MPAC Presentation to the Oshawa Ratepayers

Association

April 14, 2009

Presentation by Bill Bradley, B.A., AACI, P.App.

Account Manager of Business Relations, MPAC

Presentation Topics

• MPAC Roles, Responsibilities and Relationships

• Overview of Provincial Budget changes from 2007 & 2008

• Review of a Sample Assessment Notice

• Key Sections of the Assessment Act

• How are assessed values established?

• Overview of CAMA

Presentation Topics (cont’d)

• Overview of Valuation Process

• Reviewing Your Assessment

• Access to Property Information

Ground Rules

• What we cannot address :• Tax policy or changes to tax policy (Province of

Ontario)• Individual Property Issues (contact the MPAC Call

Centre or Valuation Review Specialist at the local assessment office)

• Municipal tax or servicing issues (City of Oshawa or Durham Region)

MPAC Roles, Responsibilities and Relationships

MPAC Roles, Responsibilities and Relationships

Municipalities & Province

Adjudicate

Administer

Legislate

Tax

Assessment Review Board

MPAC: Roles and Responsibilities

• Assign a Current Value Estimate (CVA) & property tax class to 4.7 million properties on a four year cycle

• Annual Assessment Rolls to all 445 municipalities

• Prepare provincial jury lists, school support lists and municipal voters’ lists

MPAC: Roles and Responsibilities cont’d

• MPAC assigns CVA as well as property class

• Classification of property based on use

• Seven major property classes– Residential, multi-residential, commercial, industrial,

pipeline, farm, managed forests

• Property class also determines Municipal tax rate to apply

Assessment Act

• The Assessment Act is the legislation that outlines the “rules” around property assessment in Ontario

• The Assessment Act directs MPAC to assess all properties at their Current Value Assessment as of a specific date (eg. Jan 1, 2008)

• The Assessment Act outlines the definition of Current Value Assessment (CVA)

• The definition of CVA is what the property would be expected to sell for as of the effective date of valuation on the open market between a willing seller and a willing buyer

Assessment Related Budget Changes: 2007 and 2008

Ontario Budget 2007/2008: Assessment Related Changes

• Assessment Cycle changes to four years (tax policy change)

– Four year cycle commences for taxation commencing Jan. 1, 2009 based on Jan. 1, 2008 assessed value

– Next assessment update will be based on Jan.1, 2012 valuation date for taxation beginning Jan. 1, 2013

Ontario Budget 2007/2008:Assessment Related Changes (cont’d)

• MPAC will phase in assessment increases over four year cycle for residential, farm and managed forest properties (2007 Budget).

• Extended to all property classes (2008 Budget)– Example: Assume property increased in value by

20% from Jan. 1, 2005 to Jan. 1, 2008– Means 5% increase in assessment over the next 4

years (2009,2010, 2011, 2012)• Assessment decreases are immediate

Assessment Update Cycle

Update Year Taxation Year(s) Valuation Date

2005 2006, 2007, 2008 January 1, 2005

2008 2009, 2010, 2011, 2012 January 1, 2008

Four Year Assessment Cycle with Phase-In (Example)

Assessed Value of Your PropertyProperty Classification ResidentialYour Property Value as of January 1, 2008 $240,000Your Property Value as of January 1, 2005 $200,000Over 3 Years Your Property’s Value Changed By $ 40,000

Therefore, the “phase-in” of the assessment increase would be:

2009 Tax Year $210,000

2010 Tax Year $220,000

2011 Tax Year $230,000

2012 Tax Year $240,000

New Terminology

• Starting Point– The starting point will be the 2005 CVA

• Destination Value– The destination value will be the 2008 CVA

• Phased-in Assessment– Any increase in an assessed value from 2005

to 2008 will be phased-in in equal increments over the four tax year ( 2009 through 2012)

– If there is an assessment decrease from 2005 to 2008 CVA then this 2008 CVA becomes the phased in assessment for the next four years

Review of a Sample Assessment Notice

Reassessment Impacts

Generally speaking if the subject property’s percentage change from 2005 to 2008 is:

– is close to the average percentage change for the Municipality then, as a result of the reassessment, there would be little or no tax impact

– Less than the average change for Municipality then taxes, as a result of the reassessment, would decrease

Reassessment Impacts con’t…

• If the percentage change from 2005 to 2008 is above the median percentage change for the Municipality then taxes, as a result of the reassessment, would be expected to increase

It is important to note that any tax rate changes would then have to be factored into any

reassessment changes

Request for Reconsideration (RfR)

• There have been changes to the legislation affecting the request for reconsideration process

• Request for Reconsideration is the free and informal review of an owners current value assessment/classification

• Property owner would file a Request for Reconsideration form with MPAC stating the reasons for the review

• For example, property owner may consider filing RfR if they purchased the property on the open market in and around the effective valuation date date of January 1, 2008 at a purchase price less than the current value assessment

Request for Reconsideration

Is it Mandatory?

