Business Improvement Areas: Interim Administrative Procedures
for 1998 and Municipal Code Amendments for the
(Former) City of Toronto
The Strategic Policies and Priorities Committee recommends the adoption of the following
joint report (March 19, 1998) from the Interim Lead, Economic Development, the
Commissioner of Urban Planning and Development and the Chief Financial Officer and
Treasurer, subject to the following amendments:
(1) deleting from Recommendation (5)(c) the date "July 31, 1998" and inserting in lieu
thereof "August 31, 1998 or the 1st day of the month following the due date" so that
Recommendation (5)(c) now reads:
"(c) that BIA advances on the first 50 percent of the net levy be interest free until
August 31, 1998 or the 1st day of the month following the due date, and that
interest be charged at the rate of prime plus one percent on the portion of
advances in excess of 50 percent of the net levy and after August 31, 1998 or
the 1st day of the month following the due date, and";
(2) deleting from Recommendation (7) the words and numbers "Section 86.1 of" so
that Recommendation (7) now reads:
"(7) The Procedural By-law be amended to authorize the Strategic Policies and
Priorities Committee to deal with BIA Boards of Management appointments
and the Budget Committee to deal with BIA budgets instead of the Urban
Environment and Development Committee.";
(3) renumbering Recommendation (8) and numbering it Recommendation (9); and
(4) inserting a new Recommendation (8) to read as follows:
"(8) Recommendation (7) be deemed notice to amend the Procedural By-law as
required by Section 134 thereof."
The Strategic Policies and Priorities Committee submits the following joint report (March
19, 1998) from the Interim Lead, Economic Development, the Commissioner of Urban
Planning and Development Services and the Chief Financial Officer and Treasurer:
Purpose:
This report outlines the Business Improvement Area Program and recommends interim
administrative procedures and policies for 1998 and process for developing an integrated
program across the amalgamated municipality for implementation in 1999.
Funding Sources, Financial Implications and Impact Statement:
No funding is required. Providing interest-free advances to BIAs as has been requested by the
Toronto Association of BIAs and as is set out in Recommendation 5(c) will result in lost revenue
to the City in treasury bill interest on investments. It is estimated that the net revenue reduction
will be in the range of $8,000.00 to $12,000.00.
Recommendations:
It is recommended that:
(1) City Council request the Minister of Municipal Affairs to amend the meaning of BIA
membership set out in Section 220 of the Municipal Act to include all business tenants as
well as the assessed owners "of rateable property in the area that is in a prescribed
business property class";
(2) to clarify that all business tenants may continue to participate at BIA General Meetings,
that authority be granted for the introduction of the necessary Bills to Council to give
effect to an amendment to the (former) City of Toronto Municipal Code which will delete
subsections A, B, C and D of Section 20-10;
(3) the City Solicitor be authorized to review Section 20 of the former City of Toronto's
Municipal Code and to introduce the necessary Bills to Council to bring it into
compliance with the amendments made by Bill 106;
(4) the Director of Economic Development be requested to review the administrative
practices, services and support that has been provided to BIAs in each of the former
municipalities in consultation with the BIAs and the Chief Financial Officer, Solicitor,
Auditor, and other staff involved in administrating the program, and report further
recommending an integrated BIA program for implementation in 1999;
(5) the following interim administrative procedures be adopted for the BIA program during
1998:
(a) that BIA levies be included on the final realty tax bill in 1998 due to the late
delivery of the assessment roll;
(b) that BIAs be permitted to draw advances of up to 75 percent of their net levy
following approval of their budgets by Council;
(c) that BIA advances on the first 50 percent of the net levy be interest free until July
31, 1998, and that interest be charged at the rate of prime plus one percent on the
portion of advances in excess of 50 percent of the net levy and after July 31, 1998;
(d) that the balance of the net levy be provided to BIA Boards of Management only
when collected;
(6) City Council adopt the objective of continuing to serve BIAs with as little disruption as
possible during 1998 while the program review is ongoing, and to that end generally
continue to provide each BIA with the same services as were previously available in its
former municipality;
(7) Section 86.1 of the Procedural By-law be amended to authorize the Strategic Policies and
Priorities Committee to deal with BIA Boards of Management appointments and the
Budget Committee to deal with BIA budgets instead of the Urban Environment and
Development Committee; and
(8) the appropriate City officials be authorized to take the actions necessary to implement the
foregoing.
