Multi-Residential Property Class -

Tax Policy Options

 The Strategic Policies and Priorities Committee recommends the adoption of the recommendations in the following transmittal letter (July 12, 1998) from the Assessment and Tax Policy Task Force:

 Recommendations:

 The Assessment and Tax Policy Task Force on July, 6, 7, 11, and 13, 1998, recommended to the Strategic Policies and Priorities Committee and City Council that:

(1)property tax increases due to reassessment for all multi-residential properties be capped at 2.5 percent in each of the tax years 1998, 1999 and 2000 and be funded by proportionately reducing tax decreases within the multi-residential property class;

 (2)Council pass a by-law to create a property class for newly constructed rental buildings at the residential/farm tax rate and that the Province be requested to make this a permanent tax policy tool;

(3)the Province be requested to amend the legislation to provide that the landlords be required to pass on any decreases in taxation to tenants, with detailed deadlines for passing on any decreases and providing for mandatory fines or penalties should the deadlines not be met;

(4)all tenants be informed of any tax increases and decreases due to reassessment or tax policy changes by the City and that a plan for such notification be developed by the Chief Financial Office and Treasurer and that a budget for this undertaking be produced and submitted to Council through the Budget Committee and the Strategic Policies and Priorities Committee, following consultations with the Federation of Metro Tenants Associations;

 (5)given that consultations have not provided a guaranteed strategy for ensuring that tax reductions will go to tenants:

 (a)the City continue to lobby the Provincial Government to achieve legislative and regulatory reform which will guarantee that tenants receive the benefit of tax reductions over the long term, including the removal of loopholes that now exist;

 (b)City staff develop detailed proposals to achieve these objectives; and

 (c)there be no equalization tax shifts of the municipal share of property taxes between the multi-residential class and the residential class until there are guarantees that the tenants will receive the benefits;

 (6)because, under the current legislation, tax increases will be absorbed by tenants while tax decreases will largely go to landlords, and because tenants are the most unfairly taxed group of residents in the City, Council should adopt a strategy which minimizes the tax changes effecting tenants;

 (7)a workplan be developed to formulate comprehensive tax policies, including development of a permanent solution to ensure property tax equity between homeowners and tenants and a mechanism that would ensure tenants receive the full benefit of any reduction in tax burden for the multi-residential class, including reports on the following:

 (i)a "de-linking" process which separates the tax bill from the rent bill and that City staff develop a programme which will allow this "de-linking" to take place and a complete set of provincial and/or municipal legislative, regulatory and administrative initiatives which will achieve this objective;

 (ii)the creation of subclasses or graduated tax rates in the multi-residential class for the purpose of creating progressive tax rates for multi-residential buildings;

(iii)treating owner-occupied units in multi-residential class properties as residential/farm property in the same way the Federal and Provincial Governments treat such units as a principal residence;

 (iv)the number of multi-residential buildings with only seven or eight units and what options owners of such buildings have in converting units to uses other than housing and what powers the City has in protecting rental units from being converted to non-residential uses;

 (v)commencing in 1999, on how to better inform the taxpayers of the nature and type of services being paid for in the property tax bill, including education, services on property, services relating to people, i.e., "income redistribution"; and

 (vi)the appropriateness of clawing back the education equalization imposed by the Province, even recognizing the inability of the City to ensure that the tax reductions will benefit the tenants.

 The Task Force reports having received for information, a report (June 23, 1998) from the City Clerk advising that approximately 1,500 form letters had been received from citizens living in multi-residential apartments requesting that their property taxes be equalized.

 Background:

 The Assessment and Tax Policy Task Force had before it a report (June 29, 1998) from the Chief Financial Officer and Treasurer outlining the tax policy options available to Council with respect to the multi-residential property class.

 The Task Force also had before it the following communications respecting the Current Value Assessment and the multi-residential property class:

(a)(July 3, 1998) from Mr. Gary Griesdorf, Executive Director, Greater Toronto Apartment Association;

 (b)(Undated) from Mrs. Rosen;

 (c)(July 6, 1998) from Mr. Sam Lewkowicz;

 (d)(Undated) from Mr. Julian Smit;

 (e)(July 6, 1998) from Mr. Howard Tessler, Federation of Metro Tenants' Association; and

 (f)(July 7, 1998) from Councillor McConnell, Chair, Multi-Residential Work Group.

 (Copies of the communications referred to in the transmittal letter of the Assessment and Tax Policy Task Force have previously been circulated to all Members of Council with the Assessment and Tax Policy Task Force agenda and copies thereof are on file in the office of the City Clerk.)

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 (Report dated June 29, 1998, addressed to

the Assessment and Tax Policy Task Force from

the Chief Financial Officer and Treasurer)

 Purpose:

 This report outlines the tax policy options available to Council with respect to the multi-residential property class.

 Funding Sources, Financial Implications and Impact Statement:

 The recommended capping of multi-residential properties will protect tenants from significant CVA-related tax increases. However, if the cap is adopted by Council, budgetary tax increases, if any, in 1999 and 2000 would have to be funded from uncapped properties. For every one-percent increase in the City's levy during the next two years, there would be a 2.8 percent increase in the City's municipal portion of the residential/farm tax rate or a 1.8 percent increase in the total residential/farm tax rate.

 Recommendations:

 It is recommended that:

(1)property tax increases due to reassessment for all multi-residential properties be capped at 2.5 percent in each of the tax years 1998, 1999 and 2000 and be funded by proportionately reducing tax decreases within the multi-residential property class;

 (2)the Province be requested to rescind any provisions in Bill 16 which prevent a municipal council from funding a budgetary tax increase from all property classes, should the capping provisions be adopted;

 (3)a workplan be developed to formulate comprehensive tax policies, including development of a permanent solution to ensure property tax equity between homeowners and tenants and a mechanism that would ensure tenants receive the full benefit of any reduction in tax burden for the multi-residential class.

