Municipalities (cities, towns, villages, resort villages, and rural municipalities) raise most of their revenue through property taxes. The information below is for reference only and is often pulled directly from the provincial government's website. Tax calculation can be very complicated and is based on numerous factors.To begin with, taxes are based on the taxable portion of your property's assessed value. Property assessments are performed by SAMA. Please review the section on assessments for more 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 the ad valorem method of taxation or to utilize 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 mayor, reeve, and members of council." - Government of Saskatchewan
How does a municipality decide how much taxes to levy?
A municipality must first pass a budget before they set their tax rates. Why is this? First the municipality must decide what core services it intends to provide, and review what the costs of those services are. Additional costs for capital upgrades, etc. are then added to the budget. Council the reviews where the revenue to cover the budgeted expenses will be coming from, sometimes reducing expense lines to reduce the revenue required. Some revenue comes from things like user-pay fees for activities and programs to help reduce the tax payer burden and cover some expenses for the facilities the events/activities take place in. Some revenues come from pulling funds from municipal reserves (often these are dedicated reserves for things like infrastructure upgrades or capital purchases).Some revenue comes from the federal and provincial governments in the form of grants-in-lieu of taxes and revenue sharing. There are other forms of revenue such as rent/lease agreements, grants, etc.
Because a large portion of municipal revenue to pay for expenses comes from the governments, the municipality will generally wait until the federal and provincial budgets have been released before it finalizes its own budget. If a large change to the anticipated amounts municipal governments will receive occurs in a provincial or federal budget, it will directly effect the municipal budget. Council must decide whether to reduce expenses (and often services) in that year, increase funds pull from reserves or increase the tax rate to cover the difference.
How are taxes calculated?
Initial property taxes are calculated using the ad valorem basis of taxation meaning that your property taxes increase proportionately with the value of your property. This is the taxable portion of your assessment multiplied by the mill rate divided by 1000. Tax tools are a mechanism allowing council to redistribute the cost of public services within its tax base. They may adjust taxes using these tools for properties based on whether they are commercial, agricultural or commercial, and also depending on whether you have land or land with an improvement (home, garage, etc.) on it. Tax tools may only be applied to municipal property taxes.
Your tax bill will include both municipal and school taxes. The education (school) portions of your taxes are set by the province. The municipality cannot make adjustments to the school portion of your taxes. There may also be other special taxes or improvement levies set by a municipality which could affect the total amount of your tax bill.
What are tax tools?
Municipalities have three tax tools that can be used individually or in various combinations: Mill Rate Factors, Minimum Tax, and Base Tax
Mill Rate Factors: A municipality may use mill rate factors 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.
Minimum Tax: A minimum tax may be established 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.
Base Tax: A base tax may be applied 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.
Wadena uses a combination of Mill Rate Factors and a Base Tax.
- Mill Rate: 18 (used to calculate the ad velorum tax)
- Mill Rate Factors:
- Agricultural: 0.9137
- Residential: 0.4098
- Commercial/Industrial: 1.107
- Base Tax:
- Land $375, Improvements: $425, Property (land with improvement): $800
- Land $375, Improvements: $400, Property (land with improvement): $775
- Land $475, Improvements: $475, Property (land with improvement): $950.00
Examples of taxes as they would be calculated in Wadena
Your municipal taxes will be determined by taking the Base Tax and then adding the ad valorem tax calculation (using Mill Rate), multiplied by the Mill Rate Factor. In other words, we will build on the base.
- Formula: Base Tax + ((Taxable Assessment x Mill Rate / 1000) x Mill Rate Factor)
- Pretend your commercial property assessment (taxable portion only) is $81,700 (land only, no improvement (shop or building, etc.))
- Base taxes for land will be $475.
- Mill Rate: (ad velorum) ($81,700 x 18.0 / 1000) = $1470.60
- Mill Rate Factor: Take the ad velorum rate calculated above times the mill rate factor: $1470.60 x 1.107 = $1627.95
- Take the Base Tax for your land $475 + $1627.95 = $2102.95.
- $2102.95 is your municipal tax levy. You will need to add to this any school taxes, special taxes, or property improvement levies applicable.
- Pretend your residential property assessment (taxable portion only) is $150,000 (land with improvement( house, garage, etc.))
- Base taxes for land with improvement will be $775.
- Mill Rate: (ad velorum) ($150,000 x 18.0 / 1000) = $2700.00
- Take the ad velorum tax times mill rate factor: $2700 x 0.4098 = $1106.46
- Take the Base Tax for your land with house $775 + $1106.46 = $1881.46
- $1881.46 is your municipal tax levy. You will need to add to this any school taxes, special taxes, or property improvement levies applicable.