Nova Scotia enacts legislation to cap future assessment increases
September 15, 2004
In Ontario property taxes are apportioned based on assessment. With rising waterfront values, there has been a substantial shift of tax in recent years onto waterfront properties. At current levels the resultant tax burden bears no relationship to services provided or ability to pay. This tax shift onto waterfront has also occurred in Nova Scotia and that province has now moved to deal with the inequity arising from the strict application of current value as a means of allocating property taxes.
In May, 2004, following extensive consultation, the Province of Nova Scotia enacted legislation, effective in 2005, for the purpose of capping assessment increases for residential properties. The base year is 2001/02, a four-year rollback. For purposes of distributing property taxes, the assessed value is the lower of the actual assessed value and the capped value. The capped value will be escalated at a percentage per annum to be determined later this year by regulation. An example of how the system will work is as follows, assuming 5% escalation.
Actual assessment |
Capped assessment |
|
2001/02 |
100,000 | 100,000 |
2002/03 |
120,000 | 105,000 |
2003/04 |
125,000 | 110,250 |
2004/05 |
140,000 | 115,762 |
2005/06 |
140,000 | 121,550 |
In this example, the capped value is below the assessed value in each year. If the assessed value dropped below the capped value, the assessed value would be used to distribute taxes.
The 2002 base year will be used as long as the property is retained by the owner or transferred to a related person. If the property is sold on an arms-length basis, the new base value is the assessed value in the year of sale. Major improvements to a property have a new base year.
This Nova Scotia initiative, which incorporates some elements of the California system, is a Canadian precedent and as such is very relevant to tax reform efforts in Ontario. It is one of the potential changes to the present Ontario methodology which would correct a portion of the past shift and minimize future shifts of tax onto waterfront properties, while at the same time retaining the present assessment system.