Motion to change Farm Tax Ratio defeated
Administrator | Jan 24, 2017 | Comments 106
UPDATE JAN 24:
The motion to change the Farm Tax Ratio, accepted unanimously at the last committee of the whole meeting, was defeated Tuesday night at council.
In a recorded vote 9-7, councillors who stated they wanted to support farmers but changed their vote, cited difficulty making the decision following numerous conversations with constitutents by phone, email and social media; a growing divide on the issue in the community; a lack of complete information and the need for more in depth information.
A few, upon learning MPAC announced the coming increases in 2012, were disappointed the issue had not been brought to council years earlier. A few also noted the farmers do have support and recourse through the Ontario Farmers Association and MPAC itself, through appeals.
Mayor Robert Quaiff said he has already booked meetings to gain more information with ministers and senior policy advisors related to the issue at next week’s ROMA (Rural Ontario Municipal Assocation) conference in Toronto.
Council did approve the motion that the Agricultural Advisory Committee investigate programs available, or that may be implemented to assist and encourage viability of young farmers and tenant farmers within the County as a result of the increase of farm tax property assessment.
Those opposed to the change in farm tax ratio included councillors Gale, Graham, Roberts, Turpin, Dunlop, Epstein, Ferguson, Fox and Mayor Quaiff.
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UPDATE: As requested, a staff report on this issue was requested for a Committee of the Whole meeting in January.
Federation of Agriculture to suggest easing hardship on County farmers
The Prince Edward Federation of Agriculture will tell council it has serious concerns about the current Municipal Property Assessment Corporation (MPAC) assessed farmland value increases and the potential impacts that on farm families and associated business.
John Thompson
“We are asking council to take a very logical action to mitigate the damage,” said John Thompson, federation president, who is to be addressing council on behalf of the federation Tuesday at Shire Hall.
He is to present a formula to councillor to avoid a “property tax shift” onto farmland property owners for the next four years.
“We note that this request is not a tax break as farm property owners will still be paying more taxes each year, they will simply be paying the same 1.8 per cent of County taxes. The effect of these changes would raise the tax cost to residential properties including farm residential by about 0.4 per cent annually.”
“In the recent MPAC notices the taxable assessment of Ontario farmland has increased about 70 per cent. The Prince Edward County current value assessment has increased by an average of 112 per cent while residential values here have increased by about seven per cent,” Thompson notes in his deputation. “There are many factors involved in the sales at higher prices, but the income from farm commodities has been decreasing for four years. If increases were just driven by earnings, land prices would be in decline and this may in fact be the future.”
He shares an example from the previous drought year in 2012 when the North American fall harvest price for grain corn was about $8 per bushel USD, and this year, he says, is about $3.50 as the drought was local so did not raise the commodity price. He adds farmland prices in Iowa have declined for the last three years, a first in three decades.
“If no action was taken to address the high assessed values, the percentage of County taxes collected from the farm tax would rise from the current 1.8 per cent to 3.4 per cent by 2020 and our farm families would be facing a farm tax increase of around 100 per cent,” said Thompson. “This would be a hardship for many farms and would seriously impact the funds available to fund family life, as well as the current expense and capital needs for business retention and possible expansion.”
Thompson notes that when there was a major increase in residential values, it was possible to mitigate this with a decrease in the tax rate as the residential tax class makes up the majority of the County tax roll. But he says this will not be possible in the current situation with the farm taxes making up a small portion to the budget.
“The province caps the farm tax ratio at 25 per cent of the residential rate as the farm properties do not consume much in terms of municipal services. For example, a farm house on 100 acres does not need more services than a house on a residential lot and the farm residence is taxed at the residential rate. The farm land and buildings do not add much to municipal costs and we believe that services to people should be paid by the residential tax portion and services to farming by the farm tax. We see the current tax ratio of 25 per cent as being fair in the past and studies have supported this.”
He suggests that to avoid a property tax shift onto farmland property owners, adjustments to the tax rate would be required. Using calculations by a staff researcher with the Ontario Federation of Agriculture using all information currently available, he suggests the following formula:
2017 – 20 per cent
2018 – 17 per cent
2019 – 14 per cent
2020 – 13 per cent
“We recommend that council support farm families by taking this initiative for tax fairness, business retention and growth potential.”
Council meets at Shire Hall Tuesday, at 7 p.m.
