How Economic Development and Assessment Work Together

Transcription

1 How Economic Development and Assessment Work Together EDCO Annual Conference February 8, 2017 Carla Y. Nell Vice President Municipal and Stakeholder Relations Rebecca Webb Regional Manager Municipal and Stakeholder Relations

2 Topics for Discussion Ontario s Assessment and Taxation System MPAC and Assessing Properties Provincial Market Trends From Property Assessment to Taxation Assessment Base Management 2

3 Ontario s Assessment and Taxation System 3

4 Ontario s Assessment Cycle Tax Years January 1, 2012 (valuation date) Tax Years January 1, 2016 (valuation date) Tax Years January 1, 2020 (valuation date)

5 MPAC and Assessing Properties 5

6 Our Role ONTARIO S 2015 ASSESSMENT ROLL THE MUNICIPAL PROPERTY ASSESSMENT CORPORATION (MPAC) is an independent, not-for-profit corporation funded by Ontario s municipalities OVER 1,700 employees across the province OVERSIGHT provided by the Ministry of Finance 15-MEMBER Board of Directors Made up of municipal, Provincial and taxpayer representatives, appointed by the Ministry of Finance MPAC is responsible for accurately assessing and classifying all properties in Ontario in compliance with the Assessment Act and related regulations set by the Ontario Government. 6

7 Properties We Assess *2015 Annual Report

8 Determining Assessed Values MPAC ONTARIO S updates and 2015 collects ASSESSMENT data from ROLL various sources: Building Permits Sales Transactions Request for Reconsideration Appeals Tax Applications Land Severances On-site Property Inspections Rent Rolls (rental agreements) PIER (property income and expense reporting tool) Third party data: Canada Mortgage and Housing, Farm Credit Canada, Federation of Rental Property Owners, etc. DATA COLLECTION & PREPARATION + MARKET ANALYSIS + PROPERTY VALUE REVIEW = 2016 VALUES January 1, 2016 Valuation Date 8

9 Determining Assessed Values ONTARIO S 2015 ASSESSMENT ROLL MPAC reviews all sales to determine: Conditions of Sale Chattels MPAC reviews information to determine significant variables: Location Building Design and Quality Vacancy Rates and Rental Income Building Costs MPAC calculates: Land Values Replacement Costs for Buildings Fair Market Rents Net Operating Income Capitalization Rates Vacancy and Collection Loss DATA COLLECTION & PREPARATION + MARKET ANALYSIS + PROPERTY VALUE REVIEW = 2016 VALUES January 1, 2016 Valuation Date 9

10 Determining Assessed Values ONTARIO S 2015 ASSESSMENT ROLL All values are reviewed to accuracy and equity with the local market. To establish assessed values, MPAC applies appraisal industry standards and best practices, and takes into account the unique characteristics of each municipality. DATA COLLECTION & PREPARATION + MARKET ANALYSIS + PROPERTY VALUE REVIEW = 2016 VALUES January 1, 2016 Valuation Date 10

11 Assessing Properties Our assessors are trained experts in the field of valuation and apply appraisal industry standards and best practices. MPAC established the value of real property by one of three different perspectives or approaches to value: DIRECT (sales) COMPARISON APPROACH INCOME APPROACH COST APPROACH 11

12 Approaches to Value DIRECT COMPARISON APPROACH Based on the sale prices of comparable properties Adjustments made for differences between the subject and comparables Direct Comparison Approach is recognized as the industry preferred methodology to value residential properties 12

13 Approaches to Value Select an appropriate capitalization rate INCOME APPROACH Land estimate from vacant land sales and land residual methods Convert net income into an indication of the capital value of the property Calculate net operating income Estimate total annual operating expense An income-producing property s ability to earn revenue is directly tied to its market value. The Income Approach is used to determine the value of income-producing properties such as office buildings and retail properties. 13

