EBR Review R2003005 Ministry of Natural Resources

Ministry of Finance

Managed Forest Tax Incentive Program (MFTIP)

June, 2004

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EBR Review R2003005, June 2004 ii

Table of Contents

Executive Summary ........................................................................................................vi 1. Introduction to EBR Review R2003005 related to the Managed Forest Tax Incentive

Program ..................................................................................................................... 1 1.1 The request for review of the MFTIP under the EBR ........................................ 1 1.2 Scope of Review Request................................................................................. 1 1.3 Background to the review process .................................................................... 2 1.4 Review Organization......................................................................................... 3 1.5 Overview of the report....................................................................................... 3

2. Privately owned forests in Ontario.............................................................................. 4 2.1 The importance of the resource ........................................................................ 4 2.2 The societal interest in privately owned forests................................................. 5 2.3 Expression of the provincial interest in privately owned forests ........................ 7 2.4 Other organizations involved in private land stewardship ............................... 12

3. Overview of the Managed Forest Tax Incentive Program (MFTIP) .......................... 13 3.1 The Managed Forest Tax Rebate Program .................................................... 13 3.2 Current Roles and Responsibilities for MFTIP ............................................... 14 3.3 MFTIP eligibility and accountability mechanisms ............................................ 14 3.4 Reviews of the MFTIP and property assessment system ............................... 17

4. Current Use valuation for the MF property class ...................................................... 19 4.1 Current Use Assessment ................................................................................ 19 4.2 Current Use Assessment - Farms................................................................... 19 4.3 Use of Proxy Farm Land Rates....................................................................... 20 4.4 Description of valuation procedures for the MF property class ....................... 21 4.5 2004 Reassessment Impacts.......................................................................... 24 4.6 Current Property Taxation Levels for Managed Forest Properties .................. 25 4.7 MFTIP Participation – Net Impact ................................................................... 31 4.8 Municipal perspective ..................................................................................... 32

5. Potential harm to the environment........................................................................... 34 5.1 Reduction of forest cover and associated benefits.......................................... 34 5.2 Implications to stewardship objectives ............................................................ 35 5.3 Land use conversion and afforestation ........................................................... 35

6. Future considerations.............................................................................................. 37 7. Summary of Findings and Recommendations.......................................................... 38

7.1 Review Findings.............................................................................................. 38 7.2 Review Recommendations ............................................................................. 43 7.3 Conclusion ...................................................................................................... 45

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EBR Review R2003005, June 2004 iii

List of Figures

Figure 1.2 Average $/acre rates for properties in the MF property class as compared to farm land rates....................................................................................... x

Figure 2.1 Tangible values and benefits of healthy forests and wooded areas........... 6 Figure 4.1 Distribution of Managed Forest Taxes for 2004 (Managed Forest Only) . 27 Figure 4.2 Distribution of Managed Forest Taxes for 2004 (Managed Forest +

Residential Component) .......................................................................... 28 Figure 4.3 Comparison of 2003 and 2004 Taxes for Managed Forest Properties .... 29 Figure 4.4 Managed Forest Tax Increase 2003 to 2004 ........................................... 30 Figure 4.5 Managed Forest Properties ..................................................................... 32

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EBR Review R2003005, June 2004 iv

List of Tables

Table 3.1 Summary of proposed changes to Ontario Regulation 282/98 (pertaining

to the MFTIP)........................................................................................... 18 Table 4.1 Farmland property classes (Source – MPAC).......................................... 20 Table 4.2 2003 and 2004 reassessments impacts................................................... 24 Table 4.3 Average $/acre rates for properties in the MF property class as compared

to farm land rates..................................................................................... 25 Table 4.4 MFTIP participation by year (Source: MNR) ............................................ 31

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EBR Review R2003005, June 2004 v

List of Appendices

Appendix A Maps Private land in Ontario Municipal tree cutting bylaws Appendix B MFTIP participation by municipality for 2004 (report generated

March, 2004)

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EBR Review R2003005, June 2004 vi

Executive Summary

The Environmental Bill of Rights (EBR) Review On September 22, 2003, the Ministry of Natural Resources (MNR) received an application for review from the Environmental Commissioner’s Office (ECO) requesting a review of the Managed Forest Tax Incentive Program (MFTIP). The applicants alleged that “…the program policy is no longer achieving its stated objectives. We believe that the failure of this policy will lead to significant environmental harm”. The applicants further stated “The government’s principle was that managed forests should be taxed at the same rate and assessed identically to farmlands (i.e., based on land productivity). The assessment of managed forests has now been redefined to be “highest end use” (i.e., a land’s potential value for residential and commercial development and not its forest value); therefore, these forests lands are no longer valued on the same basis as farmlands”. On December 30, 2003, MNR informed the applicants that an EBR Review would be undertaken. MNR indicated that it originally intended to complete the review by March 31, 2004, which was later extended to April 30, and subsequently extended to June 30, 2004. MFTIP Overview The objective of the Managed Forest Tax Incentive Program (MFTIP) is to encourage forest stewardship. The program does this by providing a property tax reduction to participating landowners who agree to conserve and manage their forests. The MFTIP is a voluntary program, established in 1998 to recognize the societal and ecological benefit of these lands. The program is designed to offer a two-pronged benefit: - managed forests are to be assessed based on “current use” value, as opposed to

“current value”; - managed forest properties are taxed at a rate that is 75% lower than the rate that

applies to residential properties. MFTIP eligibility criteria specify that the property must have at least four hectares of forest, be owned by a Canadian citizen and have an Approved Managed Forest Plan. Landowners who apply and qualify for the MFTIP have their property classified in the Managed Forest (MF) property class. The MF property class is set out in Ontario Regulation 282/98 under the Assessment Act and has grown to include over 10,000 properties with over 700,000 ha (1.78 million acres). Participants in the program range from Essex County landowners looking after the fragmented natural landscape, to owners of shore land in Muskoka, some of whom also own cottages, to large forest companies in northern Ontario contributing to the northern economy.

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EBR Review R2003005, June 2004 vii

Current roles and responsibilities The Ministry of Natural Resources (MNR) is responsible for program administration, eligibility requirements and ongoing program support. MNR has partnered with the Ontario Forestry Association (OFA) and the Ontario Woodlot Association (OWA) for the delivery of certain aspects of the program, which focus on customer service to landowners. The Ministry of Finance (MOF) establishes the policy framework for property assessment and property tax in Ontario. The Municipal Property Assessment Corporation (MPAC) is the administrator of the assessment process and carries out assessment policies established by the Province in accordance with legislative and regulatory requirements. Municipalities are responsible for the administration of the property tax system, including billing. The assessment of properties in the MFTIP In 1998, the Government of Ontario introduced substantial reforms to the property tax system. In order to provide for fairness and consistency, properties were to be reassessed at their current value based on a uniform valuation date. The new property tax system specifically recognized the importance of farms, conservation lands and private woodlots by creating distinct property tax classes with a lower tax rate, as well as by providing for “current use” assessment in place of “current value” assessment. Current use assessment differs from current value assessment in that properties are assessed at their value in their current use, such as farms or woodlots, and not at their potential value if they were to be sold for a different use, such as residential land. From 1998 to 2002, managed forest properties were assessed using a subset of farm land values (specifically, acreage rates for farm land in classes 4, 5, and 6). In the absence of better available data in these years, farm land values were used as a proxy for managed forest property land values, based upon the similarity of land values at that point in time. Over time, MPAC has been able to accumulate and evaluate data on managed forest properties. Through ongoing sales analysis, it became evident to MPAC that the values of managed forests and farms have not kept pace with each other. Sales data confirm that managed forest properties are valued differently from farms. In order to maintain consistency with the broader legislative and assessment policy framework, MPAC felt that the continued application of the farm rate proxy would be inappropriate. In 2003, MPAC began to implement new valuation procedures for managed forests based on a sales comparison of other managed forest properties in a given area. Implementation of the new valuation methodology was gradually implemented over two

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EBR Review R2003005, June 2004 viii

reassessments, with all eligible managed forest properties assessed based on a sales comparison approach by the 2004 reassessment. This change in assessment procedures has resulted in a considerable number of landowner complaints in response to perceived and real increases in assessment values for some parts of Ontario. The request submitted to the Environmental Commissioner by members of the public for an EBR review of the change in assessment procedures is one manifestation of these concerns. This report is prepared in response to requirements under the EBR regarding applications for review. During this review, the issues raised by the applicants and broader concerns raised by landowners, were considered by examining: - whether the assessment methodology change initiated by MPAC was appropriate - the communication to landowners with respect to the assessment methodology

change - the tax impacts arising from the assessment methodology change - whether environmental harm has resulted, or could result, from the change in

assessment methodology - whether changes should be introduced to the MFTIP program by the Ministry of

Natural Resources and the Ministry of Finance. 1) Was the assessment methodology change initiated by MPAC appropriate? MPAC is a municipal corporation that is mandated to undertake the assessment of properties throughout Ontario for property tax purposes. MPAC operates under the legislative framework of the Assessment Act. MPAC is legally mandated to establish property assessments that reflect current value, and for certain defined properties, current use value. To do so, MPAC relies on three common methods of property assessment: - sales values (used for most properties, including residential properties) - replacement values (commonly used for industrial properties) - capitalized income values (commonly used for commercial or income generating

properties) In all cases, MPAC’s choice of assessment methodology is intended to fulfil the requirements of the Assessment Act by establishing current value (or current use value). Results from any assessment methodology must be regularly compared with available sales data for comparable properties to confirm that assessed values track sales values within a defined tolerance. MPAC’s performance standard for assessment to sales ratios is .90 to 1.10 (residential/farm is .98 to1.02). It is acknowledged that from 1998 to 2002, managed forest properties were assessed using a subset of farm land values. However, it is incumbent upon MPAC to periodically review its existing assessment methodologies, and refine and update where necessary to provide the most accurate reflection of the value of properties.

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EBR Review R2003005, June 2004 ix

The integrity of the property tax system rests on the equity and transparency of the property assessment system. Under Ontario’s Assessment Act, properties must be valued based on their current value or current use value, and not on the basis of characteristics of properties in another, unrelated property class. To ignore the actual current value or current use value of a property in favour of a proxy value, particularly where sales data is readily available, would be inconsistent with the Assessment Act and would establish a new and inappropriate precedent in property tax policy. The establishment of current value or current use values for properties through the property assessment process is essential in creating a foundation for fairly and transparently distributing municipal and education property tax responsibilities amongst property owners. For these reasons, it is felt that MPAC acted appropriately in identifying the divergence in land values between farm and managed forest properties, and in creating a new valuation model that develops assessed values for managed forest properties based on the sales of managed forest properties within defined areas of the province. 2) Was the communication to landowners regarding the change in assessment

methodology appropriate? It is acknowledged that the change in assessment methodology was not communicated by MPAC to MFTIP property owners in advance or as it was implemented. This lack of communication was particularly unfortunate as property owners often received assessment notices with significant increases without an accompanying explanation or outreach effort. The responsibility to communicate to landowners regarding assessment methodology was particularly important given the widespread understanding that the government had committed to a principle of “assessing managed forest properties in a manner similar to (sometimes expressed as “identical to”) farmland.” Program materials for the MFTIP program included this wording, and it was commonly understood by stakeholders and property owners to reflect a commitment to use acreage rates for farms as a proxy for managed forest land values. Although this wording was felt to be accurate by provincial staff, given the terms of the Assessment Act which specify that current use methodology was to be applied to managed forest properties, similar to the methodology applied to farmlands, it is understandable that property owners took this commitment at its plainer meaning. Although Ministry of Finance and Ministry of Natural Resources staff investigated landowner complaints when these first arose with the 2003 reassessment, it was not initially clear to staff that a new assessment methodology was primarily responsible for the increases in property assessments being experienced by landowners. In fact, these increases were initially attributed to changes to the apportionment method of attributing property value to residential and managed forest components of mixed-use properties. (Apportionment changes were initiated by MPAC to clarify the component

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EBR Review R2003005, June 2004 x

land values for municipal tax administration purposes. This apportionment methodology was refined through the 2003 Request for Reconsideration Process and for the 2004 reassessment in the favour of landowners.) When analysis of the 2004 reassessment data was completed, the assessment methodology change could be isolated and identified as a significant factor contributing to the higher assessment values. Given the lag in the ability of provincial and MPAC staff to isolate the impact of the new assessment methodology, provincial efforts to communicate to landowners were not undertaken in a timeframe that would have been appropriate relative to the release of 2004 property assessment notices. 3) What were the assessment and tax impacts arising from the assessment

methodology change?

In aggregate, the average property values for managed forest properties, as measured by the average value per acre, did not increase substantially as a result of the new assessment methodology. Values per acre of managed forest properties are similar to values per acre for Class 4 farmland in all areas of the province, with the exception of the GTA and South-Central Ontario, where values lie slightly above Class 4 rates. Figure 1.2 Average $/acre rates for properties in the MF property class as compared to farm land rates

Average farm land rate by productivity class (Class 1-6)

($/acre)

MPAC Region

Average MF acreage

rate ($/acre) 1 2 3 4 5 6

South West 930 4,550 3,775 3,200 1,500 1,000 725 Central-South 1650 4,100 3,400 2,900 1,350 900 650

GTA 2800 6,000 4,975 4,225 1,975 1,300 950 Central-North A 400 2,500 2,075 1,750 825 550 400 Central- North B 400 1150 950 800 375 250 125

East 420 1,575 1,300 1,100 525 350 150 North 260 725 600 500 225 150 75

The tax rate applied to managed forest properties is low - 25% of the local municipal residential rate, plus 25% of the province-wide education rate. Typically, the applicable tax rate on managed forest properties is .25% to .35% of assessed value. For 2003, the average annual property tax for a managed forest property was $168; the average corresponding value of the MFTIP incentive to the landowner was $504. For 2004, the average annual property tax for a managed forest property is estimated at $232; the average corresponding value of the MFTIP incentive to the landowner is estimated at $696.

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EBR Review R2003005, June 2004 xi

Although data on average property tax and incentive values are relevant, these must be considered in the context of a wide range of managed forest properties, both in size and value. The following figures show the distribution of managed forest properties by the level of tax responsibilities. The first chart shows the tax incidence for all managed forest properties, with the non-managed forest components (such as residential or other components) of mixed-use properties removed. The second chart shows the tax incidence for all managed forest properties, including the tax incidence relating to the residential or other components of these properties.

For the property tax incidence for pure managed forest properties and the managed forest components of mixed-use properties, property taxes for the majority of property owners fall within the $50 to $250 range. Fewer than 10% of property owners will face a tax responsibility greater than $500.

Distribution of Managed Forest Taxes for 2004(Managed Forest Only)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

< $50 $50 to $100 $100 to $250 $250 to $500 $500 to $1000 $1000 to$2500

$2500 to$5000

$5000 to$10000

> $10000

Taxes

# Pr

oper

ties

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EBR Review R2003005, June 2004 xii

Distribution of Managed Forest Taxes for 2004(Managed Forest + Residential Component)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

< $50 $50 to $100 $100 to $250 $250 to $500 $500 to $1000 $1000 to $2500 $2500 to $5000 $5000 to$10000

> $10000

Taxes

# Pr

oper

ties

For the total property tax incidence for all managed forest properties, including those that contain both a managed forest and residential or other components, the tax distribution stretches across a wider range, with peaks in the $100 to $250 range and the $1,000 to $2,500 range. As might be expected, the higher tax responsibility generally reflects the inclusion of property taxes on the residential or other component of the property.

