Magazine Articles Products & Services Store Shows My Lake Community Contests About Us Subscribe

Gripes of WRAFT

Hammered by tax hikes, cottagers have formed a coalition to fight for fairer treatment

By Gwen Smith

Ask Jane Hogg what's special about her cottage on Lake Huron , and the words pour out. For starters, she and her husband, John, designed it, then he and their two sons built the place. She speaks of barnwood beams, a folding staircase that pulls down from the ceiling to open up a loft, the Muskoka chairs that took shape on John's workbench. Her quiltwork appears throughout the cottage, while he made the exquisite cherry table that seats 10. The Hoggs have never stopped adding to the cottage, moulding it into the perfect retreat; a place for their children, and now grandchildren, to enjoy.

But after endless hours of loving toil, and with John, at 67, retired from his job as an autoshop teacher, the Hoggs are contemplating selling the cottage. The reason? “We are tax poor,” Jane says simply. “Literally tax poor.” The Hoggs bought their lot 13 years ago for $70,000. Last year, their property assessment came in at $196,000. In one year, their taxes on the place doubled to $5,000.

They'll fight to hang on – renting out the cottage for a couple of weeks in the summer to earn the difference. But they don't know how they will manage further increases. An empty lot the same size as theirs sold in November for $235,000. They are dreading this fall's assessment. What will it do to their taxes? And what about the assessment after that? “You can't imagine how much we've talked about this,” says Jane. “We're desperate.”

The Hoggs are not an isolated case. Similar stories and sentiments from anger to despair are being voiced all over cottage country. Bob Topp, executive director of WRAFT – Waterfront Ratepayers After Fair Taxation – knows of Ontario cottagers who have just given up and sold because of recent tax hikes. Those on the coveted Muskoka lakes were the first to feel the bite of higher levies as land values escalated in the '90s. But, says Topp, “it became apparent by early 2004 that the 2003 assessment was creating havoc around the whole province.” From Lake of the Woods east to the Rideau lakes, “sure enough, people were getting hammered all over the place.”

While property taxes have long been tied to real estate appraisals, three things have changed to cause the dramatic increases of the past couple of years. The first, of course, is that demand has caused the value of lakefront lots to skyrocket. The second is that in the late 1990s, the Mike Harris government switched to the Current Value Assessment (CVA) system, with the result that owners now receive updated property assessments every fall (with the exception of the McGuinty government's freeze in 2004) instead of every four or five years. In a soaring market, this means frequent and large increases. The third issue is that the Harris government also downloaded to local governments costs related to many social services, such as policing, ambulances, welfare, and nursing homes. These get passed along in the property tax.

Topp notes that the cottage tax hikes are a levy on real estate gains that exist only on paper, and they bear no relationship to the ability to pay or to the services provided. But WRAFT is zeroing in on what it perceives as the real injustice: The load is not fairly distributed. As individual taxes are calculated by multiplying the local tax rate by one's assessment, this means those cottagers fronting lakes are paying considerably more than those with landlocked real estate, which has seen modest gains. “We are focussed on one issue: the share of property tax being paid by waterfront property owners,” Topp says. “It is completely disproportionate and getting worse.”

To back its case, WRAFT bought data from the province's Municipal Property Assessment Corporation (MPAC) that averaged the increases in residential assessments from 1999 to 2003. In 80 per cent of townships with waterfront, the assessments were higher on the water than off. In many cases, much higher. It won't be a comfort to the Hoggs that two Lake Huron municipalities top the list. The four-year increase in waterfront values in their municipality of Bluewater averaged just over 75 per cent, while their off-water neighbours saw gains of 23 per cent. Also hit hard were cottagers on the Muskoka lakes, swaths of Georgian Bay , Lake Simcoe , the Kawarthas, and the shores of the St. Lawrence River.

Topp, who has owned an island on Lake Rosseau since 1943, does not want an “us-versus-them” fight with town residents. But he thinks there is a strong argument to make that the tax system is inherently unfair. Why, for instance, does he pick up a much bigger share of the municipal load than the fellow with a property in Bracebridge, the one using services year-round?

The mayor of Bracebridge, Scott Northmore, agrees the system is flawed, but cautions that local residents, who earn the bulk of their incomes in the summer, can't afford much more in taxes either. To help ease the burden on cottagers, his town council chose to phase in tax increases over three years until 2005. This affected any property that saw gains of more than 20 per cent and at least $400. Conversely, property tax decreases were also phased in. “This means the family living in Bracebridge with the $100,000 assessment is helping to pay for the $3 million cottage,” he says. “That's not fair either, but it was the fairest thing we could do given the new assessments. But I don't think the non-waterfront owners could take another hit like that.”

Both Northmore and Topp agree that the next move has to come from the province – the level of government responsible for the tax system. WRAFT plans to present Queen's Park with some potential solutions and has hired a specialist at the University of Michigan to compare tax systems across North America . He is analyzing the tax process in several states with waterfront, including California , Massachussetts , Virginia , and Florida . “ Maine , for instance, has had a huge issue with exactly the same thing,” says Topp. “In fact, waterfront property values have been rising all over North America.”

