Winnipeg’s Property Taxes

Commentary, Frontier Centre, Manitoba, Taxation, Uncategorized, Winnipeg (historic)

Is Winnipeg on a roll? A spate of “good news” stories has led some to that conclusion, and let’s hope they’re right. But new research data on the City’s high property taxes tell a cautionary tale, that the fundamentals necessary to a sustained boom may not be in place.

First, the good news. The Winnipeg Free Press recently headlined the fact that over $200 million in new spending is slated for the downtown area. Canwest is starting to shift jobs to Winnipeg from the newly acquired Southam newspapers. Winnie the Pooh may be poised to lead us to the honey pot of tourist dollars via a “Poohseum,” with the apparent blessing of marketing heavyweight, the Disney Corporation.

The optimists view these developments as evidence that Winnipeg’s perennial also-ran reputation is on the way out. Mayor Glen Murray deserves credit for his aggressive role as River City’s biggest cheerleader. As an articulate proponent of the need for a stronger political voice for cities, he has raised Winnipeg’s profile. Urban guru Jane Jacobs agrees that cities in Canada have little real power — that the provinces and feds seem to view them as “country bumpkin governments.”

That discussion implies that stronger cities means giving them more taxing power. Urban governments elsewhere receive a portion of sales and income taxes, as well as a chunk of gasoline taxes. But this debate faces an uphill battle here. Why does the City need more money when it has among the most onerous property taxes in the land?

How onerous?

The latest report from the Frontier Centre (see below) shows that Winnipeg has the highest effective residential property tax burden in Canada. Despite recent property tax reductions and hopeful language from the mayor, this fact presents a formidable barrier to sustained economic growth.

The most common way to compare property taxes across jurisdictions is to look at effective property tax rates (property taxes relative to market values) because the property tax is levied on the market value of properties. Since market values vary significantly from city to city, a similar tax level produces much lower effective tax rates where market values are high, and higher effective tax rates where market values are low. Some politicians view Manitoba’s unique record of producing about the most depressed property values in Canada as a benefit. In the end, however, it translates into Winnipeg having high effective tax rates.

Effective residential tax rates for different types of dwellings in Canada, based on the Survey of Canadian House Prices, Spring 2000 from the real estate company, Royal Lepage, show that Winnipeg property taxpayers pay from 2.52 percent for a standard two-story house to 2.21 percent for a condominium. Effective tax rates are lowest in Vancouver, Victoria, and Calgary where they are one percent or less for all housing types. In other parts of the country, effective tax rates on residential property range between one and two percent. In other words, if you are paying $4500 on a house worth $150,000 in Winnipeg, you would be paying $1,500 to $3,000 in other cities.

Over the period from 1996 to 2000, the effective tax rate on a detached executive two-storey house in Winnipeg actually increased, in spite of recent nominal tax reductions. Paradoxically, a slight property tax cut in a stagnant property market actually has brought us a higher effective rate despite the Murray administration’s efforts to trim property taxes.

If property values are booming, on the other hand, effective property tax rates will fall even if the city is raising nominal rates. For example, between 1996 and 2000 property values in Calgary, Edmonton and Ottawa respectively grew by 35, 27, and 41 percent with effective tax rate falling .37, .38 and .67 of a percentage point. At the end of the day, Calgary increased its residential tax rate by 4.0 percent in 1999 and by 2.2 percent in 2000. However, in relation to rising property prices, Calgary’s and most other Canadian cities’ effective property taxes are, in fact, falling. In Winnipeg, where property values were basically flat over that period, that is not the case.

Other yardsticks confirm Winnipeg heavy residential tax burden. Property taxes relative to income for Winnipeg are far higher than any other city, at 5.6 percent. The lowest taxes relative to income were in Calgary at 2.6% of income.

The data also show that effective property tax rates in Winnipeg are two to three times higher than the average rate in major U.S. cities. They also validate the city’s complaint that it gets stuck with the high cost of education property taxes. The city with the highest education taxes in the City of Edmonton survey was Winnipeg, followed by Regina and Saskatoon.

The analysis shows plainly that Winnipeg has among the highest real property taxes in Canada. When smaller cities like Regina and Saint John are excluded, it has the heaviest residential tax burden in Canada.

If that doesn’t change, Winnipeg might never find the honey pot.