To:Strategic Policies and Priorities Committee

From:City Clerk, Assessment and Tax Policy Task Force

Subject:Reassessment and Tax Policy Information and Communications Plan

Recommendation:

The Assessment and Tax Policy Task Force recommends that the Chair of the Task Force and the Chief Financial Officer and Treasurer be authorized to meet with provincial officials to discuss valuation models, quality control studies and the review of the quality and accuracy of the reassessment in Toronto, and report back to the Task Force on those discussions, at its meeting to be held on October 22, 1998.

The Task Force also requested the Chief Financial Officer and Treasurer to report to the Task Force on the creation of a class of land to be valued based on current use as opposed to current value.

Background:

The Assessment and Tax Policy Task Force, on September 29, 1998, had before it a communication (July 21, 1998) from The Honourable Ernie Eves, Q.C., Minister of Finance respecting Reassessment and Tax Policy Information and Communications Plan, responding as requested by Council, to Clause No. 3 of Strategic Policies and Priorities Committee Report No. 3 titled, "Reassessment And Tax Policy Information And Communications Plan", which was amended and adopted by City Council on March 4, 5 and 6, 1998.

The Task Force's recommendation is noted above.

City Clerk

Frances M. Pritchard/

980929.2

July 21, 1998

Ms. Novina Wong

City Clerk

City of Toronto

Metro Hall

55 John Street

Stn. 1071, 7th Floor

Toronto ON M5V 3C6

Dear Ms. Wong:

Thank you for your letter about Toronto Council's request for valuation models, quality control studies, and a review of the quality and accuracy of the reassessment in Toronto.

The process of establishing a new current value for each property in Ontario involved planning; data collection and verification; sales verification; stratification and market analysis; valuation; and fine-tuning of the values. It benefitted by modern mass appraisal techniques designed to produce accurate, consistent and fair values as of the June 30, 1996 valuation date.

These values were rigorously tested to ensure equitable treatment between different property types, age groups, sizes, and locational areas. Assessors, with the assistance of property owners, also reviewed the values for fairness in preparation for delivery of the assessment roll on June 15th, and will continue to do so through the reconsideration and appeal periods.

The Property Assessment Division is currently assembling and documenting its valuation models. Although this is an extensive process and will produce a lengthy report, it may be that some part of the report could be used to respond to Council's request. I have asked Ms. Elizabeth Patterson, Assistant Deputy Minister, Property Assessment, to share the information with you.

Detailed sales and property characteristic data will not be included in the report due to concerns about the protection of individual privacy. If a municipality wanted such information, it would have to undertake not to release it to the public on a property specific basis. Alternatively, the ministry could consider providing detailed information without data which identifies specific properties.

Council also asked that the Province undertake an arms-length review of the quality and accuracy of the reassessment in the City of Toronto.

The reassessment involved strict adherence to international quality standards and ongoing process controls, and the work was monitored by both the Property Assessment Division's Appraisal Services Branch and its Quality Control Unit. Following delivery of the assessment roll, the Division commenced a quality audit, and it anticipates that final values will meet or exceed international standards. The report will be available to the public.

You asked that each member of Council receive a copy of the assessment roll on CD. The CD version of the roll is now available and will cost approximately $2,000.00 per copy, with a volume discount. Copies can be obtained by writing to Mr. Ray Bowart, Senior Manager, Production and Client Support Services, Data Services and Development Branch, Property Assessment Division, Ministry of Finance, 33 King Street West, 6th Floor, Oshawa, ON L1H 8H5. Council may wish to consider a more cost effective alternative to a CD, and that is extracting the required data from the year-end tax file which was delivered along with the assessment roll.

Council's final request was for information necessary to determine assessments based on current value in current use. Generally, assessments reflect the current value of a property based on current use. I have attached an explanatory note, entitled "Current Value in Current Use," which I believe addresses this issue.

I appreciate your bringing Council's concerns to my personal attention.

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Current Value in Current Use

Key Issue:

In the new province-wide assessment system which bases current value on sales significantly different from valuation in current use?

Considerations:

Under the Ontario Fair Assessment System, assessments generally reflect the current value of a property based on its current use, which is, in almost all cases, also the property's highest and best use.

In rare cases, for less that 1 per cent of properties, the current value of a property reflects a more likely and economically appropriate use. These properties are typically under utilized, and most are being held for imminent redevelopment. These properties are often described as "properties in transition."

Some examples include:

(a)parking lots located on high density downtown lands that are being held until development proceeds on a high-rise office or residential building;

(b) industrial properties with obsolete buildings that are located adjacent to commercial sites recently developed as big box retail outlets (e.g., Home Depot, Costco);

(c)old style one storey motels on major commercial arteries, that are usually redeveloped as modern multi-storey hotels;

The increase in taxes on retail stores along major arteries like the Danforth and Bloor Street West is not the result of valuation based on speculative higher and better uses; these neighbourhoods are not being extensively re-developed and properties are purchased based on the intention of carrying on the existing use. Assessments of these properties are based on their value in current use. Values are rising steeply now because these properties have been significantly undervalued in the past.

Bill 106 enables the municipality, with prior approval of the Minister by regulation, to pass a bylaw creating a class of land to be valued based on current use. For example, residential properties located on commercially zoned land awaiting development could be valued on the basis of continuing residential use.