Municipal Property Tax Tools and Other Taxes
Municipalities (cities, towns, villages, resort villages and rural municipalities) raise most of their revenue through property taxes.
Traditionally, your property taxes were calculated using the ad valorem basis of taxation meaning that your property taxes increase proportionately with the value of your property.
Property taxes for your school division continue to be calculated using the ad valorem basis. Your tax bill will include both municipal and school taxes. There may also be other special taxes which could affect the total amount of your tax bill.
1. Ad Valorem Method of Tax Calculation
To calculate your property taxes using the ad valorem method of taxation:
- Your property is assessed by the municipality's assessment service provider (usually but not necessarily the Saskatchewan Assessment Management Agency) who calculates a value for tax purposes.
- A provincially established percentage is applied to this value - this is called your taxable assessment.
- The municipal council adopts a budget outlining expected expenditures and revenues, including the amount to be generated by property taxation.
- The council establishes the municipal tax rate (or uniform mill rate) expressed as a mill, by dividing the amount of taxation revenue it requires by the total taxable assessment, and multiplying that number by 1,000.
For example, a municipality with a total taxable assessment of $34,200,000 requires property tax revenue of $342,000. The tax rate is $342,000 / $34,200,000 x 1,000 = 10.0 mills.
- The municipal portion of your property tax is calculated by multiplying your taxable assessment times the tax rate, and dividing that number by 1,000.
For example, if your taxable assessment is $81,700, the municipal portion of your property tax will be $81,700 x 10.0 / 1,000 = $817.
2. Tax Tools (mill rate factors, minimum tax, base tax)
Tax tools are a mechanism allowing council to redistribute the cost of public services within its tax base. Tax tools may only be applied to municipal property taxes.
Municipalities have three tax tools that can be used individually or in combinations: mill rate factors, minimum tax and base tax.
Mill Rate Factors
A municipality may establish a mill rate factor by bylaw to transfer some of the cost of public services from one property classification to another. All property in a municipality is classified as agricultural, residential or commercial. Mill rate factors essentially adjust the mill rate, with the result that the effective mill rate for a specific property classification may be higher or lower than other property classifications.
To calculate the municipal portion of your property taxes when council implements a mill rate factor, the ad valorem tax calculation is multiplied by the mill rate factor. If the mill rate factor is greater than 1.0, the resulting property taxes will be higher; if the mill rate factor is less than 1.0, the resulting property taxes will be lower. For example, using the above specifics, let's assume that the municipality has implemented mill rate factors of 5.0 for commercial property, and 2.0 for residential property.
- Your commercial property taxes would be ($81,700 x 10.0 / 1,000) x 5.0 = $4,085.
- Your residential property taxes would be ($81,700 x 10.0 / 1,000) x 2.0 = $1,634.
By deciding to use these mill rate factors, the council has decided that commercial properties in the municipality will pay a greater share of the cost of public services, relative to residential properties.
A minimum tax may be established by bylaw to increase the amount of taxation revenue generated from lower assessed properties within one or more property classifications. Minimum tax will generally be a specified value or amount; however, it may also be expressed in a formula.
This tax policy will reduce the uniform mill rate which will benefit properties with higher assessed values.
Your municipal taxes will be the greater of the minimum tax or the ad valorem tax calculation. In other words, you will pay either the minimum tax or the ad valorem tax. For example, let's assume that the municipality has implemented a minimum tax of $400. The mill rate is 10.0 mills and we have two properties - Property "A" has an assessed value of $81,700 and Property "B" is assessed at $13,000.
- Using the ad valorem tax calculation, the municipal tax levy relative to Property "A" is $81,700 x 10.0 / 1,000 = $817. As this amount is greater than $400, the property taxes for Property "A" will be $817.
- Using the ad valorem tax calculation, the municipal tax levy relative to Property "B" is $13,000 x 10.0 / 1,000 = $130. As this amount is less than $400, the property taxes for Property "B" will be $400.
A base tax may be applied by bylaw to all properties within one or more property classes. Base tax will be a specified amount. A base tax will lower the tax rate reducing the difference in property taxes between lower and higher assessed properties.
Your municipal taxes will be determined by adding the base tax to the ad valorem tax calculation. In other words, we will build on the base. For example, let's assume that the municipality has established a base tax of $500 on residential property, and a base tax of $800 on commercial property. As a result of implementing base tax policy, the tax rate is 10.0 mills. Suppose there is only one property (1) in each property class.
