CAPTR

• « News Index

Toronto Star: McGuinty buys time with property tax freeze

Ian Urqhart

July 3, 2006

There was more spin than substance in last week's government announcement of a two-year freeze on property tax assessments in the province.

The ostensible reason for the freeze is to allow time for the Municipal Property Assessment Corp. (MPAC) to implement changes in its procedures that have been recommended by the provincial ombudsman.

"We want to ensure that the changes will result in an improved and strong functioning system that is fair to all Ontarians," said Finance Minister Greg Sorbara in announcing the two-year freeze last week.

But the changes could have been implemented while MPAC continued to reassess properties. That's the institutional equivalent of walking and chewing gum at the same time.

The real reason for the freeze is that Liberal MPPs have been getting it in the ear from their constituents about skyrocketing assessments.

The issue has been a prime topic in the weekly behind-closed-doors meetings of the Liberal caucus, where MPPs griped they could lose their seats if something were not done.

The freeze puts the issue on ice until after the next election, scheduled for October, 2007.

But that time is apparently not going to be used by the government to study the system of market value assessment. And it is the system that is the real problem; MPAC, with its complex computer systems and its arbitrary attitude, is just a symptom of the problem.

Market value assessment was introduced on a province-wide basis eight years ago by the Mike Harris Conservatives, who renamed it "current value assessment."

It was seen as much fairer than the polyglot system that preceded it, which often saw mansion owners in Toronto's tony neighbourhoods paying less in property taxes than bungalow residents in the suburbs.

But now, with assessments soaring in hot markets in the cities and on waterfront lots in cottage country, many Conservatives are having second thoughts about the system they created.

One Conservative MPP, Tim Hudak, a former minister in the Harris cabinet and now his party's finance critic, has introduced a private member's bill that would cap annual assessment increases at 5 per cent.

In defiance of their party leadership, eight Liberal backbenchers voted for Hudak's bill on second reading (approval in principle) back in April.

But the government has effectively derailed the bill by ensuring it never goes to committee.

The government sees a cap as inequitable. Says Sorbara: "You would transfer the tax burden from those living in Rosedale to those living in Rexdale."

Why? Because assessment is a zero sum game.

Every year as properties are reassessed by MPAC, there is an increase in the average assessed value of properties in a given municipality.

The municipality's mill rate is then adjusted downward so that the net effect is revenue neutral. That is, the municipality does not take in more or less money as a result of changes in assessment.

But for those property owners with assessment increases that are above average (in Rosedale, for example), taxes will go up.

And for those below average (in Rexdale, for example), they will go down. Capping the increase for the former would mean higher taxes for the latter.

Which explains why the government is reluctant to adopt a cap. Indeed, Conservative Leader John Tory, while criticizing the government for playing politics with its two-year freeze, has also been reluctant to embrace his own finance critic's bill.

"Tim Hudak has put forward one idea on his own behalf," said Tory recently when asked about current value assessment. Whether it becomes part of the Conservative party platform next year remains to be seen.

As for the governing Liberals, their view has been best expressed by Sorbara, paraphrasing Mississauga Mayor Hazel McCallion (who herself was paraphrasing Winston Churchill):

"Current value assessment is the worst system for establishing a property tax system except all of the others that have been tried, basically across the continent and perhaps the world."

Sorbara may be right. The system we have may be the best option among a series of unpalatable choices.

But the two-year freeze at the very least gives the government some breathing room to appoint a blue-ribbon panel to study other systems and consider alternatives.

It is an opportunity that should not be lost.

• « News Index