(An Act to amend the Assessment Act with respect to homesteads)
From the CANADIAN NATIONAL TAXPAYERS COALITION (CNTC)
BACKGROUND:
The Homestead Act was put before the Ontario Legislature last month. It passed first reading March 1, 2006 and second reading on April 13, 2006. It is now at the committee level prior to the third and final reading in the Legislature.
It is a private member's bill, submitted by the Tory Opposition Finance Critic, M.P.P. Tim Hudak. Very seldom does a private member’s bill pass final reading, especially one from the non- governing side of the Legislature.
CNTC felt it necessary to express our views on the contents of this Bill in order for people to be made aware of what we feel it really means. The following is the inside story, or as Paul Harvey says, "The rest of the story"! After reading the contents of Bill 75 yourselves, you may have a different view of things. If so, we would be pleased to hear from you.
PREAMBLE # 1:
At first glance the Bill seems to answer some of the concerns and criticisms that have been aimed at MPAC and Ontario's Assessment System. However, if you look at it closely and have some background of how MPAC works on the inside, this Bill may be a "red herring" that baits the taxpayers of this province into thinking they are finally getting some action, over and above what the Ombudsman's report recommends. Some organizations here in Ontario, (WRAFT in particular), have stated that this legislation "is a significant step forward in the fight for property tax reform". They go on to say, “it is also in the best interest of all residential property owners".
CRITICISM # 1:
Bill 75 will restrict the annual increase in assessments on residential type properties only, to 5% per year. Now this would appear to bring some predictable stability to assessments.
However, of what is this 5% composed?
ANSWER:
If you look at the collective agreements between the municipalities and the unions, the average increase in salaries and benefits amounts to around 3% per year (sometimes a little more). In effect this would pay the "demands" of the municipal employees and still give a little bit left over for the municipal budgets (slush funds).
NOTE: Granted, we have oversimplified things a bit in order to get our point across. We have not even considered that the tax rate (mill rate) will still be increasing, only to compound the actual increase. Only if there were zero increase in the actual tax rate would the percentages mentioned above be correct. If your municipality comes in with zero increase, you still have to consider the education and county tax increases.
CRITICISM # 2:
What about the taxpayers on fixed incomes (retirees, seniors and disabled) that must comply with the "rate of inflation" increases?
ANSWER:
If they are lucky, their increases are not subject to income tax claw backs. The 5% increase is a straight tax out of the "after tax income" of these people. We also have to remember that as the years go by, that 5% increase is compounded and escalates faster than the "net income" of the taxpayers.
CRITICISM # 3:
So is this 5% increase a good thing?
ANSWER:
We would suggest that the 5% should be reduced to the "rate of inflation" or 2%, whichever is less, as CNTC and CAFTA (CNTC’s parent organization) have been proposing for well over two years. This would be more in line with what the taxpayers are getting on a yearly basis. (We still have to keep in mind that if we do not bring this "monster" under control, it will likely bankrupt Ontario, particularly rural areas.)
CRITICISM # 4:
What happens to the 5% when the ownership of the property changes?
ANSWER:
When the ownership changes, the 5% per year cap stops too. The property value then goes to the value determined by MPAC. After that valuation year the 5% cap then returns with the new owner in the next valuation year.
PREAMBLE #2:
Bill 75 says that seniors and the disabled would not pay property taxes on the first $10 000 of assessment on their principal residence. That is of some help to them, but on a property worth $200 000, that amounts to only a 5% decrease in actual taxes. For a property worth $300 000, the amount of reduction is reduced to only a 3.3%.
CRITICISM # 5:
Do seniors and the disabled really not pay on the first $10 000 of assessment?
ANSWER:
No one disputes that there are many people out there that need whatever financial help they can get, but should we be led to believe something is not what it seems to be?
The municipalities still have to come up with the money to balance their budgets, so while one group is getting assistance, the difference has to be made up for by the rest of the taxpayers. This translates into an increase in the tax rate / mill rate. This higher tax is then applied to the rest of the taxpayers (higher taxes) and also to the seniors and disabled that are getting the assistance (a tax claw back).
