STATEMENT TO A NEWS CONFERENCE AT QUEEN'S PARK
April 15, 2008
The following statement was presented by Bob Topp, Chair of CAPTR, along with Cliff Hatch, Chair of Wraft and Terry Rees, Director of WRAFT.
Bob Topp:
Ladies and gentlemen, we're here today - and I'm sorry to say, "once again" - to make you and your various audiences aware of a problem that continues to adversely affect thousands upon thousands of property owners in Ontario.
Firstly, we'd like to share with you this morning the results of a survey that we have commissioned which confirms that property owners across Ontario will be in for a shock when they receive their assessment notices this year.
We then wish to relay a message and a call to action to property taxpayers throughout the province....
We have a tax system in this province that is not working fairly, despite recent efforts by the Government to fix it. Because it is not working fairly, thousands of property owners will be facing huge tax increases next year. The combination of volatile real estate markets with a crude assessment system will result once again, in 2008, in substantial shifts in assessment and hence property tax from one area to another, and one neighbourhood to another.
As you know, property taxes are determined on the basis of a property's market value assessment - or, supposedly, what the property would be worth if it was put up for sale.
But of course, most properties aren't put up for sale, so the Government of Ontario has adopted a system whereby every residential property is assessed by the Municipal Property Assessment Corporation, better known as MPAC.
The last assessment of Ontario residential properties was carried out in 2005. It had been planned from then on to assess properties annually, but in June 2006 it was announced by the Government that assessments would be frozen for two years with the next valuation to take place effective the end of 2007, shortly after the fall provincial election. And then, after that, assessments would be done every four years... so the next one is scheduled in 2011 - again, conveniently, after the scheduled election.
CAPTR has been working for over two years to convince the Government that the assessment system needs to be stabilized, so that property owners can predict their tax bills from one year to the next and so that they are not subject to the vagaries of the real estate market.
The last assessment, at the start of 2005, covered one and a half years, and produced major tax hikes for tens of thousands of Ontario property owners. It is clear that the coming assessment, covering a three year period, with notices arriving this fall, will again produce major and unexpected shifts in property tax.
In an effort to determine the impact, we commissioned a well known real estate firm, Cushman Wakefield Lepage to project the potential effects of the upcoming assessment. We've provided copies of the report to you, and we'll leave some in the Press Gallery lounge after this news conference.
Scope of report
Two areas of the province were examined, the City of Toronto and the regions of Muskoka/Haliburton.
In the case of Toronto, Cushman Wakefield examined the projected impact based on median resale prices by District in the fourth quarter of 2004 with the fourth quarter of 2007. In Muskoka/Haliburton, the third quarter of 2004 was compared with the third quarter of 2007 because fourth quarter data was not available, and broken down between waterfront and non waterfront.
The report also examined a substantial number of individual sales around the end of 2007 and compared the sales prices with the latest assessments which were last updated at the end of 2005.
Conclusions
I urge you to review the report in full detail. But I can tell you that the conclusions from the report are clear:
- for Toronto, there are on average significantly higher value increases in the inner city than in the outer city over the years 2005 to 2007. This is highlighted on page 4 where all the darkest shaded areas are south of the 401 and between Dufferin St and Victoria Park Ave.
- for Muskoka/Haliburton, there are much larger selling price increases for waterfront properties throughout the region than for those off water over the same three year period
- the comparison of individual selling prices with assessments clearly illustrates huge variances from one property to another. For Toronto, sales prices exceed assessments by percentages ranging from 102% to -5%. They also vary widely from the average increases for their respective Districts which highlights the disparity between individual price increases and District average increases.
- In Muskoka/Haliburton there is if anything an even wider disparity between individual sales prices and assessments, with excesses ranging from 154% to -1%.
So, basically, in the majority of cases studied, it's safe to say that MPAC's assessments are simply not realistic.
Implications
So what does this all mean?
Well, there are two major implications from the study.
Firstly because of these new assessments, there will again in 2009, and thereafter, be a substantial shift in Toronto tax load from the outer to the inner city, and in Muskoka/Haliburton from properties off water to those on water. It is reasonable to assume that the same trends will occur in other urban areas and in the countless waterfront regions across the province.
Secondly, the comparison of individual sales prices and assessments highlights both the inaccuracy of assessments and the disparity in valuation increases that are bound to occur.
So, with the volatility of the real estate market, particularly in the past decade, combined with the imprecision of the assessment system, Ontario property owners will be faced with dramatic and unpredictable assessment and tax shifts with the coming assessment and with each new assessment cycle. And that means, for many homeowners, unjustly higher taxes.