 Background:

 The report is set in the following sections:

 Background:

Housing Stock and Households

History of Assessment of Residential Properties

Determination of Rental Income

Average Rents and Property Taxes

 Comments:

Current Value Assessment - 1998

Implementation of CVA

Option 1 - Capping Tax Increases

Option 2 - Phase-in Program

Tenant Protection Act - Automatic Rent Reductions

Impact of Capping or Phase-in on Automatic Rent Reductions

Permanent Rent Reductions

Impact of Increased Profitability on Assessments

Options for Reducing Tax Burden on Multi-Residential Properties

Establish Uniform Municipal Tax Rate

Reduce Tax Ratio for Multi-Residential Class

Shift Taxes over Residential Phase-in Period - "The Kinahan Concept"

New Apartment Class

 Conclusion:

 Background:

 Housing Stock and Households:

 Ward profiles show that 51.5 percent of all residential dwellings in Toronto are occupied by tenants. Appendix 1 shows the total number of occupied dwellings by tenure for each ward. However, in order to compare the number of owners and tenants in the residential versus multi-residential property classes, the data should be separated by structure type, so as to distinguish between tenants occupying single family homes in the residential class versus tenanted apartments in the multi-residential class.

 Appendix 2 shows the impact of current value assessment on all residential properties in the City, categorized by structure type. Separate data is shown for single family homes (including attached and detached), condominiums and co-ops, duplexes, multiplexes, residential above retail and apartments. As can be seen, the number of apartment units in the multi-residential property class represents 32 percent of all residential dwelling units.

 History of Assessment of Residential Properties:

Prior to 1998, all properties were assessed based on market values. However, across Ontario, assessments were based on values that were out of date, with assessments ranging from the 1940s to the early 1990s. The Province initiated reassessment due to the fact that most municipalities were on different assessment base years.

 Assessors use three basic methodologies to determine the assessed value of a property: comparative sales, income capitalization and replacement cost. For residential homes, market values are determined based on comparative sales data. Multi-residential properties are considered business properties and as a result, market values are determined based on the rental income produced by the property.

 Prior to the reassessment for 1998, once the market value of a property was calculated, the assessment was determined by factoring that value back to the base assessment year for that particular municipality. However, different property classes were assessed at different levels respective to their market values based on the ratio of existing (or frozen) assessment to market value. Residential properties were generally assessed at a lower percentage (ratio) of market value than commercial properties. Multi-residential properties were usually assessed at a higher percentage of market value than other classes. Historical class tax burdens were preserved at levels which existed prior to the provincial takeover of assessment in 1970, and continued through the policies and practices hidden within the assessment system.

 Assessment to market value ratios in Metro Toronto prior to the current reassessment ranged from a low of 1.97 percent for the residential class to a high of 10.74 percent for the multi-residential class. Set out below are the average assessment to market value ratios in Metro Toronto prior to the 1998 reassessment.

 Source: 1993 Equalization Factors.

 Residential properties with 3-6 units have historically been assessed at levels slightly higher than single-family homes, which resulted in slightly higher tax burdens. However, the methodology used to assess these types of properties was the comparative sales method (the same method as single family residential), as opposed to the income method used for high-rise apartment buildings. Assessment reform introduced by the Province has moved these 3-6 unit properties into the residential property class, so that properties with less than seven units which have historically been assessed in a similar manner as single-family home, will be taxed at the same rate as single family homes.

 Appendix 3 shows the tax impact of current value assessment for properties (assessment portions) with 3 to 6 residential units. Of the 8,706 properties in the residential property class with 3-6 units, 6,309 or 72.5 percent would experience tax decreases and 2,397 or 27.5 percent would experience tax increases as result of reassessment. Since the properties with 3 to 6 units are now included in the residential class, and therefore taxed at the lower residential rate, there has effectively already been a shift in taxes relating to these properties. The total reduction in taxes for these properties amounts to $11.7 million, which has now been redistributed among other residential properties.

 The method for determining the assessed values of multi-residential properties resulted in high-rise apartments being assessed at four to five times the rate of single family homes. Since a common mill rate was applied to the assessed value of all residential properties, tenants paid taxes at higher effective tax rates than homeowners. However, the difference in tax burden was hidden in the assessed value of the property and most tenants were not aware of how much property tax they actually paid through their rent. With the 1998 reassessment, the difference in tax burdens between tenants and homeowners has become transparent by having different tax rates for the residential and multi-residential property classes. The updated preliminary transition ratio transition ratio for the multi-residential class in Toronto, as determined by the Province, is 5.2355, which results in the updated preliminary tax rate for municipal purposes being five times that of the residential class.

 Determination of Rental Income:

 Owners of rental income properties can claim deductions against income under the provisions of the Income Tax Act (Revenue Canada). Expenses that can be deducted fall under the categories of current expenses or capital expenses. Generally, current (or operating) expenses are recurring expenses that provide short term benefit such as repairs to ensure the rental property is maintained. These would include expenses incurred for painting the exterior walls of a building. Capital expenses provide a long term benefit and could include the purchase priced of the property, installation of vinyl siding or other permanent improvement, or the replacement of major appliances.

