Yesterday, I picked up my morning paper and immediately smiled when I saw this headline!
I’ve been claiming that MPAC is a joke since the first day I heard of it (and the first time they under-priced a property by 50%).
Now, The Globe & Mail has let everybody know by writing the following article and putting it on the front page…
KAREN HOWLETT
The Globe & Mail
December 7th, 2010
The Ontario agency responsible for assessing more than four million properties is in the spotlight once again, not only for out-of-date valuations that leave one in eight homeowners paying too much or too little in taxes, but for spending $1,700 on Nintendo Wii consoles, a set of Taylor Made golf clubs and iPod touch phones.
The items were bought as promotional gifts, officials at the Municipal Property Assessment Corp. explained to the provincial auditor. But Auditor-General Jim McCarter, who revealed the spending in his annual report released on Monday, said it remains a mystery why the items were needed in the first place with no documentation saying who received them.
MPAC joins a long list of government entities that have come under the auditor’s scrutiny for their free-wheeling spending on lucrative contracts awarded to consultants and for wining and dining employees.
A dozen MPAC employees expensed a $955 dinner at Toronto’s CN Tower to celebrate their department’s year-end results, the report says. A group of 16 employees expensed a $746 Christmas lunch.
MPAC president Carl Isenburg stressed in an interview on Monday that the agency’s free-spending days are over.
“Our policies have now changed,” he said. “We no longer accept year-end dinners or those kinds of expenses.”
Mr. Isenburg said MPAC tightened its policies in the fall of 2009, when Premier Dalton McGuinty warned that employees of the province’s far-flung network of agencies, boards and commissions must play by the rules governing the use of taxpayers’ money.
In addition to the “questionable” spending at MPAC, the auditor also gives homeowners plenty of reason to wonder whether their property tax bills are too high. One house assessed at $330,000 in January, 2008, sold for just $100,000 six months later, meaning the new owner would be paying too much in taxes. On the flip side, a house assessed at $588,000 in January, 2008, sold for $1.4-million five months later.
Overall, the selling price of one in eight of the 11,500 houses sampled across the province differed from the market-value assessment by more than 20 per cent because MPAC did not have up-to-date information.
The assessments are done on a four-year cycle. The most recent ones are pegged to housing values calculated last Jan. 1, 2008.
The assessments are highly political. In 2006, the McGuinty government froze property tax assessments for two years, guaranteeing that the controversy surrounding homeowners’ skyrocketing tax bills at the time would not become an issue during the 2007 election campaign.
Dan Mathieson, chairman of the board of directors of MPAC and mayor of Stratford, pledged that the agency will do a better job of reviewing the sale price of a house when it differs significantly from its assessed value.
“Our job is to make sure that the assessed value of a home is accurate,” he said in a statement.
MPAC is just the latest example of questionable spending at a government entity. The McGuinty government has also been under siege over spending scandals at eHealth Ontario, the Ontario Lottery and Gaming Corp. and, more recently, Niagara Parks Commission.
Progressive Conservative Leader Tim Hudak said on Monday that Mr. McGuinty’s “legacy of waste, rot and scandal” continues.
New Democrat Leader Andrea Horwath also criticized the lavish spending at MPAC. “It’s as if nothing was learned from the eHealth scandal,” she said.
This is the second time MPAC has come under scrutiny. In a 2006 report, Ontario Ombudsman André Marin documented serious problems at the agency. He said it had a “superiority complex” that led it to disdain taxpayers and produce thousands of incorrect property appraisals every year.
I’ve often wondered who MPAC is and why they exist.
This is taken directly from MPAC’s website:
On December 31, 1998, the Government of Ontario transferred responsibility for property assessment from the Ministry of Finance to the Ontario Property Assessment Corporation, an independent body established by the Ontario Property Assessment Corporation Act, 1997.
Amendments to the Act in 2001 changed the composition of the Board of Directors and renamed the organization to the Municipal Property Assessment Corporation (MPAC).
Every municipality in Ontario is a member of MPAC, a non-share capital, not-for-profit corporation whose main responsibility is to provide its customers – property owners, tenants, municipalities, and government and business stakeholders – with consistent and accurate property assessments.
Forgive me if I find this slightly amusing.
They use the words “consistent” and “accurate” to describe their assessments.
I’ve always thought the words “laughable” and “artificial” better describe them.
Unless you’ve been living in a cave for the last decade, you know that seemingly every MPAC assessment is well below the actual value of the property.
So much so, in fact, that these assessments have become utterly useless to buyers and sellers of real estate.
For example, I received my glorious letter from MPAC earlier this year telling me that my condo was valued at $251,000.
I peg the value of my condo at around $340,000 – but what’s a measly $89K, right?
You would think that common sense should eventually prevail. I mean, how many 1-bedroom condos with parking are available downtown for $251,000? A five second conversation with somebody in their first week of real estate (or a waiter, or a barista…) could help those at MPAC to realize that this $251,000 figure is impossibly inaccurate.
