April 17, 1998
TO:Corporate Services Committee
FROM:Chief Financial Officer and Treasurer
SUBJECT:Metro Toronto Housing Authority Assessment Appeals - Proposed Settlement
Purpose:
This report is to recommend to Council a position with respect to a proposed settlement of assessment appeals for a
number of Metropolitan Toronto Housing Association (MTHA) units across the City. MTHA operates the units on behalf
of the Ontario Housing Corporation (OHC) which owns the units.
Source of Funds:
If the Provincial settlement is accepted on account of deficient payments-in-lieu for 1991-1997, the City would be writing
off $6.14 million, with no charge back to, or refund from the school boards for their share of $3.46 million.
Recommendations:
It is recommended that:
Council reject the proposed MTHA settlement from the Ministry of Municipal Affairs and Housing on the basis that the
Province of Ontario should pay its fair share of taxes for MTHA properties for 1991-1997.
Council request the Ministry of Municipal Affairs and Housing to make full payment for MTHA payments-in-lieu
outstanding for the years 1991-1997, based on the assessments confirmed by the Ontario Municipal Board.
The appropriate officials be authorized and directed to take the actions necessary to give effect to the foregoing.
Council Reference/Background/History:
The Metro Toronto Housing Authority (MTHA) is a division of the Ontario Housing Corporation which is an agency of
the Province of Ontario. As a crown agency, the MTHA does not pay realty taxes on its properties, but makes
payments-in-lieu of full residential taxes under the provisions of the Housing Development Act. The Province of Ontario,
while not required to pay full residential taxes, had as a practice, paid its fair share through a pyament-in-lieu of taxes on all
owned properties, save and except for MTHA properties for 1991-1997.
Comments:
The MTHA filed appeals in 1991 and subsequent taxation years against the assessment of its properties in Metropolitan
Toronto. In 1995, the MTHA attempted to withdraw the appeals on some of its properties which, upon further
investigation, were found to be under-assessed and would have actually resulted in assessment increases had they
proceeded at the Assessment Review Board (ARB).
The area municipalities, together with Metro Toronto School Board, filed a motion with the ARB, opposing the appeal
withdrawals by the MTHA. The ARB held that the MTHA did not have a unilateral right of withdrawal and the appeals
could not be withdrawn. In October 1997, counsel for the Regional Assessment Commissioners, the Metro Toronto School
Board and the MTHA agreed at the OMB to the withdrawal of all the MTHA appeals. The assessments of all properties
were fixed by the OMB in the amounts returned on the rolls for the tax years under appeal and the appeals of the former
municipalities were dismissed.
MTHA makes payments-in-lieu of taxes under the provisions of the Housing Development Act. The Act is permissive in
that it states that the Province Amay agree to pay annually ... a sum of money calculated on any basis whatsoever but not in
excess of the amount that in the opinion of the Minister of Revenue would have been payable to the municipality as
taxes.@
Since 1991, the MTHA has withheld portions of its payments-in-lieu (PILs) to Metro area municipalities for the tax years
involved in the assessment appeals, based on an arbitrary 10% reduction in amounts somewhat related to assessment
values. The former area municipalities treated the PILs shortfall slightly differently but essentially the amount of PILs
withheld was either accrued or written-off. The school boards continued to receive their full, unreduced share of PILs,
except in the cities of York and North York. York treated the school share as an allowance deficiency and included the
school share in its annual allowance figures. North York reduced the shares to be paid to the school boards annually.
In mid-January 1998, the Ministry of Municipal Affairs and Housing issued separate cheques payable to each of the former
area municipalities. The cheques represent the school board portion of MTHA PIL=s (with the exception of North York),
based on a settlement reached between the Ministry of Finance and the MTHA. The settlement, to which no area
municipality was party to, is not based on assessment reductions as the assessments were confirmed at the original level by
the OMB.
In his letter which accompanied the cheques, the Assistant Deputy Minister of Municipal Affairs and Housing stated that by
accepting and negotiating the cheques, the municipality would be agreeing that it had been paid in full in respect of the
Areduced@ PILs made by the MTHA and OHC for the taxation years 1991 to 1997. Accordingly, the municipality would
also be agreeing that it would make no charge backs to the school boards, nor request a refund, in respect of these PILs for
their share. The former City of North York has deposited its cheque from the Ministry but has subsequently written to the
Minister informing him that although the funds were deposited, that action did not constitute acceptance of the Minister=s
offer of settlement.
Schedule 1 sets out the amount of MTHA PILs in each of the former municipalities that is currently in dispute and the
amount of PILs offered as a settlement in January. The total amount in dispute for all the former area municipalities is
$16.5 million and the amount offered by MTHA as a settlement in January was $9.15 million. It appears that the intent of
the settlement amount is to reimburse the former municipalities for the full share of school board MTHA PILs already paid
by them to the school boards. From 1991 to 1997, the school boards had use of these revenues, while the former
municipalities had to absorb the total reduction PILs revenue pending resolution of the dispute.
