SUBJECT: Creation of New Residential Condominium Property Classes
PREPARED BY: Paul Wealleans, Director, Taxation, Markham, Ontario
RECOMMENDATIONS:
THAT the report “Creation of New Residential Condominium Property Classes” be received;
AND THAT the Condominium Working Group recommends to Council that it support the creation of new property classes for residential condominium townhomes and residential condominium apartments in Ontario;
AND THAT the Province of Ontario be requested to amend legislation and any necessary regulation(s) to create a new property class for residential townhome condominiums and a new property class for residential apartment condominiums;
AND THAT letters regarding this request be sent to the Premier of Ontario, the Minister of Finance, the Minister of Municipal Affairs, the Minister of Public Infrastructure Renewal, the Canadian Condominium Institute (CCI), and any other appropriate organization;
AND THAT staff be authorized and directed to do all things necessary to give effect to this resolution.
EXECUTIVE SUMMARY:
The Condominium Working Group was established by Council on October 9, 2007 and has held four meetings since then. Its goal as set out by Council was:
“To identify issues/options with respect to services received and taxes paid by
condominiums that the Town of Markham could support and advocate at the
provincial level.”
The full Terms of Reference are included in the Background section of this report. A number of reports and analyses were considered by the Group, including:
• Background overview and summary of reports and presentations that had come before Council prior to the establishment of the Group;
• Condominium stock in Markham;
• MATCO financial impact analysis reports and presentations;
• Waste grants;
• Staff report and presentation regarding estimated costs of providing certain services to residential condominiums in Markham;
• Review of various options
• Creation of new residential property classes for condominiums.
There was considerable discussion with respect to services received by condominiums and estimated costs (produced by both staff and MATCO) to provide services to condominiums. Alternative options were considered. Analysis completed by staff estimated that providing certain hard services to residential condominiums would increase the Markham tax rate by 1.9%. While there were differing opinions of the amount of a tax rate increase under various scenarios, any cost to provide the services will result in a corresponding tax increase to Markham taxpayers.
After considerable discussions and debate, the Group is recommending to Council that it request the Province to amend legislation to create new property classes for apartment condominiums and townhome condominiums.
PURPOSE:
The Condominium Working Group is recommending to Council that it request the Province of Ontario to create new property classes for residential condominium townhomes and residential condominium apartments in Ontario.
BACKGROUND:
At its meeting of November 24, 2009 the Condominium Working Group considered a staff report “Creation of New Residential Condominium Property Classes”. The Group recommended that Council request the Province of Ontario to create new property classes for townhome condominiums and for apartment condominiums.
The Condominium Working Group was established by Council at its meeting of October 9, 2007. The Terms of Reference were also set by Council and amended slightly by the Working Group at its first meeting on November 13, 2008. Its goal and final Terms of Reference are:
Goal: To identify issues/options with respect to services received and taxes paid by condominiums that the Town of Markham could support and advocate for at the Provincial level.
1. Identify and clarify the extent of the services that are not provided by the Town on townhome condominium properties, including: street lighting, potable water, water system maintenance, sewer maintenance, road maintenance, snow removal, etc.
2. Identification of all condominiums in the Town to include both townhome and high-rise for maximum potential impact.
3. Identification of physical limitations to providing services to all condominiums.
4. Determination as to whether or not there should be qualifying criteria for condominium inclusion or should all condominiums be included.
5. Review of fairness issue to other private property owners not receiving identified services on their properties, such as commercial malls, etc.
6. Estimate of cost impacts.
7. Financial impact on Town’s tax rate.
8. Review of MATCO’s 3 proposed options, including any legislative impacts:
a) Rebates
b) Town to provide services
c) New property class for condominiums in taxation system.
9. Summary and Recommendations
a) Develop a strategy at political level
b) Develop a strategy at provincial level
c) Consider other groups that should be asked to be involved at the Provincial level, such as: AMO (Association of Municipalities of Ontario), AMCTO; AMTCO; CARP (Advocacy Group for Canadians Over 50); and BILD (Building Industry and Land Development Association).
10. Task Group membership: (As per Council Extract of October 9, 2007)
• 3 Councillors
• 2 MATCO Members
• 1 Non-MATCO Condominium Association Member
• 2 Non-Condominium Homeowners
• 2 Finance Department Staff, Town of Markham
OPTIONS/ DISCUSSION:
The creation of new property classes requires the Province of Ontario to amend the Ontario Assessment Act. The Town of Markham can only request that the new classes be created but the power to implement the changes rests with the Province.
Requirements to Create New Property Classes
Section 7 (1) of the Assessment Act prescribes the classes of real property for the purposes of municipal taxation. This section of the Act allows the Minister to further define the classes by regulation. Ontario Regulation 282/98 (as amended) does just this. Section 3 (1) (ii) of O.Reg 282/98 provides that “a unit or proposed unit, as defined in the Condominium Act” is to be included in the residential property class. To create the two new condominium classes it would be necessary for the Province to amend this regulation.
Markham Council would need to adopt a resolution requesting the Province to create a new property class for residential condominium townhomes and to create a new property class for residential condominium apartments.
Impact of Tax Ratios on the Potential New Property Classes
Tax ratios represent the amount of taxation that is borne by each property class in relation to the residential class. The ratios reflect the tax rate of each class to the residential class. Section 308 (3) of the Municipal Act, 2001 defines the tax ratio for the residential class as being 1. For example, if the tax ratio for the commercial class is 1.50, then the commercial tax rate is 1.5 times the residential tax rate.
Currently, no other class ratio can be less than 1 with the exception of the farm class and certain non-residential vacant land classes.
For the proposed condominium classes to have a tax rate lower than the residential class, the Province would need to amend legislation.
FINANCIAL CONSIDERATIONS:
Should the Province amend legislation to create new condominium property classes and permit a tax rate less than the residential tax rate for condominiums, and should Markham Council approve a lower tax rate for condominiums, there would need to be a corresponding tax increase to the balance of Markham taxpayers.
Thursday, March 11, 2010
Property tax on condos too high. Politicians back residents’ fight to lower taxes
Property tax on condos too high: group
Politicians back residents’ fight to lower taxes
• By David Fleischer Mar 03, 2010 - 1:48 PM
A movement is gaining momentum, and support from Markham council, to have property taxes on condominiums lowered.
• Condos are increasingly prevalent in York Region with nearly 2,000 apartments sold last year along with 875 apartments;
• Most condos are in the southern half of the region and there were about 330 on the market in January;
• Average prices for an urban apartment ranged from $326,192 in Thornhill to $260,000 in Newmarket;
• There were only about 75 townhomes for sale in January with most averaging between $300,000 and $350,000.
Markham politicians and residents are working together to alter how condominiums are taxed in Ontario.
Markham council votes next week on a motion asking for the power to tax condominium apartments and townhomes at a lower rate than single-family homes, the result of nearly two years of collaboration.
Bert Taylor, vice-president of the Markham Association of Townhome Condominium Owners, began even earlier with letters to provincial finance ministers dating back more than a decade.
Condos were relatively scarce then, but planned landmark communities such as Vaughan Metropolitan Centre and Markham Centre could not exist without them.
“They sure have grown and they’re going to grow a lot more,” Mr. Taylor said.
He and other condo owners have sought change since their property taxes suddenly doubled in the 1990s, highlighting their belief that they are not fairly taxed.
“We’re all homeowners and we’re not trying to say we deserve something so different,” said Armand Conant, Toronto area chapter president of the Canadian Condominium Institute.
The non-profit group has not lobbied the government for changes to the Assessment Act, but it is certainly on their radar, Mr. Conant said.
“All politicians have realized the phenomenal growth of condominiums,” Mr. Conant said.
That means greater power for previously-marginalized voters and bigger potential for change, he added.
Mr. Conant points out condo owners pay for the same services as house-dwellers, although they shovel their own driveways, have their own internal pipes and other infrastructure, and pay for it through condo fees.
“How is that fair?” he said.
But the province has shown little interest in changing the legislation.
“It would not be fair to create new property class definitions every time properties in some areas escalate in value more rapidly than the average or each time owners of particular types of property request special property tax treatment,” Ministry of Finance spokesperson Scott Blodgett said.
There are seven different property classes now and condos are included with other residences.
Once the residential tax rate is set, other rates are set as ratios in relation.
For 2010, for example, the commercial rate in Markham is 1.18 while farmland is set at 0.25.
Condo owners would like to have their units, which have smaller footprints than houses, similarly discounted.
“Having the same residential tax rate apply to all residential properties within a single municipality ensures that all residents contribute on an equal basis to the funding of programs and services available to all residents of the municipality,” Mr. Blodgett said.
The effort came about with the formation of a condominium working group in late 2007 and residents were immediately impressed by support from the town, including Mayor Frank Scarpitti who attended every meeting.
“It was a little bit disconcerting, it was so positive,” Mr. Taylor said. “This is entirely new and ground-breaking,” Ernie Nyitrai said.
He and Doug Hortin sit on the board of an Austin Drive condominium and Mr. Hortin thinks if Markham wants to intensify and encourage condo development, being able to lower the tax rate is one way to do it.
“It’s the future,” he said. “There’s no way you’re going to do it unless you go up.”
Of course, if taxes drop for condo owners, they rise for everyone else.
Town staff estimate the tax rate would climb by 1.9 per cent if such a change were made official.
Residents aren’t asking for any specific discount right now, just for the town to be able do implement one, Mr. Nyitrai said. Moreover, he totally understands if homeowners are skeptical.
“We’re looking at it one step at a time,” he said. “This is the first step”
If passed at Tuesday’s council meeting, the motion will be circulated to provincial officials and other municipalities and organizations across Ontario.
Politicians back residents’ fight to lower taxes
• By David Fleischer Mar 03, 2010 - 1:48 PM
A movement is gaining momentum, and support from Markham council, to have property taxes on condominiums lowered.
• Condos are increasingly prevalent in York Region with nearly 2,000 apartments sold last year along with 875 apartments;
• Most condos are in the southern half of the region and there were about 330 on the market in January;
• Average prices for an urban apartment ranged from $326,192 in Thornhill to $260,000 in Newmarket;
• There were only about 75 townhomes for sale in January with most averaging between $300,000 and $350,000.
Markham politicians and residents are working together to alter how condominiums are taxed in Ontario.