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EBR Review R2003005, June 2004 xiii

Comparison of 2003 and 2004 Taxes for Managed Forest Properties

0

2

4

6

8

10

12

14

16

18

20

2003 2004

Mill

ions

Year

Tota

l Tax

es ($

)

Managed Forest Residential (For mixed-use properties)

$1.7 M $2.4 M

$15.2 M$12.4 M

$16.9 M

$14.9 M

It is interesting to note that total tax responsibilities for managed forest properties have declined between 2003 and 2004, although there has been a modest increase in the tax revenue from managed forest properties and managed forest components of properties. This result can be attributed to the more favourable apportionment methodology adopted by MPAC that results in a greater proportion of assessed value being attributed to the managed forest portion of mixed use properties, which is taxed at a lower rate.

4) Has environmental harm resulted, or could it result, from the change in

assessment methodology? This review cannot conclude that the change in assessment methodology for managed forest has resulted in, or could result in, harm the environment. The MFTIP program has been successful in establishing a significant commitment among private landowners to forest stewardship. Of the 16.8 million acres (6.8 million hectares) of forested land that is privately owned in Ontario, 1.78 million acres is in the MFTIP program. This portion represents slightly over 10% of total private forest acreage and likely represents a higher percentage of eligible properties, given the acreage and other eligibility criteria for the MFTIP program. The number of properties in the MFTIP has grown from 8,000 to 10,400, or by 31% in the period of 1998 to 2004. Total acreage in the program has increased from 1.46 M

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EBR Review R2003005, June 2004 xiv

acres to 1.78 M acres, or by 22% from 1999 to 2004 (acreage data for 1998 is not available in a consistent format).

Area of Managed Forest Properties

1.4

1.5

1.6

1.7

1.8

1.9

2

1998 1999 2000 2001 2002 2003 2004

Year

Are

a (M

illio

ns o

f Acr

es)

N/A

Number of Managed Forest Properties

7000

7500

8000

8500

9000

9500

10000

10500

11000

1998 1999 2000 2001 2002 2003 2004

Year

Num

ber o

f Pro

pert

ies

As property values across Ontario have increased, the value of tax incentive programs to individual landowners has increased proportionately. The 75% reduction in property tax rates offered by MFTIP could make this program attractive for landowners to pursue and actually increase landowner participation. However, in areas such as the GTA where property values are significant and increasing, the reduction in property taxes provided by MFTIP may not be a significant enough incentive alone to offset financial gains from converting the land to other uses. Each landowner has his or her own circumstances, interests and ability to support the carrying cost for their property. An amount that appears inconsequential to one landowner may impact another significantly and result in efforts to sell or sever land or practice poor forest management practices, such as heavy cutting, to produce income. The influence of regulatory controls, such as the planning system or municipal tree cutting by-laws, may also constrain landowner decisions. The Ontario government is committed to maintaining the MFTIP program and to working with private landowners to maintain and increase participation in the MFTIP program. The Province is also studying other measures to ensure that greenspace is preserved and growth is managed to support a healthy environment and a high quality of life for Ontario citizens. Initiatives such as the work of the Greenbelt Task Force, the Oak Ridges Moraine Conservation Plan, the Niagara Escarpment Plan Five-Year Review, the planning reform initiative (including the review of the Provincial Policy Statement, Planning Act and Ontario Municipal Board reform), watershed-based source protection planning, the Growing Strong Rural Communities Plan, and the Growth Management consultation process will all contribute to the preservation of a healthy environment, including the preservation of Ontario’s forests. It is appropriate that MOF and MNR staff monitor landowner participation in MFTIP in coming years to ensure that the program continues to retain and attract landowners committed to forest stewardship.

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EBR Review R2003005, June 2004 xv

5) Are there changes that should be introduced to MFTIP by the Ministry of Natural Resources and the Ministry of Finance?

The requirement to undertake an EBR review has been a constructive process for provincial staff. In the review of the program’s history and the analysis of program data and stakeholder input, a range of possible program refinements has been identified. Many of these proposals have been put forward by stakeholders at previous points in the program’s history. Some have been put forward as recommendations, both by stakeholders and provincial governments, but never fully implemented. This review offers a timely opportunity to bring forward these suggested program refinements for early discussion with stakeholders and expeditious consideration by the provincial government. Examples include lengthening the eligibility period for MFTIP landowners from five to ten years (with a five year review) to spread the cost of participation in MFTIP over a longer period and finalizing regulations to clarify the eligibility of managed forest properties with non-forested landscape features, such as rocky outcroppings. This review also highlights the importance of close communication amongst provincial ministries responsible for administration of MFTIP, stakeholders, MPAC and other decision-makers or administrators who may influence the environment for MFTIP participants. A key recommendation arising from this report is the recognition that an ongoing working group is required to ensure a forum for constructive discussion and policy development.

Recommendations Arising from the Review The participation of landowners in MFTIP is one of the most important indicators of the ability of the program to encourage private landowners to commit to forest stewardship through good forest management practices. Recommendation #1: MNR and MOF should continue to monitor participation of landowners in MFTIP to track net participation rates and review program success parameters. The report discusses revisions proposed to the MF property class portion of O. Reg.282/98 of the Assessment Act that would assist in MFTIP administration and help to mitigate participation costs. A significant proposed revision is changing the Managed Forest Plan term from five years to ten years (with a report back at the five year mid-point) which would allow MFTIP participants to spread their plan development costs over 10 years.

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EBR Review R2003005, June 2004 xvi

Recommendation #2: MOF, with MNR’s participation, will proceed with proposing revisions to O. Reg. 282/98 of the Assessment Act in order to realize MFTIP administrative efficiencies and program clarification. The principle of current use requires that the actual use of the property be the determining factor in its assessment valuation. For managed forest properties, the current use of the property is as a forest. That said, the current use valuation of the property must be determined based on the property being used as a forest, not on the basis of any other use to which the property could be put. It is acknowledged that farm land rates were used when MFTIP was created. However, it is incumbent upon MPAC to review its existing assessment methodologies, refine where necessary, and update to provide the most accurate reflection of the value of properties. It is also important to focus on the integrity of the property assessment system, in terms of equity and transparency. To continue to ignore the current use value of a property in determining its assessed value would establish an inappropriate precedent in property tax policy. A detailed description of the methodology for the assessment properties in the MF property class is found in Section 4. Recommendations #3: MPAC’s existing current use valuation procedures for managed forests, the intention of which is to determine assessment based on a sales comparison of other managed forest properties in the area, should continue to be used as the assessment methodology for managed forest properties. Recommendations #4: MOF and MNR should work together to update and clarify MFTIP program materials to more clearly communicate the property assessment and property tax system as it applies to MFTIP properties. Much of the difficulty surrounding the transition from the use of farm land rates has been the lack of transparency in the determination of the valuations themselves. Stakeholders were not informed by MPAC of the transition to a new assessment methodology. While there is no requirement for MPAC to notify stakeholders when such a change in valuation procedures is being considered or implemented, it would be a good practice for MPAC to adopt in order to alleviate stakeholder concerns and increase taxpayer understanding of the process. Recommendation #5: MOF will work with MPAC to reinforce the need for more clarity and transparency for property owners on the valuation procedures for managed forests properties

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and to ensure that property owners receive more timely notification of any future revisions to property valuation procedures. In response to a lack of transparency and proactive communications on the change in assessment methodology, there has been stakeholder criticism of the ability of the existing MPAC assessment procedures to provide for current use assessment and a belief that they may be actually resulting in assessments based on highest and best use. As the new assessment procedures were implemented, there have also been concerns raised with inconsistent application and questionable interpretation of the data used to support analysis. Recommendations #6: MOF will work with MPAC to undertake a review and validation of the existing assessment methodology used for managed forest properties by an impartial third party. Recommendations #7: MOF and MNR will establish a committee, including stakeholder representatives and MPAC, to be involved in efforts to respond to issues with implementation of the assessment procedures in the coming year. This committee will also oversee the implementation of recommendations in this report. The government is pursuing initiatives for the “greening” of southern Ontario. MFTIP is viewed as one of several important tools that can assist in encouraging the conservation and stewardship of private forest lands. As work on these new initiatives progresses, it is expected that MFTIP objectives may be revisited in the context of what the program can contribute to the broader objective of the “greening” of southern Ontario. Recommendation #8: MNR will work with MOF to address how any potential changes to the MFTIP can support the government’s initiatives for the “greening” of southern Ontario.

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EBR Review R2003005, June 2004 1

1. Introduction to EBR Review R2003005 related to the Managed Forest Tax Incentive Program

In accordance with Section 61 of the Environmental Bill of Rights (EBR), two residents in Ontario may apply to the Environmental Commissioner to request a review of a policy, act, regulation or instrument. 1.1 The request for review of the MFTIP under the EBR The Ministry of Natural Resources (MNR) received an application for review on September 22, 2003 from the Environmental Commissioner’s Office (ECO). In their application, the residents requested MNR undertake a “review of the Ministry of Natural Resources’ Managed Forest Tax Incentive Program (MFTIP)….because the program policy is no longer achieving its stated objectives. We believe that the failure of this policy will lead to significant environmental harm.” MNR reviewed the application and returned it to the ECO because “the matters raised in the application concerned a change in assessment procedures used by the Municipal Property Assessment Corporation (MPAC) under the Assessment Act administered by the Ministry of Finance (MOF) and, therefore, are not within the jurisdiction of MNR.” It is important to note that while MNR policies and instruments are subject to the EBR, MOF and the Assessment Act are exempt. The ECO resubmitted the application to MNR on October 29, 2003 responding that since the MFTIP is MNR’s program and the public has asked that the program be reviewed because it is no longer achieving its stated objectives, MNR is obligated under the EBR to process and consider the application. Subsequent to this resubmission, MNR initiated its process to consider an application for a review under the EBR. In accordance with MNR procedures for processing an EBR Review request, a preliminary assessment was undertaken. MNR concluded that a review would be undertaken and the applicants were notified on December 30, 2003. MNR indicated that it originally intended to complete the review by March 31, 2004. This target deadline was later revised to April 30, 2004 and then to June 30, 2004. The applicants were advised of these deadline extensions. 1.2 Scope of Review Request In their application, the applicants requested MNR to undertake a review for the reasons stated above.

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EBR Review R2003005, June 2004 2

The applicants’ stated concern was that the “government’s principle that managed forests should be taxed at the same rate and assessed identically to farmlands (i.e., based on land productivity)” was not being followed. The applicants contend that MPAC’s new procedures result in managed forest properties being assessed at their “highest end use” (i.e., a land’s potential value for residential and commercial development and not its forest value). Anticipated harmful environmental impacts, as identified by the applicants are: - reduction of forest cover that protects ground water and wildlife - a significant loss of green space due to development pressures - higher incidence of intensive harvesting practices to offset tax burden - accelerated conversion of forestland to farmland and a disincentive to convert

farmland to forestland (i.e., afforestation of marginal lands) - negative impact on the stewardship objectives of many provincial initiatives aimed

at conserving natural forests such as Oak Ridges Moraine Plan, Smart Growth Initiatives and programs of NGO’s that use MFTIP to implement objectives

- discouraging the intrinsic stewardship ethic of forestland owners in Ontario - impacts to MFTIP which is the only program providing private forest landowners

with incentives to practice sustainable forest management - risking losing land that supports rural economic activities such as fishing and

forestry and many of the provincial Areas of Natural and Scientific Interest 1.3 Background to the review process Two government ministries are involved in the implementation of the program. MNR is responsible for the overall administration and program eligibility requirements for MFTIP. The Ontario Forestry Association (OFA) and the Ontario Woodlot Association (OWA) deliver certain customer service aspects of the program. The Ministry of Finance (MOF) establishes the policy framework for property assessment and property tax in Ontario. Further explanation of roles and responsibilities associated with the MFTIP is included in Section 3. Representatives from MNR and MOF have had ongoing discussions with stakeholder representatives to respond to concerns about property assessment before and after the EBR Review request. In January 2004, forest owners in the Haliburton area threatened to restrict public access to snowmobile trails as a means of expressing their concerns regarding MPAC’s new assessment procedures. Staff from MOF traveled to meet with representatives of the Haliburton Forest Owner’s Association to hear their concerns directly. On January 21, 2004, staff from MNR and MOF met to scope the EBR Review process and content of the associated report. In order to undertake this review MNR and MOF developed an action plan and met several times over the ensuing months to complete the review. On January 29, staff from MNR and MOF met with key stakeholder representatives (including OFA and OWA) to outline the EBR Review process. On

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EBR Review R2003005, June 2004 3

February 26, a conference call was held with OFA and OWA representatives to update them on progress. On May 7, 2004, preliminary discussions were held with the Association of Municipalities of Ontario (AMO) to advise that this report was under development. A subsequent status update was provided to OFA and OWA on June 30th. As indicated above, there were a number of extensions to the original target date for completion, to allow for a full review of the issues. 1.4 Review Organization An organizational structure was established in accordance with MNR’s EBR Review procedures. A four member MNR EBR panel, chaired by the Director, Forest Management Branch, was established to provide direction and support for the review. Advisors from MNR’s Legal Services Branch and MNR’s A/EBR coordinator were also assigned to assist the panel. A MNR review leader was assigned and assisted by designated program staff. Several MNR staff with past involvement in MFTIP development and implementation and staff involved with related programs were tasked with reviewing and commenting on draft material.