Filed Under: Local News
That is quite a one sided slant on things when you claim that farmers are subsidizing residential. Enjoying low taxes and reaping the benefit at some point of a significant land value increase is quite the sales pitch. We would all love a deal like that.
Gary, the farm tax assessment (not counting the farm residential part) is currently paying 1.8% of the County tax roll. This would subsidize the residential portion by growing to 3.4% if not updated from the current 25% of residential rate.
The Province has clearly stated that the farm tax class is capped at 25% rather than fixed as such. Municipalities can set the rate lower if deemed appropriate. Otherwise, we would only have the Province to talk to on this issue. The farm residence and one acre are taxed at the full residential rate as mentioned.
I looked up the rules for property taxes of farmland on the OMAFRA website.Here’s an excerpt:
* Your farm residence and one acre of surrounding land will be taxed at your municipality’s residential tax rate.
* The remainder of the farm property will be taxed at 25% of the residential tax rate.
It would seem that the 25% factor is fixed by the provincial government and is, therefore, not subject to being changed.
John, what is the total farmland assessment?
Would be a little more palatable if there was some recognition of the pressures as well upon urbans. All I’ve seen is a dismissal of that needed relief and pushing the farm agenda with full expectancy that residential will pick up more of their tax bill. What happens if they are granted tax relief and then up and sell at a huge profits?
I wouldn’t Marnie. But I do not want to take on additional tax for their toys, mortgaged or not.
How do you know that those farmers do not have nice big shiny mortgages and vehicle loans too, Emily? Lots of townies have big houses, fancy cars and swimming pools in their backyards.
Why are you telling me that? I didn’t say anything about a shining truck. LOL
Susan ,if you spent the money they spend in farming you should be entitled to have a shining truck
The two big farms just north of Picton have big nice homes and shiny new trucks! Moving their taxes to residential under extreme pressure already is not appropriate.
Uh Barney, don’t lay that flushing stuff out there. They have a point on the water costs. We all love farmers, it’s Canadian. But don’t hit residential under crisis unless your willing to help out on the other end of the relief coin.
susan,
you casually bring up the water crisis. dont flush as much as you do. rural folks know the rule, maybe city folk should learn to conserve. just sayin
John, you very casually sluffed off the urban water crisis with no relief in sight. Farmers are important but we have a lot of folks that require assistance. We have water bills equalling or surpassing property taxes. It has to be fair for all.
Yes Fred, the process is based on market value but the 25 percent rate has become out of date as it was meant to reflect the cost of the services needed by farms.
I have some difficulty taking on additional property taxes for someone whose property is escalating in market value and increasing their equity. The whole MPAC process is based upon market value.
Chuck, the increase to residential of about 0.4% would also apply to on farm residential. While urbans struggle with the cost of water/wastewater, farmers and other rurals have the carrying cost of wells and septic, the cost of servicing, repairs and septic pumping plus the cost of having water hauled when needed. Some probably find this cheaper than urban and others find it more expensive.
Gary, if one is “asset rich” in non liquid assets and there is farm succession for 1 to 7 generations or more, higher land prices are more of a hindrance than help as the next generations may need to purchase more land to be competitive. Farmers won’t object to paying taxes in line with needed services rather than values of assets which are not for sale.
The MPAC process for taxation will carry on but our view is that the 25% rate needs to be updated.
It is stated that the increase shifted to residential will be minor. How can one simply arrive at the assumption that any further additional increase to residential as part of relief to farmers is manageable? Residential generational families that pass the home on to family would not view this as positive. Further,urban residential are under extreme pressure from the cost of water & wastewater. Would relief for them be supported?
John, the expression “asset rich, but cash poor” comes to mind.
Even if the farm is passed on to the children, it remains a family asset, which can be sold off at some point.
There are alternatives. Someone mentioned that some western Ontario farmers are selling off high-value farmland in western Ontario and buying replacement land in eastern Ontario.
Typo in my comment below, was to say “25% of the residential rate” not “or”. Sorry about that.
Can’t disagree with any of that hockeyman…I remember dumping milk down the gutter to maintain the level of quota alloted.You were penalized for over production and quota was taken away,,a juggling act. Price was high when purchased but was worth a lot more when sold. The 30-50 cow herd was replaced with 100-200 cow herds and you bought in or sold out.