Markham council votes next week on a motion asking for the power to tax condominium apartments and townhomes at a lower rate than single-family homes, the result of nearly two years of collaboration.
Bert Taylor, vice-president of the Markham Association of Townhome Condominium Owners, began even earlier with letters to provincial finance ministers dating back more than a decade.
Condos were relatively scarce then, but planned landmark communities such as Vaughan Metropolitan Centre and Markham Centre could not exist without them.
“They sure have grown and they’re going to grow a lot more,” Mr. Taylor said.
He and other condo owners have sought change since their property taxes suddenly doubled in the 1990s, highlighting their belief that they are not fairly taxed.
“We’re all homeowners and we’re not trying to say we deserve something so different,” said Armand Conant, Toronto area chapter president of the Canadian Condominium Institute.
The non-profit group has not lobbied the government for changes to the Assessment Act, but it is certainly on their radar, Mr. Conant said.
“All politicians have realized the phenomenal growth of condominiums,” Mr. Conant said.
That means greater power for previously-marginalized voters and bigger potential for change, he added.
Mr. Conant points out condo owners pay for the same services as house-dwellers, although they shovel their own driveways, have their own internal pipes and other infrastructure, and pay for it through condo fees.
“How is that fair?” he said.
But the province has shown little interest in changing the legislation.
“It would not be fair to create new property class definitions every time properties in some areas escalate in value more rapidly than the average or each time owners of particular types of property request special property tax treatment,” Ministry of Finance spokesperson Scott Blodgett said.
There are seven different property classes now and condos are included with other residences.
Once the residential tax rate is set, other rates are set as ratios in relation.
For 2010, for example, the commercial rate in Markham is 1.18 while farmland is set at 0.25.
Condo owners would like to have their units, which have smaller footprints than houses, similarly discounted.
“Having the same residential tax rate apply to all residential properties within a single municipality ensures that all residents contribute on an equal basis to the funding of programs and services available to all residents of the municipality,” Mr. Blodgett said.
The effort came about with the formation of a condominium working group in late 2007 and residents were immediately impressed by support from the town, including Mayor Frank Scarpitti who attended every meeting.
“It was a little bit disconcerting, it was so positive,” Mr. Taylor said. “This is entirely new and ground-breaking,” Ernie Nyitrai said.
He and Doug Hortin sit on the board of an Austin Drive condominium and Mr. Hortin thinks if Markham wants to intensify and encourage condo development, being able to lower the tax rate is one way to do it.
“It’s the future,” he said. “There’s no way you’re going to do it unless you go up.”
Of course, if taxes drop for condo owners, they rise for everyone else.
Town staff estimate the tax rate would climb by 1.9 per cent if such a change were made official.
Residents aren’t asking for any specific discount right now, just for the town to be able do implement one, Mr. Nyitrai said. Moreover, he totally understands if homeowners are skeptical.
“We’re looking at it one step at a time,” he said. “This is the first step”
If passed at Tuesday’s council meeting, the motion will be circulated to provincial officials and other municipalities and organizations across Ontario.
Sunday, October 18, 2009
Property Tax Reform Ontario: What Have Learned?
EVALUATION OF THE RECENT REFORMhttp://www.ctf.ca/
**see bottom
The result of the Ontario property tax reform is a tax system that has not changed
much in terms of equity but has changed dramatically in terms of the complexity of
administration. Current value assessment is being used for residential properties. This
means that residential taxpayers have finally moved to a market value system—in
some cases, with a phase-in. The assessment on multiresidential, commercial, and
industrial properties, however, has virtually been frozen at pre-reform levels.
A uniform assessment system with variable tax rates provides much more visibility
and accountability than the previous system, in which property tax differentials
were hidden in the assessment method. Wherever anyone locates in the province,
similarly valued residential properties are assessed at a similar value. Tax rates
differ by location depending on the level of service and local government decisions
about relative tax burdens.
In terms of neutrality, differential property taxes will be distortionary unless
they ref lect different benefits received. It can be argued, for example, that the
benefits from local public services are different for different property classes. In
particular, a case can be made on benefit grounds for taxing non-residential properties
at a lower rate than residential properties. However, it appears that, under
the Ontario property tax reform, differential property tax rates ref lect the desire to
maintain relative tax burdens and not to achieve fairness based on benefits received
from municipal services....
RECENT REFORM OF PROPERTY
TAXES IN ONTARIO
Starting in January 1998, a uniform assessment system based on “current value”
(similar to market value) was implemented province-wide. Every property was
assessed as of the same valuation date, June 30, 1996. The next reassessment has
been done for 2001; after 2005, annual updates will be done using a three-year
rolling average.
The change to a uniform province-wide assessment system by itself would have
resulted in large shifts in tax burdens within and between classes of property. For
this reason, tax policy changes were introduced along with assessment reform.
Indeed, the provincial government introduced seven pieces of legislation in all.
Before the reform, municipalities were required by legislation to levy differential
tax rates on residential and non-residential property. Specifically, the residential
rate had to be 85 percent of the non-residential rate. Following the assessment
reform, municipalities are allowed to levy variable tax rates for different classes of
property:
residential,
multiresidential,
commercial,
industrial,
pipelines,
farms, and
managed forests.
