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Property Taxes: A Stream of Consciousness

Wrote this rant about property taxes in 2010. Property taxes continue to leech money as my house goes up in value (allegedly). When folks talk about taxing the rich, remember, your house is pretty valuable. Maybe in their eyes, you are rich?

Property taxes time is a magical time, just for the sheer volume of money that seems to go for taxes.

First we have the CRA and Income Tax coming due in April, which causes lots of excitement as I mentioned in How Do You Do Your Taxes ? I am happy to say that this part 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. 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. I choose to make the two payments in March and May. You can pay monthly if you wish as well. 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 27 years ago. This as various levels of Government off-load their own service load and down load them to the municipal governments. The City of Ottawa is an interesting story all on its own with Amalgamation (2001). The fact that the City of Ottawa keeps growing and thus its thirst for Tax Funds is never quite satiated.

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:

  • Paying 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. This will never happen with my Property Taxes. This 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. Many people successfully argue that their property valuation was too high, but it is a tedious and slow process. There is a chance your valuation may go up if you appeal.
  • 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)it is not possible. 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 School board 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 (behavioral, 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.

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Random Thoughts: When Bloggers Meet

We had another get together of the National Capital Financial Bloggers Association this past week and the regulars were there, but we also had a special guest appearance by Canadian Financial DIY, and he has been added to the prestigious N.C.F.B.A. blogroll in the right hand column. A very interesting chap and with many of the same attributes as yours truly (worked in the same places, from Montreal, etc.,). He also is brave enough to show a picture of himself on his blog (I may one day, but I need to find a top hat and monocle first).

Financial Blogging This Week

Many interesting posts for this week, and let’s start off with our spotlight blogger this week:

Victoria Day Weekend

Given it is an early long weekend here in Canada, don’t look for anything on Monday, I will be enjoying a day off, but look for a new video for the weekend enjoyment.

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Random Thoughts: Mr. President Elect

The three-year marathon that was the U.S. Federal election ’08 has finally been completed, and we can get back to normal, but unfortunately, as we can see from a cursory read of some of the Financial Blogs around, what is Normal anymore? Oh, and when does the sprint to 2012 start? Luckily we have a Quebec election to fill our time up with for now.

This Week’s Personal Finance Highlights

  • Michael James showed his artistic side giving us a graphical rendition of Market Timing in Pictures that i is missing the Big Cajun Graph where the Sell is on the bottom and the buy is on the top (look at the pictures and you’ll understand that one).
  • For my fellow bloggers who might use WordPress, TechCrunch posts this important warning about Fake WordPress Site Releasing Backdoor Code.
  • Stats Canada mentions that there still are about the same number of Rural Folk in Canada (6 million) however due to the growth of Urban areas, the Rural folk are now a much lower percentage of the population.
  • For we religious folk that might want to make a wager, a bookie in the U.K. has put odds at 4-1 that God Exists, I think I’d put a few quid on that.
  • Finally the Canadian Capitalist and a few other bloggers have been looking at Manulife Income Plus: The High Cost of Peace of Mind. The N.C.F.B.A. met last night and there was the usual friendly banter but the discussion around this topic made me very concerned about what new tricks the financial services industry will pull out of their bag in the future? Read these posts carefully (Michael James has some data on it as well).

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My House is worth 67% More

Truly a classic from 2008. Are houses an investment, or are they merely somewhere where you lay your hat? Given the housing market in Ottawa, it has now more than doubled in value. Still where I lay my hat.

Is my house more valuable than the day I bought it about nine years ago? That is not a bad investment. I base this all on the wacky assessment notice that I got from MPAC . I don’t actually believe the evaluation is a fundamental value that I would get if I sold my house (without taking into consideration all of the associated costs with selling a home). However, it is an exciting number to start with. 

The actual evaluation will not be implemented right away. It will be gradually raised until 2012 when this value will be in place, which is more interesting, since if the housing market in Ottawa remains robust, my house may be worth even more by then? Maybe not, but it is something else to consider in this wacky equation.

Does this mean I will be paying more property taxes? Given that my evaluation has gone up about 11% from the assessment I had in 2005, I think my property taxes will not go up that much in reference to this evaluation, however, my guess is other charges from the City of Ottawa will increase my property taxes by a fair amount this coming year. My first property tax bill arrives sometime in January.

Percentage of Home Ownership

If I am to assume that this evaluation is relatively close to what the market will pay for my house, it does change how much (as a percentage) of my house that I own. Figuring out how much I still owe on my property, I actually own about 60% of my house currently, which is a reassuring feeling, however, it’s not like I can jettison 40% of the house and thus be out of debt. 

The other problem is, all other houses around me are appreciating as well, so the value of my home as an investment is not that great, in that it is unlikely I will move out of it and into a much cheaper house soon.

Gas Below 90 cents a Liter

Speaking of wacky, gas dropped below 90 cents a liter for a while in Ottawa, which is very interesting. The Canadian Dollar has swung like a pendulum, but now with lower gas prices, suddenly, travelling becomes much cheaper than it was going to be six months ago. Will gas prices stay down? Don’t know, but it’s nice to see for now, as it makes running my cars (and snow blower) much cheaper right now.

Stocks Still Dropping

The world continues to be jittery about stocks, and they continue to drop in value for now. Rate cuts continue in most countries trying to stimulate spending, but a lot of folks are just worried and are going to keep their money in their wallets for now, until they are sure their jobs are safe.

More Job Cuts

Rumour has it that my former employer will soon be adding to the employment pool by laying off another 18% of their workforce (I have heard, this is an unsubstantiated rumour), which will make looking for jobs in Ottawa that much more complicated. Not all the job losses will be in Ottawa, but there continues to be a steady flow out.

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Indicators are OK

Our friends at Stats Canada published their Leading Indicators for August 2008 yesterday and things in the Canadian economy seem to be doing ok, not great, but not as bad as some might think.

The most interesting statement made was:

Household demand has remained the most consistent source of growth in recent months. Sales of furniture and appliances grew steadily, helped by a steady housing market. Housing starts rebounded in August. Meanwhile, personal services have become the main prop to growth in services employment. Sales of other durable goods were an exception to the strength in household spending, reflecting slower auto sales over the summer in response to record gasoline prices.

The housing index dropped, which may mean more reasonable housing prices or a slowing of the price increases we have seen, which is good as well.

Speaking of House Prices

The Citizen talks about how new price valuations for homes across Ontario are about to be sent out by The Municipal Property Assessment Corporation. Remember these valuations have been frozen for the past two years, so these new numbers could be pretty darn crazy (given a 20% price increase since 2005 on average in Ontario).

“Residential property values have increased by an average of approximately 20 per cent across Ontario since 2005, when the last assessment update was done. Because of the four-year phase-in, property taxpayers will see an average assessment increase of five per cent next year,” Carl Isenburg, president and chief administrative officer of the Municipal Property Assessment Corporation (MPAC)…

I look forward to seeing this envelope in the mail.

Quick Run Around the Blogs

Some excellent articles this week from other bloggers worth having a look at:

  • Michael James writes about the Current Financial Mess and gives a very philosophical view that we are still living good lives, we just need to figure that one out.
  • The Canadian Capitalist writes about the implications of the Fall of AIG, a little depressing, but good research as well.

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