Property Assessment and Classification Review - Appendix B

APPENDIX B: SUMMARY OF RECOMMENDATIONS

Access to Assessment Information

  • MPAC and the Ministry of Finance should work together to ensure that there is an open exchange of information between MPAC and the public. It is recommended that this matter be overseen by the Ministry of Finance / MPAC Joint Committee.

  • The Joint Committee should review MPAC's current policies governing the release of assessment information to determine whether the policies sufficiently respond to the needs of municipalities and the public, and the Joint Committee should report to the Minister of Finance within six months to advise whether MPAC should provide expanded access to information about assessment methodologies, policies and procedures.

  • The following principles should guide the Joint Committee in its deliberations on this matter:

    • Property owners should be provided with sufficient information to enable them to understand the basis upon which their property assessments are derived. In order for taxpayers and municipalities to have confidence in the assessment system, they need to have a basic level of understanding about how the system operates.

    • It is vital that MPAC safeguard the personal information that it collects as part of its statutory duties. As we move further and further into the age of electronic information, it is critical to ensure that the privacy rights of our citizens are protected.

Accreditation of Assessors

  • The Province of Ontario should not impose standardized education or accreditation requirements on persons working as property assessors.

Advisory Committees

  • The Ministry of Finance / MPAC Joint Committee should serve as an ongoing venue in which stakeholder groups can bring forward assessment and property tax issues that are causing concern within their particular sectors. In this venue, parties could work together to identify emerging problems and propose solutions.

  • The Joint Committee should take the initiative to inform stakeholders of the opportunity to make submissions and engage in discussion with representatives from the Ministry of Finance and MPAC through the Committee.

Appeals

Requests for Reconsideration:

  • The deadline to appeal assessments to the ARB should remain consistent for all property owners at March 31st of the tax year.

Upper-Tier Appeal Rights:

  • Appeal powers should not be conferred upon upper-tier municipalities.

Banks

  • The Province should not prescribe an assessment methodology to be used in the assessment of stand-alone bank branches.

Cables

  • The imposition of property tax on cables and telecommunication lines is not recommended at this time.

  • With respect to properties that are leased to telecommunication companies for the placement of cable lines, the following recommendations are being made:

    • As a general rule, portions of railway corridors which are leased by the owner to another entity and are used for a purpose other than rail transportation should be subject to assessment and taxation.

    • As a general rule, pipelines which are leased by the owner to another entity and are used for a purpose other than the transmission of oil or gas should be subject to assessment and taxation.

    • In these situations, railway corridors and pipelines should be assessed on an income basis, and the rates of assessment and taxation should be developed by the Ministry of Finance in consultation with MPAC and the affected property owners to ensure the rates are fair and appropriate.

Camps

  • Children's recreational camps which are used on a seasonal basis should be included in the residential class.

  • Facilities which operate for business purposes on a year-round basis and offer camp programs on a seasonal basis should be included in the commercial class.

  • Camp properties which are currently exempt from taxation under the Assessment Act or private legislation should retain their exempt status.

Car Dealerships

  • The Province should not prescribe special rules for the assessment of car dealerships.

  • The Province should not create a special property class for car dealerships or make any changes to the current commercial classification of these properties.

Conservation Land

Assessment of Mixed-Use Properties:

  • The Province should not prescribe an apportionment methodology to be used in the assessment of conservation land on mixed-use parcels.

Eligible Property:

  • In deference to the consultation process that is being led by the Ministry of Natural Resources, no specific recommendation is being made at this time concerning a proposed expansion of the categories of properties that are eligible for exemption from property taxation.

Economic Development Incentive Tools

  • Zones should be created in which property tax incentives could be provided to businesses that construct new buildings or expand existing facilities. The Province should establish minimum eligibility criteria, and municipalities should be permitted to add additional criteria.

Environmental Protection

  • Features of a property which are designed for environmental protection or pollution control should not be subject to additional assessment.

Exempt Landlords with Taxable Tenants

  • The Province should not take action to require MPAC to assess all occupants of exempt properties.

