Historically, assessment and property taxes
were dealt with as separate entities:
• Assessed Values were set
• Tax rates reflected budgetary
requirements
Assessed Value X Tax Rate = Property Taxes
2
Introduction of “Capping” created a new
assessment / tax relationship
Taxes became the base for allowable %
increases and claw-backs
BUT, only certain types of assessment
revisions affect the tax calculation
3
“Annualized
Taxes” refers to the year-end
tax calculation that reflects,
 legislated capping limits
 optional capping parameters
& includes:
 allowable assessment changes
4
“Allowable” assessment changes that
revise taxes include:
 Physical changes
(e.g. improvements, additions, demolitions)
 Changes in use
(i.e. classification changes)
 Reconsiderations & ARB decisions
which reflect the changes above
5
“Equity” changes do not revise Taxes
 Opinion of Value
 Change in Valuation Method
[unless legislated under s. 32(4)
of Assessment Act]
 Corrections
6
Calculation of annualized taxes
required a new process:
 Identify type of change
(equity vs. physical)
 Separate the CVA associated with
each type
7
Such a breakdown not explicitly
provided in:
 Reconsideration Minutes
 ARB Decisions/Minutes
Only clearly allowable changes are
supps/omits
8
Identification/Separation process relied
on MPAC involvement
Need for consultation, especially in
reassessment year, time-consuming for
OPTA & municipalities and labourintensive for MPAC
But we managed!
9
Phase-In scheme has introduced new
requirements:
 2005 base year CVA can only be
adjusted for physical changes
 equity changes (i.e. non-physical or opinion of value)
adjust the 2008 base year CVA, but not
the 2005 base year or tax calculation
10
The Assessment & Tax World have
now come together!
Phase-In adjustments are essentially
the same as Annualized Tax
adjustments!
Identification/Separation process
requiring detailed breakdowns now
extends to the Phase-In Calculation
11
Allowable changes must be incorporated
into annualized tax calculation for
commercial, industrial & multi-residential
properties
Obvious physical changes that revise
CVA include
 Omitted & Supplementary assessments
(e.g. new building, improvement, class
change)
 Demolitions
12
Majority of ARB decisions/minutes,
Reconsideration minutes and Year-End
changes do not differentiate physical from
equity changes
Review required to identify the type of changes
responsible for the revised CVA:

Physical – Revises Annualized Taxes

Equity

Mix of Physical & Equity
– No Impact on Annualized Taxes
– Annualized Taxes revised for physical portion only
13
Where a mix of physical and equity
changes is identified, CVA details by
classification (RTC/RTQ) are required:
 CVA attributed to physical change(s) by class
 CVA attributed to equity change(s) by class
Annualized taxes are revised to reflect these
apportionments of the previous year CVA
As apportionments are not formally issued,
taxpayers can only challenge the revised
annualized tax calculation and not the
assessment breakdown
14
Phase-In introduced as an additional tax
mitigation method for the new 4-year
reassessment cycle
Assessment increases limited to 25% per
year based on difference between 2005 base
year CVA and 2008 base year CVA
Applies to all properties
(i.e., capped & non-capped)
15
Maintenance of 2005 base year CVA and
2008 base year CVA required to calculate
amount of phase-in each year
Taxes for the year reflect changes made:
 for physical changes captured in the
2005 base year CVA
Onus for adjusting the 2005 base year CVA
falls solely on MPAC
16
Phase-in requires time adjustment to set
2005 CVA where a physical change affects
2008 CVA
2005 CVA and 2008 CVA should value the
property in the same condition, i.e. including
the same assessment changes
For physical changes only, 2008 base year
CVA is factored to 2005 base year CVA by
applying either of the:
 Municipal Discount Factor (MDF)
 Property Specific Discount Factor (PSDF)
17
Allowable changes must be incorporated into
annualized tax calculation for all properties
Omitted & Supplementary assessments
(e.g. new building, improvement, class
change) are physical changes that revise CVA
Increase in 2008 CVA is factored by MDF or
PSDF and added to 2005 CVA
Phase-In amounts are recalculated based on
revised 2005 CVA and revised 2008 CVA
18
Reconsideration minutes, ARB
decisions/minutes and Year-End changes
rarely identify a change as physical or equity
However, annualized tax calculation
requires such details for all properties:
 Type of change (physical or equity)
 Class(es) affected
 CVA associated with each type of change
by Class (RTC/RTQ)
19
 Physical changes
2005 CVA attributed to the physical change(s)
is added/removed from the original 2005 CVA
Adjusted 2005 CVA is used by OPTA and
municipalities to adjust the annualized taxes
 Equity changes
No adjustment to the 2005 CVA or
annualized taxes
 Tax impact differs depending on type of
assessment change!
20
2009 Roll
Reduction: $2,000,000 (2008 CVA)
Demolition: $1,000,000 (2008 CVA)
Equity:
$1,000,000 (2008 CVA)
According to regulations, 2005 CVA should
only be adjusted for physical changes, i.e., in
proportion to the 2008 CVA associated with the
physical changes
Phase-in amounts would be calculated using
revised 2005 CVA and 2008 CVA
21
2009 Roll
Reduction: $2,000,000 (2008 CVA)
Demolition: $1,000,000 (2008 CVA)
Equity:
$1,000,000 (2008 CVA)
Demolition Identified
Value associated with Demolition ($1,000,000)
would be removed from 2005 CVA in tandem
with 2008 CVA (Sections 48 and 48.1 of O.
Reg. 282/98)
Phase-in amounts would be calculated using
revised 2005 CVA and 2008 CVA
22
Demolition Identified
2005 CVA Adjustment reflected on the
Reconsideration
If the PSDF was 0.812, property would receive
a reduction of $812,000 in the 2005 CVA
Based on a tax rate of 3%, the annualized
taxes effective at the beginning of the 2009 tax
year would be reduced by $24,360
23
2009 Roll
Reduction: $2,000,000 (2008 CVA)
Demolition: $1,000,000 (2008 CVA)
Equity:
$1,000,000 (2008 CVA)
Demolition Not Identified
2005 CVA is not adjusted in Recon Minutes
Entire $2,000,000 reduction would be phasedin over the four year cycle
(Note: Assumes that a phase-in calculation applies, i.e.,
2008 CVA is greater than the 2005 CVA)
24
Demolition Not Identified
2005 CVA Adjustment not reflected in the
Minutes and the 2005 CVA not adjusted
If entire $2M reduction treated as an opinion of
value/equity change, no change to 2005 CVA
No 2005 CVA change means no change to the
annualized taxes for the affected year
Property owner will see no reduction in CVA or in
annualized taxes beginning in the 2009 tax year
CVA reduction will be phased-in over four years
25
2009 Roll
Increase:
$2,000,000 (2008 CVA)
Improvement:
Equity:
$1,000,000 (2008 CVA)
$1,000,000 (2008 CVA)
Opposite scenario: ARB decision supports
municipality’s appeal to increase assessment
Again, 2005 CVA should only be adjusted for
physical changes and not equity changes
Phase-in amounts would be calculated using
revised 2005 CVA and 2008 CVA
27
2009 Roll
Increase:
$2,000,000 (2008 CVA)
Improvement:
Equity:
$1,000,000 (2008 CVA)
$1,000,000 (2008 CVA)
Improvement Identified
Value associated with Improvement ($1,000,000)
would be added to 2008 CVA and factored by
MDF or PSDF to set 2005 CVA equivalent
increase (Sections 48 and 48.1 of O. Reg. 282/98)
Phase-in amounts would be calculated using
revised 2005 CVA and 2008 CVA
28
Improvement Identified
2005 CVA Adjustment reflected in ARB
decision/minutes
If the PSDF was 0.812, the 2005 CVA of the
property would increase by $812,000
Based on a tax rate of 3%, the annualized
taxes effective at the beginning of the 2009 tax
year would be increased by $24,360
29
2009 Roll
Increase:
$2,000,000 (2008 CVA)
Improvement:
Equity:
$1,000,000 (2008 CVA)
$1,000,000 (2008 CVA)
Improvement Not Identified
2005 CVA not adjusted by decision/minutes
Entire $2,000,000 increase would be phased-in
over the four year cycle
(Note: Assumes that a phase-in calculation applies, i.e.,
2008 CVA is greater than the 2005 CVA)
30
Phase-in rules only allow adjustments to the
2005 CVA which is used to calculate
annualized taxes for physical changes
This now casts doubt on long-standing
premise that assessment is separate from
taxation:
The calculation of property taxes can
no longer be seen as a tax issue alone; it
has evolved into an assessment issue
that affects everyone!
32
Thought for the Day:
If we ensure that Minutes of
Settlement reflect not only the total
CVA change by class, but also
include details about what part is
physical and what part is equity,
together with their associated
CVAs, we will all be better served.
33
Thank you!