 Types of expenses that owners of rental properties can deduct from income include:

 (i)property taxes;

(ii)advertising for available apartments;

(iii)insurance premiums;

(iv)interest on money borrowed to improve the property which could include certain fees such as mortgage application fees, appraisals, etc.;

(v)management and administration fees;

(vi)motor vehicle expenses;

(vii)office expenses;

(viii)legal, administration and professional expenses;

(ix)salaries, wages and benefits;

(x)travel;

(xi)utilities; and

(xii)miscellaneous (i.e., landscaping)

 These expenses allow the owner to reduce costs against income and is a key reason that multi-residential properties are assessed as income-producing properties and are taxed at a higher rate.

 Average Rents and Property Taxes:

 According to CMHC's rental market survey, the average monthly rental costs in Toronto in 1997 for a bachelor apartment were $555, for a one bedroom apartment $683, for a two-bedroom apartment $821 and for a three-bedroom apartment $1,002. The average rent for all units was $756.

 Prior to 1998, the assessment of every occupied unit was set out separately on the assessment roll. Property taxes for an individual apartment unit could be estimated by multiplying the assessment by the mill rate. However, several factors made it difficult to determine the actual property taxes paid by each tenant. Firstly, landlords may have included in their rents an amount of tax for common areas (i.e., recreational facilities, parking garages) that may have been assessed separately. Further, the method of apportionment could vary based on the number of units in the building, the size of the units or the amount of rent paid by individual tenants.

 Total property taxes as a proportion of rent for any particular unit may also vary based on the length of the lease. For example, similar sized units may pay different rents if rented in different years or leased for different time periods. Rental rates also vary depending on residential vacancy rates. As well, a lease can require a tenant to pay a set amount of monthly rent for several years, while municipal taxes may change in the interim. For that time period, the tenant's rent may fall behind other tenants in the building but could exceed other rents in a subsequent lease renewal. In addition, total property taxes as a proportion of rent for social housing units with rent geared to income will vary based on the income of each individual tenant.

 Using the average monthly rental costs from the CMHC market rental survey and 20 percent as the average proportion of property taxes to total rent as determined by the Ministry of Municipal Affairs and Housing, average property taxes for apartments in Toronto are set out below. However, actual property taxes paid for similar units may vary widely within the same apartment building for the reasons outlined above.

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 Appendix 4 compares the estimated average taxes per dwelling unit and per capita for each of the residential and multi-residential classes. The table shows the average taxes per unit and per capita in 1997, as well the average taxes based on the final CVA data. On a per unit basis, in 1997 residential taxpayers paid $2,363 a year per unit, or 18.95 percent more than tenants. The final CVA data shows that average taxes per residential unit are $2,388 a year, or 21.2 percent higher than the average multi-residential unit.

 Comments:

 Current Value Assessment - 1998:

 The final tax impact study shows that 2,579, or 64 percent, of multi-residential properties would experience tax increases, while 1,463 properties, or 36 percent would see their taxes decrease due to reassessment. The average tax increase is 19.7 percent, while the average tax decrease is 12.7 percent Of the number of properties increasing, 257 properties would experience increases of greater than 100 percent, and 408 properties will receive tax increases of greater than $20,000. The average tax increase for the 408 properties with tax increases of greater than $20,000 is $67,528 or 28.03 percent or $512 per apartment unit. Appendix 5 shows the ranges of tax increases and decreases (percentage and dollar) for the multi-residential property class.

 The Fair Municipal Finance Act (Nos. 1 and 2) and Small Business and Charities Assistance Act (Bill 16), which received Royal Assent on June 11, 1998, contain assistance measures that municipalities can use to offset or minimize the impact of reassessment. The options available to Council are set out below.

 Implementation of CVA:

 Option 1 - Capping Tax Increases:

 The Small Business and Charities Assistance Act (Bill 16) allows municipalities to limit property tax increases on business properties, including multi-residential, to 2.5 per cent per year of 1997 taxes for 1998, 1999 and 2000. The Bill specifies that the 2.5 per cent cap must apply for all three years.

 Council may wish to cap tax increases for multi-residential properties. However, it should be noted that capping is a short-term solution and, if used, cannot address the tax burden issue facing the multi-residential class in 1999 and 2000 -- Council's only opportunity is this year before applying the cap.

 The final tax impact study showed that almost 60 percent of the properties in the multi-residential class would receive tax increases but the taxes paid by these properties represent only 30 percent of the total taxes paid by this class. As a result, capping tax increases at 2.5 percent significantly reduces the amount of decreases that can be provided over the three years.

 Capping increases at 2.5 percent would limit the increases being paid in Year 1 to $4.9 million. Since capping must be funded within each property class, only $4.9 million in decreases would be allowed. However, the total decreases that would have been received without capping total $46.9 million. As a result, in Year 1, decreases would be limited to 10.5 percent ($4.9 million ) $46.9 million) of the decreases that would have been received without capping.

 In order to finance the capped tax increases within the multi-residential class, tax decreases in Year 1 of a three-year capping program would be limited to 10.5 percent of the tax decrease that would have been received if there was no capping. In Years 2 and 3, tax decreases would be limited to 18.9 percent and 26.0 percent respectively of the tax decrease that would have been received without capping. For example, a property that would have received a 10 percent tax decrease without capping, would only receive 1.05 percent (10 percent V 10.5 percent) in the first year, 1.89 percent in the second year and 2.6 percent in the third year that capping is in place.

 Option 2 - Phase-in Program:

 The Fair Municipal Finance Act provides for the phasing-in of tax increases and decreases due to reassessment. The maximum phase-in period is 8 years. Any phase-in must be financed within each property class, so that tax decreases are phased-in to offset the phasing-in of tax increases within that class.

