When MPAC visits

Rising farmland prices likely means higher property taxes

Prince Edward County raises about $30 million each year through taxes on about 12,000 properties—an average of $2,500 in taxes payable per property. But not all property is created equally, so these taxes aren’t divvied up equally either.

The province has determined that the share each property pays must be based upon its current market value—the amount a buyer would be willing to pay in a straight-up sale today. In this way, valuable properties pay more, humble properties pay less. To keep track of these fluctuating values, Ontario created an agency, the Municipal Property Assessment Corporations (MPAC) to monitor about five million properties.

The system works well enough in city and suburban settings, where understanding the value of one house says a lot about the value of other homes in the neighbourhood. It works less well in rural areas. Even less so when comparing farmland.

The important bit is that folks with a large waterfront home pay a greater share of the County’s $30 million tax levy than the owner of an vacant lot in Hillier. Seemingly unsatisfied with this modest amount of complexity— municipalities then tax properties at different rates based upon how the land is used. In the County, Shire Hall applies 13 tax rates—residential, commercial, industrial etc. One of the lowest rates is accorded to farmland—that is actively being used to farm.

To ensure this is all legit and above board, the province employs the Ontario Ministry of Agriculture, Food and Rural Affairs to determine and certify who is a farmer, and who isn’t. Only a registered farmer is eligible to pay the lower property tax rate.

MPAC once tried to update its valuations each year—but that became unworkable. Currently, it does this once every four years and phases in the change over the same number of years.

But occasionally, one or more classes of property increases in value at a faster rate than others in this four-year span. Unless tax rates are adjusted, the portion paid by these classes of property owners will rise—perhaps dramatically.

To understand this, it is important to remember that only 12,000 property taxpayers fund Shire Hall’s $30 million tax levy each year. If some pay more, others pay less. Every four years there are winners and losers—as the County’s tax burden shifts from one class to another.

This brings us to the MPAC meeting specifically for farmers held last week in Wellington. It seemed strange—a special meeting for one class of property owner. Especially since changes to one class necessarily have an effect on all other classes.

All became clear, however, when the MPAC folks explained that farmland values have risen exponentially in this region since 2009. Though prices have cooled in recent years, farmland values rose by 30 per cent in 2012, 16 per cent in 2013 and 12 per cent in 2014.

For some, their farmland value has doubled since the last assessment. This likely means a big hike in the property tax bill for these property owners.

Did wineries do this? Or folks retiring onto farms? Terri-Lynne Wright of MPAC says no. She says the value of farmland across the province has been climbing steadily. She explained that farmland valuations are based solely on sales of land used by farmers, as farmland, sold to registered farmers. She dismissed the notion that non-farm uses were driving farmland values higher.

It now puts the issue awkwardly into Shire Hall’s court. Using existing tax rates, farmland owners will pay a larger share of the municipal levy than they have ever done. Other classes of property owners will pay smaller share (though the actual amount each pays, and whether it goes up or down) will depend on the size of the tax levy next year.

County council will be tempted to ratchet the farmland rate down to appease these landowners. But doing so will nullify the principle of market value assessment in determining who pays property taxes.

This isn’t something council is qualified to do. The County does, however, share this same dilemma with other rural communities in Ontario. It needs to seek guidance from the province or prod its regional association.

MPAC can’t do it. It can only raise red flags when it sees a problem. IT has done this. Now its time for the County to seek an appropriate remedy. This is not something it should try to fashion inside Shire Hall.