Assessment Base Management Practice

Presentation to Members of Council and Staff: City of Peterborough

February 21 2005

Presentation by:Carla Y. Nell - Vice-President, Tax PolicyMunicipal Tax Equity (MTE) Consultants Inc.www.mte.ca

Assessment OverviewProperty assessment and taxes are the product of an integrated system involving:

Provincial GovernmentMunicipal Property Assessment Corporation,TaxpayersAssessment Review Board (ARB)Municipalities

While each has a distinct role and interest in the assessment process, success of the system depends on all parties defining relationships and working together effectively

Provincial GovernmentASSESSMENT LEGISLATION

The Provincial Government sets the broad legislative and regulatory framework for current value assessment in Ontario The Ministry of Finance is the principal ministry involved in setting assessment policies via the Assessment Act and accompanying regulations; Ontario Regulation 282/98 is of particular significance to the property tax system

Municipal Property Assessment Corporation (MPAC)

Responsible for assessing all property in OntarioMain responsibility is to estimate current value of property to serve as the basis of assessment, and to classify properties according to their use, for each of the over four million properties in OntarioValues are provided to municipalities on annual assessment rollsValues are based on opinions; it is a subjective measure, not an exact science

The Role of the RatepayerQuality AssuranceHolds both MPAC and the municipality accountable for accuracy of assessment, and equity and fairness in taxation; CVA versus tax connectionThe taxpayer is provided with opportunities to challenge CVA and tax in both the Assessment Act and Municipal Act

Assessment Review BoardAPPEALS -

The Assessment Review Board is an independent tribunal of the Ministry of the Attorney General that is responsible for hearing property assessment appealsIt has the authority to change an assessed value or a property classification, and to interpret statutes and regulations related to these purposes The Board’s decision is final and binding except on questions of law, which can be further appealed to the Ontario Court (General Division) Superior Court of Justice if the Court grants leave to do so

The Role of the MunicipalityMunicipal roles have changed over timeMunicipalities are finding that they need to become more actively involved in assessment matters for these reasons

The system is more complexChanges to MPAC structure, resources, responsibilitiesAccountability for taxation rests firmly at the local levelIncreased municipal service responsibilities has dramatically amplified the importance of locally-generated property tax revenues to the economic health of local government

Philosophy

Traditionally, Municipalities expected MPAC (formerly OPAC and Ministry of Finance) to protect and defend the assessment rollMunicipalities throughout Ontario are now becoming more actively involved to varying degrees in monitoring, auditing and augmenting the assessment function

Definition of Assessment Base Management (ABM)

ABM is an umbrella term that encompasses a wide range of assessment and taxation activities that are designed to maximize the amount of revenue available for collection by the Municipalities, to protect the assessment base from unnecessary losses = Assessment StabilizationAn ABM program can provide a means of effectively combating the need to reduce costs, cut primary services and /or increase the tax rate when additional revenue is required

ABM Objectives

Maximize productivity of existing revenue sources using initiatives to yield measurable results:

Increase revenuesDecrease lossesEnsure local government is receiving all of the revenue to which it is entitledPromote greater equity and fairness

About Municipal Tax Equity (MTE)Established in 1990, MTE provides assessment and taxation support services exclusively to municipalities and other public sector clients

Areas of Expertise:Tax Policy (education, analysis, and advice)Property Tax Administration Support (tax policy implementation, administration, tax billing services)Assessment Base Management (ABM) & Property Valuation, including reviews of assessment policy issues

Types of ABM InvolvementA comprehensive ABM program includes a range of projects and programs that fall within the two primary categories of ABM activity:

Proactive Approach = Review of the roll to enhance overall size and health of the assessment rollReactive Approach = Targeted involvement to mitigate against unnecessary erosion of the base; an important assessment stabilization method

ABM InitiativesProactive Services are designed to enhance size and health of the tax base; and increase revenue

Audit the Roll to Identify Errors and Omissions

Audit the Roll to Identify Desirable Assessment Policy/Practice Changes

Errors & Omissions AuditsThe Assessment Roll Audit Process

Annual review to identify anomalous assessment changes – assists with the identification of assessments that may be incorrect or that have not been updatedScrutinize changes by comparing last year’s value to CVA assigned for the current yearLost revenue to Municipality if not rectified by way of supp/omit process, or appeal to the ARB

Errors & Omissions AuditsDevelopment Land Review

Monitoring of land changes throughout development process that could result in value and/or tax class changesSubstantial value changes when plans registered and individual lots assigned; plus different (higher) tax rates will also applyYear end inaccuracies could mean missed revenue if not reflected on next roll return

Errors & Omissions AuditsBuilding Permit Review

Not uncommon that new assessment from new building permits is omitted from rollTiming of the addition to the collectors roll is critical for both municipalities and the taxpayer (to avoid a tax bill for potentially 3 years)Revenues lost if not omitted in timeframe Allocation of resources to track building permits that would generate assessment revenueMunicipal proactive appeals should be filed if supps/omits are not issued

Errors & Omissions AuditsTax Classification Review

Property use changes over timeABM audits can identify tax class changes and/or value increases for specific properties that will generate increased revenues (e.g. farmlands, commercial property).Supps/omits may be issued; municipal appeals may be required to protect the municipality’s right to retroactive changes and compel updates

Errors & Omissions AuditsVacant Land Classification Review

Property use changes over timePurpose is to identify properties that are classed as vacant land but that may contain buildings not assessedValue increases for specific properties will generate increased revenues Supps/omits may be issued; municipal appeals may be required to protect the municipality’s right to retroactive changes and compel updates

ABM InitiativesReactive Services are designed to protect the tax base and preserve revenue; not intended to deny the taxpayer’s right to seek relief, but rather to ensure that reductions through appeal/rebate are no more than fairExamples:

Assessment Appeal Participation Requests for Reconsideration ReviewsTax Relief Application Reviews

ABM InitiativesAssessment Appeal Participation

Protect the municipality’s interest in proceedings where a taxpayer/agent is alleging that a property is assessed “too high” or is incorrectly classifiedCan be done by either augmenting MPAC’s resources to bolster their position, or taking an alternative position

ABM InitiativesRequests for Reconsideration Reviews

Substantial erosion of assessment base each yearOften circumvents appeal processMunicipalities frequently unaware of negotiation and intended reductionOnus shifts to Municipality to challenge the settlement between MPAC and property owner Important that Municipality be involved in the process as early as possibleSeek explanation/justification about reduction or tax class change from MPAC

ABM ImplementationEnlisting the appropriate type and level of expertise is critical to a successful ABM program“Must be customized to fit needs” because no two municipalities are alikeA comprehensive ABM plan will go a long way to ensuring that Municipalities have greater access to the financial resources that they require to provide high quality services and to meet the needs of the community they serve.

Open Forum: Question and Answer