April 21/04 Report
1:40 to 3:42 pm

Committee Members Present:
Larry DiIanni - Chair, Chad Collins, Murray Ferguson , Sam Merulla, Bill Kelly, Tom Jackson

Other Councillors Present:
Phil Bruckler, Dave Mitchell, Dave Braden, Maria Pearson, Terry Whitehead

City Staff
Peace - Acting City Manager, Joe Rinaldo (Manager, Finance), Beth Goodger (Public Works - Waste Management), Lee-Anne Coveyduck (Manager, Planning), Catherine Graham (Manager, HR)

Media/Others

• Hamilton Spectator - Eric McGuiness and Chinta Puxley
• Citizens at City Hall (CATCH)
• MPAC Staff

Agenda:
www.city.hamilton.on.ca/Clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2004/Apr21/Agenda.pdf

Changes to the Agenda:
That the following communication be added to the agenda: Correspondence referred from City Council at it's last meeting from John Hogg, President of CLT Canada respecting property assessment.
www.city.hamilton.on.ca/Clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2004/Apr21/Item%204.1.pdf

DiIanni - ".We can add (change to the agenda item) to 9.2 on today's agenda because we have a presentation on exactly that. Members of Council may I have a verbal motion to approve the agenda as amended. Ferguson , Merulla , all in favour, carried. Members of Council may I have, are there any declarations of interest? Seeing none. May I have a verbal motion, Merulla , Ferguson , for the minutes of March the 3rd? All in favour? That's carried. , Members of Council you have before you item 3.1 a delegation request from Minali Prem of the Canadian Federation as stated there, for delegation request, moved by Ferguson , seconded by Merulla , all in favour? That's carried".

4.1 Delegation Requests :
www.city.hamilton.on.ca/Clerk/agendas-minutes-reports/
Strategic-Planning-Budgets/2004/Apr21/Item%204.1.pdf

DiIanni : "And the next item members of Council today we have a presentation on current value assessment and I'd like to welcome Corrine McCormack whose the account manager of municipal relations and let me get this right, Corrine, yes, account manager, municipal relations. I did get that right, thank-you for being here Corrine. Accompanying her are Dave Vaulcong who's the municipal relations representative as well as Holly Shebo who's the administrative assistant. Welcome to all of you and Corrine is going to walk us through a presentation on MPAC and I'm going to ask members of committee and council to just listen to the presentation and then she will take questions right?"

Item 6. Public Hearings/Delegations: Ms Corrine McCormack, Municipal Property Assessment Corporation (provincial body), respecting current value assessment. (No posted copy - CATCH has a hard copy)

McCormack : "Thank-you your worship. Thank-you for the invitation to appear here today. It's my intention to cover 5 topics today to try to address the needs as I understand your desires. The 5 topics: The Ontario model of property assessment (essentially who does what), MPAC'S structure, governance and funding, Preparing property assessments (essentially what's assessable), the annual assessment process (which is essentially a 5 part process) and resolving assessment concerns.

I think with some of these slides in the interest of expediency, we'll go through them rather quickly, you do have handouts and additionally I believe the Clerk is providing you with copies of a guide to assessment on which this presentation is founded.

So within the property assessment property taxation model in the province of Ontario there are 4 integrated parties, the province establishing legislation, MPAC responsible for administering that legislation and regulation, municipalities setting tax rates and additionally I should have added the provincial government establish an education rate, and finally the assessment review board who would hear assessment complaints from property owners.

Our governance and funding. We were established as a corporation in 1998. We were initially established as the Ontario Property Assessment Corporation, for some reason we were renamed in 2001, but the essence is the same. We are a not-for-profit, non-share capital corporation. We are funded by the 400 some odd Ontario municipalities. Our affairs are managed by a 15 member board of directors that is appointed by the province. On that board there's 8 municipal representatives, 50% of whom are elected, 50% are staff, 5 taxpayer representatives and two provincial. We also at my level report to a CAO who is responsible to the board for our operations. We have a number of legislated roles, apart from the annual assessment of Ontario 's 4.3 million properties. I think for today's purposes, if you wish to review that slide, you probably could do so at your leisure.

We are, under the assessment act, on an annual assessment cycle that started this year. Since 1997, we have reassessed the province 4 times. The current legislation says that we are now to move forward on an annual basis, and we are currently in the process of working on updating current value assessments to a 2004 base for taxation next year. The existing legislation says that with next year we are to start averaging assessments, however, on the 15th of March, Minister Severa (sp?) announced, along with some of the regulations affecting tax ratios, that it's the governments intention to review the averaging provisions that are currently in the assessment act. But as the legislation stands, we are to begin that averaging process.

I mentioned earlier we are funded by the municipalities, again the formula for recovery, or really it's the formula for allocating costs to municipalities, is defined within the Municipal Property Assessment Corporation Act, section 12.

The formula is, that for every municipality that is single tier and upper tier municipalities, the total ratio is established that's based on the s of the municipal assessment base and the municipality's properties as a ratio to the total assessment base in the province and the total number of properties. That ratio is averaged and then applied to our operating costs. The process comes secondly; our budget is established and approved by the board.

So for this year, this slide is indicating the calculation to the City of Hamilton . The assessment base as returned for 2004 taxation is 35 billion - there are 155,280 properties. The provincial assessment base is 1 trillion 1.5 billion, and there are 4.3 million properties.

So, as far as the assessment base is concerned, Hamilton 's 35 billion represents 3.1% of the provincial base, and the 155 thousand properties is 3.6% of all properties in the province. So those two figures are . and averaged, resulting in the City of Hamilton having an MPAC allocation ratio of 3.35%. The $141,800,000 is our 2004 operating budget as approved by our board of directors and it's resulting in a 4.7 million dollar charge for services to the City of Hamilton . For your information that works out to $30.65 per property in Hamilton . On a provincial basis the costs are at $32.95.

Preparing property assessments. Real property such as land and improvements buildings are assessable. What is not assessable are items such as landscaping, paved driveways, sidewalks and chattels. Chattels because there not affixed to property and not deemed to be real property.

How are we to assess property? Again, the assessment act directs and defines that all properties are to reflect current value, and I've paraphrased the statutory definition, current value is the price a property might reasonably be expected to sell for in it's current condition and on the open market.

There is a distinction between current value and sale price. A sale price is an indication of current value and it's a price agreed to in a single transaction; versus current value, which are the prices paid in multiple transactions by numerous purchasers, in a competitive, open market situation, under all conditions of a fair sale.

Mass appraisal is characterized by values of properties being established as of a given date, using common data, standardized methods, mathematical models and statistical techniques. Mass and single or fee appraisals use techniques rooted in standard approaches to value, however, we differ in scope, tool sets and purposes.

Fee appraisals may vary depending on the purpose, whether it be financial, for insurance purposes, or for marketing purposes. And the three approaches to value that both a fee appraisal and mass appraisal jurisdiction will use are the income, cost and sales approach. The income approach is applied particularly to investment properties. A cost approach is generally more appropriate with a manufacturing facility, large industrial that does not normally sell on the market.

