Property Tax Redux

Alternate Property Tax Model

So after whining about my Property Taxes, I think I have come up with a simple(r) model for Property Tax valuations which could make lives simpler (simpler for me).

Simply put, your Property Tax is set when you buy your house. When the price is set, that is what your property taxes will be based on, until the house is sold again.

Sounds easy doesn’t it? The municipalities could tweak it so that they could add an inflationary increase each year, so that their incomes could slowly increase, and maybe a caveat on the valuation at sale (i.e. the City can have an independent body valuate the house at sale time and then base property taxes on that value), in case folks try to sell houses for $1 or the like.

Advantages?

• Property tax increases would be limited year over year to only an inflationary increase, better than current system where Property Tax valuations can wildly vacillate (mostly up)
• If someone stays in their house for a long period of time, they will not end up having to sell their house because their neighbourhood suddenly went “up scale” and their Property Taxes have sky rocketed (as in Vancouver), good for Fixed Income seniors.
• May cause a boom in contracting work for upgrading houses, since it’s value will not increase unless it is sold (i.e. why move to a bigger house, when it ends up being cheaper to add a room to my current home)
• Less yearly paper work with new valuations and warning home owners of the pending change.

Disadvantages?

• Municipalities incomes may not be as large as they need them to be and it may force them to cut services (to run a balanced budget)
• Tom-foolery and shenanigans are still possible given there can be manipulations of these systems, like we have seen with rent controlled properties and such.
• Might throw cold water on the housing market, with folks maybe staying in an older house, instead of buying a brand spanking new one, because it costs more (and the older house has been inhabited in for a while)

Opinions? Should I write this one up and present it to the Ottawa City Council as a progressive and exciting way to move forward in the 21st century? Maybe if I add a Green element to it, it might be an easier sell (it will help the environment, because it will slow housing developments)?

CIS Basketball in Ottawa and Finances

Best of: Don’t Pass it to the Other Team!

The CIS championships return to Ottawa for the last time this weekend (they go back to Halifax for a while after that), and with that in mind we go back in time to one of my favorite old postings Don’t pass it to the other team sound advice from an excellent (if not hard-edged) coach (Dave Smart of Carleton). You can find this post and several other of my favorites at My Favorites page (well worth a read).

As a note, I still dabble in helping out with basketball (although I suspect I am a much better assistant coach/team manager than I am head coach), and hopefully will get to 1 or 2 games this weekend (will be attending a coaching clinic on Saturday morning, hopefully there will be other useful messages that I can translate into the world of personal finance). Also Carleton’s string of 5 championships in a row was broken, however they are defending champions again this year, so we shall see how this weekend goes. (I am a Carleton fan, but a Waterloo Alumni, luckily my Alma Mater is not playing this year).

Don’t Pass it to the Other Team!

So one of my sidelights is coaching basketball, and I love going to clinics from coaches who talk about coaching and plays and stuff (I’m an old gym rat at heart). Last Saturday I was lucky enough to hear from Dave Smart who is the head coach at Carleton University (the Ravens have been Canadian Champions the last 3 years running), and he was fascinating to listen to. Coach Smart admits to being a perfectionist and telling it like it is, and one of the expressions he tells all of his players is “Don’t Pass the ball to the other team“.

The first time you hear this expression it sounds obvious, of course, who would do that, but what Coach Smart was trying to say (I think) is most basketball players watch their own players, but rarely see the other team’s players. If you watch the defensive players, you won’t pass it to them! Simple, right? No! You know where the offensive player is going to go, you don’t know where the defender is going, and you need to watch them!

What does this have to do about finances? (Darn good question, get ready for a stretch here) Don’t take your eye off things that you can’t control, the stuff you can control, your savings, your retirement, your investments, your debt reduction plan, if they are under control that is good.

You have to plan for the things you don’t control, and that means:

• Reduce DEBT! You can’t control interest rates, you can’t move forward with your car in reverse. Debt reduction is first and foremost. Everything else can be dealt with much more easily if you are carrying little or no DEBT!!!
• Have contingency funds in place for:
  • Car repair. I am guilty of that one, car repair bills always throw me off kilter
  • House repair. I am going to get a major bill to replace the roof and furnace on my house, but they had to be done. If your house is new, you’ll need to replace these things in 15 years, but in 15 years, if you haven’t saved any money for it, it’s going to HURT!
  • Catastrophic illness. I have long term disability insurance with my company just in case. If I had a stroke tomorrow, my family would at least have an income of some kind.
  • Loss of employment. If you lose your job, how long will you last? A priest once told me everyone is 12 weeks away from living on the streets, make sure you are not one of those folks
  • Death! Term insurance to protect your family, and a will to protect them even more (thanks Dividend Guy, for pointing out I missed that).

