Guide to Property Assessment in Ontario

Transcription

1 Guide to Property Assessment in Ontario Understanding Your Property Assessment Assessment Update Questions & Answers MPAC's Role Resolving Assessment Concerns Forms AboutMyProperty Guidelines for the Release of Assessment Data Guide to Property Assessment in Ontario Contact Us Glossary of Terms Related Links Average Residential Changes Local Information Notice Schedule Preface Chapter 1 - Chapter 2 - Chapter 3 - Chapter 4 - Conclusion Glossary Table of Contents Overview of Ontario s property assessment system History of assessment and taxation in Ontario The Ontario model of property assessment Preparing property assessments What is assessed How current value assessments are determined Beyond assessed value Property Assessment Notices Annual Assessment Rolls Omitted or supplementary property assessments Property owners rights to assessment information Resolving assessment concerns Property taxation Municipal property taxes Education property taxes Property tax adjustments Property tax incentive programs Provincial Land Tax Preface The Guide to Property Assessment in Ontario provides general information about Ontario s property assessment and taxation system. While it does contain some information about commercial, industrial and special purpose properties, the guide focuses primarily on residential and farm properties. It will benefit anyone who wants a basic understanding of property assessment and its relationship to taxation. It is important to remember the contents of this guide are an interpretation of provincial legislation and regulations. In all cases, the legislation and regulations will prevail. The guide is not intended to provide legal advice and should not be relied upon as such. If you would like more detailed information about property assessment or wish to provide feedback about this guide, please contact the Municipal Property Assessment Corporation (MPAC) toll free at MPAC (6722) or by to enquiry@mpac.ca. (1 of 25)07/02/ :08:12 AM

2 Chapter 1 Overview of Ontario s property assessment system This chapter highlights the foundation, nature and rationale of the property assessment system in Ontario. The main topics are: History of assessment and taxation in Ontario The Ontario model of property assessment History of assessment and taxation in Ontario Various forms of property tax have been used throughout history. In Canada, the early system of taxation was a uniform tax based on the value of property owned. Property in Ontario has been assessed for municipal taxation purposes for more than 200 years. This can be roughly divided into three periods pre-1970, and post PRE-1970 Although property assessment originally came under the jurisdiction of Upper Canada, it was transferred to Ontario municipalities in Over time, each municipality developed its own assessment system and methods of valuing property. This resulted in inconsistencies in property assessment and the distribution of property taxes. Within a municipality, properties with a similar appearance and value could have very different assessments. There were also very different assessments from municipality to municipality. In 1963, the Provincial Government appointed the Ontario Committee on Taxation to study taxation and recommend changes. Its report, published in 1967, highlighted many inequities in the assessment system MARKET VALUE ASSESSMENT INTRODUCED In response to The Ontario Committee on Taxation Report, the Provincial Government assumed responsibility for property assessment in 1970 to create a uniform assessment system for all Ontario municipalities. The Government introduced market value assessment and the new system was offered to municipal governments on a voluntary basis. Since the new system was voluntary, not all municipalities implemented market value assessment. As a result, property assessments differed from municipality to municipality. This situation was addressed by the Province with the introduction of the Fair Municipal Finance Act, With this Act substantial amendments to the Assessment Act, the Municipal Act and other related legislation were implemented, setting the stage for reshaping Ontario s assessment and property tax system in POST-1997 ONTARIO FAIR ASSESSMENT SYSTEM Under the Ontario Fair Assessment System, property assessments across the province were updated to their current value, using a common valuation date. In addition, on December 31, 1998, responsibility for property assessment was transferred to a new, not-for-profit corporation called the Ontario Property Assessment (2 of 25)07/02/ :08:12 AM

3 Corporation, later renamed the Municipal Property Assessment Corporation (MPAC). Every municipality in Ontario is a member of MPAC, which is governed by a Board of Directors comprised of taxpayer, municipal and provincial representatives. The Ontario model of property assessment There are four main components in Ontario s property assessment and taxation system. Each plays an important part in supporting education and local community services. The Provincial Government passes legislation, sets assessment policies and determines education tax rates. The Municipal Property Assessment Corporation determines current value assessments and classifications for all properties in Ontario. Municipalities determine their revenue requirements, set municipal tax rates and collect property taxes. The Assessment Review Board, an independent tribunal, hears assessment complaints from property owners. PROVINCIAL GOVERNMENT The assessment and taxation system begins with the legislative framework set by the Government of Ontario. The principal ministry involved in setting assessment legislation is the Ministry of Finance, through the Assessment Act. The Province is also responsible for determining education tax rates as described in Chapter four. In addition to the Assessment Act, MPAC conducts its activities in accordance with the provisions of other acts and regulations, including: Assessment Review Board Act Municipal Freedom of Information and Protection of Privacy Act Municipal Act Education Act Municipal Elections Act Municipal Property Assessment Corporation Act Provincial Land Tax Act Local Roads Board Act Local Services Board Act Payment-in-Lieu of Taxes Act Municipal Tax Assistance Act (3 of 25)07/02/ :08:12 AM