What I would like to focus on today is the sale comparison approach, and that approach analyzes the sale prices of properties with similar characteristics. 90% of Ontario 's 4.3 million properties are valued using this approach, and it's single-family residences and condominiums. As I mentioned earlier, the annual assessment process is essentially a five-step process, and obviously it begins with data collection. Our database currently has over 2 billion elements and it's updated regularly from land transfer tax affidavits, plans for subdivisions and new condominiums, receipt from land registry office. We receive building permits from the municipalities to act upon new construction. We do conduct on-site property inspections associated with requests for reconsideration, assessment review board appeals and indeed the building permits. Also correspondence from owners, we collect income and expense data for commercial and industrial investment properties. And in some jurisdictions, unfortunately not Hamilton , we do get information from the real estate boards.

The sales comparison approach, values are predicted under this approach by adjusting sale prices of similar properties for differences between the comparable, that is the sale property, and the subject property, or the unsold property. And similarity, there selected based on similarity with respect to most importantly, competitiveness in the same market, the date of sale, physical attributes and economic conditions surrounding the transaction. If the comparable and the subject properties are not competing in the same market place, supply and demand factors that each property faces are different. As an example, a residence with similar utility in Hamilton is going to sell for a significantly different price than it will sell in the Toronto market. Real estate markets themselves are geographic areas, again there subject to the same economical influences of supply and demand, and the properties in the market are in competition with one another. The values will appreciate or depreciate in a similar fashion, there generally contiguous, and generally there is about several thousand within a market. Within a market there are subdivisions, the distinguishing characteristic of locational neighbourhood is similar desirability for that location. Additionally one will find that there are similar lot sizes and site amenities. And these locational neighbourhoods are usually marketed by a specific name or are known to the populace by a specific name such as the Durand or the Delta neighbourhoods. For residential properties there are two market types in Hamilton , I'm excluding condominiums, but we analyze the urban market area which is, an urban area is normally part of a metropolitan area or it may be clusters of towns and surrounding areas. The distinguishing feature of an urban real estate market is that frontage and depth land unit measurement is most appropriate. Where as the rural market areas, land is usually more predominately expressed by either square footage or acreage, so you're looking at larger site holdings. For illustration purposes this was taken from the Hamilton Spectator Spec Homes page 2 on April 10th, and it's an illustration of the map that the Realtors association of Hamilton Burlington is using and they also are identifying market areas as Hamilton, essentially there saying below the mountain and above the mountain, and then there outlining areas and communities. The real estate board, at least at this publication date, is identifying 28 locational neighbourhoods, there referring to them as districts and you can see the breakdown, it's the first column of numbers, the numbers in brackets are how they refer or identify those neighbourhoods.

The next slide shows what are analysis has done. We're saying yes there are 2 urban areas, Hamilton below and Hamilton above, and then we're saying there is a second urban area comprised of Ancaster, Dundas, Flamborough and then there's the rural market which is those areas outside of Ancaster, the old Ancaster core, Flamborough, Glanbrook and Stoney Creek. So we have three market areas and those total to 104 locational areas.

For our analysis for 2003 current value assessment, I thought you might be interested to see that in the urban area 1, the range of sale prices, $18,000 to $800,000, with the average sale price of $142,000. That's Hamilton below. Urban 2 the minim is $40,000 and the maxim sale price that was used for analytical purposes $835,000 and you're seeing the average increasing significantly. The rural area, again you can see the range of properties, with the average for those areas of $226,000. I'd like to stress at this point, if it's not clear by now, it's our job to analyze the market - we don't create the real estate market. But this is the evidence that we're finding of sales transactions in the last year.

The date of sale obviously is important because properties will again appreciate or depreciate in value over time. We continue to have a high demand market, not just in Hamilton but in the entire province and upward pressure is being exerted on prices. Time adjustments may be made or are made reflecting the date of valuation. And again, from the Hamilton Spectator, on April the 10th, Mr. Sean Murray, the president of the RAHB has stated so far this year that would be till March, prices have risen 6% in this market.

Typical adjustments for physical differences are made for lot size, the building size, quality of construction, the age and condition of the structure and amenities such as garages and pools, fire places, central air, extra bathrooms, finished basements. This slide is for illustration purposes only, the numbers shown here are not derived from any of our analysis, but I'm showing you the subject property with an estimated current value assessment of $243,000. The sale property is in the third column at $250,000. And I'm just indicating the sort of adjustments that occur from the analysis of sales and are applied to determine the current value assessment for similar unsold property.

Financing, again current value assessment assesses open market competitiveness without advantage accruing to either party. Favourable financing has been know to push prices upward, and rather than reflecting an open market consideration for the real property itself. Vendor take-back mortgages twenty years ago used to result in a higher sale price being registered as compensation to the vendor for risk and illiquidity. That however, is not a recent characteristic of the residential market given the low interest rates and again CMHC's alleviation of equity requirements to enter the real estate market. It hasn't been a major influence. I wanted to point out to you though that with tax incentive programs, similar to favourable financing concepts, one may expect to see higher prices for properties receiving advantages taxation treatment. Obviously, the vendor of that property might want some kind of compensation for giving up that advantage. We use computers, obviously, all assessment jurisdictions do. We use multiple regression analysis to determine both the value influences and the adjustments that are to be made, and then we move into quality testing of the predicted values. And the generally accepted standard for testing the accuracy of the values is the assessment to sale ratio; obviously, the closer the predicted current value assessment is to the sale price or one the more accurate the assessment. The median then of the assessment to sale ratios is established for each property type and finally analysis of how tightly those ratios are clustered around the median is conducted. The coefficient of dispersion is the term for that measurement, and the more uniform the assessment, the lower the coefficient of dispersion should be. The International Association of Assessing Officers has established that 15 or lower is the standard coefficient of dispersion that should occur for residential properties and I'm pleased to say that in the Hamilton city in urban area 1 that figure is coming in at 8.9, urban area 2 at 8 and the rural at 9.9 reflecting the greater heterogeneity of the rural area. Finally, the values are applied to all the properties and these values are reviewed. The properties with high or low assessment to sale ratios from the median are prioritized by local staff for review. Revisions are made on the basis of local knowledge and data integrity issues associated with particular property. We mail assessment notices, there's two mailings, a regular notice and then amended notices. And finally the role is returned to the municipality on the third Tuesday of every December.

Assessment concerns. There's two options available to property owners, the request for reconsideration, there's no application fee for this one, the filling deadline is December 31st of the taxation year and it's filed directly to MPAC. The Assessment Review Board, which operates as an administrative tribunal under the Ministry of the Attorney General, has a deadline of March 31st; it charges filling fees of $50 for residential properties and $125 for commercial or industrial. The Chair of that hearing reviews evidence on the basis of sale, data integrity and/or similar properties. The decision of the Chair is final for the particular taxation year.

What does MPAC look at when a request for reconsideration comes in? It's essentially similar things that we look at on doing mass appraisals. Were looking to ensure that the data integrity associated with the property is correct. Were investigating whether the value reflects a reasonable expectation of what it could have sold for in the base year. Were looking to see if the value reflects what other similar properties were selling for in the vicinity in the base year. But of great confusion, the increase and decrease between two base years is not a review issue that either MPAC looks at under OFR (?) or that the RB (?) Chair looks to in a hearing. And you'll be relieved to know this is the final slide. Owners may obtain assessment information by role viewing at municipal offices. Additionally, ' About my Property' , which is on our website, will provide property owners with a property profile of their own property, basic information for 12 other properties or the owner may also six comparable properties and additionally, we will support six properties. Thank-you for your attention, I hope that was fast enough".

