News   Nov 18, 2019
 795     2 
News   Nov 18, 2019
 301     0 
News   Nov 18, 2019
 1.4K     5 

Property taxes

taal

Senior Member
Member Bio
Joined
May 19, 2007
Messages
6,605
Reaction score
95
Location
NYCC
Might as well have a single thread regarding this rather then the small tidbits that pop up in other threads and eventually get deleted or shunned as being not related to the given topic.

As a starting point:

nfitz; said:
You sure about that? It was reported this year that the residential tax increased by 2.9%. The residential mill rate itself dropped from 0.6027807 in 2009 to 0.5895702% in 2010; a drop of 2.2% (because property values themselves increased far more than 2.9%). However the commercial rates dropped from 2.0431761% in 2009 to 1.9367482% in 2010; a drop of 5.2%.

To me that looks at though the difference between the drop of the residential rate and the commercial rate exceeds the increase in the total taxes paid, so commercial rates are dropping. Even if frozen compared to residential taxes they are dropping versus inflation.

Not sure I'm missing something, I'm only looking at this, and not something else ...
Glen said:
Yes, you are missing the relative changes in assessment values. During the last assessment cycle non residential assessment values increased more than residential ones. As such the mill rate decreases more. You should also note that when this occurs, non residential increasing faster than residential, they city lets it go because it decreases the ratio with little impact on revenues. But when the opposite occurs, they city runs to the Province and gets the minister of finance to prevent "cva related tax burden shifts". Toronto cries that it is unfair to allow tax shifts when residential assessments rise faster than non residential, but allows the opposite to occur.

From June 2004,
nfitz said:
Interesting. That does create a dlilemna. And it surprises me, given the amount of vacant commerical lands we see through much of the outer 416 area. Given we don't have acres of residential lands empty, and we do have acres of commercial/industrial lands empty, I'm surprised that market forces are pushing up commercial/industrial lands faster than residential lands. Again, I'm wondering if I'm missing something ... (and I see this in good faith!).
Glen said:
Speculation. Many commercial properties have assessment values that poorly related to cap rates (income). MPAC can choose, and does so, to value non residential properties market values instead of based on income. Many non residential properties have a market value that is related to their redevelopment potential (residential). MPAC looks at recent sales, which is influenced by purchases of such sites, and extrapolates the heightened values to other properties. Most office buildings are valued on a strict income approach.

There is also the issue of promised tax cuts. Toronto's high taxes have decreased values. When the city announced the program to reduce taxes, values increased in anticipation of of higher net rents.

One simple step the province could take is to change the way that MPAC values non residential properties to be valued on as is current use (income) basis. This would remove the speculative distortions.
nfitz said:
Why were commercial properties not revalued in 2008 when residential properties were revalued?
 

Glen

Senior Member
Member Bio
Joined
Oct 12, 2007
Messages
1,305
Reaction score
0
Every property in Ontario, regardless of class, shares the same assessment date.
 

taal

Senior Member
Member Bio
Joined
May 19, 2007
Messages
6,605
Reaction score
95
Location
NYCC
Every property in Ontario, regardless of class, shares the same assessment date.
I'm probably missing something ... but say property values go up ... if the city is looking to take in the same dollar value the mill rate decreases correct? In that sense commercial property taxes are decreasing from % point of view but from a land owner (and it's tenants) if the MPAC valuation isn't overly accurate really nothing has changed in terms of property taxes ?

I'm sure I'm missing something here - otherwise this seems OK and amounts to rates staying the same but definitely not decreasing ... in other words instead of being proactive this is a wait and see attitude in the sense that it relies on the 905 increasing there rate i.e. not lowering their mill rates - and by them coming up over time we may be more equalized ?
 

Glen

Senior Member
Member Bio
Joined
Oct 12, 2007
Messages
1,305
Reaction score
0
I'm probably missing something ... but say property values go up ... if the city is looking to take in the same dollar value the mill rate decreases correct? In that sense commercial property taxes are decreasing from % point of view but from a land owner (and it's tenants) if the MPAC valuation isn't overly accurate really nothing has changed in terms of property taxes ?
Yes that is what happens. To be revenue neutral, if assessment values go up by 20%, then the mill rate will decline by 20%. The tax revenue generated will be the same.

