|
Sections: Index | 1 | 2 | 3 | 4 | 5 | App
Section 4 - Property Tax Policy Options/Tools
As the province implemented reform of the property taxation system, it established legislation to provide municipalities with more autonomy to make tax policy decisions and more flexibility to respond to local priorities. Municipalities were given a number of optional as well as mandatory “tools” in order to manage the transition from the old system to the new. These “tools” are described briefly below. A summary of the tax policy tools currently in use across the GTA is provided inAppendix 3 (PDF 56KB, 1 page).
4.1 Upper-tier Delegation of Tax Ratio Setting
The Municipal Act allows upper-tier municipalities to delegate the responsibility of setting tax ratios to its lower-tier municipalities, rather than setting region-wide tax rates for the upper-tier's share of the property tax burden. Upper-tier municipalities that choose to delegate this authority must develop an apportionment methodology to determine the amount of the upper-tier levy that each of the lower-tier municipalities would be required to raise. Delegation requires unanimous lower-tier agreement as well as approval from the Minister of Finance (see Appendix 2 (PDF 9KB, 1 page) for requirements and deadlines).
The Region of Peel apportions its general and special upper-tier tax levy requirements (except for waste management and Police services) among its lower-tier municipalities based on their relative shares of Current Value Assessment (CVA) weighted by the transition ratios for each class of property. The waste management levy requirements are apportioned among lower-tier municipalities on the basis of the relative share of household counts according to the assessment roll data provided by MPAC. Peel Regional Police levy requirements are apportioned between Mississauga and Brampton according to each municipality's share of the sum of their combined CVA. The Ontario Provincial Police (OPP) levy is apportioned in its entirety to Caledon since it is served only by the OPP.
The Region of Peel has delegated its authority to set tax ratios to its lower-tier municipalities during the 1998-2011 time period. It is currently the only upper-tier municipality in Ontario delegating its authority to its lower-tier municipalities as the lower-tier municipalities have unanimously agreed that they favour delegation.
4.2 Changing Tax Ratios
Tax ratios reflect how a property class' tax rate compares to the residential rate. Changes in tax ratios affect the relative tax burden between classes of properties. Tax ratios can be used to prevent large shifts of the tax burden caused by relative changes in assessment among property classes as well as to lower the tax rates on a particular class or classes. Other than for the 2004 and 2006 taxation years, municipalities have only been permitted to adjust tax ratios for the multi-residential, commercial, industrial and pipeline property classes closer to the provincially prescribed ranges of fairness.
4.3 Optional Property Classes
Upper-tier municipalities have the option of establishing any of the optional property classes allowed in the legislation. Use of optional classes provides additional flexibility to adopt different tax ratios for different types of property within the broader commercial, industrial and multi-residential property classes. The deadline to establish optional property classes is October 31st of the preceding year in order to allow for the appropriate coding of properties on the assessment roll. The optional classes of property defined in provincial legislation are as follows:
- New Multi-residential
- Shopping Centres
- Office Buildings
- Parking Lots
- Large Industrial
The Region of Peel in consultation with its lower-tier municipalities has not implemented optional property classes during the 1998-2011 time period.
4.4 Graduated Tax Bands
Upper-tier municipalities have the option of establishing up to three graduated tax bands within the commercial and industrial classes. This tool provides the ability to protect lower valued properties by allowing municipalities to apply different tax rates for each band of current value assessment. However, this program is self-funded within the class, and as such, by providing a lower tax rate below a threshold, increases the tax rate(s) above the threshold(s).
The Region of Peel in consultation with its lower-tier municipalities has not adopted graduated tax bands during the 1998-2011 time period.
4.5 Phase-in Program
Upper-tier municipalities have the option of establishing a program to phase-in all property tax changes that occur in the year of a reassessment, including municipal budgetary increases. Phase-in programs can apply to any or all of the property classes and may be spread over a period of up to eight years. For the purposes of a phase-in program, the residential, farm and managed forests classes are deemed to be one class.
A phase-in program is self-financing. Properties entitled to decreases will be required to forego a portion or all of their decrease in order to fund the phase-in of tax increases. Should a program shortfall occur, the upper-tier municipality and its lower-tier municipalities must share any shortfall occurring as a result of a phase-in program. This includes the education portion of the shortfall, as the province does not share in a phase-in program.
A phase-in program can use thresholds based on percentages or dollar amounts. The program may phase-in equal amounts each year, provided that the amount phased in each year is no more than the amount phased-in for the previous year.
The Region of Peel in consultation with its lower-tier municipalities has not adopted a phase-in program during the 1998-2011 time period.