Background:
Business Improvement Areas (BIAs) play a key role in the beautification, safety, maintenance
and promotion of retail strips and traditional downtowns across Ontario. The BIA program is
governed by provincial legislation (Section 220 of the Municipal Act) and is administered by
municipalities. If the majority of businesses in an area are in favour of forming a BIA, the
municipality is permitted to pass a by-law so designating the area. This enables the businesses
and property owners in an area to contribute to a special levy that can then be used to promote
the area as a shopping district and to make improvements to public property. The size of the
levy and how it is used is determined by a volunteer Board of Management made up of BIA
members and municipal councillors. The people on the Board of Management and the annual
budget and levy is approved by Council. The levy is collected by the municipality and turned
over to the Board of Management for spending in accordance with the approved budget. Every
business property in the area is automatically a member of the BIA and is required to pay its
share of the improvement budget.
BIAs do not receive direct funding from the municipality. Most municipalities provide staff
support to the program at no charge, and many also contribute grants, physical infrastructure
(such as enhanced lighting, flower boxes, decorative brick sidewalks, banners, etc.) and various
types of in-kind services (e.g. audit services, office space and services). The amount and type of
municipal support provided varies widely across the province.
There are 39 BIAs across the City of Toronto. The largest concentration of BIAs is in the former
City of Toronto, as follows:
Toronto 26
North York 0
Scarborough 1
Etobicoke 6
East York 1
York 5
Total - 39
The appended map indicates the general location of the City's BIAs while Appendix A lists all
of the City's BIAs and designating by-laws.
As is summarized in Appendix B, Toronto BIAs collectively raised over $3 million from their
business members in 1997 -- monies which were reinvested in upgrading the City's commercial
districts' appearance and services, holding special events and festivals and in district promotion.
About three hundred business representatives served on the volunteer Boards of Management,
contributing thousands of hours of time to developing and implementing BIA programs and
representing the interests of their neighbourhoods.
The BIA program is widely considered to be a successful commercial area revitalization model
and has been emulated around the world. The money and time which the program encourages
business to invest in their commercial districts creates a more attractive ambiance along city
streets. Local residents enjoy the many free festivals and special events sponsored by BIAs. The
enhanced appearance and image of the commercial district contributes to the quality of life in the
local community. It also makes the district more attractive to businesses seeking new locations.
Local businesses see a return on their investment as people translate their increased enjoyment of
the area into increased visits and increased sales. In short, a successful BIA program helps
anchor an upward spiral of increased business for local merchants and increased neighbourhood
amenity for local residents. It contributes to the local economy by attracting specialty shopping
and tourist expenditures, and by helping to make the City an attractive community in which to
live and do business.
The BIA program is affected by two major changes that took effect on January 1, 1998:
(1) the changes to the municipal taxation system that were introduced in the province by Bill
106; and
(2) the amalgamation of the City of Toronto.
This report summarizes the implications of these changes, and recommends interim
administrative procedures and other actions to reduce their negative impact on the BIA program
during 1998.
