A fairer way to implement property assessments?

AACI | Vice President, The Regional Group of Companies Inc.
  • Feb. 16, 2017

Last week, I took part in a stakeholders meeting with Ontario’s Municipal Property Assessment Corp. (MPAC) on how the process of determining, implementing and appealing a property’s assessment might be improved.

John ClarkWe all must pay our fair share of taxes. Our society simply wouldn’t function as it does and deliver the services we expect otherwise.

But the emphasis must always be on what is fair. Not just in terms of how much each of us must pay, but also in how changes in the property assessments that can impact our municipal tax bill roll out.

This was a big topic of conversation at the meeting last week.

MPAC undertakes to be an impartial government service with the mandate to provide estimates of market value (Current Value Assessment) on a four-year cycle. The challenge and difficulty with property tax is that it is the only tax we pay based on someone else’s opinion of something. “Market value” is not a fact but rather an opinion.

Flowing from it being an opinion, coupled with the large number of properties in Ontario to be assessed (about five million), there always will be occasional errors as well as situations where the evidence in support of the opinion is vague and unclear. Municipalities depend on property tax for a substantial portion of their revenues – the better the assessment process, the more predictable and stable their revenue base.

Idea #1: Time to digest

Several suggestions were made by industry, including allowing a substantial period from the issuance of the notice of assessment until the roll takes effect. This would give property owners more time to review and analyze the assessment and, in all likelihood, resolve differences of opinion without the need for a formal assessment appeal. 

How long a period? Suggestions ranged from nine to 12 months. This would mean that in a reassessment year (say 2021 for the next cycle) notices of assessment would be generated as early as the fall of 2019. All of 2020 could then be used to sort out problems before the tax year begins for which the reassessment applies. 

If successful, many assessment issues would have been resolved by the time the tax year began. The result would be fewer appeals flowing into the actual taxation year. Municipalities and taxpayers alike would have greater certainty about revenue and expenses.

Idea #2: Budget neutral tax projection

Another suggestion was to follow a model adopted by the City of Calgary. In this scenario, the property owner is provided with the new and the old assessment plus the tax impact the new assessment will have – assuming there is no change in the municipal budget.

For example, say your assessment rose 15 per cent but the assessment base rose by 20 per cent on average. If your tax bill had been $10,000 in the prior year, the revenue neutral impact of the reassessment would result in a new year tax bill of $10,000 x (115/120) = $9,583. Conversely, an increase of 25 per cent in your assessment, with the same average 20 per cent increase in the base, would result in a new year tax bill of $10,416.

The property owners may not like the increase in taxes, but they will know where they stand well before their next bill. Without this budget-neutral information, property owners are left anxious and frustrated as to what the reassessment means for them. 

As an example, I am dealing with a property owner who has seen a 45 per cent increase in his assessment but the reality is that once the average increase in the local assessment base is known, the outcome may be that he sees no tax increase.

Producing a budget-neutral tax projection would require a substantial amount of work by MPAC as it deals with properties in a few hundred different municipalities. But I think that if this was achieved, property owners would often have their angst relieved, municipalities would have a more predictable assessment base on which to generate tax revenue, and everyone might gain a higher level of trust and respect for the taxation system.

No matter how you cut it, taxation is the price of freedom

Most people irrationally object to taxation. In some quarters, there are people who only preach cutting taxes. While I don’t want to pay more than my fair share, I also remember that taxation is the price of freedom.

To the tax-cutters, I say why stop at a small reduction? Go for the whole and cut 100 per cent. First to go would be government pensions to seniors, followed by Medicare, policing and fire protection, and road and infrastructure building and repair. While this is an option, only the most loony would agree to it. A country without taxation becomes a lawless geographic expression.

To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

Industry Events