Calculating levy change and notional tax rates and municipal tax ratios
This bulletin outlines the method of calculating notional tax rates to be used in determining the overall levy change for the purpose of adjusting taxes on properties subject to the 5% limit on reassessment related increases.
This bulletin also outlines the calculations to be used to determine municipal tax ratios for 2003 and subsequent years for the commercial, industrial and multi-residential classes where these classes were restricted from levy increases and if the municipality had a levy increase in the preceding year.
These calculations are set out in Ontario Regulation 73/03.
Overall Levy Change/Notional Tax Rate
- The overall levy change adjustment is needed to separate reassessment value changes from municipal levy changes. To do so requires the calculation of a set of notional tax rates for the taxation year to be compared to the actual tax rates adopted by the municipality in that year.
Notional Municipal Tax Rates
- For 2003, the first step is to determine the total
annualized or year-end taxes for 2002 (based on the municipality's 2002 adopted
tax rates and the 2002 revised total assessment).
- The 2002 total taxes are then divided by the total tax
ratio weighted assessment for all classes using the assessment roll returned
for taxation in 2003 to obtain the notional 2003 residential tax rate.
- This rate is multiplied by the municipality's starting tax ratios for 2003 to obtain the 2003 notional tax rates for each property class.
Overall Levy Change
- The 2003 overall levy change factor measures the
percentage change between the sum of the 2003 actual tax rates and the sum of
the 2003 notional municipal rate and the education tax rate.
- First, the difference between the sum of the 2003 actual
municipal and education rates less the 2003 notional municipal rate and the
actual 2003 education tax rates is calculated. The result is divided by the sum
of the 2003 notional municipal tax rate and the actual education tax rate to
obtain the percentage change used to adjust the capped taxes on a
property.
- This percentage difference is used to adjust capped taxes for municipal levy increases or decreases.
Revenue Limit
- Municipalities with property classes that have tax ratios
above the threshold may not levy tax rates for restricted classes that exceed a
maximum rate. The maximum rate is calculated based on an overall revenue limit
and any increase in tax requirements above the overall limit must be raised by
a special levy applied to non-restricted classes.
- The revenue limit is calculated as follows:
- for each property class, multiply the revised 2002 assessment by the sum of the 2002 general levy tax rate and the 2002 special levy tax rate, if any;
- total the revenues for all classes.
- Using the notional 2003 rates, the municipality can then calculate the maximum rates for a restricted class.
LEVY RESTRICTIONS
- Starting in 2001, the Province restricted municipal levy
increases for municipalities with tax ratios above: 2.74 for multi-residential,
1.98 for commercial, and 2.63 for industrial.
- These ratio thresholds are maintained for the 2003
taxation year in O. Reg 73/03
- The levy restriction applies to the broad class (e.g., if
a municipality has adopted a large class and a residual industrial class, the
restriction is based on the broad industrial class tax ratio).
- Municipalities with tax ratio(s) that are above the class
specific threshold cannot apply a general levy increase to the restricted
class(es).
- For 2003, if 2002 levy increases were applied to the unrestricted classes, the necessary rate adjustments to raise the levy increases were to be carried separately from the general levy for 2002 as a "special levy" and these rates are to be included in the municipal tax ratio calculations for 2003.
CALCULATING STARTING MUNICIPAL TAX RATIOS FOR 2003
- The starting municipal tax ratios for 2003 are the tax
ratios that reflect any tax increases levied in 2002 on unrestricted classes of
property, based on the calculations set out in the regulation and summarized in
this Bulletin.
- Single-tier or upper-tier municipalities have the option
of lowering the 2003 starting tax ratios on classes that are above the ranges
of fairness.
- For municipalities that do not have restricted classes,
the starting municipal tax ratios for 2003 are their 2002 tax
ratios.
- For municipalities with restricted classes in 2002:
- If there was no single-tier or upper-tier levy
increase in 2002, the starting tax ratios for 2003 are the 2002 tax ratios.
- If there was a single-tier or upper-tier levy
increase in 2002, the starting tax ratios for 2003 must be recalculated to take
into account the 2002 restricted levy increase.
- If there was no single-tier or upper-tier levy
increase in 2002, the starting tax ratios for 2003 are the 2002 tax ratios.
- The following examples illustrate the recalculation of 2003 starting tax ratios for municipalities with both levy increases in 2002 and restricted classes.
