Property tax revenue for the Town of Hinton will be approximately $510,870 higher than originally calculated, with a total of $13,198,722 in 2019, due to a larger number of reassessments that took place in 2018.
The larger number of reassessments impacted by changing land values and updated lease rates in 2018 caused an overall increase in assessment values of approximately four per cent.
During budget deliberations each year, administration estimates the amount of inflation according to property assessment values from the previous year, but they had not anticipated an increase of this magnitude.
“This is always a conundrum and why some municipalities find it challenging when they’re trying to set a budget and approve a budget as of December 31 because we’re doing that based on a number of estimates and that’s what we did this year, there were growth and inflationary numbers in there but they were not near the tune of what we did,” said Carla Fox, director of corporate services, during the regular council meeting on July 9
Typically what would happen when assessments come in the spring is a determination is made by the administration if the assessments are impactful and it is then brought back to Council, said Fox.
Administration will schedule a discussion on options for the 2019 property tax surplus by the end of September 2019.
Administration suggested that it would be appropriate during budget deliberations for Council to be presented with additional information in order to come to a decision on how to allocate the unbudgeted property taxation surplus.
Budget deliberations take place in September through December each year for the operating and capital budget of the following year, and anticipated taxation increases, or decreases are estimated based on a calculation to determine the equivalent amount of a one per cent taxation increase.
Last year, the actual growth in property assessments came to council prior to passing the tax rate bylaw in the spring allowing them to adjust the taxation increase before the tax rate was passed, said Nelson.
“To me having the growth numbers in there before we passed the tax rate bylaw is how we potentially police this,” said Nelson.
The tax rate bylaw was passed this year on May 7, while the assessment value numbers were presented in July. Fox stated there is an annual budget schedule presented to council to which a requirement could be added to present the assessment numbers to council as they come in.
“In that schedule one of those things that should happen is that when those assessments come to town we should be going back to council and look at those impacts to make decisions based on the impact,” said Fox.
The 4.4 per cent approved taxation increase in 2019 and the estimated 2018 assessment values were used to generate a mill rate, which is the amount of tax payable per dollar of the assessed value of a property and is used to calculate the amount of property tax owing.
That calculation only accounted for approximately $50,000 of the inflationary increase in assessment values and this has resulted in an unexpected taxation revenue increase of approximately $510,870.
“By dealing with [the budget] in the fall, you don’t have the numbers in front of you. The legislative deadline for condition is December 31. None of those numbers provided in the fall would be concrete numbers,” said Warren Powers from Powers and Associates.
Assessments aren’t finalized and available until February, he added. The Town of Hinton contracts Powers and Associates to do appraisals for property tax assessments, which can change as the appraiser carries out mass appraisals.
Appraisals involve an assessment value being calculated against similar properties that have recently sold. Those assessments are divided by its sales price, creating an assessment to sales ratio, which can be applied to similar properties to help re-adjust assessments and keep them accurate to actual value on the market.
“A year over year increase, in excess of other properties, does not necessarily mean a property is over assessed. The MGB is aware of the legislative requirement to conduct annual assessments and this can, and often does, result in different rates of increases or decreases for various properties within the same area,” read Powers during the meeting.
He added that a property’s previous year’s assessment may have been incorrect, and in the course of having it corrected it can result in a significant year over year increase.
Powers suggested a way to fix discrepancies between the estimated assessment base and the true assessment base is to split the assessment notice from the tax notice.
Currently the town sends out a property tax notice that also includes the assessment value, a split notice would send a notice of property assessment value first and then a property taxation notice.
“This would allow the town to know with 99 per cent certainty their total assessment base earlier in the taxing year and prepare more accurate estimates for the equalization process,” he said.
Administration will bring a report to a future standing committee meeting regarding assessment policy options, including split notices and supplemental assessments.
The majority or 43 per cent of the revenue increase from the reassessments comes from commercial, while 35 per cent is industrial, and 26 per cent is residential.
Mobile homes and condominiums in Hinton saw a seven per cent decrease in assessment value and taxation.
Residents can contact the assessor to confirm the property details they are being assessed on are accurate and correct. Residents can also contact the Town of Hinton finance team to discuss the budget and where their tax dollars are going.
Complaints about the assessment can be made with the assessment review board of the Province of Alberta.