Representatives from Municipal Property Assessment Corporation (MPAC) attended the December 8th Council meeting to present an orientation to Council members outlining how property taxes are set in Ontario.
MPAC is an independent, not-for-profit corporation, responsible for assessing and classifying more than five million properties in Ontario. It calculates property values across the province to establish Current Value Assessments (CVA) which determine the distribution of the property tax burden across individual property owners.
MPAC establishes property values by examining completed sale transactions in each area, which are then extrapolated to establish a market price for every property, neighbourhood by neighbourhood. The amount of property taxes paid by each residential property owner is the assessed value of their home (CVA) multiplied by the tax rate. CVA values are usually reassessed every four years, with changes in value phased in over the following four years, but Covid has delayed the 2020 update to 2024.
The fact that property values have not been updated does not have a material impact on the rate calculation because the assessment process is revenue neutral. In other words, an increase in property values does not automatically result in a tax increase. The amount you pay will depend on how your property appreciates relative to the value of the average property in your area. Because there has been no reassessment, CVA’s of existing properties have not changed, so distribution of the tax burden has not changed, either. The only change to municipal CVA’s relates to growth.
New builds and improvements increase the tax base for the municipality. MPAC analyses building plans and permits to estimate the value of these projects. The increases in CVA are incorporated into the tax calculation. This growth allows the tax burden to be distributed across more properties, helping to fund the increases in expenditures that usually result from a growing population. Property owners can learn more about their property valuation by visiting MPAC’s website at www.aboutmyproperty.ca.
How are municipal tax rates set? Municipalities across the province are setting their budgets for the upcoming year. Long days are spent analyzing departmental requests for cash to keep the doors open, services flowing and the roads, buildings and other infrastructure in good repair. Decisions on expenditures conclude in a final budget that reflects the needs and priorities of the municipality as determined by its elected officials. This final funding requirement is shared by ratepayers across each municipality based on their property values. In short, the budget amount is divided by the total CVA for properties within the municipality- that determines the municipal tax rate.
Only a portion of the amounts collected by the township are for its own use: our municipality also acts as a collection agency on behalf of Peterborough County and the Ministry of Education. They, too calculate the costs of providing their services by establishing their budgets. These expenditures are passed down to the municipalities which allocate them across all properties based on their assessed values. In this way property taxes, like income taxes, are progressive: the more valuable the house, the higher its tax bill.
The municipal tax rate will be determined by Council when the 2023 budget is finalized, which is scheduled to occur on Tuesday, February 21st. KG
