A St. John's city councillor is warning that residential taxes could be going up in next year's budget.

Dave Lane, councillor at large, told CBC's St. John's Morning Show that assessed values of homes in the city — estimated value as of March 1, 2017, the assessment date now being used for taxation purposes — have decreased slightly since the last round of assessments.

"We're looking at how the economy has been shaking out over the past few years," said Lane. "It looks like assessed values will be going down."

All homes aren't affected equally

If a house's assessed value goes down, so do property taxes — provided the mill rate stays the same. Lane said that presents a challenge for the city.

"If we multiply the same mill rate by reduced property tax values, that means we get less revenue, so we can't cover the budget that we have," he said.

It's the bigger homes that have gone down in value, because less people are buying them. - Dave Lane

The city can increase the mill rate — currently 7.3 — by enough to cover the expected loss of residential tax revenue — an estimated average of two to five per cent — to even things out, but the problem is an average drop in assessed value won't be uniform across every house; some houses' values may drop more than others — and some may go up.

Lane says smaller houses are more likely to see an increase in value than larger houses.

"Because of the way the economy has gone, it's the bigger homes that have gone down in value, because less people are buying them. They're less appealing in a downward economy, and lower property values have gone up."

St. John's city council plans to release information about revenues and possible tax increases in October, ahead of the council vote in December. (CBC)

The city's 2018 budget has $91.3 million in residential tax revenue. Losing two to five per cent of that would mean a $1.8 to $4.6 million loss.

The city is doing its best to keep costs down, said Lane, but there are "external pressures" that are making that difficult.

"We are looking at our electricity rates going up. We've seen a few new facilities open up — for example, the Paul Reynolds Centre in the east end, we're looking at Kenmount Terrace Community Centre opening up. These all require operating costs," he said.

"So not only are we looking at a potential decrease in revenue as the property assessments change, we're also looking at costs going up due to external forces like that."

Council to release budget info early

Lane said the city is planning a public update in October — ahead of the budget coming before council in December — to lay out what revenues will look like for the next year, and what that might mean for tax rates.

"And then we're gonna say, let's talk about this, and we're gonna put out some options that we have to deal with that. We're going to talk about what we've done to try to mitigate costs," he said.

This will mark a change from the city's usual practice of presenting the budget — including mill rates — to the public on the day it's voted on by council. That approach caused headaches for councillors in 2015 when residents protested against a budget that raised taxes and cut services.

Lane acknowledged people are likely to have strong opinions about any threat of higher taxes. That is one of the reasons why he's talking about it now.

Reaction to a potential tax increase drew immediate criticism on Twitter.

Read more from CBC Newfoundland and Labrador

With files from The St. John's Morning Show