Five strategies for uncovering hidden property assessment
Municipalities are often not collecting all of the property taxes that are owing to them. This largely comes as the result of property owners who choose not to secure the required building permits under the Building Code when undertaking new construction. Particularly in rural or more remote areas of the municipality, it is often next to impossible to flag this type of illegal construction activity.
Assessors often rely largely on building permit information to initiate property assessment reviews based on new construction. In short, where there is no permit, there is no trigger to reassess a property. This is simply wrong in so many ways and could have notable impacts in terms of lost revenue that could otherwise have been collected and used to support municipal operational and capital budgets. This issue is especially important in light of the ongoing pressures placed on municipalities to do more with less.
In addition, there is a fairness issue at stake. Property owners who abide by the law and who secure building permits are being asked to cover more than their fair share of municipal property taxes. By default, these law-abiding citizens are forced to pay more property taxes than they should in order to compensate for those who are not paying their share due to the issue of hidden property assessment.
So, what can municipalities do to address this reality?
1. Invest in Municipal Geographic Information Systems
GIS is a very powerful technology that puts a wide range of spatial data sets at the fingertips of municipal staff. While staffing and equipping a full-fledged municipal GIS department can be quite expensive and out of the reach of many smaller municipalities, many communities are adopting an application service provider (ASP) approach to deliver the benefits of this service. Staff could very easily review and compare georeferenced data sets depicting property boundaries (with addresses and roll numbers), aerial imagery, municipal building permit files, and assessment data to determine if there are any structures not accounted for within the records. This review may be complemented by a site visit to confirm additional details.
Should GIS not be an option for the municipality, the acquisition of high-quality aerial imagery and access to property-specific data should suffice. Good quality, up-to-date aerial imagery is not cheap; but, it can more than pay for itself through the revenues realized by finding hidden property assessment.
2. Hire/Appoint a Property Assessment Review Officer
A recent trend in many municipalities has been the establishment of a position responsible for reviewing assessment. Timmins, North Bay, and Whitby represent a few examples of municipalities that have recently implemented this approach. Essentially, this position would utilize GIS technology, assessment data, municipal building permit data, and site visits to develop a detailed spreadsheet of offending properties.
Municipalities should contemplate either designating an existing staff person or hiring a new person to complete this work, at least on a contract basis. A contract approach may provide the municipality with sufficient time to initially test and evaluate the merits of such a position. You may quickly learn that the gain in assessment and property taxes could more than pay for the related salary/benefit costs.
3. Take Action to Address Illegal Construction
Municipalities must implement an appropriate strategy to manage the issue of illegal building activity in their respective communities. If the approach is strictly punitive, the municipality can expect to devote considerable resources for enforcement and staffing towards this effort. However, this approach would also be expected to deter subsequent illegal building construction activity in the community. In contrast, an approach that is too lenient provides little incentive for property owners to secure building permits before they construct. Under this lenient scenario, offending property owners benefit by potentially saving hundreds to thousands of dollars annually through avoiding (or at least deferring) the assessment process and payment of the resulting associated property taxes.
4. Supplement Municipal Compliance Requests
The database formulated based on the efforts of the municipal property assessment review officer has another valuable use. It can be used to enhance municipal compliance reports requested from solicitors when properties are in the process of being sold or mortgaged. Advising a prospective purchaser’s solicitor that there is no record of a building permit being issued for the dwelling unit on the property would most likely have a negative impact on the progress of the sale. This approach can work to penalize property owners who have illegal structures and also to encourage them to bring these into compliance with accepted standards. It can also act as a major deterrent for those property owners who are contemplating illegal construction.
5. Public Engagement and Education
Municipalities have an obligation to constantly educate residents of the importance of securing proper building permit approvals prior to construction. We need to do a better “selling job” of why it is important to do so … we need to sell the value of the service! This can be accomplished by using a variety of tools, including public information sessions, newspaper ads, radio promotions, website ads, as well as social media. Educating residents about the value of conducting a property assessment review project can help to make law-abiding citizens stronger allies and can also discourage others from constructing illegally.
Municipal staff cannot be expected to be everywhere at once, particularly when communities are comprised of larger geographic areas and have limited staff. It is reasonable to surmise that the “low hanging fruit” of illegal construction would be more prevalent in the less visible and remote regions of the municipality. The old adage “out of sight … out of mind” definitely applies in this case. Combining public education with opportunities for citizens to readily report potential illegal construction activity provides the municipality with more “eyes and ears” in the field. Establishing communication conduits to submit reports of illegal building activity – through dedicated telephone hotlines, email addresses, social media, as well as other mechanisms – for the public can go a long way in assisting municipalities to better manage this issue.
Municipalities can do a better job of collecting the property taxes due to them as a result of construction without the requisite permits. Today, there are a wide variety of accessible, powerful tools available to help remedy this situation, with benefits that accrue to the municipal coffers – but also safety, fairness, and protection of rights of neighbouring property owners. MW
A version of this article was published in Municipal World, August 2015
✯ Municipal World Executive Members: You might also be interested in the full version of this article or in the regular features on assessment and taxation in the Municipal World Journal, included in your membership. Note that you can now access the complete collection of past articles (and more) from your membership dashboard.
Mark Jensen, BA, MPL, MCIP, RPP is employed by the City of Timmins as the Director of Community and Development Services. Mark is a member of the Ontario Professional Planners Institute, the Canadian Institute of Planners, the Economic Developers Association of Canada, and the Ontario Building Officials Association.
Related resource materials:
