'People on the big lakes sold and moved onto smaller lakes. That created a mini-market and drove up values on those smaller lakes. It’s a ripple effect that adds a premium to a new lake where values weren’t that high before.'

— Anne Haines, MPAC municipal relations representative

Placing a price on paradise: Waterfront property tax fighters
set course for Ontario election battle over rising assessments

News Archive BY GARY MAY
Taro and Mary Alps found their waterfront paradise in 2005 on the shores of Bobs Lake in the Land O’Lakes region of Eastern Ontario. But Alps looks westward from that picture-perfect location with a slight sense of unease and uncertainty.  

Alps hears stories about much-in-demand regions such as Muskoka, where waterfront property assessments have skyrocketed in recent years, and counts himself lucky that it hasn’t happened in his area — yet.  

The president of the Greater Bobs and Crow Lakes Association knows, though, that a lot of Muskoka residents are selling homes and cottages — some of which have been in their families for years — and looking farther afield for communities where waterfront assessments aren’t as high. And that worries him.  
“We’re thinking maybe in the next two to three years, enough people will be moving into our area that it’s going to push our prices and assessments up, too,” Alps tells MyNewWaterfrontHome.com. “Eastern Ontario has been one of the best kept secrets, and now people are starting to look at this area.”  

Waterfront property assessments have risen dramatically across the province in recent years — especially in high-demand regions — and the resulting property tax shift onto their shoulders has left owners reeling.  

Municipalities use assessment values to apportion property taxes. As waterfront property assessments rise and a greater share of the tax burden falls on the owners, skyrocketing taxes have driven out long-time residents and turned some high-demand waterfront areas into the exclusive domain of the wealthy. 

'That's the price of living on the waterfront'

Fraser Govan tells how the assessed value of his property on the south shore of Lake of Bays in Muskoka went from $300,000 to $733,000 in 2005 when he added a $250,000 building to the property. He appealed and, after a lot of research and a two-year fight, he succeeded in having his assessment cut by $120,000.  

Govan learned so much along the way that he became a consultant, advising others how to manoeuvre their way through the appeals process. He says others haven’t been as successful as he in fighting the assessors. Others shrug and say, “that’s the price of living on the water.” Those who can’t afford that price sell to someone who can, and move away.  

Rich Phillips lives in Kingston and has a cottage in Land O’ Lakes. Sure, he says, property taxes have risen, and he feels that as someone living on a private lane with few services, his taxes seem high.  

“But I chose to have a cottage where I have it. The tax system hasn’t changed,” Phillips says. “I could have chosen not to have a cottage. Sure, you’d prefer if taxes didn’t go up so much.   “This summer we’ll be building a small addition and it’s going to cost as much as the original cottage and the lot did 31 years ago. Costs have increased significantly. All costs.”  

But why is it that taxes on waterfront properties have increased faster in recent years than those for non-waterfront properties? It’s all about the relative value buyers place on a particular type of real estate, the experts says.  

The Municipal Property Assessment Corporation (MPAC) is an independent body created by the Ontario government in 1998 to administer a uniform assessment system based on current market values for all Ontario properties. It studies the sale price of properties and considers all the factors that influenced those prices, then applies the same criteria to determine fair market value for all properties.  

Waterfront assessment has many variables

“The No. 1 factor in all real estate is location,” says Anne Haines, municipal relations representative for MPAC’s office for Muskoka and Parry Sound. And across Ontario, waterfront is a significant influence on the price buyers are willing to pay for any property. But within that broad category, there are many other variables.  

Variables such as: How much waterfront is there? Is there a sandy beach? Are there panoramic views? Is the property close to a marina? Is it on a private island? And if a property isn’t directly on a lake, there are still “second-tier lots,” says Haines, that might not include waterfront ownership, but offer an unobstructed view.  

Between 2006 and 2008, the value of waterfront properties increased most in the regions of Parry Sound, Muskoka and Haliburton, Haines says.

In recent years, says Terry Rees, executive director of the Federation of Ontario Cottagers’ Associations, they have also spiked in Sudbury, the Goderich area of Lake Huron and the North Kawarthas. North Kawarthas property owners, he says, experienced annual assessment increases of 30 to 40 per cent for several years.  

