Good is bad

Posted: November 16, 2017 at 9:02 am   /   by   /   comments (9)

John Thompson wants you to pay his property tax increase. John’s property taxes are higher this year because his land is worth more. He doesn’t want to cash in his windfall just yet—so he wants you to pick up the resulting increase in his property taxes. Forever.

On Thursday, John will ask council to do this for him and other farmland owners. His presentation will be chock full of numbers, ratios and percentages. He will use words like fairness and suggest, ever so subtly, that the way he uses his land is more noble than the way others do.

But it comes down to this: John wants council to open up the municipal tax codes and make it so that he pays less tax. And you pay more. Next year. And every year after that.

John will tell council he has a problem. The land he and other farmers owns is worth more than it was four years ago—or 10 years ago. Objectively, this is a good thing for John and the value of his business. But in the short term, he is liable to pay more in property taxes. So, John must convince council that a positive is a negative.

If anyone can do that, it is John Thompson. He is an able and persuasive advocate for his landowner constituency.

Let us remember, however, that each of us pays municipal taxes based upon the value of our property. The value goes up, we pay more, the value goes down, we pay less.

That is the system. That is how it works. For everybody.

But John wants to change it—to tilt the table for his benefit. And for other farmland owners.

Let us remember, that these folks already pay a distinctly lower rate of tax than you do—much lower than other businesses, much lower than homeowners. (Specifically, farmland owners pay just a quarter of the tax rate of residential homeowners.)

This discount is based on the notion that an acre of farmland requires fewer municipal services than does an acre of homes. We can debate whether this is valid or not—particularly if that acre has just one home—but it is the balance we have agreed to across most of Ontario.

But now John wants to upset this balance. More problematic, he wants council to subvert Ontario’s market value system of determining property taxes in the process.

Specifically, he wants you to pay the increase in his tax bill, because his land is worth more than it was four years ago. More than that, he wants council to fix it so that he doesn’t have to come back each year, seeking a bigger and bigger discount. He likely understands that this is a one-shot deal—that residents will clarify council members’ thinking if they acquiesce to his request.

To do this, he will ask council to ensure that his taxes never rise as a result of rising land values. He will urge council to adopt a complicated tax formula to forever protect him—and other farmland owners—from higher taxes due to higher property values.

On the other hand, should his farmland prices ever fall, he will, of course, insist on paying the lower tax. Plus, when he sells some land, he will naturally insist on pocketing all the capital appreciation he has gained with the increase in his land. It is called the “having-your-cake-and-eating-ittoo” principle.

John wants all the upside. None of the down.

Now some may be thinking,why do I care? If John has conjured a creative way to pay less property tax, then good on him. But here is the problem. For every dollar farmland owners save in this scheme, a dollar is added to residential or business land owners’ tax bills.

The County will likely raise about $35 million next year in property taxes. All of this will come from landowners in Prince Edward County. If council agrees to let John pay less, you will pay more. It is as simple as that.

No one should blame John for asking for this relief. It is smart, creative and legitimate advocacy for his constituents.

But council needs to give this a wide berth. There are a great many property owners who have watched with mounting distress as their property values hav risen over the past decade. A home in Wellington worth $200,000 three years ago is now traded for double that amount. Good for the seller. But the widow next door has lived her adult life in this house. She lives on a fixed pension and a bit of savings. She is buffeted by this storm of demand.

This year her property taxes are a thousand dollars more than they were a couple of years ago. She doesn’t have a thousand dollars. Not on hand. Yes, her property is worth more—but she doesn’t want to move. Yet she may be forced to—so that she can pay her increased taxes.

Council, if it is inclined to go along with John Thompson’s scheme, must first explain to this widow—and every other resident of the County—why she should also have to help pay the taxes of farmland owners too.

Comments (9)

  • November 23, 2017 at 10:03 am Lockie

    Well, Rick, i guess you showed your true colours on this one. It is a subject that touches on many of the issues that are effecting our lives on a daily basis.
    I think it is understood by most that agricultural land value’s are being driven up by speculators, whether they be residential or agricorps. Certainly the small farmers have few options to increase their income to pay for the higher taxes. Their land is not generating increased profits the way real estate is.
    One option they do have is to rezone land touching the roads and hwy’s in The County and develop those one acre lots as residential. I see this as a serious problem for those who hope to preserve some of the beauty that I enjoyed when I first toured The County as a young lad more than 50 years ago. It was that beauty that I remembered in 1997 when I wanted to relocate to a more family friendly community than the one where I lived and worked. It was a great decision.
    Every bungalow built by the side of a road, however, steals a piece of beauty from the landscape.
    Norman Frennette’s point about the harm done by Freedman economics when applied to real estate is well taken. The residential development, whatever form it takes, should take place in our residential communities, much the way it is done in Europe. This just makes sense to me in so many ways.

  • November 23, 2017 at 5:46 am Gil Leclerc

    RIC, I am embarrassed by the tone you take in regards to your comments. You obviously don’t know where you are living and don’t care about what makes PEC so distinct. You also fail to understand the economics of the situation as you are focussed on the short term gains made in your position of shifting the taxes to anyone else. This short term gain mindset is typical of your corporate attitude that you learned back in good old corporate Toronto where you came from.

  • November 19, 2017 at 7:56 pm Ron

    Ya, you really have to watch those shifty farmers trying to increase our taxes. Are you freakin’ serious???? If they are not fighting increasing costs of fuel, repairs, equipment, labour and the fickleness of mother nature..they are fighting the cost of owning the property they try to make their living from. Just remember, for the most part, its the farmers who have provided the agriculture economy that so many people have been employed by before we we’re “discovered” and tourism took over.

  • November 19, 2017 at 4:44 pm Rick Conroy

    Lee is correct to note that farm land owners pay the residential rate for their homes. The letter writer is wrong, however, when he/she asserts that the increase in farm land assessments are due to land speculation in the County. MPAC only considers sales of land between farmers. Nor is the issue of the rising value of farmland isolated to Prince Edward County. It is a trend across this province. Indeed across North America.

    • November 22, 2017 at 6:08 pm Lee

      So you assert that farmers don’t have to pay more for land (that is sold farmer to farmer) because of outside speculative land buyers that are bidding on the same land, and that mpac always gets it right?

  • November 18, 2017 at 11:21 am Lee

    The writer doesn’t mention that farmers do pay full residential tax on their residence portion.
    Also not mentioned is that farmland values have gone up exponentially on speculation value in the county and have not followed declining commodity prices that farmers have been receiving the last number of years.
    So like the “widow”, bona fide farmers can only cash in if they sell out and get out (which a lot have had to).

  • November 17, 2017 at 7:36 pm Kate

    Council should be doing more to support local farmers especially when MPAC assessment is valuing farmers land more than it is worth.

  • November 17, 2017 at 8:42 am Mel

    I would be willing to pay a small increase in land tax if it means supporting local farmers.

  • November 16, 2017 at 9:14 pm m.moore

    You should really look into getting your facts straight. this article is no better then one from the daily mail! It is a shame you are willing to put down farmers that support this community just because you do not understand the topic at hand.

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