4 MPAC MPAC s main responsibility is to classify and value all property in Ontario for taxation purposes according to the legislation and regulations set by the Provincial Government. MPAC classifies properties and updates current value assessments on an annual basis. The valuation, classification and assessment processes are explained in Chapters two and three. MPAC also provides information on all properties to Ontario s municipalities and taxing authorities on annual assessment rolls. The rolls are used to calculate the property and education taxes owed by each property owner. Property taxation and its relationship to property assessment is examined in Chapter four. In addition to administering Ontario s property assessment system, MPAC collects information for the purposes of preparing provincial jury lists, school support lists and municipal voters lists. Information about MPAC s products and services can be found on this web site or by contacting MPAC toll free at MPAC (6722). MUNICIPALITIES Property taxes are the primary source of operating revenue for municipalities and are used to finance local programs and services such as: Waste and water management Parks and leisure facilities Police and fire protection Social services Libraries Roads and sidewalks Public transit Municipalities set tax rates according to their annual revenue requirements. They are responsible for issuing tax bills, collecting property taxes to support local services and collecting education taxes on behalf of the Provincial Government. ASSESSMENT REVIEW BOARD (ARB) The ARB is an independent, adjudicative tribunal of the Ontario Ministry of the Attorney General. The ARB provides property owners with an opportunity to have an independent review of their property classification or assessment. The assessment complaint process is explained in Chapter three. (4 of 25)07/02/ :08:12 AM

5 Chapter 2 Preparing property assessments This chapter describes the main features of Ontario s property assessment system. The main topics are: What is assessed How current value assessments are determined What is assessed Ontario s Assessment Act outlines what properties are assessable for taxation. The Act defines real property as: Land Improvements (such as buildings) This does not include things like furniture, jewellery, automobiles or other personal property. In accordance with the Act, all properties are assessed, but some are exempt from taxation and many exemptions have conditions associated with them. Some examples are: Churches, cemeteries, public educational institutions and public hospitals Property owned by some non-profit organizations and charitable institutions such as the Boy Scouts, seminaries of learning and the Canadian Red Cross Conservation lands Property improvements for seniors or individuals with a disability, who would otherwise require institutional care Property owned by municipalities, provincial and federal governments (paymentin-lieu of taxes) How current value assessments are determined Ontario is one of the larger assessment jurisdictions in the world. MPAC values more than four million properties each year using the most up-to-date technology and tools available in the property assessment industry. Regardless of the tools used to calculate values, up-to-date property data is the key to determining accurate assessments. The following sections explain how MPAC collects this data, how property assessments remain current, how properties are classified and the valuation methods applied for different property types. (5 of 25)07/02/ :08:12 AM

6 DATA COLLECTION MPAC s property database, which contains over two billion pieces of data, is one of the most detailed in the world. This data is updated regularly using a variety of sources, including: Land title documents registered at Ontario Land Registry Offices Building permits issued by local municipalities Discussions and correspondence with property owners and on-site property inspections Income and expense information for commercial, industrial and rental properties (such as apartment buildings or hotels) Real Estate Boards Under the Assessment Act, an MPAC representative (identified in the Act as an assessor) is permitted to inspect a property and/or request information to assist in preparing the current value assessment. During an on-site inspection, MPAC staff will observe, record and verify relevant physical details of the property. This may include both an interior and exterior review of the property. MPAC is permitted to conduct a property inspection provided: The assessor (MPAC representative) produces proper identification. The inspection is at a reasonable time. The inspection or request for information is for current value assessment purposes. VALUATION DATE The valuation date is the fixed day as of which all properties are valued. For assessment purposes, the value of a property reflects market conditions as of that day. This value is used by municipalities when setting property taxes for the following year. In 2004, the Ontario Government changed the valuation date from June 30 to January 1. Changes made to a property between January 1 and December 31 are reflected in the current value assessment that is used in the following year. The chart below illustrates the province-wide assessment update cycle since ASSESSMENT UPDATE CYCLE Update Year Taxation Year(s) Valuation Date , 1999, 2000 June 30, , 2002 June 30, June 30, , 2005 June 30, January 1, 2005 Annual updates thereafter January 1 of the year before the taxation year (6 of 25)07/02/ :08:12 AM