14 Approaches to Value Properties that do not regularly trade in marketplace COST APPROACH Land estimate from vacant land sales and land residual methods Values calculated by an Automated Cost System (ACS) Replacement cost of the improvement less depreciation plus the land value The Cost Approach is used to value unique properties that are rarely sold on the market, such as large and general-purpose industrial properties, gravel pits and warehousing. 14

15 Provincial Market Trends 15

16 Farm Value Comparison ZONE 1 ZONE 2 64% or 16% annually South West Golden Horseshoe Annual 4-Year Change 18% 16% 64% Annual 4-Year Change 18% 12% 48% 48% ZONE 3 ZONE 4 GTA Central Ontario City of Toronto Annual 4-Year Change 18% 13% 13% 52% 52% Annual 4-Year Change 18% N/A N/A ZONE 5 ZONE 6 Central North East East Annual 4-Year Change 18% 16% 16% 64% 64% Annual 4-Year Change 18% 19% 19% 76% 76% ZONE 7 North Annual 4-Year Change 18% 72% 72% 18% 16

17 Farm Values Explained 17

18 Multi-Residential Value Comparison 28% or 7% annually ZONE 1 South West Annual 5% 4-Year Change 20% 18% ZONE 3 GTA Central Ontario 13% Annual 6% 4-Year Change 52% 24% 18% ZONE 5 Central North East Annual 16% 5% 4-Year Change 64% 20% 18% ZONE 7 ZONE 2 Golden Horseshoe Annual 5% 4-Year Change 20% 48% 18% ZONE 4 City of Toronto Annual 12% 4-Year Change 48% 18% ZONE 6 East Annual 19% 4% 4-Year Change 76% 16% 18% North Annual 7% 4-Year Change 72% 28% 18% 18

19 Multi-Residential Values Explained 19

20 Commercial Value Comparison 12% or 3% annually ZONE 1 South West ZONE 2 Golden Horseshoe Annual 2% 4-Year Change 8% 18% Annual 4-Year Change 18% 5% 20% 48% ZONE 3 ZONE 4 GTA Central Ontario City of Toronto Annual 4-Year Change 18% 13% 5% 52% 20% Annual 4-Year Change 18% 9% 36% 7 ZONE 5 Central North East ZONE 6 East 6 Annual 4-Year Change 18% 16% 0.3% 64% 1% Annual 4-Year Change 18% 19% 2% 76% 8% ZONE 7 North Annual 4-Year Change 2% 72% 8% 18% 20

21 Commercial Values Explained 1 Retail development in an expanding housing market Retail development remains strong in areas with growing residential communities to support the demand for retail services from new residents. 2 Capitalization rates and office buildings Capitalization rates continue to compress in most parts of Ontario. New supply continues to be added in several major markets, including Toronto, Richmond Hill, Mississauga and Oakville. 3 Ottawa faces decline in office building values Ottawa continues to see a decline in rents and an increase in vacancy as the federal government continues to relinquish office space back to the market. 4 Big box vs. standard retail properties Province-wide, big box properties are experiencing marginally lower increases in assessment when compared to standard retail properties due to the limited utility beyond their existing use and limited market demand within this sector. 5 Commercial in the Northwest The main urban centres of Thunder Bay, Kenora, Dryden and Fort Frances are experiencing the most consistent assessment increases in the region. Affordable housing market conditions along with stability in the mining and forestry sector have contributed to steady market conditions in the commercial sector. 6 Commercial in Northeastern Ontario Northeastern Ontario is seeing the lowest average change in commercial properties in the region. Increases to small retail properties are tempered in part due to the continued development of big box centres in these communities which have drawn consumers from traditional retail markets. Office buildings and large shopping centre values have outperformed small retail as sectors and investors outside of Northern Ontario see value in investing in the North due to low interest rates.