 The phase-in options as they relate to the multi-residential property class have been reviewed. Annual tax increases that would result under different phase-in scenarios were calculated for each property. The eight scenarios analyzed cover no phase-in, as well as phase-in periods of 2 years through 8 years. Appendix 6 shows the number of assessment portions and ranges of annual tax increases and tax decreases (dollar and percentage changes) that would occur under these scenarios.

 As shown in Appendix 6, 64 percent or 2,579 multi-residential properties would receive tax increases due to reassessment. The number of apartment units that would be affected by a tax increase is 121,987. The average tax increase is 19.7 percent, or $16,403 per property or $346 per unit. Of the properties receiving tax increases, 408 multi-residential properties, or 10 percent, would receive tax increases of greater than $20,000 with the average increase for these properties being $67,528 or 28.03 percent or $512 per apartment unit. For these properties, the 8-year maximum phase-in period would result in an average annual tax increase of 3.5 percent for the 53,801 apartment units affected.

 Tenant Protection Act - Proposed Regulations for Automatic Rent Reductions:

 The Tenant Protection Act came into force on June 17, 1998. Under this legislation, residential rents are automatically reduced if the municipal taxes for the rental properties are decreased by a prescribed percentage. The Act requires municipalities to inform landlords and tenants of the rent reductions through a notice that will specify:

(i)the fact that the lawful rents will be reduced;

(ii)the amount of the rent reduction as a percentage;

(iii)the date the reduction will take effect; and

(iv)the rights of the landlords and tenants to apply to the Ontario Rental Housing Tribunal if they disagree with the amount of the reduction.

 The Ministry of Municipal Affairs and Housing has prepared a discussion paper proposing the regulations which would establish the conditions for automatic reductions in rents and municipalities were invited to provide their input on the proposed regulations.

 Highlights of the proposed regulations are as follows:

 (i)all rental properties would be affected by automatic rent reductions, including apartment buildings, rented townhouses, mobile home parks, boarding and lodging homes, rented condominiums, care homes, and "for-profit" cooperatives. Social housing and certain types of care homes are exempt from these rules;

 (ii)the types of tax decreases that would result in automatic rent reductions include: reassessment changes, amalgamation of municipalities, the education portion of the municipal tax bill, and any phasing-in portion of the tax decrease up to 8 years;

 (iii)the percentage of rent reduction would be calculated by multiplying the percentage of tax decrease between two previous consecutive years by 20 percent, which is a Ministry estimate of the proportion of rent for municipal taxes;

 (iv)tenants would be eligible for automatic rent reductions only when the reduction is at least 1 percent, which means when the tax decrease must be 5 percent or more. When the rent reduction is less than 1 percent, tenants may apply to obtain the reduction to the Ontario Rental Housing Tribunal;

(v)municipalities would only be required to send the notice to landlords and tenants of residential properties with at least 7 units. However, municipalities may choose to send notices to those buildings with less than 7 units;

 (vi)the effective date for automatic rent reductions resulting from a tax decrease would be January 1, 1999;

 (vii)The first notice for the rent reductions would be required to be given to tenants and landlords on or before November 30, 1998. For subsequent years, the notice would be required no later than August 31;

 (viii)Municipalities would be allowed to select the most appropriate method of delivering the notice from a number of prescribed options including regular mail, hand delivery, leaving the notices where mail is ordinarily left for tenants, or courier delivery.

 At its meeting on May 28, 1998, the Task Force adopted recommendations for changes to the Tenant Protection Act and the proposed regulations. The major changes requested included:

 (i)authorization for the City to send notices to tenants in apartments with less than seven units;

(ii)reduction of the threshold for tax decreases which would cause an automatic rent reduction, from the proposed 5 percent to 2.5 percent;

(iii)legislation limiting the City's liability in the case of errors;

(iv)authorization for the City to rescind or amend notices;

(v)legal requirement for the landlord to post notice of all tax decreases and increases for a minimum of 120 days;

(vi)Provincial notification of both current and former tenants where there are successful assessment appeals and retroactive rent adjustments;

(vii)City consultation prior to finalizing the notice for automatic rent reductions.

 The Task Force also adopted motions requesting the Province to declare the current lawful rent to be the rent at the time of the last legal increase and requested the Province to exempt Toronto from vacancy decontrol. The recommendations of the Task Force were adopted by Council at its meeting on June 3, 1998.

 In the past, the assessment roll contained detailed information for each residential unit including name, mailing address and the assessed value for each unit. The final assessment roll for 1998 only includes individual tenants' names and the specific apartment unit within the building but individual assessments for each unit are no longer apportioned. It is anticipated that the City will be able to use the assessment roll as the source of data for the notices.

 Assessment appeals will also impact the process of rent reductions as they are not considered as automatic rent reductions unless finalized in the same tax year as the appeal. Tenants will have to apply to the Tribunal for a rent reduction for appeals that are delayed. With the new provincial tax assessment system for 1998, it is expected that many residential property owners will file assessment appeals. There are issues regarding the administrative resources required as well as timing of the tax appeal decisions and notifying tenants of the individual tax decreases resulting from the appeals. It is very likely that appeals will not be heard this year or perhaps even in 1999 due to volume which could result in delays in legal rent reductions for 2 or more years (or until the appeal is finalized). The proposed regulations allow for tenants to apply for an adjustment in rent for the period covered by an appeal decision and will have one year from the date of the decision to make the application. However, the proposed regulations limit the retroactivity of rent reductions to the two preceding years. This is not an automatic reduction but rather a process where application must be made.