From 1991 to 1997, although MTHA was not paying the full amount of PILs, the area municipalities (with the exception
of York and North York) paid over to the school boards their full share of PILs. York treated the PILs withheld as tax
allowance deficiences and charged back $622,000 to the school boards. North York reduced the PILs paid annually to the
school boards for the years 1991-1996, but paid the school boards their full share of the 1997 PILs. If Council agrees to the
terms set out in the Assistant Deputy Minister=s letter, the new City of Toronto would have to reimburse the school boards
the $622,000 previously withheld by York and the $313,324 previously withheld by North York. In total, the City would
have to reimburse the school board $935,324 as part of the settlement, so the net amount that would be retained by the City
is $8.22 million. As noted in Schedule 1, if the Province intended to make full reimbursement for the school board share,
the settlement amount should have been $10.09 million.
The cheques in hand would offset monies already paid to the school boards (with the exception of York and North York),
but PILs of $6.41 million that should have paid by the Province to the Metro and the old local municipalities are still left
unpaid. If Council agrees to the settlement, the City would have to absorb both the Metro and old local municipal shares of
the MTHA PILs for the tax years 1991 to 1997. The former municipalty of North York wrote off the outstanding PILs
annually. However, the former municipalities of East York, Etobicoke, Scarborough, Toronto and York accrued the
outstanding MTHA PILs. As a result, the outstanding accrued amounts, totalling $6.14 million, would be required to be
written-off.
The proposed settlement will result in the City absorbing the total loss in revenue of $6.41 million. It is equivalent to a
37% decrease in assessment, without the benefit of being able to recover the revenue from the school boards. Under normal
circumstances, the former municipalities would be able to charge back approximately 54% of the revenue lost to the school
boards, or $3.46 million.
The new CVA figures for these properties for the 1998 tax year reflect a decrease of only $2,258,986 or 3.89% decrease
from full PILs of $58,142,757. As part of the provincial downloading, social housing costs (i.e., MTHA) will be borne by
municipalities and shared across the GTA, so the decrease in assessment values due to reassessment would result in overall
lower taxes for these properties across the GTA.
It should be noted that the legislation under which the MTHA makes payments-in-lieu is permissive. The legislation states
that the MTHA Amay@ make payments, and may calculate the amounts to be paid on whatever basis it wishes. Council
may therefore wish to accept the MTHA settlement since refusal of the settlement does not guarantee that the Province will
make full payment of the outstanding MTHA PILs. However, in principle, the only situation where Council should accept a
PILs payment that is lower than that levied by the municipality is where the property has received an assessment reduction.
As noted above, this is not the case with the MTHA properties.
The fundamental issue at stake is one of fairness. Although the payment of PILs by the Province is permissive, taxpayers
should not have to subsidize Provincially-owned properties and the Province should pay their fair share for municipal
services. Should the Province refuse to pay their fair share based on the confirmed assessments, Council may wish to raise
the issue with respect to the subsidization of MTHA properties by all taxpayers of the City of Toronto as it sets a precedent
for other PILs activities. Other properties that are liable to pay PILs, such as Ontario Hydro, the Federal Government and
Crown Corporations, may in turn consider the arbitrary and unilateral withholding of PILs as Ontario Housing Corporation
has done, with Toronto taxpayers being required to subsidize a much larger segment of similar properties eligible for
payments-in-lieu of taxes.
Conclusion:
The MTHA proposal from the Ministry of Municipal Affairs and Housing would appear to satisfy it, the MTHA and the
school boards. The proposal is a cash settlement and cheques totalling $9.15 million were provided with the written offer
from MMAH. All assessments for the MTHA properties under appeal have been confirmed by the Assessment Review
Board and Ontario Municipal Board. Acceptance of the cash settlement would result in the new City of Toronto having to
make an immediate write off $6.14 million in tax-related revenues with no charge back or refund from the school boards
for the proportionate shares.
The only situation where Council should accept a lower PILs payment is where the MTHA has received an assessment
reduction at either the ARB or OMB. It should be noted that at this point, it appears that the school boards tax write offs for
all years will be fully covered by the Province without specific penalty or incursion into the funding formula for the
operation of the school boards.
If the Province refuses to pay their fair share of the payments-in-lieu of taxes on the MTHA properties, Council should
raise the issue with respect to the subsidization of MTHA properties by all taxpayers of the City of Toronto as it sets a
precedent for other PILs activities.
Contact Name:
Audrey Birt, 392-7820
Ed Desousa, 397-4226
Wanda Liczyk, C.A.
Chief Financial Officer and Treasurer
Appendix 1
MTHA Payments-in-Lieu of Taxes
The settlement offered for the former municipality of North York represents the 1997 school share of MTHA PILs, which
was paid in full to the school board by North York in 1997. Prior to 1997, North York reduced the shares of PILs paid to
the school boards by their share of the disputed amount under appeal annually. If the City accepts the settlement, the City
would have to reimburse the school boards $313,324 in respect of the reduced shares paid to them in the years 1991-1996.
North York also did not accrue the City and Metro shares of withheld MTHA PILs and wrote these amounts off annually.
York previously charged back $622,000 of the withheld MTHA PILs to the school boards through tax allowance
deficiencies. If the City accepts the settlement, the City would have to reimburse the school boards $622,000 previously
withheld by York.
The total Ministry offer of $9,154,886 would result in the City having to reimburse the school board $935,324 for reduced
PILs paid to them by North York and York. The City would have to write off $6.1 million, which represents the reduced
City and Metro shares of MTHA PILs accrued by the former municipalities. The settlement would result in net
cash-in-hand of $8.22 million.
