2017 Property Taxation: Targeted Land Assessment Averaging S tanding Committee on City Finance & S ervices March 8, 2017
Agenda • Property Assessment & Taxation Framework • Provincial & CoV Property Tax Relief Programs • Tax Relief for “ Hot” Residential Properties • Tax Relief for “ Hot” Commercial Properties • Recommendations & Next S teps 2
Property Assessment & Taxation Framework City Council Land Use Policies Market Dynamics BC Other Taxing Assessment Authorities City Council determines: BC Assessment determines: • land use policies (zoning, density, etc.) • property value based on zoning & market activities • total tax levy & residential/ business tax share • property class based on • tax rate for each property class act ual use • tax relief programs 3
Property Assessment & Taxation Framework Propert y value increases do NOT increase propert y t axes t hat t he Cit y receives • Cit y does not get more t ax revenues; t ax rat es are adj ust ed down t o collect Council-approved levy • propert ies wit h increases higher t han average will experience an increase higher t han Council-approved % t ax increase • propert ies wit h increases lower t han average will experience an increase lower t han Council-approved % t ax increase; some may even get a t ax reduct ion 4
Impact of Assessment Changes on Property Taxes Year 2 Year 1 Total Property Value $3M Total Property Value $3.3M (+10% ) Total Tax Levy $6,000 (flat) Total Tax Levy $6,000 Tax Rate $1.82 per $1,000 (-9.1% ) Tax Rate $2 per $1,000 Property Value $1M Property Value $1.1M (+10% ) Tax Bill $2,000 Tax Bill $2,000 (flat) Property Value $1M Property Value $1M (flat) Tax Bill $2,000 Tax Bill $1,818 (-9.1% ) Property Value $1M Property Value $1.2M (+20% ) Tax Bill $2,000 Tax Bill $2,182 (+9.1% ) If a property’s value increase > class average increase higher tax increase If a property’s value increase < class average increase lower tax increase 5
Differential Property Value Increases Results in Differential Property Tax Impact 2017 avg tax increase % doesn’t look right…we’re @ 3.9% Pending 6
Informing the Public A video at vancouver.ca/ property-tax illustrates the relationship between assessment changes and property taxes Q4 2016 – BCA mailed notifications to property owners with significant assessment increases in 2017 (>15% higher than class average increase) 7
Agenda • Property Assessment & Taxation Framework • Provincial & CoV Property Tax Relief Programs • Tax Relief for “ Hot” Residential Properties • Tax Relief for “ Hot” Commercial Properties • Recommendations & Next S teps 8
Provincial & CoV Property Tax Relief Programs Residential Non-residential Provincial Programs 1. Assessment Act s19(8) N/ A ( long-term owner/ occupier adj ustment) 2. Home Owner Grant N/ A 3. Property Tax Deferment N/ A City of Vancouver Program Targeted Land Assessment Averaging for “ hot” properties (currently 3-yr; transition to 5-yr in 2019) Targeted averaging provides short-term, multi-year relief to property owners and tenants to enable market adjustments and/or lease renegotiations. Taken together, these measures have addressed major property tax increases for residents and businesses. 9
What is a “ Hot” Property? Propert y Tax Policy Review Commission’ s definit ion (2014) A propert y t hat experiences an unant icipat ed, year-over-year increase in t ot al net assessed value, before land averaging is applied, which exceeds t he average assessment increase for t he same propert y class by more t han 10% 10
Agenda • Property Assessment & Taxation Framework • Provincial & CoV Property Tax Relief Programs • Tax Relief for “ Hot” Residential Properties • Tax Relief for “ Hot” Commercial Properties • Recommendations & Next S teps 11
Where are the “ Hot” Residential Properties? (2017: ~19,500 (10.3% ) | 2016: 15,800 | 2015: 9,900) 12
Provincial Property Tax Relief Programs Residential #1 - Assessment Act s19(8) Intent: Protect long-term home owners whose assessed values would rise due to zoning changes How: Land is assessed based on current zoning, not anticipated redevelopment potential Eligibility: Owner/ occupier @ principal residence >10 yrs # of Properties: 2017 – 423 13
Provincial Property Tax Relief Programs Residential #2 - Home Owner Grant (“ HOG” ) Intent: Provincial grant to offset taxes to protect lower value homes & seniors How: Up to $570 grant for lower value homes; additional $275 grant to seniors Eligibility: Owner/ occupier @ principal residence valued up to $1.6M (reduced to zero @ $1.714M) # of Claims: 2016 – 81,000 2017 applications pending 14
