June 8, 1998

  BUDGET COMMITTEE:

 City Council, at its meeting held on June 3, 4 and 5, 1998, had before it Clause No. 10 of Report No. 7 of The Corporate Services Committee, headed AProtection of the City=s Tax Base@.

 Council directed that the aforementioned Clause be struck out and referred to the Budget Committee for further consideration.

 City Clerk

 J.A.Abrams/dcm

 Encl.

 Sent to:Budget Committee

Chief Financial Officer and Treasurer

  June 8, 1998

  CHIEF FINANCIAL OFFICER AND TREASURER:

 City Council, at its meeting held on June 3, 4 and 5, 1998, had before it Clause No. 10 of Report No. 7 of The Corporate Services Committee, headed "Protection of the City's Tax Base".

 Council directed that the aforementioned Clause be struck out and referred to the Budget Committee for further consideration.

 City Clerk

 J.A.Abrams/dcm

 Encl.

 Sent to:Budget Committee

Chief Financial Officer and Treasurer

  CITY CLERK

Clause embodied in Report No. 7 of the Corporate Services Committee, which was before the Council of the City of Toronto at its meeting held on June 3, 4 and 5, 1998.

10

Protection of the City's Tax Base

 (City Council on June 3, 4 and 5, 1998, struck out and referred this Clause to the Budget Committee for further consideration.)

 The Corporate Services Committee reports having requested the Chief Financial Officer and Treasurer to report directly to Council, for its meeting scheduled to be held on June 3, 1998, on the number of cases under appeal, the dollar value involved, and an interim action plan as to how City Council can deal with these appeals.

 The Corporate Services Committee submits the following report (April 16, 1998) from the Chief Financial Officer and Treasurer:

 Purpose:

 This report outlines the initiatives that will be investigated to protect the property tax base.

 Source of Funds/Financial Implications:

 There is no funding required.

 Recommendation:

 It is recommended that this report be received for information and that a full report on this program, be brought back to Council by September 1998.

 Council Reference/Background/History:

 At its meeting held on March 4, 5, and 6, 1998, Council passed a motion that the Chief Financial Officer and Treasurer report to the Corporate Services Committee on how to protect the City=s tax base due to the School Board not continuing to pursue action to fight certain tax appeals.

 The Toronto District School Board was involved in the fighting of specific appeals where it felt the assessment allocated to the property was defendable. The School Board used an outside tax agent and lawyers to represent them on certain outstanding appeals. Due to the change in funding of education effective January 1, 1998, the School Board is no longer directly impacted by the outcome of appeals.

 The former City of Toronto has been and is actively involved in certain appeals which coincide, in some cases to those properties the School Board was also involved. The former municipalities were not aggressive in defending assessment appeals.

 Comments:

 The practice of defending the City=s tax base varied across the former municipalities and we are in the process of developing a new strategy to defend the City=s tax base. The strategy will involve ensuring that assessments represent the property=s fair share of taxes. This will be accomplished by reviewing assessment appeals and deciding which ones to challenge at the Assessment Review Board or which ones to accept. We have generally found that more analysis needs to be done in order to methodically protect the tax base from being eroded and unfortunately, the Province does not seem have the resources to do so.

 Part of the strategy will involve identifying new assessments for properties in which new tenants have moved in to vacant properties or a portion of properties, especially when it comes to commercial and industrial properties. This can be done in conjunction with staff such as utility meter readers, building inspection staff, business licensing groups, etc. It will mean a close link with building staff to ensure any new construction, renovations, additions, etc. are quickly brought to the attention of the Assessment Office in order to be reflected in revised assessment amounts. We have generally found that the new or revised assessment numbers are not reflected on the assessment rolls or on a supplementary billing as quickly as we would prefer.

 We will be drafting a Request for Information (RFI) to find out who can provide which specific services and at what cost to the City. The various bodies will include the Province, School Board and any private organizations.

 We will also be looking at the feasibility of reorganizing our own internal staff resources to expand an assessment/appeals section which will deal with this very issue. It is envisioned that a group of staff could be dedicated and experienced in methodically determining whether assessments accurately reflect the value of the property and whether the City should accept, defend or increase assessments when they are appealed. This group would consist of about three or four individuals dedicated to protecting the City=s tax base and where the cost/benefit is easily defendable. The group would pay for itself on an annual basis by finding new assessments and defending existing assessments. A performance measurement system would ensure that stated targets are achieved annually. The group would also act in the capacity of doing spot analysis to ensure the accuracy of assessments and find areas where there are inconsistencies.

 The Province has stated that municipalities will be responsible for the assessment function through the new Ontario Assessment Corporation. The role that the City will play in ensuring that its best interests are protected is unclear at this point in time. In the meantime, we need to ensure that we have a plan that will address our concerns.

