MPAC – Property Assessment and Tax

Author: Financial Awakening Blog

If you still haven’t read Step 1 – Plan ahead. Imagine where you are when you retire, I highly recommend you to read it first.

 

Conflict of Interest

Conflict of Interest

If you do not know what is MPAC, Municipal Property Assessment Corporation, then you probably are not a landlord. MPAC is the corporation that do the assessment of your property. They are supposed to mail to you a letter every year telling you the assessment value of your property. In the letter, they will tell you that the change (almost always increse) in assessment value do not necessary increase your property tax because the property tax is calculator based on the mill rate. Don’t be fooled. Your property tax will increase!

In 2010, Auditor General published a report on MPAC’s management, 2010 Annual Report of the Office of the Auditor General of Ontario Section 3.08. Feel free to read it if you are interested in knowing more. However, it provide you with one clear message. MPAC is incompetent.

Here are some points to note from the report.

  • the assessments are inaccurate
  • extremely long delay in reassessments
  • highly inefficient in budgeting
  • spent unusually amount of money in dinning and winning.

MPAC should be doing the assessment every year, but instead, they do it every 4 years. The last assessment was in 2008. The next one will be this year, 2012 for taxation year 2013 – 2016. They will not increase the assessed value in one shot. Instead, they will phase in over 4 years, a quarter of the installment every year. Decrease are not subject to phase in and will be applied immediately. However, it rarely happen with MPAC. If you are not happy with the assessment value, you should try to fight it right away. If you wait, MPAC may say that you accept the new assessment in the first year by not complaining right away.

Here is a table of the assessment cycle.

Assessment Cycle
Taxation Year Valuation Date
1998, 1999, 2000 June 30, 1996
2001, 2002 June 30, 1999
2003 June 30, 2001
2004, 2005 June 30, 2003
2006, 2007, 2008 January 1, 2005
2009, 2010, 2011, 2012 January 1, 2008
2013, 2014, 2015, 2016 January 1, 2012

Here is an example from City of Toronto site.

EXAMPLE of a Four Year Market Value Assessment Increase:
A residential property with a 2008 CVA of $400,000 (based on a January 1, 2005 valuation date) was reassessed for 2009 at $480,000 to reflect a January 1, 2008 valuation date. The overall increase in CVA is $80,000, or 20% over the past three years since the last reassessment. Under the new phase-in program, the assessed value used for taxation purposes is increased each year by one-fourth of the total CVA change, or $20,000 per year, until the final “destination assessment” of $480,000 is attained in year four. The table below illustrates how assessment increases will be phased-in over the four year period 2009-2012 for this example.
Sample Calculation of Assessment Phase-in
CVA based on January 1, 2008 valuation date: $480,000 CVA based on January 1, 2005 valuation date: $400,000
Change in CVA (total amount to be phased-in): $80,000
Annual amount to be phased-in: $80,000 / 4 years = $20,000 per year
Taxation Year 2008 2009 2010 2011 2012
Valuation Date January 1, 2005 January 1, 2008 January 1, 2008 January 1, 2008 January 1, 2008
Phase-in % 25% 50% 75% 100%
CVA figure used for taxation $400,000 $420,000 $440,000 $460,000 $480,000*

You can find more information about this in City of Toronto Property Tax.

When you received your assessment and see the value is much higher than your purchase price or what you think your property is worth. Don’t be happy. And don’t think that you are making money because of the appreciation. The assessment value from MPAC assessment is just an imaginary number. It is not a good estimate of how much your property worth. The only purpose of this number is to calculate your property tax.

One point to note is that this is not the number insurance company use to define the replacement cost.

 

Here is the formula to calculate MPAC’s Payments for services from the city.

(A+B)/2 x C

Where A is the total assessment on all property in the municipality / total assessment of all property in Ontario

B is total number of properties set out in assessment rolls returned in the municipality / (total number of properties set out in all assessment rolls returned to all municipalities in Ontario + those without territory)

C is the amount that the Corporation considers necessary to pay for its operations during the taxation year

You can read more about the Municipal Property Assessment Corporation Act, 1997 if interested. The above is from Section 12.

I wonder how they calculate the amount that the corporation considers necessary to pay for its operations. It is not difficult to imagine how much the executive members got paid if you look at the executive salary from LCBO or ORNGE, etc.

If you believe your assessment is too high, you can send in request for consideration form to MPAC. However, do not have your hope high, they will not take you seriously.

Read MPAC – The Wolf in Red Riding Hood in the next article.

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About albert

I am an investor that want to achieve financial independent by the time when I retire. I plan to achieve this goal by planting more passive income sources. One of the easiest and best know passive income is through real properties. It is an art to create a portfolio to achieve this goal. I will share my thoughts and findings so that more people will be able to benefit from it. You will learn more about financial planning, retirement planning and how to earn more passive income. You will experience financial awakening which will change your life forever. Please feel free to comment and add your thoughts and findings to share. You can subscribe my RSS feed, and visit my facebook fanpage. Enjoy. Don't forget to like my page. I hope all of you will experience Financial Awakening and start planning.
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6 Responses to MPAC – Property Assessment and Tax

  1. Pingback: MPAC – The Wolf in Red Riding Hood | Financial Awakening Blog – Real Estate Passive Income

  2. Pingback: Fighting Assessment with MPAC | Financial Awakening Blog – Real Estate Passive Income

  3. Pingback: Fighting MPAC, File an Appeal with ARB | Financial Awakening Blog – Real Estate Passive Income

  4. You’ve got some genuinely important information written here. Great job and keep posting good stuff.

  5. Reassessment of Property Taxes says:

    Your post very cool. I glad to be here. I enjoyed reading your articles and if allowed i would like to bookmark your posts.

  6. M. says:

    Thanks for the insightful information. My gut was telling me the right thing then…really appreciate the info!

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