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School tax deferral bill — comments show cottage owners oppose the provincial government’s proposal
Jun 25, 2010

An interesting question posed by a number of presenters at the committee hearing on the province’s Cottage Property Tax Increase Deferral Act Bill was why the bill was even conceived and drafted in the first place. 

After all, the only relief you can defer this year and 2011 is the difference in taxes from this year to last year’s based on the reassessment of cottage properties. Of course, you will have to pay it back with interest (yet to be determined what the rate will be and how it will be compounded). 

Depending on the rural municipality and school division where your cottage is located, taxes may be up noticeably. The pertinent question is why are school taxes making up the greatest portion of a cottage property’s total tax bill? 

In Victoria Beach, for example, is a cottage area highlighted as having one of the biggest jumps in values from 2003 to April 1, 2008. One cottage owners’ tax bill clearly shows the increase this year in total taxes is made up almost entirely by the hike in education taxes — not municipal taxes. School taxes went up from $1,575.20 to $1,933.34, while municipal taxes rose from $1,402.31 to $1,437. 

It does not seem likely that a cottage owner needs relief on the $35 in municipal taxes. Perhaps the bill needs to be renamed the Cottage Education Tax Increase Deferral Act Bill. 

It is obvious the Victoria Beach municipality adjusted the mill rate low enough to keep municipal taxes in check while the school division raised additional school taxes by levying a higher mill rate. 

It should be pointed out that $326 of the Victoria Beach cottage owner’s total municipal tax portion is a special levy for the new water treatment plant, and remains on the tax bill until 2017. So, if you remove it from the $1,437 to get the true municipal property tax bill, it decreases to $1,111. 

The result is that school taxes nearly representing two-thirds of the total property tax bill when the levy is excluded. How fair is that when these owners are already paying school taxes on a principal residence. Moreover, cottage owners do not have the right to vote for a school trustee nor are they eligible for the education property tax credit. Cottage properties are portioned in the same way as any residential property at 45 per cent.

Is it any wonder a local REALTOR® in the Victoria Beach area is seeing property tax fatigue and more listings arise as a result? And this is before cottage owners have even received their cottage property tax bills in the mail, as the tax bills have been delayed for some unknown reason, although  taxes will still have to be paid by the end of July. It will be interesting to see what cottage property values will be in the next reassessment which will be based on 2010 evaluations.

The Manitoba Association of Cottage Owners (MACO) and certainly the Manitoba Real Estate Association and WinnipegREALTORS® made presentations at this legislative committee hearing. They indicated the proposed bill at least shows the government recognizes school taxes are unfair by attempting to offer some small relief. 

The reality is a number of cottagers are saying enough already and have put up their cottage for sale. Ironically, some of the new purchasers of cottages are from out-of-province, so Manitobans who may not be able to afford to keep a cottage or buy one can rent one from these new owners since they cannot be here all the time to take full advantage of their cottage.

MACO sent out the proposed cottage tax increase deferral bill to members of their association. The following are some of the comments received:  

“We would not be interested in deferring the taxes. We think the government has our kids in enough debt as it is!”

“If the government is passing this bill, it is acknowledging that something is wrong with the system.”

“I see this bill as a tax deferral loan program meant to appease cottage owners by reducing the immediate impact of unfair and higher taxes, but which will in actuality result in the cottage owners paying interest on top of the higher taxes.  Instead of offering a cure to reduce the unfair tax burden, Bill 5 simply hides the symptom with a short-term expensive band-aid.”

“Manitoba schools require proper funding.  Should a school in a wealthier area in Winnipeg have an advantage in funding over a school in a poorer area of Manitoba without the advantage of high-priced property?”

“The seniors/retirees may have homes that continue to increase in value thus increasing taxes.  Will they be able to keep this asset as expenses increase?”  

“What about the younger people?  Taxes on their property more than likely means taxes on their debt being their mortgage.”

“In Question Period (in the provincial legislature), while the Conservative were in power, both (former Education) Minister (Steve) Ashton and former Premier (Gary) Doer criticized the off-loading of the responsibility for funding education.  Nothing has changed.  School taxes continue to increase.”

“I didn’t read the entire document, but what I read is tax is deferred?  So cottage owners still pay what they pay, but defer it?  How stupid is that.” 

“Both of us read the proposed Bill 5 and were not impressed at all.  How does deferring the increase help us at all?  All it does is give the government the chance to take our properties if we default on the repayment.  That isn’t a solution at all.  The only bill that we would like to see is one, where for cottage owners, the school taxes are completely taken off of our property tax bill.  As cottage owners, we only use our properties for part of the year, so how does paying school taxes help us at all?  We pay school taxes in the city which is more than enough. We hope that enough people vote against Bill 5 so that it doesn’t get passed and instead come up with a solution that benefits cottage owners.”

“When did the government get into loan sharking. I will read again to make sure I understand this bill, but at this time I do not know why they are doing this.”

“I am guessing that MACO’s concern is what the bill doesn’t deal with.  MACO is flogging a dead horse with its obsession with getting vacation cottages exempt from school tax.  It ain't gonna happen.  I suggest that MACO get together with some other groups, including business, and: 1. lobby to remove taxing powers from school boards as a first step;   2. Replace school tax on property fazed in over a five or ten year period and 3.  Require school boards to budget with whatever funds the provincial government provides from general revenue based on some sort of formula.” 

“Who dreams up this stuff. Are the inmates running the asylum called a legislature now?”

“They set tax rates that are absurdly high and fold in school taxes which most other jurisdictions have removed long ago and then come up with this as a sort of a carrot to placate the downtrodden and make them debt holders to the government rather than address the reason why they have to put this nonsense bill in place.”