7 CURRENT VALUE Ontario property values are updated annually to reflect current value. In the Assessment Act, current value is defined as in relation to land, the amount of money the fee simple, if unencumbered, would realize sold at arm s length by a willing seller to a willing buyer. This means, the price a property might reasonably be expected to sell for, in its current condition, on the open market. For assessment purposes, MPAC refers to this estimated value as current value assessment. Key characteristics of current value assessment are: It is the estimated value of a property at a specific point in time. It is expressed as a dollar value. It assumes a transaction between unrelated parties in the open market, with no advantage being taken by either party. It usually recognizes the use of the property as of the valuation date. Current value vs. sale price A sale price is only an indication of current value that represents the price a buyer and seller agree to in a particular transaction. Current value is the most probable price a property should bring in a competitive and open market under all conditions of a fair sale. It is important to note that MPAC does not create current value. People create value by their decisions in the marketplace. MPAC has the legal responsibility to study those transactions and value properties accordingly. CURRENT USE In determining the current value assessment of some properties (e.g., farms and managed forests), the current use of the land is considered, not the potential use of that land in the future. For example, a farm property next to an urban community may sell for future residential subdivision development purposes, however, as long as it is farmed, it will be assessed as a farm. PROPERTY CLASSIFICATION All property is assigned a classification according to its use. This is an important part of the assessment and taxation process. The property classification determines the tax rate that will be applied to each property by the municipality. Since some properties may have multiple uses, portions of a property may be assigned to different classifications. For example, a building with an apartment above a retail store would have the upper portion in the residential class and the lower portion in the commercial class. There are seven major property classes: Class 1 residential (7 of 25)07/02/ :08:12 AM

8 Class 2 multi-residential Class 3 commercial Class 4 industrial Class 5 pipeline Class 6 farm Class 7 managed forests In addition to these major property classes, municipalities may have one or more of the following optional classes: Class 8 new multi-residential Class 9 office building Class 10 shopping centre Class 11 parking lots and vacant land Class 12 large industrial Class 13 professional sports facilities Some of these major and optional classes are further defined by specific sub-classes. MASS VS. SINGLE PROPERTY APPRAISALS Like all assessing authorities, MPAC operates in a mass appraisal environment to produce estimates of current value for more than four million properties across the province. Mass appraisal is simply the process of valuing a group of properties as of a given date using common data, standardized methods, mathematical models and statistical testing. Both mass and single property appraisals have techniques rooted in standard approaches to value, but they differ in terms of scope and the toolsets used to arrive at value estimates. To complete its analyses, MPAC uses industry-standard computer assisted mass appraisal methodologies that allow MPAC to accurately value a large number of properties in an efficient, cost-effective manner. APPROACHES TO VALUE MPAC uses three approaches for determining current value assessments: the sales comparison approach, the cost approach and the income approach. The following chart outlines the property types commonly valued using each approach. Approach How current value assessment is determined Examples of property types Sales comparison approach Cost approach Compares sale prices of similar properties to the property being assessed Current value of land + cost of improvements depreciation = value of property Single-family residence Condominium Vacant land Manufacturing plant (8 of 25)07/02/ :08:12 AM

9 Income approach Analyzes future benefits (e.g., income-producing potential) Hotel Apartment building Office building Sales comparison approach In Ontario, over 90 per cent of properties are valued using the sales comparison approach. This approach provides a dependable indication of current value and is best suited to residential properties and other types of property that sell often on the open market. This approach to value is endorsed by the Appraisal Institute of Canada and the International Association of Assessing Officers. The sales comparison approach to value estimates the current value of a subject property by adjusting the sale prices of comparable properties for differences between the comparable properties and the subject property. Recently sold comparable properties are selected based on their similarity to the subject property with respect to: Date of sale Physical attributes Economic conditions Competitiveness in the same market Of these four items, competitiveness in the same market is the most important component to similarity. If the comparable property and the subject do not compete in the same market, then the supply and demand factors that each property faces are different. Sale prices of comparable properties are adjusted for the differences from the subject property. An estimate of current value for the subject property is established based on the adjusted sale prices of the comparable properties. Typical adjustments include the following: Physical characteristics (living area, age, lot size, etc.) Time Location Financing Separate analyses are conducted for each market area across the province. Market areas are geographic areas subject to the same economic influences. Properties in a market area tend to move up or down together in value and are in competition with one another in the marketplace. They are usually, but need not be, geographically contiguous and typically have at least several thousand residential properties with several hundred sales to analyze as a minimum. Market areas may be further subdivided into neighbourhoods and sub-neighbourhoods to adjust values for location within each market area. Their distinguishing characteristic is similar locational desirability. While the general value influences are consistent across each market type and area, (9 of 25)07/02/ :08:12 AM

