Assessments made easy (sort of)
Rising values mean making sense of the process is more onerous

By Holli Moncrieff Winnipeg Free Press

IF you’ve ever wondered how your home is assessed, you’re not alone.
Making sense of property assessment was never easy for the average person, but the recent run-up in Winnipeg house prices has made that even more difficult.

What if you are convinced that the city’s assessors got it wrong? What recourse do you have?

Nelson Karpa, director of the city’s department of assessment and taxation, is used to guiding people through the murky waters of property assessment.

“Our department’s job is to assess the market value of all the real estate in the city of Winnipeg,” explains Karpa. “We try our best to divide the budget requirements fairly. People pay their share of the total value of all the property in Winnipeg, according to the market value of their home.”

About 12,000 to 15,000 single-family homes sell in Winnipeg each year.

Property assessment is not the only determining factor in deciding property taxes, Karpa stresses. If your property assessment increases dramatically, it does not mean your tax bill will increase at the same rate. To determine your property tax bill, the city decides what its budgetary requirements are for the year, and adds that total to the budgetary requirements of the school divisions.

That number is then divided by the total assessment of all city property, which results in a mill rate.

The mill rate is then applied to the value of your home to determine your share of the city’s overall property tax bill.

City assessors work under a four-year assessment cycle, and are currently using 2003 as a reference point. This explains why your home’s last assessment was probably a lot lower than you could expect to sell it for today.

The next general reassessment will take place in 2010, and will use 2007 as a reference point. Karpa’s department reports a 35 to 40 per cent increase in the market value of Winnipeg homes between the reference years 2003 and 2007.

“The next reassessment will be entirely different. The housing market has taken an extremely positive turn, and the next reassessment will reflect that. People should be bracing themselves,” he says. “But, again, that doesn’t mean property taxes will go up at the same rate.”

A lot rides on what the city and school divisions set as their budgetary needs for the year. “The school divisions do the same calculations as city council, but the city council does not control the amount of tax the school divisions ask for. The City of Winnipeg collects school taxes, but immediately has to turn that money over to the school divisions,” says Karpa.
“City council has held their mill rates stable for the past few years, but school division mill rates have continued to increase every year.”

If you purchased your home during the assessment reference year, you may be puzzled about why your home’s purchase price may vary dramatically from its assessed value.

“Our job is to determine market value, and one sale does not a market value make. It’s a good indicator of the market value of your home, but it’s not the only indicator,” Karpa explains. “To determine what a home would have sold for in a particular reference year, the department looks at similar homes in the same neighbourhood, and we have to produce a market value for your home whether it sold in that particular year or not.”

To determine market value, the city assessors look at the same variables as a potential purchaser.

“We do exactly what a home seller or potential buyer would do when determining the value of your home — we take into account size, quality, condition, whether or not it has a garage, A/C, a swimming pool, or a finished basement,” says Karpa. “A lot of it depends on the neighbourhood. Some neighbourhoods are traditionally strong, and we see houses in those areas going for as much as 150K over asking price.”

If you are convinced that your assessment is wrong, there are a number of actions you can take.

The first step is to call the department of assessment and taxation, and speak to a city assessor.

“We have strong evidence and information that support our opinions of value, but as a homeowner, you may disagree,” Karpa says. “Sometimes we get it wrong, and when we do, we’re more than happy to revise your assessment. You can’t appeal your taxes, but you can appeal your assessment.”

If the issue is still not resolved, you may appeal your assessment under the Manitoba Municipal Assessment Act, which governs all property assessments.
If you choose to appeal, you must do so within 21 days from the time your notice of assessment was issued. Everyone who appeals receives a hearing with the Board of Revision.

Some valid reasons to appeal your assessment include:

* if you feel your home falls under certain exemptions that weren’t recognized by the city assessor (for example, you believe your home should be classified as a church, but the city doesn’t);

* the classification of the property is wrong (for example, a business instead of a residence, etc.);

* refusal by the assessor to amend the assessment role under subsection 13-2 of the Municipal Assessment Act;

* if you’ve added characteristics that weren’t taken into account (garage, finished rec room, etc.);

You will need to supply valid evidence that supports your version of the home’s market value. Without that evidence, your appeal will be dismissed quickly.

Although the most common reason to appeal is an assessment that seems too high, some homeowners have also complained that their property assessment was too low, says Karpa.

“Financial institutions will look at our assessment to determine the amount of equity a homeowner has, so sometimes people do get upset if they feel their assessment is too low.”
Over the past several years, the department has been able to drastically lower the amount of property assessment appeals.

During the 2006 reassessment, there were 4,545 appeals, which is considered a very small amount in comparison to the potential 200,000 property owners in Winnipeg.

There were 9,277 appeals during the 2002 reassessment.

While Karpa’s goal is to minimize the amount of appeals, he doesn’t want to eliminate them entirely.

“If we had no appeals, the system would be broken. We’re striving for a low volume of appeals, but there does have to be some. If everyone’s happy with their assessment, something’s wrong,” he adds. “We hear complaints all the time. People look at their assessment, say ‘this looks about right’… and then they get their tax bill.”

How a new home is assessed

The process of assessing a new home is not a lot different from assessing an existing home, except that certain assumptions must be made as to how today’s new home’s features would affect market value during the assessment year (2003).

* The Department of Assessment and Taxation receives information about the new home (see example below)

* From that data, they determine the market value of the home during the reference year. In this case, the reference year is 2003.

* This is the assessed value of the home.

* For tax calculation, the department applies the Provincial portioning percent of 45 per cent to determine the portioned assessment

* They then take the mill rate as set by City Council for 2007, and multiply it by the portioned assessment, to determine the municipal tax bill for 2007

* Finally, the department takes the same portioned assessment value and applies the corresponding education mill rates to determine the education taxes to be paid

Neighbourhood: Fairfield Park (this is a new extension to Richmond West)

Building Code: Single Family Dwelling

Building Type/Style: Modern Two Storey

Year Built: 2007

Mechanical: Forced Air Gas Furnace with Central Air

Number of Rooms: 8

Number of Fireplaces: 1

Number of Full Baths: 1

Number of Half Baths: 2

Number of Whirlpool Tubs: 1

Total Living Area: 2330 square feet

Garage: Double Attached (433 square feet)

Wood Deck: Yes (184 square feet)

Lot Size: 44.0′ x 131.23′

2007 Assessment (based on the reference year of 2003): $236,000

Rounding: values more than $100,000 are rounded to the nearest $1,000; less than $99,000 to the nearest $100.

Portioned value: $106,200 (236,000 x 0.45)

Mill rate (2007, municipal): 25.448

Mill rate (2007, education): 23.572

2007 Taxes (full year) would be:

Municipal: $2,702.58

(106,200 / 1,000 x 25.448)

School: $2,503.35

(106,200 / 1000 x 23.572)

Frontage Levy: $112.20

TOTAL: $5,318.13 (Gross Taxes)

2007 Sale (as registered in WLTO on August 9, 2007): $320,647(Does not form part of current assessment, but will be a factor for the 2010 assessment, which calculates 2007 market values. Assessed value in 2010 will be similar to the 2007 sale price, but is unlikely to be identical.)