2015 Ontario Economic Outlook and Fiscal Review
Chapter III: Economic and Fiscal Outlook

Section C: Strengthening Ontario’s Property Tax and Assessment System

The government is strengthening Ontario’s property tax and assessment system through a range of measures, such as implementing the recommendations of the Special Purpose Business Property Assessment Review, creating a fair and modern Provincial Land Tax system, and proposing enhancements that would improve the fairness and transparency of the Business Property Tax Capping Program.

The Province and municipalities have a shared interest in a strong and competitive property tax and assessment system, which helps support local municipal services and Ontario’s school system.

The government has successfully implemented a number of important measures that have enhanced the fairness, effectiveness and predictability of Ontario’s property tax and assessment system for both property owners and municipalities. The Province continues to work with key stakeholders to identify potential opportunities to further strengthen Ontario’s property tax and assessment system.

2015 Budget: Building Ontario Up

The 2015 Budget highlighted initiatives to strengthen Ontario’s property tax and assessment system:

  • Special Purpose Business Property Assessment Review — improving the property assessment system by implementing the recommendations of the assessment review in partnership with the Municipal Property Assessment Corporation (MPAC), municipalities and stakeholders.
  • Provincial Land Tax (PLT) announcing PLT changes for 2015 and 2016 that marked an important first step towards creating a fair and modern PLT system. This is the first time in over 60 years that PLT rates have been updated to increase revenue.
  • Power Dam Special Payment Program — working with municipalities to explore ways to implement the phase-down of this mitigation program in a manner that is fair and manageable, and also exploring the option of reintroducing property taxation for power dams.

Progress since the 2015 Budget

Ontario continues to make significant progress in moving forward on these commitments.

Special Purpose Business Property Assessment Review

The Province is working to strengthen Ontario’s property assessment system by implementing the recommendations of the assessment review.

One of its key recommendations is the introduction of an advance disclosure process for special purpose business properties that involve complex assessment methodologies. This initiative will enable affected businesses and municipalities to contribute to the determination of assessed values before the assessment roll is prepared. As part of this initiative, MPAC has published methodology guides to improve the transparency of valuation procedures.

Provincial Land Tax

As part of the ongoing PLT review, the government will consult with northerners on ways to further address tax inequities in the north before determining PLT rate adjustments for 2017. The Province has already initiated this next round of discussions by holding 15 open houses across northern Ontario between August and October. The open houses provided an opportunity for unincorporated area property owners to hear more about PLT changes and provide input.

Power Dam Special Payment Program

Ontario has conducted extensive analysis and held productive discussions with municipal and electricity sector representatives as part of the government’s exploration of phase-down and taxation options. Considering property taxation for power dams is a complex and challenging proposal, particularly when balancing the priority of avoiding adverse impacts on electricity ratepayers.

Going Forward

Special Purpose Business Property Assessment Review

As part of the advance disclosure process, MPAC has begun consultations on market factors and analytics that underlie the assessment of special purpose business properties. It will publish market valuation reports containing this information in early 2016.

As a further measure to support the objectives of the assessment review’s recommendations, the Province is proposing improvements to the Request for Reconsideration process to standardize timelines and support the early resolution of assessment issues.

Power Dam Special Payment Program

While work is underway to examine phase-down and taxation options, the government appreciates that municipalities would benefit from as much advance information as possible to support their budgeting process for the upcoming taxation year.

As a result, the Province is announcing a stable funding guarantee for 2016. This means that municipalities will receive the same payment under the Power Dam Special Payment Program for 2016 as they received in 2015, subject to any necessary maintenance adjustments for changes such as the decommissioning of generating stations.

Business Property Tax Capping Program

The Business Property Tax Capping Program was implemented in 1998 as the Province transformed the property tax system to the current value assessment (CVA) model, to ensure that businesses would not see large increases in property tax as a result of this transition. In 2015, slightly more than 10 per cent of business properties province-wide remained in the capping program, a significant decrease compared to nearly 90 per cent in 2004. However, in light of the continued inequities for some properties, many municipal and business stakeholders have requested changes to the capping program that would further enhance fairness and transparency for property owners.

Beginning in 2016, municipalities would be provided with increased flexibility to accelerate progress to CVA-level taxes. Municipalities that meet certain eligibility criteria established by the Province would also have the option to exit or phase out the capping program, if doing so would have a limited impact on business properties. As a result of these proposed changes, municipalities would be able to adjust the capping program to best suit their local circumstances, and address the potential for inequities and economic distortions that may result from the capping program. Properties removed from the capping program would continue to benefit from the ongoing mitigation provided through the four-year assessment phase-in program.