MPAC is a Four Letter Word

Say GST, and many people automatically start to curse Brian Mulroney for implementing it and Jean Chrétien for not ending it as he promised. MPAC affects me in similar fashion except I direct my feelings towards former Ontario Premier Mike Harris.

From my perspective, it was one of the worst law changes implemented in the province of Ontario by the former Harris government. The methodology, Current Value Assessment (CVA) has few, if any, redeeming features but does have some serious negatives.

An overall negative, whether done intentionally or not, is that CVA adds confusion to establishing the accountability for changes in individual property taxes; i.e.- it fogs accountability for property tax increases or decreases.

For example, according to my MPAC assessment notice, the average assessment change for Whitby is 3.4 % . That does not mean, 2009 Whitby property taxes will change by that percentage. Why; because the law says that the tax rate for Whitby must be adjusted similarly. The final 2009 budget, when passed by Council, will modify that adjusted tax rate, higher or, far less likely, lower. It will then be used in calculating the 2009 property taxes. A similar process is gone through for County and Region property taxes. MPAC, however, did not include the necessary Durham Region assessment change numbers on the assessment notice. This lack of information increases the difficulty for taxpayers too understand the root causes for changes in their total property tax bill.

Understanding the degree of accountability for increased property taxes is confusing. Cynical as it may sound, I think that is why there has not been an outcry from municipal politicians insisting the Province develop a better assessment methodology.

From my perspective, one of the most significant downsides to CVA is that it results in what amounts to a tax on an unrealized or unsubstantiated capital profit. What does that mean? Consider the following example;

Let’s assume Whitby, very uncharacteristically, decided to keep all 2009 budget lines equal to 2008. Based on the data from Nov 5, 2008 Whitby This Week article, taxes of a Ward 1 resident would increase because he/she lives in Ward 1. Most property assessments in all other wards would decrease. Why, because in Ward 1 assessments increased by 3.5% to 4.4%, which is higher than average assessment change for Whitby of 3.4%. In Wards 2, 3 & 4 assessments only increased by 2.2% to 3.4% or less that the average 3.4% change.

Simply put, this is a tax shift. The property tax increase is not based on a change in either the use of or availability of municipal services. Instead, the hypothetical increase in value results from the use of MPAC formulae, considered confidential under proprietary rights. In a time where politicians deem transparency of government processes essential, CVA is a disgrace.

The assessment process must change to eliminate the vagaries of the market place. A new methodology that uses a flat rate to establish an arbitrary consistent value for old and new buildings alike, and another for land, should be developed for use province wide, year after year. Then the tax rates established by each municipality would truly represent the cost for the services each provides for its residents.

Such a process would simplify the taxation process, eliminate the overhead associated with tax transferring based on the latest popularity of a location and lastly, but most importantly, bring clear political accountability for property tax changes within each municipality.