 There is an equity issue in the decision as to which type of rental buildings should receive the notice for automatic rent reductions. While municipalities are not required by the proposed regulations to inform tenants of rental buildings with fewer than 7 units, the City may choose to include these buildings for automatic notification in order to ensure equity for all tenants. There are approximately 8,700 properties that contain 3-6 units which the City may wish to consider including in the notification program.

 Since August 1, 1985 and up until June 17, 1998 when the Act cames into force, rent setting legislation related to the maximum rent which could be charged for a unit, not the amount of rent that the tenant in the unit actually paid. The amounts can be different. Maximum rent is the amount of rent a landlord could have charged for a unit had all the rent increase guidelines, as determined by the Province, been applied. The lawful rent is what the tenant pays (subject to certain rules). The landlord can charge the tenant an amount equal to the maximum rent, or a lower amount.

 There are also tenant situations where a rent reduction resulting from a tax decrease in one year could translate into higher rents the following year. These would occur in buildings where the rents are below the legal "maximum" rent and would only apply to tenants who already reside in the building ("sitting" tenants). Under this scenario, landlords could increase rents to the "maximum" because a hearing before a tribunal is only needed for above "maximum" rents. The result would be that in one year a rent reduction would be obtained by the tenant due to a tax decrease but in the following year, the rent could be increased above the original rent level to bring it to the "maximum" allowable. This would mean the tenant would face a higher rent in the second year than originally.

 Ministry staff estimate that approximately 50 percent of all tenanted units in Toronto are below "maximum" rent. If one assumes a turnover rate of 25 percent for all rental units as estimated by Ministry staff, then 12.5 percent (50 percent of total units x 25 percent turnover rate) of units below "maximum" rent would see new tenants and the remaining 37.5 percent sitting tenants could experience increases to the "maximum" rent and therefore not benefit from the rent reduction. Based on 168,341 rental apartment units in the multi-residential property class receiving tax decreases, there could be 63,128 units (168,341 x 37.5 percent) that could see increased rents to the "maximum" and not benefit from rent reductions in the long term. This is based on the assumption that all units below "maximum" would see tax decreases but even if they do not, increases to "maximum" rent are possible.

Automatic rent reductions due to tax decreases must take into account any tax relief provisions that municipalities implement due to reassessment. Consequently, any expected tax decrease that is reduced by capping or a phase-in must be taken into consideration in the automatic rent reduction.

Impact of Capping or Phase-in on Automatic Rent Reductions:

 Appendix 7 shows the number of properties that would qualify for an automatic rent reduction under the Tenant Protection Act due to a decrease in municipal taxes under various phase-in scenarios. If there was immediate implementation of CVA, approximately 1,102 properties would qualify for automatic rent reductions. The average tax decrease is 12.7 percent, resulting in an average rent reduction of 2.5 percent. However, under an 8-year phase-in scenario, only 30 properties would qualify for automatic rent reductions.

 Ministry of Housing staff have indicated that approximately 50 percent of the tenants in the City of Toronto are not currently paying maximum rents. Where tenants are not paying maximum rents, in one year a rent reduction would be obtained by the tenant due to a tax decrease but in the following year, the rent could be increased above the original rent level to bring it to the "maximum" allowable. Therefore, Appendix 7 also shows the estimated number of properties where tenants that would benefit from automatic rent reductions given the impact of vacancy decontrol and the fact that not all tenants pay maximum rent.

 Analysis also shows that capping tax increases would significantly reduce the number of properties that would qualify for an automatic rent reduction. Due to the disproportionate share of 1997 taxes for properties that would experience tax decreases compared to properties that would experience tax increases, in Year 1 capping tax increases would result in limiting tax decreases to 10.5 percent of the tax decrease that would have been received if capping had not been chosen.

 In order to qualify for an automatic rent reduction under the Tenant Protection Act, the proposed regulations specify that the property must experience at least a 5 percent decrease in municipal taxes on an annual basis. Using the 20 percent proportion of property taxes to total rent, this threshold would result in an automatic rent reduction of 1 percent. With only 10.5 percent of the percentage tax decrease being allowed in Year 1 under a capping scenario, only properties with tax decreases of more than 48 percent (i.e., 48 percent V 10.5 percent = 5.04 percent) would qualify for automatic rent reductions in 1998. The final tax impact study shows there are 18 such properties.

 The impact of not having a threshold of 5 percent for tax decreases, or having a lower threshold as recommended by the Task Force, on the number of properties that would receive automatic reductions is shown below:

 * Although all buildings would receive notices, the percentage rent reduction for many would be extremely small.

 Permanent Rent Reductions:

 The Tenant Protection Act, 1997 provides for reduction of the lawful rent which may be charged by the landlord by the reduction of municipal property taxes in certain prescribed circumstances. While the landlord is prohibited from charging rent in an amount greater than the lawful rent permitted under the Act by subsection 121(1), the lawful rent for the first rental period for a new tenant is set as the rent first charged to that new tenant (section 124). Thus, the landlord is free to initially charge new tenants whatever rent the market will bear.

 A reduction in municipal property taxes does not result in a permanent reduction in the lawful rent which may be charged for a particular unit. The lawful rent is only reduced, in the prescribed circumstances, with respect to the existing tenant. Once that tenant leaves and a new tenant agrees to rent the premises, the lawful rent is reset to the amount first charged to that new tenant. Thereafter, the lawful rent can only be increased in accordance with the provisions of the Act.

 It is important to note that the provisions of the Tenant Protection Act regarding automatic rent reductions resulting from reductions in municipal property taxes will not result in permanent rent reductions. The lawful rent is only reduced with respect to the existing tenant.

 In addition, once that tenant leaves, and a new tenant agrees to rent the premises, the landlord is free to charge whatever rent the market will bear. Subsequent lease renewals with the new tenant are subject to the conditions set out in the Tenant Protection Act, until such time as that tenant vacates and the cycle begins again.

