Ontario Fair Assessment System

General

Q 1: What is the Ontario Fair Assessment System?

A 1: The Ontario Fair Assessment System is a fair, consistent and understandable system of property assessment and taxation in Ontario. Under the new system, all properties are assessed at their current value. Current value is defined as the amount of money a property would realize if sold at arm's length by a willing seller to a willing buyer. Municipalities can set different tax rates for each of the seven new property classes. By varying the tax rates consistent with ranges of fairness set by the province, municipalities can adjust the amount of tax paid by each property class to promote fairness and respond to local concerns.

The Ontario Fair Assessment system will:

• Reassess all properties in Ontario based on current value

• Ensure property values remain current, with regular updates

• Allow an eight year phase-in period of tax changes

• Guarantee tax relief for low-income seniors and disabled homeowners Simplify the assessment appeals process

• Give municipalities important new powers to address their revenue needs in ways that best fit local priorities

Q 2: Why is property assessed?

A 2: Property has always been assessed to provide a base for education and municipal taxes, which help pay for local services such as police and fire protection, garbage and snow removal, road maintenance, public health and welfare. In Ontario assessed value is determined by property assessors who work for the Property Assessment Division of the Ministry of Finance.

The assessed values of all properties in a municipality are listed on an assessment roll which is delivered to municipalities. These values are multiplied by the municipal and education tax rates to determine the total property tax.

Q 3: Why is the government reassessing my property?

A 3: The government initiated a province-wide reassessment in 1996 to make property assessment fair and consistent within municipalities and across the province. Every property in Ontario will be assessed for the 1998 taxation year based on its current value as of June 30, 1996.

Reassessment was necessary because the former system had become out-of- date, inconsistent and unfair. Although most municipalities had assessments that were relatively up-to-date, assessments in some communities were as much as 50 years out-of-date. Out-of-date assessments create unfairness because owners of similar properties were paying different amounts of property tax.

This means that some property owners have been paying too much while others have not been paying their fair share.

Q 4: How will the Ontario Fair Assessment System fix these problems?

A 4: By reassessing every property to reflect its current value as of June 30, 1996, the Ontario Fair Assessment System will ensure that similar properties with a similar value in a municipality will pay similar taxes. Property taxes will be based on up-to-date, accurate and understandable property assessments.

Current Value Assessment

Q 5: How is property assessed?

A 5: Assessors have three main ways of determining the assessed value of a property. They can look at sales of similar properties, calculate how much it would cost to replace the property or use the income a property could generate to determine its value. The method or methods used depend on the type of property. Assessors also inspect and measure buildings; monitor building permits, which indicate where renovations or new construction is taking place; and use computer programs to help them calculate the assessed values.

Q 6: What would cause my assessment to change?

A 6: Your property assessment will change to reflect the current value of your property as of June 30, 1996. Any change in the value of your property will depend on when your property was last assessed as well as whether you've made any changes to your property. If you live in a municipality that has kept its property values up-to-date, you won't see much change. If you live in a municipality that has not been reassessed recently, your assessment may rise due to general increases in property values resulting, for example, from inflation. If you have made changes to your property, such as building an addition, the current value of your property would increase, so your assessment would also increase. Demolishing a garage, on the other hand, could decrease the assessed value of your property. Regular maintenance, such as roof repairs or window replacements will not increase the assessed value of your property.

Q 7: What is current value assessment? Why is it any different from market value?

A 7: Almost every assessment system in the world is based on value in one way or another. Property assessments across the province have been updated to current value in order to have a fair and consistent province-wide standard. Under the Ontario Fair Assessment System, your current value assessment is a reasonable estimate of what your property would have sold for on June 30, 1996. There are differences between the old and new property tax systems. For example:

• farmland assessments are based on continuing farm use, not on sales for development or any other potential use;

• municipalities can implement the reassessment gradually with a phase-in option of up to eight years;

• tax relief for low-income seniors and low income persons with disabilities is guaranteed;

• protection for lower-valued commercial property such as small main street businesses is a municipal option; and the appeals process is simplified and more accessible.

Q 8: What are some of the things that would affect the value of my property?

A 8: There are many factors affecting the value of your property. Some of these factors include the location and size of the lot, the age and general condition of the building(s), the type of construction and construction materials used, the number and size of the rooms, and the income generated by the property (if applicable).

Q 9: Is waterfront property, such as summer cottage, assessed differently?

A 9: To determine the current value of your waterfront property, assessors will take a number of attributes into account. Those most frequently used would include the selling price of other similar properties, location, access (water, road, year-round), amount of shoreline, type of shoreline, exposure, facilities and size of building. Generally speaking, in the case of waterfront property, more attributes are collected and analyzed for the land than for the buildings, which may contribute less to the overall value of the property.

Q 10: What happens when the reassessment is completed?

