TAX NEWS - JUNE 2010

Manitoba Tax: Taxing year for cottage owners

Will pay biggest share of local school taxes

Cottage owners will pay a bigger share of school taxes this year than many full-time residents in the same division.

The change is due to the most recent provincial reassessment, which boosted cottage property values in many parts of the province, reflecting a huge surge in cottage prices in the past few years. The reassessment was based on market prices as of April 1, 2008.

But that same increase in property values also means higher taxes for thousands of cottagers who are about to get their tax bill in the mail.

And the kicker for many is that while the municipal portion of the tax statement will increase modestly, it's the education tax that eats up a big part of the bill.

It has to do with what's called "shifting" and how school divisions set their budgets. Simply put, seasonal cottage areas that increased sharply in value under reassessment will pay a greater share of local school division taxes as opposed to other areas in the same division that did not increase as much or at all. The reassessment math is linked to the redistribution of the total tax requirement for the division -- it's not because of rising school budgets.

"It's all very convoluted," said David Crabb of the Manitoba Association of Cottage Owners (MACO). "What it means is that cottagers are paying a lot of bucks for nothing."

MACO has lobbied for several years to phase out funding education from property taxes as many cottagers pay education tax twice; once on their primary residence and then again on their vacation home.

A recent published report said the tax shift due to reassessment will see property owners in Gimli, Winnipeg Beach and Dunnottar carry 70.9 per cent of the education tax load this year for the Evergreen School Division.

Residential assessments increased on average 47.1 per cent in the division. Properties that shifted below the average will pay less this year than last while those above it will pay more. The average increases in assessed value in Dunnottar, Winnipeg Beach and Gimli were well above that average.

It's the same across the lake at Victoria Beach, which saw an average 92 per cent increase in the market value of their cottage properties -- the highest in the province. This tax year, the municipality of Victoria Beach will pay the Lord Selkirk School Division (LSSD) $2,023,593, up from $1,594,219 last year. Residential properties within the LSSD saw an average increase of 56.7 per cent in value under reassessment.

A Victoria Beach cottager, who did not want his name used, said almost two-thirds of his $1,929 tax bill now goes to the LSSD. His taxes are going up 21 per cent this year.

He also said the reassessment/taxation process for cottagers appears unfair because when reassessment notices came out last year, few understood what it meant for taxes as municipal and school taxes had not be calculated. Cottage owners had until last October to appeal their reassessment. Tax bills cannot be appealed. The next provincial reassessment is in 2012. It will be based on April 1, 2010 market values.

A survey of other Lake Winnipeg cottage areas and Lac Du Bonnet indicates other cottagers will see tax increases, up to a reported high of 200 per cent in some isolated cases.

In the RM of Bifrost north of Gimli, Reeve Harold Foster said the average tax increase is 27 per cent with one cottage owner seeing a 130 per cent increase.

Meanwhile, the province has announced a cottage tax deferral program in response to the increased tax-load faced by many cottagers.

Premier Greg Selinger has said the government wants the act to be passed by June 17 when the session ends so cottagers can take advantage of it this year.

However, it's still stuck in the legislative process at first reading. It needs to go to second reading, a committee hearing and third reading before it gets royal assent to be put into effect.

The Cottage Property Tax Increase Deferral Act was announced late last year. It will allow an eligible cottage owner to defer payment of the property tax increases for 2010 and 2011 until the property is transferred or the owner dies. The province will pay the increase on your behalf to the municipality and you will have to pay back the province at a nominal interest rate.

"There's basically no organizations out there that we have talked to that have asked for this," Progressive Conservative finance critic Heather Stefanson said. "The only thing I can think of is that the government is trying to appear to be doing something for cottage owners."