DiIanni - ".That was good. Thank-you. But what will be interesting will be the questions, but I'm sure you'll be up to it Corrine, thank-you. And I have Councillor Merulla as the first questioner".

Merulla - "Thank-you Mr. Mayor and to you too Corrine. Firstly I'd like to thank Corrine for being here today. Secondly, with respect to, I guess the effect on the bottom line from a taxation standpoint, from your perspective". McCormack - "I'm sorry I'm having difficulty hearing Councillor Merulla". Merulla - "Oh, no problem, I think it's this mic, from your perspective, my understanding is, our staff has indicated to us that reassessment doesn't have a positive impact from a revenue stand point because certain areas are going down, others are going up, do you concur with that?" McCormack - "Yes, definitely. The intention of an assessment is not to generate, it's supposed to be revenue neutral. The intention of the assessment is to allocate values and eventually taxes on the bases of current market conditions Councillor". Merulla - "Okay. Now with respect to situations where, I guess the value of the home is very, the actual value as opposed to the market value as its assessed by MPAC differs greatly, where someone has a conflict with what you are presenting to them and it's an obvious one, one for instance, as an example a house that would be nearby to that of the water treatment plant and the odor issues and other aspects of that particular neighbourhood that would really take away from the value of the home, but yet the prices that is attached to it on an assessment seems very unrealistic. And even though an appeal went forward, it seemed to not in any way mitigate it. How can MPAC justify that?" McCormack - "We're required to make nuisance adjustments. Were required to identify those through analysis of the sales, and it's to be hoped there's sufficient sales that are going to prove or disprove whether that is having a negative impact on the property. I mean. Obviously one would assess that there's a stigma associated with living next door to a water sewage plant, but we are required under the legislation to look for evidence of how to measure that stigma, so essentially that's what happening in that case, an assessment review board Chair in many cases would look to it and may make in his or her discretion a decision".

Merulla - "Okay. Another question. Were being very proactive in in-fill development and I know that in my area on the old Bishop Ryan high school site, there's a fairly new survey located there, and homes are in the I guess, $200,000 range, now in behind however, homes are priced at perhaps $130,000-$140,000. So in essence, based on the format that you're using, those homes that are being sold in the newer part are impacting the older part of that particular neighbourhood". McCormack - "That's going to be true in any case where new construction is occurring. The prices, obviously for new construction are higher, it also then starts to push the demand side of the equation, people want to live in that area and again it has a spill over effect onto the older properties. I would certainly not expect to see the older property having the same value as the property that's been built in the last 5-years Councillor Merulla. But it will drive prices in an area, the existence of new properties. Generally it tends to drive prices up because the newer construction, obviously the developer is going to ask for more, they want to recapture there costs and obviously a profit, and that does influence the values on other older properties in the area". Merulla - "I guess my point though is the unfairness of that, because the actual value of those homes isn't really reflective of the assessment value, because of the new homes, which are driving the actual perceived value up". McCormack - "With all due respect, were told to place values on properties by analyzing sales in the vicinity, and if that is happening as an economic factor in a vicinity, then that's what were to reflect. Once again, were not creating the market, were aware of market conditions and analyzing it and as I said, to restate, those properties in particular, that you're referring to, I would expect to have a much higher value than some of their neighbours that have been there for longer and are more established. But they're still going to exert an upward pressure".

Merulla - "Through you Mr. Mayor, in other municipalities, sorry in other jurisdictions, when dealing with this issue, are they dealing with it on average, on prices based on averages, or are they assessing each home individually?" McCormack - "MPAC is responsible for all of the province of Ontario ". Merulla - "No I mean outside of Ontario , sorry". McCormack - "I'm not an expert on what's occurring outside of the province Councillor. I can say that current value assessments as the basis of property taxation, it's used in the majority of North America and other assessing jurisdictions in the world". Merulla - "Okay, so in your opinion, how do we deal with the unfairness of those whose homes really aren't being assessed accurately?" McCormack - "With all due respect Councillor, I would argue that houses are being assessed accurately. If the owner disagrees with the value, there are the options; there is a request for reconsideration. If no settlement can be reached there, put it before the Assessment Review Board".

Merulla - "And this last thing Mr. Mayor, with respect to the percentage of appeals that are actually heard and are successful, do you have any idea how many are successful in the appeal?" McCormack - "As we left the office Councillor, we were running numbers on request for reconsideration. At this point last year, we had I believe, just a second, sorry, I believe it was around 2600 requests for reconsideration at this point last year. At this point today, we've got 2000, 94% of them are complete, and as I say, the numbers were still coming off the system. Of the ones that were complete, about 45% of them had no change and the balance did have a change, and essentially reflecting data integrity issues with the property". Merulla - "What percentage of that actually, so some people are appealing and actually after the assessment, it's actually increasing rather than decreasing? I'm just wondering if you were able to split it, how many have actually gone up as opposed to their appeal". McCormack - "I don't have that available, but I can give you an undertaking certainly to get you statistics on request for reconsideration. But I do want to stress that the request for reconsideration is not an appeal, it's an informal resolution dispute mechanism. An appeal is before the Assessment Review Board". Merulla - "Now, can you explain, .the rationale for the fee, over and above, I guess, the cost of processing the application. Is that directly related?" McCormack - "That question should be most appropriately placed before the Assessment Review Board. I believe it was instituted to cover part of their administrative costs but certainly it's not appropriate for me to speak on their behalf". Merulla - "Okay, then through you Mr. Mayor, Mr. Rinaldo , do we have any control over that $50 fee? Is that something outside our." Rinaldo (Manager, Finance) - "The province sets that.. It's nothing to do with MPAC, the province sets that, through the Ministry, which Ministry deals with that, the Ministry of the Attorney Generals Office does that". Merulla - "Okay. I personally believe the process, particularly the first phase of it, should be free. I think the $50 is kind of almost a cash grab. I'm wondering if I could put forward a motion at the appropriate time to indicate to the province that there should be a mechanism, to at least for the first phase of it to assess it, and that particular phase be free, rather than charged".

DiIanni - At the appropriate time I will take that, but the 1st phase is free, the reconsideration phase, you mean the appeal?" Merulla - "The appeal itself". DiIanni - "Okay, fair enough. I'll take that at the appropriate time. I do have a number of speakers now, and if we could sort of restrict it to a few questions rather than lots, that would help all of us, and then we could have second timers as well".

Ferguson - "... Averaging, is it supposed to be a 3-year or a 5-year average?" McCormack - "In the existing legislation, it's 3 years Councillor". Ferguson - "Mr. Mayor at the appropriate time I would like to move a motion that the City of Hamilton strongly supports 3-year averaging concept for household or business to budget taxes that could fluctuate 20% a year is not fair. We need a level, if it's going to go up, sure go up, but let's not go up 20% and down 10% the next year. I think we need the averaging.

