Although I had pointed out in a column in May that the tax rate for large industrial firms would jump as a result of the loss of tax money from Essar Steel Algoma (now just Algoma) because its assessment had been lowered by more than half, I almost jumped out of my skin when a document came my way showing this meant an increase of 56.67 percent for some firms.
I was also told that for Soo Foundry, this resulted in its annual tax bill increasing from $69,000 to $119,000, somewhat below the 56.67 percent but still high.
I had pointed out in my column that the tax rate for large industrial firms had moved up from 0.07446382 to 0.11666505 but hadn’t extrapolated it to show anything near a 56.67 increase.
Anyway, it appears the information about the 56.67 number is incorrect and had been spread widely that the city felt it required a response, which it made on June 1.
“The City of Sault Ste. Marie has received information from several outlets regarding the 2017 tax rates and their effect on properties in certain tax classes,” Deputy CAO/City Clerk Malcolm White wrote in the release.
“The information that is being circulated to various businesses is being done without the knowledge or consultation with the city.
“The city wishes to advise the community that this information regarding the tax bill for property owners is incomplete and the conclusions drawn from such calculations are misleading and deceptive. For the multi-residential, commercial and industrial classes, the information being provided does not take into account tax capping and clawback provisions, which phase in tax increases within these tax classes.
“The city reminds property owners that their most recent final tax bill, which should be received by June 5, 2017, is in fact the only accurate and complete source of information regarding the 2017 taxes.
“Property owners with questions on property taxes are encouraged to contact the city’s tax department at 705-759-5290 or email [email protected] for the most accurate information and to help further explain the tax levy rates, assessment base and ratios.”
I didn’t see this release from the city until I contacted White after receiving the information alleging the huge tax increase.
I also contacted Robert Cohen, the operator of Soo Foundry, who said the figures I had provided in my email, taken from the information I had received, were wrong.
Both he and White told me the process was complicated. Having now spent some time on it, I certainly agree but thought it was worth taking a run at to lay the false information that was being spread to rest.
To do so I will use the words of White and Cohen.
“In summary, the amount of property tax payable on a property is first determined by multiplying the assessed value of the property (determined by MPAC) by the tax rate for the type of property (determined by the municipality), White said in an email.
“For properties in the non-residential classes (ie large industrial, commercial etc) there can be significant shifts in assessment within a property class that would result in large fluctuations in their tax bill from year to year.
“The capping and clawback provisions are a tool provided by the province to mitigate these fluctuations. Capping protects property owners in these classes from paying the full amount of an assessment- related increase by capping the level of increase in a particular year.
“The loss of this tax revenue for a municipality is recovered through a clawback provision that limits the amount of an assessment related decrease a property owner might otherwise expect. “The revenue could also be recovered through levy increase or through reserves – the city has chosen the clawback provision. The overall increase this year in the large industrial class, after capping, is eight percent for the majority of taxpayers.
“The effects of these variables are outlined on the individual property tax bills. That is the message we released to the public when we became aware of the erroneous information that was being circulated in the community.
“You likely noticed that council passed a resolution on Monday asking staff to arrange a special meeting as part of the 2018 budget process to thoroughly explain all aspects of the municipal property tax system. Hopefully the material we produce for that meeting will also be helpful to the community in understanding a very complex area.”
Cohen agrees the increase is actually only eight percent but fears what is to come.
“It is eight percent but it is only eight percent because of the provincial capping so what they have done is set in motion for, if nobody addresses it next year, steady increases over the next 10 years. All the capping does is mitigate the increase,” he said.”
He suggested Rory Ring, executive director of the Sault Chamber of Commerce, as having one of the better explanations of the intricacies surrounding capping and clawback. But the chamber office was closed because of the Canada Day holiday when I phoned on Friday.
The Property Taxation Guide says, “One of the most important elements of Ontario’s current property tax system is the authority to apply differential taxation rates to different property
classes through the use of tax class ratios . . .
“Tax ratios represent the relationship between the tax rate applicable to the residential property class and the rates for other property classes. Municipalities have a considerable amount of flexibility regarding tax ratios but are restricted from setting ratios that diverge further from
“target” ranges (referred to as ranges of fairness) of ratios prescribed in provincial tax policy . . .
“When the reforms to the property tax were introduced in the late 1990s, the province prescribed transition ratios for each municipality based on the preexisting relationship in effective tax rates for the various classes of property.”
Municipalities were allowed to move ratios up or down but not beyond the prescribed limits of fairness.
As has been said, this is a complicated process.
I trust you will understand it better than I. I just thought that in this piece I would help the city put to rest the misinformation that had been circulating in regard to the tax increases facing large industrial firms.
The eight percent increase naturally won’t be considered good by those it affects, but it certainly beats what was in the information that was being circulated.
Doug Millroy can be reached at [email protected].