A 10: When the reassessment is completed, a Notice of Property Assessment will be mailed to every property owner during February 1998. The notice will indicate the assessed value of your property and who to contact for clarification or more information. The assessment will reflect the current value of your property as of June 30, 1996. In addition, each municipality will receive an assessment roll on April 30, 1998, which lists the assessment for all properties in the municipality. The municipality will then have to make decisions about how to distribute the tax burden among the different property classes. Assessments, together with the municipal and education tax rates, will determine the amount of property taxes.

Q 11: What are the different property classes?

A 11: The Ontario Fair Assessment system establishes seven standard property classes for assessment and taxation purposes:

• residential/farm
• multi-residential
• commercial
• industrial
• pipeline
• farmlands
• managed forests.

The new system also allows the provincial government to identify additional property classes.

For example, municipalities will be able to pass a by-law creating a special class for new multi-residential properties. This will allow municipalities to encourage construction of new apartment buildings by taxing them at a lower rate.

Q 12: How can I tell if my assessment is accurate?

A 12: Ask yourself whether your current value assessment is a reasonable estimate of what your property would have sold for on June 30, 1996. If you think it is, you have an accurate assessment and there is no need for you to do anything further, except to retain your Notice of Property Assessment for your records.

Q 13: Will my property be reassessed every year?

A 13: Yes, starting in 2003 for the 2004 tax year. Updating assessments annually will keep the system fair and equitable because properties will be assessed at their current value, based on the same date, in all parts of the province. For the taxation years of 1998, 1999 and 2000, the common assessment date will be June 30th 1996. All properties will be reassessed for the 2001 and 2002 taxation years on the valuation date of June 30th, 1999. By the year 2004, the valuation date will be June 30th, 2003. For taxation years after 2005, a three-year rolling average will be used. That means the assessed value will be the average of the property's value for the current taxation year and the previous two taxation years. Three-year rolling averages are intended to moderate any fluctuations in property values which may occur in any single year.

Q 14: Who is responsible for conducting assessments?

A 14: The Property Assessment Division of the Ministry of Finance is responsible for the reassessment for the 1998 tax year. Ontario is divided into 31 assessment regions. Each region has an Assessment Commissioner, who is responsible for the assessment activity within a region. The Commissioners and their assessors deal directly with taxpayers, municipalities and school boards.

Responsibilities include:

• determining the assessed value of every Ontario property;

• sending out Notices of Property Assessment;

• answering inquiries from the public about property assessment;

• defending assessments before tribunals and courts;

• conducting an enumeration every three years to support municipal and school board elections.

Recent legislation creating the Ontario Property Assessment Corporation responds to municipal government requests for greater control over the management of the assessment process, which is a key element of their local property tax system. All Ontario municipalities will be members of the new not-for-profit corporation, which will assume responsibility for the assessment function for the 1999 tax year. Assessment services will be provided by the Ontario Property Assessment Corporation to standards established by the Minister of Finance.

Municipal Taxation

Q 15: Does reassessment mean I'll pay more taxes?

A 15: An increase in your current value assessment does not necessarily mean you will experience a tax increase, in fact, your taxes may decrease. If a municipality's total tax base expands as a result of, for example, a new industrial sector that has been eveloped, new office buildings, new residential developments or condominiums, your local government can generate the same municipal tax revenue it has in the past by applying a lower tax rate. It is quite possible that the assessment of a property could rise but the actual property taxes could fall as a result of the reassessment. As always, your municipality will set the municipal tax rate early in 1998. The provincial government will set education tax rates. However, under the new Ontario Fair Assessment System, municipalities will have the option of phasing in any tax changes (municipal and education) over a period of up to eight years.

Q 16: How are my property taxes calculated?

A 16: Your current value assessment is just one part of the calculation. The other parts are the municipal tax rate, set by your municipality, and the education tax rate, set by the province.

This is the formula for calculating property tax:

Current Value Assessment X Municipal Tax Rate = Municipal Property Taxes

Current Value Assessment X Education Tax Rate = Education Property Taxes

Education Property Tax + Municipal Property Tax = Your Property Tax

Q 17: Will there be any protection for seniors and others on fixed incomes?

A 17: The government recognizes that low-income homeowners who are seniors or disabled need to be protected from large tax changes due to reassessment. The Ontario Fair Assessment System requires municipalities to offer a program to cancel or defer tax increases resulting from reassessment or provide other tax relief. Municipalities will also be able to phase in change gradually over a period of up to eight years.

Q 18: How will small businesses such as street front retailers manage tax shifts resulting from reassessment?

A 18: Municipalities will be able to set lower tax rates on lower valued commercial properties and they may also choose to phase-in the tax changes gradually - municipalities will have up to eight years to implement tax changes.

Q 19: The term "mill rate" will be replaced with "tax rate". What is the difference?

A 19: A mill rate referred to the amount of tax dollars a municipality would collect for every $1,000 of assessment. The tax rate will be a percentage of the assessed value of a property, and will be used to calculate property taxes. The switch from a mill rate to a tax rate makes it easier for property owners to understand how their property taxes are calculated. Under the new system, there will be a tax rate for each of the seven standard property classes. Municipalities will set the tax rate for each property class based on the revenue they will need to supply local services, such as fire fighting, garbage collection and snow removal. Municipalities will also include the education tax rate in the total tax rate.