10 their relative importance will vary between markets. For example, recreational waterfront markets tend to place more importance on frontage and location than nonwaterfront market areas simply because of the supply and demand factors associated with a scarce commodity. Cost approach The cost approach is based on the theory that an informed purchaser would not pay more for a property than it would cost to produce a substitute of equal utility, assuming no costly delay in construction. It is often referred to as the bricks and mortar approach and includes several steps. First, a current value for unimproved land is determined using the sales comparison approach. Then, the replacement cost of fully functional modern improvements comparable to existing buildings is calculated. MPAC uses its up-to-date construction cost database together with the physical property information, such as building size or other improvements, to determine a replacement cost. Next, all accrued depreciation to the existing property is determined from physical, functional and economic conditions, both within and external to the property. Finally, the land value is added to the building cost and depreciation is deducted, resulting in a current value assessment for the property. As a final check, the calculations are compared to actual sales to ensure the accuracy and quality of the overall product. The cost approach is a long established technique, which can be applied to properties that are structurally diverse (e.g., industrial buildings), where rental data is typically not available, or as a supplement to other approaches to value. Income approach The income approach presumes the value of certain properties can be determined by estimating the present value of all future benefits. Future benefits typically include net income generated by the property and the proceeds from the sale at the end of the investment. Income valuation techniques vary by property type but, in simplest terms, they generally include the same fundamental steps. First, market rents are determined to establish the potential revenue generation of the property. Then, vacancy and legitimate expenses incurred to maintain the property are deducted from the rent to calculate net operating income. Finally, the net operating income is converted into an estimate of value using a market capitalization rate. The capitalization rate is determined from an analysis of market transactions and a variety of other market and financial information. The income approach is ideally suited for larger investment types of properties such as (10 of 25)07/02/ :08:12 AM

11 office buildings, hotels and apartment buildings. MPAC determines current value assessments for these properties using the same techniques practiced by vendors, purchasers and their financial advisors. Regulated rates Some types of properties are difficult to assess using the three approaches to value because: They seldom trade in the marketplace. When they do trade, the sale price usually includes non-assessable items that are difficult to separate from the sale price. They cross municipal boundaries. They are of a unique nature. To arrive at assessed values for these types of properties, regulated rates are assigned by the Province of Ontario. Types of regulated properties include power generating stations and linear properties. Generally, linear properties include distribution lines or other facilities that travel across municipal boundaries. Some examples include: railway rights-of-way, gas pipelines and electricity transmission or distribution rights-of-way. Farm valuation Properties that are used for the sole purpose of farming by the owner and/or tenant are valued using bona fide farmer-to-farmer sales. The primary factors used in determining a farm s current value assessment are: Farm land Residence Residence site Farm outbuildings Other buildings Farm land is assessed according to its productivity value, that is, the ability of the land to produce crops and/or maintain livestock. Productivity rates are established using a process that determines rates for the best soils and reduced rates for less-than-optimum soil conditions. The residence is assessed in a similar manner to that of all other residential structures. If a farm residence is occupied by the person(s) farming the property, a one-acre parcel of land is valued at the farm land rate. If the residence is occupied by someone other than the person(s) farming the property, it is considered a non-farm residence. In this case, one acre of land is valued at the rural residential rate. A farm outbuilding is any improvement, other than a residence, that is used for farming operations. Outbuildings are assessed based on their design and classified by their use (e.g., barn, silo, grain bin). All other buildings not used in the farm operation are assessed based on their design and classified by their use (e.g., garage). (11 of 25)07/02/ :08:12 AM

12 Although MPAC may assess a property as a farm, it is taxed at the residential rate unless placed in the Farm Property Tax Class. The Ontario Ministry of Agriculture and Food sets the criteria for farm tax eligibility. Eligible farm properties are placed in the Farm Property Tax Class and taxed at a reduced rate. Additional information about the Farm Property Tax Class is available on the Internet at or by contacting the Ontario Ministry of Agriculture and Food at Chapter 3 Beyond assessed value This chapter describes the assessment process after current value assessments are determined. The main topics are: Property Assessment Notices Annual Assessment Rolls Omitted or supplementary property assessments Property owners rights to assessment information Resolving assessment concerns Once the property classifications have been assigned and current value assessments determined, MPAC issues Property Assessment Notices. The information contained on each Notice is also provided to municipalities on annual assessment rolls. (12 of 25)07/02/ :08:12 AM