22 Standard Industrial Value Comparison ZONE 1 ZONE 2 12% or 3% annually South West Annual 4-Year Change 18% 2% 8% Golden Horseshoe Annual 4-Year Change 18% 4% 48% 16% ZONE 3 ZONE 4 GTA Central Ontario Annual 13% 2% 4-Year Change 52% 8% 18% ZONE 5 Central North East Annual 16% 1% 4-Year Change 64% 4% 18% ZONE 7 City of Toronto Annual 4-Year Change ZONE 6 East Annual 4-Year Change 18% 18% 6% 24% 19% 2% 76% 8% North Annual 4-Year Change 2% 72% 8% 18% 22

23 Standard Industrial Values Explained 23

24 From Property Assessment to Taxation 24

25 Assessment Changes ASSESSMENT GROWTH is a measure of the economic health of the municipality. It is a source of additional tax revenue that may also place additional pressures on expenditures (operating and capital). Omitted and Supplementary Assessments for new buildings and changes in use Requests for Reconsideration and Assessment Review Board Decisions Tax Adjustment Applications 1,000, , , ,000 G R O W T H VALUATION CHANGE 200,000 Taxation Years January 1, 2016 January 1, 2020 Market Update 25

26 Assessment Growth (or Loss) Represents the amount an assessment increases or decreases over time regardless of whether a reassessment / market update occurs Growth reflects changes in a property s state, condition, or use, and is attributable to things like new construction, additions, improvements and changes in use; represents new revenue for municipalities Losses occur because of assessment reductions, changes in use, demolitions, etc It is critical to measure and understand growth separately from the impacts of market change due to the reassessment and the four-year phase-in program because assessment growth and losses impact municipal revenue streams 26

27 Real Assessment Growth/Loss January 1 st December 31 st CVA 50,000 CVA 175,000 Positive Growth CVA 10,000,000 CVA 7,000,000 Negative Growth 27

28 Valuation Change Valuation shifts reflect changes in real estate market conditions, which are driven by economic factors, demographics, etc Generally, represents the impact of reassessment, which involves updating the current assessed value of properties to reflect a new, more recent effective valuation date Under the Province s four-year assessment increase phase-in program, increases in value associated with each assessment update (Jan 1, 2012 to Jan 1, 2016) are reflected on the Roll in increments of 25% each year These types of assessment changes will not necessarily affect municipal revenue because tax rates must be restated; they will, however, affect the overall distribution of the tax burden among taxpayers as rates of valuation change do vary by class 28

29 Valuation Change (Reassessment) January 1 st 2016 January 1 st 2020 CVA 50,000 Valuation Change CVA 75,000 CVA 175,000 CVA 200,000 Valuation Change CVA 10,000,000 CVA 7,000,000 Valuation Change 29

30 Tax Administration Cycle Tax Administration Cycle Each year upper and single-tier municipalities are responsible for making tax policy decisions that will shape the local property tax landscape Local (lower and single-tier) municipalities must also make a host of decisions in respect of each year s tax program and are ultimately charged with tasks related to the issuance of property tax bills and the collection and distribution of that revenue On a general level, the main steps and stages in this process have been summarized on the continuum below Specific timing and organization varies among jurisdictions and from year to year Roll Return Tax Policy Analysis Finalize Policy Options Rate and Levy Setting Final Billing Relief & Rebate Applications Budget & Revenue Decisions Interim Billing Set Capping Parameters Capping Calculations Collection Post Billing Adjustments 4 th Quarter of Prior 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 30

31 Tax Administration Cycle MPAC s Municipal and Stakeholder Relations Raises awareness and assists municipalities in understanding potential assessment shifts Post Billing Adjustments Roll Return Budget & Revenue Decisions Assists municipalities and property owners and/or their representatives to shape property tax outcomes Relief & Rebate Applications Collection Tax Policy Analysis Interim Billing Discusses and sets expectations about 2017 growth and performance targets Final Billing Finalize Policy Options Assists municipalities in identifying and managing high impact appeals Capping Calculations Rate and Levy Setting Set Capping Parameters 31

