Interim Provincial Land Taxes

 

A Brief Overview

By:  F. Mueller  (Feb. 2007)

 

            In the late 1990’s, Ontario’s education taxes underwent substantial reforms.  Education property taxes which had previously varied from school board to school board were unified to one rate across the province.  At the same time, all properties subject to school board taxes (some properties in Ontario were – and remain – outside of school board boundaries and thus are not subject to education property taxes) were assessed at current market value.  This assured that all properties across the province would pay the same education taxes for properties of equal value.

 

            [As a footnote to these reforms, the school boards in Ontario were to adjust their boundaries to run contiguously.  This would mean that every property in Ontario would be in some school district.  The school boards balked at changing their boundaries when it became clear that they would have to foot the costs of assessing all the ‘new’ properties at market value.  Many of the properties in the unincorporated areas outside the school boundaries are remote; often accessible only by air or water.  The school boards rightly calculated that the amount of taxes generated would probably not pay for the assessment costs.  The school boards would also have lost the provincial subsidy paid by the Province for students from ‘out of area’.]

 

At the time the new education tax rate was set at about $400.00 per $100,000 of market value for residential properties.  This rate has since declined to $264.00 per $100,000 of market value for 2006.  The amounts collected under the new rates were substantially less than what had been collected (overall, the education property taxes were supposedly cut in half).  The Province of Ontario funded the remainder of education costs out of the provincial budget. 

 

            However, in exchange for reducing education property taxes, the Province of Ontario downloaded the costs of some social programs such as retirement homes, policing, and ambulance to the municipal level.  For those districts in northern Ontario without an upper-tier of government, the Province proposed setting up Area Services Boards (ASB’s) to deliver the services and tax the ratepayers directly for the costs involved.   Creating an ASB was voluntary, but no one in the north seemed to be interested in creating another body with taxing authority.   So the Province decided that if no ASB was in place by a certain date, the Province would create a District Social Services Administration Board (DSSAB) to administer the services.  The northerners politely declined.  At the present time, no ASB’s have been created in Ontario.

 

The chief difference between an ASB and a DSSAB appears to be in the authority to directly tax property owners for the services provided.  Under a DSSAB, the costs of the social services provided are apportioned to the cities and unincorporated areas by total market value of properties, and the municipalities collect the taxes and forward the monies to the DSSAB.  For those in the unincorporated areas of the districts, the province collects the taxes through the Provincial Land Tax (which is only levied on unincorporated areas) and send the monies to the DSSAB’s.

 

            However, there was a problem here.  The Provincial Land Tax (PLT) was based on property assessments from the 1940’s and the tax rate was fixed in the law at 1.5 % of this assessed value.  Through inflation, property values had soared in the intervening years.  Property taxes in general had also risen in step with the rising assessments, but the PLT could not keep up because both the assessment base and tax rates were fixed.   So the PLT was slated for revision, but only at a future date.

 

            Meanwhile the municipalities were complaining that while everyone received a break in education property taxes, the unincorporated areas were not being asked to pay the additional social program costs which were downloaded to the district level.  The Province of Ontario was paying the DSAAB’s an amount representing the unincorporated area’s share, but had no means of directly taxing for these services until the PLT was reformed.   Furthermore, it wasn’t even clear how large a share of the DSSAB costs belonged to the unincorporated areas because only those properties inside school districts had been re-assessed to market values.  No one – not even the Province – had any clear idea of the total value of property assessments in the unincorporated areas.  Therefore, dividing up the share of DSSAB costs based on total assessments was guesswork with regard to the unincorporated areas.

 

            The Province of Ontario decided that the best course of action was to take back some or all of the education tax break given to the unincorporated areas.  The Provincial Land Tax Act was amended to add in an “interim provincial land tax” (iPLT).  The iPLT was based on the education tax structure and therefore used a current value assessment.  The iPLT would be collected by the school boards as if it were an education tax, but then the monies were to be forwarded to the provincial coffers.  In fact, the school boards not only did not receive any of the iPLT monies, but they were required to remit the tax to the Province even if the local taxpayer didn’t pay the iPLT when it was due.  In such cases the money simply came out of the school board budget.

 

            The provincial government  was willing to use the iPLT to claw back the education tax breaks for the unincorporated areas.  It did not want to actually raise taxes, however.  Before these reforms were begun, education taxes had varied widely between the various school board areas.    Therefore, the ‘window of opportunity’ for tax claw-back also varied widely.  The Province side-stepped the problem by setting the tax rates for the iPLT differently for each school board area by regulation.  The iPLT tax rates were not only different between school boards (and sometimes within a school board area), they also were different year to year. 

