BONNYVILLE - Bonnyville Town council approved first reading of a bylaw last Tuesday that will create sub categories under its municipal residential assessment class, allowing the Town some ability to stabilize tax assessments on income-earning multi-family residential properties in an up and down economy.
In presenting the proposed 2023 Residential Assessment and Supplementary Assessment Sub-class Bylaw, administration explained the rationale behind creating a residential sub-class for single family residential and one for multi-family properties is based on the fluctuation of the assessments from year to year as the economy changes and impacts rental rates.
“Multi-family assessments are based on the valuation using an income approach. With changes in the economy the income and resulting assessment of these properties moves up and down significantly resulting in large tax dollar changes for these properties if no mill rate adjustments are made,” Renee Stoyles, general manager of Corporate Services, noted in presenting the bylaw to council for first reading.
Coun. Kayla Blanchette asked for clarification as to why the Town uses an income approach for assessment on these income-earning residential properties as opposed to market value.
‘The income approach is for properties that are able to generate revenue. So, the theory behind this approach is that the income-producing properties are bought and sold based on their income-producing potential,” Stoyles explained. The approach is used to assess the value of rental properties such as apartment buildings or rental offices. An income property’s potential to earn revenue is directly tied to its value.
“A detailed analysis is done to figure out the property’s income and expenses and then compared to similar properties to determine how much income a property could be expected to generate,” she said. A capitalization rate is then applied to determine assessment.
The Municipal Government Act changed in 2019 allowing for the residential assessment class to be divided into sub classes. By creating a residential sub-class for multi-family properties, Council has the option if it chooses of adjusting the mill rate to lesson tax fluctuations on these types of properties.
The bylaw will come back to Council Sept. 27 for second and third and final reading.