Farms

Application Process:

  • A requirement to submit applications for inclusion in the farm property class should be maintained. The Ministry of Agriculture and Food should continue to oversee this process.

  • There should be a common application deadline (prior to the tax year) that applies province-wide rather than the current system of different application deadlines in different municipalities.

  • To provide flexibility to respond to mitigating circumstances where the application deadline is missed, the Ministry of Agriculture and Food should be authorized to accept and process applications that are submitted up to December 31st of the taxation year.

Assessment Methodology:

  • Changes to the method of assessing farm land are not recommended at this time.

  • MPAC should develop a test to isolate farm lands within urban shadow areas to ensure that the assessed values of these lands are not higher than the assessment rate per acre for similar lands outside the urban shadow area.

  • MPAC should develop a farm assessment education and training program to address the concerns of the farming community that farmer-to-farmer sale prices do not reflect the productive capacity of farm lands.

Farm Buildings:

The following rules are recommended to govern the property tax classification of farm buildings and related facilities:

ACTIVITIES CONDUCTED ON THE FARM PROPERTY

  • Activities which are characterized as "primary agricultural production" and which are carried out on farm property should be included in the farm property class. The Minister of Finance should define "primary agricultural production" in regulation. This definition should be developed by the Ministry of Finance in conjunction with the Ministry of Agriculture and Food.

  • Activities which move a step beyond primary agricultural production to perform some processing of the farm product without changing the nature of the product ("value-retention activities") and which are carried out on the farm property should be included in the residential property class. This category should be defined in regulation by the Minister of Finance in consultation with the Ministry of Agriculture and Food.

  • Activities which utilize farm products to create a new product or which involve retail sales of products ("value-added activities") and which are carried out on the farm property should be assessed at commercial or industrial rates and included in the commercial or industrial property class (based on the activity).

  • To maintain the commitment that was made by the Province in the 1997 Ontario Budget, the land underneath value-added buildings on farm properties should be assessed at farmland rates.

ACTIVITIES CONDUCTED OFF THE FARM PROPERTY

  • Activities which are characterized as value-retention activities and which are conducted off farm property should be included in the commercial property class.

  • Activities which can be characterized as value-added activities and which are conducted off farm property should be assessed at commercial or industrial rates and included in the commercial or industrial property class (based on the activity).

  • Grain elevators located off farm property should be classified as commercial, not industrial.

  • Storage facilities which are located off farm property, that are owned and operated by farmers and are used exclusively for the storage of produce grown on the farmers' own lands, should be included in the residential property class. Storage facilities which are located off farm property, that are owned or operated by persons other than farmers storing their own produce, should be included in the commercial property class.

Government-Owned Farmland:

  • Government-owned farmlands which are occupied by tenant farmers should be eligible for inclusion in the farmlands property class.

Mixed-Use Properties:

  • Portions of mixed-use properties that are used for bona fide farming activity should not be included in the excess land sub-class, but rather, should be included in the property class which most appropriately reflects the activity on the property.

    Farming activity on mixed-use parcels could attract different classifications depending on the circumstances of the specific property. The farmed portion of a property may be included in the farmlands class, the residential class, or one of the farmland awaiting development sub-classes.

Name of Classes:

The following name changes are recommended:

  • change the name of the "residential/farm property class" to "residential property class"; and
  • change the name of the "farmlands property class" to "farm property class".

Tax Rates:

  • Upper-tier and single-tier municipalities should be given the ability (on an annual basis) to set a tax ratio for the farm property class that is below 25% of the residential tax rate. The authority to apply a reduced tax rate to the farm class should only apply in respect of the municipal portion of the tax.

Float Homes

  • Residential dwellings located on the water should be subject to property taxation at the residential rate. If there is ambiguity in the definition of assessable property under the Assessment Act, the Act should be amended to clarify that permanent dwellings located on water are assessable in the same manner as dwellings located on land. Motorized vehicles, commonly known as house boats, which are designed for only short-term recreational accommodation would continue to be treated like personal property (i.e. chattels) and would not be assessed.