Comments:
(1) Impact of Bill 106:
Bill 106, the Fair Municipal Finance Act, eliminated the business occupancy tax and the
maintenance of a business assessment roll by the Province. This necessitated that it also make a
number of changes to the BIA program since the business assessment roll was the basis for
determining BIA membership and levies. The amendments and the impact on the BIA program
are summarized in the following table:
CHANGE |
IMPACT |
BIA levies were previously billed to business
tenants. With business tenancies no longer
being included on the assessment roll, BIA
levies have become the responsibility of
property owners. The BIA levy will be billed
to property owners, and landlords will be
responsible for paying the levy to the
municipality. |
The municipality should incur significantly
lower costs in billing and collecting the BIA
levy. |
BIA levies are "deemed to be taxes" so that,
if not collected, they become a lien on the
property. The municipality will now be a
secured creditor and the collection of BIA
levies is guaranteed. |
The BIA levy will become virtually 100
percent collectable (however, there may still
be a time delay in collections). This contrasts
with the current situation where about 15
percent of BIA levies are eventually written
off. In many BIAs, it should therefore be
possible to reduce the amount of levy required
to collect any given budget. |
BIA membership previously consisted of all
business occupants included on the
assessment roll. Bill 106 changed BIA
membership so that only commercial
property owners and business tenants who
are responsible for the payment of realty
taxes through their lease arrangements are
members. Business tenants who are not
responsible for the payment of realty taxes
through their lease arrangements are no
longer qualified to be BIA members. |
BIAs traditionally have been made up of all
business occupants whether they be tenants or
owner-occupants. These have been the
interests who have voted to set up BIAs, who
served as members on the Board, who
determined the improvement program and
who paid the BIA levies. Under Bill 106,
property owners become new key players in
the BIA process.
Tenant businesses are entitled to remain
involved only if their leases require that they
pay realty taxes. Such leases are rare in small
commercial properties such as typify most
BIAs. Many people who currently are active
BIA leaders are no longer automatic members
of the BIA. They may continue to participate
only if they are nominated by a BIA member
to represent his/her interests. |
Landlords are responsible for identifying and
informing the City Clerk of those tenants in
the business property class who, under their
lease are required to pay all or part of the
taxes on the property. There is, however, no
incentive for landlords to provide this
information or recourse if they don't. |
The municipality and BIA boards of
management can no longer readily identify
which business tenants are BIA members and
which are not. |
Although the increased collectability of the BIA levy is welcomed, the Toronto Association of
Business Improvement Areas (TABIA) is extremely concerned about the impact that the change
in membership may have on the success of the BIA program. It is their experience that absentee
property owners usually have not been involved or interested in BIAs. The program has been
developed and operated to serve the interests of the business community. TABIA is concerned
that property owners and business operators often have been shown to have different priorities.
They see a potential for absentee owners to opt for cost-minimization, and to force BIAs into
inactivity by overwhelming the business interests and voting down their budgets or initiating
dissolution procedures. The fact that a portion of the BIA levy will be charged to vacant floor
space may increase this risk.
TABIA's concerns are shared by many BIAs in other parts of the province.
There also are significant administrative complications introduced by the distinction between
tenants whose leases do and do not require them to pay their property taxes. The municipalities
and boards of management will have to create and maintain their own lists of tenants qualified
for BIA membership if they are to keep them informed about BIA activities, notify them about
meetings, and verify their eligibility to serve on boards of management. The only way to verify
eligibility may be to require that tenants provide copies of their leases to the municipality.
Over the last year, TABIA has devoted considerable energies towards bringing their concerns to
the attention of provincial and municipal officials and in proposing alternative solutions.
Although the Province declined to make amendments that would secure the participation of all
business occupants in BIA programs before Bill 106 came into force, provincial officials did
indicate that additional changes to the Municipal Act were contemplated in 1998, and that this
would provide an opportunity to address the issue.
Most recently, on February 5, 1998, the Minister of Finance announced that changes would be
made to enable all business tenants to become full members of BIAs. He also indicated that
legislation would be introduced to enable landlords to recover property tax increases from all
tenants regardless of the provisions in their leases.
However, at the present time, BIA membership is still limited to property owners and those
tenants whose leases require that they pay realty taxes. After considerable consultation with
TABIA, it was determined that the problems this presents for BIAs could be reduced if all
business operators could continue to vote on the budget and on which BIA representatives should
be on the Board of Management. This is possible under current provincial legislation since the
Municipal Act indicates only that BIA Boards of Management must submit to Council budget
estimates for the current year. It does not specify how those estimates are to be determined. Nor
does it specify how Council should choose which BIA members should be on BIA Boards of
Management.