I've got a question, if in a new house built, why does it take 2, maybe 3, years to get a tax bill to them"? McCormack - I will be quite frank we have been remiss in picking up new construction Councillor Ferguson, over the last couple of years. I believe though, if you examine our performance in 2003, we issued 808 million dollars in omitted and supplementary assessment to the City of Hamilton , of which only 5% of that went back 3-years. It's going back that length of time is unacceptable to the property owner, it's unacceptable to you as a representative, and quite frankly it's unacceptable to us as well. We are moving - we have established as a corporation a standard that as a key performance indicator that all property will be issued assessment notices in 6 months of occupancy. We're moving there, we haven't been doing well, but I think our performance in 2003 is certainly encouraging". Ferguson - "Any idea where you are on year-to-date '03?" McCormack - "I'm sorry?" Ferguson - "Any idea where you are at this level with '03? Are you at June?" McCormack - "I'm sorry, I'm not understanding the question". DiIanni - "Where are you as of now? Any idea of whether you're on track? Any sense?" McCormack - "I'm going to refer to my colleague for a second just in case. I meant to check that. There's $400 million sitting, awaiting extraction for supplementary issue this year. I believe that will be issued to the municipality in June. I would anticipate seeing similar ratios, that most of it would be effective. A lot of that will be effective 2003, because we'll be capturing construction that was complete in 2003 after the last supplementary omitted extract". Ferguson - "There's $400 million?" McCormack - "There's $400 million sitting right now awaiting extract for delivery to the municipality in mid-June. That's total. I don't have the breakdown on the effect of taxation years. Again, I'm hoping that it would be staying in at least in the 5% range and not higher". Ferguson - "Just for clarity, I ask this of Joe, that's 400 . that didn't assessment - did not grow by. Is that correct?" Rinaldo - "The 400 million that Corrine is talking about possibly could be, some of it could also be '04 as well. So in fairness, it's probably not '03. What I can tell you based on the information I'm getting from the tax department is we're clearly seeing an improvement in recent months, in the last 6 or 7 months in terms of the supplementary, especially since we provided them with the occupancy, we provide them a report on occupancies now monthly from our building, from the Amanda (computer) system, and therefore things have improved. I hope by the end of this year that we'll be in a much better position overall". Ferguson - "That's not to say those new homebuyers are getting off scott-free, they're billed retroactively, right?" Rinaldo - "Yes".

Ferguson - "Okay. Great. Can you tell me why golf courses took a hit in '03 and farms took a real hit in '04?" McCormack ".For 2001 current value assessments for 2003 taxation, we changed the evaluation approach on golf courses from a cost approach, which is essentially a value to the land with improvements for greens and fees and depreciated costs for the buildings. We changed from a cost approach to an income approach to value. The analysts that are responsible for evaluating golf courses found that under the cost approach, which when we conducted assessment-to-sale ratios for golf courses we were hitting about 20% of the value, were way low, so what happened was obviously with the valuation approach to an income approach, yes we were moving closer to the actual value of the golf course. And you had a question, I'm sorry.?"

Ferguson -"Farms this year". McCormack - "Farms this year?" Ferguson - "Farms are.". McCormack - "Yes, I realize what a farm is, thank-you. I'm not recalling that there was a significant, just a second, if you'll excuse me for a moment.." Rinaldo - "Increase in farms was not this year it was the last reassessment. Farmlands actually are pretty close, the average increase in property values for farmlands in this reassessment were pretty well constant to residential. In fairness, the 2000 and the year before, the last reassessment that we saw a big increase" McCormack - "Yes. Thank-you. The increase to farms between 2001 and 2003 was about 6%, and quite frankly, .my memory is failing me on the 2001. I know I did meet with local Federation of Agriculture to discuss matters at that time. But I don't recall what the figures were for 2001, nor do I have that information with me".

Ferguson - ".Are you telling me that realty tax - this is back to golf courses for a minute - is realty tax swinging from a cost to property to an income tax?" McCormack - "No, I'm not telling you that at all, I'm saying there's three approaches that are used to value properties, and it's in one of your slides, cost approach, income approach and the sales approach, and with golf courses, under a cost approach to value, we were not approximating, not even approaching what those types of properties were selling for, so a review was conducted and golf courses were valued, income information was gathered from them and typical expenses, and those properties were valued on an income approach to value, not an income tax, we used an income approach to value to place a value on those types of properties which the appropriate tax rate would be applied". Ferguson - "So the realty tax is based on your income". McCormack - "Not at all. Office buildings, investment properties, things of that nature will sell - the purchaser will look to the income stream. We found the same with the golf courses that they were selling - purchasers were looking to the income stream that the course was generating, we moved to that approach to estimate a current value assessment. Under the previous approach, which was improved land value plus a value to the buildings, we were not achieving current value when we looked at what those properties were selling for".

Ferguson - "Okay. Mr. Mayor one final question". DiIanni - "Yes, thank-you". Ferguson - "The question I got asked 2500 times in a year is I have a widow living in the same house for 40 years, her taxes have tripled based strictly on her postal code, how do I answer that?" McCormack - "I'm sorry, our job is to put a value on the properties sir, with all due respect". Ferguson - "Yup. Thanks". DiIanni - We all know that for some it's not a fair system, that's why we keep harping on that, but I think Corrine is accurately describing what she's legislated to do, Councillor".

Collins - "Mr. Mayor, I wanted to focus on the figure of the $400 million that Corrine noted earlier on. That issue related to, you noted earlier in the presentation that the reassessment process is one that redistributes, I guess, values throughout the municipalities, so there's no net gain other than what would be associated with growth. Do you have figures for growth here in Hamilton for the most recent assessment undertaking - reassessment undertaking?" McCormack - "I didn't bring them with me today, I apologize. I believed that that had already been covered by Mr. Rinaldo and his staff, I'm sorry I didn't bring those with me. But I can undertake to provide that information". Collins - "I'd like to see that, if you could forward that to us. And that's on the $400 million dollars, could you explain that one more time, I'm not sure I understand what that figure represents". McCormack - "Throughout the taxation year, as new construction is complete and occupied, we are mandated under the Assessment Act to issue what's called supplementary assessment. We also have the authority under the Assessment Act for construction that hasn't been picked up for the current year and 2 previous years to issue omitted assessment. So the $400 million that I'm referring to that's pending is new construction or improvements that have not been added to the assessment role, they will be supplementary assessments that will be taxed once received by the municipality. And they are taxed according to the effective date, so if we have missed assessing something for two years, which is what we alluding to earlier, we're trying to avoid that, then that property would receive a tax bill going back 3 years. So it is $400 million pending, and we continue to work on new construction - we're working on that as we speak". Collins - ".Is there a cost to the municipality in not having that money, .I guess that would be a question for Joe (Rinaldo), as there's the delay for that money coming in, you're forced to finance programs in the absence of that pool of assessment. How do you account for that, I mean are there initiatives we should be taking up with the province to talk about the delay first and foremost, and Corrine I think, made it quite clear that they're making every effort to try to expedite that process, but I think somewhere along the line there's a cost to the municipality in not having it. Joe do you want to comment on that?" Rinaldo - "In terms of supplementaries, just to let you know, municipal treasurers have been raising this issue for a number of years with MPAC, we've been trying to get updated, what I'm hearing from MPAC is they're finally catching up and hopefully we won't be behind like we were in the past. In terms of supplementary taxes, what we actually budget - an annual amount in there - assuming we will get some supplementary taxes in our budget, we've got about $4 million in the budget assuming that we'll get some supplementary taxes, obviously it's hard for us to predict what the number will be, so we budget conservatively on that so that we don't create a deficit". Collins - "Is that built into the budget right now Joe?" Rinaldo - "Yes it is and.." Collins - "Just before you go on, that number you built into the budget, has that changed in any way shape or form in regards to the recent information Corrine has presented?" Rinaldo - "We increased it by half a million dollars this year in terms of supplementary tax revenues, that's what we did. Sorry and I didn't answer your first question, the opportunity cost. There is an opportunity cost obviously if we got the taxes earlier and that would be."(tape change) Collins - "Where is the $4 million supplementary, is that in corporate financials that it's included in the budget?" Rinaldo - Nods yes.