Subclasses to which rate reductions apply are vacant commercial (35 percent
reduction), vacant industrial (30 percent reduction), farmland pending development,
and certain theatres in the city of Toronto. Furthermore, the commercial
class can be divided into three subclasses according to value, with graduated tax
rates applied to each subclass. The tax rate on farms and managed forests is
legislated to be 25 percent of the residential tax rate.
As well, optional classes that municipalities can choose include
new multiresidential,
shopping centres,
office towers,
property tax reform in ontario: what have we learned? 581
parking lots and vacant land,
professional sports facilities, and
large industrial.
Variable tax rates permit municipalities to shift tax burdens among property
classes within provincially determined ranges of fairness. Transition ratios were
calculated for each property class to ref lect the relative distribution of burden by
tax class before reform (“the starting point”). Transition ratios were calculated as
the effective tax rate (property taxes relative to market value assessment) for each
property class relative to the residential class. The transition ratio for residential
properties—the benchmark—was set equal to 1.00.
Ranges of fairness were set by the provincial government as shown in table 1.
Municipalities could set their tax ratios so as to maintain the transition ratios,
move toward the range of fairness, or vary tax ratios within ranges of fairness. For
example, if the transition ratio on multiresidential properties was 4.1, a municipality
could reduce it to 4.0 or below, or it could maintain it at 4.1. It could not increase it
to 4.2 or beyond. In short, municipalities are not allowed to worsen the inequities,
but they can maintain or reduce them.
Variable tax rates within ranges of fairness were used to allow municipalities to
maintain the existing tax burdens between classes and reduce the impact of a reassessment.
These provisions raise the question whether these discrepancies between
classes of property should be allowed to remain. Two arguments can be made. On
the one hand, provincial ranges of fairness could be considered to be inappropriate
because the property tax is a local tax. Since municipal politicians are accountable
to the electorate, they should be responsible for setting tax rates without provincial
restrictions. On the other hand, municipalities are unlikely to eliminate the discrepancies
on their own (especially if it means shifting tax burdens onto residential
properties), and thus some form of provincial regulation is required to achieve
fairness. The compromise (recommended by the Who Does What Panel and
implemented by the provincial government) was to establish provincial ranges of
fairness and require only that municipalities not move further away from them.
In addition to variable tax rates, the province legislated phase-in provisions and
tax deferrals to address the shifts that would occur within classes of property,
especially within the residential property class. Municipalities, at their option, can
apply a phase-in for up to eight years for assessment-related tax changes. Interclass
subsidization is not permitted; for example, tax decreases in the commercial
class cannot be used to subsidize tax increases in the residential class. Different
schemes can apply to different classes; different phase-in periods can be used for
decreases and increases. Municipalities are required to establish a program to
mitigate assessment-related tax increases for residential properties owned by lowincome
seniors and the disabled. They can design their own mitigation programs.
The timing of phase-ins is also controversial because of the conf lict between
moving to a fairer system as quickly as possible and lessening the impact on those
whose taxes will increase. One could argue, on the one hand, that the existing
582 canadian tax journal / revue fiscale canadienne (2002) vol. 50, no 2
inequities should not be allowed to continue; on the other hand, it may not be wise
to create undue hardship by not phasing in the tax changes.
Even with all of the tax policy reforms and phase-in mechanisms, however,
there were still large shifts in tax burdens. In particular, the tax burden on small
retail commercial properties increased relative to large office towers because of the
recession in office markets in June 1996 (the valuation date). To reduce the shift
onto small commercial properties, the provincial government introduced optional
classes for office towers, shopping centres, and parking lots. Also, it introduced
optional capping. Municipalities could limit tax increases on commercial, industrial,
and multiresidential properties to 2.5 percent a year for three years (1998,
1999, 2000). This meant that the property tax could not increase more than 2.5
percent on any of these properties over what it was before reform. Furthermore,
any tax increases over the three-year period resulting from increased expenditures,
for example, would have to be financed from the residential property class. This
measure was designed to move some of the burden away from the non-residential
property classes and onto the residential class.
The result of capping was to freeze the assessment roll based on 1997. In other
words, the new assessment roll was not used to tax multiresidential, commercial, or
industrial properties from 1998 to 2000. Capping also meant that there was no
effort to remove or even reduce the inequities in property tax burdens within the
commercial, industrial, and multiresidential property classes. Instead of capping of
the amount of the tax increase arising from a reassessment, the tax itself was capped.
Only Toronto chose the capping option initially. When it became clear that
there were large tax increases on small commercial properties in other municipalities
in Ontario, the provincial government introduced another piece of legislation
that restricted property tax increases on commercial and industrial properties to 10
percent in 1998, an additional 5 percent in 1999, and an additional 5 percent in
2000. These rate restrictions were not optional, but municipalities could decide
how to achieve the 10-5-5 target—through phase-ins, capping, or some other
method. This legislation has resulted in freezing the assessment roll for commercial
and industrial properties across the province.
