If this year’s residential property tax increase of 9.85 per cent in Cochrane causes some dismay, homeowners might want to prepare for an even sharper increase next year.
The key word is “might.”
At the very least, holding the line on expenditures – which ultimately determine what the property tax rate will need to be – should be a challenge for the Town of Cochrane’s elected officials.
Cochrane Town council approved a residential property tax increase for 2022 of 9.85 percent at their meeting on Monday, May 9.
For an average single-family home assessed at $495,700, property taxes will rise this year by $224.
During the meeting, Coun. Marni Fedeyko recognized the increase may be a burden to residents who are already looking at dramatic spikes in the overall cost of living.
“I do understand their concerns about having to dig deep. It will hit people and it’s going to hurt,” she said.
“I don’t think anyone minds paying money as long as they feel their money is going towards things they notice, and that they see as beneficial to them.”
A snapshot from last year at this time shows the average residential property decreased in its assessed value from $470,100 in 2020 to $455,900 in 2021, and saw a $11 per year ($0.92/month) decrease in municipal taxes.
Property tax rates are a function of two main factors: total assessments and total expenditures. The taxes are calculated by multiplying the mill rate by a property’s assessed value.
Council approves the annual operating budget, including the amount of municipal property taxes to be collected, in December each year.
In May of the following year, council sets the property tax rates required to collect the expenditures described in the operating budget.
Town administrators cautioned at the May 2 council meeting that the expenditure side of the equation will almost certainly go up next year. One of the main reasons will be that inflation increases were not fully recognized this year, so continued growth in that rate may hit municipal governments extra hard in 2023.
At the May 2 meeting, a report was submitted by executive director of corporate services Katherine Van Keimpema that outlined some of the pressures being faced by the Town of Cochrane and other municipalities in Alberta.
To monitor inflation, the City of Edmonton has developed a tool called the Municipal Price Index (MPI), which measures a municipal basket of goods, as opposed to a consumer basket of goods, which is used to calculate the commonly used Consumer Price Index (CPI).
“Many of the goods and services driving the CPI increases also drive the MPI, so municipalities are also being impacted by the inflationary economy,” Van Keimpema’s report stated. “Items such as fuel, building materials, natural gas, electricity, interest rates, and professional and contract services are included in MPI, all of which are seeing significant price increases.”
At the meeting, Van Keimpema compared family budgeting to municipal finances.
“All of us in the community and the world are experiencing inflationary impacts on our budgets,” she said. “That also includes system impacts on municipal budgets as well.
“So, just as costs are increasing for your family, they’re also increasing for our family, in order to be able to provide services.”
Ultimately, the expenditure variable is dependent on how well the Town holds the line on costs. As always, it will be a balancing act – dollars in and dollars out.
“In theory, we want to get to a designed system that in any given year is functioning well and would only need to keep pace with inflation and growth in order to sustain the services that our community relies on,” said Town chief administrative officer Mike Derricott.
A 2021 study by the Canadian Federation of Independent Business seems to indicate the Town is up to the challenge. The study rated Alberta municipalities’ efficiency, and Cochrane came out on top.
The report cited two examples: Cochrane decreased its per-capita operating spending by 32 per cent between 2010 and 2020 while seeing the greatest population growth (108 per cent) of any municipality. And the Town reported the lowest per-capita operating spending ($1,452) while the Rural Municipality of Wood Buffalo reported the highest ($4,629).
The assessment side of the property tax equation has its own challenges.
Property tax assessments were mailed to homeowners in January. Assessments were made as of July 1, 2021.
But a hot real estate market – with some houses selling well over asking price – has characterized the period from last July to today.
That all means next year’s property tax bill will likely reflect a higher assessed value for individual homes, assuming the real estate market stays strong throughout 2022.
As long as everyone’s assessments go up, that should not mean a dramatic increase in individual taxes, since the amount the Town is drawing on would be coming from a larger pool.
Council will also be considering a new tax policy later this year, which will have a direct impact on how taxes are calculated and what the property tax rate will be next year.
Property tax bills will be mailed out May 30.
The Town collects funds on annual property tax bills for the Rocky View Foundation (to support Big Hill Seniors Lodge in Cochrane) and the Alberta Education Fund. The portion of the bill for those two things together will go up $11 this year.