Pearson - ".A couple of questions, first I wanted to ask cause you touched on it at the beginning of your presentation that you do often go to the Real Estate Boards to get information when you're doing the assessments, but in Hamilton you don't, can you tell me why, and what the benefits or negatives are to this". McCormack - "Although I'm not directly involved I would assume - I know our executive have been engaging in discussions with various real estate boards, obviously there's information, better understanding of the property that's selling, faster supply of information regarding the market Councillor".

Pearson - "Thank-you, .you also mentioned that with regard to commercial properties, that some vendors because their property taxes are lower, that they get an increase in their sale price which obviously that creates a vicious circle now because now their taxes are going up because the assessment value is going up, is that correct?" McCormack - "No, what I was trying to illustrate was if you recall in the days of interest rates starting at 15% and climbing, in that sort of market, often vendors would take back a mortgage and because they were taking back the mortgage they would demand a higher price to compensate them for them for risk associate with that, plus to compensate them for illiquidity, not having cash. It hasn't been a feature of the residential real estate market in the last number of years for a number of reasons - interest rates continue to be historically low and secondly, I believe it was in November, CMHC announced it's reduced the 5% down payment, so it's making accessibility for first time home owners a much broader aspect. I introduced it because I know that there are some incentives that as a corporation you are engaging in to encourage downtown development. I put it in the presentation just as a point of interest to you". Pearson - "Okay, but if I could, just to get a better clarification of that, because we are looking at incentives in reducing the taxes on businesses, and by doing that their going out and selling properties for a higher value, does that not now create reassessment of that property at a higher value which then deters the taxes in it". McCormack - "Well what we have to do is investigate those sales. Again this is where local knowledge is coming in, and it's local staff are alerting the analysts that they need to be watching certain properties that may be receiving an incentive for development purposes, and if required, speak to both purchaser and vendor and adjust those sale prices accordingly to reflect the value of the real estate as opposed to the financial advantage".

Whitehead - "Mr. Mayor, there's been a number of questions, I just want to move to Joe. We talked about the 4 million dollars that's been reflected in Corporate Finance, how accurate are we relative to what the real numbers are that come back from MPAC on these - I don't know what the terminology is - these reconsiderations?" Rinaldo - "On the reconsideration?" Whitehead - "Not reconsideration's, on the, I think Councillor Ferguson originally raised it, sorry, unassessed, on the unassessed portion yes". Rinaldo - "Quite frankly we tend to be conservative cause we have no idea how much assessment is out there, so we tend to put about $4 million dollars, but on average, when you roll in your tax right-offs, it seems to be balancing. When you factor in the interest on the penalties on late taxes, the interest on the right-offs - cause we have to make some right-off provisions for any taxes - when you aggregate the three, they seem to be pretty close". Whitehead - "So, I think I heard $400 million?" McCormack - "Yes there's $400 million current value assessment awaiting extraction from our database which will occur in mid-June. That listing is delivered to the municipality, as well as notices are mailed, but we are continuing to work on any new construction that's out there Councillor". Whitehead - So, that's consistent then, the $400 million is something that sort of fits within the numbers that you have selected?" Rinaldo - "We'll take a look at, we'll check with out tax department and see what they are and see if they are consistent with what we budgeted". Whitehead - "That'd be great cause I'd like to see if there's any way we can look at that through this budget process. The other thing is, I think Councillor Merulla sort of touched on it in respect to reconsideration and that, and we've asked if we could get those numbers - have an analysis done so we can understand what's happening with those reconsiderations. I would like to go further and ask on the appeals, I don't know if we need to go through MPAC or in fact if we have to make a direct request with the Attorney General's Office to get the statistical information relative to our community how many have gone to the tribunal and what are the nature of the awards - what is the trends that are currently taking place is what I'd like to try to understand. So maybe I can ask that question, who's the best to ask?" McCormack - "I've given an undertaking I will get that information prepared for you".

Whitehead - "Great. Now the other question I have is, I know that in my ward specifically that the ranges from neighbourhood to neighbourhood could be stark, it could be pretty dramatic. What's the rationale for that, and we're talking adjacent neighbourhoods". McCormack - "I can't answer your question other than I've answered previously, Councillor, with all due respect. I don't know if they're more desirable areas, if they're locational differences, that could be accounting for the difference in value". Whitehead - "Let me try something different here, I think we might be experiencing something similar in Westdale, but right now there's speculators - absentee landlords, whatever - purchasing homes in my ward to put student housing in. I'm wondering what impact that has, and there's a big concern with the neighbourhoods relative to the pressures it's bringing relative to the assessments. Can you give me some clarification on if in fact a neighbourhood close to Mohawk College is becoming more in demand as a result of student housing, in fact does that have an impact on the broader community in that neighbourhood?" McCormack - "Until that data was analyzed, I couldn't answer whether that is affecting price, one would assume that with double cohorts last year that yes, the properties in the vicinity of universities the demand is going to be higher. Now whether the demand, which will push prices upwards is solely attributable to that double cohort, the investor, or whether it's attributable to locational desirability I don't know. I certainly have alerted our analysts for the coming year to ask if they can perhaps take a look and see whether in fact that the variable of the investor can be identified from analysis". Whitehead - "Great. I believe we have a 'town and gown' (meeting) coming up where we're working with other communities relative to student housing, and I certainly hear loud and clear from the community that they see it as an issue, and I would certainly like to - we'll formally invite you to participate in the workshop so that we understand all the issues around what is happening with off campus housing.".

Mitchell - "Thank you Mr. Mayor and thank-you Corrine and your staff for coming out today. It was an excellent, educating presentation. I guess my first question would be, can we get to keep this presentation for if we have ward meetings to be able to put it on to the local constituents? What's that process? Would we invite you out, or would we do that ourselves?" McCormack - "Certainly if you could make an invitation to either myself or Dave Faulcon we can arrange to get ourselves out, or indeed some of the evaluation staff that are actually dealing with the rate payers and are involved more particularly with values Councillor". Mitchell - "Cause that's kind of a nice thing to offer at a ward meeting or something where the grassroots people could see this, try to understand it and ask some questions directly, I'd appreciate that". McCormack - "We would welcome the opportunity".

