Proposed 2022 tax increase for Chilliwack again at 2.99%
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