• Beginning in 2009, Request for Reconsideration (RfR) mandatory first step for properties in the residential, farm & managed forest property classes [39.1(3)]

• RfR not mandatory for business classes (commercial, industrial, multi-residential properties)

Request for Reconsideration

Filing Deadlines

For 2009:

• Regular Notices - March 31 of taxation year [39.1(1)]

• Supplementary/Omitted/Amended Assessments – within 90 days of Notice mailing [39.1(3)]

Request for Reconsideration

Deadlines to Complete RfRs

• MPAC shall mail the results of its reconsideration:

– By September 30 of taxation year, or

– By November 30, if all parties agree to extension [39.1(7)]

– Within 180 days of request being made, for supplementary/omitted/amended assessments [39.1(8)]

Request for Reconsideration

Settlements

• MPAC to give notice of settlement to the clerk of the municipality [39.1(9)]

• Clerk must alter the tax roll and levy taxes according to the amended assessment [39.1(10)]

• Municipality may appeal to the Assessment Review Board within 90 days after receiving the settlement [39.1(11)]

ARB Appeals

Deadlines

ARB appeal deadlines for 2009:

• Regular Notices -

– 90 days after the mailing of the results of the reconsideration [40(5)]

– March 31 of the tax year for property owners in business classes who do not file an RfR [40(6)]

ARB Appeals

Onus

• Onus simply means who has the burden of proving their case in any legal proceeding

• When value is grounds for appeal, burden of proof on correctness of current value lies with MPAC [40(17)]

• Traditional onus on the appellant applies to all other grounds for appeal (classification of property, school support)

ARB Appeals

Onus (cont’d)

Burden of proof rests with the appellant:

If he/she fails or refuses to:

– Allow MPAC to inspect property

– Comply with a request for information and documentation [40(18)]

•Person whose assessment is subject of an appeal may make a closing statement [40(15)]

ARB Appeals

Test on Appeal

• For 2009 and subsequent taxation years, the ARB must:

– Determine the current value of the property (accuracy);

AND

– Have reference to similar lands in the vicinity and adjust the assessment to make it equitable only if comparison results in reduction (equity) [44(3)]

Correction of Factual Errors

Amended Notices

• For 2009 and subsequent taxation years, errors in assessment and classification may be corrected by Amended Notice [32(1.1)] if the error:

– Called a Post Roll Amended Notice (PRAN)

– Results from incorrect factual information

– Is not from a change in opinion of current value

• Factual errors may be corrected at any time during taxation year

Other Announcements

Phase-in Extended

• 2007 Ontario Budget - mandatory 4-year phase-in of assessment increases for residential, farm and managed forest properties

• 2008 Ontario Budget – extended 4-year phase-in of assessment increases to all property classes

Ontario Budget 2007/2008:

Assessment Related Changes (cont’d)

Tax Grants and Credits for Seniors

• New Senior Homeowners’ Property Tax Grants for seniors with low and moderate incomes who own their own homes:

– Up to $250 in 2009

– Maximum increased to $500 for 2010 and subsequent years

• Enriched Ontario Property and Sales Tax Credits for Seniors for low-income seniors who own or rent their homes

Tax Grants and Credits for Seniors

• Senior couples with $250 or more in property taxes in 2008 and incomes up to $45,000 will receive the maximum grant in 2009

• Single seniors with $250 or more in property taxes in 2008 and incomes up to $35,000 will receive the maximum grant in 2009

• Application doe the 2009 grant and Ontario Tax credit is contained in the 2008 personal income tax returna (Form ON 479)

• For more information call 1-800-337-7222

Key Sections of the Assessment Act

Key Assessment Act Sections

• What is assessable in Ontario? • Definition of Current Value

What is assessable?

