COUNCIL REPORT - 2021 TAX RATE OPTIONS

2021 TAX RATE OPTIONS

RECOMMENDATION:

THAT Council determines the municipal tax rates to be implemented for 2021 and direct that a bylaw be prepared to implement the tax rates accordingly.

CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:

I concur with the recommendation.

PURPOSE OF REPORT:

To consider various tax rate options for 2021 that will achieve the Financial Plan’s revenue target for municipal taxation.

TIME CRITICAL:

Legislation requires the municipality to adopt a tax rates bylaw after adoption of the financial plan but before May 15 each year. After receiving direction from Council, staff will prepare the tax rates bylaw for consideration at the May 4, 2021 meeting with adoption on May 11, 2021. This schedule will allow sufficient staff time to prepare tax notices for mailing around the third week in May.

BACKGROUND:

The Community Charter requires Council to consider the tax rates proposed for each property class in conjunction with the objectives set out in its financial plan. Last year’s tax rate bylaw included the following objectives and policies:

Objectives

1. To ensure property value taxes remain affordable and reasonable for services provided.
2. To maintain consistent tax increases for average property values in all property classes.

Policies

1. Regularly review the affordability of property value taxes for each property class relative to other classes.
2. Regularly review and compare the Town of View Royal’s distributions of tax burden relative to other municipalities in British Columbia.

Council’s objectives may shift from time to time to adjust to current pressures and trends in assessment values.

The following schedules (attached) compare historical key tax ratios and taxes per capita in Capital Regional District municipalities and include indicators of the median and provincial comparatives where applicable:

• Schedule 1 Comparative Tax Ratios-Business Class Comparative analysis shows that View Royal’s business class ratio at 3.55 is slightly above the five-year median of 3.1 for other municipalities in the region. This ratio in 2020 ranked near the middle when compared to other Capital Regional District (CRD) municipalities.
• Schedule 2 Comparative Tax Ratios-Recreation Class When compared with other CRD municipalities, View Royal’s 2020 recreation class multiple ranked second highest, and at 4.73 is significantly more than the regional five-year median of 2.2. This reflects Council’s previous direction for this assessment class.
• Schedule 3 Comparative Municipal Taxes per Capita In 2020, View Royal’s municipal taxes per capita was the fourth lowest of all CRD municipalities and has been relatively consistent for the last four years. This analysis looks at only property taxes and excludes fees and charges for other municipal services such as garbage collection, water, and sewer.

DISCUSSION:

The 2021 assessment roll results in a nearly 2% shift in tax burden from the business to the residential property class, given no change to the tax ratios (see Scenario A). One of the primary drivers of this shift is the purchase by the Province of a significant property in Thetis Cove, causing the property’s status to change from taxable to tax-exempt. When total assessments for individual property classes diverge in both magnitude and direction (decrease versus increase), Council may use the tax ratios between assessment classes (also called the “multiples”) to re-balance the tax burden. However, doing so has the effect of increasing the taxes for individual properties in the class with declining assessments, as the tax levy is borne by fewer properties and/or lower assessments. The analysis provided with this report attempts to demonstrate this effect.

The following schedules are attached to this report to assist Council in determining tax rates for 2021:

Schedule 4 2021 Municipal Tax Rates Analysis Scenario A
Schedule 5 Summary of impact on $100,000 assessed value (2020)
Schedule 6 Sample property comparatives

These schedules include the numeric results of the following scenarios that if implemented would return the amount of tax revenue for 2021 required by the financial plan:

Scenario A Increase all tax rates by same percentage; no change to tax ratios from prior year.
Scenario B Increase tax on representative property in each class by same percentage.
Scenario C Decrease Class 5 and Class 6 tax ratios to 3.1 and 3.3, respectively.
Scenario D Increase Class 6 ratio so that representative property tax increase for that class is 0%.

The following table summarizes the changes in key elements for each scenario:

* Note: Class 2-Utilities is excluded from this analysis as legislation allows the rate to be set at a constant $40 per $1000 assessed value, which prior View Royal tax bylaws have maintained and is assumed for 2021.

Schedule 4 Scenario A Increase all tax rates by same percentage; no change to tax ratios from prior year demonstrates the base scenario using the same model and calculations on which all other scenarios are developed and analyzed. This scenario assumes no change to the tax ratios and demonstrates how the change in 2021 property assessments redistributes the tax burden from the business property class to the residential property class by nearly 2%. For the purposes of this discussion, tax burden is defined as the proportion of total taxes levied on each property class.

Schedule 5 Summary of impact on $100,000 assessed value (2020) compares the results of each scenario on a property valued at $100,000 in 2020 and includes the 2021 market percentage change for each property class. This analysis demonstrates how changing tax ratios affects properties in separate property classes differently, because of the change in assessments for that property class. It also shows that reducing a single ratio in one property class by default increases the taxes for all other property classes, to achieve the revenue target required by the financial plan.

Schedule 6 Sample property comparatives lists several significant properties and particular properties of interest to Council and estimates the effect of each scenario on each property. This analysis includes the specific change in assessed value for each property, for context.

Note that while Schedule 6 provides estimates for subsets of assessments within the residential class (single family, strata), legislation allows only one rate for the residential property class.

The impact of each scenario on the individual property owner is best described by comparing the change in their property assessment value to that of the class representative (or average) property. For example, if a scenario predicts a 7% tax increase for the class representative, or average property, it means that properties whose assessed value increased more than the representative property assessment of 3.25% will experience a higher tax increase than predicted for the class representative.

Predicted scenario results for the representative property in each significant class:

Staff will review each of these scenarios in detail with Council and be available to answer questions.

The amount a taxpayer will pay is dependent on multiple factors such as the individual property’s assessment in relation to others within the class, shifts in assessments between classes and the effect of non-market changes on each class. The 2021-2025 Financial Plan document provides information about property taxes (pages 15-17), including a graphic representation reproduced from BC Assessment’s website at https://info.bcassessment.ca/propertytax to help taxpayers understand how a change in assessments impacts their property taxes. Information about the financial plan, property taxes, the Homeowner Grant and other pertinent information will be included on an insert mailed with each tax notice.

RECOMMENDATION:

THAT Council determines the municipal tax rates to be implemented for 2021 and direct that a bylaw be prepared to implement the tax rates accordingly.

SUBMITTED BY: D. Christenson, Director of Finance

REVIEWED BY: K. Anema, Chief Administrative Officer