Low-income homeowners could face city tax hike: Lane
Early data shows home values in St. John’s could dip by five per cent, leaving the city to make up the difference
Taxpayers on the Northeast Avalon could be on the verge of a Catch-22 when it comes to their tax bill in 2019.
According to Dave Lane, finance lead of St. John’s City Council, early indications of property assessments show a potential decrease in tax revenue, meaning either increases in taxation or major cuts to services could be around the corner.
Currently, residential values are tied to 2014 numbers. In the next budget cycle, they’ll be updated to 2017 values — which have changed since the downturn in the provincial economy.
There’s still lots of data to come in from the city’s own home value assessments, but Lane says there could be a five per cent drop in total tax revenue in 2019 – which could mean anywhere from $8 million to $15 million less for the city.
The kicker is the potential consequences of a change in mill rates. Because homes valued above $500,000 have seen their values decrease and homes below that threshold have seen their values either stay the same or increase, residents in lower value homes could see their tax bill increase.
Approximately 32 per cent of revenue comes from residential property tax — just over $91 million. Another $70 million comes from commercial tax, with another $49 million from water tax. Those revenues go toward the $294 million in total expenses by city hall.
While home values are not a direct indicator of personal income, they’re a good hint.
Lane says those living in lower-value homes are likely living with lower income. Those people could see their tax bill go up, while those with higher income could see their bills go down.
“If you’re of a lower income, that means even if we were able to save millions of dollars, you’d probably still see a small increase in your tax,” said Lane.
“If all things remained equal, we could just raise the mill rate and if everybody’s property value had gone down by the exact same amount percentage wise, they wouldn’t see any change in their tax bill. But that’s not what happened.”
On the other side of the coin, Lane says spending cuts would have to be deep if the initial forecasts ring true.
“Now, we have to make deeper cuts. If we cut other expenses, we might say well now we can’t do as much — I don’t want to name services right now, but I will in my next blog post of things we’re considering.”
Ultimately, Lane says a mix of tax increases and spending cuts is likely heading into the next three-year budget cycle. He wants to start the public dialogue now to ensure the public has its voice heard heading into a difficult few years.
“We need to put out the good, the bad, and the ugly and start talking about it.”
Lane says the city will have an even better idea of how revenues are affected by the end of September.
Mount Pearl Mayor Dave Aker says it’s too early to speculate about what could change in terms of residential home values in that city. While St. John’s performs its own municipal assessment, the rest of the province has to wait from data from the provincially run Municipal Assessment agency. He says he’s been given no indication of what the new assessments may look like in Mount Pearl. Aker isn’t speculating on any potential changes, six months out from the next municipal budget.
“From a municipal point of view, in terms of providing service deliver, the thing we have to focus on is providing best value for our tax payers,” said Aker.
“Once the budget is done, we’ll know at that point the assessment. The assessments are not going to drive the level of service required in the city of Mount Pearl. That’ll be determined by what the residents want.”
Paradise Mayor Dan Bobbett says Paradise is in a bit of a different situation. Because Paradise has a lot of newer infrastructure than St. John’s, he doesn’t anticipate any large changes, but he too is waiting for data from the Municipal Assessment Agency.
“There are some indications out there, but a lot of it is only anecdotal at best,” said Bobbett.
“We’re always cognizant of what we spent. Last year’s budget, we dropped by 2.4 per cent over all. We’re always cognizant of efficiencies.”
None of the three cities mentioned changes to their mill rates in their 2018 budgets.