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The FTR vortex
If by luck or good management County council manages to escape the seductive allure of its tax ratios debate on March 12, staff ought to consider burying these dials into the walls at Shire Hall and bricking them over. Never permitted to lead another council astray.
John Thompson and the Federation of Agriculture first dusted off these tax ratios a few years ago. The inner workings of the County tax code had rarely been tinkered with before. And rarely, if ever, used as a tool for enacting County public policy. But Thompson and other large landowners suggested that by twisting one of these knobs, council could offload a portion of their farm land property tax increases.
But to pull this off, they had to convince council. They knew municipal staff would never agree to subverting the market value assessment system by which the province allocates property taxes.
How much property tax a person or a business pays is based on the value of their land. Every four years the province reassesses this value and rebalances the tax load in each municipality accordingly. For most of the past two decades this favoured rural landowners as residential homes increased in value faster than farmland. Thus a greater share of the County tax burden flowed onto homeowners.
But in the last assessment cycle, the tide turned. It was farmland owners who saw major increases in the value of their land. Some of that tax burden flowed back onto farmland owners. For some it was a significant increase.
The Federation of Agriculture lobbied successive councils, asking them to intervene on their behalf to reduce this increase. But it turns out that turning one dial affects others. Reducing the tax paid by farmland owners means transferring these costs mostly onto County homeowners (The residential land class pays more than 90 per cent of the County levy each year.)
Farmland owners were unsuccessful last year in persuading council to do this. Council was, however, sympathetic to the hardship of increased taxes, especially upon young and new farmers. So, with the participation of Thompson and the Federation of Agriculture, council created the County Farming Assistance Grant Program, specifically to help those most affected by the property tax increases. It paid out $11,399 to recipients in January to offset farm land taxes this year.
Unsatisfied, Thompson and the Federation of Agriculture returned to council in the same month, asking for more broad-based relief, once again by way of an adjustment to the tax ratios.
Farmland owners currently pay 25 per cent of the rate that residential owners pay. (For their home and land around their house, farmland owners pay the same residential rate as everyone else.) In January they asked council to reduce this ratio to 22 per cent.
Last week, a committee of council refused the request. Again.
But some council members pressed on. Councillor Brad Nieman wanted to know: How much would the farm tax ratio have to be reduced to be “revenue neutral”? His aim was likely meant to make a tax reduction more palatable to homeowners, upon whom, a portion of farmland taxes would shift. But this was no simple calculation. Chief Administrative Officer James Hepburn advised the council member that he couldn’t produce the number on the spot, but promised to work it out and bring it to the council meeting on March 12.
Nieman’s request, however, raises many more questions, yet solves none of the fatal flaws of using tax ratios to effect policy goals.
Neutral compared to what, or more precisely, when? What moment in time is he hoping to crystallize relative proportions of the tax burden? And what happens next year? Will council be compelled to adjust them again, to assure farmland owners never pay more tax? Or, to lock in the proportion paid today?
How about the next assessment, when residential values rise faster than agricultural ones? Will council turn back the dial to mimic today’s tax burden allocations?
If this isn’t daunting enough, council members pondered more creative ways to tinker with tax ratios. Some have other policy aims in mind. What about vacant land? Shouldn’t these owners pay a greater share of the tax burden, as a means to motivate them to develop this land?
Here is the thing: No matter how worthy council deems these goals and appeals, tweaking tax ratios is the wrong remedy.
Market value assessment, for all its flaws, is law of the land. There is an equilibrium of sorts that signals to every landowner across Ontario the basis upon which their property tax is calculated. Furthermore there are several appeal mechanisms to help those unfairly afflicted.
It is a mistake for County council to intervene in this way. There are too many unknowns and consequences unimagined by this council. Once they begin turning these knobs, they will be twisting them forever. Every year they will be asked to “neutralize” the impact on one class or another. To address some inequity, real or imagined. Representatives of every tax class will file into Shire Hall looking for council to favour them with better tax ratios. Each year the asker will have a compelling precedent upon which to rely.
Or perhaps council wishes to do away with market value assessment altogether? Dismiss MPAC. Perhaps they want to sit down each year and divvy up the tax levy? Maybe this year, Cherry Valley residents should pay more? Or newcomers? Or red cedars?
County council needs to stay wide of the temptation to tinker with tax ratios.
Find other remedies. Oh, wait. It did—the Farming Assistance Grant Program. It’s time to move on.
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