2003 RATIOS FOR SINGLE-TIER MUNICIPALITIES
- For single-tier municipalities, the 2003 starting tax ratios are determined by simply adding the 2002 levy increase rate to the 2002 general municipal rate for each class and then dividing the result by the residential rate. (See example below).
| Property Class | Restriction Threshold | Municipal 2002 Tax Ratios | 2002 Municipal Tax Rates (%) | 2003 Starting Tax Ratios | ||
|---|---|---|---|---|---|---|
| Actual | Increase | Total Rate | ||||
| Residential | -- | 1.00 | 0.80 | 0.10 | 0.90 | 1.00 |
| Multi-residential | 2.74 | 3.00 | 2.40 | 0.00 | 2.40 | 2.67 |
| Commercial | 1.98 | 1.50 | 1.20 | 0.15 | 1.35 | 1.50 |
| Industrial | 2.63 | 4.00 | 3.20 | 0.00 | 3.20 | 3.56 |
| Pipeline | -- | 1.50 | 1.20 | 0.15 | 1.35 | 1.50 |
| Farmland | -- | 0.25 | 0.20 | 0.025 | 0.225 | 0.25 |
- In the above example, in 2002, the municipality faced
levy restrictions on its multi-residential and industrial classes.
- The 2003 starting tax ratios are calculated by taking the
total 2002 rate for each class and dividing these rates by the total 2002
residential rate (the residential tax ratio is always 1.0).
- Here, the 2002 levy increase results in the
multi-residential tax ratio falling from 3.0 to 2.67 for 2003. As a result, the
class is not restricted in 2003 as the new ratio is below the class
threshold.
- The industrial tax ratio falls from 4.00 in 2002 to
3.56 in 2003. As the 2003 ratio is still above the industrial threshold, the
industrial levy restriction would remain in place for 2003 unless the
municipality lowered the starting 2003 tax ratios.
- The 2003 starting tax ratios for the unrestricted
classes remain the same as in 2002.
- Here, the 2002 levy increase results in the
multi-residential tax ratio falling from 3.0 to 2.67 for 2003. As a result, the
class is not restricted in 2003 as the new ratio is below the class
threshold.
2003 RATIOS IN TWO-TIER MUNICIPALITIES
- For two-tier municipalities with 2002 upper-tier levy
increases and restricted classes, the 2003 starting tax ratios are based on a
weighted upper-tier levy increase.
- The impact of the upper-tier increase on the tax ratios
is calculated by weighting the special levy tax rate by the upper-tier share of
the total general municipal taxes levied on a property class in the region or
county.
- This method ensures that common ratios will be maintained
across the upper-tier while taking into account that the upper-tier general
levy is only part of total general municipal taxes in the
municipality.
The Upper-Tier Weighting Factor is calculated as follows:
Weighting Factor = Upper-tier general levy divided by the sum of the upper-tier general levy and the lower-tier general levies (exclusive of special levies or area rates)
- Calculate the total 2002 upper-tier general levy by
multiplying the upper-tier general levy tax rates by class by the taxable
assessment for the class;
- Calculate the total 2002 lower-tier levies by multiplying
the lower-tier general levy tax rates by class for each municipality by the
taxable assessment for the class for each municipality;
- Calculate the proportion of the sum of the upper-tier general levies for all classes of property of the total municipal general levies (upper-tier levies plus all lower-tier levies).
The starting 2003 Tax Ratios are calculated as follows:
- Multiply the factor obtained for the upper-tier by the
2002 upper-tier special levy rate for each class of property;
- Calculate the sum of the general upper-tier tax rates and
the weighted special levy rates by class of property;
- Divide the resulting tax rate for each class by the
residential weighted rate to obtain the 2003 tax ratios.
| Property Class | Restriction Threshold | Municipal 2002 Tax Ratios | 2002 Upper-Tier Municipal Tax Rates (%) | 2003 Starting Tax Ratios | |||
|---|---|---|---|---|---|---|---|
| Actual Rate |
Special Rate |
Wtd Rate |
Total Rate |
||||
| Residential | -- | 1.00 | 0.80 | 0.10 | 0.06 | 0.86 | 1.00 |
| Multi-residential | 2.74 | 3.00 | 2.40 | 0.00 | 0.00 | 2.40 | 2.79 |
| Commercial | 1.98 | 1.50 | 1.20 | 0.15 | 0.09 | 1.29 | 1.50 |
| Industrial | 2.63 | 4.00 | 3.20 | 0.00 | 0.00 | 3.20 | 3.72 |
| Pipeline | -- | 1.50 | 1.20 | 0.15 | 0.09 | 1.29 | 1.50 |
| Farmland | -- | 0.25 | 0.20 | 0.025 | 0.015 | 0.215 | 0.25 |
FURTHER INFORMATION
For general information about the calculation of the 2003 tax ratios, you may contact the Ministry of Finance .
Phone: Mr. Almos Tassonyi
Property Tax Policy
Branch
(416) 327-0252
Note The information in this document is provided for general reference purposes only. For complete information or for precise interpretation, please refer to the appropriate sections of the Municipal Act, 2001 and Ontario Regulation 73/03 and any other related regulations.