13 Property Assessment Notices In November, Property Assessment Notices are mailed to all property owners. Each notice is accompanied by an explanatory insert and contains the following information: Name of owner(s) liable for assessment Property location and/or legal description Number of acres or site measurements Property classification for taxation purposes Current value assessment of the property School support designation Valuation date Deadline for submitting a Request for Reconsideration with MPAC Deadline for filing an assessment complaint with the Assessment Review Board Annual Assessment Rolls The information contained on each Property Assessment Notice is provided to municipalities in late December on assessment rolls. The current value assessments included on the rolls are used by municipalities to calculate the following year s property taxes. Some examples of the information found on the assessment rolls are: Description of the property Property owner s name(s) and mailing address Current value assessment Property classification Name of every residential tenant who is a supporter of a school board French language rights holder School support declaration Omitted or supplementary property assessments Between annual assessment rolls, changes to properties continue taking place; new homes are constructed, owners renovate, additions are built, etc. Provincial legislation allows municipalities to collect property taxes on these improvements through the omitted or supplementary assessment process. MPAC assists with this process by visiting properties with changes to determine the current value assessment of the improvements. Once the current value assessments of the improvements have been determined, MPAC notifies municipalities throughout the year by issuing omitted/supplementary assessment listings. Municipalities use these listings to update the taxes owing on the improvements and/or changes. MPAC also advises property owners of the change in their current value assessment by mailing Omitted or Supplementary Property Assessment Notices. Omitted Property Assessment Notices are issued when the current value assessment for an improvement (e.g., a new home or addition) was not (13 of 25)07/02/ :08:12 AM

14 previously recorded on the annual assessment roll. When an omitted assessment is added to the roll, the municipality can collect property taxes for the current year and, if applicable, for any part or all of the previous two years. Supplementary Property Assessment Notices are issued when there has been a change to a property during the current taxation year due to a change in property classification, an addition, renovation or new construction. When a supplementary assessment is added to the roll, the municipality can collect additional property taxes from the date use commences to the end of the current taxation year. Property owners rights to assessment information Property owners have the right to know the information MPAC maintains about their property. They are also entitled to receive information and assistance to help them understand their assessment. A property owner is entitled, free of charge, to: View the assessment roll available at municipal offices. View details for their own property and basic assessment roll information for up to twelve properties using MPAC s secure, Internet-based AboutMyProperty service. A Property Profile Report from MPAC that shows the assessment details for their property. A comparable Property Report from MPAC, listing up to six comparable properties selected by the owner and six comparables selected by MPAC. To find out more about these reports or AboutMyProperty, contact MPAC at MPAC (6722) or visit this section on our web site. Resolving assessment concerns Property owners have several options for resolving assessment concerns. The following chart outlines the options available. (14 of 25)07/02/ :08:12 AM

15 It is important that property owners pay the amount shown on their property tax bill while their assessment concerns are being addressed. CONTACT MPAC As a first step to resolving assessment concerns, property owners are encouraged to contact MPAC to verify details about their property, ask questions about their current value assessment or request information about other similar properties. If they believe that important information may not have been considered when the current value assessment for the property was determined, they may wish to have MPAC review it through the Request for Reconsideration process. REQUEST FOR RECONSIDERATION (RfR) PROCESS There is no charge for requesting a reconsideration. RfRs can be filed up to December 31 of the taxation year for which the assessment applies. An RfR must be submitted in writing. It is important to include the basis for the review and all relevant facts, such as property comparisons, sales information, rental data, farm leases, etc. Some reasons for filing an RfR are: The assessed value of the property appears to be considerably different than similar properties in the area. The property has been incorrectly classified. A person is wrongly placed on or left off the assessment roll. MPAC s records are incorrect (e.g., wrong lot size, building area). The property was purchased close to the valuation date for a significantly different amount than the assessed value. The value, classification or effective date on the Omitted or Supplementary Property Assessment Notice is incorrect. There are factors that negatively impact the property s current value, which may not be reflected in the current value assessment. Upon receipt of the RfR, MPAC staff will: Review the concerns and may contact the owner for more information. Review the assessed values and sales information for other comparable properties in the area. Verify the property details including: property size and location; structural details such as building area, condition, finished basement, number of bedrooms, bathrooms, etc.; and other factors which may impact the current value of the property such as proximity to a landfill site, major commercial or industrial property, etc. Review the property for changes since MPAC s last visit. Any changes are taken into consideration and quite often a follow-up inspection is arranged with the property owner. (15 of 25)07/02/ :08:12 AM

