THE NEW PROVINCIAL
LAND TAX
PART I
AN ARBITRARY TAX?
F. Mueller – May, 2008
On January 1, 2009 Ontario will implement the new provincial land tax (PLT). This new tax will replace the old provincial land tax and the interim PLT. Like the older version, the new tax will apply only to properties outside municipal boundaries. Unlike the current versions of the tax, no tax rate has yet been set and no one – from the Ministry of Finance on down – can say how the rates will be determined or where the money will be sent. The Ministry of Finance will only promise that “the revenues will be used to support services in the north”.
All provincial land taxes collected are paid to the Ministry of Revenue and go into Ontario’s general revenue fund. In effect the money is shared by all the residents of Ontario. The only way to determine if these funds are actually being used for services in the north is to add up what the Province of Ontario pays for actual services and compare that to the taxes collected. Part II of this article will try such a comparison.
What is known about the new PLT is that it will be based on a current value assessment of the taxable properties. Any properties currently within school board boundaries already have a current value assessment for their properties which is used to calculate school taxes. Those properties outside school board areas will have new current value assessments sent to them in the fall of 2008. There is a procedure for challenging an assessment which can be found at the Municipal Property Assessment Corporation’s website: www.mpac.on.ca. However, challenges to assessments will be up to individual property owners.
The current value assessment of a property will also be used for local roads board and local services board taxes. Local services board taxes are already collected as part of the PLT. Beginning in 2009, local roads boards will have the option of having road taxes collected through the PLT as well. [1]
The new PLT also has extra ways of collecting the taxes owed. As under the old PLT, properties are subject to liens, and after two years of unpaid taxes, seizure and sale. The new PLT liens don’t have to be registered to be valid. The Crown may also take a person to court to collect the taxes; garnishee wages; or intercept any payments due to the property owner. (The latter section is probably aimed at government payments of any sort.)
The most important aspect of this tax which remains unknown is how the government will determine the tax rate. To prevent the imposition of an arbitrary tax, ratepayers will need to know what amount is appropriate. Let’s turn to Part II of this article to see what is currently being collected and how reasonable it is.
THE PROVINCIAL
LAND TAX (PLT)
PART II
HOW MUCH AND FOR
WHAT?
Having looked at the general outlines of the new PLT in Part I of this article, let’s now look at what services it will pay for and what level of taxes will raise those amounts.
First, let’s establish a few facts. According to the TBDURA (www.tbdura.com) website, the unincorporated ratepayers in the Thunder Bay district represent 40,000 property owners owning some 20,000 parcels of property. If we assume an average price per property of $75,000, the total assessment of unincorporated property in our district is in the neighbourhood of $1.5 billion (yes, with a b). That is second only to the City of Thunder Bay in property value and voting power.
At present, there are about 40
different interim PLT tax rates as well as the regular PLT rate.[2] Here in the district of Thunder Bay,
properties in the Lakehead School Board area pay just under $200 per $100,000
property in interim PLT. That’s about
the middle of the range for all interim PLT rates. The regular PLT rate is based on property assessments from the
second world war era, so it’s a bit difficult to give exact figures for comparison. A general rule of thumb for the Lakehead
School Board area is in the neighbourhood of $50 per $100,000 property. Our total provincial land tax is
currently somewhere around $250 per $100,000 property.
Now let’s take a look at what services this tax supports. The only services which can be considered are those which taxpayers in municipalities presently pay for. All other services are paid through income and other taxes shared equally by everyone in Ontario.
The list of services include: roads, fire, dumps, recreation, sewer,
water, land use planning, policing, district health units, and DSSAB social
services (District Social Services Administrative Boards currently pay for land
ambulance, social housing, Ontario Works, and child services). Roads are presently paid through local roads
boards using a separate property tax.
Fire, dumps, recreation, sewer, water, and land use planning services –
where they exist – are paid through local services boards or on a user-fee
basis. This leaves three areas for
which the PLT might be directed:
policing, district health units, and DSSAB services.
Policing costs for municipalities vary based on service levels and number of calls. For the smaller municipalities in the Thunder Bay area it currently runs between $60 and $100 per $100,000 property[3], and given that many properties in the unincorporated areas are vacation cottages, it seems reasonable that the actual costs would be substantially lower. However, let’s use $80 per $100,000 for comparison.
The Thunder Bay district health unit and DSSAB already are being funded for the unincorporated areas. The province makes an annual grant of 7% of the total municipal contributions from our provincial land taxes as our share of the costs. For 2006, this amounted to $2.5 million for the DSSAB and about $530,000 for the district health unit. When divided into the total unincorporated assessment base of $1.5 billion, the annual tax rate is $165 for DSSAB services and $35 for district health per $100,000 property.
But that isn’t the end of the
story. The smaller municipalities in
the Thunder Bay district receive annual transfers and grants from the province
which average 65% of their budgets.[4] To compare rates, the unincorporated are
entitled to at least the same level of support. If the province pays 65% of cost of our services, the net tax to
the unincorpor-ated areas would be $94 per $100,000 property. Compare that with the $250 we are currently
paying. Realistically, the current
tax rate should be reduced dramatically.
Cost
of services for the unincorporated areas (2006)
Services provided Cost per $100,000 Tax after 65% prov. grant
Policing $ 80 $ 27
DSSAB social services $165 $ 55
District health unit $ 35 $ 12
This also raises the question of why the services in the unincorporated areas are not receiving the same financial support as the municipalities. Presently roads boards are receiving grants in the neighbourhood of 50% of their budgets and local services boards are getting substantially less. One-fourth of the Thunder Bay district local services boards and 10% across Ontario receive nothing – not one penny – in transfers for their operating costs. This needs to change.
To ensure the new PLT is levied at a reasonable rate and that the funds are actually used to support services in the north, we need to push the government for the following changes:
1. The forty tax rates currently used for the PLT should be replaced by one rate across the north. This rate needs to reflect a actual costs with a minimum 65% provincial contribution. The rate should be broken down to show exactly how much money is being raised for social services, district health, and policing. Those amounts need to be turned over to the DSSABs and the district health units as the unincorporated area contributions. This will enable the taxpayers to see where their taxes are being directed.
2. Funding for the operating costs of roads boards and local services boards need to be increased to a minimum of 65% provincial contribution. Our local MPP’s should be encouraged to introduce amendments to the Local Roads Boards Act, Section 31(1) and the Northern Services Boards Act, Sec. 24(1) to provide a minimum 2-to-1 matching grant for operating costs.
[1] See Local
Roads Boards Act, Sec. 29(1), at www.e-laws.gov.on.ca
[2] See ‘Interim Provincial Land Taxes: A Brief Overview’ at www.tbdura.com
[3] See 2006 Financial Information Reports for Neebing, O’Connor, and Gillies municipalities. oraweb.mah.gov.on.ca/fir/welcome.htm
[4] See 2006 Financial Information Reports for Neebing, O’Connor, and Gillies municipalities. oraweb.mah.gov.on.ca/fir/welcome.htm.