TABLE 1 Provincial Ranges of Fairness
Allowable range
Property class of fairness
Multiresidential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0-1.1
New multiresidential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0-1.1
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Office building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Shopping centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Parking lots and vacant land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Professional sports facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.001-1.1
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Large industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-1.1
Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6-0.7
property tax reform in ontario: what have we learned? 583
For 2001 and subsequent years, municipalities are required to limit the assessment-
related property tax increases on commercial, industrial, and multiresidential
properties to 5 percent per year. Municipal levy increases (that is, year-over-year
municipal tax increases) are not permitted in a property class if a municipality’s tax
ratio for that class exceeds the prescribed threshold ratio. The following threshold
ratios (where thresholds represent provincial averages) have been prescribed: commercial,
1.98; industrial, 2.63; and multiresidential, 2.74. Essentially, this means
that, for those municipalities over the threshold levels for all three property classes,
any tax increase resulting from budgetary increases has to be borne by residential
property taxpayers. A frozen assessment listing is no longer required for the administration
of the new 5 percent limit.
EVALUATION OF THE RECENT REFORM
The result of the Ontario property tax reform is a tax system that has not changed
much in terms of equity but has changed dramatically in terms of the complexity of
administration. Current value assessment is being used for residential properties. This
means that residential taxpayers have finally moved to a market value system—in
some cases, with a phase-in. The assessment on multiresidential, commercial, and
industrial properties, however, has virtually been frozen at pre-reform levels.
A uniform assessment system with variable tax rates provides much more visibility
and accountability than the previous system, in which property tax differentials
were hidden in the assessment method. Wherever anyone locates in the province,
similarly valued residential properties are assessed at a similar value. Tax rates
differ by location depending on the level of service and local government decisions
about relative tax burdens.
In terms of neutrality, differential property taxes will be distortionary unless
they ref lect different benefits received. It can be argued, for example, that the
benefits from local public services are different for different property classes. In
particular, a case can be made on benefit grounds for taxing non-residential properties
at a lower rate than residential properties. However, it appears that, under
the Ontario property tax reform, differential property tax rates ref lect the desire to
maintain relative tax burdens and not to achieve fairness based on benefits received
from municipal services.
Because of the focus on tax stability for each tax class, the initial goal of the
reform—to achieve equity based on ability to pay—was lost completely. The inequities
between classes of property have not been eliminated, and the inequities
within classes (other than the residential class) have not been reduced.
The reform has meant that the assessment function has been downloaded to a
corporation comprising mostly municipal officials; the tax-setting process is, to a large
extent, controlled by the provincial government. Although municipalities have
control over the level of taxes, their control over the distribution of taxes among
classes of property has been severely constrained by the province.
Attempts to simplify property tax administration have failed. The system for
setting tax rates is so complicated and has changed so many times that some
584 canadian tax journal / revue fiscale canadienne (2002) vol. 50, no 2
municipalities have been unable to set tax rates correctly. As a result of the capping
legislation, property tax bills that were issued in 1998 had to be reissued in some
cases in 1999.
Important lessons can be learned from the reform of property taxation in
Ontario. The longer you wait to reform a tax, the more difficult it will be. Annual
reassessments for property tax purposes will create far fewer shifts in taxes than a
reassessment after 40 years.
The ability to reform the property tax is more constrained than is the case for
other taxes because of the visibility of the tax. It is particularly difficult to shift tax
burdens onto residential property. Favouritism toward residential property is an
inherent part of the property tax system. Trying to change the way this tax is levied
is politically difficult. At the very least, phase-ins and tax deferrals are an essential
part of the tax policy design.
Taxpayers need to have confidence in the assessed values and the process used
to derive them. This means taking the time to do the assessment properly. Furthermore,
before property tax reform is implemented, it is necessary to undertake an
impact assessment to determine the shifts in taxation. This needs to be done in
advance so that tax policy can be designed before the reform comes into effect, and
not in a piecemeal fashion in response to problems as they occur.
More generally, the lesson from the Ontario experience is that, no matter how
economically desirable the long-run outcome of any policy change may be, its
transitional effects may be sufficiently undesirable in political terms to kill it. From
a public choice perspective, the losers from a change in policy tend to be very vocal
(even if they are the minority) because they value their losses more than the
gainers (even if they are the majority) value their gains. This problem is not unique
to property taxes, but it is particularly significant in this case because of the visibility
of this tax.
* Enid Slack Consulting Inc., Toronto. This paper relies heavily on an earlier article by the
author, “Understanding the Evolution of Property Tax Policy” (2000) vol. 6, no. 11/12 Focus on
Assessment and Taxation 89-96.
Tuesday, October 6, 2009
J.D. Power and Associates Reports:
Two of Every Five Condominium Buyers in the Greater Toronto Area Would Buy from a Different Builder
Tridel Corp. Ranks Highest in Satisfying New-Condominium Buyers for a Fourth Consecutive Year
TORONTO: 9 September 2009 - Two of five condominium buyers (40%) in the Greater Toronto Area (GTA) indicate they would have purchased from another builder if given a second chance, according to the J.D. Power and Associates 2009 Canadian New-Condominium Builder Customer Satisfaction StudySM released today.
Buyers who said they would opt for a different builder if given the choice cited a number of reasons, including poor communication from the builder; perceived misrepresentation; and delays in occupying the home. The overall satisfaction score among these buyers is 295 points lower on a 1,000-point scale than among buyers who were content with the builder they chose.
"Many condominium buyers are looking for their builders to deliver against their perceived commitments," said Marc Thibault, real estate practice leader at the Canadian office of J.D. Power and Associates. "Either the buyer expected too much or the builder delivered too little-whichever the case, there is a disconnect, and communication lines need to be improved."