There are already a large number of seniors that own their properties, and the "baby boomers" are getting closer to "seniors age qualifications". This means the $10 000 allowance will soon be nullified by the sheer numbers of seniors and the resulting increased tax rates to compensate for the allowance.
CRITICISM # 6:
Are we really going to get the $25 000 allowance for improvements to our property without an increase in assessment?
ANSWER:
The $25 000 allowance for improvements to one’s property without facing an increase in property assessment actually was already being practised within MPAC itself and is nothing new. In actual fact, an owner could conceivably spend more than the $25 000 (depending on where they make the improvements e.g. normal maintenance) and still not see an increase in assessment.
However, in order to receive part or all of the $25 000 deduction, providing the assessment has been increased due to repairs or alterations, the Homestead Act requires approval by the Clerk of the Municipality who may disallow some or all of the claim. How will municipalities cope with this new "downloaded" responsibility? Likely it will be very difficult to evaluate due to the large number of repairs/alterations made to buildings within a municipality and there could likely be a charge or fee.
CRITICISM: #7:
Will MPAC keep an up-to-date record, easily accessible, of my current assessed value?
ANSWER:
The requirement for MPAC to maintain a record and provide owners with current copy of the values is nothing new either. This statement translates into the value on the current Assessment Roll, which is available for public viewing at each municipal office. MPAC also maintains the current assessed values on their computers.
The additional requirement to supply your records "free of charge within 24 hours" is also already being done. If a property owner calls MPAC, he/she can have that information within about 30 seconds.
NOTE: The wording of this requirement has to be watched carefully. The key to this section is "current assessed value". This is what they have on file at that moment. It does not mean the "actual current value." MPAC is constantly working 18 months behind with their analysis; therefore, it is virtually impossible to have the "day to day" current value. Owners must remember when they ask for this information, that the value will always be out of date.
CRITICISM # 8:
Where might this bill lead us? Could it actually be passed into law?
ANSWER:
Consider that the current government (that has been waffling, tossing the "hot potato" back and forth) may take advantage of this opportunity to get "reverse credit", if this Bill is allowed to pass. They will be in a position to say that they have listened to Her Majesty’s Loyal Opposition by allowing the passage of the Bill. They could say, "We have listened to the taxpayers’ concerns and have acted accordingly." Having allowed passage of the Bill, they then could also say in combination with the recommendations of the Ombudsman's report, major changes have been made. This type of rhetoric is just politics and is a long way from the truth!
CRITICISM # 9:
Are there any good points to this legislation?
ANSWER:
A good point about the Homestead Act and that is the part where MPAC would allow the small percentage increase to remain in place from year to year as long as the ownership was to be transferred to a child or spouse. This is absolutely nothing new to CNTC / CAFTA as we have been proposing this as "part of the solution", providing market value assessment is allowed to continue as a basis of property taxation.
CONCLUSION:
If the passage of Bill 75 is allowed, MPAC will still be in existence; market value assessment with all its flaws will also still exist. The assessment taxation shifts will still be there; there will still be no direct accountability and the taxpayers will not have any measure of control over what is happening to them.
With the 5% cap ceasing upon sale of a property, the value is allowed to go to the figure determined by MPAC for that year. A multileveled system of assessment is then created. This makes the current bad system of valuation even worse.
When looking at the overall content of the legislation, it is CNTC’s opinion that there is very little there for the taxpayer. In effect this type of legislation lulls the person into believing something significant is being done, when in fact it turns out to be a charade that is in most part, an insult to the intelligence of the people of Ontario. Along with this, it would appear that little thought was given to the impact on local municipal staff that is generally not trained in arriving at appraised values.
One might suspect that MPAC had written the legislation in order to maintain the status quo, in an attempt to confuse and fool the people of Ontario.
If Bill 75 passes third reading, CNTC can only suspect that some kind of agreement has been made with the governing politicians in order to make it appear that changes have been made in favour of Ontario ratepayers, in turn for no future criticisms from the parties in opposition.
Finally, credit has to be given to the author of Bill 75 from the standpoint that it has heightened the taxpayers' awareness of the many problems with Market Value Assessment.
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