32 2016 Municipal Summary Report MPAC delivers reports that provide municipal administration and elected officials with an Executive Summary of the Assessment Update highlighting: provincial and zone-based market changes work performed by MPAC in support of the 2016 Assessment Update and our significant efforts to focus on roll stability, transparency and collaboration customized municipal level snapshots of the property class changes unique to each municipality 32

33 Assessment Change Summary by Property Class Municipal level snapshots provide a comparison of the distribution of the total assessment for the 2012 and 2016 base years and 2017 tax year by property class Property Class/Realty Tax Class 2012 Full CVA 2016 Full CVA Percent Change 2012 to Phased-in CVA Percent Change 2012 to 2017 R Residential 954,868,299 1,095,216, % 985,154, % M Multi-Residential 13,998,400 17,343, % 14,825, % C Commercial 49,195,909 60,962, % 50,080, % X Commercial (New Construction) 11,802,570 16,221, % 12,756, % Y Office Building (New Construction) 1,691,038 1,693, % 1,691, % I Industrial 7,099,748 9,166, % 7,475, % L Large Industrial 4,206,697 3,268, % 3,268, % J Industrial (New Construction) 4,794,130 5,693, % 4,703, % P Pipeline 52,332,000 59,272, % 54,067, % F Farm 504,603, ,731, % 613,385, % T Managed Forests 1,421,200 3,107, % 1,840, % (PIL) R Residential 2,068,300 2,225, % 2,056, % (PIL) C Commercial 3,624,200 5,051, % 3,851, % (PIL) G Parking Lot 180, , % 211, % (PIL) X Commercial (New Construction) 157, , % 177, % (PIL) H Landfill 54,300 59, % 55, % E Exempt 44,211,702 49,104, % 44,598, % TOTAL 1,656,309,985 2,268,662, % % 33

34 Assessment Base Distribution Summary Assessment Base summaries assist municipalities in evaluating their existing tax policies and the impact of a status quo policy scheme which could result in revenue changes, tax shifts and property specific tax liabilities different than those of the previous year Property Class/Realty Tax Class 2012 Full CVA Percentage of Total 2012 CVA 2016 Full CVA Percentage of Total 2016 CVA 2017 Phased-in CVA Percentage of Total 2017 CVA R Residential 954,868, % 1,095,216, % 985,154, % M Multi-Residential 13,998, % 17,343, % 14,825, % C Commercial 49,195, % 60,962, % 50,080, % X Commercial (New Construction) 11,802, % 16,221, % 12,756, % Y Office Building (New Construction) 1,691, % 1,693, % 1,691, % I Industrial 7,099, % 9,166, % 7,475, % L Large Industrial 4,206, % 3,268, % 3,268, % J Industrial (New Construction) 4,794, % 5,693, % 4,703, % P Pipeline 52,332, % 59,272, % 54,067, % F Farm 504,603, % 939,731, % 613,385, % T Managed Forests 1,421, % 3,107, % 1,840, % (PIL) R Residential 2,068, % 2,225, % 2,056, % (PIL) C Commercial 3,624, % 5,051, % 3,851, % (PIL) G Parking Lot 180, % 306, % 211, % (PIL) X Commercial (New Construction) 157, % 240, % 177, % (PIL) H Landfill 54, % 59, % 55, % E Exempt 44,211, % 49,104, % 44,598, % TOTAL 1,656,309, % 2,268,662, % 1,800,201, % 34

35 Tax Policy Tools and Incentives A variety of tax policy tools are available to municipalities in order to affect the distribution of taxes The statutory deadline for decisions is December 31 st of the taxation year, however, decisions in respect of the following need to be made in a timely fashion in order for final tax billing to occur: - Tax Ratios and Levy Restriction, if applicable - Tax Rates and Discounts for Vacant Land sub-classes and Farmland Awaiting Development, - Optional Capping Tools (increased limits, CVA thresholds, etc.) - Recovery of Capping Costs - Graduation (Banding), Optional Classes, Phase-in - Tax Relief Programs (vacancy, charities, etc.) - Heritage property tax relief program - Municipal capital facilities agreements - Brownfields financial tax incentive program 35