In some areas, 50-per-cent year-over-year jumps were not uncommon.  

Meanwhile, added to the burden of rising waterfront assessments is a wide range of mill rates in Ontario’s waterfront municipalities. For example, word is getting around that certain municipalities have high mill rates, says Karen Poshtar, agent for Royal LePage Georgian Triangle in Collingwood.  

“Taxes are one of the first questions out of people’s mouths when they come here from Toronto to look,” she says. “Compare the taxes you pay on a $750,000 home here to one in Toronto. We’re a way higher.”  

But for Torontonians, their $750,000 real estate purchase goes a lot farther in Collingwood, Cobourg and Leamington than it does at home. Still, some municipalities do offer a tax advantage. For example, a comparison of mill rates for a home assessed at $750,000 in a fully serviced urban neighbourhood reveals an estimated tax bill of $5,700 in Leamington; $6,400 in Toronto; $8,150 in Collingwood; and $12,400 in Cobourg.  

Ripple effect felt from Muskoka assessment spike

Big assessment jumps along Ontario’s waterfront began on Muskoka’s Big Three lakes, but then rippled out into the smaller and backcountry lakes as owners sold their homes with the hefty tax bills and moved to less expensive areas. It’s just that effect that Alps says concerns owners of the approximately 1,500 properties around Bobs and Crow lakes.  

MPAC’s Haines calls the ripple “an interesting phenomenon” that occurred when people began selling high-tax properties and moving into lower-priced areas.  

“People on the big lakes sold and moved onto smaller lakes. That created a mini-market and drove up values on those smaller lakes. It’s a ripple effect that adds a premium to a new lake where values weren’t that high before.”  

According to Alps, an influx of new buyers has a two-part impact: First, greater demand will increase prices. Second, “the more people move here, there will be more pressure on the townships to improve roads and add services like waste management we don’t have now.” And new services generally mean tax hikes.  

Provincewide, organizations have been trying to get the Dalton McGuinty government to introduce measures that would buffer owners of waterfront properties from steep and sudden tax increases. The Coalition After Property Tax Reform (CAPTR) and the Waterfront Ratepayers After Fair Taxation (WRAFT) have campaigned for changes to take the volatility out of the system.  

Both organizations accept that owners of higher-valued properties should pay higher taxes. What they want is limits on annual assessment increases and a method of bringing some stability and predictability for property owners.  

Assessments now phased in over four years

In 2007, after pressure from groups such as WRAFT and CAPTR, Ontario introduced changes to the property tax system that will see new assessments conducted every four years — rather than an earlier plan for annual reviews — with assessment increases phased in over the following four years. That means that if your property was assessed at a higher rate in 2008, the increases are phased in between 2009 and 2012. Then there’s a re-assessment and the process is repeated.  

As well, says Rees, the province committed itself to taking back funding responsibility for certain services that were downloaded to municipalities during the Harris government years. While those are positive actions, he says, they don’t fix the problem. The fundamentals of the tax system remain, he says.  

Rees says tax reform coalitions such as WRAFT and CAPTR will be working out strategy this summer for a fall campaign to gain public attention in time to have an impact on the October 2011 provincial election.   The opposition Conservatives and New Democrats have proposed going further, but Rees says public pressure needs to be maintained.  

The NDP first proposed freezing property assessment until the property is sold. The Conservatives responded with a plan to cap annual assessment increases at five per cent, regardless of any additional increase in MPAC’s valuation.  

Property taxation, Rees says, isn’t a high-profile issue for most people right now. But he urges waterfront landowners to turn up the pressure by signing petitions such as those maintained on the CAPTR and WRAFT websites. And let your MPP know you want meaningful changes to the system.  

Rees says he hears plenty of stories about modest cabins and homes on Ontario’s waterfront where huge jumps in assessment made it impossible for owners to maintain their properties.  

Of Ontario’s more than four million properties, about 250,000 are considered waterfront, says Rees. While that might not be a huge percentage, owners of Ontario waterfront property can make their voices heard, he says.  

“If they don’t, nothing’s going to change.”