4.6 Municipal Tax Reductions
Upper-tier municipalities have the option of providing tax reductions for properties in the commercial, industrial and multi-residential classes. The tax reductions would be processed as a reduction on the tax bill rather than through an after-the-fact rebate. The cost of this program is funded by upper-tier and lower-tier municipalities and would not be shared by the province with respect to the education share of property taxes.
The Region of Peel in consultation with its lower-tier municipalities did not adopt a municipal tax reduction program in 2011.
4.7 Capping of Property Tax Increases
Provincial legislation mandates a limit to annual tax increases resulting from reassessment for the commercial, industrial and multi-residential classes. The purpose of this limit is to ensure that the impact of CVA reform is manageable for taxpayers in these three property classes. The limit is calculated based on the previous year’s annual taxes but does not apply to municipal levy increases. Upper-tier municipalities may adopt the use of the optional property tax mitigation tools available in conjunction with a capping program.
The legislation permits municipalities to recover all or part of the cost of the “cap” by limiting the property tax decreases within the subject property class. Municipalities are given the flexibility to fund the “cap” with non-tax revenues and general tax rate increases across all property classes.
The Region of Peel was required to institute capping during the 1998-2011 time period. Under the “10-5-5 Capping” legislation, property tax reform related increases from 1997 to the commercial, industrial and multi-residential classes were limited to a maximum of 10% in 1998, 15% in 1999 and 20% in 2000. The Region chose to fund the “10-5-5 Cap” by limiting the available tax decreases through a “clawback” within each class (known as “Division B” method). This policy was continued for 2001, 2002, 2003 and 2004 at the 5% level of capping.
In the 2004 Budget (Bill 83) the provincial government introduced changes to the capping rules allowing municipalities some flexibility in their application starting in 2005. Municipalities are able to implement one or more of the following options for the capped property classes:
- Increase the amount of the annual cap from 5% to up to 10% of the previous year's taxes
- Implement a minimum annual increase of up to 5% of CVA-level taxes (based on previous year's annualized CVA taxes)
- Move capped or clawed-back properties directly to their CVA taxes if they are within $250 of their CVA taxes (or within such lesser amount as may be specified by the municipality)
In 2009, the Provincial Government amended O. Reg. 73/03 to allow for adoption of additional options for the capped property classes. Municipalities are able to implement the following supplementary options:
- Remove any properties that in the prior taxation year reached CVA-level taxes from the capping program
- Remove any properties that cross over from being capped properties in the prior year to clawback properties in the current year or from being clawback properties in the prior year to capped properties in the current year from the capping program
Regional Council chose to implement all of the proposed optional tools for the capped property classes in the 2005-2011 taxation years.
The Region is responsible for calculating the “clawback percentages” and performing a “banker” role with respect to the transfer of funds among the lower-tier municipalities. The Region’s clawback rates resulting from the application of capping over the last fourteen years are shown below:
| Clawback Rates (Tax Decrease Reductions) |
| |
Commercial |
Industrial |
Multi-residential |
| 1998 1 |
93.75% |
93.75% |
6.56% |
| 1999 1 |
68.70% |
68.70% |
3.74% |
| 2000 1 |
54.00% |
28.93% |
2.00% |
| 2001 2 |
61.53% |
52.67% |
100.00% 7 |
| 2002 2 |
73.31% |
80.08% |
100.00% 8 |
| 2003 3 |
94.11% |
93.41% |
96.01% |
| 2004 4 |
78.88% |
67.42% |
97.29% |
| 2005 4 |
55.72% |
55.44% |
23.51% |
| 2006 5 |
58.77% |
49.97% |
8.58% |
| 2007 5 |
59.52% |
77.99% |
34.46% |
| 2008 5 |
73.56% |
60.25% |
53.37% |
| 2009 6 |
47.42% |
38.22% |
8.56% |
| 2010 6 |
49.52% |
61.63% |
6.78% |
| 2011 6 |
45.70% |
56.05% |
7.54% |
1 used June 30, 1996 CVA
2 used June 30, 1999 CVA
3 used June 30, 2001 CVA
4 used June 30, 2003 CVA
5 used January 1, 2005 CVA
6 used January 1, 2008 CVA
7 capping shortfall of $4.5 million as decreases were insufficient to fund the 5% cap
8 capping shortfall of $2.7 million as decreases were insufficient to fund the 5% cap
4.8 Tax Relief for Low Income Senior and Disabled Taxpayers
Upper-tier municipalities are mandated to implement a program that provides tax relief from all property tax increases to low income senior and disabled taxpayers. The program must outline the definition of low-income senior and low-income disabled persons. The tax relief may be in the form of a cancellation of the tax increase, rebate or deferral program.
The Region of Peel, in participation with its lower-tier municipalities, is providing to eligible low-income seniors and low-income disabled persons an annual property tax rebate of $400. More information.
