What’s in the Municipal Tax Rate?

Zoocasa is a fast-growing, full service real estate brokerage relying on data and technology to better serve the real estate market.

Last month the firm published a report comparing 2021 property taxes across 35 Ontario municipalities, providing an update on a similar report published last year.  At first glance, the results may seem surprising.

In the latest report, jurisdictions with the lowest tax rates remained virtually unchanged over the previous year’s results.  Toronto ranks the lowest, followed by four other municipalities within the GTA: Markham, Richmond Hill, Vaughan and Milton, whose rates ranged from Toronto’s low of .611013 percent to Milton’s rate of .68333.  The highest municipal tax rate of 1.818668 per cent was located in Windsor, with the other top four rates found in northern Ontario communities of Thunder Bay, Sault Ste. Marie, North Bay and Sudbury, whose rates all exceeded 1.54.  These are the rates that are multiplied by the assessed value of each home to set the property taxes for each residence in the province.

The property value used for this calculation is set by the Municipal Property Assessment Corporation (MPAC).  A reassessment exercise normally occurs every four years and phased in over the four year period, but Covid has delayed the 2020 update to 2024.  Property values are established 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 paid by the property owner is the assessed value multiplied by the tax rate.  So in 2021, a house assessed at $500,000 would pay property taxes of $3,055 in Toronto and $9093 in Windsor.

How are these rates set?

Municipalities across the province are beginning the task of 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 are made line by line, concluding 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 assessed property values across the municipality- that determines the municipal rate.

Property tax bills in Cavan-Monaghan consists of three levies: municipal, county and education.  The exercise is similar for all three components: the elected officials work with their organizations to establish their budgets and allocate it 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.

Back to the rate comparisons.  Zoocasa undertook this study to become better informed about small-town and rural property rates which have become more relevant to many of their real estate clients who have been relocating to smaller communities during the pandemic.  Customers may expect that because their new property is less expensive, their property tax bill will follow suit.  Not necessarily, says the report.  Larger urban centres like those in the GTA can offer lower tax rates because they have more taxpayers sharing the expense.  The most obvious example would be road maintenance: high residential density in urban centres reduce the burden of this expense on individual properties.  The second element in the calculation is the assessment value of the properties sharing the load.  If the total assessments are high, the rates don’t have to be high to generate enough tax revenue to cover municipal expenditures.

So where does Cavan-Monaghan’s rate fall?  Somewhere in the middle.  Adding together the three property rate components on your final 2021 tax bill results in an overall property tax rate of 1.211975 per cent.   Other communities with tax rates in this middle range are generally located around the outskirts of the GTA, and include Guelph, Cambridge, Hamilton and Barrie.  Our closest neighbours identified in the study are Peterborough whose rate is 1.448245 and Oshawa whose rate is 1.304714.

To review the report in full, visit www.zoocasa.com/blog/ontario-property-tax-rates/.   KG

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