At the other end of the price spectrum, I went to a Halloween party a couple months ago at a large house in Forest Hill. I looked up the tax assessment and it showed $1,720,000. But how come the house sold 14 months ago for $3,300,000?
I don’t think I’ve ever had a client ask me, “What’s the assessed value of the house?” Probably because even the general public knows how out-to-lunch MPAC is. We’ve got to the point where nobody expects MPAC’s assessments to be even close to reality.
Thanks to this article in the Globe & Mail, now we know why!
It seems that the people at MPAC are too busy playing Nintendo and practicing their golf swings with their new Taylor Made clubs to do any real research on the value of houses and condos!
Not that I’m complaining!
Who doesn’t like paying 60% of the property tax that they ”should” be paying otherwise?
I hope nobody at MPAC reads my blog. I wonder if they can view my blog on their I-Phone 4’s?
Potato
at 11:53 am
Well, to be fair to MPAC (though not sure why I should be), their assessments don’t have to be accurate in absolute terms, as long as the relative valuations come out right. If your condo and the one across the hall and across the street, etc, all got the same MPAC assessment, then that’s fine. And if the detached house at that’s actually selling for $700k was assessed at $500k (i.e., also double your condo’s assessment) then things are working fine.
Of course, that’s a lot easier to check up on if the absolute valuations are at least close.
Princess Clara
at 2:01 pm
I read your blog on my iPhone 😉 but I only have a 3gs.. Ghetto!
Anonymous
at 3:31 pm
@Potato
Actually, that’s not true. If their assessments are not indicative of market value, then it’s a failure on the part of MPAC since they are not collecting the adequate amount of taxes for the government. This equates into lost revenue.
Kyle
at 4:12 pm
If you think the assessments in the city are hit or miss, you should see what happens when you get out of the city. I just bought a cottage for 83% of it’s assessed value. Meanwhile i am sure there are generations-old cottages on my lake assessed at less than 1/4 of the fair market. I plan to file an RFR (Request for reconisderation) for the 2011 tax year.
In case anyone wants to challenge their assessment, you can sign up on MPAC to search the assessments of comparable properties around you to see what they’re assessed at. You can then use this research to complete an RFR.
WEB
at 11:45 pm
It is frustrating for me….I bought a newer house a year and a half ago and the MPAC assessment is very close- it is about 9% too low. But every house I see listed in my neighbourhood has an assessment that is 30-40% too low! That means I am paying about $3,500 more in taxes than I should.
LC
at 7:55 am
Hmmm…..what do you suggest for someone who bought (for well below asking) a detached house on a ravine lot (TRCA lands) across the street from a private golf course for about $50K under the assessed value?
I’ve checked all the comparables in the neighbourhood and they are all assessed higher. I’ve also made a few key improvements, so I don’t want to rock the boat too much, but I can’t decide whether MPAC screwed up or I just got very lucky.
LC
at 12:21 pm
@Kyle – are you going to renovating soon? I’m considering filing an RFR but don’t want it to go the other way where they will assess even higher.
PC-Cola
at 1:19 pm
I am not too educated on this subject, but if you consider all the variables; market fluctuations, home improvements, intangibles such as proximity to streets/hydro towers, schools etc. Further, compound that by millions of homes in Ontario and most likely a thousands of assessments a week, I think you have the perfect mix for why home evaluations are less than perfect.
I think, those, like myself who have undervalued assessments feel great about the system (whaaaa hoo less tax!). Those who have overvalued properties, well that sucks for them, but with a little bit of research and time invested, you can appeal your assessment and generally get a favourable ruling.
The only loser in the scenario is the Province and the possibility they are missing out on increased tax revenues.
@ LC – I don’t see what the problem is? You’ve got a great assessment, you’re paying less tax than you should. Why not take you theoretical tax savings, the money you saved by paying well below asking and join the golf course and build a serenity garden that backs onto the ravine…
Potato
at 5:25 pm
Anonymous – look up how the property tax system works. The city doesn’t collect more tax when property values go up. Instead, the tax rate is adjusted so that their total revenue figure comes out to match the budget. The MPAC assessment is just for determining relative taxation.
Indeed, there’s a good reason for MPAC to consistently under-assess: there’s a cost of dealing with challenges. People who believe that the assessment should have some relation to the actual sale price will think that they’re getting a steal, and not appeal the assessment when it comes in low.
So, now think about the past say, 10 years. Your tax bill has either stayed the same or gone up consistently year after year, right? Now look up what the property tax rates were:
2010: 0.83%
2009: 0.85%
2008: 0.87%
2007: 0.85%
2006: 0.83%
2005: 0.91%
The tax rate actually went down from 2005-2006, and 2008-2009-2010. Under each of those boxes for the year is an example calculation, where you see that despite the changing tax rates and property values, the total tax grab goes up fairly consistently by about 2-3%/yr, which is I’d wager about what the typical Torontonian has experienced.