And after reading the bill — if it passes, which is ridiculous — it states that if I deem my cottage to be my principle residence for tax purposes for a period of time because it has appreciated more than my current residence, which seems a prudent part of tax planning from anyone’s perspective then I cannot access this deferral program even if I wanted to. Duh!”

“My understanding of Bill 5 is that it has been designed to dilute the anger and public outcry. (It’s) window dressing at best, as it delays payment but doesn’t address the real problem. 

“At Vic Beach we got hit between the eyes as the reassessments were an enormous leap. Having said that they were grossly outdated prior to and did not come anywhere near a reflection of market value. Now they reflect market value, and the leap has awakened the anger to a system that needs to be redesigned. 

“I am in favour of paying a fair share, what becomes the real issue is how to determine the right formula for fair. We pay a $5,000 tax bill on a 1,700-square-foot seasonal cabin, most of which is school tax. We pay more than that in Winnipeg, most of which is school tax. I would like to see a system designed so that as
Manitobans we pay school tax at our homes as we should, but pay a reduced levy on seasonal residences because we are essentially paying twice and in the seasonal home situation we don’t or can’t enroll students. Of no consequence, but true, is that a summer cottage at Lake of the Woods ... pays one-quarter of what we do in Manitoba. 

“The permanent residences in cottage country love us for obvious reasons, and their livelihood often exists to provide services we consume. 

“I think they would be well served to want to see a more fair system created. 

“How do we properly effect change? 

“A march on the legislature gains awareness but I don’t think it accomplishes enough. We can refuse to pay our taxes, but that requires huge participation which you won’t get for fear of legal repercussions. 

“We can shop for all things needed at the lake in Winnipeg, to make the local communities instantly aware to our frustration, but that just adds to unnecessary  conflict between permanent and seasonal residents and doesn’t serve anyone very well.  It is not the rural residents who design the tax laws.

“The right approach will take some time to formulate and I think you will begin to see, if you haven’t already, people whom historically remained silent will increasingly want to be heard. 

“I am not very familiar with MACO but have a membership. I think the lobbying effort on the issue of tax needs to be addressed on a common front. 

“It is an enormous job to mobilize a concerted effort from all Manitoba cottage communities as there are many of them. We are gathering with some minds this spring to brainstorm the problem within our little community and will certainly share those conclusions as it may be that MACO is the right vehicle to throw a groundswell of support behind. 

“In the big picture, one of the best, if not the very best, selling features of Winnipeg as a place to live is our proximity to “cabin country.” When cabin country gets marred in ridiculous taxation, we become less attractive on a whole lot of fronts. It is not purely a situation of affordability. People make choices on where and how to spend their leisure time. The cost of owning a cabin is X, the cost of a home in Phoenix is Y. The ongoing annual costs are significant factors that drive people’s decision-making. I would sooner see those enjoyment dollars stay here, because when it becomes reasonable everyone wins.” 

“Never even knew anything about this bill. If I read this correctly, it seems the government knows they have overtaxed cottage owners and to help out they will lend the owner the money — at an interest rate — that will be paid when the owner dies. Seems to me that they have decided to steal from the cottage owners’ kids inheritance.”

“I just cannot believe that Bill 5 was even born. It is another trick to make people think they are getting some benefit from their taxes, while they are really accumulating a lifetime of interest. We do not even offer this kind of benefit to students on their education loans. Why would we do this for cottagers who are obviously over-taxed, or this would not be happening?”

“This is so ridiculous. I am at awe with the financial wizardry of our government.”

If the government is passing this bill. it is acknowledging that something is wrong with the system.”

“That’s an interesting piece of legislation. On one hand it defers tax increases for cottage owners and removes the burden of collecting the increase from the RM. At the same time, it adds an interest component to the collection for the province and puts a damper on tax withholding by placing a lien against the property. If I read it correctly.”

“I see this bill as a tax deferral loan program meant to appease cottage owners by reducing the immediate impact of unfair and higher taxes, but which will in actuality result in the cottage owners paying interest on top of the higher taxes.  Instead of offering a cure to reduce the unfair tax burden, Bill 5 simply hides the symptom with a short-term expensive band-aid.”

“What will they think of next?  When will they start charging interest like the credit card companies? Are they hoping cottage owners will give up and sell their properties, thinking that the owed taxes will be paid out of the sales money?  Wake up politicians and face the real issues and stop behaving like an ostrich burying its head in the sand!”

“We just want to say that this bill is crap. We want the school taxes taken off our cottage bills not deferred with having a lien against our cottage as we get older and our children inherit it. They don’t need this extra debt either.  Get rid of the school taxes altogether!”

“In our opinion, this is the biggest smoke screen.  Do they actually think we are gullible enough to think this is a good way to reduce school and property taxes. Wow, let me out of here!”

It does nothing to reduce the school tax burden, it just tries to hide it. Anyone using this deferral clause will wind up paying more, not less, as the tax will still have to be paid at some point and will be subject to interest for the period it was deferred. We feel this bill could cost many unsuspecting tax payers a lot of money. That’s our thoughts on bill C5.”

“This is unbelievable! How pathetic is this for a response to something they obviously know is a completely unacceptable approach to taxation.”

The bill does nothing to address cottage owners’ primary complaints about government ‘double-dipping’ of education taxes for those of us who own a cottage in addition to our primary residence.”

“Also, what kind of dummy (property owner) would simply defer property tax increase payments (plus applicable interest) until their property is ultimately sold or transferred? One wonders what financial clown in government actually came up with this sleight-of-hand concept?” 

“Or do we smell a continuing socialist ‘rich can pay’ idealism? (After all, if you can afford a cottage, you must be rich?) But one wonders how many NDP MLAs meet this cottage-owning criteria?