Letter sent January 2, 2006 to the Ontario Ombudsman
January 2, 2006
Mr. Andre Marin
Ontario Ombudsman
125 Queens Park
Toronto, ON
M5S 2C7
Re MPAC review
Dear Mr. Marin
Press reports indicate that you will be issuing your report on MPAC and Current Value Assessment in January. While we have been able to meet twice with your staff and express our fundamental concerns about CVA and its use as a basis for distributing property taxes, we are taking this opportunity once again to stress the need for changes to the CVA system. Since our last meeting with Mr. Jones and Mr. Addo in November, we met with Wayne Arthurs, Parliamentary Assistant to the Finance Minister, who advised us that the government will proceed as planned with the 2005 assessment as a basis for allocating 2006 property taxes. This will shift an even greater share of tax onto our constituents, waterfront property owners, creating financial hardship and imposing serious inequity on large numbers of Ontario citizens. I'm sure you have heard from many of them.
The reasons why owners of waterfront property have been particularly hard hit by CVA are two-fold. Firstly, market values have risen sharply over the past decade. Secondly, values of other residential non-waterfront rural properties have increased only moderately and with each assessment, a larger share of tax is shifting onto the waterfront. Why is this inequitable? Because the gains in value have not been realized. This means that the valuation is only an estimate. We have provided your office with many examples of 40%, 50%, 60% and even 100% increases in assessment from that carried out only a year and a half ago. More importantly, because the gains have not been realized, there is no cash flow to pay the increased taxes. Also, there is no way to predict how much taxes will increase, from one year to the next. All property owners are potential victims of this system, but those on waterfront, where the average 2005 assessment increase was double that of all other residential properties, are particularly vulnerable.
Basing taxes on assessed value of a property is clearly inequitable. The assessment system itself is flawed and hugely unpopular as I'm sure you have learned. It is secretive and formula driven. More importantly, "the value of one's property is neither a measure of income, wealth, consumption or ability to pay" to quote a Canadian tax authority. The politicians respond by telling us to sell our properties. But where is the justice in forcing us to dispose of family properties many of which have been in the same family for decades simply because of an unjust taxation system forced upon us and maintained by the same politicians? But the overhaul of the assessment/property tax system is a long term project. In the short run we need to at least modify the impact of CVA to prevent massive shifts of individual tax burden from one year to the next. There are many precedents for this in North America. Our recommendation would be to stabilize the system by capping assessment increases using the 2004 assessment as a base and limiting future increases to a rate which parallels the historic long term Ontario real estate price index. When a property changes hands on an arms length basis its assessment would be based on current market value. This methodology would eliminate the volatility inherent in the present regime, make property taxes more stable and predictable but still allow values to rise over time in line with long term trends.
In our presentation to the Ontario government we have asked that the 2005 assessment be set aside until a full study of the present system is completed and alternative methodologies are closely examined. We urge you to consider this recommendation for inclusion in your report. The implementation of the 2005 assessment will have a devastating impact on many thousands of Ontario residents. There are four million residential properties in Ontario. According to a recent MPAC stakeholder presentation 8% of those properties had assessment increases in excess of 30%. A large percentage of those 300,000 properties are on waterfront and the owners will again experience massive tax increases in 2006 unless the 2005 assessment is set aside.
Yours truly,
Robert Topp
Executive Director
WRAFT