I'm sure I'm missing something here - otherwise this seems OK and amounts to rates staying the same but definitely not decreasing ... in other words instead of being proactive this is a wait and see attitude in the sense that it relies on the 905 increasing there rate i.e. not lowering their mill rates - and by them coming up over time we may be more equalized ?
The real importance is looking the actual burden and ratios between classes along with just what it is buying. To many people look at property tax like a sales tax. It should be looked at as a fee for your municipality to provide services. The amount of which is determined by each municipality. That is why comparisons between Toronto and its neighbours are misleading. That is only important when comparing Pareto efficiency between municipalities. If Toronto residents support much higher levels of services, it should be reflected in their taxes. Nothing wrong with that, if that is what they desire.
 

nfitz

Superstar
Member Bio
Joined
Nov 10, 2007
Messages
23,253
Reaction score
3,360
Location
Toronto
Though you can still have a higher level of service, if the delivery of service is more efficient. As it often is in denser areas. Just the simple amount pavement and watermain that has to be maintained per capita in a denser area with highrises everywhere is a lot less than you get in an estate-lot subdivision in Halton.
 

taal

Senior Member
Member Bio
Joined
May 19, 2007
Messages
6,605
Reaction score
95
Location
NYCC
Yes that is what happens. To be revenue neutral, if assessment values go up by 20%, then the mill rate will decline by 20%. The tax revenue generated will be the same.



The real importance is looking the actual burden and ratios between classes along with just what it is buying. To many people look at property tax like a sales tax. It should be looked at as a fee for your municipality to provide services. The amount of which is determined by each municipality. That is why comparisons between Toronto and its neighbours are misleading. That is only important when comparing Pareto efficiency between municipalities. If Toronto residents support much higher levels of services, it should be reflected in their taxes. Nothing wrong with that, if that is what they desire.
Alright the above leads me to question the following:

1)
Is Toronto indeed keeping the commercial property tax revenue the same? i.e. is it reducing the mill rate and effectively commercial property owners are paying the same value i.e. it's not increasing - as I believe the plan states ... or at the very least they're only paying a little bit more (proportionally compared to the residential tax rate increase). Clearly because it's not being decreased this is very much dependent on the 905 and if there rates are changing ?

2)
Again from a commercial property tax perspective - for the most part, aren't the services provided across the GTA equal in the sense that there is little in the way of benefit of business locating in the 905 or 416 for the services their commercial property tax provide? So with that said really commercial tax owners will just care about whatever property tax they are paying - which we've shown is 1.5-2X higher - just for reference:

(M = Mississauga, T = Toronto)
Total property tax (including provincial education component):
M COM: 2.14%
T COM: 3.59%

Provincial education component:
T = 1.66
M = 1.29 (this is from Markham actually but the 905 is similar throughout).

So about 170% greater.
 

taal

Senior Member
Member Bio
Joined
May 19, 2007
Messages
6,605
Reaction score
95
Location
NYCC
For the record, I think the taxes for commercial property is out of whack. I say this because personal property taxes are lower than much of the GTA.
They are but not as much as you think:

(M = Mississauga, T = Toronto)
Total property tax (including provincial education component):
M RES: 0.98%
T RES: 0.83%

Also, there is no provincial interference here ... residential provincial education rates are equal between the 416 and 905.


But I think Glen's argument about 'paying for what you get' is a lot more important here - many more services are provided in the 416 at lower costs.
This burden is probably put on commercial properties as well even though this doesn't really make sense. Moreover the cost of social welfare must be extremely high in Toronto compared to it's neighbors and I don't think the province has taken all of this back ... in the past the rest of the 905 paid Toronto a certain amount for this but the province took this over - effectively this got that burden of the 905 but the 416 is still paying more then it used to for this.
 

Glen

Senior Member
Member Bio
Joined
Oct 12, 2007
Messages
1,305
Reaction score
0
Though you can still have a higher level of service, if the delivery of service is more efficient. As it often is in denser areas. Just the simple amount pavement and watermain that has to be maintained per capita in a denser area with highrises everywhere is a lot less than you get in an estate-lot subdivision in Halton.
There is savings and expenses as a result of density. Importantly though, one has to realize that many of the hard costs, of building roads, water mains, sewers etc. are to be paid for by development fees. The maintenance and replacement though will need to be paid for from the operating budget. That being said, it is wrong to automatically assume that higher density is less expensive. The research is certainly equivocal. If you steadfastly accept it though, that density offers savings, you should contact your councillor to ask why we have not realized it.

Here is a comparison of some service costs.
http://www.toronto.ca/city_performance/reports.htm
 

denfromoakvillemilton

Senior Member
Member Bio
Joined
Apr 30, 2008
Messages
6,585
Reaction score
616
Location
Former City of York, Ontario, Canada
They are but not as much as you think:

(M = Mississauga, T = Toronto)
Total property tax (including provincial education component):
M RES: 0.98%
T RES: 0.83%

Also, there is no provincial interference here ... residential provincial education rates are equal between the 416 and 905.


But I think Glen's argument about 'paying for what you get' is a lot more important here - many more services are provided in the 416 at lower costs.
This burden is probably put on commercial properties as well even though this doesn't really make sense. Moreover the cost of social welfare must be extremely high in Toronto compared to it's neighbors and I don't think the province has taken all of this back ... in the past the rest of the 905 paid Toronto a certain amount for this but the province took this over - effectively this got that burden of the 905 but the 416 is still paying more then it used to for this.
That's true. Therefore we have to find a balance between good service and (percived) lower taxes. What I am saying is if we don't work together we are going to see more 905 flight.
 