An integral component of this review was the participation of staff from MOF who provided expertise on taxation matters and in the writing of the report. MNR also acknowledges the input provided by representatives of the OFA and OWA. 1.5 Overview of the report The report addresses concerns brought forth by the applicants and provides background information on private forests in Ontario. The background information provides context for the report explaining how the MFTIP was intended to encourage stewardship inside a regulatory and an incentive framework. This information helps in understanding landowners’ and stakeholders’ concerns with MFTIP. The report has been organized into the following sections: 1) Executive Summary/ Introduction to the EBR Review request 2) discussion of the importance of private land forests and the current regulatory

and incentive framework for maintaining and managing the resource 3) overview of MFTIP including program eligibility requirements 4) description of the current use methodology 5) review findings related to potential harm to the environment 6) some suggestions for future consideration regarding MTIP 7) review of findings and recommendations

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EBR Review R2003005, June 2004 4

2. Privately owned forests in Ontario

Ontario has a total land area of 106.8 million hectares, of which 14.8 million hectares are privately owned. Of the total landbase, 69.1 million hectares are forested, of which 6.8 million hectares are privately owned. Appendix A contains a map of private land in Ontario. 2.1 The importance of the resource MNR estimates that the province’s private forests are owned by almost 170,000 woodlot owners who contribute to the social, economic and environmental well being of all Ontarians. Private forests account for approximately 14% of Ontario’s growing stock, including over 40% of the gross total volume of hard maple and nearly 50% of the gross total volume of other hardwoods. In 2001, annual returns from forest resource processing facilities indicated that 8% of the gross total volume of conifers and 24% of the gross total volume of deciduous species processed originated from private forests. The total contribution of private forests could exceed 15% of the volume processed in Ontario. In the Area of the Undertaking [Area of the Undertaking – as identified by the Forest Management Class EA; southern boundary is generally the limit of the forest on Crown Lands (designated forest management units)] through Central and Eastern Ontario, approximately 43% of the productive forest is privately owned. In 2001, it was estimated that the local forest industry directly provided 5,000 local jobs and accounted for 14% of all goods producing jobs in this area – nearly triple the Ontario average of 5.5 percent. Across the entire Area of the Undertaking, privately owned forests contribute to fibre supply, recreation and tourism. Effective policies and incentives help promote sustainable communities. [Source: Central and Eastern Ontario – Health Forests, Healthy Business (MNR, 2001)] South of the Area of the Undertaking, achieving MNR’s mandate relies on influencing private landowners to be good stewards of their properties. An estimated 4,400 hectares of primarily privately owned forests were permanently converted to other land uses between 1991 and 1996. Urban land increased from 327,000 hectares in 1981 to 411,600 hectares in 1996, a 25.9 percent increase. Converted forest area mirrored population changes on rural lands, with increases documented in many parts of southern Ontario, and decreases in northern Ontario. Ontario’s population is projected to increase from 11.9 million in 2001 to 15.6 million in 20281, with the primary growth occurring in southern Ontario. Within this focus area, forest land in the urban shadow and in recreation areas is of particular concern because of development pressure and the severing of large tracts of forest land into small recreational parcels which often makes them uneconomical to manage for forest products or other purposes.

1 Statistics Canada, 1971-2001, and MOF projections.

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EBR Review R2003005, June 2004 5

Approximately 80 percent of the provincially listed special concern (vulnerable), threatened and endangered species occur on private land in the southern portions of the province. MNR’s Natural Heritage Information Centre (NHIC) tracks species of conservation concern in Ontario, including designated Species At Risk (SAR). In Site Region 6E, the NHIC has 3505 records of 475 tracked species; 83 of the species are SAR. In Site Region 7E, the NHIC has 7252 records of 699 tracked species; 126 of the species are SAR. (Generally Site Regions 6E and 7E cover the landscape south of the Area of the Undertaking.) In addition, private forests contribute to outdoor recreation opportunities and provide environmental benefits, particularly in southern Ontario where Crown forests are largely absent. 2.2 The societal interest in privately owned forests Urban sprawl, sustainable rural communities and increasing societal demands are some of the factors influencing Ontario’s privately owned forests. Issues related to wildlife habitat, ground water source protection and Ontario’s rural character are raising public awareness about the importance of this resource. Figure 2-1 provides a sample of some of the tangible values and benefits of healthy forests and wooded areas. A Sustainability Network survey carried out by Environics (July 2002)2 on environmental education, urban sprawl, and willingness to pay for ensuring the safety of drinking water sources, was fielded nationally between May 29 and June 11, 2002, with a representative random sample of 1,502 people. Highlights of the survey found: - four in ten Canadians (42%) strongly agree that the provincial government is not

doing enough to stop urban sprawl and the loss of forest and farmland to expanding cities.

- seven in ten respondents (68%) strongly agree that natural areas should be permanently protected from urban sprawl through provincial laws that developers must respect. When asked the same question about prime agricultural land, six in ten (59%) strongly agree that these areas should be permanently protected.

- when asked to choose from five possible impacts of urban sprawl the one that concerns them most, 36% of Canadians point to the loss of natural areas like forests and wetlands. 19% of respondents are most concerned about loss of prime agricultural land and increased air pollution because of dependence on cars. 8% are most concerned about higher taxes to pay for the road, water and sewer systems in new urban areas, and increased traffic gridlock.

2 Sustainability Network Survey: Public Opinion on Environmental Education, Urban Sprawl, and Water

Issues, Environics, 2002

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EBR Review R2003005, June 2004 6

Figure 2.1 Tangible values and benefits of healthy forests and wooded areas Ecological value - provide habitat for forest

dependent plants and animals

- enhance local ecosystem stability

- act as nutrient cyclers - enhance biodiversity Recreational value - enhance outdoor

recreational experience - provide direct recreational

opportunities (e.g., nature interpretation, nature appreciation)

Local climate enhancement - regulate temperature - reduce/redirect wind and

snow accumulation Local light or glare control - increase shade - dissipate or absorb

reflected light

Direct economic value - produce wood products - provide forest by-products

(e.g., maple syrup, resins, oils, nuts, etc)

- increase property value - reduce landscaping cost Global climate control - fix carbon and counteract

greenhouse effect Aesthetic enhancement - provide visual experience - increase visual variety of

urban landscape - improve spiritual and

psychological health - provide artistic inspiration - contribute to community

identity Environmental barometer - sensitive ecosystem that

rapidly show signs of degrading environment

Local and regional water and soil management - reduce soil erosion - reduce intensity and

volume of storm water - improve water quality in

streams and lakes - improve soil texture,

structure and fertility - regulate flood waters Local air quality control - reduce pollutant levels - reduce odours - enhance oxygen levels Architectural/engineering value in… - landscaping - screening - space articulation - acoustical control - glare control - control human vehicular

traffic Local noise level control - reduce or disperse noise - mask offensive noise

Prior to the above survey, a coalition of groups interested in the stewardship of Canadian rural lands contracted Environics to conduct a survey of landowner attitudes and behaviours between April 27 and May 28, 20003. This survey included a sample of 1,215 rural landowners – both farming and non-farming – from Ontario. The survey found (highlights): - that the concept of land stewardship is accepted by Canadian farmers and Ontario

rural residents and although there is no clear consensus on its meaning, there is

3 Survey of Farmers, Ranchers and Rural Landowners – Attitudes and Behaviours Regarding Land

Stewardship, Environics, 2000

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EBR Review R2003005, June 2004 7

openness to the importance of stewardship activities for the future health and productivity of the land

- property tax regulations (34%) and income tax regulations (25%) had an impact on their land-use decisions

- landowners are open to spending money on conservation, although economic considerations are important to them. The greatest single obstacle keeping landowners from doing more to conserve wetlands or forests was needing the land for other uses and the cost of conservation activities.

2.3 Expression of the provincial interest in privately owned forests MNR protects and encourages the stewardship of privately owned forests through a framework for sustainability based on: - coordinating the programs and efforts of the many agencies and groups interested in

promoting stewardship - providing education and skill training opportunities for landowners to become more

knowledgeable about stewardship - providing effective policies as incentives to foster stewardship of privately owned

forests - providing legislative support The framework consists of both regulatory and incentive components. 2.3.1 The regulatory framework At the provincial level, the regulatory framework includes: - the Planning Act and the Provincial Policy Statement - municipal tree cutting bylaws passed under the Municipal Act - targeted legislation to protect landscape features: specifically the Niagara

Escarpment Planning and Development Act and the Oak Ridges Moraine Conservation Act

In addition, the Forestry Act defines good forestry practices and the Professional Foresters Act identifies the Ontario Professional Foresters Association as the organization responsible for the regulation of professional forestry in Ontario. The Conservation Land Act is enabling legislation for the establishment of conservation easements and defines the agencies eligible to undertake them. The provisions of the Planning Act and Municipal Act provide a basis for municipalities to protect woodlands and their associated values. However, they are discretionary and not mandatory in nature.

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EBR Review R2003005, June 2004 8

The Planning Act 4 This Act, administered by the Minister of Municipal Affairs, provides the basic planning system whereby municipal planning authorities can plan for the development and control of land use change within their jurisdictions. The Planning Act allows for municipalities, on behalf of their community, to develop official plans and to pass zoning bylaws that can direct development away from significant natural features including woodlands. Section 3 of the Planning Act requires that, in exercising any authority that affects planning matters, planning authorities “shall have regard to” policy statements issued under the Act. The Provincial Policy Statement (PPS) indicates that development and site alteration may be permitted in significant woodlands south and east of the Canadian Shield if it has been demonstrated that there will be no negative impact on the natural features or ecological functions for which the area is identified. Under the definition section of the PPS, criteria for determining significance may be recommended by the Province, but municipal approaches that achieve the same objective may also be used. In essence, the provincial interest has been defined for significant woodlands, while identification and determination of significance has been entrusted to the municipality. The current PPS came into effect on May 22, 1996 and was amended in 1997. Subsection 3(10) of the Planning Act states that the PPS must be reviewed every five years to determine whether revisions are needed. The five-year review started in 2001 and included extensive consultations across Ontario. Presently, the province is involved in public consultations on Planning Reform. Part of the consultation includes a draft PPS for public input. Municipal tree cutting bylaws The Municipal Act is administered by the Minister of Municipal Affairs and contains provisions to enable upper and lower tier municipalities to pass bylaws to regulate the harvest of trees on private land. Councils of counties and townships in southern Ontario were first able to pass tree cutting bylaws through the Trees Conservation Act in 1946, then the Trees Act in 1950, and finally the Forestry Act in 1998. In addition, under the Municipal Act (1994), local municipalities with a population of greater than 10,000 became able to regulate the cutting of trees. Due to the population limit, bylaw provisions were not accessible to all municipalities, and in particular did not apply to many municipalities in northern Ontario. Provisions were consolidated into the Municipal Act (2001) and all municipalities in Ontario now have access to tree cutting bylaw provisions. However, it is again up to the municipality to decide whether a bylaw is required, or desirable, in their jurisdiction. Existing bylaws are valid until they are specifically amended and passed under the Municipal Act (2001). 4 The Planning Act and Provincial Policy Statement are currently being updated.

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EBR Review R2003005, June 2004 9

Upper tier municipalities can only pass bylaws for woodlands that are one hectare or more in area, while lower tier municipalities can pass bylaws for trees found in woodlands of less than one hectare. The municipality can impose and enforce conditions: - specifying how trees in a woodland are harvested - establishing the qualifications of persons involved with woodland management - requiring that a permit be obtained before forest cutting operations begin - providing the opportunity to issue “stop work orders” for operations that are not in

compliance with the bylaw - prescribing fines on a first offence to not more than $10,000 or $1,000 per tree, or

$25,000 or $2,500 per tree on subsequent convictions Most bylaws are in southwestern, southern and central parts of the province. There are fewer bylaws in eastern Ontario and no bylaws in northern Ontario. Appendix A contains a map of jurisdictions with bylaws in Ontario. Targeted legislation for landscape features The provincial interest in privately owned forests is also expressed for the Niagara Escarpment and Oak Ridges Moraine. Through enabling legislation, enhanced protection for this resource is provided under the Niagara Escarpment Planning and Development Act and the Oak Ridges Conservation Act and associated plans. The Forestry Act and “good forestry practices” MNR’s stewardship initiatives for privately owned forests encourage landowners to move towards the definition of “good forestry practices” in the Forestry Act:

the proper implementation of harvest, renewal and maintenance activities known to be appropriate for the forest and environmental conditions under which they are being applied and that minimize detriments to forest values including significant ecosystems, important fish and wildlife habitat, soil and water quality and quantity, forest productivity and health and the aesthetics and recreational opportunities of the landscape;

Municipalities passing tree cutting bylaws under the Municipal Act must have regard for “good forestry practices”. Participants in the MFTIP are encouraged to carry out their activities on properties consistent with “good forestry practices”. The Professional Foresters Act Ontario’s regulatory framework for forestry includes the Professional Foresters Act. The principal object of this Act is to regulate the practice of professional forestry and to govern its members in accordance with this Act. While the Professional Foresters Act does not restrict a landowner’s ability to cut trees on their property, it does affect practitioners of forestry whom they may hire for assistance.

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EBR Review R2003005, June 2004 10

The Conservation Land Act MNR supports the protection of natural areas on private land by enabling the establishment of conservation easements under the Conservation Land Act. The Conservation Land Act defines an eligible “conservation body” that may enter into a covenant or easement on a property with a landowner, for the purpose of conservation, maintenance, restoration or enhancement of private land. Easements may be used to protect privately owned forests and are entered into with a qualified organization that works with the landowner to define protection objectives and permissible land uses or restrictions. Since the easement is registered on title, it binds all owners of the land over the easement's term. The establishment of an easement may be complemented by the incentive framework. 2.3.2 The incentive framework To achieve healthy ecosystems, incentives are offered to promote the level of stewardship inside the legislative framework. At the provincial level, the incentive framework includes: MFTIP, the Conservation Land Tax Incentive Program (CLTIP) and Ontario Stewardship. Other programs and opportunities complement this framework and are accessible through conservation authorities, environmentally based non-government associations and municipalities. Managed Forest Tax Incentive Program The MFTIP was introduced for the 1998 tax year. The program is designed to increase landowner awareness of forest stewardship. Participants in the program range from Essex County landowners looking after the fragmented natural landscape, to owners of shoreland in Muskoka, some of whom also own cottages, to large forest companies in northern Ontario contributing to the northern economy. Landowners who apply and qualify for the program have their property classified under the MF property class set out in Ontario Regulation 282/98 of the Assessment Act. The eligible property is then taxed at 25 per cent of the residential tax rate established by the municipality. The minimum property size for the program is 4 hectares (9.88 acres). Landowners participating in the program are required to prepare a Managed Forest Plan for their property and have it approved by an individual designated by MNR as a Managed Forest Plan Approver. Section 3 contains details on MFTIP. Appendix B contains information on participation by county and municipality for 2004. Conservation Land Tax Incentive Program The CLTIP offers an exemption from property taxes to landowners who agree to protect the natural heritage feature(s) identified by MNR on their land. Activities that would degrade, destroy or result in the loss of the natural values of the site are not allowed. Eligible lands include:

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- provincially significant wetlands - provincially significant areas of natural and scientific interest - habitat of endangered species, as regulated in Ontario - lands designated as Escarpment Natural Area in the Niagara Escarpment Plan Eligible Conservation Land must be at least 0.2 hectares (0.5 acres) in size. For 2004, the program has over 14,700 properties participating thereby conserving some of Ontario’s most significant natural heritage features. As announced in the 2004/05 Budget, the Government intends to enhance the eligibility criteria for the CLTIP for land with natural and environmental significance owned by Conservation Authorities and conservation land trusts. These changes will be implemented through regulation for the 2005 taxation year, following consultation with stakeholders about appropriate definitions of eligible properties and administrative procedures for determining eligibility. Ontario Stewardship Ontario Stewardship was initiated in 1995 by MNR to encourage landowners to become more involved in stewardship activities on their property. Ontario Stewardship helps people find information, expertise, and funding to promote good management practices on private land. The program’s strength lies in its stewardship councils which are volunteer groups of landowners and land interest agencies. Each stewardship council works with a MNR staff person. Many stewardship councils have representatives from local land interest groups and the forest industry, but each council is reflective of the landscape it serves. Councils discuss, develop, and deliver local programs and projects. MNR provides funding to each council to be invested in community level projects which is often combined with funds from other sources. Examples of projects include workshops on woodlot and wetland management, stream restoration projects, endangered species conservation and community tree planting. Other initiatives MNR supports other initiatives that provide assistance to Ontario’s private landowners including: - technical and general interest publications. This includes silvilcultural guides and

Extension Notes. Silvicultural guides contain detailed information on managing different types of trees while Extension Notes are an easy-to-understand information series covering topics related to land, water, wildlife, trees and property management.

