There are very few issues that get as heated when discussed as property taxes. Everywhere from Facebook groups to coffee shops sees people getting up in arms about the amount of taxes that are paid on homes and businesses. Everyone has an opinion, but how exactly do our property taxes work? How are they calculated? Why do they go up? Who determines exactly what a property is worth?
Municipalities get their revenue from multiple sources, in Chatham-Kent property taxes account for approximately 50% of the budget with the other 50% being accounted for from other sources such as provincial and federal grants, user fees, licenses, and other smaller sources. These sources must account for the entire budget for any given year as each budget needs to be balanced, municipalities are forbidden by law to run a defect. This means that if there needs to be an increase in spending, the municipality needs to account for it somewhere within the budget that given year and one of the sources that can be changed is your property taxes.
A property’s value is determined by a company called Municipal Property Assessment Corporation or MPAC, you’ve most likely at one time or another received their notice of assessment in your mail. They administer property tax assessments and appeals of assessment for all of Ontario and will revaluate a property every 4 years. They determine what your home is worth by the evaluation of properties across the municipality and your taxes will go up or down based on how your property stacks up. If your property value goes up at the same rate as the municipal average the taxes on your property will stay the same, if its value increase exceeds the municipal average your taxes will go up, and inversely if the value is considered less it will go down. MPAC’s assessment multiplied by the tax rate set by the municipality is how your property tax bill is calculated. The idea of having tax rates go up and down based on comparisons is true in relation to industries as well. For example, farmland is assessed at a higher value when compared to residential taxes, therefore residential tax rates are lower than those relating to agriculture.
On an average 1,200 square foot home, Chatham-Kent has a current property tax rate of 1.88%, which is above the provincial average of 1.26% however, our actual property tax payments are below average at $3,127 from the provincial $3,346. Why is the rate the way it is? Low housing costs mean that the same property in London or Sarnia will be assessed at a higher value than one in Chatham-Kent. A 1,200 square foot home in Chatham-Kent is assessed at $165,500 as opposed to the provincial average of $265,725, so if the rate was the same there would be a significant tax gap.
Chatham-Kent is a very large municipality geographically as well, it’s one of the many things people enjoy about living here as there is lots of room to spread out. As a result of this freedom however, CK has a low population density with an average of 42 people per square km, comparing that with Sarnia at 451, London at 959, and Windsor at 1552, this results in a significant logistical challenge as services must cover a much larger area to reach fewer people. Low population density leads to more infrastructure to support the tax payers as well. In our Municipality we have 4,800km of drains (20% of Ontario drains), 850+ bridges, 3,588 km of paved roads and 3,264 km of gravel roads. With all this infrastructure with relation to our population density and home values, the only way to keep the budget healthy is with a higher property tax rate.
Lately, most tax increases have been to cover the cost of maintaining this infrastructure. Mike Turner, CFO for the municipality, thinks that the municipality has done a great job of managing this increase, “Over the last 4 years we’ve increased spending on infrastructure with only 1.39% tax increase which comes in well below inflation.” To put that in perspective that’s about $30 a year on our 1,200 square foot home.
So, while rates in Chatham-Kent may still be higher than the Ontario average, due to a low population density, large geographic area, and low property prices, Chatham-Kent is still able to manage their infrastructure while keeping tax increases below inflation levels.
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