These are SOME of the unknowns, that you need to watch for, and not pass the ball to them!

Hope for the best, and plan for the worst!

Property Taxes: A Stream of Consciousness

Cause he’s the Tax Man

This time of year is magical in terms of the sheer volume of money that seems to go for taxes in my household.

First we have the CRA and Income Tax coming due in April, which causes lots of excitement as I mentioned in How Do You Dor Your Taxes?, and I am happy to say that this portion of the Magical Tax Mystery Tour is over, with my E-filing this past weekend. I like to get those in early, especially when the government owes me money (and even if you owe them money, you don’t have to pay until the last possible day).

The second exciting part of this Tax Trek is Property Taxes that I owe to the City of Ottawa. Ottawa’s system has a couple of ways you can pay and I choose to make the two payments they ask for in March and May (you can pay monthly if you wish as well), and this makes for the right hook portion of the tax combination punch I receive this time of year.

Property taxes have continually gone up since I started owning a house about 13 years ago, as various levels of Government off-load their own service load and down load them to the municipal governments, but also the City of Ottawa is an interesting story all on it’s own with Amalgamation and the fact that the City of Ottawa keeps growing (and thus it’s thirst for Tax Funds is never quite satiated).

Given I seem to live in my finances in this time of year, I always end up noticing interesting points that these taxes bring into focus for me:

• I pay more in Property Taxes than I do in Mortgage Interest on my house. I guess this is a good thing, but this may change when interest rates go up.
• With Income Tax there is always a chance that I will get a refund from the Government, but this is never going to happen from my Property Taxes (which explains why I seem to loathe Property Taxes more than Income Taxes).
• Property Taxes are the only tax on the Perceived Value of something, as opposed to actual value or income. If I sold my house for $1 tomorrow, but the City said it was in fact really worth $1,000,000.00 they would be right and that would be what the new owner of my house’s valuation would be. I have seen many people successfully argue that their property valuation was too high, but it is a tedious and slow process (and you might end up with a higher valuation if you are not careful).
• If I wanted to pay more Property Tax, in exchange for more services (say better street lighting, better sewers or a fire hydrant near-by), I would not be allowed, and there is no way for me to buy these service improvements from a private firm either (given the city has a monopoly on these services).
• Even though a portion of my property taxes goes to the Schoolboard of my choice, this does not guarantee my child an education with that board. If they feel my child is not suited to their service (behaviorally, or because they have a learning disability or other reasons) they can refuse me this service, and I have little recourse (but I still must pay the fees). That one is always an interesting discussion point to bring up at a party that seems to be too quiet.

I don’t think there is anything too deep in those points, just some stuff I noticed about my property tax bill.

Improving Employment Numbers

Stats Canada announced some improving numbers for February in the world of Employment, which bodes well for the economy, but also points towards a recovery, which will cause the government to maybe get out of the way, by lowering their intervention, but also have them stop making money so easy to get (i.e. upward pressures on interest rates). This seems to be the opinion from a few folks about these numbers.

Underlying February’s employment change was a notable gain in full-time work (+60,000), which was partially offset by a decline in part time (-39,000). Since the summer of 2009, employment growth has been all in full time.

On Going Employment Graph

Employment Better for Over 55

An interesting figure is that employment for folks over the age of 55 was one of the biggest growth areas in February. This means lots of older folks, who maybe should be thinking about retirement are actually going out and getting jobs?

Employment for men and women aged 55 and over has been trending up for a number of years, the result of employment growth combined with more people moving into that age group.

Yes we are all getting older, but why are we looking for jobs? Guess we need to save a little more for our retirement?

Unemployment Down Too

This month the unemployment numbers trended down, which is good as well.

Big Picture Graph for Unemployment

The Big Table

And here is the big table to ogle for more information:

Video: Madoff Affair

Last night I watched a very interesting interview on the Daily Show with Harry Markopolos, one of the men who blew the whistle on Bernie Madoff (back in 2000). The interview with the Daily Show is astoundingly frank and entertainingly funny, and at the end of it, incredibly disturbing. The Comedy Network in Canada does not allow me to embed this interview so you’ll need to click to get to it, but it is well worth the hassle. Markopolos’ book No One Would Listen: A True Financial Thriller is an interesting read.

CNBC does have a more serious interview with Markopolos and a former co-worker Frank Casey, which outlines that Madoff’s shenanigans and financial tom-foolery had been noticed, but it seems no one did anything much about it for a long time. The best line is about how you never had to use Madoff’s last name, if you said, “Bernie” everyone knew who you meant.