However, the former City of Toronto has set out a more detailed process for holding elections to
BIA Boards of Management and approving budgets in Section 20 of its Municipal Code. It
requires BIAs to hold General Meetings of the membership at which elections to the Board are
held and the annual budgets are approved. It also requires that the Board send a meeting notice
to all BIA members by pre-paid post at least ten days before the Meeting. Although these
provisions have better ensured that BIAs follow a democratic process and fully inform their
membership when making key decisions, they now pose an additional constraint on the ability
of business owners who are tenants not required to pay realty taxes to participate in BIAs.
Therefore, it is recommended that these provisions be deleted from the Code (Section 20-10
subsections A, B, C and D).
While these provisions can be deleted from the Code, it is not possible to replace them with
provisions that would implement the intent that all business tenants continue to be informed and
involved in the process as well as BIA members. The problem is that BIA Boards of
Management are "Bodies Corporate", and therefore cannot formally be required by legislation to
involve people who are not members of the Corporation in their decision-making processes.
This notwithstanding, TABIA's desire that all business operators continue to be involved in
electing the Boards of Management and voting on BIA budgets can be achieved if the General
Meetings are viewed as giving advice to the Boards of Management and Council. Each Board of
Management should officially approve its budget after the General Meeting is over, and final
authority to approve the BIA's budget rests with City Council.
The By-laws in effect in Scarborough, Etobicoke, East York and York do not require their BIAs
to follow more detailed election and budget approval procedures than are set out in the Municipal
Act. Therefore City Council action is not necessary to permit their BIAs to involve all business
operators as well as property owners to the extent that they currently do.
Since the Municipal Act indicates that only BIA members and members of Council can be
appointed to BIA Boards of Management, any business tenants not required to pay their realty
taxes that the membership elects to the Board of Management at a General Meeting will need to
be a nominee of a BIA member. Economic Development division staff are verifying the
eligibility of all persons elected to BIA Boards, and will ensure that anyone who is not a BIA
member as set out in the revised Municipal Act is a person who has been nominated by a BIA
member before forwarding their names to Council for approval.
The amendments to BIA membership and procedures introduced by Bill 106 make some
subsections of the former City of Toronto's Municipal Code obsolete. It is recommended that
the City Solicitor be authorized to review the Municipal Code and make the amendments
necessary to bring it into compliance with Bill 106.
(2) Billing the BIA Levy:
Since the BIA levy is now charged to property owners, it can be included as a line item on the
realty tax bill. This will significantly reduce the City's costs since it will not be necessary to
send out a separate bill or to process separate BIA levy payments.
In 1999 the City may have the option of including all or a portion of the levy on the interim tax
bill. This was not possible in 1998 because of the late delivery of the assessment roll. Therefore,
it is recommended that the 1998 BIA levy be included on the final realty tax bill. This will delay
the collection of funds until several months later than has been the norm. In view of this delay, it
is recommended that BIAs be permitted to draw advances of up to 75 percent of their approved
budgets in 1998.
In the past, the former City of Toronto charged its BIAs interest at the rate of prime plus one
percent on any funds they requested in advance of levy collections. Scarborough, York and
Etobicoke provided interest free advances, while East York did not previously provide advances.
The Chief Financial Officer recommends that this practice be harmonized in 1998.
At its Annual General Meeting on February 17, 1998, TABIA adopted a motion to request that
the City provide advances of up to 50 percent of BIA budgets interest-free in 1998 due to the late
billing of the BIA levy. It previously was possible for the City to bill BIA levies in March. Due
to the late delivery of the assessment roll, in 1998 the bills will be sent out at least three months
later than normal. TABIA questions the equity of requiring BIAs to pay additional interest
charges for a delay in receiving funds that is beyond their control.
It is recommended that interest be charged on BIA advances in excess of 50 percent of their net
levy at the rate of prime plus one percent.
Providing BIAs with interest free advances is a cost to the City since the receipt of investment
interest on those funds is foregone. The cost will depend on the amount of advances requested
by the BIAs and the length of time the advances are outstanding. It is recommended that the City
put a time limit on the interest free period. July 31, 1998 is suggested since it is expected that
payment of two thirds of the levy will be due by this date.