Glen

Senior Member
Member Bio
Joined
Oct 12, 2007
Messages
1,305
Reaction score
0
Alright the above leads me to question the following:

1)
Is Toronto indeed keeping the commercial property tax revenue the same? i.e. is it reducing the mill rate and effectively commercial property owners are paying the same value i.e. it's not increasing - as I believe the plan states ... or at the very least they're only paying a little bit more (proportionally compared to the residential tax rate increase). Clearly because it's not being decreased this is very much dependent on the 905 and if there rates are changing ?

2)
Again from a commercial property tax perspective - for the most part, aren't the services provided across the GTA equal in the sense that there is little in the way of benefit of business locating in the 905 or 416 for the services their commercial property tax provide? So with that said really commercial tax owners will just care about whatever property tax they are paying - which we've shown is 1.5-2X higher - just for reference:

(M = Mississauga, T = Toronto)
Total property tax (including provincial education component):
M COM: 2.14%
T COM: 3.59%

Provincial education component:
T = 1.66
M = 1.29 (this is from Markham actually but the 905 is similar throughout).

So about 170% greater.
1) The revenues have not been going down, but rising slower than residential. To complicate matters there is the issue of CVA tax capping. When assessments were updated in the late nineties, owners of older properties were faced with tax potentially large tax increases (+500%). To mitigate such a sudden change the province legislated that the move to full current value assessments were to progress at 5% per yet (average). On the other hand there were a number of newer properties in the city that were to receive tax reductions. There reductions were also capped to balance it out.

Now most commercial space in Toronto is old, with the exception of the office towers. What CVA has done is reduce their taxes at the expense of the older properties in Toronto. Most smaller properties (commercial) see a 5% increase in taxes per year as they move towards full CVA taxation. There is no question that tax rate before CVA was so high as to negatively effect development in the Old Toronto. It is partly why NYCC was becoming downtown north. The issue had to be addressed. What went wrong though was two things. First the province abandoned the previous ratios between classes which was residential taxes being only 20% less than non. Secondly it froze the burden between classes. It decided that the intial shift to CVA should have should keep produce the same revenue from residential properties. The problem with this is that because the majority of properties that were under assessed (old assessments) were located in old Toronto. There were million dollar homes in Rosedale and Forest hill paying less than $800 in taxes. What in effect occurred was that the large number of underpaying old Toronto homes had their low taxes averaged into the general residential rate. This created the new residential rate that allowed the ratios to get out of whack.

The province realized (store owners taking to the street helped) that the ratios were unfair and when the due diligence was performed to establish what the ratios between classes should be the conclusions was that commercial/industrial should be from .8 to 1.1 times that of residential. The also regulated that municipalities who's ratios were above the provincial average (~2.3 at the time) could not raise taxes on C/I. As usual the city cried about not being able to 'access' its entire tax base. This resistance continues to shift the burden continues to this day.
 

nfitz

Superstar
Member Bio
Joined
Nov 10, 2007
Messages
23,253
Reaction score
3,360
Location
Toronto
If you steadfastly accept it though, that density offers savings, you should contact your councillor to ask why we have not realized it.
Looking at what I pay for property tax compared to people I know in 905 - I have achieved it. I gueses I should go sent my councillor a campaign donation!
 

taal

Senior Member
Member Bio
Joined
May 19, 2007
Messages
6,605
Reaction score
95
Location
NYCC
More indication for the lack of change:

http://www.toronto.ca/business_publications/pdf/2010-july.pdf

Have a look at page 6:

Taxes and Operating Costs
Each column is the last quarter going back to 2009 Q1:

GTA $18.17 $17.99 $17.80 $17.74 $17.82
Central Area $22.10 $21.75 $21.65 $21.58 $21.58
Suburbs $14.16 $14.09 $13.87 $13.88 $14.01


Assuming operating costs should only have increased proportionally between the 416 and 905 why did the "Central area" increase more then the suburbs (%2 vs 1%).
 

nfitz

Superstar
Member Bio
Joined
Nov 10, 2007
Messages
23,253
Reaction score
3,360
Location
Toronto
Assuming operating costs should only have increased proportionally between the 416 and 905 why did the "Central area" increase more then the suburbs (%2 vs 1%).
Surely the City of Toronto tax rates in the central area and the suburbs are the same; so the increase is only because market value downtown has increased faster than in the suburbs ... where we have the vacancy problems.

Given that the costs have increased more in 905 (GTA) than they have in the suburbs, then doesn't this indicate that tax increases are higher in 905 than 416?
 

Top