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Report on tax policy recommendations to go before County Council

Posted on Thursday March 09, 2017

Cobourg, ON – March 9, 2017 – Maintaining existing tax ratios for 2017, and conducting a full review of County ratios and tax policy for 2018 are two of the recommendations outlined in a report that staff will present to Northumberland County Council next Wednesday.

Council requested this report from staff in February, following a delegation by the Ontario and Northumberland Federations of Agriculture seeking an adjustment to tax ratios across the County in order to achieve reduced taxation on farm land. Representatives were seeking an adjustment of the Farm Tax Ratio to 13% of the residential tax base over the next four years, down from the current 25%, in response to significant increases in the assessed value of farm land, as determined by MPAC. The requested ratio change would result in the farm community continuing to pay their existing portion of the municipal tax burden, rather than a portion that fluctuates based on land values.

“With respect to 2017 ratios, the task before us was to make a recommendation based on a balanced and equitable approach to taxation for all residents and businesses of Northumberland,” indicated County CAO Jennifer Moore. “After careful consideration of the potential impacts and outcomes across all tax classes related to the recently-updated MPAC assessments, our recommendation is that the Farm Tax Ratio remain at the existing rate of 25% of the Residential Tax Ratio.”

Council requested a thorough examination of the issues, seeking to understand the impact of the assessment increase on the farming community versus the impact of shifting this increase to the residential and industrial/ commercial tax classes.

The staff report concludes that a shift would not be a sound approach to tax policy. Municipalities collect property taxes based on MPAC assessments determined by ‘fair market value’; the tax system is rooted in owners paying based on what a property is worth. Shifting the tax burden between classes to address a particular increase sets a difficult precedent, whereby any class facing an increase could feasibly seek similar recourse. The report cites a similar example from the recent past where residential waterfront property owners were assessed with significant increases. In this case, no adjustments to tax ratios were considered.

County Finance Director and Treasurer Glenn Dees likened the issue before Council to the analogy of a pie. “The levy is the portion of the County budget paid for through property taxes. Once the annual levy is set, farm, household and industrial/commercial business taxes are determined, based on an established ratio for each tax class.

“If we look at the County levy as a pie, the ratio assessed to each tax class is how that pie is divided up. If we reduce the slice of pie—the ratio—managed by one tax class, it means that the slices must increase for the other classes in order for levy requirements to be fulfilled. In other words, this proposed shift would mean an additional tax increase for the other classes—primarily the residential class. With the farm tax rate already set at 25% of the residential rate, staff does not feel there is sufficient evidence to recommend that Council make a further reduction at this time.”

Recognizing the concerns expressed by the agricultural community, as well as a host of needs identified across all tax classes within the County, the report to Council also recommends a detailed tax policy review be conducted throughout 2017 to properly evaluate factors affecting each class. This review will further inform any future decisions on tax policy changes.  

A third recommendation outlined in the report is the creation of an Agriculture Working Group involving County staff and representatives from the local farming community, where the County could further assist with local interests, challenges and concerns, as well as support escalation of pertinent items to upper levels of government.

Council will discuss this report at the upcoming meeting of County Council on March 15th, 2017. To view the full report, as well as other agenda items, visit Northumberland County’s Council Portal at: www.NorthumberlandCounty.ca/ Portal.

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