The study finds that only one-third (32%) of buyers felt that their builder set realistic expectations and prepared them for what to expect with their new-home purchase experience. Among the builders that successfully set homeowner expectations, 76 percent of their buyers said that the new-home purchase experience exceeded their expectations.
"Buying a new condominium is the first form of ownership for many Torontonians, and they are both excited and stressed when making this commitment," said Thibault. "Homebuilders that are able to alleviate some of this stress by educating their buyers on what to expect and keeping them informed typically have far more satisfied buyers. In the absence of information, buyers may set unrealistic expectations."
An expectation that is frequently not met by condominium builders is the readiness of the home by the confirmed occupancy date. Nearly two-thirds of buyers (63%) indicate having experienced a delay, with an average wait of approximately seven months to take possession.
The study measures customer satisfaction of condominium buyers throughout the new-home purchase and early ownership experience. Customer satisfaction is measured across eight factors (in order of importance): home/building readiness; service/warranty staff; building/shared features; home quality; price/value; sales staff; physical design; and design centre. This is the fourth year that the study has been conducted in the GTA.
Overall satisfaction has decreased to 612 in 2009, down 10 points from 622 in 2008. This overall decline is driven primarily by decreased buyer satisfaction in the price/value and service/warranty staff factors.
Tridel Corp. ranks highest in satisfying new-condominium buyers in the GTA market for a fourth consecutive year, with an overall satisfaction score of 730. Tridel performs particularly well in the two most important factors contributing to overall satisfaction: home/building readiness and service/warranty staff. Daniels Corp. (698) and MintoUrban Communities (691) follow Tridel in the rankings.
The study finds that only 45 percent of buyers say that their builder's sales staff followed up with them after their initial visit to the sales centre. Salespeople who follow up with customers receive far more favourable ratings, as well as create an opportunity to establish a relationship and ensure that all outstanding questions are answered.
"A lack of follow-up by sales staff might be overlooked in a strong housing market; however, this is not the case in today's market," said Thibault. "Builders need to pursue every prospect to maintain a healthy pipeline of sales."
The study also finds that one-third of buyers indicate that recommendations of builders from friends, relatives or colleagues triggered their initial awareness of a builder. Recommendations are second only to signage (cited by 36% of buyers) in raising initial awareness.
"A builder's past or current homeowners are among the most powerful sources of marketing they have at their disposal," said Thibault. "Builders that live up to homeowner expectations may be rewarded for many years to come with positive word of mouth advertising, which costs them nothing."
Two of Every Five Condominium Buyers in the Greater Toronto Area Would Buy from a Different Builder
Tridel Corp. Ranks Highest in Satisfying New-Condominium Buyers for a Fourth Consecutive Year
TORONTO: 9 September 2009 - Two of five condominium buyers (40%) in the Greater Toronto Area (GTA) indicate they would have purchased from another builder if given a second chance, according to the J.D. Power and Associates 2009 Canadian New-Condominium Builder Customer Satisfaction StudySM released today.
Buyers who said they would opt for a different builder if given the choice cited a number of reasons, including poor communication from the builder; perceived misrepresentation; and delays in occupying the home. The overall satisfaction score among these buyers is 295 points lower on a 1,000-point scale than among buyers who were content with the builder they chose.
"Many condominium buyers are looking for their builders to deliver against their perceived commitments," said Marc Thibault, real estate practice leader at the Canadian office of J.D. Power and Associates. "Either the buyer expected too much or the builder delivered too little-whichever the case, there is a disconnect, and communication lines need to be improved."
The study finds that only one-third (32%) of buyers felt that their builder set realistic expectations and prepared them for what to expect with their new-home purchase experience. Among the builders that successfully set homeowner expectations, 76 percent of their buyers said that the new-home purchase experience exceeded their expectations.
"Buying a new condominium is the first form of ownership for many Torontonians, and they are both excited and stressed when making this commitment," said Thibault. "Homebuilders that are able to alleviate some of this stress by educating their buyers on what to expect and keeping them informed typically have far more satisfied buyers. In the absence of information, buyers may set unrealistic expectations."
An expectation that is frequently not met by condominium builders is the readiness of the home by the confirmed occupancy date. Nearly two-thirds of buyers (63%) indicate having experienced a delay, with an average wait of approximately seven months to take possession.
The study measures customer satisfaction of condominium buyers throughout the new-home purchase and early ownership experience. Customer satisfaction is measured across eight factors (in order of importance): home/building readiness; service/warranty staff; building/shared features; home quality; price/value; sales staff; physical design; and design centre. This is the fourth year that the study has been conducted in the GTA.
Overall satisfaction has decreased to 612 in 2009, down 10 points from 622 in 2008. This overall decline is driven primarily by decreased buyer satisfaction in the price/value and service/warranty staff factors.
Tridel Corp. ranks highest in satisfying new-condominium buyers in the GTA market for a fourth consecutive year, with an overall satisfaction score of 730. Tridel performs particularly well in the two most important factors contributing to overall satisfaction: home/building readiness and service/warranty staff. Daniels Corp. (698) and MintoUrban Communities (691) follow Tridel in the rankings.