- Your commercial property taxes will be $800 x 1 + ($81,700 x 10.0 / 1,000) = $800 + $817 = $1,617.
- Your residential property taxes will be $500 x 1 + ($81,700 x 10.0 / 1,000) = $500 + $817 = $1,317.
3. Effective Tax Rate Ratio Limit
Starting with the 2023 property taxation year, an effective tax rate (ETR) ratio limit of 7:1 is placed on local tax tools. The ETR limit sets the maximum ratio between the highest ETR and the lowest ETR after all tax tools have been applied.
The ETR is the total municipal property tax levy for a given property class divided by the taxable assessment for that property class after all tax tools, such as mill rate factors, base tax and minimum tax, are considered. Please note that special tax levy and potash tax levy are excluded in the calculation of effective tax rates.
Note: if no local tax tool is deployed, then the uniform mill rate equals the ETR.
Calculating the ETR is a multi-step process, as shown below.
Suppose all three property classes have a taxable assessment of $81,700 each, and council proposed a uniform mill rate of 10.0. Let's assume the municipality implemented mill rate factors of 5.0 for commercial property, 2.0 for residential property and one for agricultural property.
- Your agricultural property taxes would be ($81,700 × 10.0 / 1,000) × 1.0 = $817.
- Your residential property taxes would be ($81,700 × 10.0 / 1,000) × 2.0 = $1,634.
- Your commercial property taxes would be ($81,700 × 10.0 / 1,000) × 5.0 = $4,085.
Now let’s say the municipality implements a base tax of $800 for commercial property and $500 for residential property. Suppose there is only one property (1) in each property class.
- Your total agricultural property taxes would be $817 + $0 = $817.
- Your total residential property taxes would be $1,634 + $500 x 1 = $2,134.
- Your total commercial property taxes would be $4,085 + $800 x 1 = $4,885.
To calculate the ETR for each property class in our example, the municipality would divide the total property tax listed in the previous bullets by the taxable assessment for that property class to arrive at a percentage:
- The ETR for agricultural property would be $817 / $81,700 = 0.010 = 1.0%.
- The ETR for residential property would be $2,134 / $81,700 = 0.026 = 2.6%.
- The ETR for commercial property would be $4,885 / $81,700 = 0.060 = 6.0%.
Finally, the municipality determines the ETR ratio by dividing the highest ETR by the lowest ETR. In our sample calculation, the ETR ratio would be 6.0 per cent / 1.0 per cent = 6. Since the ETR ratio is 6:1, the municipality is within the legislated ETR ratio limit of 7:1.
You can calculate your current ETR ratio from the same information reported in your mill rate return survey using the ETR Rate Check Template.
Municipalities unable to implement this new ETR limit for the 2023 property tax year can request an extension from the Ministry of Government Relations to do so. More details about how to make this request and what information to include with your request can be found in the ETR Limit information sheet.
4. Special Tax
A municipality may pass a special tax bylaw to raise revenue for a specific service or purpose. Public notice is required. The service or purpose must be completed within the taxation year.
Special taxes are added to the tax roll and collected with property taxes. A special tax can only be levied on a property that will benefit from the specific service or purpose stated in the bylaw.
5. Tax Increment Financing
Tax increment financing is used in areas of redevelopment. Property tax revenue is divided into two streams:
- The first stream is the amount equal to the assessed value prior to any development.
- The second stream is the amount equal to the increase in the assessed value after the development.
For a set period of time, the first stream would be directed to general municipal use. The second stream would be directed to a special increment fund to help repay the costs of the re-development.
Once the time period expires, the two streams are combined and all tax revenues may go into general revenue. This is often used for the upfront purchase of land and installation of public infrastructure (such as streets, water lines, curbs, etc.). This is typically used by larger municipalities that anticipate high growth.
6. Municipal Information
Your council is elected to make decisions that they consider appropriate and in the best interests of the municipality. These decisions may be based, in part, on your expectations as well as those of other citizens, and in part, on the judgment of the member.
Tax policy, whether the municipality chooses to use only the ad valorem method of taxation or to use one or more of the available tax tools is almost certain to generate discussion. Questions regarding the tax policy in your municipality should be directed to your administrator or elected officials.