Funeral Services

  • Visitation centres and other facilities which provide non-interment services on cemetery sites should be subject to property taxation in the same manner as their off-site counterparts. The burial ground areas of cemetery sites should retain their exemption from taxation.

Gravel Pits

  • Changes should not be made to the classification of gravel extraction lands.

Hotels

Assessment Methodology:

  • The following standards should be applied by MPAC in the assessment of hotels:

    • The standard deduction for management expenses should be 5%, but MPAC should have discretion to apply a higher or lower percentage based on the circumstances demonstrated for each individual property.

    • The standard deduction for chattels (furniture, fixtures and equipment) should be 15%, but MPAC should have discretion to apply a higher or lower percentage based on the circumstances demonstrated for each individual property.

Suite Hotels:

  • All hotel operations should be included in the commercial property class. To achieve this objective, the definition of "hotel" in O. Reg. 282/98 should be modified to capture facilities that are in the business of providing transient accommodation to the travelling public, regardless of whether on-site food service is provided and regardless of whether the property is a condominium.

Industrial Property Class

The following changes are recommended to the definition of the industrial property class:

  • Remove the phrase "in connection with", and remove the words "producing or processing anything", so that the opening words of the definition would read "land used for manufacturing".

  • Some processing activities could be included in the industrial class if they are industrial in nature, but these activities should be narrowly defined or specifically listed in the regulation to avoid unintended expansion of the class.

  • If the meaning of the word "manufacturing" is not clear within the context of the body of case law that has interpreted that word over the years, the Minister of Finance should prescribe a definition.

  • Remove research and development (R&D) from the industrial class and include R&D facilities in the commercial class.

  • Remove retail sales premises from the industrial class and include them in the commercial class.

  • Remove grain elevators from the industrial class.

  • As a failsafe mechanism, to ensure that businesses do not get unintentionally included in the industrial class, regard should be given to the zoning of the property. Businesses located in commercially-zoned areas should not be included in the industrial property class.

Large Industrial Property Class

  • The 125,000 square foot threshold should be maintained for the large industrial property class.

Life Lease Buildings

  • Changes should not be prescribed to the assessment methodology that is applied to life lease properties.

Managed Forests

Assessment Methodology (Banding):

  • The band method should not be applied to the assessment of managed forest properties.

Assessment of Mixed-Use Properties:

  • The Province should not prescribe an apportionment methodology to be used in the assessment of managed forests on mixed-use parcels.

Eligibility Criteria:

  • The Canadian citizenship ownership requirement should be removed as a prerequisite to eligibility for the managed forest property class.

  • The Canadian citizenship ownership requirement should also be removed from the farmlands property class.

  • Eligibility for the managed forest property class should be expanded to include portions of the natural landscape that cannot support trees, provided that these areas are surrounded by eligible managed forest.

Oversight and Administration:

The following program administration changes are recommended:

  • Change the application deadline from August 31 to July 31.

  • Change the application period from annual to every ten years. However, to successfully implement a ten-year application cycle, the following precautions are recommended:

    • ensure that property owners receive adequate advance notice of the application deadline at the end of each ten-year cycle;

    • annual inspections should be conducted prior to the preparation of the assessment roll to ensure that properties are still meeting the eligibility criteria for the managed forest class;

    • ensure that MPAC has the authority to change the classification of managed forest properties during the ten-year cycle if activities are conducted on the property which are inconsistent with the eligibility criteria for the class.

  • Provide new owners with 90 days in which to apply for inclusion in the managed forest property class. MNR should ensure that new owners are notified of this application requirement.

  • Give authority to Mining and Lands Commissioner to accept late applications where there are mitigating circumstances. Consistent with the recommendation made above with respect to the farm property class, the Commissioner should be authorized to accept and approve applications that are submitted up to December 31st of the taxation year.

  • Remove the obligation for property owners to submit entire managed forest plans and only require that relevant portions of the plans, as specified by MNR, be submitted with the application.

  • Allow MNR to exclude properties from the managed forest property class, but only in situations where the landowner has violated one or more of the eligibility criteria in section 9 of O. Reg. 282/98 or in its managed forest plan.

