Here in Ontario property taxes levied by the city can be quite high. They pay for basics like garbage pickup and some of the infrastructure for water and storm water (although some of those costs are instead included on the water bill). They also pay for libraries (well worth it!), parks, city staff costs, fire and emergency services and transit buses. They also go up every year and the increase is not based on the rate of inflation. So, while making our budget for retirement, I decided I need to estimate how much I can expect my property taxes to increase each year.

Historical Property Tax Increases May Not Predict Future Property Tax Increases

There are a few major unknowns in trying to guesstimate how much our municipal property taxes will increase: there is no new land to develop in our city. In the past, many new projects were funded by fees charged to land developers building new subdivisions of housing. That is no longer an option. Now, any increases will have to apply to existing housing and commercial properties.

Another major problem is “aging infrastructure.” In other words, things built 50-100 years ago are starting to wear out.

• Old sewer systems are not sized to cope with “global climate change” storms, especially if they also link into to waterways that will be in excessive flood due to a new lack of wild vegetation upstream.
• Old electrical and telephone systems can require digging up city streets to repair which tends to lead to more potholes and other street maintenance dollars being spent.
• Aging transit equipment has to be replaced.
• Parks need to be re-designed to meet changing usage. Tennis is out; soccer is in. Winter skating rinks are not viable anymore without refrigeration systems.

Unexpected costs, like the need to remove about 850 000 dead Ash trees in Toronto thanks to the Emerald Ash Borer, will also impact our local city taxes.

But What Historically Has Been Our Annual Increase in Municipal Taxes?
Unlike some costs, our property taxes have always gone up, never down. So it’s fairly easy to calculate the total change and then an approximate annual change. (They don’t go up the same amount every year, but it’s easier to use an average for our retirement budget purposes.)

• In 2000 our taxes were $3010.89.
• In 2015 our taxes were $4576.47.
• In 2016 our taxes will be $4730.22.

So our total increase will have been $1719.33.

That’s a bit over $107 a year of increase.

But is that realistic?

I looked at the actual increases to see if there was any other pattern to be wary about missing.

Well, the last four increases have been:

• 166.42
• 151.55
• 134.54
• 153.75

That’s a fair amount above $107.

So for retirement budgeting purposes, I think I’ll use $200 a year for increased property taxes. Given what I suspect will happen with infrastructure costs, I think that estimate will still be too low.

Related Reading

• Budgeting for Retirement: Dental Costs
• Budgeting for Retirement: Reduce How Much You Must Pay on a Fixed Schedule
• Budgeting for Retirement: House Maintenance Costs
• What Was Our Personal Rate of Inflation for 2014?

Join In
Have you kept an eye on the rate of increase of your property taxes? (For renters, property taxes are a component of your rent, so it still has an impact.) What pitfalls would you suggest we could avoid by better planning? Please share your views with a comment.