The study finds that only 45 percent of buyers say that their builder's sales staff followed up with them after their initial visit to the sales centre. Salespeople who follow up with customers receive far more favourable ratings, as well as create an opportunity to establish a relationship and ensure that all outstanding questions are answered.
"A lack of follow-up by sales staff might be overlooked in a strong housing market; however, this is not the case in today's market," said Thibault. "Builders need to pursue every prospect to maintain a healthy pipeline of sales."
The study also finds that one-third of buyers indicate that recommendations of builders from friends, relatives or colleagues triggered their initial awareness of a builder. Recommendations are second only to signage (cited by 36% of buyers) in raising initial awareness.
"A builder's past or current homeowners are among the most powerful sources of marketing they have at their disposal," said Thibault. "Builders that live up to homeowner expectations may be rewarded for many years to come with positive word of mouth advertising, which costs them nothing."
Saturday, September 19, 2009
HST to hit consumers hardest: TD (GLOBE AND MAIL)
HST to hit consumers hardest: TD
Karen Howlett
Friday, September 18, 2009
Toronto — Consumers will bear the brunt of the Ontario and British Columbia governments' plans to harmonize their provincial sales taxes with the federal goods and services tax, a new report concludes.
Businesses will be the big winners, as the combined tax reduces their costs by a total of $6.9-billion in Ontario and British Columbia, Toronto-Dominion Bank chief economist Don Drummond says in a report released on Friday.
But the tax burden will shift from businesses to consumers as they begin paying levies on a broad range of goods and services that are now exempt, the report says. Businesses will pass on the majority of their cost savings to consumers, but the lower sticker prices will not fully offset the higher tax rate, the report says. As a result, the effective tax rate on consumption will increase by 1.5 percentage points in both provinces.
Harmonization does not take effect until next July 1 in the two provinces. But it is shaping up to be a major political headache for Ontario Premier Dalton McGuinty and British Columbia Premier Gordon Campbell.
“In response to consumer concerns, we thought it would be worthwhile to highlight what implications the reform will have on Canadian households and inflation,” Mr. Drummond says in the report.
The report was released one day after a by-election in Toronto, where the governing Liberals sailed to victory after the opposition candidates failed to turn the race into a referendum on the proposed harmonized sales tax.
The Ontario government announced in March that it plans to combine the 8 per cent provincial sales tax and the 5 per cent goods and services tax into a new value-added tax of 13 per cent.
British Columbia, looking to close a looming tax gap with Ontario, announced plans in July to create a harmonized sales tax of 12 per cent.
Harmonization is aimed at making businesses more competitive as both provinces struggle with slowing economies. But the McGuinty and Campbell governments are under siege for hitting consumers with a tax on everything from haircuts to new home purchases over $500,000. Both provinces have moved to douse a storm of criticism over the harmonized taxes by exempting a number of basic goods, including children's clothing and diapers.
© The Globe and Mail
Karen Howlett
Friday, September 18, 2009
Toronto — Consumers will bear the brunt of the Ontario and British Columbia governments' plans to harmonize their provincial sales taxes with the federal goods and services tax, a new report concludes.
Businesses will be the big winners, as the combined tax reduces their costs by a total of $6.9-billion in Ontario and British Columbia, Toronto-Dominion Bank chief economist Don Drummond says in a report released on Friday.
But the tax burden will shift from businesses to consumers as they begin paying levies on a broad range of goods and services that are now exempt, the report says. Businesses will pass on the majority of their cost savings to consumers, but the lower sticker prices will not fully offset the higher tax rate, the report says. As a result, the effective tax rate on consumption will increase by 1.5 percentage points in both provinces.
Harmonization does not take effect until next July 1 in the two provinces. But it is shaping up to be a major political headache for Ontario Premier Dalton McGuinty and British Columbia Premier Gordon Campbell.
“In response to consumer concerns, we thought it would be worthwhile to highlight what implications the reform will have on Canadian households and inflation,” Mr. Drummond says in the report.
The report was released one day after a by-election in Toronto, where the governing Liberals sailed to victory after the opposition candidates failed to turn the race into a referendum on the proposed harmonized sales tax.
The Ontario government announced in March that it plans to combine the 8 per cent provincial sales tax and the 5 per cent goods and services tax into a new value-added tax of 13 per cent.
British Columbia, looking to close a looming tax gap with Ontario, announced plans in July to create a harmonized sales tax of 12 per cent.
Harmonization is aimed at making businesses more competitive as both provinces struggle with slowing economies. But the McGuinty and Campbell governments are under siege for hitting consumers with a tax on everything from haircuts to new home purchases over $500,000. Both provinces have moved to douse a storm of criticism over the harmonized taxes by exempting a number of basic goods, including children's clothing and diapers.
© The Globe and Mail
HST will hike prices by 0.7%, TD says
Paul Vieira, Financial Post
Consumers in Ontario and British Columbia will see prices move up 0.7% on a permanent basis due to the transition toward a harmonized sales tax, says a report released yesterday from economists at Toronto-Dominion Bank.
Still, the report's authors indicate the increase in prices will be not as bad as politicians opposing harmonization have claimed.
"Yes, it is true that the policy will have a positive permanent impact on overall consumer prices, but it will not be as much as many fear," say the authors, Don Drummond, TD's chief economist, and Diana Petramala.