To put it in simple terms, the real estate market is haywire, the assessment system is screwy, and if you're one of the unlucky homeowners, you're getting wounded in the crossfire. Even if you've done nothing to improve your property, you may be paying hundreds of dollars in unfair and increased taxes.
Terry Rees:
In cottage country, as Bob mentioned, over the past three assessments, there has been an ongoing and substantial shift of tax onto waterfront properties across Ontario.
So what does all this mean, and what message do we want to convey?
Well, first of all, our two associations accept that property taxes, like everything in this world, have to increase over time. The costs of providing municipal services - like hourly wages, and infrastructures and materials - go up, and taxes have to pay for them.
We also recognize that, in almost all jurisdictions in North America, some form of market value is used to establish each property owner's share of the tax burden. At the same time, our research as well as that of the Government, has established that in close to half those jurisdictions steps have been taken to modify the system in order to dampen the impact of volatility on property owners' tax bills.
But, we still do not believe that it is fair that a property owner should be put at a significant disadvantage, or put in a position of economic hardship, if and when the value of his or her property has increased due to the capriciousness of market forces.
Some people argue that, well, if your property value goes up, you benefit by making more money on your property when you sell it... so, it's not unfair that you should pay extra taxes.
Fair enough.
But the reality is, most people are not real estate speculators... they are simply residents, many of whom have owned their properties for generations. They have no intention of selling, or of reaping the profits that market value may have accrued. They simply want to continue living where they are, and perhaps pass it on to their children - especially in the case of cottage properties.
But for thousands of families, 'living where they are' may mean having to pay huge increases in taxes, which they cannot afford. These people didn't ask, or even want, for their property values to go up. They shouldn't have to suffer because market forces over which they have no control, have touched their properties.
Bob Topp:
So we've now identified and explained the problem... which we've been pointing out for several years...
What has the Government done to deal with it... to manage the volatility that is the underlying weakness in the present assessment-based system for distributing property taxes?
As we mentioned earlier, as of last year, the Government scrapped the plan for annual assessments and introduced a four year assessment cycle. Increases in the 2007 assessment, which you'll receive this Fall, and in all future assessments, will be phased in over each subsequent four year period. In our view, phasing the increases in may help ease the pain, but it doesn't heal the wound.
The problem is that you will get hit again at the end of 2011 when the next assessment comes around, and you are stuck with the impact of that assessment on your taxes for another four years, and so on.
By moving to a four year cycle, the risk of being hit at assessment time by a hot local market or by an inaccurate valuation is much greater. The four year assessment cycle does nothing over time to deal with volatility and unpredictability, which are the fundamental flaws with an assessment-based system.
The second step the Government took was to introduce, before the election and then in the budget, a grant of up to $500 for senior low-income homeowners. We are puzzled to say the least with this commitment of taxpayer dollars as it will go to all qualifying homeowners, whether their property taxes are higher or lower. As the Finance Minister well knows, a market based system will increase some taxes and decrease others. Surely if monies are to be spent they should go to those experiencing hardship as a result of assessment-related tax hikes.
Cliff Hatch:
Ladies and gentlemen, we have spoken to the Government several times, and they believe that they have essentially solved the problem of inequitable property tax increases. They believe that undertaking assessments every four years, and spreading any increases evenly over those four years, has mitigated the impact. And we concede, it has at least put a bandaid on the wound.
But it is not a cure.
What we propose is not a cure either. But it is far more effective than a bandaid.
We propose that the Government should establish a maximum allowable annual increase in homeowners' taxes. In the past, we have proposed 5%, which we submit is reasonable and affordable and justifiable; but we would welcome an alternative number if the Government would at least accept our argument that a cap is fair, and practical.
But our purpose is not to propose a single solution. We think that's the Government's job.
What we're here to do is bring this issue to the Government's attention, and to ask for the public's support in demanding that the Government take another look at the current system, and make it more equitable for all property owners.
We are undertaking a petition, which we are urging every property owner in the province to sign. To join the petition, you only need to visit our websites and fill out your name and address in a box on the Home Page. We will deliver the petition to Queen's Park at an appropriate time, later this year. By joining the petition, participants are merely asking the Government to take another look at the system, and make it better, that's all.
It's not a good system, but it's probably the best system that could be applied. But the way it's being applied is not fair, and the Government can do something about it.
Fair and stable property tax. That's all we're asking for.
Thank you for your attention. We'd be pleased to respond to any questions you might have...