Jeff Green | Feb 13, 2019
When Frontenac County Council completed their budget meetings last week, the Councillors seemed to be happy about the result. They wanted to keep the tax increase to the cost of living index, which was 3.1%, and county staff presented them with that number.
The only problem is that 3.1% is not the tax increase for 2019, it is something else entirely.
It is the figure for what county staff call the “total levy impact” of a budget which will result in a 5.2% increase in the amount of money that, collectively, Frontenac County ratepayers will pay this year to finance Frontenac County.
Last year we paid $9.75 million, and this year we will pay $10.25 million (all rounded figures), a 5.2% increase. That’s a pretty simple calculation and that’s the way we have always reported tax increases in this newspaper and that’s the way we are reporting them this year.
So, what is this 3.1% all about?
It is about playing games with numbers to come with a result that sounds better than it really is.
To get to 3.1% you have to start thinking about the way municipal taxes are collected, and how that relates to property values. Every property in Ontario is assessed for value by MPAC, the Municipal Property Assessment Corporation, and we pay tax by multiplying the tax rate, which is set by our municipalities, by the assessed value of our properties. The total assessed value of Frontenac County properties is up by 2.1% this year over last year. Frontenac County staff deducted that increase from the 5.2% tax increase to come up with a 3.1% “total levy impact”.
The problem is that the “total levy impact” has nothing to do with budgeting, or the actual amount of money we are all going to end up paying.
Property assessments go up in two ways. One is through new construction, new homes, renovations to older homes, new garages and decks, etc. Permits for $45 to $50 million worth of new assessment are sold each year in Frontenac County, and two to three years later those building projects result in new property value, in some cases even brand-new taxpayers. This amount of real growth represents about a 1% increase in assessment.
This 1% increase reflects a real increase in property values in our county, more garbage, perhaps even more roads. Most of these increases have a minimal effect on the cost of running a municipality in the short run, but over time they will eventually have a measurable impact.
In their budgeting, the South Frontenac Treasury Department calculates this “assessment increase due to growth” and builds in some breathing space for their budget with that money. I don’t necessarily agree with this, but at least this kind of assessment has some relation to the cost of delivering services.
In 2018, Frontenac County used this 1% figure to mitigate against the overall tax increase, in much the same way South Frontenac does.
This rest of the growth in assessment comes from the MPAC four-year assessment cycle, which is essentially a virtual exercise. Once ever four years, MPAC analyses statistical sales data from across the province, and without necessarily visiting properties in person, assigns a new value to every property in the province. Since property values tend to go up, so do the MPAC assessments. These new values are phased in, so most properties in Ontario see their value increase every year by at least a few thousand dollars. These increases do not relate to any real new ‘value’ and they don’t result in any added municipal costs. They do not relate in any way to municipal operations, and they don’t put money in property owner’s pockets either. But they can result in higher taxes because a municipality receives a bump in tax revenue without raising the tax rate.
In their 2019 budget, for the first time, Frontenac County is deducting this increased revenue from their budget increase. They are claiming that these increases are not real, that they have no “total levy impact”. But they are real enough for ratepayers, because they result in more tax to pay.
Municipal councils need to make sure their managers control costs, and can justify any of the inevitable cost increases that they request for their department. They also should be honest, with themselves and with us, about tax increases.
In Frontenac County this year, 5.2% is the real increase. The County could claim that new taxes on real growth mitigates against that 5.2% increase by up to 1%, legitimately report an increase of 4.2%. I would still report it as a 5.2% increase, with a 1% mitigation due to growth, but that is a quibble.
But the 3.1% claim about “total levy impact” is misleading, at best.
When we get our tax bills, we will see the real dollar increases. There is no way to sugar coat that.