What are Municipal Discount Factors (MDFs)?
Municipal Discount Factors (MDFs) are one of a number of methodologies used in the recalculation of phased-in assessments. MDFs are used when changes, such as new construction, have been made to a property. The factors are used to ensure the phase-in for that property represents only the market increase between the January 1, 2005 valuation date and the January 1, 2008 valuation date. They are calculated for each property class, in each municipality.
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How do I understand the MDF table?
The factors are represented in the table as discount factors. In other words, how much, on average, would 2008 market values have to be reduced to reflect 2005 values in a property class in a municipality.
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When are MDFs used?
The MDFs are used only when certain types of changes occur on a property. More details about these changes are contained in Ontario Regulation 262/09, however, the types of changes include:
- where vacant land is improved by a new building or structure;
- where land becomes, or ceases to be, exempt from taxation;
- where the land is subdivided;
- where a new unit is created by a condominium plan;
- where the land is reclassified, for example, from the residential to commercial class; and
- other specified circumstances as set out in section 5 of Ontario Regulation 262/09.
When one of these changes occur, the 2008 current value is multiplied by the applicable MDF to determine a revised 2005 current value.
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How are MDFs used to recalculate the phased-in assessment?
If a new house is built which increases a property’s 2008 current value to $200,000 and this occurred in a municipality where the residential MDF is .900000000, then the 2005 current value that will be used for phase-in purposes is $180,000 ($200,000 x .900000000). The phased-in assessment is the difference between $180,000 and $200,000, or $20,000. This is the amount of assessment that is eligible to be phased-in.
The result of the application of the MDF is that this property now has a level of phase-in that represents the average level of phase-in for all property in that property class in the municipality.
If you have any questions about the MDF table or your assessment in general, please contact us.
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