Tinkering with tax ratios

Not the best way to set tax policy: CAO

The farm tax ratio was back on the agenda last week at a council committee meeting. Earlier this year, council set its budget, but the percentages which are split up between different tax classes were still to be approved.

The farm tax ratio was once again up for debate. The Prince Edward Federation of Agriculture had requested that the ratio farmland owners pay be reduced from 25 per cent to 22 per cent for 2019, and even further to 20 per cent in 2020. The effect would see roughly $108,000 shifted onto residential owners’ tax bills in 2019.

Staff recommended that council maintain the farm tax ratio at 25 per cent of the residential rate for 2019, citing that council pursue a fair and equitable policy decision for all ratepayers, rather than respond to shifts in property value assessments.

Staff have also encouraged farm property owners to consider filing a request for reconsideration with MPAC if they disagree with their property assessment. In 2017 and 2018, 132 requests for reconsideration were filed with MPAC by Prince Edward County farmers. Of those, 67 per cent were successful and the total land value reduction was $8,228,100. The average assessment reduction for successful requests was 19 per cent.

Despite the urgings of senior staff, Councillor Jamie Forrester said he intended to put a motion on the floor to reduce the farm tax ratio to 22 per cent, calling it a “nobrainer”. He pointed to the decision made by council earlier in the meeting to reject the offer to purchase the former fire hall in Picton.

“I don’t know why this is a hard sell,” said Forrester. “We just basically gave away $1.2 million in tax money by not selling a property.”

Councillor Janice Maynard suggested that council, by failing to adjust the tax ratios over the past two years was, in effect, shifting residential taxes onto farmland owners.

“I will agree that we are supporting a tax shift from one category to another,” said Maynard, “but what we have been doing is shifting the tax burden onto the farmers.”

Councillor John Hirsch was content to leave the ratios alone. “I’ve spoken to a number of farmers, and not all, but the majority, have told me they are satisfied to leave things at the 25 per cent. This represents a fair and equitable policy decision for all ratepayers rather than making a shift that we haven’t done before,” said Hirsch.

Mayor Steve Ferguson underlined his long-held view that adjusting the farm tax ratio was the wrong way to assist these landowners.

“I can’t support a shift from one class to another class,” said Mayor Ferguson. “Last year we set up the grant program. We had a number of applications, a number of recipients. We would be going down a slippery slope, because at some point in the very near future MPAC is going to take to task another tax class who could come back to us asking for exactly the same thing.”

Ferguson recommended enhancing the grant program to capture more farmers who may be in need of tax relief.

Councillor Bill Roberts called on the new councillors around the horseshoe to be a bigger part of the discussion, as residents had voted for them to bring a fresh voice and perspective to the table.

Councillor Mike Harper said that many residents are struggling in Prince Edward County, across all tax classes.

“I understand there are farmers that are hurting,” said Harper. “But not all farmers are hurting to the same degree, and if we can find a way to help those who are especially in some difficulty, I prefer that approach rather than changing the tax ratio.”

In a bid to try and claw back some of the $108,000 that would be shifted onto the backs of residential taxpayers, Councillor Phil St. Jean proposed increasing the tax ratio for vacant land.

“I’ve never thought it was a really good policy to have a reduced rate for somebody who is squatting on land,” said St. Jean. “Just sitting there waiting for it to get better. I think it is our job to encourage people to develop those vacant commercial and industrial spaces.”

The council member later withdrew the motion, when it was explained the implications of such a policy shift hadn’t been measured or properly considered, and as such was unsuitable for a spur-of-the-moment decision.

Maynard was adamant that the current tax rates are already not proportionate.

“We have to find a way to communicate that what has happened over the last three years has been a tax shift from the residential taxpayers onto the farmers. They are now paying a proportionately larger share of the overall taxes than they were three years ago,” said Maynard.

CAO James Hepburn could not abide the councillor’s second run at this characterization.

“With all due respect, I don’t know how you can term what we’ve done as a tax shift,” said Hepburn. “It’s an assessment shift. I think we have to be careful about the words we use. That’s what’s happened. It hasn’t been done by council.”

When the motion to reduce the farm tax ratio to 22 per cent of the residential rate (from 25 per cent currently) failed, Councillor Nieman tabled a second motion, this time seeking to adjust the farm tax ratio so as to render it “tax neutral”.

While there was some general confusion about what the councillor was looking to achieve, Chief Administrative Officer James Hepburn took it to mean that the “tax ratio number would be adjusted so that the proportion of the taxes paid by the Farm Tax Class as a percentage of total taxes would be consistent in 2019 with 2018.”

The CAO was unable, on the spot, to render a specific farm tax ratio that would achieve that aim, so the motion indicated that the number would be calculated and inserted into the motion when it returns to council for ratification at a later date.

Mayor Ferguson warned his colleagues against making a quick decision.

“If there is an appetite to look at different formulae to bring this to revenue neutral, I would strongly suggest that staff be allowed to undertake that and do the appropriate research instead of doing it, figuratively speaking, on the back of a napkin,” said Mayor Ferguson.

Despite Nieman’s use of the term neutral, any reduction of one tax class by definition means shifting taxes payable from one category of taxpayer to another—in this case from farmland owner to homeowner.

That motion passed, to be revisited again on March 12.