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When a zero tax rate increase costs you money

It sounded so rosy when our city council came up with the mantra for a zero-per-cent tax increase.

That's when the trouble started - a vast majority of people don't understand the process of taxes and how they are established. The end result is that a lot of people expecting to pay the same amount on their tax bills as last year were very disappointed, they had to dig deeper to come up with the cash.

The problem arose in the reporting what the public understood as a tax freeze, a zero-based change in their tax bill. What the city did, in fact, was to freeze the tax RATE, and that's vastly different than freezing tax bills.

Taxation is complicated because it is based on a number of variables. It all starts with assessment, done by an independent body not answerable to local jurisdications. Assessments are based, in part, on market trends in real estate, as of the previous July 1. Part of that is achieved by comparing properties to similar ones that have sold recently. You can see how subjective and volatile that can be in today's market.

That creates the assessment roll on which the city then determines how much money they need for the new budget, and by setting a percentage of the total assessment roll, that creates the tax rate on which you tax bill is established.

So, if the city decides to keep it's total tax collection the same as last year, which council did, then there will not be any increase in the amount of tax collected over all. (With minor exceptions).

That should make everything hunky-dory, if your assessment remained the same as the average. However, if your assessment increased more than the average, then even with the city rate remaining the same, you have a greater starting point, thus increased taxes. The opposite is also true, if your assessment decrease is below the average, then you should get a tax decrease.

My my own case, my assessment went up slightly more than the average, so I knew my tax bill would be going up. And it did.

Clear as mud, right? Well, there's another little thing. Sometime elected officials move the goal posts while they're playing the taxation game – take some city services off the tax bill and charge user fees instead. But that's another kettle of fish. User fees are a tax by another name, plain and simple. Thus they are taking from one pocket and putting it into another.

The city's share of taxes is only one portion of your tax bill. The city can freeze it's rate, but the Regional District of Nanaimo can set its own rate. There are other jurisdications as well. But even with a tax rate freeze, the city share of your tax bill can still go up or down.

Following are the "Levies collected on behalf of other agencies."

The Municipal Finance Authority.
Nanaimo Regional District General
Nanaimo Regional District Parks
Nanaimo Regional District Sewer Benefitting Area
Nanaimo Regional General Hospital District
Regional Parks and Trails Parcel Tax
Vancouver Island Regional Library

Then there's the really big elephant in the room - school taxes collected on behalf of the Province of B.C. 

 City staff have tried for years to explain the relationship between assessment and taxes and I bet only a small per cent of the public really understand.

I would venture there are city councillors who don't understand. 

Merv Unger is a retired journalist and former city councillor, living in Nanaimo.