Municipal Flexibility

Q 20: Will municipalities have more flexibility when setting tax rates?

A 20: Under the Ontario Fair Assessment System municipalities will have the power to vary the municipal tax rates for each of the seven new property classes to respond to local concerns and to achieve greater equity between property classes. Ranges of fairness established by the province will ensure that any disparity in municipal tax burdens that currently exists cannot be increased.

Municipalities will also have the option to:

• phase in tax changes over a period of up to eight years;

• set a lower tax rate for lower valued commercial properties; and

• tax new apartment buildings at a lower rate for a period of up to eight years.

Q 21: Why are municipalities restricted to a period of eight years to phase in tax changes resulting from the change to the assessment base?

A 21: The eight-year period is a reasonable compromise between the previous four- year maximum, under which many municipalities have been reassessed, and other proposals advocating even longer periods.

Assessment Appeals

Q 22: What if I have a concern with the assessment shown on my Notice of Property Assessment?

A 22: If you do not think your new assessment reflects the current value of your property as of June 30, 1996, you should phone or visit your local assessment office, where an assessor will explain how the value of your property was determined. Tell the assessor about anything that would affect the value of your property. If the assessor agrees with you, your assessment will be changed and an amended Notice of Property Assessment will be mailed to you, or you can call your local Regional Assessment Office. Community Assessment Information Sessions will be held across the province, where you can meet with assessment staff and review your assessment. Times and locations are included with your Notice of Property Assessment.

Q 23: If I still have a concern with my assessment after talking with the assessor, then what do I do?

A 23: You will have the right to appeal to the Assessment Review Board (ARB), which is an independent tribunal. In 1998 only, you will have until June 29, 1998 to file an appeal. In subsequent years, the deadline to file an appeal will be March 31, more than 90 days after the delivery of the assessment roll to your municipality. The decision of the ARB will be final. You will be able, however, to appeal to the Divisional Court of Ontario on a question of law.

Your local assessment office will give you the assistance you need to file an appeal.

Q 24: How will unresolved 1997 appeals be dealt with under the new appeals system?

A 24: Complaints concerning the 1997 taxation year or earlier years will be resolved according to the current provisions of the Assessment Act. However, after January 1, 1998, unresolved appeals at the Assessment Review Board will be subject to the following modifications:

• Unresolved 1997 will not be automatically renewed for 1998; a new appeal will have to be filed;

• the Assessment Review Board, not the Ontario Municipal Board, will make the final decision on these appeals;

• appeals to the Divisional Court on points of law will still be heard, with leave of the court.

Q 25: How will the Ontario Fair Assessment System affect apartment buildings?

A 25: In many Ontario municipalities rental apartment buildings have been taxed more heavily than single-family homes and condominiums. Under the Ontario Fair Assessment System, municipalities have been given the power to ensure that rental properties are taxed at a fair rate.

Municipalities will also be able to pass a by-law creating a separate property class for new rental apartment buildings with seven or more units so they can be taxed at a lower rate. This special tax treatment is designed to encourage the construction of new rental accommodation in communities where the vacancy rate is low. It will continue for eight years, after which the building will be included in the multi-residential property tax class for existing rental buildings.

Q 26: How are tenants affected?

A 26: Tenants do not pay municipal property tax directly. The building owner is responsible for paying property taxes and a portion of that cost is included in your rent. However, under the new Tenant Protection Act, which became law in December 1997, any property tax decrease received by building owners will automatically be passed through to tenants as a rent decrease.

Q 27: How will the Ontario Fair Assessment System affect farm properties?

A 27: Eligible farmlands will be included in a new separate property class, the Farm Tax Rebate Program will be eliminated and farmlands will be taxed at a low rate of 25 per cent of the residential/farm tax rate in their municipality. Eligible managed forests will be taxed at the same rate. The qualification for the new farmlands class will be consistent with the qualification for the Farm Tax Rebate Program. Properties in the farmlands and the managed forests property classes will be assessed based on continuing farm or managed forest use and not on sales for development.

Business Properties

Q 28: How will elimination of the Business Occupancy Tax affect business?

A 28: Businesses will no longer pay a Business Occupancy Tax. This was an unfair, outdated tax, designed in 1904, which taxed the business operator. Municipalities can decide whether or not to recover equivalent revenues from realty taxes on any or all property classes, as long as they do not make taxes less fair as a result.

Q 29: Will vacant commercial and industrial land be taxed differently?

A 29: Vacant commercial property will be taxed at 70 per cent of the commercial rate and vacant industrial property at 65 per cent of the industrial rate. If municipalities choose, both vacant commercial and vacant industrial properties can be taxed at the same percentage (between 65 and 70 percent of the tax rate for their respective classes).

Q 30: How will charitable organizations be taxed?

A 30: Charities (and other similar organizations as determined by municipalities) occupying business property will be eligible to receive tax rebates of up to 40 per cent of total tax from their municipality. Eligible groups would apply to municipalities annually to receive the rebate.