16 Once these steps have been completed, MPAC confirms the outcome of the review by providing the property owner with a written response. It is important for the property owner to remember that an RfR can be requested anytime throughout the year, however, a complaint to the Assessment Review Board must be made by March 31. To obtain an RfR form, contact MPAC at MPAC (6722) or visit the Forms section of our web site. ASSESSMENT REVIEW BOARD COMPLAINT Another option for resolving assessment concerns is to file a formal complaint with the Assessment Review Board (ARB). The ARB is an independent, adjudicative tribunal of the Province of Ontario reporting through the Ministry of the Attorney General whose main function is to hear complaints from people who believe that properties are incorrectly assessed or classified. A complaint can be filed by anyone an owner, tenant, corporation, partnership, municipality, school board or person acting as a representative on a property owner s or tenant s behalf. A complaint can also be filed by a third party on any property. Complaint process There are specific application forms and associated fees for filing a complaint with the ARB. Provincial legislation specifies that complaints can be filed up to and including March 31 of the taxation year for which the assessment applies, unless otherwise indicated on the Omitted or Supplementary Property Assessment Notice. An ARB complaint may be launched before, during or after an RfR has been submitted to MPAC, subject to the March 31 deadline. However, if the RfR is not completed before March 31, the individual may wish to file an appeal with the ARB. If the individual s concerns are resolved through the RfR process, the ARB complaint must be withdrawn prior to the appeal hearing date. Similarly, the RfR will not be processed if an appeal has been heard by the ARB for that taxation year. ARB complaints can be filed over the Internet, by fax or by mail. E-File: Fax: or Mail: Assessment Review Board 250 Yonge Street, 30th Floor Toronto ON M5B 2L7 The ARB will acknowledge receipt of each assessment complaint in writing. Approximately four weeks before the assessment hearing is scheduled, a Notice of Hearing is mailed to the complainant, MPAC and the municipality indicating the date, time and location of the hearing. Assessment hearings are normally held at a location in or as close as possible to the municipality in which the property is located. (16 of 25)07/02/ :08:12 AM

17 Hearing process At the hearing, the presiding ARB Member hears the complaint and evaluates the evidence presented. Most property owners represent themselves at the hearing, but in some cases they may appoint someone to represent them, with appropriate authorization. During the hearing, both the complainant and MPAC have an opportunity to present their evidence. The municipality or another interested party may also participate in the hearing and present their concerns. After all parties have had an opportunity to present their information and summarize their arguments, the presiding Member will render a decision based on the evidence. This decision is confirmed through a Notice of Decision, which is mailed to the complainant, MPAC and the municipality. Upon receipt of the Notice of Decision, MPAC will update its records. If the Notice indicates a change to the classification or current value assessment of the property, the municipality will adjust the property taxes accordingly. Review of ARB decision Decisions of the ARB are final and binding on all parties for the entire taxation year to which the assessment applies. However, it is possible to request the Board to review its decision. The ARB s Rules of Procedure outline the criteria and steps for requesting a Review of Decision. Leave to appeal A decision of the ARB may be appealed to the Divisional Court, a branch of the Superior Court of Justice, only on questions of law (e.g., interpreting the meaning of a specific section(s) of the Assessment Act). To initiate this process, the complainant must apply to the Court and seek leave to appeal. Parties should consult legal counsel to explore this option. Refunding ARB filing fee In cases where a property owner has filed both an RfR and a complaint with the ARB, the Board will refund the assessment complaint fee only when the following criteria are met: an RfR is filed with MPAC before the assessment complaint is filed with the ARB, and the issue is settled through the RfR process after the ARB complaint is filed, and the ARB complaint is withdrawn before the start of the assessment appeal hearing. For more information about the ARB, filing complaints and the hearing process, contact the ARB at (17 of 25)07/02/ :08:12 AM

18 or or visit their web site at When to contact the municipality It is important to remember that MPAC is responsible for determining current value assessments. Municipalities are responsible for property taxation. Questions or concerns about municipal services, property taxes and tax bills should be directed to the municipality where the property is located as they cannot be resolved through the RfR or ARB appeal processes. Chapter 4 Property taxation Property assessments are used to determine how much property tax an owner will pay to the municipality each year. This chapter examines taxation and its relationship to property assessment. The main topics are: Municipal property taxes Education property taxes Property tax adjustments Property tax incentive programs Provincial Land Tax Municipal property taxes While MPAC is responsible for determining the property classifications and current value assessments for all properties in Ontario, municipalities are responsible for setting the tax rates, calculating the taxes payable and collecting the taxes. Each year, local governments (e.g., municipalities, counties, regions) determine the amount of money they need to provide services, such as public transit, police services, parks and libraries. The financing for these services comes primarily from property taxes paid by residents and businesses in the local area. Additional funding may come from user fees or nontax revenue such as parking fines and from any funding provided by the Provincial Government. Property taxes are not a fee for service, but a way of distributing the cost for local services and programs throughout the municipality. To calculate the amount of property tax each property owner is required to pay, municipalities use the current value assessments determined by MPAC. In the fall, MPAC advises each property owner of their current value assessment via a Property Assessment Notice. This same information is provided to local municipalities on annual assessment rolls. (18 of 25)07/02/ :08:12 AM