Mitchell - "Okay excellent. Next question I had was under the rural section that was in there. To me it didn't look like it was broke up enough as far as area. The Glanbrook section had one rural area for Glanbrook, but in reality when you get out there, depending on the lay of the land, the value of the farms in one area can be significantly different than another by the type of soil that's out there. Is that not being looked at?" McCormack - "The information that was provided to you today is dealing with residential properties only. With farm properties, yes the soil is the primary driver of valuation. The productivity of the soil will vary and the greater the quality of the soil in terms of the composition of the soil, stoniness, drainage, erosion, those things that will alter. But this market area I'm identifying for you is dealing only with the residential component as opposed to farm properties". Mitchell - "Okay. Well then in my ward if I could have you out some time it will deal with both, and the concern I'm gettin from the farm people is, the closer the farm is located to the urban area for some reason the higher the value of the farm, and then it can inflate or possibly appear to inflate everybody's". McCormack - "We are required by legislation, Councillor, when we're assessing - placing values on farms - we're required to analyze for farm assessment only, sales between bonified farmers. We are to eliminate from analysis sales that are occurring with speculators - developers buying. Now having said that, it's similar to certain other questions, which I already answered. Obviously as land use changes and supply diminishes the prices are going to be forced upwards. But we are still required to use only bonified farmer-to-farmer sales, but as there's less land to conduct farming business because there's other uses, you know, perhaps encroaching upon it, you're going to see an upward driver". Mitchell - "I guess my concern there is that definition of 'bonified farmer', because in a lot of cases it can be questioned whether it's from farmer to farmer, or somebody moves out and rents that farm and is in joint venture, but they own a trucking business or something else. It can look like it's from farmer to farmer but in reality it's not, because the definition of a bonified farmer is pretty vague". McCormack - "Unfortunately there isn't a definition in the assessment act of what a bonified farmer is, but in investigating farm sales I know one of the questions is what's your primary occupation, do you have a secondary occupation, that's investigated quite stringently".

Mitchell - "Okay, good to hear. A couple more Mr. Mayor. Reconsideration changes. I've had a lot of people in my ward that have gone through the re-evaluation process, won their case or have been re-evaluated and are happy about that, and then instantly the next year the figure went up even higher than what they were lowered down to, and it just doesn't make a lot of sense that it would come back that quickly". McCormack - "This is causing a lot of confusion, quite frankly, with property owners and with the annual assessment cycle a decision that's made, for instance, on the basis of market evidence from one base year may not be there for the next base year. So it may not carry forward. If there is an issue with the property that's going to run in perpetuity with the property - i.e. say someone has a 200 foot lot, but only 100 feet of that are usable, those are the sort of changes we are trying to capture on our database so that regardless of the market changes, that's captured from year to year because it's going to continue with the property. However, if a change is made, and again if an assessment review board chair makes a change without any reason that we can see, we are obliged to reassess again, and it may not be reflected. But I agree, I concur, it's causing a lot of confusion and discontent".

Mitchell - "There's one that maybe we are on the same page together, and that leads to my next question Mr. Mayor.  MPAC here, they are aware that that is a concern to the public. We as a City of Hamilton Council are aware that we have some issues.  How together with MPAC can we get some of those changes corrected or the computer formula fixed?  How can we work together to fix some of our dilemmas?" McCormack - ".We have been working, especially in the last I guess 18 months, very, very closely with administration - City of Hamilton - on exchange of data and information both to assist us in doing a job better and to try to help finance departments. But certainly we welcome any opportunity to continue that...alluded earlier about public education opportunities". Mitchell - "In other words, through motion or whatnot of Council, we direct it through to the local MPAC office and our staff and their staff would talk about it and try to come up with a recommendation or some kind of plan to fix it. 

My last one was, .does assessment values going up across this new city increase what it costs us as a city to pay MPAC to operate by percentages?  I saw the formula up on the board and it had several variables to it, but does increased assessment that seems to be happening every year to us - and in a lot of cases that can be a good thing - does that drive up what our costs to MPAC is because, I guess my concern is, as things get formulated and working better, the workload of MPAC should come down not go up". McCormack - "Definitely.  Our budget is established. We establish what we need to operate for the current year. That's approved by our Board of Directors. The allocation to the municipalities is simply taking the relationship of the assessment base and the number of properties to the total assessment base for the province and the total provincial properties. But please, there is no fiscal advantage to MPAC to having values increase significantly every year.  Our budget operating and capital budgets come first, then the allocation formula". Mitchell - "I just wanted that clarified because it's been hinted to me, Mr. Mayor that there is that component, but I just wanted to know how it works.  Thank you".   DiIanni - "Thank you for asking, I have a variation when it's my turn.  Joe did you want to chime in on that?" Rinaldo - "The other thing I wanted to point out to you, because property values in the rest of the province have been growing at a faster rate, our share has been proportionately - even though the dollar is going up, we have had a small advantage in Hamilton because the values in other parts of the organization - in other parts of the province - have been growing at a faster rate than us, so we get a slight advantage that way, that's about it, but they don't make it absolutely clear, MPAC does not generate more dollars for their budget because values are going up".   McCormack - "Just as an adjunct to what Joe said, I did happen to have that number with me.  In 2003, Hamilton paid 3.4% of MPAC's operating costs, for this year it's 3.3%".  DiIanni - "Thank goodness for small miracles". McCormack - "You're getting an increased price, but you're getting a decreased ratio". (She laughs)

Bruckler - "It has been extremely interesting.  Just to follow up on Councillor Whitehead's questioning about student housing, I know there has been a concern with respect to not only student housing, but perhaps other sort of detached conversions, if you will, into income homes, and given that one of your methods of evaluation is based on income. Granted it's much smaller than apartments and so on. Would there be any opportunity of assessing those on the basis of income, so that those people within those neighbourhoods who have no desire to go in that direction would have perhaps a fairer basis for their assessment?" McCormack - "Certainly we could, that could be investigated, an income approach. But the bottom line remains that we have to, regardless of what approach is used, we have to come up with the most reasonable estimate of current value assessment.  I personally happen to reside in an area where, yes, it's also a concern to me, but under our mandate it's put the current value on regardless of what approach you use, whether it's sales, income or costs.  I do know that there's.some activity looking at student housing in other municipalities with post secondary institutions".   Bruckler - ".I guess I'm looking for some way to make a distinction so that there is this level of equity and fairness and I'm not sure we are in ...." McCormack -Well, I think first of all, we have to look to identification.  One: that would be an issue identifying properties that are being used for investment purposes.  I'm not sure that that info is available at this point.  I think the second thing that would have to be looked at is the desire, what is the ultimate goal? Is the desire to maintain the integrity of the neighbourhood and the use of the property, or is the desire to assess somebody higher because they aren't a resident at that property?  If the desire is to maintain the integrity of the property, then I would respectfully like to suggest that that's more the land use issue and I do feel that there's - there could probably be - some very severe difficulties associated with assessing real property at a different rate because of occupancy status. I don't think that would stand up to an appeal very long".  

Bruckler - "One final question, certainly the question has been raised, but you're dealing with this on a daily basis, I'm sure you're very familiar with some of the concerns within the community.  Is there a movement, if you will, that is looking at some of the more common concerns that have been raised?  I think there is some realization that this system is not perfect, very obviously.  Is there a movement, and what is that process for moving it forward and how do we play a role in that?" McCormack - "I'm not aware .there have been copious commissions and studies on the best assessment method to use for property taxation.  The earliest one I recall studying was - to give you a perspective - was Mr. Gardner, (who) was mayor or chair of Toronto at the time.  The most recent report was the 'Anne Golden Commission' in 1996. And again, all these commissions are coming through and saying that the current value approach, yes, it's like any other approach, it has its problems, but it is the most objective. People can see from where the values are coming, as opposed to perhaps a cost approach, where the assessor has a little blue manual with rates in it.  There's other approaches. For instance, Saskatchewan taxes land at a higher rate than it does improvements. Certainly that has its problems because as one taxes land higher than an improved property, then people move to improved properties, so you're looking at sprawl and concerns that go that way as well.  California implemented Proposition 13, back in the early '80's, and essentially a property's assessment was frozen until such time as it's sold.  I understand that there's all sorts of problems now coming from that approach..  I also understand from the literature that there's a very severe problem associated with the accurate recording of the value of the consideration at transfer.  I'm trying to be polite there.  The other one that I've heard is the poll tax, the number of people per property, and that's a very unpopular tax, as Margaret Thatcher could attest to.  But there are these approaches and they have been studied, and no, current value assessment is not perfect, it never will be perfect, neither are our evaluations perfect but each approach has its own positive and negative features".  