 In order to equalize the tax rates between tenants and homeowners, Council may wish to shift some of the tax burden from the multi-residential class onto the residential class. While reducing the tax burden on the multi-residential class may benefit some tenants in the short term, the change in tax burden will not result in reduced rents across the City in the long term and any financial benefit may only accrue to the owners of multi-residential properties.

 Tenant populations tend to be highly transient with an average annual turnover rate of approximately 25 percent. As rental apartments turn over from one tenant to the next, the landlord may charge whatever rent can be negotiated with the new tenant.

 The vacancy rate for rental housing in Toronto was extremely low in 1997 at 0.8 percent. As a result, landlords with vacant apartments may be able to attract higher rents when leasing to new tenants than the rents that could otherwise be attained during times when residential vacancies are high. Pressure on the residential rental market will continue through 1998 due to a number of factors. The CMHC attributes the low vacancy rate to three factors: Toronto leads the rest of Ontario in employment growth; a stronger job market has increased in-migration to the Toronto area; and an improved job market has lead to income growth which has allowed households to uncouple. Considering these factors, the CMHC expects that the vacancy rate in Toronto will continue to decline in 1998.

 Impact of Increased Profitability on Assessments:

 The method of valuing multi-residential properties is based on the income generated. If rental properties experience increased rents because maximum rents can be increased upon unit vacancy, an increase in value would follow. However, to estimate the level of vacancies, the expected increase in rental income generated from new tenants and the resulting impact on value without such data is speculative and difficult to determine.

 In general, increased rents will increase values and affect tax rates. If municipal budget expenditures remain constant until the year 2001 (the year of the next reassessment), an increased value of the multi-residential class with no change in the budget would result in a lower tax rate.

 Preferred Option - Implementation of CVA:

 To implement CVA, Council can phase-in or cap tax increases and decreases. As noted above, where tax relief is provided -- either through a phase-in program or a cap -- the immediate benefit to tenants and landlords of a tax decrease will be significantly diminished.

 Council can opt for a phase-in program of up to eight years. The shorter the period for the phase-in program, the greater the number of tenants that will receive automatic rent reductions under the Tenant Protection Act. However, automatic rent reductions under the Act will likely only benefit tenants in the short term and will not result in reduced rents over the long term. Owners or landlords will be the taxpayers benefitting most from a tax decrease.

 Council can opt for a capping program, but a capping program will virtually eliminate automatic rent reductions except for 18 properties, or 288 units. The final CVA data indicates that 10 percent of the properties in the multi-residential class will receive tax increases of greater than $20,000. These increases, with no cap, will result in 53,801 apartment units receiving increases in rent of more than 5.6 percent.

The preferred option for implementing CVA in Toronto is therefore a capping program. A phase-in program may benefit more tenants in the very short term but will only benefit landlords in the long term. A capping program will protect tenants occupying 121,987 apartment units from permanent rent increases resulting from property tax increases.

 Options for Reducing Tax Burden on Multi-Residential Properties:

 A.Establish a Uniform Municipal Tax Rate for Residential and Multi-Residential Property Classes:

 The Education Quality Improvement Act (Bill 160) provides for a uniform tax rate for education purposes for all residential and multi-residential property owners across the Province. However, this uniformity in rates does not apply to the municipal share of taxes. The transition ratios, which determine the municipal tax rate for each property class, were established by the Province to maintain 1997 total tax burdens by class.

 Council can, under the Fair Municipal Finance Act, establish a uniform tax rate for municipal purposes for both the residential and multi-residential class by adopting a tax ratio of 1.00 for the multi-residential class. The updated preliminary tax ratio for multi-residential as received from the Province was 5.2355.

 A uniform municipal tax rate would result in a shift of $376.7 million in municipal taxes from the multi-residential property class to the residential property class. The decrease in total tax burden for multi-residential properties would be 65.9 percent, while the increase in total tax burden for the residential property class would be 25.6 percent, or an average of $610 per residential unit. The tax rate for the residential class would increase from 1.25 percent to 1.57 percent, while the tax rate for the multi-residential class would decrease from 4.60 percent to 1.57 percent. For individual property owners in these classes, the percentage increase or decrease would be over and above any tax change resulting from the implementation of current value assessment and would be an immediate, non-phaseable increase.

 Appendix 8 shows the impact on both the residential and multi-residential classes, if Council were to phase-in a uniform municipal residential tax rate from two through eight years. The table shows that if a uniform tax rate were phased-in over two years, the impact would increase total taxes for the residential property class by $188.35 million annually, or 12.8 percent per year. The average tax increase per residential unit would be $305 per year. However, if the phase-in period for a uniform tax rate was extended to eight years, the annual tax shift to the residential class would be reduced to $47.09 million or 3.2 percent per year. The average tax increase per residential unit would be $76.00 per year.

B.Reduce the Tax Ratio for Multi-Residential Class:

 The transition ratios, which determine the municipal tax rate for each property class, were established by the Province to maintain 1997 total tax burdens by class. Council can reduce tax burdens for certain property classes, by adopting tax ratios that are closer to the fairness ranges set by the Province.

 The updated preliminary transition ratio calculated by the Province for the multi-residential property class is 5.2355. The fairness range established by the Province for the multi-residential class is 0.6 to 1.1. Appendix 9 illustrates the impact on the residential property class if Council wishes to reduce the tax burden for the multi-residential property class, by adopting lower tax ratios of either 2.0, 3.0, or 4.0. In each case, the calculation assumes that the tax ratios for the commercial and industrial classes would also be adjusted so that there would be no tax shift onto these classes.