"The increase in the consumer-price level needs to be put into the broader context of the widely held view, with which we concur, that a value-added tax is a more efficient tax than the provincial retail sales taxes currently in place in both Ontario and British Columbia."
Both Ontario and British Columbia will harmonize the GST and their retail sales taxes with a single harmonized tax, beginning on July 1 of next year, as part of an effort to make businesses in these provinces more competitive by lowering the effective tax rate on business inputs. The Ontario rate will be 13%, whereas the B. C. rate will be 12%.
The study estimates the move will reduce the cost of doing business by a total of $6.9-billion in Ontario and British Columbia, as inputs used by firms to make goods will not be taxed as they have been through several stages of the production cycle.
However, "the tax burden will shift from businesses to consumers, who will now pay the harmonized tax on a broader array of goods and services than before," the report said, adding the overall price level will increase by 0.7 percentage points in both provinces.
"While consumers will find themselves paying more tax on certain goods and services, the hope is that the higher costs will be offset by stronger sustainable income growth," it added.
Businesses are likely to pass on savings to consumers in lower pretax prices, the economists said, citing evidence of what happened when New Brunswick, Nova Scotia, and Newfoundland and Labrador moved to a harmonized tax in the late 1990s.
Home builders are likely to pass on savings from avoiding tax on inputs such as hammers and lumber. Hence, TD calculated, the price of a new home priced at $400,000 could cost as little as $387,000. Further, residents in Ontario and B. C. will be eligible for tax credits on home purchases, covering up to $400,000 of the acquisition.
On a national basis, the harmonized tax will permanently push up prices by 0.4%. However, the report noted the Bank of Canada does not include indirect taxes when calculating core inflation. (The central bank sets rates to ensure inflation hits a 2% target.)
Saturday, September 12, 2009
COMPENSATING CONDOMINIUM OWNERS FOR MUNICIPAL SERVICES
COMPENSATING CONDOMINIUM OWNERS FOR MUNICIPAL SERVICES
By: John Rappa, Principal Analyst
You asked if other states' laws allow municipalities to compensate condominium owners for trash pick up, snow plowing, or other municipal services they pay for through property taxes but do not receive.
Your question relates to the fact that condominium owners pay property taxes often without receiving all the municipal services other property owners receive. A municipality could compensate them for the services they do not receive by cutting their taxes or reimbursing them for services procured from private vendors.
Maryland appears to be the only state with a statute explicitly allowing municipalities to assist condominium associations, an online search of legal databases found. Maryland law allows municipalities to contract with these associations to provide residential street service or reimburse them for the cost a municipality would incur if it provided the service (MD Code 1957, Art 23A, § 50, Attachment 1).
Alternatively, states could require municipalities to provide services to condominiums. New Jersey is the only state that does this. Its 1989 Municipal Services Act requires municipalities to provide specified services to condominiums and cooperatives or reimburse them for the cost (NJSA 40: 67-23. 2, Attachment 2). The services include removing snow, lighting streets, and collecting leaves and recyclable materials. Attachment 3 discusses the cases construing the act (New Jersey Law Journal, “New Jersey's Municipal Services Act Becomes an Adult,” June 23, 2008).
New Jersey's law appears to be the model for a bill the Rhode Island legislature is currently considering. H 5537 requires municipalities to collect garbage and recyclable materials from condominium as they do single family homes or reimburse them for the cost of obtaining this service (Attachment 4).
Although Maryland appears to be the only state with a law allowing compensation, municipalities may not need such an enabling law. Our research found examples of municipalities in Connecticut and other states that compensated condominiums for services they paid for but did not receive.
By: John Rappa, Principal Analyst
You asked if other states' laws allow municipalities to compensate condominium owners for trash pick up, snow plowing, or other municipal services they pay for through property taxes but do not receive.
Your question relates to the fact that condominium owners pay property taxes often without receiving all the municipal services other property owners receive. A municipality could compensate them for the services they do not receive by cutting their taxes or reimbursing them for services procured from private vendors.
Maryland appears to be the only state with a statute explicitly allowing municipalities to assist condominium associations, an online search of legal databases found. Maryland law allows municipalities to contract with these associations to provide residential street service or reimburse them for the cost a municipality would incur if it provided the service (MD Code 1957, Art 23A, § 50, Attachment 1).
Alternatively, states could require municipalities to provide services to condominiums. New Jersey is the only state that does this. Its 1989 Municipal Services Act requires municipalities to provide specified services to condominiums and cooperatives or reimburse them for the cost (NJSA 40: 67-23. 2, Attachment 2). The services include removing snow, lighting streets, and collecting leaves and recyclable materials. Attachment 3 discusses the cases construing the act (New Jersey Law Journal, “New Jersey's Municipal Services Act Becomes an Adult,” June 23, 2008).
New Jersey's law appears to be the model for a bill the Rhode Island legislature is currently considering. H 5537 requires municipalities to collect garbage and recyclable materials from condominium as they do single family homes or reimburse them for the cost of obtaining this service (Attachment 4).
Although Maryland appears to be the only state with a law allowing compensation, municipalities may not need such an enabling law. Our research found examples of municipalities in Connecticut and other states that compensated condominiums for services they paid for but did not receive.
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