On-farm processing changes part of farm to industrial: MPAC

By Tom Collins

Farmers who want to start processing product on their own farms could likely end up paying higher taxes but many are unaware of this downside.

This tax jolt came to light for one Creemore dairy farmer after he started processing milk on his farm in 2012. He was recently slapped with a tax bill of $37,000 in back taxes.

Miller’s Dairy, located about 45 minutes west of Barrie, gets its milk from 120 on-farm Jersey cows. From that, they make skim, 1 per cent, 2 per cent, 3.25 per cent, chocolate milk, 10 per cent cream, and 35 per cent whipping cream. Owner John Miller said he was shocked when he got the bill.

“It’s just an extension of our farm business,” he said, adding the plant is connected to the barn with an underground pipe to transport the milk. “That’s what we feel it should be viewed as.”

But the Municipal Property Assessment Corporation (MPAC) sees otherwise. It learned of Miller’s expansion through his application for a building permit for the new plant and then sent someone to evaluate in the spring of this year. MPAC then sent the farm a notice that the 6,000-sq.-ft. facility is now designated industrial, and in September, the municipality sent him a whopping big bill. The farm now owes $16,000 in taxes each year, instead of the estimated $2,000, for the land the plant is on. Miller also crops 1,200 acres.

Miller has appealed MPAC’s designation, and his town council and MPP are also on board. During the appeal, Miller doesn’t have to pay the extra money, but if he loses, he’s on the hook for the back taxes plus interest.

While he is confident he will be successful, Miller said he would like to see the government create a special designation for on-farm milk processing.

While some farms have had portions of their properties switched to industrial, others haven’t. Ray Duc, president of the Ontario Fruit and Vegetable Growers’ Association, said about 95 per cent of fruit and vegetable growers with processing facilities are still zoned as agricultural.

“They should absolutely stay agricultural,” he said, explaining that peaches need to be processed because of market demands. “That’s what we have to do to supply the demands of consumers. It’s not a choice. It’s something we’re forced by the marketplace to do. We need a good definition of agricultural, which is something that’s missing, and once we have that, we can cater to that to avoid these problems.”

But Anne Haines, MPAC account manager of municipal relations, disagreed.

“We treat all farms that do have processing in a similar fashion,” said Haines. “If there’s processing on the farm, it falls in the industrial category.”

According to Ontario regulations (282/98 Section 6, subsection 1) a piece of property would be classified as industrial if it is used for or in connection with “manufacturing, producing or processing anything.” It doesn’t matter what classification the property was beforehand.

Haines noted there are numerous triggers to investigate the property, including the filing of a building permit, property sale, request for reconsideration of assessment, an assessment appeal, and a re-inspection of a target area because either the area has not been assessed in 12 years or there are numerous changes to area properties.

“We partner with the Ontario Federation of Agriculture,” she said. “They should be (aware of the assessment). We want to work with farmers. We don’t want anything to be a surprise.”