- through the Eastern Habitat Joint Venture Program, MNR and partners actively conserve important wetland and upland habitats for the benefit of waterfowl, other wildlife and people. Through this program, non-government partners offer technical and financial assistance to landowners for conservation projects.

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2.4 Other organizations involved in private land stewardship There are many groups and agencies that provide information to landowners who want assistance with land stewardship. For example, many of the 36 conservation authorities in Ontario provide services to landowners. In addition, non-governmental organizations such as OFA and OWA and the Federation of Ontario Naturalists provide support to landowners. Some municipalities have greening strategies and policies in their official plan to promote private land stewardship. Quite often these groups promote MNR initiatives and products to assist in achieving their mandate thus building value onto the framework provided by the province. For example: - Ontario Nature (previously the Federation of Ontario Naturalists) has a southern

Ontario Woodlands Initiative and are working in cooperation with municipalities and stakeholders to develop a Significant Woodland document to guide municipalities in the protection of the resource

- the Forest Conservation Bylaw Committee is assisting municipalities in developing tree cutting bylaws that define the minimum quality and standards of forest practices permissible

- forest certification initiatives, such as the Eastern Ontario Model Forest’s pilot project with the Forest Stewardship Council, are elevating private land forestry to internationally recognized standards

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3. Overview of the Managed Forest Tax Incentive Program (MFTIP)

The objective of the Managed Forest Tax Incentive Program (MFTIP) is to encourage forest stewardship. The program does this by providing a property tax reduction to participating landowners who agree to manage their forests in accordance with good forestry practices (as defined in the Forestry Act). The MFTIP is a voluntary program and was established in 1998 to recognize the societal and ecological benefit of these lands. The program is designed to offer a two-pronged benefit: - managed forests are assessed based on “current use” value, as opposed to

“current value”. - managed forest properties are taxed at a rate that is 75% lower than the rate

that applies to residential properties; MFTIP is a relatively inexpensive and vital policy tool to incent individuals to undertake forest stewardship on private lands. The MFTIP has grown to include over 10,000 properties with over 700,000 ha (1.78 million acres) in the program. Appendix B summarizes program participation by municipality for the 2004 tax year. 3.1 The Managed Forest Tax Rebate Program The Farm Tax Rebate Program (FTRP) was introduced in 1970 as a result of a 1969 Royal Commission. The original Managed Forest Tax Rebate Program (MFTRP) was introduced effective for the 1973 tax year. The Conservation Land Tax Reduction Program (CLTRP) was introduced effective for the 1988 tax year. Under the MFTRP, FTRP and CLTRP, landowners annually received rebate cheques from the province. The rebates provided were equal to 75%, 75% and 100% of property taxes respectively. Under the programs, landowners had to first pay their property tax before they were reimbursed. This was often cited as a financial burden for participants. The FTRP and CLTRP remained operational until they were replaced by incentive programs in 1998. The MFTRP was cancelled in 1993 for fiscal reasons but reintroduced for 1996 and 1997. In 1998, as part of a broader property tax reform, all three rebate programs were converted to tax incentive programs. Dedicated property classes were created for farms and managed forests. Rebate cheques were replaced by a direct reduction in property taxes paid or an exemption in the case of conservation lands.

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3.2 Current Roles and Responsibilities for MFTIP The Ministry of Natural Resources (MNR) is responsible for establishing and maintaining program requirements and landowner eligibility for the MFTIP. MNR has partnered with the Ontario Forestry Association (OFA) and the Ontario Woodlot Association (OWA) for the delivery of certain aspects of the program that focus on providing customer services to landowners. The Province, through the Ministry of Finance (MOF), establishes the policy framework for property assessment and property tax in Ontario. Ontario Regulation 282/98 of the Assessment Act sets out the eligibility criteria that govern how property is assigned to one of the seven standard property classes as part of the assessment process. This regulation details the eligibility criteria for inclusion of property in the managed forest property class. The Municipal Property Assessment Corporation (MPAC) is a municipal corporation which serves as the administrator of the assessment process. MPAC is responsible for determining the assessed value of all properties in Ontario and for ensuring that properties are fairly and equitably assessed in accordance with legislative and regulatory requirements. Municipalities are responsible for the administration of the property tax system, including billing and collection of both municipal and education taxes. 3.3 MFTIP eligibility and accountability mechanisms MFTIP is available to landowners who own four hectares or more of forest land, and who agree to prepare and follow an approved Managed Forest Plan for their property. 3.3.1 Eligibility criteria: Properties being entered into the MFTIP must be owned by a Canadian citizen(s) or permanent resident(s) or a Canadian corporation, partnership or trust. The forest must covers at least 4 hectares (9.88 acres) excluding residences and be on one property with one municipal roll number. The forest must include a minimum of: - 1,000 trees of any size per hectare (400 trees per acre); or - 750 trees per hectare (300 trees per acre) measuring more than 5

centimeters (2 inches) in diameter; or - 500 trees per hectare (200 trees per acre) measuring more than 12

centimeters (5 inches) in diameter; or - 250 trees per hectare (100 trees per acre) measuring more than 20

centimeters (8 inches) in diameter. The diameter measurements are taken 1.3 meters (4 ½ feet) off the ground.

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On an eligible forested property, some areas with less than the minimum number of trees may be entered into the program as long as this area does not make up more than 10% of the total eligible forested area by roll number. This partially recognizes the diversity of the forested landscape. Non-eligible lands Residences and landscaped areas are not eligible. At least one acre is deducted for residences as defined by MPAC. There is no area deduction for outbuildings used for forestry purposes. Property is not eligible for the MFTIP if: - it is subject to a Registered Plan of Subdivision or would be subject to a plan

if the subdivision came into existence before the Planning Act; - it is licensed under the Aggregate Resources Act, or is zoned for aggregate

extraction (gravel pits) in areas outside the jurisdiction of the Act; or - it is owned by the municipal, provincial or federal governments that pay grants

in lieu of taxes. Land owned by businesses, such as golf courses, campgrounds or ski hills, is not usually eligible. There are some exceptions. The MNR receives a list of properties with area in the Managed Forest property class on a quarterly basis from MPAC and validates the list to ensure that only eligible properties are in the program. 3.3.2 Accountability mechanisms The MNR is responsible for monitoring the approval of Managed Forest Plans to ensure that the approvals meet the requirements specified in the MFTIP Guide and in the Standards and Review Criteria for Managed Forest Plans. MNR sends yearly confirmation letters to all program participants, to confirm their participation in the program, and to remind them of their obligations. Managed Forest Plans entering the MFTIP undergo three stages of review: - the approval process conducted by the Managed Forest Plan Approver

(MFPA); - the administrative review conducted by the associations (OFA/OWA); and - the technical and ongoing eligibility reviews conducted by the MNR. The Approved Managed Forest Plan To ensure that public benefits are realized from MFTIP, landowners participating in the program are required to prepare a Managed Forest Plan for their property and have it approved by an individual designated by the MNR as a Managed Forest Plan Approver (MFPA). MFPA’s are independent contractors and are

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paid by the landowner for their service. Landowners develop a plan based on their interests and reasons for owning the property such as: - enhancing wildlife habitat - providing recreational opportunities - protecting environmentally sensitive areas - creating economic opportunities through harvesting forest products The cost of obtaining an approved Managed Forest Plan and the opportunity cost associated with managing according to “good forestry practices” can be significant. Management activities on properties in the MFTIP are to be carried out according to good forestry practices as defined in the Forestry Act. To obtain MFPA status, contractors write an exam that tests their knowledge of forest management and the requirements of the MFTIP. MNR has established the MFPA Board of Examiners which sets the exam. The Board of Examiners also monitors the MFPA program. To be approved, plans must meet the requirements specified in the MFTIP Standards and Review Criteria for Managed Forest Plans which have been developed by MNR. The purpose of the Standards and Review Criteria is to: - document requirements of Managed Forest Plans for entry into the MFTIP - present a quantitative assessment system by which Managed Forest Plan

approvals will be reviewed by the MNR - act as a procedure guide to assist MFPA’s in carrying out approvals In order to approve the plan the MFPA must: - visit the property and verify the forest is eligible - review all sections of the Managed Forest Plan to ensure it meets standards

as contained in the Standards and Review Criteria document - ensure that proposed management activities are in accordance with good

forestry practices and are realistic and achievable - complete an Approval Form and associated Area Verification Form(s) The MFPA may also be involved in the preparation of the entire plan or in assisting in areas such as preparing maps and inventories or by making specific recommendations regarding appropriate management activities. Administrative reviews by the associations Approved Managed Forest Plans are forwarded to OFA or OWA for processing. The associations review the following items from the approved Managed Forest Plan, ensuring that: - the plan is approved by a MFPA and has the required application forms; - the Approval Form(s) and Area Verification Form(s) have supporting

documentation (i.e., Notice of Property Assessment); - a map is included that shows the area to be reclassified as Managed Forest

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The Approval Form(s) and map(s) are forwarded by the associations to MPAC. In addition to this processing function, the associations also serve as “points of contact” for landowners and the public by answering questions on MFTIP, distributing MFTIP information, and responding to resource management questions. Technical reviews by MNR MNR staff monitor the approval of Managed Forest Plans to ensure that approvals meet standards. Approvals are scored section by section within defined parameters. Detailed descriptions of the scoring are incorporated in this document under the Review Criteria heading. In the scoring, there are two categories of concern - minor deficiencies and major deficiencies. Minor deficiencies impact the quality of the plan but do not bring the overall integrity of the plan into question. Minor deficiencies are dealt with by deducting points from the section where the weakness was noted. Excessive deduction of points may indicate that a poor approval was carried out by the MFPA. Major deficiencies bring the overall integrity of the plan into question and occur when a Mandatory Item was not addressed. Approved Managed Forest Plans must have no major deficiencies and a minimum score of 75%. The Board of Examiners administers a progressive discipline process for MFPA’s who approve plans that have deficiencies. Eligibility reviews by MNR The MNR is responsible for ensuring that only eligible properties are in the MFTIP and that activities on these properties are in accordance with good forestry practices. The MNR carries out both reactive and proactive eligibility reviews. Reactive reviews occur when a complaint is received by MNR. Proactive reviews are carried out by MNR’s MFTIP Administrator or by MNR district staff. If MNR finds that a property has forfeited its eligibility for the MFTIP, it may remove the property from the MF property class and the owner may have to repay property taxes for a period of up to 5 years (Section 33(1)5 of the Assessment Act). 3.4 Reviews of the MFTIP and property assessment system Since the inception of the MFTIP, numerous proposals for program refinements have been recommended by landowners, stakeholders and provincial staff. For example, with the participation of client and stakeholder representatives, MNR undertook an internal program review of the MFTIP in 2000 to assess if it was

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efficiently and effectively achieving its objectives. The review identified program enhancements that, if implemented, would provide some program delivery efficiencies and better recognize the ecosystem. The means of implementing many of these suggestions would be to amend O.Reg 282/98, which defines eligibility criteria for managed forest properties. Proposed changes to O. Reg. 282/98 include modifying program documentation to better encourage stewardship planning and changing the application requirement and plan period to every 10 years to reduce landowners’ costs. Other suggestions include a broader recognition of the diversity of the forest by expanding the eligibility criteria to include fragile components of the ecosystem such as non-provincially significant wetlands, some of which were excluded because of administrative definitions. A summary of recommendations from the program review is found in Table 3-1. Table 3.1 Summary of proposed changes to Ontario Regulation 282/98 (pertaining to the MFTIP)

Items proposed for change

Current O.Reg. 282/98 of the Assessment Act and MNR staff recommendations

Application requirement Current: Yearly Recommendation: 10 years with reporting requirement at the 5 year period

Canadian ownership Current: Insufficient definition Recommendation: Clarify co-ownership requirements

Right to inspection Current: Allows for MNR to inspect while property is in the MFTIP Recommendation: Allows MNR to inspect the property after it has left the MFTIP

Application deadline Current: August 31st of the year prior to taxation Recommendation: July 31st of the year prior to taxation

Continuing eligibility when property changes hands

Current: New landowner must apply (no specified period) Recommendation: New landowner must apply within 90 days of ownership change

Mitigating circumstances Current: Mining and Lands Commissioner does not have authority to include properties where the application deadline is missed Recommendation: Provide authority to the Mining and Lands Commissioner

Open areas Current: 10% of eligible forested area allowed Recommendation: Areas that cannot support trees may be included along with 10% of eligible forested area

Plan submission Current: Application must be accompanied by an approved Managed Forest Plan Recommendation: Portions of plan required for program administration be submitted

These identified proposals for future changes to O.Reg 282/98 should be reviewed by the working committee (recommendation #7), with recommendations proceeding to the Minister of Finance for his consideration.

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4. Current Use valuation for the MF property class 4.1 Current Use Assessment Effective for the 1998 taxation year, the entire property tax system was restructured to move toward a current value assessment system. For the first time, all properties in Ontario were reassessed based on up-to-date values with a common valuation date. All property was classified into one of seven standard property classes, one of which was for managed forest properties. The property tax system specifically recognized the importance of private woodlots. MFTIP replaced the previous rebate program. Under MFTIP, eligible managed forest properties are intended to receive a two pronged benefit. Managed forest properties are to be assessed based on their current use and taxed at a rate that is 75% below the municipal residential tax rate. The only other property classes to receive similar assessment treatment are farms and conservation lands. (Conservation lands are tax exempt). A current-use approach establishes a value for a property based on its actual use, not on potential uses the property could have if developed to its full potential (i.e., highest and best use). Land eligible for the MF property class is assessed under Section 19(5.2) of the Assessment Act:

The current value of land that is conservation land or managed forests land as defined in the regulations shall be based only on the current use of the land and not other uses to which the land could be put.

4.2 Current Use Assessment - Farms The current use assessment of a farm is based on farmer to farmer sales. For the purposes of determining the current value of farm lands, consideration is given to the current value of the lands and buildings for farm purposes only. Consideration is not to be given to sales of farms to persons whose principal occupation is other than farming. It is recognized that the value of a property as a farm is heavily influenced by its soil productivity. For this reason, MPAC uses six soil classes that depict the productivity of the land to categorize properties within the farm class. Class 1 is the most productive with class 6 representing the least productive farming land.

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The determination of which class or classes apply to a particular property is determined by having an assessor visit the property and point the land. In this way, variables such as soil quality, drainage, mineral composition and climate which affect the productive capacity of the land are factored into its valuation. Productivity is important because it reflects the ability of the site to produce revenue, albeit on a periodic basis. It is important to note that this assessment methodology for farm properties is still required to produce assessment values which reflect sales values for farmer to farmer sales. Table 4.1 Farmland property classes (Source – MPAC)

Soil Class

General Description

1 This land has good drainage, good loam texture and is nearly level. No physical limitation to a high level of farm production exist

2 This land is subject to moderate limitation in use for farm crop production. These limitations may be wetness, rolling topography, moderate erosion, moderate stoniness, or a combination of two or more factors.

