How HRM sets the tax rate – focus on the average impact

The short version

Every year most folks (including a lot of the media) become convinced Council is taking both the increase in assessment and then increasing the tax rate on top of that.

In plain English, HRM sets a target for the average tax bill increase, not the rate increase.  This means Council votes on the per home impact, not the rate. Council does this before we are provided with an up to date assessment roll.  The rate is then set after the assessment comes in to match the tax bill increase.

If there is a huge assessment increase, HRM brings down the rate, to hit the target of the average tax bill.

Average Impact

What do I mean by average?  The average used for Council is a Single-Family Home average (post CAP) for taxable amounts, for those that had one home as per the official assessment roll in both years.  The current market values may differ but the assessments are done by PVSC and those are what HRM levies the tax on.  Note that this average excludes vacant land, apartments and anything with more than one unit.

The average assessment will differ for each home and by District.  When Council does the Fiscal Framework in the Fall HRM do not have the roll and don’t know the distribution by individual home or district.  Council provides direction based on the average increase and we adjust the tax rate when we get that roll.  The final legal vote is on the rate.

I don’t know of other cities doing it this way. I think most focus on the tax rate and vote on that for direction, not the average impact.  I think this fairer.

What about rural bringing down the urban average?

There is a concern expressed every year that “low rural assessments” bring down the average assessment.  Two years ago I asked staff to give me stats on average HRM, average urban service/commuter shed, and average rural beyond commuter shed (Musquodoboit Valley and Eastern Shore).  The HRM average was 245K, the urban was 249K, the rural was 88K.

Actual average tax assessment of homes in HRM in 2019 – with CAP

  • Urban Service – $249,900 – 66%
  • Sub/Rural Com- $245,000 – 30%
  • Rural Resource – $88,000 – 4%
  • Average we based the tax rate on – $245,800

So no, in fact the rural component makes little to no impact at all. Facts matter in this discussion.

Is this assessment real? Houses are selling for way more than this! 

The average assessment is a real number, it is from PVSC assessment data which is the arms length body that does assessment.

The data for this year only includes the first 5-6 months of the “hot housing market” so we will see even higher increases next year.

The amounts do vary from district to district. The full assessment roll is publicly available and easily confirmed. Average assessment by District is included in the Jan 28 Package, Table 3 in Attachment 6.  The increases for most districts are comparable (6.7%-8.6%).

So what do taxes look like this year?

The budget is far from done but based on the fiscal direction of January 28, the assessment roll, without the benefit of the final calculations on the limited control and provincial taxes, and before Council adds or deletes anything from the final budget, the urban tax rate looks like this:

Municipal Tax (council discretion)

Urban Rate                                             $0.0648
Regional Transportation tax rate        $0.0470
Local Transit tax rate                             $0.0990
(also local area rates)                            n/a

Subtotal                                                                       $0.794

Municipal Tax (limited control)

Fire Protection rates                           $0.0130           (UARB)
Supplementary Education                  $0.0220           (long term contract)
Subtotal                                                                       $0.0350

Provincial Mandatory Property Tax

Property valuation tax:                        $0.014
Correction services tax:                      $0.013
Metropolitan Housing Authority tax:   $0.009
Mandatory Education Tax:                 $0.305
Subtotal                                                                       $0.341

Total Urban Tax Rate (tentative)                                            $1.170

This is a reduction of the Urban Rate from 0.813 to 0.794.

There are three parts to your tax bill.

There are the municipal taxes that Council controls and can change every budget.  This includes the general tax rate (which is urban, suburban or rural) and regional and local tax rates (where you live determines if you are charged them).

There are municipal taxes that are agreed to or set by external bodies, fire protection by the UARB, and supplementary education is a contractual agreement with HRCE.

Then there are provincial taxes, three of which are set based on cost recovery models, and one, the Mandatory Education Tax, or MET, which is set by the provincial cabinet. HRM has no control over MET, which is not indexed and should go down (or frankly be eliminated).

In April, Council votes on a final Budget Resolution with all the final numbers, last year is here: https://www.halifax.ca/sites/default/files/documents/city-hall/regional-council/210504rc1113.pdf