19 Using the assessment roll, municipal staff determine the total assessment base for each property class (e.g., residential, multi-residential, commercial, industrial). Once the total assessment is determined, a tax rate is set for each class. There may be three tax rates indicated on a property tax bill: The municipal tax rate set by the local municipality. The county or regional tax rate set by the county or regional government. The education tax rate set by the Provincial Government (education property taxes are discussed later in this chapter). CALCULATING INDIVIDUAL PROPERTY TAXES For most properties (e.g., residential, farms), the property taxes can be calculated by multiplying the assessed value indicated on the Property Assessment Notice by the tax rate. For example: municipal tax rate x current value assessment = municipal portion of tax county/regional tax rate x current value assessment = county/regional portion of tax education tax rate x current value assessment = education portion of tax total property tax In some cases (e.g., commercial, industrial, multi-residential properties), the Province or municipality may implement measures that affect the actual taxes paid on a property. For more information, please refer to your property tax bill or contact your local municipality. Education property taxes In Ontario, public education is funded through both property taxes and government grants. School board funding allocations are determined by the Ministry of Education using a student-focused funding formula. The Ministry of Finance determines the education tax rates based on the funding allocations. Municipalities apply the education tax rate to the current value assessment of each property to determine the amount of education taxes payable. This means individuals who own more than one property (e.g., a primary residence and a cottage property) are required to pay education tax on each property. Education tax dollars are collected as part of the property taxes. These tax dollars are combined with provincial funding and distributed to each school board up to the level set by the funding formula. Depending on where the property is located, one or all of the following school boards may have jurisdiction: (19 of 25)07/02/ :08:12 AM

20 English-language Public District Board English-language Separate District Board French-language Public District Board French-language Separate District Board Protestant Separate School Board (Penetanguishene only) MPAC collects school support data from property owners and tenants to help school boards determine the number of trustee positions. Designating school support enables qualifying property owners to vote for school trustees. To request a change in school support, property owners and tenants must complete a school support application. Application forms are available from local school boards. Applications may be filed at any time during the year and the change will become effective the following taxation year. Property tax adjustments Municipalities may adjust property taxes under certain circumstances or where there may be changes on properties during the tax year. For instance, if a building is destroyed by fire or demolished, the property owner may apply for a tax adjustment based on the value of the building and the number of months left in the tax year. For more information about property tax adjustments, please contact the tax department at your local municipal office. Property tax incentive programs The Ontario Government has implemented a number of initiatives that offer property tax relief to qualifying individuals, including the Farm Property Class Tax Rate Program, Managed Forest Tax Incentive Program, Seniors and Disabled Exemption Program, Vacancy Rebate Program and others. Many of these programs are administered by the municipalities, while others are administered by the Province. For more information about property tax incentives, please contact the tax department at your local municipal office. Provincial Land Tax Provincial Land Tax is a tax administered by the Ontario Ministry of Finance. The taxes collected through this program fund services for Northern Ontario properties that fall outside of current municipal boundaries. Properties in this category may be subject to any or all of the following taxes: Education tax Provincial Land Tax Local Roads Board tax Local Services Board tax Statute Labour Board rates MPAC maintains a Provincial Land Tax roll with up-to-date records of land ownership, land use, property classification and assessments for those properties outside (20 of 25)07/02/ :08:12 AM

21 municipal boundaries. The Provincial Land Tax roll is used by the appropriate taxing bodies, such as the Provincial Government or local roads board, to collect the taxes owing. MPAC values these properties using the same principles that are applied to all other properties in Ontario with the exception of the valuation year. Assessments on Provincial Land Tax properties are adjusted to reflect a 1940 valuation date as stipulated in the Provincial Land Tax Act. Property Assessment Notices are mailed by MPAC on February 15 each year and taxes are due to the appropriate taxing authorities by March 15 of the same year. The statutory tax rate for Provincial Land Tax properties is 1.5 per cent of the assessed value. Conclusion We hope this guide provided you with a general understanding of the property assessment process in Ontario. For more information, please contact us toll free at MPAC (6722) or by to enquiry@mpac.ca. MPAC gratefully acknowledges the following for their assistance in producing this guide: Alberta Municipal Affairs Assessment Review Board Association of Municipal Clerks and Treasurers of Ontario Ontario Ministry of Finance Municipalities of Ontario MPAC staff Glossary Assessment Act The Act governing the way property is assessed in Ontario. Assessment Update The yearly cycle of assessment-related activity, which leads to the delivery of assessment rolls to municipalities in late December. Assessment Base The total current value assessments of all property within a municipality. Assessment Review An independent, adjudicative tribunal of the Ontario Ministry of Board (ARB) the Attorney General. The ARB hears complaints from individuals who believe a property has been incorrectly assessed or classified. Assessment Roll An annual list of the current value assessments for all properties in a municipality, which includes the names of the property owners and tenants and their addresses. Cost Approach One of the approaches used to value property. The cost approach is based on the theory that a person would not pay any more to purchase a property than it would cost to buy the land and replace the existing buildings or improvements. (21 of 25)07/02/ :08:12 AM