3 Similar handicaps to those of Class 2 above only to a greater extent. 4 This land is subject to severe limitations for use in farm crop production

such as: too susceptible to erosion, too stony, or too poorly drained to be cultivated frequently.

5 This land is generally unsuited to cultivation but can be used for grazing. It is subject to similar but more severe limitations than those of Class 4.

6 This land should be kept in vegetation because of steepness of slope, severe erosion, shallow soil or other features that make cultivation impractical. Suitable for moderate grazing.

At the time that MFTIP was established, limited data was available on managed forests property land values. MPAC used a subset of farm land rates (classes 4, 5 and 6) as a proxy for the valuation of managed forests. Farm land rates were selected as the closest like property that was also assessed based on current use. MPAC has never pointed the land for managed forest properties (i.e., physically walked around properties and tested soil to assess productivity), which is a requirement for the determination of all six farmland classes. 4.3 Use of Proxy Farm Land Rates In 1998, the Government of Ontario introduced substantial reforms to the property tax system. In order to provide for fairness and consistency, properties were to be reassessed at their current value based on a uniform valuation date.

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The new property tax system specifically recognized the importance of farms, conservation lands and private woodlots by creating distinct property tax classes with a lower tax rate, as well as by providing for “current use” assessment in place of “current value” assessment. Current use assessment differs from current value assessment in that properties are assessed at their value in their current use, such as farms or woodlots, and not at their potential value if they were to be sold for a different use, such as residential land. From 1998 to 2002, managed forest properties were assessed using a subset of farm land values (specifically, acreage rates for farm land in classes 4, 5, and 6). In the absence of better available data in these years, farm land values were used as a proxy for managed forest property land values, based upon the similarity of land values at that point in time. Over time, MPAC has been able to accumulate and evaluate data on managed forest properties. Through ongoing sales analysis, it became evident to MPAC that the values of managed forests and farms have not kept pace with each other. Sales data confirm that managed forest properties are valued differently from farms. In order to maintain consistency with the broader legislative and assessment policy framework, MPAC felt that the continued application of the farm rate proxy would be inappropriate. In 2003, MPAC began to implement new valuation procedures for managed forests based on a sales comparison of other managed forest properties in a given area. Implementation of the new valuation methodology was gradually implemented over two reassessments, with all eligible managed forest properties assessed based on a sales comparison approach by the 2004 reassessment. 4.4 Description of valuation procedures for the MF property class Property 100% eligible for the MF property class (non waterfront) The following example outlines the current use valuation for a managed forest property which is 100% eligible for the managed forest property class. Step 1: MPAC analyses sales of 100% managed forest properties within the market area (recognizing natural boundaries) within the valuation base year. Managed forest property sales are analysed within ranges of sizes of parcels, from which typical assessed values are assigned to each property. For example, in Central - North Ontario (MPAC customer service area includes Northumberland County through Parry Sound District), the median assessment for 10 acre parcels is approximately $12,540 or $1,254 per acre. The median assessment for 100 acre parcels is approximately $26,000, or $260 per acre.

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Vacant land parcels on waterfront are tracked separately. If there are insufficient sales to establish a statistically significant sample size, more sales are selected. Step 2: To get more sales, the number of years for sales comparisons and the market area is broadened. Time adjustments are used to achieve consistency with the valuation base year. The number of eligible sales is expanded by taking into account incremental properties while staying within the same property environment (that is, continuing to look at only eligible managed forest sales). If there are still insufficient sales to establish a statistically significant sample size, MPAC moves to include the next most similar property type. For managed forests, the next most similar property type is vacant land. Step 3: Supplemental data from similar vacant lands may be used to broaden sales data comparisons. An investigation is undertaken to determine if development activity or potential activity is part of the vacant land sale (that is, in order to exclude any market value sales impacts). If any development activity or potential activity is found, the sale is not included in the sample set. The expansion to include vacant land sales is typically sufficient to reach a statistically significant sample size. Step 4: After establishing the managed forest values, the assessment to sales ratio is used to compare the assessed values against the actual sales of managed forest properties. Adjustments by property code can then be made if values are over or under assessed. MPAC has indicated that the use of the next closest “like property” where there are insufficient sales in a particular area is not unique to managed forest properties. Step 4 is an important check to confirm that the inclusion of vacant lands as the next closest like property does not influence the assessment values produced for managed forest properties. Managed forests on waterfront For the first province-wide reassessment in 1998, it was decided by MPAC that managed forests along waterfront would be assessed at a higher rate to reflect their higher market value. The “band method” was applied to increase the value on the first 208 feet of forested land with water frontage. Soon after the 1998 reassessment, managed-forest owners expressed concern about the impact of the band method on their waterfront properties. Some owners successfully appealed to the Assessment Review Board, which stated the band method was not appropriate because it did not reflect current use. However, the Board issued inconsistent rulings on this issue. For the 2003

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reassessment, MPAC re-evaluated its managed-forest assessment methodologies, and discontinued the use of the band method for valuing waterfront property. MPAC separates the sales of vacant land parcels that are on waterfront, from those that are not on waterfront. Typically, managed forest waterfront land sells for more than non-waterfront property. The model outlined above is also used for waterfront properties, based on the sales of waterfront properties only. Mixed-Use Properties Around 60% of properties in the MFTIP are mixed –use properties and are therefore less than 100% eligible for the MF property class. Some of these properties have a home or cottage. Owners of mixed-use properties expressed concern that the portion of their property that was not eligible for the MF property class (e.g., houses and abandoned fields) had high assessments relative to the total assessment on the property (a larger proportion of the total assessment was assigned to the non-MF class). This reduced the tax incentive in the MFTIP. For the 2003 tax year, MPAC re-examined its apportionment methodology for mixed-use properties. If a managed forest property has a home or cottage located on the same parcel of land, then MPAC specifically looks at the sales of properties with similar attributes. One acre is generally assigned to the residential structure. The assessment is then partitioned between the managed forest property class and the other property class (i.e., typically residential), using the same rate per acre throughout the parcel. For waterfront properties, the discontinuation of the band method whereby the shoreline value was generally attributed to the cottage, has resulted in a distribution of the higher waterfront value across the entire property. As a result, the new apportionment for mixed-use properties shifts a larger proportion of the total assessment, including the waterfront value, to the managed forest component. For mixed-use properties, the apportionment methodology used by MPAC appears to have had favourable results for landowners in that a lower amount of the total assessment is attributed to the non-managed forest portion of the property, while a higher amount of the assessment is attributed to the managed forest portion of the property, where it is then taxed at a lower rate. Recently, the value of waterfront property has escalated at a faster pace than the value of non-waterfront properties. The inclusion of mixed-use waterfront properties (typically including a cottage) within MFTIP permits the influence of waterfront to dominate the value of mixed-use properties. As the value of waterfront properties escalate, so too does the value of managed forest properties, which include cottages. If this trend continues, the benefit of MFTIP participation to mixed-use property owners with cottages would become more

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attractive, as the value of the tax incentive grows in proportion to the growth in value of the property. 4.5 2004 Reassessment Impacts All properties in the province were reassessed for the 2004 taxation year based on a June 30, 2003 valuation date. The market value for the 2004 taxation year reflects two years’ worth of market value changes because the date used for valuation purposes for 2004 was updated from June 30, 2001 to June 30, 2003. On a province-wide basis, the average property values in the managed-forest property class increased 18% (14% for non-waterfront ). This compares to an increase of 13% province-wide for the residential property class and 8 % for the farmland class. The average for all property classes is about 12%. The previous reassessment was for the 2003 taxation year based on a June 30, 2001 valuation date. The 2003 reassessment impacts also reflect the change in value over a two year period, from June 30, 1999 to June 30, 2001. Table 4.2 summarizes assessment increases by property class along with the compound increase over the last two reassessments (i.e., reflects change in value over the four year period, June 30, 1999 to June 30, 2003). Table 4.2 2003 and 2004 reassessments impacts

Property Class 2003 2004 Compound increase Residential 11% 13% 25% Multi-Residential 12% 12% 24% Commercial (Broad) 12% 5% 18% Industrial (Broad) 18% 7% 26% Farmland 18% 8% 27% Managed Forest 22% 18% 44% Average increase 12% 12% 25% Preliminary estimates based on MPAC's Market Comparison Profile. Information has been filtered to remove anomalous properties, new construction, payment-in-lieu, and farmland awaiting development. The above-average assessment increase for the MF property class reflects the one time adjustment in the transition from farm land rates to the use of sales comparisons. MPAC has indicated that the transition from farm land rates to sales comparisons is now complete for most, if not all managed forest properties, and that there should be little if any remaining impact of the transition on future assessments.

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EBR Review R2003005, June 2004 25

MPAC aims to achieve a .90 – 1.10 standard for its assessment to sales ratio. For the 2004 reassessment, managed forest properties are around 94%, suggesting that in aggregate, these properties were slightly under-assessed relative to sales values. Table 4.3 summarizes preliminary data, provided by MPAC, which compares average 2004 regional acreage rates for managed forest properties and farms. For the average MF acreage rate, the assessed value for all eligible property in the MF property class for the MPAC Region was summed and then divided by the total area in the region. For the farm land rates, acreage rates are expressed as a range given that farm properties are categorized into one of six subcategories. Table 4.3 Average $/acre rates for properties in the MF property class as compared to farm land rates

Average farm land rate by productivity class (Class 1-6)

($/acre)

MPAC Region

Average MF acreage

rate ($/acre) 1 2 3 4 5 6

South West 930 4,550 3,775 3,200 1,500 1,000 725 Central-South 1650 4,100 3,400 2,900 1,350 900 650

GTA 2800 6,000 4,975 4,225 1,975 1,300 950 Central-North A 400 2,500 2,075 1,750 825 550 400 Central- North B 400 1150 950 800 375 250 125

East 420 1,575 1,300 1,100 525 350 150 North 260 725 600 500 225 150 75

The data provided by MPAC indicates the average MF acreage rate is generally in line with the class 4-6 farm land rate soil classes that were previously used to determine assessed value (with the exception of GTA and South-Central, which lie slightly above class 4 rates). While table 4.3 is intended to illustrate average acreage rates, it does not reflect the full range of acreage rates that are applicable to individual properties. 4.6 Current Property Taxation Levels for Managed Forest Properties According to available data, there were 10,385 eligible managed forest properties in Ontario for the 2003 taxation year, with a total assessment of approximately $550 million and an average assessed value of about $55,000 per property. Using 2003 tax rates, managed forest properties experience an average tax of $168 per property. The average value of the MFTIP incentive is $501.

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EBR Review R2003005, June 2004 26

Based on available data, it is estimated that the average annual property tax bill in 2004 for a managed forest property will be close to $230. The average value of the MFTIP incentive is estimated to be $696. In order to determine the implications of MPAC’s updated valuation procedures on the assessment of properties in the MF property class and resulting property tax implications, MOF provided the following analysis. For 2003, this analysis was based on the assessment roll for the 2003 tax year multiplied by the applicable municipal and education tax rates. The 2004 tax impacts are based on the assessment roll for the 2004 tax year and revenue neutral tax rates. As this exercise is an attempt to isolate the reassessment impacts, the 2004 tax impacts do not take into consideration any potential municipal tax increases.

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EBR Review R2003005, June 2004 27

Figure 4.1 Distribution of Managed Forest Taxes for 2004 (Managed Forest Only)

Figure 4.1 illustrates the property tax incidence for pure managed forest properties and the managed forest components of mixed-use properties. Property taxes for the majority of property owners fall within the $50 to $250 range. Fewer than 10% of property owners will face a tax responsibility greater than $500.

Distribution of Managed Forest Taxes for 2004(Managed Forest Only)

0

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$250 to$500

$500 to$1000

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$2500 to$5000

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> $10000

Taxes

# Pr

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EBR Review R2003005, June 2004 28

Figure 4.2 Distribution of Managed Forest Taxes for 2004 (Managed Forest + Residential Component)

Distribution of Managed Forest Taxes for 2004(Managed Forest + Residential Component)

0

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< $50 $50 to $100 $100 to $250 $250 to $500 $500 to $1000 $1000 to $2500 $2500 to $5000 $5000 to $10000 > $10000

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Figure 4.2 demonstrates the total property tax incidence for all managed forest properties, including those that contain both a managed forest and residential or other components. The tax distribution stretches across a wider range, with peaks in the $100 to $250 range and the $1,000 to $2,500 range. As might be expected, the higher tax responsibility generally reflects the inclusion of property taxes on the residential or other component of the property.

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EBR Review R2003005, June 2004 29

Figure 4.3 Comparison of 2003 and 2004 Taxes for Managed Forest Properties

Comparison of 2003 and 2004 Taxes for Managed Forest Properties

0

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2003 2004

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es ($

)

Managed Forest Residential (For mixed-use properties)

$1.7 M $2.4 M

$15.2 M$12.4 M

$16.9 M

$14.9 M

Figure 4.3 illustrates that although there has been a modest increase in the tax revenue from managed forest properties ($1.7 million rising to $2.4 million), the overall property taxation on properties with a managed forest component has fallen from $16.9 million to $14.9 million. This result can be attributed to the more favourable apportionment methodology adopted by MPAC that results in a greater proportion of assessed value being attributed to the managed forest portion of mixed use properties, which is taxed at a lower rate. Additionally, Figure 4.4 indicates that managed forest property tax is a relatively small component of the overall property taxes on properties which contain a managed forest portion.

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EBR Review R2003005, June 2004 30

Figure 4.4 Managed Forest Tax Increase 2003 to 2004

Managed Forest Tax Increase2003 to 2004

0

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Decrease 0 to $50 $50 to $100 $100 to $250 $250 to $500 $500 to $1000 >$1000

Projected Tax Increase ($)

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Figure 4.4 indicates that over 6,000 of the properties with area in the MF property class saw a decrease in taxes for 2004. Approximately 80% of these properties are mixed-use and it is likely that much of this decrease is attributable to the change in apportionment on these properties. Of the approximately 4,000 properties experiencing a tax increase in 2004, more than 2,700 properties will experience a tax increase of less than $100. An additional 1,050 properties will face a tax increase of between $100 - $500. Approximately 375 properties will experience a tax increase greater than $500.

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EBR Review R2003005, June 2004 31

4.7 MFTIP Participation – Net Impact Table 4.4 summarizes program participation by year including the number of properties and the total acreage participating and was provided by MNR. The reporting date is July of each year. 2004 data was produced in May. Table 4.4 MFTIP participation by year (Source: MNR)

YEAR Number of properties

Percentage increase in number

of properties

Area (Millions of

acres) 1998 7,957 --- --- 1999 8,698 9.3 1.46 2000 9356 7.6 1.54 2001 9,289 -0.7 1.51 2002 9,899 6.5 1.75 2003 10, 385 4.9 1.78 2004 10, 458 0.1 1.78

The number of properties in the MFTIP has grown by more than 31% in the period 1998-2004. This equates to an increase in area of approximately 22% over the same period. (note: 1998 program acreage is not reported because of changes in program criteria associated with the transition from the rebate program). There was a decrease in participation in 2001 in both number of properties and acreage participating. 2000 marked the five year anniversary of the program. This initiated a renewal process for the first group of woodlot owners who entered the program in 1996 in the rebate program (see Section 3.1). To maintain eligibility in the program, these property owners were required to submit a new management plan in July 2000. Out of the original group of landowners that entered the program in its inaugural year, 84% submitted a new management plan and recommitted to continue their participation in the program. Managed Forest Plans due for renewal in 2002, 2003 and 2004 plans were extended on a yearly basis, to be responsive to the uncertainty surrounding the apportionment of mixed-use properties and the proposal for increasing the plan period from 5 to 10 years. This may have contributed to lower levels of attrition during the last three year period.

