Sunday, March 11, 2007

John Tory Dons A Cap

A couple of things to consider when evaluating Ontario P.C. Leader John Tory's pledge to cap Ontario property tax assessments at 5 per cent.

Firstly, does MPAC (the Municipal Property Assessment Corporation), the body that determines property tax assessments in Ontario, act like a bunch of dicks? The answer to that is probably "yes". Once an arm of the political government, about ten years ago MPAC was spun off into a weird private sector-type entity that essentially had no competition. All sorts of abuses can pop up under these circumstances. MPAC makes a lot of mistakes when it comes to valuing large industrial/commercial properties, for example, where computer models and college students doing "drive bys" aren't good enough to establish value. Unfortunately, MPAC's decision re when to acknowledge error often seems based on arbitrary whim. But will capping assessments change their behavior? Well, it would render them irrelevant. If you are going to cap increases at five per cent permanently, based on the current level, its difficult to see why you a body out there determining market value on an on-going basis. So why not get rid of MPAC entirely?

Secondly, are outrageous property tax increases MPACs fault, generally speaking? Probably not. In every case, where a jurisdiction has "reformed" its property tax system by introducing Market Value Assessment (or Actual Value Assessment, as they call it in Ontario), they have thereafter scrambled to negate the effects of their own reforms. The system tends to punish people at random just because they live in areas where property values have increased sharply, and reward them just as randomly for the opposite reason. So when AVA was first introduced by the Mike Harris Tories, Toronto apartment dwellers would have seen their rents sky-rocket as property tax increases were passed through by building owners, and downtown office towers would have saved millions because of the effects of the early 1990s' recession. Knowing that this wouldn't fly, the provincial government immediately introduced measures to take the "actual value" out of Actual Value Assessment. Hikes on apartment buildings based on market conditions were capped, and decreases on office properties likewise stifled.

John Tory's plan simply extends the principle of undermining the reforms launched the last Conservative government.

So the message is, ignore calls for property tax reform based on market value. Once again, if you hear a politician running this line by you, kill 'em and run the body through a chipper.


Jim91 said...

Rent did increase repeatedly due to property tax increases even with the caps.

This was supported by a Toronto tenant group of course wholey funded by the city who were against Toronto tenants property tax cuts.

While other unfunded Toronto tenants associations fought the city.

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