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Assessment, Taxes and Grants

Assessment

Property assessment is the process of establishing a dollar value on each assessable property in a municipality. Property assessment is used for the distribution of the cost of local government and to support the cost of public education. The Municipal Government Act states that each municipality must prepare annually an assessment for each property in the municipality, except non-assessable property as listed in the Act.

The valuation standard for the majority of properties is market value or according to value. There are also regulated rates under the Minister's guidelines for other properties such as, farmland, linear property, machinery and equipment, and railways.

The property assessment system anticipates that all assessed persons will pay a proportionate share of the cost of providing services in relation to the value of the property that they own.

Similar properties should be assessed in a similar manner within a municipality. Assessed persons who believe their assessment is inaccurate can file a complaint with the either the Loical Assessment  Review Board (LARB) or the Composite Assessment Review Board (CARB).

The local assessment review board (LARB) is made up of 3 persons as members. The primary function of the LARB is to hear complaints about any matter referred to in section 460(5) of the MGA on residential property with 3 or fewer dwelling units, or farm land, or a tax notice other than a property tax notice.

The composite assessment review board (CARB) is made of 2 persons appointed by council and 1 provincial member appointed by the Minister of Municipal Affairs. The composite board will hear all matters for residential dwellings with 4 or more dwelling units, commercial and industrial properties and all the matters referred to in section 460(5) of the MGA.

A member of an assessment review board may not participate in a hearing of the board unless the member is qualified to do so in accordance with the regulations. After hearing a complaint, an assessment review board, must in writing, render a decision and provide reasons, including dissenting reasons within 30 days from the last day of the hearing. If an assessed person, a taxpayer, the assessor, or the municipality is not satisfied with the LARB or CARB decision, they can appeal to the Court of Queen's Bench on a question of law or jurisdiction with respect to a decision of an assessment review board. On leave to appeal being granted by a judge, the appeal must proceed in accordance with the practice and procedure of the Court of Queen's Bench.

Equalized Assessment:

On behalf of the Minister, Alberta Municipal Affairs prepares an annual equalized assessment for each municipality. An equalized assessment is an estimate of the total property value in a municipality. The purpose of equalized assessment is to distribute requisitions among municipalities based on the relationship of their total property value to the total property value in a cost-sharing jurisdiction.

Because the relationship of property assessments to market value varies among municipalities, assessments must be adjusted/equalized to determine the best estimate of the total property value in each municipality. For example, where the total assessment of all properties within a municipality is $10,000,000 and assessments are about 95% of market value, then a municipality's equalized assessment would be calculated:

10,000,000/95% = 10,526,300

Municipalities are responsible for reporting assessment totals and assessment to market value relationship used in the calculation of the equalized assessment. It is important for municipalities to report accurately so that each municipality contributes fairly into cost sharing programs.

Property Taxation:

Property tax is a main source of revenue for financing municipal operations. Each year during its budgetary process, the council for each municipality approves the amount of revenue required to operate the municipality. Remove from the revenue required the amounts for grants, licence fees, permits, etc. The remainder represents the total amount of money to be raised by property taxes. This amount is divided by the total value of all the property in the municipality to arrive at the tax rate.

$200,0001$10,000,000 = 0.02 tax rate

To determine each property owner's share of the total property taxes, the municipality multiplies the tax rate by each property's assessed value.

If property values rise or fall in a municipality and the council does not require additional revenue, the council may adjust the tax rate to maintain tax bills at prior year levels. A reassessment of all properties will not automatically raise or lower the total property tax gathered by a municipality.

The tax rate is set once each year. Council may vary the rates for each of the four assessment classes. The assessment classes are as follows: residential, non-residential, farm land, and machinery and equipment.

Once the tax notices are mailed, the property tax rate bylaw cannot be amended unless approved by Ministerial Order. In addition to the municipal tax rate, municipalities must set tax rates to raise funds that are requisitioned for cost sharing programs such as the Alberta School Foundation Fund. The amounts of these requisitions are established through the equalized assessment process.

Education Tax:

In 1994, the province took over responsibility for collecting all education property taxes and distributing those funds to school boards on an equitable basis. The Alberta School Foundation Fund was introduced to address inequities in the amount of property taxes paid by local taxpayers, and to provide equitable per-student funding among school jurisdictions.

Since the province began collecting and pooling education property taxes, it has implemented mitigation programs to create stability in the requisitions for municipalities, and predictability in the tax bills for property owners. A committee continues to review the issues of equitably distributing the education property tax requisition.

Other Taxes and Revenues:

In addition to the property tax levy, a municipality may impose a business tax, a special tax, or a local improvement tax. As well, the MGA provides for taxes within a business revitalization zone.

A special franchise is an agreement between a municipality and a natural gas or power company, as an example, to collect a payment based on a fixed percentage of gross revenue rather than collecting property tax on the company's machinery and equipment assessment.

There are other sources of revenue available, generally related to user fees. Utility charges for water, sewer treatment, and garbage collection are common in Alberta municipalities. Council may want to develop a policy setting the rates based on the degree of cost recovery considered desirable. Fees can also be set for other services, such as recreational facilities, photocopying, or meeting room rental.

Conditional Grants:

These are grants in which the granting government requires the municipality to meet certain conditions. The conditions usually require the funds to be expended on particular activities, and may also be on a cost-shared basis.

Information on all provincial grant programs supporting municipalities are available on the Municipal Grants Web Portal at: www.municipalaffairs.slberta.ca/municipalgrants.cfm