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EBR Review R2003005, June 2004 32

Figure 4.5 Managed Forest Properties

Area of Managed Forest Properties

1.4

1.5

1.6

1.7

1.8

1.9

2

1998 1999 2000 2001 2002 2003 2004

Year

Are

a (M

illio

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N/A

Number of Managed Forest Properties

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1998 1999 2000 2001 2002 2003 2004

Year

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4.8 Municipal perspective Prior to Local Services Realignment (LSR), managed forest properties were taxed at the residential class rate by municipalities and school boards. The Province then rebated 75% of municipal and education property taxes directly to taxpayers. Under Local Services Realignment and property tax reform, eligible managed forest properties were taxed at 25% of the residential tax rate, rather than the previous rebate program. To mitigate the impact of this change, the estimated impact on municipalities was included as part of the Community Reinvestment Fund (CRF) calculation. The transfer of rebate costs to municipalities was captured in the CRF calculation through two components: Component 1 - Municipal tax: This portion of the rebate is calculated as 75% of the taxes paid in 1997, for municipal purposes, on properties classified as managed forest.

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EBR Review R2003005, June 2004 33

Component 2 - Education tax: The portion of the rebate in respect of school board taxes was included in the calculation of the transferred residential education tax room. That is, 1997 education taxes from managed forest properties were reduced by 75%. From this starting point, municipal eligibility for CRF funding has been increased to reflect the growth in the MFTIP program. Municipal funding was increased to reflect the 1999 and 2001 reassessments. Given the lag in CRF funding updates to reflect final program data, growth in MFTIP since 2001 has not yet been recognized in CRF funding. The province is currently reviewing the CRF. It should be noted that not all municipalities receive CRF funding, although many of the municipalities which have a high proportion of managed forest properties do. Municipalities have expressed concern about the growth in the MFTIP program and the implications for their revenue base in the long term. It is expected that municipalities would be concerned about any change that would reduce the property tax liability of one property class, as it must be redistributed to other property classes within the municipality in order to maintain the same level of revenue. If the assessment on managed forest properties were to be further reduced, this would result in a tax shift to other property classes. Concerns have also been raised related to the eligibility of “cottagers” under MFTIP. Abutting landowners would be subject to property taxes based on the current value of the property and taxed at the full residential tax rate. There is some perception that the MFTIP may be a property tax shelter for private land owners who undertake no additional forestry preservation other than securing a Managed Forest Plan. Municipalities do have optional mitigation tools to make reassessment-related tax changes more manageable for managed forest taxpayers. Municipalities could choose to implement a phase-in of tax changes over a period of up to eight years following a reassessment (residential, farmland, and managed forest to be considered one class for phase-in purposes). In order to do this, the municipality is required to phase-in tax changes for the residential, farmland and managed forest property classes. Additionally, municipalities may provide tax relief to individual managed forest property owners in cases of hardship.

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EBR Review R2003005, June 2004 34

5. Potential harm to the environment

An important consideration in an EBR review is if a policy, act, regulation or instrument has potential to harm the environment. As identified in Section 1, the applicants have raised a number of anticipated harmful environmental impacts as a result of the change in assessment methodology. To assist in responding, the applicants’ concerns have been grouped into broader categories. 5.1 Reduction of forest cover and associated benefits Applicants’ concerns: - reduction of forest cover that protects ground water and wildlife - a significant loss of green space due to development pressures - higher incidence of intensive harvesting practices to offset tax burden It is doubtful that the change in MPAC valuation procedures will result in an immediate decrease in participation in the MFTIP. Although some landowners have expressed concern with increases in assessments, they will continue to realize a 75% tax rate reduction if they continue to participate in MFTIP. Landowners will need to individually determine if this tax incentive is sufficient to justify their participation in MFTIP. As property assessments increase, the 75% reduction in property taxes could make MFTIP more attractive for landowners and actually increase landowner participation. Each landowner has their own unique set of circumstances, interests and ability to absorb increases to carrying costs for their property (i.e., property taxes). An amount that appears inconsequential to one landowner may impact another significantly. While the current incentive may continue to attract program participants, some participants may feel it necessary to sell the land, sever the land into smaller pieces, or as an interim measure practice poor forest management practices (i.e., heavy cuts). MFTIP is a voluntary program which encourages stewardship by providing an incentive in reduced property taxes. In areas where property values are increasing, a reduction in taxes alone may not be a significant enough incentive to offset financial gains by converting the land to other uses. Even if the landowner intends to sell, sever or practices poor forest management, their ability to do so may be constrained the regulatory framework (see Section 2). The planning system may restrict a landowner’s ability to develop. Municipal tree cutting bylaws may restrict a landowner’s ability to maximize short term revenue by harvesting all mature trees on their property. MFTIP is one of many tools to achieve the government’s broader green agenda.

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5.2 Implications to stewardship objectives Applicants’ concerns: - negative impact on the stewardship objectives of many provincial initiatives aimed

at conserving natural forests such as Oak Ridges Moraine Plan, Smart Growth Initiatives and programs of NGO’s that use MFTIP to implement objectives

- discouraging the intrinsic stewardship ethic of forestland owners in Ontario - impacts to MFTIP which is the only program providing private forest landowners

with incentives to practice sustainable forest management As discussed above, the review cannot conclude that the change in MPAC valuation procedures will result in an immediate decrease in participation in the MFTIP or undermine stewardship objectives. MFTIP is only one of a number of programs available to address stewardship objectives and conservation of forested areas. Although some landowners have expressed concern with increases in assessments, they will continue to realize a 75% tax rate reduction as an incentive to participate in MFTIP. 5.3 Land use conversion and afforestation Applicants’ concerns: - accelerated conversion of forestland to farmland and a disincentive to convert

farmland to forestland (i.e., afforestation of marginal lands) - risking losing land that supports rural economic activities such as fishing and

forestry and many of the provincial Areas of Natural and Scientific Interest Land use conversion pressures exist for a variety of reasons (e.g., economic and financial circumstance of the owner, broader market and trade conditions, development and planning pressures, and other fixed costs). MFTIP is only one of a number of tools to that can assist in mitigating some land use conversion pressures. However, MFTIP is a voluntary program and, on its own, shouldn’t be expected to resolve broader societal concerns with conserving greenspaces in high development areas of the province. Section 2 provides an overview of various programs and regulatory framework that are available for consideration. Tree planting and encouraging afforestation of marginal lands can provide important environmental benefits. Currently, woodlots on farms are assessed differently than similarly productive managed forests. The data provided by MPAC (see Table 4.3) indicates the average MF acreage rate is generally in line with the class 4-6 farm land rate soil classes that were previously used to determine assessed value with the exception of GTA and South-Central, which lie slightly above class 4 rates. The data is limited and the new procedures have not been in place long enough to provide reliable trend data. However, it does suggest that longer term monitoring would be in order.

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Assuming that the change in assessment methodology may lead to a divergence in the assessments derived using farm land rates and valuation procedures for the MF property class and a disincentive for a tree planting, the following considerations should be noted: - tree planting on farms that continue to be farmed should not be impacted as farm

land rates are expected to continue to be applied to these properties - tree planting on properties already in the MFTIP should not be impacted because as

a result of planting, more lands could be brought into the program and realize the 25% tax rate.

- retiring low productivity farms and converting to forest could be impacted as the land would no longer be classified as a farm (i.e., no longer be assessed using farm land rates) and could become eligible for entering the MFTIP. Depending on whether there is a divergence in taxation between farm lands and managed forests, an unintentional barrier could be created which may discourage tree planting and afforestation on these types of lands.

It can not be concluded that the new procedures will result in harm for the reasons discussed above. Net participation and other program success parameters in MFTIP should be monitored over time and program reviews undertaken should desired outcomes not be achieved.

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EBR Review R2003005, June 2004 37

6. Future considerations

The Greenbelt Task Force’s vision for permanent greenbelt protection in the Golden Horseshoe looks towards a permanent and sustainable legacy for current and future generations and recognizes that creating a greenbelt will make communities stronger and more liveable. MFTIP is viewed as one of several important tools that can assist in encouraging the conservation of greenspaces, particularly in southern Ontario. As work on this new initiative progresses, it is expected that MFTIP will be revisited in the context of what the program can contribute to the broader objectives of greenspace conservation. To be responsive to concerns raised with implementation issues associated with the change in assessment methodology, a committee is being proposed to oversee implementation of the recommendations in this report (see Recommendation # 6). It is anticipated that this committee will be helpful in providing input as the “greening initiatives” for southern Ontario progress. As part of the EBR Review, approaches used for woodlot taxation in other jurisdictions were looked into. Hibbard et al (2001)5 have produced a comprehensive review and analysis of property taxation of private forests in the United States. This review identified five major categories of forest property tax incentive programs: - ad valorem programs tax forestland based on its fair market value (full or a

percentage thereof) - current use programs determine the land’s taxable value according to its use in a

forested condition, as opposed to its “highest and best use” [which is the approach used in Ontario]

- flat tax programs levy a fixed annual tax per acre - exemption programs that excuse forest land from property taxation altogether - hybrids of current use and ad valorem values are used to derive a taxable value for

forested property The review by Hibbard et al (2001) is available online at: http://www.cnr.umn.edu/FR/publications/staffpapers/Staffpaper150.PDF. This information is noted in this review. As a starting point, this report provides good information on incentive programs that may be helpful in future considerations. However, there are challenges in comparing the tax burden in different jurisdictions because of the variation between programs and the different mechanisms by which the incentive is realized.

5 Calder M. Hibbard, Michael A. Kilgore, Paul Ellefson. 2001. Property Tax Programs Focused on Forest

Resources: A Review and Analysis. University of Minnesota.

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7. Summary of Findings and Recommendations On September 22, 2003, the Ministry of Natural Resources (MNR) received an application for review from the Environmental Commissioner’s Office (ECO) requesting a review of the Managed Forest Tax Incentive Program (MFTIP). On December 30, 2003, MNR informed the applicants that an EBR Review would be undertaken. 7.1 Review Findings This report is prepared in response to requirements under the EBR regarding applications for review. The focus of the application request is a change in assessment methodology for managed forests by the Municipal Property Assessment Corporation (MPAC) and alleged potential impacts on the environment. This change in assessment procedures has resulted in a considerable number of landowner complaints in response to perceived and real increases in assessment values for some parts of Ontario. The request submitted to the Environmental Commissioner by members of the public for an EBR review of the change in assessment procedures is one manifestation of these concerns. During this review, the issues raised by the applicants and to broader concerns raised by landowners, were considered by examining: - whether the assessment methodology change initiated by MPAC was appropriate - the communication to landowners with respect to the assessment methodology

change - the tax impacts arising from the assessment methodology change - whether environmental harm has resulted, or could result, from the change in

assessment methodology - whether changes should be introduced to the MFTIP program by the Ministry of

Natural Resources and the Ministry of Finance. 1) Was the assessment methodology change initiated by MPAC appropriate? MPAC is a municipal corporation that is mandated to undertake the assessment of properties throughout Ontario for property tax purposes. MPAC operates under the legislative framework of the Assessment Act. MPAC is legally mandated to establish property assessments that reflect current value, and for certain defined properties, current use value. To do so, MPAC relies on three common methods of property assessment: - sales values (used for most properties, including residential properties)

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- replacement values (commonly used for industrial properties) - capitalized income values (commonly used for commercial or income generating

properties) In all cases, MPAC’s choice of assessment methodology is intended to fulfil the requirements of the Assessment Act by establishing current value (or current use value). Results from any assessment methodology must be regularly compared with available sales data for comparable properties to confirm that assessed values track sales values within a defined tolerance. MPAC’s performance standard for assessment to sales ratios is .90 to 1.10. It is acknowledged that from 1998 to 2002, managed forest properties were assessed using a subset of farm land values. However, it is incumbent upon MPAC to periodically review its existing assessment methodologies, and refine and update where necessary to provide the most accurate reflection of the value of properties. The integrity of the property tax system rests on the equity and transparency of the property assessment system. Under Ontario’s Assessment Act, properties must be valued based on their current value or current use value, and not on the basis of characteristics of properties in another, unrelated property class. To ignore the actual current value or current use value of a property in favour of a proxy value, particularly where sales data is readily available, would be inconsistent with the Assessment Act and would establish a new and inappropriate precedent in property tax policy. The establishment of current value or current use values for properties through the property assessment process is essential in creating a foundation for fairly and transparently distributing municipal and education property tax responsibilities amongst property owners. For these reasons, it is felt that MPAC acted appropriately in identifying the divergence in land values between farm and managed forest properties, and in creating a new valuation model that develops assessed values for managed forest properties based on the sales of managed forest properties within defined areas of the province. 2) Was the communication to landowners regarding the change in assessment

methodology appropriate? It is acknowledged that the change in assessment methodology was not communicated by MPAC to MFTIP property owners in advance or as it was implemented. This lack of communication was particularly unfortunate as property owners often received assessment notices with significant increases without an accompanying explanation or outreach effort. The responsibility to communicate to landowners regarding assessment methodology was particularly important given the widespread understanding that the government had committed to a principle of “assessing managed forest properties in a manner similar to (sometimes expressed as “identical to”) farmland.” Program materials for the MFTIP

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program included this wording, and it was commonly understood by stakeholders and property owners to reflect a commitment to use acreage rates for farms as a proxy for managed forest land values. Although this wording was felt to be accurate by provincial staff, given the terms of the Assessment Act which specify that current use methodology was to be applied to managed forest properties, similar to the methodology applied to farmlands, it is understandable that property owners took this commitment at its plainer meaning. Although Ministry of Finance and Ministry of Natural Resources staff investigated landowner complaints when these first arose with the 2003 reassessment, it was not initially clear to staff that a new assessment methodology was primarily responsible for the increases in property assessments being experienced by landowners. In fact, these increases were initially attributed to changes to the apportionment method of attributing property value to residential and managed forest components of mixed-use properties. (Apportionment changes were initiated by MPAC to clarify the component land values for municipal tax administration purposes. This apportionment methodology was refined through the 2003 Request for Reconsideration Process and for the 2004 reassessment in the favour of landowners.) When analysis of the 2004 reassessment data was completed, the assessment methodology change could be isolated and identified as a significant factor contributing to the higher assessment values. Given the lag in the ability of provincial and MPAC staff to isolate the impact of the new assessment methodology, provincial efforts to communicate to landowners were not undertaken in a timeframe that would have been appropriate relative to the release of 2004 property assessment notices. 3) What were the assessment and tax impacts arising from the assessment

methodology change?

