If you own property in Ontario, you’ve received statements from the Municipal Property Assessment Corporation (MPAC) which indicates a value they have established for your property that is used to calculate your municipal tax bill. MPAC is an independent, not-for-profit corporation funded by all Ontario municipalities, representing the largest assessment jurisdiction in North America, it assesses properties with an estimated total value of $2.2 trillion. On your 2015 municipal tax bill, 50% is retained by the township to fund its services, 23% is directed to Education and the remaining 27% goes to Peterborough County. All three amounts are calculated based on the Municipal Assessment value, so it is the key factor in determining the size of your property tax bill.
For the past four years, the property taxes have been based on an assessed value as of January 1st, 2012, which are used to calculate values for the following four years. Increases in value are phased in over the period, but if the assessment reflects a decrease in value from the previous assessment, the lower value is used immediately. In 2016, the Municipal Property Assessment Corp. (MPAC) will provide an updated assessed value for the nearly five million properties in Ontario. How do they do it?
The data that MPAC transforms into property values comes from the consensus of value that results when a buyer and seller find a price for a property upon which they both agree- and do the deal. The results of these transactions- specific selling prices for specific properties- become part of the public record. MPAC uses these prices to establish a market price for every property, neighbourhood by neighbourhood, to help determine the value of each property.
MPAC doesn’t set tax rates. Based on their determination of value of each property, they sum these values for each municipality, which sets the property tax base used by each municipality and that calculates the value of the property tax base for each municipality. The tax rate is set by various levels of government at an amount that covers the costs of providing municipal services and other expenses. Simplifying the matter a great deal, if the costs of providing government services each year are $10 and the value of the total property tax base was $100, the tax rate would be 10 per cent or 10/100. This simplified example does not include the educational portion of the tax bill which is set by the province.
The assessment process is revenue neutral, meaning an increase in property values does not automatically generate an increase in taxes. Suppose, for example, property values appreciate so that now the total tax base is $200 instead of $100. If the municipal budget stays at $10, the tax rate will fall to five per cent or 10/200. In other words, the level of revenue gathered by the government isn’t determined by assessment. The process is designed to create a tax system that redistributes wealth in a progressive manner. The amount you pay in property taxes will depend on how your property appreciates relative to the value of the average property in the area. Those whose property values increase relative to others will pay relatively more in property taxes, everything else remaining equal. The assessment process determines these relative changes.
An MPAC update published last August on the 2016 valuations offered a sneak peek into the changes in value property owners can expect on their new assessments which will be used for the 2017-2020 period. Residential property values have risen from 4% to 29%, depending on the location, with eastern Ontario showing the lowest rise and the GTA the highest. Farmland values have risen more consistently, from 42% to 48% over the same period throughout Ontario.
So don’t shudder when you receive your new property assessment- an increase in your property value is good news, after all, and doesn’t necessarily mean your property tax bill is set to climb. If you are concerned about the value, you can register to obtain information on their property and surrounding ones at https://www.aboutmyproperty.ca/.
By Karen Graham
