As the city struggles with a way to make up lost revenue from provincial funding cuts – a big part of the $6-million budget hole they are facing in 2020 – there's another major drain on local revenues that gets much less attention.
While some people may remember the Municipal Property Assessment Corp. from its flawed voters list from the last election, MPAC's main role is determining the value of land in each Ontario community — and that determination is the basis for how much property tax everyone has to pay.
But a trend that has emerged, especially since 2017, are appeals of those assessments by big industrial and commercial companies seeking to lower their tax bill.
Those appeals are heard by Ontario's Assessment Review Board (ARB), an independent body created by the provincial government. Ed Stankiewicz, the city's budget director, told members of the finance committee Tuesday those appeals have increased in number in recent years, to the point the city is losing millions to ARB decisions each year.
“It’s very difficult to get the assessment (tax revenue) that MPAC provides,” Stankiewicz said.
He said the major mining companies – Vale and Glencore – as well as other businesses have realized the ARB often lowers the tax bill, and that it's worth it to them to appeal as many assessments as they can.
“There is $3 million in tax writeoffs that has resulted from successful appeals for 2019,” Stankiewicz said in an interview after Tuesday's meeting, adding the city has lost similar amounts in recent years. “It's a trend that's been going on for a few years – 2017, 2018 and 2019 have been extraordinarily bad for assessment appeal losses.”
Mayor Brian Bigger said it's frustrating to try and budget when they lose so much money — two to three per cent of tax revenue — to appeals.
“A single MPAC reassessment can wipe out all the work we’ve done in the community,” Bigger said.
Stankiewicz said companies hire experts in the field — tax agents — whose job it is to save their clients money. And knowing the willingness of the ARB to lower assessments, they don't have much to lose by appealing most every decision.
“They're very hungry and they're very aggressive,” Stankiewicz said. “It's been a booming business for them for the last few years.
“MPAC is valuing properties as best as they can. However, again, the tax agents are very, very savvy and they know their way around the Assessment Act.”
The city is dealing with so many appeals — the city has to defend the cases, not MPAC — they end up with a choice between hiring costly outside help to cope with all the cases, or negotiating with the companies to lower the bill without going to the ARB.
With so many cases being lost, Stankiewicz said negotiations are often a more cost effective way to proceed.
“So sometimes we're just better off taking a little loss just to make sure that you don't spend the money (to defend a case). An appeal could cost us $50,000-$60,000 for just one property.”