In aggregate, the average property values for managed forest properties, as measured by the average value per acre, did not increase substantially as a result of the new assessment methodology. Values per acre of managed forest properties are similar to values per acre for Class 4 farmland in all areas of the province, with the exception of the GTA and South-Central Ontario, where values lie slightly above Class 4 rates.

The tax rate applied to managed forest properties is low - 25% of the local municipal residential rate, plus 25% of province-wide education rate. Typically, the applicable tax rate on managed forest properties is .25% to .35% of assessed value. For 2003, the average annual property tax for a managed forest property was $168; the average corresponding value of the MFTIP incentive to the landowner was $504. For 2004, the average annual property tax for a managed forest property is estimated at $232; the average corresponding value of the MFTIP incentive to the landowner is estimated at $696.

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Although data on average property tax and incentive values are relevant, these must be considered in the context of a wide range of managed forest properties, both in size and value. For pure managed forest properties and the managed forest components of mixed-use properties, property taxes for the majority of property owners fall within the $50 to $250 range. Fewer than 10% of property owners will face a tax responsibility greater than $500. For the total property tax incidence for all managed forest properties, including those that contain both a managed forest and residential or other components, the tax distribution stretches across a wider range, with peaks in the $100 to $250 range and the $1,000 to $2,500 range. As might be expected, the higher tax responsibility generally reflects the inclusion of property taxes on the residential or other component of the property. It is interesting to note that total tax responsibilities for managed forest properties have declined between 2003 and 2004, although there has been a modest increase in the tax revenue from managed forest properties and managed forest components of properties. This result can be attributed to the more favourable apportionment methodology adopted by MPAC that results in a greater proportion of assessed value being attributed to the managed forest portion of mixed use properties, which is taxed at a lower rate.

4) Has environmental harm resulted, or could it result, from the change in

assessment methodology? This review cannot conclude that the change in assessment methodology for managed forest has resulted in, or could result in, harm the environment. Section 5 addresses the concerns stated by the applicants pertaining to anticipated harmful environmental impacts as a result of the change in assessment methodology. The MFTIP program has been successful in establishing a significant commitment among private landowners to forest stewardship. Of the 16.8 million acres (6.8 million hectares) of the forested land that is privately owned in Ontario, 1.78 million acres is in the MFTIP program. This portion represents slightly over 10% of total private forest acreage and likely represents a higher percentage of eligible properties, given the acreage and other eligibility criteria for the MFTIP program. The number of properties in the MFTIP has grown from 8,000 to 10,400, or by 31% in the period of 1998 to 2004. Total acreage in the program has increased from 1.46 M acres to 1.78 M acres, or by 22% from 1999 to 2004 (acreage data for 1998 is not available in a consistent format). As property values across Ontario have increased, the value of tax incentive programs to individual landowners has increased proportionately. The 75% reduction in property tax rates offered by MFTIP could make this program attractive for landowners to pursue and actually increase landowner participation. However, in areas such as the GTA where property values are significant and increasing, the reduction in property taxes

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provided by MFTIP may not be a significant enough incentive alone to offset financial gains from converting the land to other uses. Each landowner has his or her own circumstances, interests and ability to support the carrying cost for their property. An amount that appears inconsequential to one landowner may impact another significantly and result in efforts to sell or sever land or practice poor forest management practices, such as heavy cutting, to produce income. The influence of regulatory controls, such as the planning system or municipal tree cutting by-laws, may also constrain landowner decisions. The Ontario government is committed to maintaining the MFTIP program and to working with private landowners to maintain and increase participation in the MFTIP program. The Province is also studying other measures to ensure that greenspace is preserved and growth is managed to support a healthy environment and a high quality of life for Ontario citizens. Initiatives such as the work of the Greenbelt Task Force, the Oak Ridges Moraine Conservation Plan, the Niagara Escarpment Plan Five-Year Review, the planning reform initiative (including the review of the Provincial Policy Statement, Planning Act and Ontario Municipal Board reform), watershed-based source protection planning, the Growing Strong Rural Communities Plan, and the Growth Management consultation process will all contribute to the preservation of a healthy environment, including the preservation of Ontario’s forests. It is appropriate that MOF and MNR staff monitor landowner participation in MFTIP in coming years to ensure that the program continues to retain and attract landowners committed to forest stewardship.

5) Are there changes that should be introduced to MFTIP by the Ministry of

Natural Resources and the Ministry of Finance? The requirement to undertake an EBR review has been a constructive process for provincial staff. In the review of the program’s history and the analysis of program data and stakeholder input, a range of possible program refinements has been identified. Many of these proposals have been put forward by stakeholders at previous points in the program’s history. Some have been put forward as recommendations, both by stakeholders and provincial governments, but never fully implemented. This review offers a timely opportunity to bring forward these suggested program refinements for early discussion with stakeholders and expeditious consideration by the provincial government. Examples include lengthening the eligibility period for MFTIP landowners from five to ten years (with a five year review) to spread the cost of participation in MFTIP over a longer period and finalizing regulations to clarify the eligibility of managed forest properties with non-forested landscape features, such as rocky outcroppings. This review also highlights the importance of close communication amongst provincial ministries responsible for administration of MFTIP, stakeholders, MPAC and other

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decision-makers or administrators who may influence the environment for MFTIP participants. A key recommendation arising from this report is the recognition that an ongoing working group is required to ensure a forum for constructive discussion and policy development. 7.2 Review Recommendations The participation of landowners in MFTIP is one of the most important indicators of the ability of the program to encourage private landowners to commit to forest stewardship through good forest management practices. Recommendation #1: MNR and MOF should continue to monitor participation of landowners in MFTIP to track net participation rates and review program success parameters. The report discusses revisions proposed to the MF property class portion of O. Reg.282/98 of the Assessment Act that would assist in MFTIP administration and help to mitigate participation costs. A significant proposed revision is changing the Managed Forest Plan term from five years to ten years (with a report back at the five year mid-point) which would allow MFTIP participants to spread their plan development costs over 10 years. Recommendation #2: MOF, with MNR’s participation, will proceed with proposing revisions to O. Reg. 282/98 of the Assessment Act in order to realize MFTIP administrative efficiencies and program clarification. The principle of current use requires that the actual use of the property be the determining factor in its assessment valuation. For managed forest properties, the current use of the property is as a forest. That said, the current use valuation of the property must be determined based on the property being used as a forest, not on the basis of any other use to which the property could be put. It is acknowledged that farm land rates were used when MFTIP was created. However, it is incumbent upon MPAC to review its existing assessment methodologies, refine where necessary, and update to provide the most accurate reflection of the value of properties. It is also important to focus on the integrity of the property assessment system, in terms of equity and transparency. To continue to ignore the current use value of a property in determining its assessed value would establish an inappropriate precedent in property tax policy. A detailed description of the methodology for the assessment properties in the MF property class is found in Section 4.

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Recommendations #3: MPAC’s existing current use valuation procedures for managed forests, the intention of which is to determine assessment based on a sales comparison of other managed forest properties in the area, should continue to be used as the assessment methodology for managed forest properties. Recommendations #4: MOF and MNR should work together to update and clarify MFTIP program materials to more clearly communicate the property assessment and property tax system as it applies to MFTIP properties. Much of the difficulty surrounding the transition from the use of farm land rates has been the lack of transparency in the determination of the valuations themselves. Stakeholders were not informed by MPAC of the transition to a new assessment methodology. While there is no requirement for MPAC to notify stakeholders when such a change in valuation procedures is being considered or implemented, it would be a good practice for MPAC to adopt in order to alleviate stakeholder concerns and increase taxpayer understanding of the process. Recommendation #5: MOF will work with MPAC to reinforce the need for more clarity and transparency for property owners on the valuation procedures for managed forests properties and to ensure that property owners receive more timely notification of any future revisions to property valuation procedures. In response to a lack of transparency and proactive communications on the change in assessment methodology, there has been stakeholder criticism of the ability of the existing MPAC assessment procedures to provide for current use assessment and a belief that they may be actually resulting in assessments based on highest and best use. As the new assessment procedures were implemented, there have also been concerns raised with inconsistent application and questionable interpretation of the data used to support analysis. Recommendations #6: MOF will work with MPAC to undertake a review and validation of the existing assessment methodology used for managed forest properties by an impartial third party.

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Recommendations #7: MOF and MNR will establish a committee, including stakeholder representatives and MPAC, to be involved in efforts to respond to issues with implementation of the assessment procedures in the coming year. This committee will also oversee the implementation of recommendations in this report. The government is pursuing initiatives for the “greening” of southern Ontario. MFTIP is viewed as one of several important tools that can assist in encouraging the conservation and stewardship of private forest lands. As work on this new initiative progresses, it is expected that MFTIP objectives may be revisited in the context of what the program can contribute to the broader objective of the “greening” of southern Ontario. Recommendation #8: MNR will work with MOF to address how any potential changes to the MFTIP can support the government’s initiatives for the “greening” of southern Ontario. 7.3 Conclusion This report summarizes and concludes the review undertaken in response to application EBR Review R2003005.

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A-1

Appendix A. Maps Private land in Ontario

Municipal tree cutting bylaws

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A-2

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A-3

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B-1

Appendix B. MFTIP participation by municipality for 2004 (report generated March, 2004)

Upper Tier Lower Tier Number of Roll MF Area (ac) ALGOMA ALGOMA DISTRICT SCHOOL BOARD 7 2,388.63

ALGOMA LAND TAX 1 122,067.40

BLIND RIVER TOWN 1 188.28

ELLIOT LAKE CITY 1 207.39

HILTON TOWNSHIP 6 560.53

HURON SHORES MUNICIPALITY 12 1,217.63

JOCELYN TOWNSHIP 6 646.25

JOHNSON TOWNSHIP 2 304.00

LAIRD TOWNSHIP 4 177.27

MACDONALD MEREDITH ET AL TOWNSHIP 20 4,110.10

PLUMMER ADDITIONAL TOWNSHIP 24 3,939.16

PRINCE TOWNSHIP 7 554.22

SAULT STE MARIE CITY 18 3,774.72

SHEDDEN TOWNSHIP 3 204.74

ST JOSEPH TOWNSHIP 2 150.50

BRANT BRANTFORD CITY 3 93.35

COUNTY OF BRANT 42 1,931.89

BRUCE ARRAN-ELDERSLIE MUNICIPALITY 7 558.94

BROCKTON MUNICIPALITY 24 1,214.96

HURON-KINLOSS TOWNSHIP 8 507.23

KINCARDINE MUNICIPALITY 12 1,246.35

NORTHERN BRUCE PENINSULA MUNICIPALITY 42 7,611.41

SAUGEEN SHORES TOWN 7 524.36

SOUTH BRUCE MUNICIPALITY 9 697.62

SOUTH BRUCE PENINSULA TOWN 55 7,761.05

CHATHAM-KENT CHATHAM-KENT MUNICIPALITY 5 218.25

COCHRANE BLACK RIVER-MATHESON TOWNSHIP 46 6,253.69

COCHRANE PLT 26 84,728.78

COCHRANE TOWN 15 1,820.71

COCHRANE-IROQ FALLS/BR-MATH LOCALITY 12 1,551.76

IROQUOIS FALLS TOWN 19 2,757.83

TIMMINS CITY 91 9,333.95

DUFFERIN AMARANTH TOWNSHIP 17 1,441.63

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EBR Review R2003005, June 2004

B-2

EAST GARAFRAXA TOWNSHIP 17 756.97

EAST LUTHER GRAND VALLEY TOWNSHIP 16 1,685.82

MELANCTHON TOWNSHIP 11 850.39

MONO TOWN 113 4,774.12

MULMUR TOWNSHIP 142 6,628.91

ORANGEVILLE TOWN 1 15.40

DUNDAS NORTH DUNDAS TOWNSHIP 12 879.30

SOUTH DUNDAS TOWNSHIP 35 4,044.04

DURHAM AJAX TOWN 4 512.32

BROCK TOWNSHIP 22 1,108.82

CLARINGTON MUNICIPALITY 112 10,324.94

OSHAWA CITY 17 641.93

PICKERING CITY 15 812.10

SCUGOG TOWNSHIP 72 4,625.35

UXBRIDGE TOWNSHIP 109 6,151.16

WHITBY TOWN 9 479.47

ELGIN BAYHAM MUNICIPALITY 10 534.02

CENTRAL ELGIN MUNICIPALITY 19 984.59

DUTTON/DUNWICH MUNICIPALITY 2 93.60

MALAHIDE TOWNSHIP 17 669.03

SOUTHWOLD TOWNSHIP 6 545.58

ST THOMAS CITY 3 67.25

WEST ELGIN MUNICIPALITY 12 501.49

ESSEX AMHERSTBURG TOWN 3 233.50

ESSEX TOWN 13 303.85

KINGSVILLE TOWN 7 164.15

LAKESHORE TOWN 5 134.18

LEAMINGTON TOWN 2 67.42

TECUMSEH TOWN 1 22.40

WINDSOR CITY 1 91.80

FRONTENAC CENTRAL FRONTENAC TOWNSHIP 103 14,531.89

CORPORATION OF THE CITY OF KINGSTON 23 1,858.51

FRONTENAC ISLANDS TOWNSHIP 6 363.86

NORTH FRONTENAC TOWNSHIP 24 4,162.19

SOUTH FRONTENAC TOWNSHIP 72 7,486.75

GLENGARRY NORTH GLENGARRY TOWNSHIP 25 2,528.08

SOUTH GLENGARRY TOWNSHIP 30 1,852.78

GRENVILLE AUGUSTA TOWNSHIP 10 1,526.72

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EBR Review R2003005, June 2004

B-3

EDWARDSBURGH/CARDINAL TOWNSHIP 14 726.24

MERRICKVILLE-WOLFORD VILLAGE 6 874.97

NORTH GRENVILLE TOWNSHIP 12 566.69

GREY BLUE MOUNTAINS TOWN 55 3,300.78

CHATSWORTH TOWNSHIP 119 8,300.01

GEORGIAN BLUFFS TOWNSHIP 75 7,063.98

GREY HIGHLANDS MUNICIPALITY 154 10,335.41

HANOVER TOWN 2 34.80

MEAFORD MUNICIPALITY 76 5,024.48

SOUTHGATE TOWNSHIP 35 2,354.60

WEST GREY TOWNSHIP 156 12,100.15

HALDIMAND HALDIMAND COUNTY 33 1,939.88

HALIBURTON ALGONQUIN HIGHLANDS TOWNSHIP 36 3,061.52

DYSART ET AL TOWNSHIP 239 142,665.33

HIGHLANDS EAST MUNICIPALITY 95 10,838.97

MINDEN HILLS TOWNSHIP 131 10,719.04

HALTON BURLINGTON CITY 10 388.08

HALTON HILLS TOWN 38 1,160.70

MILTON TOWN 84 3,686.20

OAKVILLE TOWN 3 55.76

HAMILTON HAMILTON CITY 76 4,561.09

HASTINGS BANCROFT TOWN 78 7,896.46

BELLEVILLE CITY 7 356.75

CARLOW/MAYO TOWNSHIPS 69 9,066.31

CENTRE HASTINGS MUNICIPALITY 21 2,053.84

FARADAY TOWNSHIP 82 13,110.53

HASTINGS HIGHLANDS MUNICIPALITY 109 10,818.93

LIMERICK TOWNSHIP 67 28,322.28

MADOC TOWNSHIP 27 4,741.60

MARMORA/LAKE/DELORO TOWNSHIP 126 25,822.45

QUINTE WEST CITY 35 1,834.85

STIRLING-RAWDON TOWNSHIP 11 1,544.92

TUDOR CASHEL TOWNSHIP 80 22,071.86

TWEED 125 17,933.43

TYENDINAGA TOWNSHIP 25 2,419.42

WOLLASTON TOWNSHIP 51 5,740.79

HURON ASHFIELD-COLBORNE-WAWANOSH TOWNSHIP 23 1,430.00

BLUEWATER MUNICIPALITY 31 1,454.11

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EBR Review R2003005, June 2004