 Conclusions:

 There will be a complete investigation of the most cost-effective method in protecting the tax base in the near future and we will report back by September 1998 on the best way to protect the City=s interest.

 Contact Name:

 Ed DeSousa, Phone: 397-4226, Fax: 392-3649.

 Mr. David Powell and Ms. Carla Nell, Representatives of the Municipal Tax Equity Consultant, appeared before the Corporate Services Committee in connection with the foregoing matter.

 (City Council on June 3, 4 and 5, 1998, had before it, during consideration of the foregoing Clause, the following report (June 2, 1998) from Chief Financial Officer and Treasurer:

 Purpose:

 This report outlines the interim initiatives that the City will be taking to protect its property tax base, prior to a detailed report being submitted by this fall. The report also includes information requested by the Corporate Services Committee.

 Source of Funds/Financial Implications:

 There is no funding required.

 Recommendation:

 It is recommended that this report be received for information and that a full report on this program be brought back to Council by this fall.

 Background:

 At its meeting held on May 25, 1998, the Corporate Services Committee passed a motion that the Chief Financial Officer and Treasurer report directly to the next Council meeting on the number of cases under appeal, the dollar value involved and an interim action plan as to how City Council can deal with these appeals. The current status of tax appeals is attached as Appendix I and the spreadsheet illustrates the potential loss of tax dollars to the City. A detailed list of outstanding appeals filed by the Toronto District School Board is available through the Finance Department.

The Toronto District School Board was involved in the fighting of specific appeals where it felt the assessment allocated to the property was inappropriate. The School Board used an outside tax agent and lawyers to represent them on certain outstanding appeals. Due to the change in funding of education effective January 1, 1998, it would appear that the School Board is no longer directly impacted by the outcome of appeals. The Province would be expected to make up any shortfall. As a result, the School Board will be discontinuing their involvement with outstanding appeals in the near future. The Board is waiting to receive written confirmation from the Province that their funding is protected before formally withdrawing from the balance of the appeals.

 The former City of Toronto has been and is actively involved in certain appeals which coincide, in some cases, to those properties in which the School Board was also involved. The other former municipalities were not as aggressive in defending assessment appeals.

 Comments:

 The practice of defending the City=s tax base varied across the former municipalities and we are in the process of developing a new strategy to protect the City=s tax base. The strategy will involve some analysis to verify that assessments represent the property=s fair share of taxes and to identify properties that were previously vacant, but have been since occupied and not yet recorded by the Province. The strategy will be geared mainly towards appeals for 1998 and beyond and for occupied properties that were assessed as vacant for the past couple of years. In most cases, the City=s efforts should compliment and not duplicate the Province=s work.

 In the interim, until a full report is submitted to Council by the fall, City staff will be protecting the City=s tax base as follows:

 (1)Staff will continue to review the list of all properties that the School Board had an interest in (400-500) and identify the top 25-50 or so properties they feel the City should potentially be involved in.

 (2)Staff will then review the Assessment Review Board (ARB) and Ontario Municipal Board (OMB) hearing schedules to determine if any of the subject properties are scheduled to be heard before the fall. If they are scheduled to be heard, then we will meet with the Assessment Commissioner to discuss the feasibility of entering into the appeal process at this late stage or the impact of requesting a delay in the process. The cost/benefit of our involvement to defend the existing assessment would also be required for each case. In addition we will consider the use of external consultants in these assessment appeals.

 (3)In consultation with the City Solicitor, it is advised that each appeal needs to be reviewed on a case by case basis to ensure that the City's involvement would add value to the process. At the ARB, we are automatic parties to the hearings, but at the OMB we need special permission from the chairperson and the other parties. It should be noted that many of the larger appeals at the ARB are for matters in adjournment which are awaiting decisions from the OMB for the earlier tax years under appeal. Many of these have been settled.

 The concept of fighting assessment appeals is a sensitive issue which must be balanced with the City's vision of attracting new businesses to, and keeping existing businesses and industry in Toronto. Consideration needs to be given to the possible impact of the assessment decrease, possible future use of the building/property if the business relocates and the potential impact to our community. Council will need to decide how vigorous a position it wants to take on assessment appeals in conjunction with all factors. Finance will develop criteria, in consultation with Economic Development, for determining appropriate City involvement in the appeal process as part of its final report. In the interim, as a general guideline, if the estimated loss of annual taxes is greater, the $250,000.00 the City will consider steps to protect its interest, taking into account various factors. The factors include chance of success, financial impact and probability of a precedent being set. City staff are in the best position to advise which assessment appeals should be pursued and to negotiate a mutually agreed upon settlement to avoid both sides incurring great legal expenses.

 Contact Name:

 Giuliana Carbone, Phone: 392-8065, Fax: 392-3649.)

(Appendix I)