 As can be seen, in each case a shift in municipal taxes, from the multi-residential class to residential class, would occur. For individual property owners in these classes, the percentage increase or decrease would be over and above any tax change resulting from the implementation of current value assessment. However, if Council wishes to move towards equalizing the tax burdens paid by tenants and homeowners but limit the impact on the residential class, it could phase-in any change to the multi-residential tax ratio over a period of years, similar to that outlined in Appendix 8.

 C.Reduce the Tax Ratio to Implement Uniform Education Tax Rate:

 A transition ratio of 3.7530 has also been included in Appendix 9. This ratio is based on the preliminary method for calculating transition ratios released by the Province in the summer of 1997.

 The revised preliminary calculations show deliberate tax shifts between property classes resulting in an increase of approximately $15.3 million onto the residential property class, based on the Province's transition ratios. The creation of a uniform Provincial residential education tax rate would have shifted $119.7 million from multi-residential taxpayers to residential taxpayers. The Province, in setting the transition ratios, has shifted back $85 million -- almost but not all of the $119.7 million and has left $15.3 million of new tax burden on the residential class.

 The updated preliminary transition ratio of 5.2355 prescribed by the Province tries to negate the effect of the uniform education tax rate. Except for a $15.3 million shift onto the residential property class and a decrease of $4.6 million from the multi-residential class, the prescribed updated preliminary transition ratio almost nullifies the effect of a uniform residential education tax rate by filling the tax room created by the uniform residential education tax rate with municipal taxes.

Council can reduce the tax ratio for the multi-residential property class to reflect the impact of a uniform education tax rate. The tax ratio of 3.7530 reflects an additional shift of $104.3 million in education taxes that would have occurred due to the Province establishing a uniform education tax rate and results in a tax rate for the multi-residential class of 3.76 percent. However, the tax shift would increase total taxes for the residential property class by 7.08 percent, or an average of $169 per residential unit.

 For individual property owners in the residential class, this increase would be over and above any tax change resulting from the implementation of current value assessment, and would result in some homeowners who would have received a tax decrease, now receiving a tax increase. In order to minimize the impact on the residential class, Council could also opt to phase-in this change over a period of years by explicitly changing the tax ratio each year.

 D.Shift Taxes over Residential Phase-in Period - "The Kinahan Concept":

 Another option to be considered in order to achieve the total equalization of the multi-residential tax rate to the residential, would be to calculate the dollar change from the residential phase-in options and use that value to be the tax shift from multi-residential to residential.

 The following table is an example of this concept, based on immediate implementation as well as phase-in periods of 3 and 8 years for the residential property class:

 The total tax shift required to achieve a uniform residential and multi-residential rate is $376.7 million. If CVA were implemented immediately, $162.8 million would shift between taxpayers with tax increases and taxpayers with tax decreases in the residential class. Using this concept, and shifting an equivalent amount of taxes from the multi-residential class, the theory is that residential decreases would be eliminated and tax increases would be doubled, and equity would be achieved in 2 years. This concept would require an annual allocation of tax shift to achieve the tax changes noted above.

 It should be noted that legislation does not allow Council to phase-in tax increases resulting from a shift in tax burden from other classes. Also, if Council wishes to reduce the tax burden of the multi-residential class, and also opts for capping tax increases due to the reassessment, it can only shift taxes in 1998 prior to applying the cap. Once the cap is in place, Council cannot shift tax burdens and would have to wait until the next reassessment, and the end of the capping period, to reduce the tax burden of the multi-residential class.

 None of the options for reducing the tax burden for the multi-residential property class are recommended at this time. Additional work is required to define and develop tax policies that would ensure property tax equity for both homeowners and tenants. The definition of 'fairness' as it relates to the tax burden for the multi-residential class must be considered within the context of other tax structures, and must balance the needs of tenants in both the residential and multi-residential property classes. Additional work is also required so that any reduction in tax burden for the multi-residential class will provide the benefit intended (i.e., permanent rent reductions and increased rental housing affordability).

 New Multi-Residential Class:

 The Fair Municipal Finance Act allows municipalities to request a separate class for new rental apartment buildings with seven or more units. The legislation permits municipalities to request the new multi-residential class at any time. Municipalities can tax these new buildings at a lower rate than the multi-residential class. Properties would remain in the new apartment class for up to eight years, after which they would be moved to the multi-residential property class.

 The intent of the legislation is to encourage investment in new rental housing, thus helping to create jobs and growth in the construction sector. By encouraging rental building construction, it will increase the supply of rent housing.

 It is not recommended that Council request the creation of a separate class for new constructed multi-residential buildings until such time that Council adopts a policy respecting tax burdens between the residential and multi-residential property classes. If a new apartment class was created, and there was no change in existing tax burdens between these classes, these properties would face significant tax increases once they were moved from the new class to the multi-residential class.

 Conclusion:

 It is recommended that Council cap tax increases for multi-residential properties at 2.5 percent per year for 1998, 1999 and 2000. To fund the capping program within the multi-residential class, it will be necessary to proportionately limit tax decreases. Although Council could opt for a phase-in program to mitigate the impact of reassessment, a phase-in program would not provide the extent of relief as capping would. A capping program will protect tenants occupying 121,987 apartment units from large rent increases resulting from property tax increases.

 Unless Council opts for immediate implementation of CVA for the multi-residential property class, few tenants will see significant reductions in their rents due to a reduction in municipal taxes. Sitting tenants that are currently not paying maximum rents could see increased rents to the "maximum" and not benefit from rent reductions in the long term. A phase-in program may benefit more tenants in the very short term but will only benefit landlords in the long term.

