Bulletin - Special Purpose Business Property Assessment Review Update February 06, 2015

This is the second bulletin of the Special Purpose Business Property Assessment Review (SPBPAR). The first bulletin, released on August 12, 2014, alerted stakeholders to the Ministers’ approval of the SPBPAR recommendations, the establishment of a reference committee to guide the implementation of the recommendations, and initial progress in implementing the overarching and property-specific recommendations.

The Province, in consultation and collaboration with municipalities and stakeholders, is focussed on implementing the improvements recommended in the SPBPAR report.  The report included specific recommendations related to the assessment of special purpose business properties, as well as overarching recommendations for strengthening the overall property assessment system.

To guide implementation of the overarching recommendations contained in the report, the Ministry of Finance established a Reference Committee with municipal staff and stakeholder representatives.  The committee has five sub-groups, corresponding to five categories of the overarching recommendations: advance disclosure and assessment methodology; accountability, roles and responsibilities; data accuracy and integrity; appeals and municipal assessment at risk strategies. 

The Municipal Property Assessment Corporation (MPAC) and the Assessment Review Board (ARB) are actively participating in the working group process, and are continuing their own initiatives to improve the property assessment system, many of which are aligned with the SPBPAR recommendations.

Advance disclosure and assessment methodology

Objectives:

The recommendations on assessment methodology and advance disclosure are among the most transformative contained in the SPBPAR report.  The objectives in introducing an information and data sharing policy, methodology guides, and an advance disclosure process are:

  • increase the transparency, accuracy, and predictability of the property assessment system, while promoting a much more collaborative approach amongst all participants in the system.
  • enable business taxpayers and impacted municipalities to contribute to the assessment process in advance of roll return.
  • help to identify and resolve issues and points of disagreement before values are finalized on the returned assessment roll.

Consultations:

Over the summer and fall of 2014, the Reference Committee heard directly from Ministry of Finance and MPAC staff regarding the plan for implementing these recommendations.  Then, in November 2014, taxpayer representatives and property assessment specialists attended focus group sessions on these recommendations.  Municipalities, taxpayer representatives, and other stakeholders provided important feedback and helped to shape the implementation plans for these transformative recommendations.

Implementation Plans:

Further to the SPBPAR recommendations and consultations with partners and stakeholders, the following products will be delivered in advance of the 2016 province-wide reassessment:

  • The information and data sharing policy will help all participants in the assessment process to understand what information MPAC requires from which parties and for which purposes.  It will clarify MPAC’s procedures for protecting and sharing information during advance disclosure and throughout the valuation process. It will also clarify how MPAC works within the ARB’s framework to protect and share information during appeals.  It will explain the implications of non-compliance with MPAC’s requests for information, including penalties.  The first policy will apply only to non-residential properties.
  • MPAC will publish detailed technical methodology guides that serve as a useful tool for MPAC’s assessors, promote consistency in the application of assessment methodologies, and explain valuation procedures to stakeholders.  The guides will provide a common understanding of MPAC’s preferred valuation approach.  
  • Building on the information and data sharing policy and methodology guides, MPAC will establish a new advance disclosure process for certain complex properties.  This new process will provide municipalities and taxpayers with the opportunity to review MPAC’s market analytics and preliminary assessed values in advance of roll return.  These market analytics for business properties have usually been available only after roll return or through the request for consideration and appeal processes.  Stakeholder feedback and new information and data will be considered by MPAC when finalizing market analytics and current value assessments for roll return.
  • A new assessment methodology change disclosure protocol will be adopted in order to ensure a consultative approach to any major changes in assessment methodology. This protocol will ensure that any potential changes are thoroughly considered, analyzed, and consulted on prior to implementation.

Municipalities, taxpayers and stakeholders expressed support for the proposed approach. Stakeholders are interested in the opportunity to meet with MPAC in advance of roll return to discuss market analytics and preliminary assessed values.  Many acknowledged the fundamental linkage between these recommendations – a high-quality information and data sharing policy and comprehensive methodology guides are necessary preconditions for a successful advance disclosure process.