Provincial Property Tax Relief Programs Residential #2 - Home Owner Grant (“ HOG” ) (Continued) 200,000 Due to the 2017 2016 2015 disproportionate 180,000 increase in property No Basic Grant Available values in Vancouver due t o high value 160,000 54,800 44,500 (relative to the rest of 54,500 BC), the number of properties not eligible 140,000 7,700 Part ial Basic Grant Available for HOG has been 8,000 due t o high value Residential Properties 10,900 increasing over time. 120,000 That said, the increase in HOG threshold in 100,000 Full Basic & Add'l Grant 2017 increases eligible Available properties from 59% 80,000 (109K) to 61% (114K) of 121,700 114,200 residential properties in 108,800 60,000 Part ial Basic Grant Available Vancouver due t o Min Tax 40,000 No Basic Grant Available 20,000 due t o Min Tax 10,200 10,000 8,100 0 15 188,100 185,100 182,900
Provincial Property Tax Relief Programs Residential #3 – Property Tax Deferment Intent: Tax deferral for seniors & families with children; taxes & low rate interest paid upon sale of property How: Charge against the property on equity released resulting from sale Eligibility: Owner/ occupier - >55 yrs old, or - with children <18 yrs old # of Properties: 2016 – 5,700 2017 applications in progress 16
CoV Property Tax Relief Program Residential - Targeted Land Assessment Averaging • Targeted i) “ hot” properties only ii) unanticipated increases only, not owner-induced increases (rezoning, improvement upgrades) • Tailored mitigation to intensity of volatility • Time-limited to allow tenants time to react (renegotiate, relocate) • Easy to understand • Straightforward to administer • Minimize unintended consequences • Maintain market assessment as much as possible • Not to unduly defer redevelopment to highest & best use 17
CoV Property Tax Relief Program Residential - Targeted Land Assessment Averaging (Continued) • Target ed averaging is only applicable t o eligible “ hot ” propert ies (~10% ), leaving most propert ies unt ouched – 2017 threshold: ~36% average property value increase + 10% = ~46% • “ Non-hot ” propert ies (~90% ) will pay higher t ax t o compensat e for t he t ax relief for “ hot ” propert ies • For eligible “ hot ” propert ies, t arget ed averaging should reduce t heir values for propert y t ax calculat ion; under limited circumst ance where averaging would increase t heir values, propert y tax will be calculat ed based on t he assessed values provided by BC Assessment 18
Targeted Averaging – Residential Properties Threshold: Property Value Increase >~46% Property Tax Increase >~11.55% 19,500 (10.3% ) Most Properties Not Averaged Averaged 19
Impact of Targeted Averaging on Tax Rates Residential Preliminary Tax Rate Change (per $1,000 assessed value) (from No Avg’ g) No Averaging (BC Assessment Value) $1.217 - 2017 Targeted Averaging (as proposed) $1.257 +3% 2016 Target ed Averaging $1.562 +2% 20
How Provincial & CoV Property Tax Relief Programs Complement Each Other 21
How Provincial & CoV Property Tax Relief Programs Complement Each Other (Cont’ d) Loss of Home Owner Grant Offset by Targeted Averaging • 365 propert ies went from full grant in 2016 t o no grant in 2017 • 357 propert ies (98% ) could be eligible for t arget ed averaging • Impact of t arget ed averaging t o t hese propert ies: 24.9% Median Property Tax Increase with HOG loss (before t arget ed averaging) 5.7% Median Property Tax Increase with HOG loss (aft er t arget ed averaging) (Not e: Analysis based on Cit y’ s propert y t ax only; t axes levied by ot her aut horit ies not included) Targeted averaging largely offsets property tax increase arising from HOG loss 22
Agenda • Property Assessment & Taxation Framework • Provincial & CoV Property Tax Relief Programs • Tax Relief for “ Hot” Residential Properties • Tax Relief for “ Hot” Commercial Properties • Recommendations & Next S teps 23
Why Commercial Properties become “ Hot” ? • Rezoning • S peculat ion • Rapid Transit (or ot her maj or infrast ruct ure development ) • Market Trends • Changes init iat ed by BC Assessment 24
Where are the “ Hot” Commercial Properties? (2017: ~3,300 (23% ) | 2016: ~2,800 | 2015 ~1,500) 25
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