What a 0 percent tax increase means, or, what is a levy anyway?

Time is money, so, if you have just a bit of time to read why a zero per cent tax levy increase doesn’t necessarily mean people paying the same amount of taxes as last year, here’s a quick explanation:

• City Council decided to raise the same amount of money from municipal taxes this year as it did the previous year. Sometimes, this is described as a “zero percent tax increase.” But it’s more accurate to call it a “zero percent tax levy increase.”

• The tax levy is the overall amount of tax dollars raised. The tax levy is not what an individual taxpayer pays.

• Not increasing the tax levy can still mean increases or decreases for individual taxpayers because their bills are determined in part by their house value and the housing market.

The big picture, the big question

More time? Here’s more of the story. Here’s the question:

Why would some property tax bills increase even though Council did not increase the tax levy this year?

“We calculate property taxes based on the assessment value of your property,” said Cate Watt, Branch Manager of Assessment and Taxation.

 “City Council sets the total amount of property taxes we collect, but assessment values play a large role in your individual tax share. Assessment values change from year to year, and if your property value changed by a different percentage than the overall market, your share of the total tax bill will change as well. 

Back to the levy

An individual tax bill is a calculation of four elements: municipal taxes, provincial education taxes, property assessments and market conditions. 

The municipal tax levy is the portion of the property tax that the City collects to fund programs and services. Your parks, roads, bridges, fire service, libraries and the rest.

The municipal tax combines with the education tax (collected on behalf of the provincial government to fund primary and secondary schools) to form the overall property tax levy. This overall total (municipal and education) is just over $2.2 billion dollars in 2021.

This total amount can change from year to year. In 2021, City Council voted for an overall 0 percent tax levy increase. This means that the total tax revenue collected is essentially the same as the year before, excepting factors such as growth due to new construction.

Slicing the pie

So how does the City divide up that total tax amount among more than 400,000 Edmonton properties? It’s basically like slicing up a pie. The size of the pie is determined through the budget process. The slices of that pie are determined by property assessment values. In effect, property owners pay their share of the tax as determined by their share of the total assessment within their property class. 

Which re-raises a version of the same big question above: Since the pie is essentially the same size as last year, won’t my individual slice be the same size as last year? 

No, not necessarily.

The 2.7 per cent solution

The answer is that it all depends on how your property value changed compared to the overall market. In a year with a 0 per cent tax levy increase, only the properties that experienced exactly the average change in their residential or non-residential class will come out with the same tax bill. 

This year, the average change in the residential class of properties was -2.7 per cent. So those residential property owners whose assessment values dropped 2.7 per cent will pay the same as last year. For the non-residential class of properties, such as industrial properties, retail buildings and office towers, that average change was -8.0 per cent. .

Who pays what?

Everyone else will pay a different amount in taxes depending on how their property value change relates to the average change. Using the residential property example, if your property value went down more than 2.7 percent, you’ll pay less in taxes than last year. But if the change in your property value stayed above the average—your property value decreased by less than 2.7 percent, or increased by any amount—you’ll pay more in taxes than last year. 

In the end, the total of all taxes collected will all add up to just over $2.2 billion. But your piece of the pie is most likely going to be slightly different than in 2020 because of the change in your property value compared to everyone else. 

“Comparing values to the average market conditions is one of the fairest ways we can evaluate property taxes,” said Cate Watt. 

“Using the average means that for everyone who’s paying more, there are just as many who are paying less, and often those people can switch places from year to year.”

In summary

This information can be taxing. Here are three key takeaways.

Tax Takeway 1: Changes in property values do not affect the overall property tax amount collected. Property values can go up or down, but they do not change the total amount the City collects; that amount is set by City Council through the budgeting process each year.

Tax Takeaway 2: An individual’s tax share is determined by the owner’s property value, and property values normally change from year to year. The change in a property’s value compared to the change in the overall market determines whether an owner’s tax share changes and by how much.

Tax Takeaway 3: Individual tax bills will often change by a different amount than the overall tax change. This is due to differences in their property value changes from year to year compared to the average change in their tax class.

More to read

Check out the handy document on how your property compares to the average for a quick reference guide as to how much you might pay in taxes this year. 

To find out more information on your property’s assessment history, or see how much you paid in taxes in previous years, sign up for an account on myproperty.edmonton.ca. Use the individual access code on your tax notice to register. You can even sign up for electronic notices where you’ll receive your assessment and tax information electronically and not have to refer to paper notices again. 

Questions? Visit edmonton.ca/taxes for more information. Keep in mind that the deadline to pay your property taxes is June 30. 

You can also sign up for the City’s monthly payment plan and spread a portion of your balance over the remainder of the year. Find more information on the monthly payment plan online. This year, the City has waived the 2 percent, one-time fee to sign up for the plan.