Revenue neutral assessment

This term, “revenue neutral assessment”, is being tossed about but does anyone really understand what it means? Not likely. Unfortunately using this principle does not necessarily guarantee lower taxes. The town can still increase its budget and hike the tax rate but it does mean more transparency and a clearer understanding of the way the system works on both the part of the municipality and those paying the tax bills. The City of Calgary , which follows this principle, describes it very well: The emph. however is ours.

The annual re-valuation of properties (based on current market values) does not change the amount of municipal tax dollars received by The City of Calgary. To illustrate, based on the premise that there is no change in budget, the tax rate is adjusted up or down to account for the year-to-year change in market values.

So, if market values increase, the revenue neutral tax rate decreases and if market values decrease, the revenue neutral tax rate increases. The revenue effect of market value assessment change is “neutral” to The City of Calgary.

Simply put, Council only collects what it needs for its budget. Should that budgetary requirement change, then it is the tax rate that is adjusted to meet the revenue needs.

That’s the principal of revenue neutral. Your annual assessment simply indicates what your share of the taxes will be based on Council’s budgetary decisions.

An easy to understand illustration was developed to demonstrate the principle of revenue neutral.

Sources

revenue neutral

calgary link

This is the way our system is supposed to work. The revenue neutral principle just makes that very clear to everyone. As you can see the revenue neutral notice would clearly tell you what your Tax or mil rate would be based on the new (increased or decreased) assessment if it was neutral of revenue to the town, i.e. if the budget did not increase.

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