    • In such cases, MNR should notify MPAC of the change and MPAC would issue a supplementary notice of assessment to effect the mid-year class change.

  • MNR should be permitted to inspect properties for up to a year after they leave the managed forest property class. If it is found that activities were conducted on the property which violated the eligibility criteria of the class, MPAC should be notified and authorized to issue a notice of supplementary or omitted assessment to remove the managed forest classification back to the date of the offending activity.

  • MNR should not be authorized to delegate its obligation to consider requests for reconsideration to an outside agent.

Multi-Residential Property Class

Future Elimination of the Class:

  • The multi-residential property class should be combined with the residential class and the municipal tax rate on multi-residential properties should be reduced to the residential rate.

  • Municipalities should be required to fully implement the elimination of the multi-residential property class as early as January 1, 2006. However, in recognition of the unique circumstances facing the City of Toronto which had an extremely outdated assessment base prior to reform, Toronto should be given until at least January 1, 2010 to fully implement the merger of these two classes.

  • Municipalities should be permitted to redistribute the cost of eliminating the multi-residential class across all classes rather than shifting the cost entirely onto the residential class.

Rooming Houses:

  • Licensed rooming houses should be included in the residential class.

Retirement Homes:

  • Retirement homes should be included in the residential class.

Co-Operative Buildings:

  • Co-operative and co-ownership buildings should remain in the residential class and should not be placed in the multi-residential class in the event that less than 50% of the units are owner-occupied.

  • O. Reg. 282/98 should be amended to remove the provisions which prevent co-operative and co-ownership buildings from being included in the residential class if they are created after 1998. Buildings with the same ownership structure that are developed after 1998 should be in the residential class.

Vacant Multi-Residential Land:

  • Vacant lands which are zoned for any form of residential development should be in the residential class, regardless of whether the zoning specifies single family or high-density development.

Land Lease Communities:

  • Land lease communities should be included in the residential class to be consistent with the treatment of mobile home parks and other similar properties.

Thresholds:

  • Upper-tier and single-tier municipalities should be given the option of increasing the number of units (above seven) that will trigger eligibility for the multi-residential property class within their boundaries.

Non-Profit Organizations

  • The rebate program under section 442.1 of the Municipal Act should be enhanced to give lower-tier municipalities the option of providing property tax rebates to non-profit organizations that have not been made eligible for rebates by the upper-tier level of government.

  • The cost of rebates that are initiated by lower-tier municipalities should be shared in the same manner as tax relief for brownfield sites or heritage properties under sections 442.7 and 442.8 of the Municipal Act whereby the lower-tier municipality decides on a percentage of tax relief to be provided, a matching percentage of the education tax may be provided, and the upper-tier municipality is given the option of providing matching relief in respect of its portion of the tax.

  • The definition of "non-profit service organization" should be clarified to ensure that non-profit animal shelters, which by their very nature provide a service for the welfare of the community, are eligible for inclusion in the residential property class.

  • Expansions to the list of statutory exemptions are not recommended at this time.

Office Building and Shopping Centre Classes

  • The 25,000 square foot threshold should be maintained for the office building and shopping centre classes.
  • There should be only one 25,000 square foot threshold applied to each parcel of land on which there are one or more buildings that are eligible for inclusion in the office building or shopping centre classes.

Parking Lots and Vacant Land Class

Rates and Ratios:

  • Restrictions should be placed on the tax ratio of the parking lots and vacant land class to ensure that vacant land and railyard properties are not penalized by the application of this class. The tax rate of this class should be no higher than the rate that would be levied on vacant land and railyard properties in the commercial vacant land sub-class.

Sub-Classes:

  • The Province should not create parking lot sub-classes that would distinguish between different categories of ownership or different types of parking lots.

Pipelines

  • The property tax treatment of oil and gas pipelines should be changed from an assessment-based system to a prescribed tax rate system.

    The following approach is recommended to calculating and applying tax rates:

    • For each municipality, calculate the total property tax yield from pipelines (in the year preceding the first year of implementation of the new program) and calculate a tax rate which, when applied to the length of pipes in the municipality, would yield the same amount of tax.

