Bracing for a tax shift with property assessments delayed again

London, Ont. -

As house prices continue to climb, some wonder about what that might mean for property taxes.

Ward 7 councillor Josh Morgan is the former council budget chair. He says, for the most part, changes in the value of properties doesn't directly impact municipal taxes.

"The city sets a number that it's going to collect and whether houses have appreciated $100,000 or $200,000, the tax rate actually adjusts to make sure that we only collect the amount that we budgeted for."

The municipal budget process is currently underway in London with a draft 2.8 per cent increase as a starting point.

But there may be a hitch for future municipal budgets. In his recent economic statement, Ontario finance minister Peter Bethlenavy delayed property assessments to 2022/2023.

The organization that conducts those assessments, the Municipal Property Assessment Corporation (MPAC) says, due to a four-year rolling system, 2016 assessments will continue to be used with any increase shared across all tax groups — residential, commercial and industrial.

Carmelo Lipsi is vice-president and chief operating officer of MPAC, and says, "Whatever happens within the various sectors, within those property types, will typically vary. So they're not always consistently increasing or decreasing at the same time."

A key part of the assessment process is determining how much of the tax responsibility falls to each tax group, based on shifting values.

Lipsi says, like residential properties, industrial property prices have been climbing. He says that’s partly due to the growth of the gig economy. An example of that is the large Amazon fulfillment centre being constructed in Southwold Township, just south of London.

Morgan says at some point, new assessments will be needed and that could mean significant shifts in the tax burden within sectors, "For example, if commercial properties haven't appreciated very much, or even been devalued, but residential properties have gone way up, well the tax burden could shift dramatically."

Morgan says if that happens, the province will have to be prepared to offer assistance.

"There's a limited capacity for municipalities to soften those blows."

He says this situation, created by the COVID-19 pandemic, points to a need to address property tax reform to prevent the potential for large shifts in the future.