Report from CAO / Director of Finance

July 2003

Impact of using Current years tax ratios for Apportionment

At the June Board meeting, the issue of using the current years tax ratios was discussed.  This report summarizes those discussions.  The issue was deferred to another meeting for a vote when more Board members would be present.

Under the existing apportionment model the assessments used in the apportionment calculation are the current year assessments that are received in December of the preceding year. The share payable by a particular municipality is arrived at by applying the current year tax ratios to the current year assessments.  Until such time as we have received all the tax ratios we are unable to do the apportionment calculation. 

Member municipalities are not obliged to set the tax ratios until April 30 (May 31 for 2003 and June 30 for 2002) of each year and some do not meet this Ministry deadline.  Finance staff spend considerable time trying to get the current year tax ratios from some member municipalities and explaining these delays, which are beyond our control to other municipalities.  At the local level statements are made that the ADSAB has not finalized its budget which is not correct.

During the first six months of each year, the Director of Finance receives many calls from member municipalities wanting the exact amount of their levy.  Municipalities are told that we can not answer those enquiries until we have received all the tax ratios.  Under the current approach all current year tax are required to do the apportionment calculation.  Despite the fact that this Board goes to exceptional lengths to meet their obligation to set a budget no later than March 1 of each year, the amount payable by a particular municipality is held up for several more months while we wait on the setting of tax ratios by all member municipalities.  This can be further complicated when the Ministry gives extensions for setting the tax ratios as they have in the last two years.

Nipissing DSSAB and the Manitoulin DSSAB has solved this problem by passing a resolution to use the prior year’s tax ratios to estimate the current year levy. They then collect those estimated levy amounts in that year. When all the tax ratios are received they then calculate the actual levy and notify all member municipalities of any changes.  Any adjustments are not processed until the following year.  Kenora DSSAB does not have this problem as they use gross assessment and do not apply the tax ratios.  Other DSSABs are also seeking a solution.

Historically there was little or no change from year to year in tax ratios.  There are significant shifts year to year in assessments.  These assessment changes are picked up by using the current year assessments.  Once again, statements are made at the local level that the ADSAB levy has changed when in fact the movement from year to year has been driven by assessment changes within a particular municipality and relative assessment changes between member municipalities.  We are aware that there have been some significant shifts in the ADSAB apportionment for 2003 caused by assessment change.  If a municipality or municipalities successfully appeal an assessment with the Municipal Property Assessment Corporation (MPAC) the impact of these decisions are picked up in the following year.

Recommendation:

The ADSAB administer the approved apportionment model as follows:

1.                 Utilize the previous year’s tax ratio to estimate the current year apportionment when the current budget estimates are passed by the Board.

2.                 Recalculate the apportionment once the current year tax ratios are received.  Inform Member Municipalities of any changes from the calculations in step 1.  No adjustments to invoices would occur until the following year.

Impact:

Under this revision there would be no delay in determining the share payable by member municipalities.  In the first week of March of each year, following the setting of the annual budget on the fourth Thursday of February the share to be apportioned to each member municipality will be calculated as an estimate.  Once all the current year tax ratios are received, the actual apportionment will be calculated and the member municipalities would be informed of any changes.  Any changes would be reflected in the following years billings so there would be no impact in the current year.

The interim levies now sent out in January and February would cease.  The levy which goes out in the first week of March would be for the period January 1 – March 31 payable on March 31.  There would be no need for interim levies and no need for an adjustment levy.  The balance of the levies would go out monthly and be payable as they now are at the end of each month.

David Court, CAO

Keith Bell, Director of Finance.