ADMINISTRATIVE REPORT

Date: November 16, 1998
Author/Local: K.Levitt/7251
RTS No. 299

CC File No. 1551

TO:	Vancouver City Council
FROM:	Director of Finance
SUBJECT:	1999 Property Tax Land Averaging

RECOMMENDATION

A. THAT, pursuant to legislative requirements in the Assessment Act, the City Clerk be instructed to notify the Assessment Commissioner before January 1, 1999 that the City is considering three-year land averaging and/or land phasing as property tax calculation options for 1999. It should be noted that this notice of intent is revocable should Council, at a later date, decide not to proceed with either of these taxation options.

B. THAT the Director of Finance be instructed to report back in the new year on the projected taxation impacts of three-year land averaging, based on the assessment values provided by the BC Assessment Authority in the 1999 Consolidated Roll.

C. THAT the Area Assessor for Vancouver be invited to address Council in the new year on the assessment trends reflected in the 1999 Consolidated Roll.

GENERAL MANAGER'S COMMENTS

The General Manager of Corporate Services RECOMMENDS approval of A, B and C.

COUNCIL POLICY

Council policy is to keep property taxes affordable by following a practice of holding year-over-year tax increases at inflationary levels. Council has used three-year averaged land values in the calculation of property taxes for Class 1 and Class 6 in each year since 1993.

PURPOSE

The report recommends that the Assessment Commissioner be notified that Council is considering the use of land averaging/phasing as potential taxation options for 1999. This notification does not commit Council to the implementation of either option. Detailed statistical modelling of the impacts of various taxation options will be reported to Council in the new year.

BACKGROUND

Interventions to the Market-Based Taxation System

Since 1989, Vancouver City Council has taken proactive measures to address the tax shifts within property classes that have resulted from uneven year-over-year assessment increases. These measures have in various years taken the form of: (i) a cap on each property's year-over-year increase in taxable land value (1989 only), (ii) a cap on each property's year-over-year tax increase (referred to as "tax capping"), and (iii) the use of a three-year average of taxable land value in property tax calculations ("averaging").

All interventions to the market-based taxation system are revenue-neutral within each property class. This means that while the taxes paid by an individual property may differ depending upon whether a mitigation measure is used, the overall levy paid by a class of property remains the same, whether or not that mitigation measure is used. When an individual property's tax is lowered in a given year due to an intervention to the market-based system, there are other properties in the same class for which taxes will increase as a result.

Mitigation measures have been applied to the residential and/or business class in every taxation year since 1989. Three-year land averaging was approved by the Provincial Government as a taxation option in 1992 for use in subsequent taxation years. Council has approved the use of three-year land value averaging as a taxation option for residential and business properties in each year since 1993.

Statistical modelling has shown that land phasing has not been as effective in lowering the share of properties that experience extreme tax increases as averaging has been. Although there are strong arguments for applying land value averaging on an ongoing basis, provincial legislation requires Council to approve averaging on a year-by-year basis, and notify the Assessment Commissioner annually of their intent to use averaging.

DISCUSSION

This report directs staff to notify the Assessment Commissioner of Council's intent to use land averaging and/or land phasing in the coming year. This notification gives Council the authority to apply land averaging or land phasing in 1999, but does not commit them to doing so in any way. Once the Consolidated Roll is available, staff will report back on the impacts of the various 1999 taxation options.

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(c) 1998 City of Vancouver