Belleville Tax Rate Stabilization Fund

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| Published , updated April 19, 2024

Reserves and reserve funds are used to ensure a municipality’s long-term financial sustainability, reducing the need for long-term borrowing or imposing sudden tax increases.

The purpose of the Tax Stabilization Reserve Fund is

To stabilize tax rates by funding in-year shortfalls and one-time/unanticipated expenditures including but not limited to legislated and discretionary plans/studies, legal costs, and insurance claims/premium increases.

Reserve & Reserve Fund Policy

Tax Rate Stabilization Reserve Funds are to be used to reduce the sudden impact to tax or utility rates from unexpected costs in budgets, or unexpected costs arising mid-year. The purpose of the funds set aside by Council is to reduce the sudden impact to tax or utility rates from unexpected costs in budgets, or unexpected costs arising mid-year.

Belleville By-Law Number 99-84 – Reserve Fund for Local Service Realignment Stabilization, was first established on June 14, 1999.

Reserve Fund has been used to fund various initiatives

In Belleville’s Tax Rate Stabilization Reserve Fund has been drawn down in recent years, from a balance of:

  • $10.826M in 2021
  • $9.427M in 2022
  • $6.519M down to $2.25 million in 2023.

It has been used for:

2023 – Automated Speed Enforcement surplus destination

Council approved that any net surplus (net deficit) from the Automated Speed Enforcement Program be transferred to (from) the Tax Rate Stabilization Reserve Fund:

[ASE] will be cost neutral and net surplus (net deficit) from the Automated Speed Enforcement Program be transferred to (from) the Tax Rate Stabilization Reserve Fund to be used for traffic safety related projects/initiatives and community road safety projects.GMTOS-2023-29

March 2024 – Reserve & Reserve Fund Report and Policy created

In 2024, the Reserve & Reserve Fund Policy and report found the Tax Rate Stabilization Reserve Fund and other reserves to be considerably underfunded:

  • Tax Rate Stabilization Reserve Fund by $6.4M
  • Asset Management Reserve Fund by $38.2M
  • Sanitary Sewer Reserve Fund by $24.7M

March 2024 – Surplus & Deficit Management Report and Policy created

In 2024, Belleville approved a Surplus & Deficit Management Policy to govern the management and administration of surpluses and deficits at the City, to ensure:

  • The treatment of Surpluses and Deficits are in accordance with the Municipal Act, 2001 (the Act).
  • A priority application framework is established and consistently applied for the allocation of Surpluses and Deficits.
  • That the intended uses and targets established in the Reserve & Reserve Fund Policy are continually considered when making decisions at the City.
  • Financial sustainability is maintained while still providing for stabilized taxes and user fees to ratepayers.

It sets a consistent priority application framework, intended to replenish key reserve funds, including but not limited to the City’s Tax Rate Stabilization, Asset Management, and various user-funded reserve funds.

The Treasurer or designate is authorized to distribute the tax-funded operating surplus in the preceding year as follows:

  • 50% to the Tax Rate Stabilization Reserve Fund
  • 50% to the Asset Management Reserve Fund

February 2024 – Property Assessment Analysis

What is an Assessment at Risk?

Assessment at Risk results from appeals launched by property taxpayers.

Property taxpayers in all classes who disagree with MPAC’s assessment of their property value or classification, can submit a Request for Reconsideration (RFR) to MPAC. The deadline for submitting a RFR is provided on each Property Assessment Notice.

As all municipalities issue tax bills based on returned assessment, any subsequent appeal constitutes a potential liability for the City. In recent years, we have witnessed many Commercial appeals which have resulted in significant reductions in assessment.

In Belleville, since 2016, there have been 1,280 properties with Assessment Appeals of which 2 properties for multiple years remain open and unresolved. While the number of unresolved appeals is small, the overall value being appealed is quite significant and would have a large financial impact if successful.

Large commercial property owners filing for property tax relief through the Assessment Review Board

The municipal law as it relates to property taxation continues to be subject to challenge.

In reaction to the effects of the COVID-19 pandemic, some large commercial property owners, ineligible for government relief programs, filed claims for Section 357 tax relief due to the emergent issues created by the pandemic.

While these claims were denied by the Assessment Review Board (ARB), the ruling has been challenged in court. Municipalities across Ontario and the ARB are awaiting decision. The remaining assessment at risk in Belleville is approximately $793M.

As a rough estimate, using the Commercial tax rates for the years in question, an appeal decision rendering an average 25% reduction in the remaining assessment at risk would produce a liability for the City of approximately $6.15M.

As tax appeals commonly take several years to be resolved, the eventual expenditures resulting from current outstanding claims would be determined over years to come. It should be noted that this calculation does not include any potential assessment appeal in 2024 for these properties.

Since 2017, the City has paid out approximately $12.3M in tax adjustments from Assessment Review Board and Request for Reconsideration Appeals, Post Roll Amendments, Amended Notice Adjustments, and Classification changes:

The City has budgeted aggressively for appeals and tax adjustments since 2017, with residual funds being allocated to the Tax Rate Stabilization reserve fund to provide funding availability for assessment at risk. Below is the projected transfer to the Tax Rate Stabilization Reserve fund based on the preliminary 2023 tax adjustments and supplemental taxes:

As the timing of an appeal decision is generally unknown and the magnitude of successful appeals can be significant, it is critical that funding is maintained in the Tax Rate Stabilization Reserve Fund to adequately accommodate against these potential financial risks. For 2023, approximately $2M is projected to be transferred to this reserve fund.

For 2024, a budget of $3.1M is proposed. This funding combined with the reserve fund balance are important to allow the City to fund outstanding and potential appeal settlements in 2024 and beyond.

Supplementary and omitted assessments

Assessment increases that occur after the annual assessment roll has been returned are liable for property taxation. These assessment increases can be supplementary – arising from changes to property values (triggered by building construction), classification, or tax-exempt status – or omissions from the roll when it was returned. Omitted assessments can only be issued for the two preceding tax years.

MPAC is responsible for notifying property owners of any change in property value resulting from a supplementary or omitted assessment. The City issues supplementary/omitted tax bills upon notification by MPAC. A summary of annual supplementary and omitted tax bills is outlined below:

For 2024, staff are proposing a budget for supplementary and omitted taxes of $4.4 million. Over the course of 2022 and 2023 there were significant increases in Building Permit valuations for new construction. At the end of 2023 certain identifiable occupancy permits have been issued supporting significant increases in assessment that has occurred, and should be added to the assessment base in 2024.

The City has benefited from considerable residential growth in recent years. However, continuing commercial tax appeals have and continue to pose a significant cost and financial risk to the City. Staff continues to monitor these issues and has developed Operating Budget provisions to ensure any future liabilities are addressed.

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