Braden - "...A number of little questions, if you could help me, how do you go about assessing on an active farm the self-help, the extra house for farm help?  And to complicate it, one of them could be permanent and the other could be - we have some temporary permit from the government that as long as the person lives and then we have to yank it".  McCormack - "Primary residence, I know is assessed as a single family dwelling as if it was separate, but there is consideration given to that - the value of the land - so instead of having a residential lot value component associated with it, it's picking up the highest value, the highest class of soil on the property goes to that property.  The second farm residential unit, if memory., I really shouldn't say, I need to check this one, I'm sorry".   Braden - "Can I phone you or send you an email?" McCormack -"Certainly, or I can get back to you".

Braden - "Perfect. Most of these are small little ones and they are a little off-scale.  I want to know if you are going to assess windmills, solar power or communication towers?" McCormack - "The Assessment Act says that we are to assess all property, and the courts have defined real property, as far as improvements are concerned, they look to the degree of fixation to land, the permanency of the structure.  I don't know what's happening with the windmills; I'm aware of Hydro - OPG - I believe has a major windmill operation in Pickering .  Communication towers, again I'd have to check policy, Councillor Braden, I'm not involved in the direct valuation any longer and some of the more esoteric sides of it are escaping me, but I will get you a response".   Braden - "I am a little esoteric so that's okay. But the new windmill towers are in fact going to come down so can you just check that.so that they are going to lay down flat ...put them up so can you check that too".   McCormack - "I'll give you an undertaking to take that forward to find out what's happening with our evaluation branch".

Braden "I want to get to farming.  In my area a lot of people are involved in livestock, mostly cattle, but a lot of livestock and the value of a livestock business today is questionable. I mean it's questionable if it's worth anything, it might be worth minus.  Does the assessment system somehow accommodate this concern? If my farm is all set up for a livestock system you can't just convert it, you can't just change my farm for chickens. So it doesn't serve any purpose to stay in business, so it's sort of like an empty store. Does the system that you look after deal with the fact that this farm infrastructure has no value?" McCormack - "Again, under the act we are looking first of all to the productivity of the land not the use to which the land is made.  Secondly, if there's a change in operation, obviously a hog barn is going to be of no use to a poultry operator.  Normally the farm owner would be in contact with us whether they're demolishing the structure and they're applying for a tax rebate under Section 358 of the Municipal Act, or if even a building has become obsolete and can't be used, then yes, certainly the owner contacts us, we'll do a site inspection and would adjust according...". Braden - "That's what I wanted, cause I mean it's too expensive to take it down so I don't want to take it down.  I got a couple more.  If I'm doing (it) illegally now, lots of people are like me. So (if) I have a barn, can't make money off chickens, I'm parking antique cars and making a bundle, can you assess it for what it's being used for, as opposed to what is legal?" McCormack - "We could apportion it to commercial". Braden - "Good. The whole thing - if I have the whole thing full of antique cars?" McCormack - "No, we could apportion the total value of the property. The portion that's being used for commercial purposes could be apportioned out from residential tax rate to commercial tax rate having used for commercial purposes".   Braden - "How does that system kick-start, because you won't know by looking at the barn what's going on?" McCormack - "We've had - again, we get queries from neighbours, oddly enough, and we hear from various sources, but no we're not conducting an inspection program to verify that".

Braden - "Okay, I heard the issue before, but I just want to clarify. If people have a severed lot and they haven't received a tax bill for 2 1/2 years is it true that they are going to get a tax bill and it's going to go right back the 2 1/2 years and they are going to owe the tax plus interest?" McCormack - "Can I defer that question to my colleague Mr. Rinaldo?" Rinaldo - "They'll owe the taxes but not the interest". Braden - "Not the interest?" Rinaldo - "But they must, unfortunately, pay it. Unfortunately we end up sending them a large bill and sometimes what they ask is for a deferral of the payment or a payment plan and that's when the interest may be involved, but if they pay the bill right away there would be no interest".

Braden - ".Two houses in Westdale exactly the same - exactly the same - you would think are worth the same amount.  One has an illegal apartment in it.  We think that the value of them is $190,000. Basically does your department say they are both worth $190,000 even though one has the illegal apartment in it?" McCormack - "there are no two properties that are exactly the same, they are different by simply spatially, but if there's an illegal use going on, no we don't know about it". Braden - "OK it's the same, if you didn't know about it, it would be the same value?" McCormack - "It should be a similar value". 

Braden - "OK.  The things that don't affect assessment, I think somewhere it said the driveway.  McCormack - "That's correct". Braden - "Trees?" McCormack - "The things that are not assessable include landscaping, paved driveways". Braden - "Basketball courts?" McCormack - "No". Braden - "Doesn't include it?" McCormack -"We're looking for real property.  Braden - "Will you forgive me for not knowing the difference between real property and physical property?" McCormack - "Well, real property is land and or buildings or something on land that's not intended to be removed from the property".  Braden - "Is a tennis court taxable? You can't take that away".  

McCormack  - "A tennis court, I believe is assessable, yes". Braden - "Like a pool?"  

McCormack - "Yes". Braden - "Is there anything else you can help us know. What I'm just trying to understand..." McCormack - "I appreciate that.  No the basketball hoop for one wouldn't be assessable, the fences wouldn't be assessable, a window air conditioner is not assessable.  It's the building, or the improvement to the building is intended to stay there in perpetuity, it's not intended to be moved because the seasons change or the owner plans on taking it with him upon sale.  Is that sufficient?" Braden - "Yeah, I'm getting farther and I appreciate you struggling with it.  Thank you, I'm done".

DiIanni - "You're done, right.  I just have 4 quick questions, then a couple of others, then hopefully we can put you off the hook.  The first one is back to the issue of revenue neutral through the assessment process, and it's a tough one to get out there to the community. And of course, in fact I've never been told, okay show me someone whose assessment has gone down and we know that assessments go up and assessments go down but people seem to hear from those whose assessments have gone up and the other ones keep their heads down, I guess, but the corollary to that, you've answered that, but the corollary to that has to do with the increased assessment.  Maybe this is a Joe question, more than you, but maybe one of you can handle it.  In other words, assessments have gone up what, 8.9% across the whole city?" McCormack - "I believe that is the average assessment increase". DiIanni - "OK, so the assessment has gone up about 9%, why doesn't that generate more money?" Rinaldo - "We're prohibited by legislation to do that.  If you looked at the report I did on reassessment (http://www.hamilton.ca/Finance/2003-budget/pdf/
2003-Reassessment-and-Budget.pdf)

there was a table there that showed the amount of revenues we generated before the reassessment and it showed exactly the same.  The problem we had this year, until...this morning is we were having a compounding affect; one is that the commercial industrial properties were growing at a slower pace than residential.  So what's happening in Hamilton 's reassessment is a 2-prong approach.  One is if your property values are growing at a faster rate than 8.9, in the residential class, you simply attract a greater portion of taxation, but in addition to that we add a 1.1% impact because our commercial values and industrial values were growing at a slower pace than residential because when they say revenue neutral they're talking about the total tax system not just the residential.  Now this morning what we did through the policies of the province implement was eliminate that 1.1% shift which you were able to do as part of a policy". 