Priority Activities:

Based on the SPBPAR recommendations, the Ministry is working with MPAC to prioritize the following activities for seven special purpose business property types: pulp mills, paper mills, saw mills, value-added wood products manufacturing plants, steel manufacturing plants, automotive assembly plants, and automobile parts manufacturing plants.

  • Producing an information and data sharing policy that incorporates stakeholders’ feedback, brings clarity to the information gathering and sharing processes, and explains the safeguards put in place to protect confidential information.  The first policy will be published on MPAC’s website in the first quarter of 2015.
  • Publishing methodology guides that incorporate stakeholders’ feedback, as appropriate, explain in detail the valuation approach for these sectors, and clarify the analysis and judgements that assessors must make when determining the current value assessment of these property types.  The guides for the seven property types listed above will be published on MPAC’s website in the first quarter of 2015.
  • Designing a two-stage advance disclosure process that provides ample opportunities for stakeholders to provide feedback and new or additional information to MPAC in advance of roll return.  A protocol for the advance disclosure process will be published on MPAC’s website in the first quarter of 2015.  The protocol will include a timeline and step-by-step procedures.
    • Stage one – market valuation reports – will consist of MPAC’s market analytics, which explain how MPAC applied the valuation methodology for a particular group of properties and demonstrate MPAC’s understanding of the market conditions driving the value of these properties.  Following consultations with stakeholders, the finalized market valuation reports will be published on MPAC’s website by the end of 2015.
    • Stage two – preliminary values – will consist of MPAC sharing its preliminary assessed value for each property with the property owner and relevant municipality.  Key valuation components (such as functional and external obsolescence, fair market rent, depreciation, etc.) will also be shared at this time. Confidential information will be protected in accordance with all legislative requirements and the information and data sharing policy.  The preliminary values will be released to affected parties in early 2016.
  • Hosting forums to discuss the market valuation reports with affected parties, and accepting written feedback on the market valuation reports.  These forums will be designed to allow for sufficient time for discussion, to achieve strong participation by affected parties, and to provide different mechanisms for submitting feedback.  These forums will take place in fall 2015.
  • Organizing meetings with affected parties to discuss preliminary values and key valuation components.  These meetings will provide an opportunity for MPAC, individual taxpayers, municipalities, and their representatives to discuss the preliminary values without prejudice in a collaborative environment.  These meetings will take place from early to mid-2016.

Additional Activities:

MPAC has elected to expand the scope of the methodology guides to include additional special purpose business properties and other property types. Specifically, the current consultations on assessment methodology guides have been expanded to include the following special purpose business property types: chemical manufacturing plants, oil refineries, food processing plants, mining properties, and pharmaceutical manufacturing plants.

MPAC may also elect to expand the scope of these activities as implementation for the next province-wide reassessment progresses.  MPAC has confirmed that any future decision to expand the scope to include additional property types will not compromise their ability to deliver high-quality products and processes for the seven special purpose business properties noted earlier.  Once MPAC has finalized which property types will be included, they will communicate the full implementation to all stakeholders and affected parties.

Municipalities and stakeholders raised the importance of tracking our progress and measuring the impacts of these initiatives.  This work will be coordinated with the ongoing consultations related to the development of key performance indicators for MPAC.

More Information:

The Ministry is confident that by taking a collaborative and consultative approach and by producing high-quality products, MPAC can successfully implement these transformative recommendations.  More information about these new elements of the property assessment system will be available in the coming weeks on MPAC’s website: www.mpac.ca.  MPAC can also be reached at consultation@mpac.ca.

Other overarching recommendations

In addition to the work being done to implement for advance disclosure, as recommended in the SPBPAR report, an independent performance evaluation of MPAC has been completed.  The results of this evaluation will help guide the on-going implementation of the SPBPAR recommendations.

One of the key findings from the independent performance evaluation of MPAC is the need for a strong data quality management framework, reflecting an approach to quality that is cohesive and proactive rather than responsive.  MPAC has implemented several initiatives to improve data accuracy and integrity through streamlined process control procedures, integrated business processes and centralization of data.

