A Cautionary Tale – Municipal Engagement in Assessment Appeals

A Cautionary Tale – Municipal Engagement in Assessment Appeals

Submitted by: Robert Brazzell and Damian Bernacik, Colliers, Toronto, ON

The transformation of Ontario’s property assessment appeal system’s is accelerating. This is at least in part due to the postponement of the property reassessment. However, the recently increased disparity in the distribution of taxes has been exacerbated by the dramatic and even unprecedented increases in municipal property tax rates. These developments have garnered significant attention. Meanwhile, a less discussed yet equally significant trend is emerging; municipalities are leveraging the assessment appeal system to increase their assessment base and property tax revenue. This has markedly changed the dynamics of Ontario’s property tax system.

Municipal Property Tax Rate Increases
For the last four years, the provincial government suspended the general reassessment.

Despite, or more likely because, of this, Ontario is experiencing surging property tax rates. In 2023 municipalities passed historic property tax rate increases. One, the Township of Black River-Matheson, passed a 2023 property tax increase of 34.2%. In 2024, municipalities are proposing or have already passed further increases compounding on last years’ increases. The City of Toronto has proposed a controversial 10.5% property tax hike, while the proposed 12.5% property tax increase in the City of Stratford has triggered a taxpayer petition in opposition.

Rise of the Municipal Appellant

Since the provincial reassessment was suspended, Ontario has experienced an unprecedented increase in municipality-initiated assessment appeals. This is no doubt an effort to grow their assessment and taxation base.

Based on the Assessment Review Board’s (“ARB”) “January 2024 Condensed Master List,” municipalities are the appellant in over 39% of open Assessment Act appeals. As a block, municipalities are currently, by a wide and no doubt unprecedented margin, the most frequent appellant in ARB proceedings.

Also notable is the frequency and scale of their success. In Parkyards Inc. v Ottawa (City), 2023 CanLII 123166 (ON ARB), the City of Ottawa appealed the assessment of a property and the ARB, more than tripling the assessment as returned by MPAC.

The proliferation of assessment appeals filed by municipalities is not limited to larger municipalities. Smaller municipalities are also increasingly active in the assessment appeal system. The County of Wellington in Municipal Property Assessment Corporation et. al v. County of Wellington, 2023 ONSC 591 (CanLII) had a resounding victory when the Divisional Court upheld an earlier decision whereby the assessment and classification of gravel pit properties were altered with gravel pit owners required to pay millions of dollars in additional property taxes.[1] The successes of Ottawa, the County of Wellington and other municipalities have seemingly been a catalyst for greater numbers of municipalities filing assessment appeals.

Taxpayers Responding to Assessment Appeals

Taxpayers should take immediate action in response to receipt of a notice of an assessment appeal filed by a Municipality. If a taxpayer does not respond to the appeal within the time required by the ARB’s Rules of Practice and Procedure, MPAC and the municipality may look to settle the appeal without consideration of the taxpayer. This is precisely what occurred in 10198447 Canada Inc. v. Municipal Property Assessment Corporation, 2022 ONSC 6807 (CanLII), where the taxpayer did not serve a pleading by the required deadline, and the municipality and MPAC settled the appeal without regard to the taxpayer’s position. The Board issued a decision, based on the settlement between MPAC and the municipality, by deeming the taxpayer not to oppose the settlement as the taxpayer failed to serve a statement of response.

The Municipal Respondent to Assessment Appeals

Municipalities are not just appellants. Increasingly, they are also active as respondents in taxpayer-initiated appeals, especially those involving significant revenue or precedent-setting issues with the potential to affect future assessments.

In recent years, ARB appeals relating to the pandemic’s impact on assessments or the ability of taxpayers to annually challenge their assessments during an assessment cycle, have attracted attention from municipalities. In each of the following three notable ARB motion decisions issued in 2023, municipalities and MPAC jointly opposed taxpayers’ right to appeal assessments annually.

• Ivanhoe Cambridge Inc v Oshawa (City), 2023 CanLII 116832 (ON ARB)
• ARI STC GP Inc. v Toronto (City), 2023 CanLII 116834 (ON ARB)
• Manulife Ontario Property Portfolio Inc. v Municipal Property Assessment Corporation, 2023 CanLII 13877 (ON ARB)

Another notable decision involved the City of Toronto as a respondent to appeals filed by Canadian Tire Corporation Limited. Canadian Tire challenged the returned assessment of $85,014,000. The City relied on a highest and best use analysis to argue that the property was under assessed. The Board agreed and increased the assessment by $21,248,000 to $106,262,000. This increase will apply to every taxation year back to 2017, resulting in a windfall of $millions in additional property taxes for the City. This decision serves as yet another example of how municipalities have begun using assessment appeals as a tool for the growth of their assessment and taxation base absent a general reassessment.

Adapting to Changes in Ontario’s Assessment Appeal System

The prominence of municipalities in the assessment appeal system has changed the dynamics of property assessment disputes. In addition to becoming increasingly complex and adversarial affairs, there is a manifest and unprecedented power imbalance. Taxpayers, large and small, engaged in the assessment appeal process must account for the possibility that two government bodies, each with extensive resources, will oppose them. Difficult to reconcile this with the taxpayer’s right to audit and correct their property tax assessments through the appeal process. Trepidation is appropriate for Ontario taxpayers considering what lies ahead in 2024.

To minimize risks, taxpayers must now more than ever be mindful of Schedule of Events deadlines and exercise all rights available to them in every appeal proceeding. Additional taxpayers can leverage the resources of industry, trade, and professional associations like the CPTA and NAIOP, which are intent on safeguarding the interests of property taxpayers during these turbulent times.

Authored By:

Robert Brazzell, Managing Director, Property Tax Services, Colliers
Damian Bernacik, Director, Property Tax Services, Legal Services, Colliers

[1] County gravel pit operators owe millions in back taxes after ruling: https://www.guelphtoday.com/local-news/county-gravel-pit-operators-owe-millions-in-back-taxes-6587401