DiIanni - " I understand that, now help me understand it because I want to be able to explain it to a lay person who doesn't understand shift, from you know stick-shift.  So what do we do, what factor do we inject into the formula to get at the same assessment dollars regardless of the assessment growth of 9% and regardless of some going up and some going down?  What do we physically do to the formula at the end of the day to get the same dollars coming in through assessment"? Rinaldo - " ...The tax ratios, because the assessments are given to us so we have to adjust the tax rates to reflect that is basically one of the things we do in order to get it back to neutrality before we start a new budgetary process". McCormack - " A point of clarification, Mr. Mayor, the values between 2001 and 2003 increased properties in general appreciated an average of 9% as opposed to growth". Rinaldo --I'm assuming Mr. Mayor, when you mentioned growth you were talking about the increase in value, not the assessment growth.  I made that assumption". DiIanni - " Okay, I understand that, so we actually do something with the math to make sure the same number comes out at the end in spite of the fact that ...."

Rinaldo --I'd be more than happy to, we did a table in the previous report that actually shows how we did that, I'd be more than happy to pull it back out and show it to you". DiIanni - " No that's fine I think I have it, I just wanted it explained. 

My second question has to do with, this is to you Corrine, are you familiar with 'Cole Layer Trumble Canada Inc.'
(http://www.cltcanada.ca/_documents/Premier%20Eves%2001.pdf, http://www.cltcanada.ca/) McCormack - "Yes I am sir".  DiIanni - " Alright, so they've sent us a letter asking us to support the concept of competitive property assessment systems in Ontario (a search of the web shows that many municipalities received this letter).  They want us to write to the Premier and the government asking that you not be the sole provider of service but in fact they and companies like them be in competition with you.  Is that a good idea or a bad idea?" McCormack - "I don't think it's appropriate for me to respond to that in this for Mr. Mayor.  I'd be pleased to discuss it with you privately, but no I don't wish to entertain that sort of question in public meeting, thank you". DiIanni - "Not a fair question.  Mr. Treasurer is that a good idea or a bad idea?"  

Rinaldo - "From my point of view, Mr. Hogg, I happen to know Mr. Hogg, we did a whole assessment review in Halton and he was part of it.  The issue of whether we do a reassessment province-wide, my view is that if you do that, what they'll likely do is skim off the better assessments, in other words the larger municipalities, and the smaller municipalities will have an increased cost.  Will it be beneficial to Hamilton , it's really hard to say, but I can tell you honestly, it's very unlikely that the province will proceed with this.  He's been asking for the province to make these changes for years and it's very unlikely they'll do that because of those kind of issues that they'll run into when they start doing, grabbing the more assessment-rich municipalities and going after them and leaving the smaller municipalities to have higher costs for assessment". McCormack - "Perhaps as a point of interest, in '96 the provincial government at that time tendered the assessment project for the province of  Ontario .  There a number of appraisal firms bid for portions of the jobs Joe's suggesting and again no one wanted the entire job and indeed within municipalities they didn't want the entire municipality to be a certain property type, just as a historic fact, you may be interested in looking at 'Cole Layer's web site.  You may find some information there that may be of interest to you".  DiIanni - "I appreciate that, thank you.  We're going to have to deal with this as part of correspondence, so we're going to have to either receive this or do something with it and I didn't mean to put you on the spot.  You answered it very well. 

Your budget though is according to the formula you showed us about $141 million a year?" McCormack - "It's - for 2004, $141.8 was approved".  DiIanni - "So $142 million a year, and we pay a share of that which in our case is about $4million a year?" McCormack - "Yeah, it's 4 point...." DiIanni - "4.6, I guess. The question - I know we went from a system where we pegged property values at 1975 or 1980 and then we did this complicated formula to generate the mill rate and so on and it was very difficult for people to relate to.. When you see those assessments and an assessed value of .for our properties and people said 'what was that all about?' and we had to try to explain - well just a way of getting at tax dollars for us - and then we went to this new process which essentially says whatever your home is worth now is what you're going to be assessed at, and you define that according to what the home would be sold for in a fair, open, free market and people understand that part.  What they have problems with though is these wild fluctuations that we have.  What you would say, and what most of us might say to try to straighten out the system that was off-kilter, for some people might have been paying too little and now they're catching up and some people might have been paying too much and now they're sort of going to a fairer level but, and Councillor Ferguson hit, or was intending to find a wider range of years on which to base the assessment that might be fairer to people or might appear to be fairer.  Can you comment on that?" McCormack - "Yes I think the annual assessment cycle, as rigorous as it is, it tends to mitigate the shifts because you're moving on an annual update so if properties have increased 6% from 2003 to 2004 - yes some properties are going to increase more than that. But because you're updating that base year annually, you don't get the sort of swings as you do moving the city of Hamilton , the old city of Hamilton from 10.5% of a 1975 base to a full current value assessment.  That's one factor about it.  The system as it was proposed was pure, when it was introduced in 1997 the province was reassessed, it was pure value.  If this was the value of your house, the municipality would strike a tax rate for that particular property and that would be your taxes.  We then were introduced to protecting commercial, industrial and multi-res properties in the taxation formula and we're getting into what Mr. Rinaldo is alluding to.  You're having to protect the taxes in that component to finance operations you can only move to the residential, so there's a number of things that have confused what I think was probably a very - was a more transparent process.  There is a - the association of municipal clerks and treasurers do have a resolution to the Minister recommending that the 3 year averaging not proceed on the following basis:  they're saying that there seems to be, with the annual assessment cycle, there seems to be a growing understanding emerging with the public that's happening.  There is - with the three year averaging - there's going to be even less transparency to the property owner because now it's going to be going back to you must look at the value 2001, 2002, 2003, so you're confusing the issue there.  There's a concern that an assessment review board or a hearing, you've got one tax year under appeal but you've got 3 assessment years.  And again there's a concern about how one would administer a 3-year averaging on commercial, industrial and multi-res properties that are currently being capped.  So I guess I haven't really answered your question other than.here's some of the considerations that are being discussed and considered...." DiIanni - "I appreciate that, and maybe part of the review that may be undertaken might be to look at some of these factors as well. 

My final question, and I don't know how well you can - I think you've sort of answered it in a way - but this is a tough process to try to explain to people both from the assessment perspective - what about my value...gone up twice, the value of the existing home but if I don't sell it and I'm on a fixed income I'm just being punished - I mean all of those things you hear.  But the really tough one that I find very difficult to answer is the one when someone comes to you and shows you what his home has sold for, or more appropriately what the person has purchased the home for, and sometimes it is considerably less than the assessed value, and yet because you compare other factors and the sale of the home is only one factor; they're wrong and you're right even though they can show you they sold it for far less". McCormack - "They're not necessarily wrong.  Why have they purchased it for so much less than we assessed it for?  Is there something wrong with the condition of that property?  Have we...is the information associated with that property correct is the first question.  Secondly, why did they...properties normally sell in an average...what's happened...was that an open market transaction or...?"

End of Tape