Taxpayers, municipalities likely to bear brunt of Capped Assessment Program shift

BY KIRK STARRATT

NovaNewsNow.com



It might sound good at first, especially to homeowners who feel they’re overtaxed, but if a presentation to Kings County council’s committee of the whole (COTW) by Corporate Services director Bill McKennan is any indication, the province’s Capped Assessment Program will lead to hardship for municipalities and taxpayers further down the road.

He said the province introduced the CAP in 2005 to protect properties experiencing enhanced values, such as waterfront properties, for example. The initial CAP rate was 10 per cent for 2005, 2006 and 2007. If your assessed property value increased by 10 per cent or more, you could apply for relief.

However, in 2008, the province plans to set the CAP to the Consumer Price Index (CPI), which is currently 2.3 per cent. McKennan said much higher participation in the program is expected once it’s set to the CPI, but municipal expenses will not be capped. To maintain service levels, counties will have to increase taxes to offset revenue losses each year.

Since the CPI always changes, going forward, the county wouldn’t know what the CAP would be. Provincially mandated programs aren’t capped and these represent 36 per cent of the county’s budget.



Tax burden could shift

Both the current and proposed capping programs aren’t supported by Assessment Best Practices, including no capping or freezing of assessments, no preferential treatment of certain properties or property types, and providing tax relief where required outside the assessment system, such as through low income tax exemptions.

McKennan said specific concerns relating to CAP include unequal treatment of properties of comparable value; inequities will continue until a capped property is sold; the link between taxes and market value is broken; and equity isn’t based on benefits received from municipal services.

It may lead to a shift of the tax burden within residential classes; increase the tax burden on commercial ratepayers (who believe they’re overtaxed already); the redistribution may not achieve provincial policy objectives of capping to CPI; first-time and other purchasers would be treated unfairly; and there is no income test. Higher value properties benefit more than lower ones.

“From a municipal perspective, we’re saying the legislation is fundamentally flawed,” he said.

During year one of the CAP at CPI, municipal administration costs will increase as the number of capped properties could increase from the current 890 to 15,500. This means 70 per cent of Kings tax accounts would potentially be capped. Changes in uniform assessment will transfer costs to Kings County from units with more active CAP use.

“The program will create inequities on an ongoing basis that will be very difficult to correct in the future,” he said.