B-4

CENTRAL HURON MUNICIPALITY 28 1,402.71

HOWICK TOWNSHIP 2 201.14

HURON EAST MUNICIPALITY 8 527.81

MORRIS-TURNBERRY MUNICIPALITY 14 1,624.96

NORTH HURON TOWNSHIP 10 838.75

SOUTH HURON MUNICIPALITY 19 1,561.12

KENORA DRYDEN CITY 1 15.32

IGNACE TOWNSHIP 1 209.00

KENORA CITY 2 279.15

KENORA DIST (PAT) PLT (TOWNSHIPS) 5 158,741.71

MACHIN MUNICIPALITY 2 320.00

LAMBTON DAWN-EUPHEMIA TOWNSHIP 4 345.04

ENNISKILLEN TOWNSHIP 4 222.50

LAMBTON SHORES MUNICIPALITY 19 544.22

OIL SPRINGS VILLAGE 1 15.60

PLYMPTON-WYOMING TOWN 4 84.20

SARNIA CITY 1 34.50

ST CLAIR TOWNSHIP 3 145.48

WARWICK TOWNSHIP 1 41.70

LANARK BATHURST BURGESS SHERBROOKE TOWNSHIP 71 6,757.47

BECKWITH TOWNSHIP 7 405.71

DRUMMOND/NORTH ELMSLEY TOWNSHIP 16 1,440.04

LANARK HIGHLANDS TOWNSHIP 164 17,642.81

MISSISSIPPI MILLS TOWN 83 8,353.40

MONTAGUE TOWNSHIP 13 1,189.62

LEEDS ATHENS TOWNSHIP 7 615.77

BROCKVILLE CITY 3 88.04

ELIZABETHTOWN-KITLEY TOWNSHIP 14 1,113.03

FRONT YONGE TOWNSHIP 2 253.90

GANANOQUE TOWN 1 34.82

LEEDS & THOUSAND ISLANDS TOWNSHIP 20 1,773.32

RIDEAU LAKES TOWNSHIP 32 3,839.79

LENNOX ADDINGTON ADDINGTON HIGHLANDS TOWNSHIP 42 6,171.20

GREATER NAPANEE TOWN 4 239.70

LOYALIST TOWNSHIP 8 580.94

STONE MILLS TOWNSHIP 34 5,119.93

MANITOULIN ASSIGINACK TOWNSHIP 1 100.30

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EBR Review R2003005, June 2004

B-5

BARRIE ISLAND TOWNSHIP 2 57.70

BILLINGS PT.ALLAN TOWNSHIP 49 3,743.54

BURPEE AND MILLS TOWNSHIP 48 4,411.03

CENTRAL MANITOULIN TOWNSHIP 71 5,618.15

COCKBURN ISLAND TOWNSHIP 1 71.63

GORDON PT.ALLAN TOWNSHIP 14 1,244.39

MANITOULIN LOCALITY EDUCATION 22 1,756.34

NORTHEASTERN MANITOULIN & THE ISLANDS 5 406.90

TEHKUMMAH TOWNSHIP 6 673.82

MIDDLESEX ADELAIDE METCALFE TOWNSHIP 4 109.81

LONDON CITY 4 92.35

LUCAN BIDDULPH TOWNSHIP 1 11.50

MIDDLESEX CENTRE TOWNSHIP 10 412.08

NORTH MIDDLESEX MUNICIPALITY 32 3,153.95

SOUTHWEST MIDDLESEX MUNICIPALITY 9 635.24

STRATHROY-CARADOC TOWNSHIP 3 149.76

THAMES CENTRE MUNICIPALITY 19 907.73

MUSKOKA BRACEBRIDGE TOWN 201 20,027.98

GEORGIAN BAY TOWNSHIP 81 7,984.11

GRAVENHURST TOWN 58 3,531.89

HUNTSVILLE TOWN 216 19,461.93

LAKE OF BAYS TOWNSHIP 240 25,159.35

MUSKOKA LAKES TOWNSHIP 169 12,341.96

NIAGARA GRIMSBY TOWN 1 12.86

LINCOLN TOWN 4 155.43

NIAGARA-ON-THE-LAKE TOWN 4 45.95

WEST LINCOLN TOWNSHIP 12 444.30

NIPISSING BONFIELD TOWNSHIP 2 146.48

CALVIN TOWNSHIP 2 364.14

CHISHOLM TOWNSHIP 11 1,051.68

EAST FERRIS TOWNSHIP 6 497.55

MATTAWAN TOWNSHIP 1 309.00

NIPISSING COMBINED SCHOOL BOARDS 1 63.78

NORTH BAY CITY 16 1,872.38

PAPINEAU-CAMERON TOWNSHIP 9 808.66

SOUTH ALGONQUIN TOWNSHIP 17 2,484.51

TEMAGAMI TOWN 2 100.03

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EBR Review R2003005, June 2004

B-6

WEST NIPISSING TOWN 18 1,897.42

NORFOLK NORFOLK COUNTY 166 8,947.21

NORTHUMBERLAND ALNWICK/HALDIMAND TOWNSHIP 34 1,589.43

BRIGHTON MUNICIPALITY 14 1,157.18

CRAMAHE TOWNSHIP 9 473.65

HAMILTON TOWNSHIP 16 774.56

HOPE & PORT HOPE TOWN 48 3,941.95

TRENT HILLS MUNICIPALITY 26 1,914.29

OTTAWA OTTAWA CITY 145 9,121.78

OXFORD BLANDFORD BLENHEIM TOWNSHIP 16 814.58

EAST ZORRA-TAVISTOCK TOWNSHIP 4 353.43

NORWICH TOWNSHIP 9 755.59

SOUTH-WEST OXFORD TOWNSHIP 6 337.60

ZORRA TOWNSHIP 12 1,538.21

PARRY SOUND ARCHIPELAGO TOWNSHIP 51 3,727.08

ARMOUR TOWNSHIP 33 2,591.57

CARLING TOWNSHIP 39 2,875.12

EAST PARRY SOUND BOARD OF EDUCATION 22 1,930.00

JOLY TOWNSHIP 71 6,643.62

KEARNEY TOWN 41 3,172.08

MACHAR TOWNSHIP 20 1,807.46

MAGNETAWAN TOWNSHIP 43 3,457.08

MCDOUGALL TOWNSHIP 67 4,640.02

MCKELLAR TOWNSHIP 8 445.67

MCMURRICH/MONTEITH TOWNSHIP 40 3,178.04

NIPISSING TOWNSHIP 23 2,052.80

NORTH HIMSWORTH TOWNSHIP 3 134.93

PERRY TOWNSHIP 26 2,230.17

POWASSAN MUNICIPALITY 3 189.00

RYERSON TOWNSHIP 37 2,910.75

SEGUIN TOWNSHIP 107 7,572.27

SOUTH RIVER T.S.A. 19 1,667.35

STRONG TOWNSHIP 13 941.21

WEST PARRY SOUND BOARD OF EDUCATION 2 170.94

WHITESTONE TOWNSHIP 27 1,993.18

PEEL BRAMPTON CITY 12 1,041.78

CALEDON TOWN 211 11,301.57

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EBR Review R2003005, June 2004

B-7

MISSISSAUGA CITY 1 33.90

PERTH NORTH PERTH TOWN 1 100.00

PERTH EAST TOWNSHIP 14 660.31

PERTH SOUTH TOWNSHIP 26 1,526.98

WEST PERTH MUNICIPALITY 7 304.56

PETERBOROUGH ASPHODEL-NORWOOD TOWNSHIP 3 172.00

CAVAN-MILLBROOK-N MONAGHAN TOWNSHIP 24 2,890.58

DOURO-DUMMER TOWNSHIP 49 7,410.19

GALWAY-CAVENDISH AND HARVEY TOWNSHIP 131 18,132.59

HAVELOCK-BELMONT-METHUEN TOWNSHIP 84 6,828.43

NORTH KAWARTHA TOWNSHIP 110 12,160.68

OTONABEE-SOUTH MONAGHAN TOWNSHIP 16 782.98

SMITH ENNISMORE LAKEFIELD TWP 13 936.30

PRESCOTT AND RUSSELL ALFRED AND PLANTAGENET TOWNSHIP 31 2,241.90

CHAMPLAIN TOWNSHIP 4 280.87

EAST HAWKESBURY TOWNSHIP 1 34.90

THE NATION MUNICIPALITY 37 3,171.77

PRINCE EDWARD PRINCE EDWARD COUNTY CITY 23 1,650.61

RAINY RIVER ATIKOKAN TOWNSHIP 1 248.00

RAINY RIVER DIST LOCALITY ED 1 157.50

RENFREW ADMASTON/BROMLEY TOWNSHIP 37 5,616.33

BONNECHERE VALLEY TOWNSHIP 58 7,798.75

BRUDENELL LYNDOCH RAGLAN TOWNSHIP 29 4,969.31

DEEP RIVER TOWN 8 319.24

GREATER MADAWASKA TOWNSHIP 90 14,616.57

HEAD CLARA MARIA TOWNSHIP 1 43.22

HORTON TOWNSHIP 10 1,503.50

KILLALOE, HAGARTY & RICHARDS TOWNSHIP 16 1,898.62

LAURENTIAN HILLS TOWN 37 2,800.69

LAURENTIAN VALLEY TOWNSHIP 27 2,788.39

MADAWASKA VALLEY TOWNSHIP 37 5,059.92

MCNAB/BRAESIDE TOWNSHIP 19 1,249.96

NORTH ALGONA WILBERFORCE TOWNSHIP 80 8,555.40

PETAWAWA TOWN 13 1,567.92

RENFREW TOWN 1 71.91

WHITEWATER REGION TOWNSHIP 31 3,498.14

SIMCOE ADJALA-TOSORONTIO TOWNSHIP 54 2,668.12

BARRIE CITY 1 16.71

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EBR Review R2003005, June 2004

B-8

BRADFORD WEST GWILLIMBURY TOWN 10 524.30

CLEARVIEW TOWNSHIP 79 4,621.10

ESSA TOWNSHIP 29 1,039.68

INNISFIL TOWN 25 983.88

MIDLAND TOWN 3 144.72

NEW TECUMSETH TOWN 24 769.26

ORO-MEDONTE TOWNSHIP 112 6,332.61

PENETANGUISHENE TOWN 7 373.83

RAMARA TOWNSHIP 26 2,429.19

SEVERN TOWNSHIP 35 3,182.83

SPRINGWATER TOWNSHIP 85 4,506.94

TAY TOWNSHIP 30 1,579.15

TINY TOWNSHIP 112 7,014.14

WASAGA BEACH TOWN 2 62.50

STORMONT CORNWALL CITY 3 232.98

NORTH STORMONT TOWNSHIP 39 3,239.34

SOUTH STORMONT TOWNSHIP 41 3,956.69

SUDBURY BALDWIN TOWNSHIP 13 1,004.87

ESPANOLA LOCALITY EDUCATION 15 2,078.94

ESPANOLA TOWN 23 1,706.83

FRENCH RIVER TOWN 4 335.29

MARKSTAY-WARREN TOWN 1 160.00

NAIRN AND HYMAN TOWNSHIP 4 698.77

SABLES - SPANISH RIVERS TOWNSHIP 27 2,879.39

SUDBURY DISTRICT PLT 3 100.68

SUDBURY LOCALITY EDUCATION 4 2,524.37

THUNDER BAY CONMEE TOWNSHIP 2 180.13

DORION TOWNSHIP 4 426.15

GILLIES TOWNSHIP 4 759.49

GREENSTONE TOWN 6 214.49

LAKEHEAD DIST LOCALITY ED 17 2,920.23

NEEBING MUNICIPALITY 4 274.08

NIPIGON TOWNSHIP 2 160.06

OCONNOR TOWNSHIP 5 725.00

OLIVER PAIPOONGE MUNICIPALITY 15 1,938.68

SHUNIAH TOWNSHIP 32 2,624.98

SUPERIOR-GREENSTONE DIST LOCALITY ED 4 412.58

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EBR Review R2003005, June 2004

B-9

THUNDER BAY CITY 20 1,527.39

THUNDER BAY DIST PLT (TOWNSHIPS) 1 274,606.00

TIMISKAMING GAUTHIER TOWNSHIP 55 1,880.20

JAMES TOWNSHIP 3 397.63

KIRKLAND LAKE LOCALITY EDUCATION 11 1,655.60

NEW LISKEARD TOWN 13 880.13

TIMISKAMING LOCALITY EDUCATION 22 2,880.92

VICTORIA KAWARTHA LAKES CITY 152 53,343.95

WATERLOO CAMBRIDGE CITY 8 490.92

KITCHENER CITY 10 303.73

NORTH DUMFRIES TOWNSHIP 17 626.15

WATERLOO CITY 4 249.28

WELLESLEY TOWNSHIP 4 169.16

WILMOT TOWNSHIP 12 291.20

WOOLWICH TOWNSHIP 10 360.63

WELLINGTON CENTRE WELLINGTON TOWNSHIP 47 2,941.83

ERIN TOWN 71 3,179.98

GUELPH CITY 7 596.86

GUELPH ERAMOSA TOWNSHIP 19 923.05

MAPLETON TOWNSHIP 23 3,431.97

MINTO TOWN 6 228.79

PUSLINCH TOWNSHIP 52 2,897.00

WELLINGTON NORTH TOWNSHIP 19 2,563.02

YORK AURORA TOWN 3 85.41

CITY OF TORONTO 3 49.48

EAST GWILLIMBURY TOWN 48 1,812.54

GEORGINA TOWN 36 1,499.72

KING TOWNSHIP 64 2,280.62

NEWMARKET TOWN 2 49.20

RICHMOND HILL TOWN 4 150.44

VAUGHAN CITY 10 1,757.62

WHITCHURCH-STOUFFVILLE TOWN 47 1,742.49

CLARENCE-ROCKLAND CITY 66 3,006.75

FORT ERIE TOWN 13 420.67

GREATER SUDBURY CITY 135 47,716.49

NIAGARA FALLS CITY 9 294.03

PELHAM TOWN 12 261.60

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EBR Review R2003005, June 2004

B-10

PORT COLBORNE CITY 7 231.92

RUSSELL TOWNSHIP 5 411.38

THOROLD CITY 3 134.80

WAINFLEET TOWNSHIP 16 581.56

WELLAND CITY 1 52.00

Total: 10563 1,790,471.64

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