22 County Current Use Current Value Assessment Depreciation Education Tax Exempt Property Improvements Income Approach Land An upper-tier municipality, which is a federation of towns, villages and townships within its boundaries, each of which has representatives on a county council. The actual current use of the property, excluding any consideration of a potential or future use. The price a property might reasonably be expected to sell for if sold by a willing seller to a willing buyer after appropriate time and exposure on an open market. A decrease in the value of a property for any reason (e.g., age or condition of a building). A tax collected as part of the property tax, which contributes towards the provision of education services. Property which is assessed but not taxed. Buildings or other structures and attachments to land that are intended to remain attached to the land (e.g., house, garage, shed). One of the approaches used to value property. The income approach is based on the theory that income-producing properties are bought and sold based on their income-earning potential. As defined in the Assessment Act, land, real property and real estate include, land covered with water, all trees and underwood growing upon land, all mines, minerals, gas, oil, salt quarries and fossils in and under land, all buildings or any part of a building, all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land, all structures and fixtures erected or placed upon, in, over, under or affixed to a highway, lane or other public communication or water, but not the rolling stock of a transportation system. Linear Property Local Roads Board Local Services Board Mass Appraisal Municipal Act Property that generally extends in lines and has distribution networks or other facilities that extend across municipal boundaries (e.g., railway rights-of-way and power utility corridors). A board which is responsible for maintaining roads in unorganized territories. A board which is responsible for providing certain services in unorganized territories. The services may include street lighting, water, sewage, garbage collection, recreation and fire protection. The process of valuing a group of properties as of a given date, using common data, mathematical models and statistical tests. The use of mass appraisal allows MPAC to value a large number of properties in a short period of time. The Act governing how municipalities administer municipal services and collect taxes (e.g., property taxes are calculated and collected by the municipality using the assessments determined by MPAC). (22 of 25)07/02/ :08:12 AM

23 Municipality Municipalities are created by the Province of Ontario. They are geographical areas such as a city, town, village or township. The following definitions are provided: Municipal Enumeration Upper-Tier Municipality A county, regional municipality or district such as the County of Haliburton, the Region of Durham or the District Municipality of Muskoka. Lower-Tier Municipality A local municipality such as a town, township, city or village. Regional Municipality A federation of municipalities. Each regional municipality has a regional council, the members of which are either from municipal councils or are directly elected. Single-Tier Municipality A municipality that is not part of a county but which is located within a county s boundaries (e.g., the Town of Smiths Falls, which is in the County of Lanark; the City of Windsor, which is in the County of Essex). The process of collecting information in a municipality for the purpose of preparing preliminary voters lists for municipal and school board elections, lists of potential jurors and the Ontario Population Report. MPAC carries out enumerations every three years in the same year as municipal elections. Municipal Revenue The income of a municipality. It includes property taxes, provincial grants, payments-in-lieu of property taxes, fees-forservice and other forms of income. Omitted Assessment An assessment which has not been recorded on the assessment roll. When an omitted assessment is added to the assessment roll, property taxes can be collected for the current year and, if applicable, for any part or all of the previous two years. Ontario Fair The assessment system created under Bill 106, the Fair Assessment Municipal Finance Act, 1997, to make property assessment and System (OFAS) the calculation of property taxes fair, consistent and understandable. Under OFAS, property assessment values across the province were updated to their current value, using the same valuation date; standard property classes were created; the business occupancy tax was eliminated; local governments were given the authority to establish different tax rates for different classes of property; and the appeal process was simplified. Ontario Population Report Payment-in Lieu Personal Property A report containing information about a municipality s population. MPAC provides this report to municipalities in a municipal election year. Payments made to municipalities by the provincial or federal government where properties are exempt from property taxation. All moveable items of property not permanently attached to, or part of, the real estate. Examples include automobiles, furniture, jewellery and works of art. (23 of 25)07/02/ :08:12 AM