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Property-tax deferment plan has backers in Montrea

Property-tax deferment plan has backers in Montreal

Condo projects in older neighbourhoods in central Montreal can help drive up land prices, which means taxes also rise. Two organizations suggest tax deferments so homeowners can avoid paying more than the inflation rate until they sell.

MONTREAL - Tax relief is on the lips of a number of municipal politicians now that the city of Montreal's 2012 $4.74-billion budget has announced a three-per cent increase on local tax bills next year.

The three-per-cent figure, composed of a 2.5-per-cent spike for property taxes and a 0.5-per-cent increase for the island-wide water tax that funds repairs to Montreal's crumbling water network, represents the average increase. The tax hikes run 50 to 90 per cent higher than the average in six of the city's 19 boroughs.

In older neighbourhoods in central Montreal, real estate speculation and gentrification drove up property values well above the rest of the island in the latest three-year municipal assessment roll. Property and water tax rates, as well as the city's roadwork tax and any local borough taxes, are calculated on the assessed value of a property.

It turns out an opposition party at Montreal city hall and the Union des municipalités du Québec have each developed similar proposals to provide property tax relief without knowing about the other's efforts.

Projet Montréal and the UMQ, representing more than 275 Quebec municipalities, are calling for a program that would allow property owners to defer payment of the portion of any increase in their property taxes that's above the going inflation rate until the owner sells the property, presumably at a higher value.

"I think everyone in the municipal world is reflecting on the issue," Projet Montréal leader Richard Bergeron said.

Under his party's proposal, which he said has been in its platform since 2005, every owner would pay a property tax increase equal to the inflation rate each year. At the time of sale, the buyer's tax bill would be based on the new, higher assessed value.

The UMQ's proposal, the Programme de report de l'impôt foncier (PRIF), is more detailed on how the deferral would work. It's based on the premise that a property owner should pay a property tax increase no higher than the annual inflation rate. A trust fund would pay the municipality any remainder owing above the inflation rate.

For example, if the property tax increase on a home is 5.5 per cent and the inflation rate is 2.5 per cent, the owner would pay a tax increase of 2.5 per cent and the remaining three per cent would be paid to the municipality out of a trust that the UMQ wants the province to manage and initially fund.

When the home is sold at a higher value down the road, the trust would be paid back for the taxes it paid from the proceeds of the sale. A lien on the property would ensure the taxes are paid at sale.

"It would be equitable and pretty simple," said UMQ president Éric Forest, the mayor of Rimouski.

But the Quebec government rebuffed the UMQ when it presented the proposal nearly two years ago, he said. The government suggested that municipalities offer property owners a tax credit. That's unthinkable, he said, because residents would have to pay even higher property taxes to finance a local tax credit.

The UMQ plans to keep its proposal alive, Forest said.

"We're worried. There are people who see their homes double and triple in value and don't necessarily have the means to pay their taxes."

 

2012 MONTREAL BUDGET: SEE WHERE YOUR MONEY GOES

To access our interactive chart, showing spending per activity in the 2012 Montreal city budget, go to montrealgazette.com/news/budget.html

 

lgyulai@montrealgazette.com



Read more: http://www.montrealgazette.com/business/Property+deferment+plan+backers+Montreal/5799482/story.html#ixzz1h0ywapVH