To explain it to others that farm should have a sizeable nest egg to draw interest from and can still produce income from other sources as the owners health and time allows. No more working eight days a week.Can you answer the question about the property tax rebate to the producing farm?
To answer your question ADJ, farms in times past paid the full residential rate and received a 75% rebate from the Province to counter the overtaxation for the low cost of services provided to farms. This was changed to farms paying 25% or the residential rate and the Province paying an increased transfer to the Municipalities.
Smaller operations don’t own a modern combine but hire the larger operators to do the harvest or do it themselves with a decades old combine which may be worth more or less $30,000. The larger modern machines are doing wheat harvest for a couple of weeks and a couple of months harvesting beans and corn to justify the investment.
Gary, we have farmers who don’t see higher property values and cash flow issues as good news. They are not retiring in the residential style of sell out and move on but doing a generational transfer to meet the needs of both generations, often like the generation before. Higher values and taxes make things more difficult for the successors to invest in their needs for the present and future. This does not look like increased retirement security for the parents.
The proposal is to avoid a tax shift of residential services costs onto the farm tax class, not to shift a new load onto residential.
ADJ there are only a handful of dairy farms left in the county and the quota they have sure wasn’t given to them.I am not sure about present time but years back the milk marketing board would take quota away if there was too much milk being produced and not compensate you.That is really profitable. Dairy farmers deserve all they can get for their quota
John, I’m sure that you’ll agree that the increase in market values of farmland is really good news for farmers, combined with a bit of bad news. For each $100,000 of increase in market value, the annual property tax (2016 rates) has increased by $268. For each $1 million of increase, the tax is $2680 higher.
Like all of us, farmers will eventually retire, and the increase in market values is a wonderful boost to retirement security.
If the market value of our house increases by $100,000, we”ll have to pay $1072 more in property taxes (not $268). We’ll be more than pleased to do so.
In no way am I critizizing your facts and figures John and for sure not telling anything you don’t already know but lets be honest…dairy quota is worth way more than when it was originally bought.This could be a $1M nest egg when sold. Aside from that increases can be covered by the farm now raising beef cattle and market feeders, sell wood at $250/ cord,rent out the fields to another farmer,make maple syrup at $50/gallon,manage a farm vacation rental not to mention the interest on that $1M quota and dairy herd sale.The list is endless and we have seen this locally.Not downplaying the hard work involved but there are other means of income to put towards the tax increase.Correct me if I’m wrong but at one time farms were rebated a portion or all? of their taxes? Perhaps the farms today need to take a step back in time and not put all their investment in one part of the farm.Grain prices flucuate with world markets but it still costs more to plant this year than last. That $300,000 combine only works 3 weeks a year.Smaller farm operations with far less investment might be the answer.
A few comments to address the input received here to date. In order to understand the magnitude of the problem, consider that a typical family farm of commercial scale would be paying about $3000 per year of farm taxes in addition to the residential tax which is at the residential rate. A $3000 per year tax increase by 4 years out is a substantial hit to a farm family income or a farm operating budget. This proposal does not stop an increase but keeps it in line with the residential increases.
Farmers, other business people and farm credit lending institutions know that it is not feasible to borrow against equity, earnings are required to pay the bills. Lenders require cash flow as they do not want to repossess farms, many of which are multi generational and continuing on for more generations. It is not possible to sell a few square feet of land like others might sell some stock to pay bills.
Farm loans are typically at a higher rate than home mortgages. Neither lending agencies or government are providing low interest loans.
The farm tax class rate is capped by the Province at 25% of residential because of the low amount of services required. The logic for that requires a lower rate now that farmland has inflated faster than residential or the farmers contribution to the County budget will be excessive. The increase to residential rates to accommodate this is minor because of the large tax base there.
I just wonder if there is not a mechanism to defer some portion of farmland taxes indefinitely until said farmland is sold at market value and taxes owed could be collected retroactively, thereby providing needed tax relief now and needed tax revenue later. Just asking.
Oh, I think the urbans do know. Enough not to be duped into assuming farm taxes while their property equity has escalated nicely for them.
Sue you are right because most urban people like the ones on this site haven’t got a clue about rural living.
A great comment needs to be reposted…
hockeynan says:
“All you people that think owning and operating a farm is so great you should buy one and see how rich you get”
What she said… 😉
The comments here are a perfect example of why rural and urban areas should be separate municipalities.
