PERTH COUNTY – Perth County has the highest farmland Current Value Assessment (CVA) as a percentage of total in southern Ontario at a percentage exceeding 60 per cent. This is more than 10 per cent higher than the second-highest CVA, which is in Huron County. This creates a significant shift in the tax burden onto farmers.
Council is required to make tax policy decisions that impact the distribution of the tax burden on the citizens of the county. Since 2004, council has adopted all regulatory tools concerning property tax capping options, with 2020 being the first year the county has exited capping. Corey Bridges, Perth County manager of finance, presented a multi-purpose report during the March 4 council meeting informing councillors on zoning bylaw, tax policy and tax rates for 2021.
He pointed out that a focus for county staff continues to be lobbying to get the province to move ahead with current Municipal Property Assessment Corporation (MPAC) assessments for property values.
“The 2021 tax policy is currently based on the 2016 MPAC information,” said Bridges.
The report also included details related to the optional subclass for small business.
“I’ve contacted our local municipalities about this subclass and many of them are deferring them for this year in absence of… regulation from the provincial government,” he said.
According to Bridges, the only highlight of the tax policy is that the county is reducing the multi-residential rate to one per cent. He pointed out that approximately 60 per cent of the tax burden is residential, 29 per cent from farmlands and the remainder being made up by commercial and industrial classes.
“I got an email from the president of the Perth County Federation,” said Warden Jim Aitcheson. “They were kind of hoping we might reduce the farm tax ratio below 25 per cent... any thoughts on that?”
Coun. Bob Wilhelm said they have discussed this topic numerous times and he thinks what they are being taxed currently is fair.
“To be honest with you I’d like to see the government look at some of these industrial farms and tax them appropriately,” he said.
Council voted in favour of leaving the tax ratio at 25 per cent.
“We’ve had that discussion and it doesn’t look like you want it to change so there is no sense us proceeding any further,” said Aitcheson.
Council received the report and voted to keep the tax rates the same as 2020 except for the multi-residential rate.
Bridges took a moment to speak to the Perth County Federation of Agriculture and emphasize that the county is continuing to lobby the province for current value assessment.
“The issue is (the) residential (rate) can’t move – it’s at one,” he said. “But if we get current value assessment to a greater value than 2016 the shift is going to be created through urban-rural… With housing values which I see to date, I think the average in Toronto is sitting around $1 million per house.”
According to Bridges, the high assessments of residential housing should automatically change the rates without adjusting ratios over the next four years.
“I agree with what you said,” said Aitcheson.
Coun. Doug Eidt suggested that the yo-yo effect will keep going until either the farm market or the residential market has a bust.
Bridges shook his head in disagreement.
“I think the hot farm market happened previously and they have taken consideration of that in current value assessments up to 2016,” he said. “I don’t think we’ve taken into consideration the hot residential market from 2016 to 2020.”
Bridges said there will be some increases in farmland assessments but he believes the increases in residential will exceed them.
Eidt said he thought the housing market was only hot in 2020 and won’t have much effect on the new assessments.
Several other councillors shook their heads to show their disagreement with Eidt’s comments.
Bridges said the residential market has been hot and not showing signs of any reductions.
Coun. Walter McKenzie agreed it was hot before 2020 but said it was previously unheard of for sellers to get a few hundred thousand more than their asking price.
“That’s compounded the problem I think,” he said. “I agree with Doug – this housing market has gone right through the roof.”
Kasenberg spoke of an idea a county delegation had presented to the minister of finance a few years ago on this subject about using income tax instead of property tax to support municipalities.
“I’m quite compassionate to the issues that farmers are facing,” he said.
He is seeing farmers paying a significant amount of their incoming revenue in property taxes.
“This is of concern, especially to small farm businesses,” said Kasenberg. “I agree with the general premise that changing that 25 per cent on the dollar against residential is probably not the right approach.”
However, he said he has a more ambitious agenda in regards to tax reform and the support of municipal governments.
Kasenberg questions whether property tax is the right way to go about funding municipal operations.
“Farm asset value which is what MPAC is measuring is not liquid and farmers may have terrible cash flows and be asset rich,” he said.
Kasenberg said this leaves farmers paying taxes based on assets that someday might be realized or passed on to their children.
“Unless they liquidate it they don’t see the return,” he said. “Some in society would argue – poor them, that’s their problem, they have a wonderful problem that someday they will liquidate and they will get a boatload of money out of it.”
The argument that says assets represent the way people should be taxed doesn’t feel right to Kasenberg.
“What feels right to me is your income is how we tax you and I recognize there are ways businesses have to move income around and invest in their businesses,” he said. “Farmers have the same availability of those kinds of initiatives but I would rather see a progressive income tax-based system for municipal support that relies on realized income and not asset value – projected asset value which has no liquidity.”
Kasenberg has done enough research to know there are very few jurisdictions that fund their cities from income tax and he admits there would be some logistics issues to deal with in implementing it.
“There are also some logistics answers already,” he said.
The federal government can tell at the FSA level – the first three letters of a postal code – how much money is raised in federal and provincial income taxes.
“If their computers can narrow it down to parts of cities and towns which it appears they can then they can surely code into their system a means by which they say this is a taxpayer who lived in North Perth who lived nine months of the year in North Perth so essentially we are designating North Perth the recipient of their municipal income tax,” said Kasenberg.
One of the concerns which could be raised with a switch away from property taxes is that it could swell the size of government at the federal level if more people are needed to take care of all that tax collection.
Kasenberg said he would be willing to wager that software the federal government already has for managing income tax files could have filters created in the database so that they can say someone who lives in North Perth pays their income tax at the North Perth level.
“We had a delegation with Former Finance Minister of Ontario Rod Phillips … and we pitched to him four remedies to deal with the Ontario Municipal Partnership Financing (OMPF) reductions and the impacts on municipal governments and one of those was to scrap property tax,” he said. “Literally, because he is a pleasant man, he smiled broadly, he leaned forward and he said that was very bold… but sometimes you have to think boldly.”
There is such a thing as a cashflow poor farmer, and Kasenberg reminded council that some of them live within Perth County.
“I want them to pay their fair share but I don’t want them to disproportionately pay at this point when they have no liquid assets,” he said. “That’s madness.”
McKenzie said as a courtesy, a response should be sent to the Federation of Farmers to make sure they understand their concerns weren’t taken lightly.
The Small Business Optional Subclass was part of the 2020 Province of Ontario legislative framework for all municipalities to implement a small business subclass. This would allow a municipality to create a reduced subclass threshold for small business as established by the county.
The county treasurers’ group recommended this subclass be deferred until the county can review the provincial regulation, which will assist in determining tax implications.
The reduction in multi-residential is a policy objective to stimulate the multi-residential sector and try to reduce increased urban sprawl.
Colin Burrowes, Local Journalism Initiative Reporter, Listowel Banner