Monday, September 18, 2006

Municipal Tax Creep in St. John's

It's already been reported in many local media outlets that the St. John's tax assessments are out and been received all over town. People have been shocked and appalled to discover that their house assessments have climbed an average of 22%.

Last Fall, during the municipal election, I talked about the dangers and effects of Tax Creep. The concept is a simple one: the mill rate stays constant while house assessments rise and that effectively increases tax rates for the homeowner. That lets City Hall rake in more revenue while preening about "no tax hikes".

These assessment hikes are exacerbated by the fact that they are based on last year's market values, a recent high from which we've already seen a drop. It's bad luck of timing for us; good luck for the city.

Right now the mill rate is $12.7 per $1000 in assessed residential value or 12.7 mills. For 2006, total revenue from residential property taxes to the city is estimated at $47.4million on total property values of about $3.9billion. This represents about 1/3 of the total $152million revenue taken in by the city.

With a 22% increase in residential assessed value, that means that the city will now realize a tax haul of almost $58million or an increase of $10.4million over last year.

This is equivalent to a mill rate hike from $12.7 per $1000 in assessed residential value to an astounding $14.9 per $1000 in assessed residential value.

That's a pretty steep rise in one go - 12.7 mills to 14.9 mills.

For the city to make the assessed values revenue-neutral in terms of taxes realized, the city would have to drop the mill rate down to no more than $10 per $1000 or 10 mills. To account for the rate of inflation as suggested by Mayor Wells, the magic number to look for is 10.2 mills. That's a drop of 2.5 mills from the 12.7 mills currently.

The Board of Trade, who also want to see the mill rate dropped to compensate for the artificially high assessments, are crunching the numbers before committing themselves to a mill rate target.

Meanwhile, the chair of the capital city's finance committee Dennis O'Keefe would like to see the mill rate drop between half a mill and a full mill when it's set in December.

In other words, he's going take 5 away from us behind our backs, give us back 1 or 2 and then expect us to be grateful for the magnanimous gesture. I'd really like to say I want to be impressed by that kind of shell game but I really can't.

Watch city hall carefully over the next few weeks and see what they do.

In fact, contact your councilor and find out what they intend to do.

And while you're at it, it might be worth your while to invest $60 in appealing your assessment. Apparently Mayor Wells thinks that because few people are appealing their assessment through a process that is known by very few residents, then we must be pretty satisfied with the situation.

I know I'm not.

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