We've had a few calls come in about the arm's length Provincial body known as the Municipal Property Assessment Corporation (MPAC), especially as there's been some coverage of MPAC on the news lately. MPAC does an assessment on your property every four years that sets the tax rate for our city. Pressure is mounting on Premier Ford to proceed with a fresh property assessment across all Ontario municipalities, as the reassessment that was due in 2020 was delayed due to the pandemic.
MPAC has a handy video on how the current value assessment system works:
Let's review the key parts of the current value assessment outlined in MPAC's video and unpack them a little.
It's true that when the Province-wide assessment updates are done, recent nearby sales are the most important factor in determining your home's value. Additionally, MPAC tries to carefully group similar property types in each neighbourhood to determine values. That means that while the sale of a fully renovated monster home might have some impact on the entire street, properties that are smaller "originals" should be adjusted closer to their true value. There is also a process to file an appeal if you feel that your property has been improperly assessed. If the next assessment assigns a value to your two-bedroom bungalow that seems like it would better fit the mansion next door, you will want to file an appeal.
Recent media reports have highlighted under-assessed luxury homes and some over-assessed smaller homes across Toronto, so I checked in with Casey Brendon, the Director of City of Toronto Revenue Services, to get some insights. For as long as either of us could remember, MPAC has slightly low-balled your assessment amounts. Proportionately, MPAC assessment values are often $200,000 to $400,000 lower than what your house might sell for in a bidding war. I've heard questions and complaints about MPAC low-balling because people think it will affect the resale value of their homes or their ability to borrow. The fact is, your MPAC assessment only affects one thing: your property tax bill. The real estate market itself determines what your home will sell for.
The most important thing I'd like you to take away from the video explainer above is the amount MPAC calls "the cost of running the city you live in." This is all-important as it truly limits the amount of taxes any municipality can fairly collect. This is the amount we divide the number of homes in the city by to arrive at a tax rate.
Because we're dividing the cost of running the city across the value of all the homes in Toronto, just because your property assessment goes up by 20% does not mean the amount of tax you pay goes up 20%. As shown in the video, if every home in the city increases in value by 20%, the overall tax rate lowers and you actually end up paying the same amount of property tax. I know some folks get worried that a reassessment will drastically up their taxes, but that is not the case. It just makes sure everyone is paying their fair share of that cost to run our city.
The issue with the cost of running the city number is that it was set provincially over 20 years ago when MPAC was created. Since then, the cost of running Toronto has changed by far more than just inflation. Our city has grown and added a significant amount of both infrastructure and services, such as libraries, community centres, and massive increases in transit infrastructure, including the Sheppard subway, the York University subway extension, new streetcar maintenance facilities, bus garages, and soon, of course, the operation of the Eglinton Crosstown, to name a few. It's no wonder that we've had to exercise our only option to add a property tax increase on top of your assessed rate when year after year, the Province hasn't updated the original calculation of how much it costs to run our city.
Here is the problem with the math exactly as MPAC described is in their explainer video: Each time there is a new assessment, we take the "cost of running the city" number and divide it by the total value of homes in the city. That means that added homes just help to stabilize your property taxes, and the only windfall we derive from new homes is when they pay the property tax increases that our City budget is permitted to apply.
It's good to discuss all of these assessment details in advance of an update. The Province has been waiting for the pandemic impacts to pass, so a Province-wide reassessment is imminent. It's good for you to know some of the basics of the system but, fundamentally, we need the math updated to create fairness. Most of all, we need to tackle the fact that your property tax bill is ill-equipped to sustain a city like ours, full stop.
Let's have the most fair and updated property tax calculation, by all means. Once that's taken care of, we need permission and access to an added source of revenue that actually captures wealth and redistributes it. Property tax is not the right tax to run our growing transit system or support refugee claimants who arrive in our city. Instead, we need a measure like a Municipal Sales Tax that taxes based on ability to spend and captures tax from visitors and non-residents who use our city infrastructure without contributing to it.
Toronto is staring down a significant budget hole. While it's due time for an MPAC update, we also need to look at the bigger picture and chart a course to make Toronto financially sustainable for generations to come. I'll be sharing plenty more on this topic in the months ahead, so stay tuned.
We'll be taking a short break from the E-Blast next week, but rest assured we'll be back on August 17 with more important updates for our community. My office’s phone line and email will continue to be answered over the next two weeks, so please don’t hesitate to reach out about any issues that may arise.
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