Last Friday the new property valuation rolls were announced for the agglo by the city of Montreal. The rolls affect all boroughs and demerged cities on the island of Montreal. The new valuations increased property values by an average of 13.7% across the island. Demerged suburbs were hardest hit. Their valuation increases averaged 20% with some municipalities like Dorval and Beaconsfield at 27 and 25% respectively.
On the surface this is good news.It demonstrates Montreal's real estate sector - though still a relative bargain - is catching up to other cities. And though the other cities have more robust economies, the valuation rolls evidence some degree of progress in Montreal. There is cause for hope for growth after years of stagnation. Even if that growth is driven in some measure by flight capital. Toronto and Vancouver have taken the lion's share for years. It is clear that Montreal is getting some of that capital now.
However, let us issue a note of caution to Montreal's City Hall. The fastest way to stop growth dead in it's tracks is to tax it to death. Historically, Montreal has always raised property taxes in the first budget following the triennial valuation rolls. Not because the city suddenly needs more money. Valuations don't relate to any expenses of the city. The city does it for just one reason...because it can. But it shouldn't.
The current valuation rolls are based on some 30,000 plus transactions over the oast several years. It's nothing more than a snapshot of where prices are going. But we have become so used to getting taxed more as valuations rise that we don't even stop and bother to remind our politicians that one has nothing to do with another. Higher valuations make property owners wealthier on paper. They don't cause increased expenses for the city. No connection whatever.
But Montreal is the last city of over a million people in North America where some 70% of municipal revenues still come from property taxes. In all the others they are under 50%. It's like a self perpetuating chronic disease. We don't even bother to fight. But Mayor Plante take notice. Montreal still has 34% of its households below the poverty line. Many of the properties whose values have gone up are modest duplexes or triplexes in poorer areas.Valuations are being driven up by flight capital. Not by inherent growth of the economy. If you try and do what Mayor Tremblay did in his first term when valuations jumped 20% and he raised property taxes by 6% you will face a record number of bankruptcies and a record number of properties for sale because people can't pay the new taxes.
If properties for sale begin to flood the market, buyers will have the upper hand and prices will be driven down. Taxes will have killed any chance for growth. The city doesn't need more money. In her first year in office Mayor Plante raised taxes because she claimed there was a deficit left from Mayor Coderre. A few months later she had to admit there was a robust surplus. But she never reverses the tax increases. We must hope she does not make the same mistake again.
Plante said that people shouldn't panic. That she will make a formula where taxes will not be tied to the same rate as valuation increases. But she had no specifics. Well, here is a suggestion for her. Beaconsfield's Mayor Georges Bourelle has become the only mayor to commit that his city's property taxes will not rise beyond the rate of inflation, or about 2%. That took guts. We hope Mayor Plante follows Mayor Bourelle's 2% solution for the benefit of all Montrealers. She does not want her legacy to be that of forcing seniors on fixed incomes to sell their homes because they can't pay the extortionism of city hall.