• According to the Assessment Act of Ontario all land, real property and real estate is assessable

• This will include:– Land covered with water– All trees and underwood growing on land– All buildings and structures erected or affixed to the land

• Personal property is not assessable in Ontario

What is Current Value Assessment?

• According to the Assessment Act, in relation to the land, current value is what a property would be expected to sell for on the open market between a willing seller and a willing buyer

• Arms-length, open market sales become part of the MPAC analysis in determination of CVA

• Family sales, sales between related parties, power of sales, foreclosures, sales between related companies are eliminated of analysis purposes

How are assessed values established?

How are assessed values established?

• 3 recognized approaches to estimating value

– Direct Comparison Approach– Income Approach– Cost Approach

Property Types Valued by the Income Approach

• Office Buildings, Shopping Centres• Multi residential – Rows & Apartment

Buildings• Hotels, motels• Nursing homes, Retirement homes • Golf courses• Multi-use properties• Specialty properties i.e. Air Canada Centre,

Scotia Bank Place, CN Tower, Rogers Centre.

Valuation Approaches (cont’d)

• Direct Comparison (Sales) Approach– Models the behavior of buyers and sellers in the real

estate market

– Compares property to be valued with recently sold properties

– Works best when there are sufficient comparable sales

– Sales Comparison approached used to value s.f.d., condominium, res. waterfront, vacant land, store front retail Toronto and Ottawa

– Property sales best evidence at Tribunals

Valuation Approaches (cont’d)

• Cost Approach

– Seeks to determine the replacement cost of the improvement less depreciation plus the land value

– Primary approach on properties that do not regularly trade in marketplace

– Land estimate from vacant land sales and land residual methods

– MPAC has developed an Automated Cost system (ACS)

2,300.0 / .1%

3,288,700.0 / 90.0%

322,850.0 / 8.8%

39,900.0 / 1.1%

LEGISLATED

MRA

COST

INCOME

Valuation Approaches Used

DIRECTCOMPARISON,

Current Value vs. Sale Price

Current Value– Most probable price a property should bring in a competitive

and open market under all conditions requisite to a fair sale– MPAC derives a median sale price which will incorporate the

range of market sales

Sale Price– Price a particular buyer and seller agree to in a particular

transaction– Only indications of market value– Range in sale prices possible for a particular property

Source: Mass Appraisal of Real Property, IAAO

Overview of Computer Assisted Mass Appraisal (CAMA)

Single Property Versus Mass Appraisal

• Single property appraisal is the appraisal of one property at a time

• Mass appraisal is the process of valuing a group of properties as of a given date, using standardized methods and allowing for statistical testing

• Multiple Regression Analysis (MRA) is an appraisal application of the sales comparison approach

Five Key Components to Value Using Sales Comparison

1. Building area

2. Construction grade

3. Age -Adjusted for additions and renovations

4. Lot dimensions

– Frontage, Depth and/or Acreage

5. Location, location, location (neighbourhood)

85% of a property’s value is generally attributed to

these five characteristics

Sample MRA Value Calculation: Residential

• Sample subject property has the following attributes:

– Located in the area referred to the “East End of Town“

– Lot frontage 50 feet; lot depth 120 feet

– 2 story house with full basement built in 1985

– Finished basement area of 500 square feet

– 2 full and one half baths

– Single car attached garage

– Fireplace, air conditioning, small deck

– Property abuts an active railway line

Sales Price v. Living Area

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1,000 2,000 3,000 4,000 5,000

Living Area (sq. f t.)

Sal

es P

rice

Relationship between Sale Price & Living Area

What makes up the value of your home ?Location & Site

Base Value = $30,000East End of Any Municipality -

50 feet @ $2,000 pff

120’

$100,000

Main Floor 800 s.f. @ $60/sq.f. =$48,000

2nd Floor800 s.f. @

$45/sq.ft. =$36,000

Attached Garage250 s.f. @ $20/sq.ft.

=$5,000

Bsmt - 800 s.f. @ $10/sq.ft. = $8,000

Finished Bsmt500 s.f. @ $12/sq.ft. = $6,000

Deck - 150 s.f. @ $8/sq.f. = $1,200

Age of Structure May, 1985 = - $ (15,000)

Structure

Additional Adjustments to Value

$3,000

$11,000 $2,500Yes => Minus $ (12,000)

$3,000

$11,000 $2,500

$ 223,000

Yes => - $ (12,000)

LOCATION

+SITE

STRUCTURE

Overview of the Valuation Process

What is the Valuation Process?