    • These tax rates would be prescribed by the Minister of Finance for each municipality, further to discussions with MPAC and the industry.

    • Consideration should be given to increasing the rates over time to reflect the rate of inflation. It is also recommended that consideration be given to the appropriateness of making downward adjustments to reflect the depreciation of the pipeline assets (recognizing that the assessments currently factor in an annual depreciation amount).

    • To make this system operational, it would be necessary for pipeline owners to report on the location and length of their pipelines to the affected municipalities.

  • As a long-term goal, the municipal-specific tax rates should gradually be phased into consistent province-wide rates.

  • Ongoing dialogue should be conducted with pipeline owners and municipalities to ensure that this proposed new system is responsive to their needs.

  • Gate stations, which regulate gas pressure and monitor gas flow and quality, should be included in the commercial property class.

Race Tracks and Golf Courses

  • Provincial intervention in the methodology of assessing race tracks and golf courses is not recommended at this time.

  • The property owners should continue to engage in a dialogue and exchange of information with MPAC with a view to reaching a consensus on these issues. The Ministry of Finance should monitor the progress and outcome of these discussions through the Joint Committee.

Railways

Railway Corridors (Rights-of-Way):

  • The current system of prescribed tax rates for nine regions should be maintained for main-line rail corridors. However, modifications should be made to the tax rates of short-line railway corridors.

  • It is recommended that short-line railway corridors be taxed at the lower of:
    • The prescribed tax rate for the region in which the rail corridor is located; or
    • the average of the tax rates prescribed for all nine regions.

Railyards:

  • O. Reg. 282/98 should be amended to clarify that a railyard includes not only the tracks, but also the marshalling areas, loading and unloading areas, holding areas, intermodal transfer areas, and associated lands.

  • To provide equity to competing modes of transportation, it is recommended that trucking terminal lands (but not the buildings), which serve a similar function to railyard lands, be included in the excess land sub-class.

Recreational Complex for Employees

  • An expansion of the residential class to include recreational properties owned by for-profit business entities is not recommended.

Residential Condominiums

  • Residential condominiums should remain in the residential property class.

Schools (For-Profit)

  • Changes should not be made to the tax treatment of for-profit private schools.

Self-Storage Facilities

  • The commercial classification should be maintained for public storage and mini-warehouse facilities.

Shopping Malls

  • The Province should not create separate assessments for anchor tenants.

  • The Province should not introduce artificial tenant apportionments for shopping malls.

Small Business Properties

  • The graduated tax rate mechanism, which is currently optional, should be made mandatory for the commercial property class. This mechanism would require municipalities to apply lower tax rates to smaller and lower-valued properties.

    The Province should prescribe minimum standards for the assessed value threshold and the tax rate of the first band.

Trailers

  • All residential units located in trailer parks, campgrounds, and land lease communities should be assessed and taxed at the residential rate if they meet the test of being assessable real property by exhibiting characteristics of permanency.

  • MPAC should not be required to issue omitted assessments for residential units that have not been assessed prior to 2003 due to the moratorium policy that was previously in effect. Therefore, it is recommended that the Assessment Act be amended to create a limited exception to the omitted assessment rules to address this particular situation.

Wells

  • Oil wells should be subject to fixed assessments. Municipalities would continue to levy a tax on wells at the local commercial tax rate.

  • Different assessment rates should be prescribed for oil wells of different depths.

    • It is recommended that a maximum of four well depth assessment categories be created (to match the four major rock strata in southern Ontario), and that different fixed assessments be prescribed for each category.

    • It is recommended that a fifth category be established for "historic" oil wells, and this category should be assessed at a rate below the lowest of the rates applicable to the four aforementioned categories.

Issues for Future Consideration

Cap on Tax Increases:

  • The Province should conduct consultations with stakeholders on the question of the continuation of the mandatory cap on reassessment-related tax increases.

Crown Land:

  • The Province should conduct further consultations with municipalities to address their concerns about Crown land.


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