Municipalities need to establish reserve contingencies for property tax appeals (Article)

This artlcle was published in Friday June 7, 2013 edition of Novae Res Urbis – Toronto Edition, by Greg MacDonald


Despite a pending provincial review into the assessment process; municipalities need to build more contingencies for assessment changes and appeals into their budgets, according to delegates at the International Property Tax Institute’s Ontario tax summit. But convincing local politicians looking for budget savings to build in safeguards can be a major barrier to preventing budget crunches caused by assessment shortfalls, Municipal Finance Officers Association of Ontario representative and Clarington treasurer Nancy Taylor said at the summit, held in North York Tuesday. “It’s very difficult to sell [assessment contingencies] to a council that’s been elected on a promise of zero tax;’ Taylor said. She added that the inclusion of assessment reform in the provincial budget, however, highlights the importance of planning for shortfalls.


In last month’s budget, the provincial government pledged to review the property assessment process, particularly the appeals system. Tue Municipal Property Assessment Corporation has come under fire in recent years for incorrect or late assessments, as well as a back-up of appeals at the Assessment Review Board. While the provincial budget promises changes, what those refinements will be is vague, said University of Toronto professor Almos Tassonyi. “Reading the Ontario budget is a bit like reading the Bible;’ he said. “You can infer what you like, you can take away what you like but you have to read between the lines to understand the [implications]:’As large-scale assessment appeals occur across the province, municipalities must be prepared for potentially major changes to their assessment bases. Increasingly, the urgency for contingency planning is made apparent as the Assessment Review Board makes its rulings. A recent example is a decision which left two rural communities-Espanola and Dryden with a $1-million budget shortfall due to a decrease in the assessed value of a local paper mill.


The City of Toronto recently faced one of its biggest assessment appeals when bank towers in the financial district appealed their property assessments between 2001 and 2012. The 12 office towers represent 9 per cent of the city’s commercial property tax revenue, so any changes to the assessed value over the 11-year period had implications for the city’s budget. The city settled the appeal in November, resulting in the loss of $95-million in property taxes. Agreement was reached on the minutes of settlement in March.


Changes in assessment and appeals by property owners are built into the city’s budget process, said Toronto revenue services director Casey Brendon. “We put money aside at the end of every year to provide for a potential assessment loss;’ Brendon said, noting that the process creates “breathing room” in the event of a large change due to an appeal. In the case of the bank towers, the city over-budgeted contingency funds to deal with the impact of the appeal ┬áby close to a $100-million. Brendon wants that money to go into the city’s reserves, including a $30-million dedicated assessment appeals reserve fund.


The city’s executive committee approved the establishment of the reserve fund at a meeting in late May. The matter will be before council at its meeting next week. While Brendon is hopeful the funding will go to a reserve, he acknowledges that it could be tempting to use it in this year’s budget. “There’s a lot of money at stake;’ he said.