• Data Collection• Analysis• Values to Field Offices for Fine Tuning• Quality Testing of Models• Fine Tuning and Value Application• Production and Mailing of Assessment

Notices

What is the Valuation Process (cont’d)

• Production and Mailing of Assessment Rolls to Municipalities

• Open houses• Requests for Reconsideration • Assessment Appeal if necessary

Data Collection

• Property information is collected by MPAC from a number of sources

– Land transfer tax statements (sale prices, owner names)

– Building permits (from municipalities)– On-site inspections– Sales investigations– Income and Expense Data from owners– Realnet, Realtrack, Marsh reports

Analysis of Data

• Sales analysis and Benchmarking• Cost database determination• Land Analysis• Fair Market Rent Determination• Income and Expense, Vacancy,Cap Rate analysis

Fine-tuning and Value Application

• Initial property values are reviewed by local office field staff (Valuation Review Specialists)

• Necessary updates made to values prior to placement on assessment roll

• Utilize statistical tests such as the Assessment to Sale Ratio (ASR = 1.00 )

• Utilize digital mapping (GIS) to pinpoint areas requiring review

Using GIS to Identify “Outlier” Using GIS to Identify “Outlier” Sales Requiring Fine-tuningSales Requiring Fine-tuning

0 - 0.89

0.9 - 1.1

1.2 & above

Data Management - G.I.S.

• Detached 2200 square foot home

• Two storeys

• 40 feet x 110 feet lot size

• Standard construction quality

• Built in 1992

• Two car attached garage

• 890 square foot finished basement• Urban area > 50,000 population

Benchmark Urban Two Storey Home Details

Benchmark Urban Two Storey Home Comparison

$338,000ST. CATHARINES

CAMBRIDGE$323,000

MARKHAM$430,000VAUGHAN

$559,000

BARRIE$297,000

MISSISSAUGA$447,000

OSHAWA$317,000

OTTAWA$380,000

WINDSOR $229,000

TORONTO$701,000

Major Property Classes

Provincial

Average

21.66%

Reviewing Your Assessment

How Do I Review My Assessment?

• Call us at 1 866 296- MPAC (6722)

• Complete a Request for Reconsideration form, available at www.mpac.ca

• Send a letter to:

MPAC

P.O. Box 9808

Toronto ON M1S 5T9

• Visit local field office

Request for Reconsideration Process

• Based on the RfR, if MPAC changes the property classification or adjusts the property value, the property owner will be sent a Minutes of Settlement (MoS)

• Property owner can either:– Sign the MoS and return to MPAC for processing of the

change(s)

OR– Decide to file an assessment appeal with the Assessment

Review Board

• If MPAC does not receive the signed MoS from the owner MPAC will send a reminder letter 45 days after the original MoS offer was mailed

When to ask for Reconsideration?

• Current open market sale of subject property less than CVA estimate

• Deferred maintenance/condition issues

• Unique site or structure traits not already captured

• Partially completed structure

When to ask for Reconsideration?cont’d

• Restrictive zoning or holding designation

• Change in GLA or reconfiguration of commercial tenants

• Recent market value appraisal of property less than CVA

Request for Reconsideration (RfR) vs. Formal Complaint

• RfR is free and informal vs. Formal Complaint requires a prescribed fee

• New Dates for RfR and Appeals

Property owners in the residential, farm or managed forest classes must RfR by March 31 and appeal 90 days after results are mailed by MPAC– For more information on the appeal process, visit the

Assessment Review Board web site:www. arb.gov.on.ca

Access to Property Information

New AboutMyPropertyTM

• A Redesigned AboutMyPropertyTM will be available to support the delivery of the 2008 Assessment Update

• Username and password will be provided on the 2008 Assessment Notice

• Property taxpayers will have access to detailed property report for their own property

• New AboutMyPropertyTM will also include options to select properties of interest from an interactive map

New AboutMyPropertyTM

Sample Log-in Screen

New AboutMyPropertyTM

About My Property

New AboutMyPropertyTM

My Neighborhood Properties

Questions? Need Information?Please Contact Us!

Visit our website at www.mpac.ca

Call our Customer Contact Centre1 866 296-6722

Visit your local MPAC Office(28 locations across the Province)

Thank you.

Questions?