Of particular interest to WRAFT is the tax model that Nova Scotia adopted just last year, which places an annual cap on property-assessment increases. For 2005, that limit is 10 per cent. The cap applies if a property is transferred within a family, but if it is sold, the new owner's taxes will be based on the full current assessment. Topp says WRAFT will also consider whether to recommend breaking down the residential class of property into waterfront and non-waterfront. That way, assessments could be held down for one group as a whole.

Motivating the province to undertake reform won't be easy, but one strength WRAFT has is its expanding size. In the year since it formed, the organization has come to represent 97 property and cottage associations. It has seen strong growth in areas such as the Thousand Islands , where most of the landowners on the St. Lawrence River are seasonal residents and where property values have at least doubled in four years. That new reality hit home in February 2004. “The week the tax bills went out, my phone didn't stop ringing,” says David Bull, the executive director of the Thousand Islands Area Residents Association. Compounding the increase in assessments, the township's expenses rose from $4.26 million in 1998 to more than $9 million in 2004, in part because the county hiked its levy for downloaded provincial services. All, of course, landed in the property tax bills.

The Canadian side of the St. Lawrence is dotted with islands and cottages that have been in families for generations. Bull notes that “a lot of these are heirlooms to pass down, not investment assets.” Bruce Chick has one such small cottage on Tremont Island . It was built by his great-great-grandfather in the 1890s, and Chick is painstakingly reconstructing it from a dilapidated condition. His “heirloom” sits on a small property that for years was assessed at about $34,000. In the last assessment, while the building remained a windowless shell, the property's value grew to $73,000. He can manage the taxes that increased to about $1,000, but dreads what lies ahead, when his work is done. Nearby, a cottage on comparable property is on the market for more than $300,000.

Chick's plan has been to hand the cottage down to his daughter, the sixth generation on the island. But, in a voice rising with anger, he says that if his taxes soar to $4,000 or $5,000, “I don't want to sell, but I will.” He tried to press his case at the town council of Leeds and the Thousand Islands , but the meetings left him disheartened. “I told the mayor, ‘all you're going to do is flip people like me for millionaires. They'll build monster cottages, they won't care about the local heritage and the river.'”

Unfortunately, arguments like that aren't carrying much weight with local councils because townships no longer have much control over their costs, says Terry Rees, the executive director of the Federation of Ontario Cottagers' Associations (FOCA). One of the consequences of the CVA system and downloading is that “the only thing they really have a say about is the revenue side. Even the municipalities with the best intentions are forced to contend with the reality that bigger, more highly developed properties, including timeshare condos, and more building permits have a positive impact on revenue.”

This encourages a pro-development attitude and what Rees calls “the incremental suburbanization of the waterfront.” Add to that the fact that cottagers with big properties are parcelling off expensive shoreline plots in order to afford taxes and there are more ripple effects for the forested, natural shoreline, the water, and the ecosystem as a whole.

FOCA is one of WRAFT's founding members and Rees is one of its directors. Like Topp, he believes the solution to cottagers' tax woes lies with the province. But he does not see much energy from the government about the need for reform. Over at Queen's Park, the point person on the property tax file is MPP Mike Colle, the parliamentary assistant to the Finance Minister and a man well versed on his subject. In the Opposition back in 1997, Colle warned of the impact a free-market-based tax system would have on “hot” properties such as cottages. Today, he is sympathetic to the pain of waterfront tax increases and has Peter Tomlinson, an expert on Canadian property tax, advising on possible solutions to large year-to-year jumps in taxes. Tomlinson previously counselled the Muskoka Fair Tax Coalition, the predecessor to WRAFT. But while Colle says he is open to ideas, he also quickly adds: “There has been no policy decision made. I don't want to give people the impression there is a commitment from the government to make change.” In fact, warns Rees, without a concerted push from WRAFT, “nothing will change.”

Topp and Rees both know that, besides proposing solutions, WRAFT's other big job is to turn up the political heat. It will need to become more vocal, a force that can't be ignored or placated with platitudes. To do so, it will need the active involvement of cottagers. “We need to get the MPPs where we live to realize that there are a lot of us – a couple hundred thousand of us – who all feel it's a big problem that should be dealt with,” says Rees. “We're not an unreasonable bunch, but we're also not pushovers.”

Toronto-based freelance writer Gwen Smith is a cottager on Kennisis Lake

*Published in the March 2005 issue of Cottage Life.

Click here to read letters from Cottage Life readers about this article and the issue of taxation.

We'd like to know what YOU think. Write to us at yourletters@cottagelife.com. Your letter may be published on cottagelife.com or in Cottage Life magazine, and may be edited for length and clarity.

Copyright © 2005 by Cottage Life. All rights reserved. Reproduction of any article, photograph, or artwork, for other than personal use, in whole or in part, without the written permission of the publisher is strictly forbidden.