Farmland tax rate disputed as farm assessments rise

Wednesday, April 2, 2014

by SUSAN MANN

As farm assessments rise, so too do farmland taxes. And even though municipalities have the power to ease the tax burden on farmers, the challenge, as the Ontario Federation of Agriculture and its county federations are finding, is convincing them to do so.

Federation president Mark Wales first raised the issue about a year ago when he wrote in a Jan. 25 column that it was time municipalities give due “consideration to where residential tax rates need to be to fund their share of services and infrastructure and adjust the overall weighting of farm tax rates to reflect a fair proportion of the bill.”

Farmland values have significantly outpaced residential values and that is pushing taxes for farmland higher if they’re not adjusted fairly, Wales wrote.

Since then, the Ontario federation has been working with its county federations to request the county councils decrease the percentage of the residential rate that’s used for farmers to pay taxes for farmland. Municipalities have the authority to set the farm class tax rate at a maximum of 25 per cent of the rural residential rate. The provincial government has also given municipalities the flexibility to set it lower than 25 per cent. All farmers in Ontario pay the full residential rate on their residences plus one acre of land.

Mark McDonald, chief administrative officer for Elgin County, says for their municipality many county councilors are farmers and “may have experienced rises in assessment.” And while the Elgin Federation of Agriculture has twice approached county council to request the farm class tax rate be decreased, council has declined the request.

“County council came to the conclusion that we’re not going to shift the burden to other property classes in order to lower the farm tax ratio,” he says. Years ago lakefront properties in Elgin County were hit with huge assessment increases but council didn’t ask farmers to share the increased tax burden lakefront property owners were facing. The municipality can’t give farmers “a break now when we didn’t give those residential properties a break several years ago when they got hit with increased assessments.”

McDonald says any assessment increases are phased in over the four years of the assessment cycle, to ease the process of adjustment. “We realize it isn’t perfect but that’s the system we’re living with.”

Elgin County council didn’t want to shift the burden away from the farm class tax rate “to residential, commercial or industrial any more than they already have. I guess the bottom line is they felt the 25 per cent rate is fair,” McDonald says.

It’s true farmland doesn’t use municipal services, such as public health, libraries or garbage collection, but that’s why the tax rate for it is at 25 per cent of the rural residential rate and the residential rate is at 100 per cent, he says. “There’s already recognition they aren’t using certain services at the same level as a residential property.”

Some counties, such as Chatham-Kent at 22 per cent, already have a farm class tax rate that’s lower than 25 per cent of the rural residential tax rate. Wales says in a recent telephone interview some councils have had the lower rate since the mid-1990s when there was a push across Ontario to amalgamate municipalities.

The reassessments for 2008 to 2012 released by the Municipal Property Assessment Corporation (MPAC) showed that on average across the province farmland went up by 53 per cent, Wales notes. The next reassessment cycle is from 2013 to 2017, and “unless there’s a crash of some kind, we’re going to see another massive increase because eventually it has to catch up to where land is trading at.”

In comparison, rural residential assessments for the same time period increased by an average of 13 to 15 per cent across Ontario, he says.

MPAC is a non-profit corporation that’s responsible for property assessments in Ontario.

Wales points out that in many cases farmland is actually selling for more than it has been assessed at. For example, in his township, Malahide in Elgin County, productivity Class 1 land (the top class MPAC has for farmland) has been assessed at about $7,400 per acre but it’s selling for more than double that. MPAC’s productivity classes for farmland are slightly different than the Canada Land Inventory soil classification system but they’re based on it, he says.

In addition to its concern about the impact increased assessments are having on farmers’ property taxes for farmland, the federation is also concerned about the method MPAC is using to do the assessments. Wales says there are too few sales that are being used to determine farm assessment values in some parts of Ontario and that’s resulting in inaccurate data.

The federation is working with MPAC and the Ontario Finance Ministry to improve MPAC’s processes. “About half of all of the areas in Ontario don’t have enough sales to be truly statistically valid,” he says.
 
One suggestion the federation has to fix the problem would be to increase the sample size by using farm sales data from a larger geographic area. BF