4.9 Tax Relief for Registered Charities and Similar Organizations
Upper-tier municipalities are mandated to implement a program that provides property tax rebates to registered charities that occupy commercial and industrial property. The rebate amount must be at least 40% of the taxes or amounts paid on account of taxes paid, but may be as much as 100% of the taxes paid. The cost of the program is shared among the Region of Peel, the lower-tier municipalities and the province, which funds the education portion of the rebate. Municipalities have the option of extending the program to organizations that are similar to eligible charities and to charities or similar organizations that occupy property in classes other than commercial or industrial.
The Region of Peel has passed a by-law which established a program that provides a 40% rebate to registered charities that occupy commercial and industrial property. More information.
4.10 Tax Relief for People in Hardship
Lower-tier municipalities have the option of establishing a program to provide tax reductions or refunds to property owners in the residential and farm classes whose property taxes are deemed to be “unduly burdensome”. The province will automatically share in the cost of the program with respect to the education portion of the tax bill. Upper-tier municipalities have the option of sharing in the cost of the program with respect to the upper-tier portion of the tax bill.
Lower-tier municipalities in the Region of Peel have not established a program under this provision.
4.11 Tax Rebate Program for Vacant Properties
Effective with the 2001 taxation year vacant properties in the commercial and industrial classes are shown on the Returned Assessment Roll as fully occupied. These properties will now be taxed at 100% of the appropriate tax rate. Lower-tier municipalities are mandated to have a program to provide tax rebates to owners of commercial or industrial property that have vacant portions. Property owners may apply to the lower-tier municipality for a tax rebate for periods of vacancy. The program may include evidentiary requirements that must be satisfied for the owner to be entitled to the rebate.
The legislation allows a rebate for commercial properties of 30% and for industrial properties of 35% of the taxes paid. Upper-tier municipalities are allowed to establish a single percentage for both classes of properties. The Region of Peel has passed a by-law establishing a single percentage rebate of 30% of taxes paid.
4.12 Tax Discount for Farmland Awaiting Development
The Minister of Finance prescribed two sub-classes for Farmland Awaiting Development for the purposes of providing tax reductions. Farmland Awaiting Development Phase I applies to properties once a plan of subdivision has been registered. Phase I subclass tax rates are to be set between 25% to 75% of the residential and farm property class tax rate even though the properties may be in the multi-residential, commercial or industrial property classes. Farmland Awaiting Development Phase II applies to properties once a building permit has been issued with respect to the property. Phase II subclass tax rates are to be set between 25% to 100% of the class rate of the property.
The Region of Peel has passed a by-law that provides Farmland Awaiting Development Phase I properties with a 70% reduction (taxed at 30% of the residential and farm property class rate). The by-law does not provide a reduction to Farmland Awaiting Development Phase II properties (taxed at 100% of the class rate).
4.13 New Construction Properties
Commercial, industrial and multi-residential properties that are newly constructed, undergo substantial physical changes or that change classification from an unprotected property class to a protected property class are taxed at a level of assessment that is no higher than that of six comparable properties in the same vicinity. Properties that qualify as new construction are not included in the capping calculation. As required by the legislation, the Municipal Property Assessment Corporation (MPAC) must provide lower-tier municipalities with a list of up to six comparable properties for each eligible new construction property. The lower-tier municipality must give notice of the comparable properties and the total assessment determined to the property owner within 60 days after receiving the comparable information from MPAC. The property owner has 90 days from the mailing of the information by the lower-tier municipality to appeal in writing to the Assessment Review Board (ARB) to request that up to six alternative properties be used as comparables in establishing its assessment.
In the 2004 Budget (Bill 83) the provincial government introduced changes to the legislation by allowing municipalities the option of phasing out the favourable treatment afforded to eligible new construction properties. In 2005 Regional Council adopted the phase out of the “new construction treatment” by creating floors and establishing a minimum percentage of CVA tax responsibility, such that eligible properties would be taxed at:
- Up to 70% of CVA-level taxes in 2005;
- Up to 80% of CVA-level taxes in 2006;
- Up to 90% of CVA-level taxes in 2007;
- Up to 100% of CVA-level taxes in 2008 and future years.
4.14 Property Tax Relief for Residences that are Built or Modified to Accommodate Seniors or Persons with Disabilities
The Assessment Act contains provisions to exempt from property taxes any alterations and additions that are made to existing residential properties to accommodate seniors or persons with disabilities. The exemption also applies to the prescribed portion of newly built homes that are designed to accommodate seniors or people with disabilities. It is the responsibility of the property owner of the eligible property to apply to the Municipal Property Assessment Corporation (MPAC) for the exemption as the exemption must be approved by MPAC.
Sections: Index | 1 | 2 | 3 | 4 | 5 | App
Revised:
Friday July 29 2011
www.peelregion.ca
|
