Current Value Assessment Demystified Part 2

  Further to my prior posting I will herein shed some light as to how Current Value Assessments are applied to your property for municipal property taxation purposes.

  Relative to the Assessment Notice that you have recently received, the current

value for your property was established effective January 1st 2012 and is an

updated value from the Current Value

Assessment that was established by MPAC back in January 2008. Two possible scenarios exist in terms of how

this revised assessment is applied to your property for taxation purposes.

 

 The most common application for a revised property assessment is for it to be “phased in” over the next four years. Please see the chart attached which illustrates how the phase-in process works. In this example, if your property assessment increased in value a total of $60,000, then for property taxation purposes, the increase is “phased-in” at a rate of $15,000 per year over the next four years. The municipal tax multiplier for your particular municipality will be applied to each of these values to arrive at your annual property taxes for the corresponding years.

  The second example illustrates what happens in the event your assessed value has decreased. If this is the case which is not doubt somewhat rare, then the decreased value is applied effective with the 2013 taxation year and this value will remain constant or fixed for the four year assessment cycle.

  This is somewhat of a good news bad news scenario. We all take some solace in learning that our property values and equity is increasing. With Current Value Assessments moving more in line with market values, sellers will be in a better position to defend their asking price to potential buyers. The immediate reaction or fear that most property owners have however is the increase in their assessed value will immediately trigger an increase in taxes. This need not nor should not be the case.

  I have a property listed for sale that has a Current Value Assessment of $842,000. The new Current Value Assessment has jumped to $1.293 million, an increase of $451,000 or 53.5%. When phased-in over the four year period, the annual increase amounts to $112,750. Using the current tax multiplier for the municipality where this property resides, the annual tax increase would amount to $1,103.00 which is an increase of 13.4% over the taxes currently being paid for 2012. Does this municipality need, can they justify or are they entitled to a 13.4% property tax increase just because the Current Value Assessment has risen? Absolutely not.

  MPAC has confirmed that in northern Ontario for example, Current Value Assessments for the next four year cycle have increased 30% while farm/agricultural assessments across the province have increased 40% to 70%. If municipalities across the province are managing their budgets effectively, then municipal tax multipliers should be coming down. Adjustments to municipal tax multipliers should somewhat reflect the increases which are taking place with respect to Current Value Assessments as a whole. Municipalities had better sharpen their pencils come budget time for 2013 through 2016. In the example provided where the Current Value Assessment increased from $300,000 to $360,000, it is neither fair nor justifiable for a municipality to follow through with a corresponding 20% increase in property taxes during the four year assessment cycle. With provincial Municipal elections now 2 years away, property owners need to keep this in mind and should be holding their municipal Councils accountable for their spending.