Feb. 26, 2003
PROPERTY TAXES
It is clear that all is still not well with our property tax
system.
I believe the principles upon which a property tax system
should be based to be as follows:
1. Property taxes are exactly what they say they are - taxes
on property. They are not taxes on wealth. They are not taxes on income and the
relationship between property taxes, wealth and income is subtle. If you can't afford the
costs, you shouldn't buy the property.
2. The greater the distance from an urban centre, the lower
the value of similar size and quality properties and the higher the service costs.
3. Property taxes can remain unchanged or not during periods
of recession. If all they fund are city services and education, which are non-cyclical
costs, then they can be held constant through a recession. However, if they are required
to fund cyclical, social and unemployment related services, they will be counter-cyclical
and will rise during a recession and fall (theoretically anyway!) during times of economic
growth.
4. Property taxes are either a fixed overhead cost of
business or are paid out of the after-tax income of residents. Therefore, they need to be
a stable and relatively small component and not a large and fluctuating component of the
ratepayer's budget.
From the above:
1 Both size (land plus improvements) and market value ought
to be taken into account when determining the assessment basis for any property.
2. In principle, an assessment, once in place and not
challenged by the owner, should remain unchanged until the property is sold. This way,
retired people and those who improve properties are not penalised. Vendors of property
would be required to obtain a notice of reassessment prior to listing.
3. A safety net regarding cyclical costs needs to be
established. Property taxes are fine when they cover property expenses and property
related city services, but we cannot expect ratepayers to shoulder the load of expenses
which, rightfully, should be financed from the stronger sales and income tax bases (both
of which have fixed, ie forecastable rates) and by a level of government that has the
ability to borrow to cover deficits.
4. Where possible, governments should seek to reduce property
taxes and seek to use income and expenditure based taxes to fund programs.
5. Because property taxes are either an overhead cost of
business or directly funded from the after-tax income of residents, there needs to be a
cap on the amount of property taxes raised, no different from income tax and sales/gst
rates. There needs to be certainty moving forward as to what property ownership costs will
be and this has been recognized for commercial and multi-dwelling ratepayers, but not
residential ratepayers.
You can use the above in comment, and what comes next is
comment from me to you.
The above takes into account the funding issue that David
outlined in his note to you. The reality is that both the federal and provincial
governments have cut the support for services that are now supplied by municipalities and
left it for municipal councillors to sort it all out. Add an unwanted bout of amalgamation
and we have a real mess.
Re size and efficiency, I believe we need to break down the
city into manageable areas, probably along the line of the old municpal boundaries, to
enable municipal employees, councillors and residents and ratepayers to reconnect on a
level of familiarity that builds supportive relationships. Everybody now is far too remote.
This is from my own analysis, from the time I was on the
CORRA Property Tax Conmmittee.
I pulled out of all that involvement after mva and
amalgamation were imposed. I had become disillusioned and it seemed unwise for me to spend
any more energy on a lost cause.
This is only one of many problems we face in the area of
governance and most of us tend to be pretty unconscious about how these energies actually
work, self included.
A good place to start is to try and lay down some principles
and, if we can agree upon the principles, articulate parameters for a workable solution.
That is what I have tried to do here.
Other areas, just in the field of municipal governance that,
in my view, and in the view of others, need to be addressed are:
1. Restructuring the GTA and, if necessary, other Ontario
municipalities, to allow for the efficient management of all parts. This will require us
to develop a political and management structure that recognizes the unique characteristics
of each part, and the way it contributes to the whole. From my superficial study of the
subject, a city (municipality) can be most efficiently managed when it's population is
somewhat less than 500,000 people. Jane Jacobs is one person who could talk best to this
issue.
2. Restructuring the relationship between Ontario's
municipalities and the Government of Ontario. The fact that this relationship, in this day
and age, is still predicated upon a structure designed a century and a half ago for a
largely rural based economy, simply boggles the mind.
At this time, I do not know how much public interest there is
in all/any of this.