 

The chart at the end of this article lists the iPLT rates for the 2006 tax year.  Note that the tax rate for West Parry Sound is only $19 per $100,000 home while in Sault Ste. Marie the same $100,000 home would pay over $400.  If any school board area is missing from the chart, they would be paying no iPLT taxes at all.  Also note that within any school board area the public, Catholic, and French school supporters all pay the same iPLT rates. 

 

Conclusion:

 

            The Provincial Land Tax Act of 2006  which received royal assent on December 22, 2006 sets out to reform the PLT.  Under the new law (which does not come into effect until January 1, 2009), the old PLT and iPLT are replaced with a new tax.  The new PLT will be based on market value assessment and the tax rate will be set by regulation.  This means that the Minister of Finance can change the tax rate without changing the law.  There are few exemptions from the new PLT (it appears that farms and managed forests are no longer exempt) and the law specifically allows the Minister of Finance to continue to set different tax rates for different areas.  Further, none of the taxes collected are dedicated to any services or based on any cost structure.  They are simply charged and remitted to the general revenue fund of the Province.

 

            It seems reasonable to conclude that the reformed PLT will simply continue the policies created by the fusion of the old PLT with the iPLT.  Tax rates will likely be set based on what the taxpayer paid in the past and not on any actual costs.  Different areas will be taxed at different rates for the same property values.   Any tax windfalls will likely be kept by the Province; any perceived shortages will be an excuse to raise the tax rates.  Given the current tax rates listed below, it is difficult to see how anyone in government could be held accountable for how the rates are set and where the monies are sent.

 

            Further, now that all properties in Ontario are to be assessed at market value (with the expense of the assessment borne by the Provincial government), the school boards will no doubt re-assess whether to change their boundaries to be contiguous.  It is possible that in addition to the new PLT, all unincorporated properties will also soon be subject to the education tax.              

 

 

 

 

 

Ontario Regulation 97/06, s. 2.

 

TAX RATES FOR THE RESIDENTIAL PROPERTY CLASS AND THE MULTI-RESIDENTIAL PROPERTY

CLASS FOR 2006*

 

Territory Tax Rate Expressed as $(Tax) per $100,000 of Assessed Value

                                                            Residential Property Class / Multi-Residential Property Class

     District of Nipissing

      Timiskaming Board of Education                             $192.248

      Nipissing Combined School Boards                        $122.661

      District of Parry Sound

       South River Township School Authority                 $204.230

      West Parry Sound Board of Education                    $  19.026

      East Parry Sound Board of Education                     $185.855

      District of Manitoulin

      Manitoulin Locality Education                                 $155.616

      District of  Sudbury

      Sudbury Locality Education                                    $342.413

      Espanola Locality Education                                   $445.696

      Chapleau Locality Education                                   $155.047         /           $463.170

      Foleyet DSA Locality Education                             $  85.164

      Gogama DSA Locality Education                $  21.070

      Asquith Garvey DSA Locality Education                 $152.681         /           $220.314

      District of Timiskaming

      Kirkland Lake Locality Education               $264.450

      Timiskaming Locality Education                              $268.976

      District of Cochrane

      Kap SRF and District Locality Education    $249.575

      Cochrane-Iroquois Falls Locality Education            $  55.833

      James Bay Lowlands Locality Education                 $  92.150

      District of Algoma

      Sault Ste. Marie Locality Education             $400.961         /           $985.543

      District of Thunder Bay

      Nipigon Red Rock Locality Education                     $  45.881

      Lake Superior Locality Education               $102.858         /           $862.319

      Lakehead Locality Education                                  $187.073

      Auden DSA Locality Education                              $  20.554

      District of Rainy River

      Fort Frances/Rainy River Locality Education

      (assess. roll numbers beginning with 5902)              $168.322         /           $167.371

      Fort Frances/Rainy River Locality Education

      (assess. roll numbers beginning with 5903)              $128.105

      Atikokan Locality Education                                   $  77.495

      District of Kenora

      Kenora Locality Education                          $  98.995

      Dryden Locality Education

      (assess. roll numbers beginning with 6060)  $134.033         /           $209.719

      Dryden Locality Education

      (assess. roll numbers beginning with 6093)  $168.188

      Dryden Locality Education

      (assess. roll numbers beginning with 6096)  $172.950         /           $275.266

      Red Lake Locality Education                                  $256.427

 

  • Note:  The table is modified from the original regulation to express tax rates per $100,000 assessed value.

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