The absolute maximum cost of providing interest free advances until July 31, 1998 will be
$16,850.00. This amount will only be incurred if no portion of the levy is collected before July
31 (this is unlikely since the due date for payment of the first one third of the levy is expected to
be June 30) and if all BIAs immediately request the maximum interest-free advances. This
amount will be reduced to the extent that levy payments are received by the City before July 31
and that BIAs delay or do not request advances or request advances in excess of 50 percent of
their levies (and pay interest on those portions). All three of these things are likely to happen,
and a more realistic estimate of the cost of providing interest-free advances to BIAs probably is
in the $8,000.00 to $12,000.00 range.
It is anticipated that the need for BIA advances will be reduced in the future if the levy or a
portion thereof can be included on the interim tax bill. Policy respecting interim billing and the
charging of interest on advances are among the issues to be addressed in the review of the BIA
program discussed in the following section of the report.
(3) Issues Related to Amalgamation:
It is considered desirable that the BIA program be administered consistently across the new City
of Toronto. However, each of the five municipalities within the new Toronto that have BIAs
have dealt with them in different ways in the past. Some of the municipalities have their own by-laws governing the program while others do not. Different services are offered and fees charged
from area to area. Before an integrated program can be developed, considerably more review
and discussion is needed to evaluate which practices are the most efficient and which services
are the most cost effective and important to offer within the context of limited resources.
Therefore, it is recommended that 1998 be considered a transition year during which BIA
practices will be reviewed with the objective of bringing forward recommendations for an
integrated program in time for 1999 implementation.
The objectives of the review are to develop a program which (a) supports the ability of BIAs to
contribute towards the economic health of the City; (b) provides the required municipal
administrative support efficiently and economically; and (c) encourages BIA Boards to be
accountable to their members. The issues and services that will be addressed include:
(a) election and budget approval procedures;
(b) the role of the municipality in monitoring Board practices and expenditures;
(c) policies and procedures respecting audits, access to insurance coverage, billing and
collecting the levy transferring funds to the BIAs, and the charging of interest on
advances;
(d) procedures for forming new BIAs;
(e) the need to maintain a list of businesses in BIAs;
(f) the need for a municipal BIA by-law;
(g) the provision of municipal services to BIAs and the charging of fees; and
(h) the provision of commercial revitalization and economic development advice and
assistance to BIAs, and municipal expenditures on special grants and services (e.g.
municipal contributions to streetscape improvements).
It is recommended that the review be co-ordinated by Economic Development staff, in
consultation with the BIAs and all other staff who are involved with administering various
aspects of the program.
While this review is underway, it is recommended that each BIA continue to be served in
accordance with past practices. The Boards will then be in a better position to plan their budgets
and programs knowing (for example) that the municipality will or will not pay for banner
installations or the planting of trees in 1998 if that was the practice in the past.
Notwithstanding this general approach, the process for securing Council approval of the BIA
Boards of Management and budgets and levies can be harmonized immediately without
affecting service to the BIAs. Section 86.1 of the Procedural By-law indicates that BIA Board
appointments and budgets be reported to Council through the Urban Environment and
Development Committee. However, this is the only aspect of the BIA program that is dealt with
by that Committee. The remainder of the economic development program reports to Council
through the Strategic Policies and Priorities Committee. It would be more efficient for staff and
probably more rationale for Committee members if the Strategic Policies and Priorities
Committee were to deal with BIA Board appointments as well as other aspects of the program.
Staff in the Finance Department are of the view that BIA budgets should be reviewed by the
Budget Committee instead of the Urban Environment and Development Committee. It is
recommended that the Procedural By-law be so amended.
Conclusions:
BIAs play a significant role in helping the City maintain a healthy community and economy. It
is important that their effectiveness not be undermined by the changes that have been made to
the property tax system and structure of municipal government. The interim administrative
procedures and program review set out in this report are intended to serve this objective.
Contact Name:
Judy Morgan; phone number 392-1003; fax number 392-0675; E-mail address
jmorgan1@city.toronto.on.ca