All you people that think owning and operating a farm is so great you should buy one and see how rich you get
Argyle,What do you really know about farming other than nothing?Try making money with some of today’s market prices and the drought we had this year
Come on John . Marketing boards, crop insurance, low interest farm loans and now you want property tax relief ….. Really .
Isn’t this proposal from the former Councilor and Prince Edward Agricultural head that his last proposal on Council size has us heading for an OMB Hearing that is budgeted at $125,000 on the taxpayer?
I agree. To allow this undermines the entire MPAC assessment process. The open door will be endless. Market value is what it is.
There are very few poor dirt farmers in the County eating out an existence. A whole lot of today’s farmers are sitting on a huge equity that has increased dramatically. A lot sold out out milk quotas at huge $$ and went to cash crops. I like and enjoy farmers and understand it is not a chosen life style unless you love it, but I do not agree with them not paying their fair share knowing their very comfortable payout at the end of the day. We have folks that can’t put adequate food on the table or enjoy the pricey bounty at local stands attracting tourists. I cannot support relief in this case when they are assuming great property equity.
If they own that acreage at today’s market value they have quite the nest egg.
A “$100K farm” is a 16 acre plot Gary. Multiply your example by about 75 to 100 times (1000 to 1500 acres) to get the real picture on Commercial livestock and cash crop farms.
Snowman, the property tax on $100,000 of farmland assessment is $268. If the farmer borrows to pay the tax, after 10 years, the loan would be only $2680, a very small percentage of the value of the land. So what I suggested is sustainable over the long term.
I found an ad online for 100 acres of farmland listed at $600K. Let’s say that the price a few years ago was $300K.
So, for an increase of $300K in the farmer’s equity, the cost in additional taxes is $804 per year.
Pay less tax and reap more profit on land when sold. Makes perfect sense! Perhaps the urban residential tax base needs to attend Council and request relief on water & wastewater. Perhaps the low income renters need to approach Council and request tax relief on the buildings they rent from. There are many in need of relief and many that will never sell land at high market rates.
I think its great that for years now (since 2007) farmers have been paying less in taxes… Say in 2007, a farmer’s land was worth $500,000 and since then they’ve been paying taxes on this land at this price, but since 07′ the land value has gone up.. Shouldn’t the tax level go up as well?
can’t have your cake and eat it too. If your land was worth 500,000 in 2007, and 750,000 now in 2016, I can imagine the farmer would want 750,000 at least to sell, why shouldn’t they pay that market value for tax as well? makes no sense to me
Additional revenues can be used to help figure out the roads deficit, or water issues… Or will just be used to bring more tourists in.
@ Gary Mooney. Borrowing against equity to pay yearly operating expenses?? You, of all people should know that, that practice is not sustainable over the long term.
And if farm land prices fall ( and they have,in the short term)your lender calls the loan because you have borrowed against $10k per acre land, that is now worth $5k.
Frankly, if non farm investors would stop “running up” the price of land in this province,like they do stocks, then this would not be a problem.
The province needs to step in and cap the tax on farmland based on it’s historic productive capability. They have the required production numbers/yields per acre at their finger tips. This is not just a PEC problem
The increase in farmland assessment is both good news and bad news. The bad news is higher taxes, with a negative effect on cash flow. The good news is higher land values, with a positive effect on the farm operation’s equity.
One solution is to borrow against the increased equity to pay the increased taxes.
This is not a shift of tax burden. This a plan that will keep taxation at present levels. To not do this will cripple farms in the long run and home owners would receive a large decrease in taxes.
With all due respect to farmers there are a lot of folks that require relief. How do they present their case? Shifting more tax to residential is not an ideal solution.
The water crisis for farms was far worse than urban with the need to purchase and haul water for livestock at costs in the thousands of dollars. Also drought stressed crops had yields which were running from one half of normal to zero while commodity prices are at long term lows. A perfect storm situation.
The request is to prevent a tax shift onto the farm tax class so the taxes would increase at the same rate as urban.
Well isn’t this interesting. Rural Prince Edward looking for tax relief while absolutely no rural recognition to the water crisis in urban areas. Even more reason for a truly County Government.
It would not be more tax base to residential, just the existing portion.
Farming is a business. Urban business has took quite a hit with construction. Urban residential are in a water crisis. Moving more tax base to residential is bad timing at best.