So if MPAC did suddenly assess everyone higher, the city would just lower the tax rate to compensate and end up with the same total revenue. Conversely, MPAC systematically under-assessing isn’t robbing the city of tax revenue.
Patrick (#2)
at 10:05 pm
David – I enjoy your blog but was astonished when I read this post. If it had been written by one of your first time buyers I’d understand. A property assessment is a point-in-time value based on a legislated valuation date for tax purposes only. Buyers and sellers of real estate would only refer to this value to calculate their tax liability for a given year (assessment x tax rate = taxes). The assessment notice you refer to clearly states “Assessments for the 2009 to 2012 property tax years are based on a legislated valuation date of January 1, 2008” (and I know this because I have a relatively new condo and got the same notice). In a market where values are increasing the assessed value is typically going to be lower than current value, sometimes dramatically so depending on how fast values are going up. If as a real estate professional you had calculated the value of your unit as of January 1, 2008 and found a dramatic difference between your estimate and the assessed value then I’d understand your rant, but you’re comparing your current value to an estimate established at a different point in time, and for a different purpose.
PS: based on the comments so far Potato has a better-than-most understanding of how assessment and taxation works
Kyle
at 10:07 pm
@LC
I do plan on doing a few renovations, but all of the reno’s i have planned are cosmetic (i.e. no change in square footage and no change to how many bedrooms or baths), so they shouldn’t make any difference in MPAC’s simplistic hedonic pricing models. I plan on looking for 10 cottages of similar size and configuration, that i suspect have super-low-assessments, then i will only use the ones that really make my assessment look high when i fill in the RFR. As well i plan to hammer the fact that the assessment is way higher than the price i paid. There’s no guarantee that it will work, in fact there isn’t any guarantee that it won’t back fire on me, but i figure if i can knock 600 to 1000 off the annual tax bill, it’ll cover my gas for the cottage season.
LC
at 8:08 am
@PC-Cola – I’m paying more tax than I should considering the assessment is higher than the purchase price. When I look at other properties in my location that sold recently, all except for one also sold below the assessed value. So that’s why I think MPAC is overvaluing these properties.
But you’re right, overall I saved alot by buying under asking, and those savings are worth far more than the extra few hundred a year I’d save in a tax reduction.
John
at 1:07 pm
I for one enjoyed this article, I am also of the belief that when so many senior officials in a Government agency are getting their huge salaries/bonus/credits/cars/expenses paid/ you get what I mean.. they should at least have the courtesy to do their job right. MAYBE not the first time…. but how about over the last 10 years of existence. HOGWASH!!
Mr. Marin should move in to the BRAND NEW MPAC HO, it is obvious without somebody looking over their shoulder (babysitting them) they are unable to behave themselves.
That must be why nothing gets done!! I forgot it is hard to play wii and golf at the same time. With a stomach full of free (expensive) food that must be complete agony. Maybe they were out playing with the customers. Wait I am a customer too!!!! One who does not get ANY SERVICE. I think the visions and mission stuff on their website is part of an April Fool’s joke left back in error. But then again with a 800 dollar holiday meal they must be busy thinking of ways to spend the money or get more contracts. Good for Ms. Karen Howden to write so eloquently on this tragedy of a corporation.
LINDA
at 9:51 pm
I just went a few rounds with MPAC. But here’s a question because I may not be finished, looking for someone who can figure this one out.
The day BEFORE the court date, got a call to settle. Minutes of settlement were agreed on. The minutes of settlement agreed to covered the dates of 2010, 2011 and 2012 and was agreed to early in December. The MPAC rep was quite miffed as they had to do this rather last minute as no one had put together the paperwork in advance of the initial hearing and they seemed to have scrambled to put together an offer of settlement. (which they then lost and then I had to re-sign another set). She wanted me to delay the date so she could come out and inspect the property. I said no, that I had already gone to the expense of getting a professional valuation and a letter of opinion…and in the back of my mind I was thinking that MPAC’s disorganization was not a reason for to cancel the court hearing. (They’d already had 3 months – I managed to jump through all the hoops.) I was ready to go to court, and had all my valuations and other paperwork together…and had prearranged a day off work. This was 4:30pm the day before the hearing!
MPAC officer decided to agree with my valuation, and finally received my minutes of settlement. This was 2 weeks ago.
Just today I received a “notice of hearing” . The appeal # is the same as the one referenced in my minutes of settlement.
I am worried because I told her we were renovating the house. Do you think this is some sneaky mpac way to get a higher valuation? Why would they ask for another hearing?
LINDA
at 9:55 pm
Oh and re the above… we purchased August 2009 at an amount approx 50k lower than the assessment MPAC figured out for Jan 2008. We agreed to an amount 30k less than what I paid.
vince
at 2:17 pm
Looks like MPAC is at it again for 2016. I just recently signed a petition at http://www.saynotompac.com check it out!
vince
at 6:42 pm
Join my fight against MPAC: http://www.saynotompac.com