The economics of waste disposal in Ontario are shifting through significant increases in municipal taxes for private companies and payments in lieu of taxes for upper tier municipalities. The Municipal Property Assessment Corporation (MPAC) is in the process of re-assessing landfill facilities in Ontario for the 2013-2016 municipal taxation period. MPAC intends to re-assess over 600 sites (all private and municipal landfills) and is currently seeking information to calculate a re-assessed value. The MPAC re-assessment is scheduled to be completed by November 2012 with increased assessed value and classification changes to be reflected on 2013 tax rolls and in 2013 municipal tax bills and payments in lieu of taxes.
The MPAC activity is based on the previous sales of the Ridge Landfill and Green Lane Landfill in southwestern Ontario and the assumption that based on these sales, the current value of landfills is understated. MPAC has designed a new valuation model — a modified “cost method” that intends to capture the economic value of the site. The re-assessed land value becomes a function of the remaining capacity of the landfill. It goes like this:
Land Value = remaining capacity (m3) X capacity rate ($/m3)
This new methodology represents a significant departure from tax assessment based on the “use of property” and fully incorporates the value of a business enterprise into the tax system. This approach is not used for other land uses. For example, the business value of different types of farm enterprises (pasture versus vineyards) is not incorporated into the valuation of specific agricultural lands.
MPAC has commenced re-assessing private landfills (2) and the City of Toronto Green Lane site and in these three situations, the assessed value has increased up to 60 times the current assessed value. New assessed values are ranging from $60 to $97 million per landfill site. MPAC is acquiring data on the remaining private sector sites and will be sending a questionnaire to municipalities so the same methodology can be applied to municipal landfills.
The impact of this re-assessment is significant for private sector sites as the valuation increases will translate into a significant increase in municipal taxes. Business dynamics suggest that tax increases will be reflected in a significant increase in future tip fees. This increase will impact the cost of disposal in Ontario but may also drive more waste to lower-cost US jurisdictions and pose as an incentive to dispose rather than recycle materials to ensure that annual tonnage limits are met. The MPAC re-assessments will shift the disposal marketplace in Ontario in a significant way.
The impact on municipalities is also significant. Municipalities using private sector landfills may bear the increased disposal cost depending on the contract provisions in place between the municipality and the company.
The value of municipal landfills will also increase in the range of magnitude experienced by private sites to date. The increased value for municipal facilities will be a challenge for all levels of municipal government. For upper tier municipalities, increased assessment values will directly impact the “payment in lieu of taxes” agreements with lower tier municipalities where the landfill is located. This will increase the cost to dispose of residential waste at municipal facilities.
Lower tier municipalities with a private or municipal landfill will also be impacted by:
• Increased taxes from private sector facilities; however greatly increased assessment value and taxes for one taxpayer that will force a re-alignment of the entire municipal tax base.
• The risk that appeals to the re-assessment will leave municipalities exposed to refunding significant taxes.
• Impacts on municipal grant eligibility due to an increased municipal tax base.
• The challenge of planning for sustainable municipal services with high levels of taxes paid in early years declining over time as the landfill reaches capacity.
The Ontario Waste Management Association (OWMA) has been engaged in discussions with MPAC to fully understand the new MPAC assessment methodology and the implications of the re-assessment to both private and public sector members. OWMA is continuing to liaise with MPAC and will be bringing US landfill valuation experts to Ontario to meet with MPAC valuators to discuss various valuation approaches and to determine the fairest approach to valuation.
The resolution of this issue will ultimately rest with the province (Ministry of Finance). Change of this nature and magnitude is an issue of tax policy and should be the responsibility of our elected representatives and not MPAC (a quasi-independent administrative body).
Rob Cook is Executive Director for the Ontario Waste Management Association (OWMA) in Brampton, Ontario. Contact Rob at