36 Assessment and Financial Management Changes in the assessment landscape and resulting tax policy decisions may influence prospective business decisions. Example: Source City of Mississauga Website 36

37 Assessment Base Management 37

38 Assessment Base Management Municipalities are gradually becoming more actively involved in assessment matters due to: 1) Growing awareness of their statutory role 2) The property tax and assessment system s complexity 3) Accountability for property taxation rests firmly at the local level 4) Increased municipal service responsibilities have dramatically amplified the importance of locallygenerated property tax revenues to the economic health of local government 38

39 Guiding Principles The assessment roll should be complete, accurate, predictable and stable. Assessment Base Management (ABM) encompasses a wide range of assessment and taxation activities ABM requires all parties to share information and work collaboratively, applying a best practice philosophy to ensure that effort and outcomes are valuable, meaningful, carefully thought out and well executed ABM requires all parties to be fully engaged, actively participating and committed to executing their responsibilities within the program All parties have a role to play in: Maximizing the amount of revenue available for collection by municipalities Protecting the assessment base from erosion Ensuring fair and equitable treatment Stabilizing the Assessment Roll 39

40 Approach As a best practice, a comprehensive Assessment Base Management (ABM) program includes a range of assessment projects and initiatives that fall within three primary categories: - Maintenance Two-way sharing of information to enhance overall fitness of the assessment roll (accurate, complete, current) - Mitigation Targeted involvement to mitigate against erosion of the base and/or plan for assessment at risk - Management Active management to understand change and develop positions on key taxation objectives Approaches will vary by jurisdiction in response to assessment base demographics and municipal culture, which will influence philosophy about involvement (passive vs. active) 40

41 Maintenance Services Municipalities Often municipal staff have the opportunity to share information that informs the valuation/assessment of property Municipal staff is often privy to local property issues that MPAC can utilize Relevant information should be shared on a timely basis and as a standard business practice Issuance of building permits Land Committee Decisions (severances and consolidations) Zoning changes MPAC Planning Decisions Matters that impact ARB Decisions Knowledge of occupied/unoccupied properties Active and ongoing activities and business process enhancements to ensure quality data and accurate assessments, including: - Data Cleanse Activities - Sales and Sales Review - Building Permit Review - Vacant Land Classification Review - Assessment Roll Audit Process (IAAO Standards) - Development Land Review - Tax Classification Review 41

42 Mitigation Services Mitigation Services are designed to protect the tax base and preserve revenue, while ensuring reductions through appeals and tax rebates are fair and equitable Assessment Appeal Review RfR Reviews Targeted Collaboration Assessment Appeal Participation Tax Application Review Advanced Disclosure/Pre-roll Consultations 42

43 Management of Taxation Understanding Property Taxation Property tax is a major revenue source for municipalities, and all parties need to understand that changes can influence the overall health of a community Understanding Tax Shifts Keeping CVA current means that tax shifting is the norm, not the exception Understanding the Change Municipalities need to understand change and develop positions on key taxation objectives Analysis, budgeting, appeals and Request for Reconsideration monitoring, collaboration, networking and advocating Understanding Tax Tools There are many legislated tools available to help mitigate tax shifts and changes to the assessment base Tax ratios, graduated taxes/banding, optional tax classes, changes to provincial education tax rate and local implications 43

44 Assessment Base Management MPAC offers municipalities a host of information to increase awareness about assessment changes, growth and high risk appeals, including: - Market Trend Maps - Assessment Summary Reports - Municipal Change Profile Reports and Dataset - Municipal Connect

