When someone hears talk of school taxes, mill rates, the education support levy, the special education levy and equalization grants most people’s eyes glaze over. Of course, this numbing effect vanishes after they receive their property tax bill in the mail — then the pain becomes practically unbearable!
School divisions have raised taxes to the point that, when combined with the much smaller provincial education support levy, they now represent approximately half of one’s total property tax bill in Winnipeg.
The Winnipeg Real Estate Board said school taxes are unfair because they are levied on the value of a property with no relation to the owner’s income or ability to pay. In certain instances, homeowners do not have the financial wherewithal to maintain their homes due to the high property tax burden, and could even be forced to sell their most significant lifetime investment at a less than optimal price because of the onerous tax burden.
The WREB said education is an essential core public service and should be funded through provincial general revenues like health care and social services.
In an environment where property taxes are on an upward trajectory because of school taxes, where is the incentive to improve one’s property let alone try to maintain it? The more citizens improve their properties, the higher the valuation. The higher the valuation, the higher the school tax even though services have not increased!
Many provinces have gone towards 100 per cent funding of education from general revenues or have taken on an increasing share of the total
education funding requirements
from general revenues. Even Saskatchewan, which is known as Manitoba is for placing too much reliance on property to fund education, has made moves to reduce the education tax burden on property owners.
Without even raising the fairness argument, there is also the question of how competitive Manitoba wishes to be in relation to other provinces like Saskatchewan or Alberta when attempting to attract new businesses or residents or retain our youth in the province.
A recent column by former mayoral candidate Peter Kaufmann in the Winnipeg Free Press singled out school taxes as a real deterrent to our city’s ability to raise taxes for infrastructure and recreation facilities. He said we must bring our city back to a level where it can compete more effectively and realize its full potential.
“If we are not keeping up, then we are falling behind,” he said.
The board said property owners should be very mindful this year of a higher property tax bill because of what happened following the 2002 reassessment. In 2002, a number of school boards actually increased the mill rate despite the fact that property values had gone up between 1995 and 1999 (bureaucratic double-dipping). The next year many of the same school boards again increased the mill rate — more double-dipping.
This phenomenon, when school tax increases happen at a higher rate of increase during an assessment year, is not unique to Manitoba. A study done in Saskatchewan by the Canadian Taxpayers Federation showed that between 1997 and 2001 (reassessments are done every four years like Manitoba), school taxes went up significantly more than in non-assessment years.
One reason cited for this is the public’s confusion and lack of understanding of how mill rates work. While reassessments are supposed to be revenue neutral, that has not been borne out in practice.
Mill rates explained
Mill rates are simply one-thousandth of the assessed value of a property. In the case of Manitoba, where portioning exists at different rates depending on the class of property, residential properties are set at 45 per cent of the assessed value. If you know the assessed value of your property — based on “fair market value” — and what the school division mill rate is, you can then calculate your school taxes on property by multiplying 45 per cent of your assessed value by the mill rate.
Louis Riel School Division’s 2005-06 budget document states its boundary area includes a total population
of 107,000 people and has over
50 per cent of households with no children.
Louis Riel School Division is holding its public budget consultation meeting next week. It will be interesting to see whether the school board officials will stay focused on the actual budget amount determined last year ($121,996,218) and then discuss a percentage increase or decrease. Or, will they focus on their special levy mill rate and mix in the provincial education support levy mill rate to confuse people more.
If history repeats itself like it did in Manitoba in 2002, then be wary. Here is why:
Assessments up
The WREB figured out the average MLS® sale price of two different single-family detached dwellings types that sold in 1999 and 2003 (assessment period for 2006 reassessment) in River Park South, a popular residential development in the Louis Riel School Division.
In 1999, the average price of a bungalow in River Park South between 1,200 to 1,400 square feet was valued at $ 130,633. Four years later, the average value went up to $158,121, a difference of $27,488. After applying the 45 per cent portioning the difference is $12,369.
For a 2,000- to 2,200-square-foot two-storey residential-detached home in River Park South, the average sale price in 1999 was $176,385. In 2003, the average sale price was $214,488, a difference of $38,103. After applying the 45 per cent portioning the difference reduces down to $17,146.
Taxes up
If the 2005 mill rate for the Louis Riel School Division (28.958) remains the same this year, when you apply it to the higher portioned assessed value, the increase in the education tax will be $358 for the bungalow and $496 for the two-storey home. The percentage increase works out to the same percentage increase in their assessed value.
In the two examples, the bungalow and two- storey home owners would pay increases of 21 and 22 per cent, respectively. Even if the increases are smaller on some more modestly priced properties, where are the seniors on fixed incomes going to find the extra money to pay their substantial education tax increases?
Lorne Weiss, the chair of the Manitoba Real Estate Association’s Political Action Committee and the spokesperson for the education property tax coalition, said even if school boards hold the line on mill rates, school taxes will rise sharply due to the notable increases in house prices over the four-year assessment period.
If they follow the 2002 reassessment example and increase the mill rate another full point the tax hike will be significantly higher — they will again be double-dipping.
A Probe Research poll, conducted jointly by the Manitoba Real Estate Association and the Winnipeg Real Estate Board last fall, showed the majority of Manitobans want the provincial government to change the way it funds education. Of the over 1,000 people surveyed, 62 per cent said they agree that funding of Manitoba’s education system should come out of the province’s general revenues. The number jumps to 72 per cent for Manitobans 55 and over.
In 1999, southeast residents of Winnipeg ranked education taxes on property very high on a provincial pre-election survey. Seven years
later, that concern has certainly not dissipated, and it will continue to be
a pressing concern if nothing of
any major consequence is done to change the way education funding is financed.