Our solution: scrap both MPAC and the system

Editorial Orangeville Citizen December 16 2010
ONTARIO’S AUDITOR GENERAL, Jim McCarter, got a lot of press last week following the release of his annual report.
However, relatively little of the coverage dealt with the third chapter of the report, based on his investigation of the operations of the Municipal Property Assessment Corporation, which is responsible for setting values on all the assessable property in the province.
Although his findings may have surprised many, we were not among them.
For years, this space has deplored the whole concept of market value assessment as inherently so subjective that it’s almost impossible for any amount to be justified unless the property in question has recently been sold by a willing seller to a willing buyer.
Worse yet, the system is designed to punish those who maintain their property well and enhance its appearance with effective landscaping, while rewarding those whose properties are poorly maintained, messy and in obvious need of repair.
However, even we were a bit surprised at the extent of the discrepancies the auditor general’s investigators found in the most recent valuation of properties, completed by Jan. 1, 2008.
At the high end were three properties: one assessed at $588,000 that was sold in May 2008 for $1.4 million; one assessed at $874,000 that had already been sold the previous November for $2.1 million, and one assessed at $714,000 that sold the following April for more than $1.6 million.
On the other hand, MPAC assessed one property at $330,000 that commanded a princely $100,000 when it was sold the following June. Worse yet, a property that had been sold for $85,000 in May 2007 was deemed worth $217,000 and one assessed at $335,000 was sold in October 2008 for just $150,000.
Undoubtedly, such enormous discrepancies are exceptional, but we suspect that in towns like Orangeville or Shelburne there are wide variations in the assessments of similar properties, particularly if one happens to have been built 50 years ago and the other is in a new subdivision.
The auditor general’s first recommendation was that to help ensure that individual properties are assessed in accordance with the Assessment Act at the amount that a willing buyer would pay to a willing seller, MPAC should “formally establish a threshold above which differences between a property’s sale price and its assessed market value must be investigated within a reasonable period of time, and where warranted, adjust the property’s assessed market value accordingly.”
The report says MPAC has already agreed to that proposal, noting that it “already has a requirement in place for field-office staff to conduct a sales investigation when the sale price of a property differs from its assessed value beyond a certain amount,” and adding that the requirement for conducting a sales investigation will be reviewed by October 2010 “and will likely incorporate such additional factors as the date of the most recent inspection, existence of outstanding building permits, and whether the property is atypical for the neighbourhood.
“Where necessary, the Corporation will make adjustments to a property’s assessed value as a result of a sales investigation.”
The report also called for more frequent inspections of residential properties but noted that MPAC’s 233 inspectors have heavy workloads, particularly in Toronto where there are more than 25,000 properties per inspector.
Although the report called for MPAC to improve its procurement policies, notably in the area of payments to consultants and contractors, nowhere in the report did we find just how much the current assessment system costs.
However, it must be a huge amount when you consider that MPAC must assess 4.5 million residential and farm properties, plus 157 multi-residential and large commercial properties and 77,000 large industrial properties.
When you add to that the cost of handling requests for reviews and assessment appeals, the question Ontarians should be asking their MPPs is whether it’s all worth whatever the price is.
And it’s not as if there was no other way of raising taxes from property owners.
On the contrary, one alternative that would involve relatively miniscule costs would be to base property taxation on two factors that would bear some relationship to a property’s value but have the twin benefits of stability and simplicity: the amount of property owned and the local zoning.
All the “assessor” would have ti do is calculate the size of the owner’s lot and the occupancy space in the house or other structure.
Armed with that simple calculation (which would change only if the structure was replaced or enlarged), it would be up to the municipality to decide the appropriate zoning and the rates to be charged for the various types of property that would be sufficient to offset the budgeted expenditures.
If the Province is unwilling to institute such a reform, it should at least let municipalities opt out of market value assessment, particularly if the reform is supported by voters in a referendum