45 Market Trend Report - Residential 45

46 Market Trend Report - Shopping Centres 46

47 Market Trend Report - Multi-Residential 47

48 Municipal Connect Municipal Connect offers municipalities a modern and flexible way to access real-time assessment information 48

49 Dashboard Metrics 49

50 Assessment Appeal Analytics 50

51 Property Information and Reports Methodology Guides and Property Profile Reports

52 Detailed Property Information

53 Collaboration Works MPAC is focusing on increased collaboration with the municipal community, property owners and industry representatives to facilitate discussions and deliver assessed values are fair, accurate and stable both pre and post Roll Return Successful Outcomes Municipal Working Group endorses MPAC s settlement of the outstanding Canadian Tire appeals and application of the settlement to the 2016 current value assessments Reached agreement with key property owners and municipalities about the 2016 values for specific properties Ontario Federation of Agriculture validates the positive changes made by MPAC in valuing farm properties Infrastructure Ontario and host municipalities sign a Memorandum of Understanding regarding the final 2016 values for 5 super courthouses Federation of Rental-housing Providers of Ontario Association publically endorses MPAC s valuation approach for multi-residential properties The Work Continues Municipalities and the industry continue discussions with a view to reaching early resolution of the 2016 values Collaborative approach to the valuation of pits and quarries: - Top Aggregate Producing Municipalities of Ontario (TAPMO) - Ontario Sand Stone and Gravel Association (OSSGA) and - MPAC Discussions continue about large industrial special purpose properties with a view to achieving early resolution of the 2016 values (e.g. mines, mills, food sector, etc.) Support for municipalities to understand assessment-related shifts that impact budget and tax policy decisions 53

54 Case Study: Economic Development & Assessment Proposed Waterfront Rehabilitation (Public, Private and Not-for- Profit Partnership) Undeveloped Lands = Low Assessed Value and Tax Revenue Assessing Community Impacts and Acceptance Potential Increase/Decrease in Neighbourhood Property Values Future Business and Residential Development Commercial/Industrial Assessment Growth and Tax Revenues Assessment Growth Tourism & Employment Growth Planning for Assessment Adjustments on New Comm/Industrial Properties Economic Stability of the Community Economic Stability of the Community 54

55 Assessing Community Impacts & Acceptance

56 Future Business & Residential Development 56

57 Assessment Growth & Tax Revenue

58 Tourism & Employment Growth 58

59 Economic Stability of the Community 59

60 Opportunities Municipalities are often privy to information about new, closing or relocating businesses that MPAC could utilize Sharing information leads to informed decisions MPAC s Municipal and Stakeholder Relations Representative works closely with municipal staff as a first line contact New two-way Service Level Agreement with municipalities establishes clear accountability frameworks and service parameters 60

61 Service Levels 61

62 Implementation As municipal input was integral to the development of the SLA, MPAC has sought out the varied expertise of municipal representatives across the province to support a soft launch of the SLA. Municipal team members are being asked to: Provide municipal perspective, insight, and support/participation in outreach and implementation strategy Create opportunities for continued improvements in service delivery Offer regular feedback on the reporting of service levels This partnership creates opportunities for greater collaboration with municipalities and allows for any improvements required prior to provincial launch in

63 Timeline Soft Launch Commenced July 1, 2016 Soft Launch Ended July 1, 2017 Provincial Launch Q Monthly meetings to review and discuss performance metrics AMO August

64 Municipal Representation Peel Region City of Ottawa City of Windsor Halton Region City of Mississauga District of Muskoka Town of Petrolia Town of Milton Township of Lake of Bays York Region City of Thunder Bay Atikokan Township Oxford County City of Toronto City of Barrie County of Lambton Municipality of Wawa City of Sarnia Town of Newmarket Township of Zorra City of Greater Sudbury Ministry of Finance 64

65 Municipal Experience A new service delivery model Transparency and shared understanding New channels to support municipalities in understanding their assessment base Support to assist the shaping of property tax outcomes A commitment to performance and service standards 65

66 Questions? 66