The Ministry and the Reference Committee are reviewing MPAC’s data integrity improvements to confirm they meet the needs of municipalities and stakeholders, identify further opportunities to enhance data accuracy and integrity, and ensure the proactive communication of significant data changes to municipalities and taxpayers.

The Assessment Review Board (ARB) and MPAC are working to clarify, streamline and improve efficiencies in the appeal process.  The ARB is working to establish fairer and reasonable hearing procedures and provide timelier and more effective resolution of appeals and is also adopting a more active role in promoting comprehensive adjudication.  The ARB is also encouraging parties in the appeal process to participate in mediation. 

MPAC has also committed to respond to all appeals within the 4-year reassessment cycle and is developing a framework for early engagement with appellants as well as increased information sharing with municipalities in the appeal process.

The municipal assessment at risk strategies sub-group of the Reference Committee is focused on assisting municipalities in identifying, understanding and planning for the potential financial implications of appeals and Requests for Reconsiderations.  A data-based review was undertaken to better understand the nature and scope of assessment at risk in Ontario.  This sub-group has also worked to share and document best practices and tools currently in use to track, forecast and plan for assessment appeal losses.  These have been promoted at municipal conferences and regional treasurers’ forums, and feedback has been sought on how municipalities may be better supported to manage and plan for assessment at risk. In addition, some early enhancements have been made to the Online Property Tax Assessment (OPTA) tool.

Property-Specific Recommendations

The SPBPAR report also included recommendations relating to the assessment of specific complex business properties, including mills, industrial lands, landfills, billboards, grain elevators, farmland, and wind turbine towers. 

As recommended in the report, the following regulations have been filed:

  • Billboards – Regulation provides that billboards used for third-party advertising shall be assessed based on structure cost.  Further discussions are underway with MPAC and stakeholders to consider implementation details such as depreciation.
  • Grain Elevators – Regulation provides that licensed commercial grain elevators shall be classified as commercial, elevators located on farms that store only the farmer’s own grain shall be classified as farm; and on-farm elevators shall have a split farm/commercial classification if the farmer also has a licensed commercial elevator operation. 
  • Wind Turbine Towers – Regulation provides that the assessment of wind turbine towers used in the generation of electricity shall be increased based on the average increase in industrial property values, which is approximately 3.3% per year for 2014 to 2016.  The amount of increase will be updated with every four-year reassessment, beginning in 2017.

During the consultations on methodology guides, there were some questions as to whether and how the industrial lands recommendation would be addressed through the methodology guides. MPAC staff are currently working on separate guidelines for the assessment of industrial properties located in designated employment areas. More information will be available soon on MPAC’s website regarding the consultative process for preparing these guidelines.

With regard to the assessment of landfills, as recommended in the report the consultation process was resumed in fall 2014, to examine the methodologies presented during the assessment review, and arrive at a recommended valuation approach in time for the 2016 reassessment.  The Ministry engaged a facilitator to assist with this process.

Next Steps

The Ministry of Finance will continue to work with MPAC, ARB, municipalities, taxpayers and professional organizations to implement the recommended improvements to Ontario’s property assessment system.  The Ministry relies on the advice received from Reference Committee members for the implementation of the recommendations, and the committee meetings will continue in 2015.  The Ministry will continue to provide updates on the progress of the implementation of the SPBPAR recommendations to ensure a transparent process.

If you have any questions or comments about this process, please contact:
Director, Special Purpose Business Property Assessment Review Secretariat, Provincial Local Finance Division, Ministry of Finance at: SPBPAR@ontario.ca.

LEARN MORE

Read the Report on Special Purpose Business Property Assessment Review
Visit the Municipal Property Assessment Corporation 
Link to list of Reference Committee Members
Link to the first progress update on SPBPAR

FOR MEDIA INQUIRIES ONLY:
Kelsey Ingram, Minister’s Office, 416-326-1409
Scott Blodgett, Ministry of Finance, 416-325-0324

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