 No other tax policy options, including shifting taxes from the multi-residential property class, are recommended at this time. Additional work is required and should be continued to develop a permanent solution to ensure property tax equity between homeowners and tenants, including defining 'fairness' as it relates to tax burdens for all classes. The definition of 'fairness' must be considered within the context of other tax structures, and must balance the needs of all taxpayers, including tenants in both the residential and multi-residential property classes. Additional work is also required so that any reduction in tax burden for the multi-residential class will provide the benefit intended (i.e., permanent rent reductions and increased rental housing affordability).

 Contact Names:

Lynne Ashton392-7828

Paul Wealleans392-6955

Bill Wong392-9148

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 List of Appendices

 Appendix 1Occupied Dwellings by Tenure - Ward Totals

 Appendix 2Current Value Assessment and Total Taxes by Structure Type

 Appendix 3Current Value Assessment and Total Taxes - Residential Properties (3-6 Units)

 Appendix 4Average Taxes per Unit - Residential vs. Multi-Residential

 Appendix 5Ranges of Tax Decreases and Increases - Multi-Residential Property Class

% Tax Change

$ Tax Change

 Appendix 6Phase-in Distribution for Multi-Residential Property Class

Range of Dollar Increases and Decreases

Range of Percentage Increases and Decreases

Appendix 7Automatic Rent Reductions - Impact of Phase-in Program

 Appendix 8Phased-in Reduction of Multi-Residential Tax Burden - Impact on Residential/Multi-Residential Property Classes

 Appendix 9Impact of Reduction to Multi-Residential Tax Ratio

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 Source: Ministry of Finance, Assessment Information, 1996.

The Strategic Policies and Priorities Committee also submits the following report (July 7, 1998) from the Multi-Residential Working Group, addressed to the Assessment and Tax Policy Task Force:

 Purpose:

 To provide information to Council on the potential to ensure that multi-residential tax decreases have a positive impact on tenant rents.

 Funding Source, financial Implications and Impact Statement:

 None to report

 Recommendations:

 The Working Group recommends that Council adopt the following:

(1)That, given that consultations have not provided a guaranteed strategy for ensuring that tax reductions will go to tenants:

 (a)the City continue to lobby the Provincial Government to achieve legislative and regulatory reform which will guarantee that tenants receive the benefit of tax reductions over the long term, including the removal of loopholes that now exist

(b)City staff develop detailed proposals to achieve these objectives; and

(c)there be no equalization tax shifts between and the multi-residential class and the residential class until there are guarantees that the tenants will receive the benefits.

 (2)That the City advocate a "De-Linking" process which separates the tax bill from the rent bill and that City staff develop a programme which will allow this "de-linking" to take place and a complete set of provincial and/or municipal legislative, regulatory and administrative initiatives which will achieve this objective.

 (3)Because, under the current legislation, tax increases will be absorbed by tenants while tax decreases will largely go to landlords, and because tenants are the most unfairly taxed group of residents in the city, Council should adopt a strategy which minimizes the tax changes effecting tenants. Options considered by the Committee included:

 (i)that a 2.5 percent cap be implemented on rent increases and decreases for multi-residential properties, or;

(ii)that tax changes be phased in over a number of years for multi-residential properties.

(4)That, in accordance with the preference expressed by landlord representatives, the Province be requested to amend the legislation to provide that the landlords be required to pass on any decreases in taxation to tenants.

 (5)That all tenants be informed of any tax decreases by the City and that a plan for such notification be developed and that a budget for this undertaking be produced and submitted to the Budget Review Committee following consultations with the Federation of Metro Tenants Associations.

 (6)That, for new rental multi-residential buildings, a the City establish a process to achieve equalized taxation between multi-residential and residential properties. This would be accomplished by creating a separate class of property for new rental multi-residential buildings and conversions from office/industrial buildings to rental multi-residential.

 (7)That the Task Force investigate the appropriateness of clawing back the education equalization imposed by the Province, even recognizing the inability of the City to ensure that the tax reductions will benefit the tenants.

 Background:

 The Multi-Residential working group was established by Council on May 13th to "initiate discussion with landlords in order to obtain their support for regulatory changes that would insure that reductions in multi-unit residential taxes result in benefit to tenants".

 The Working Group met four times including meetings with representatives from landlord and tenant organizations on two occasions. Landlords were represented by:

 Phil Dewan, of the Fair Rental Policy Organizations (FRPO)

Gary Griesdorf, of the Greater Toronto Apartment Association (GTAA)

Tina Schickedanz, of the Tenant Landlord Coalition

Heather Waese, of Spar Property

Mary MacDonald, of the Multiple Dwelling Standards Association (MDSA)

 Samuel Lewkowicz of the Multiple Dwelling Standards Association also contacted the Working Group by fax. Several tenants also participated in the consultation meetings to provide their views.

 The working group attempted to find points of consensus with landlord organizations, tenant organizations and the City regarding changes to the Tenant Protection Act that could provide some certainty that tax cuts would benefit tenants now and in the long term.

 City staff made a detailed report to the Assessment and Tax Policy Task Force on May 28, 1998. The report reviewed proposed regulations under the Tenant Protection Act, 1997(TPA) and their impact on the City, and on tenants. The Task Force made several recommendations regarding changes to the TPA. These recommendations were subsequently adopted by Council. These recommendations formed the basis for discussion with landlords at the Working Group meetings.

 Issues dealt with by the Working Group are discussed below under the following headings:

 (1)Administrative Issues

 (2)Threshold for Automatic Rent Decreases

 (3)Notification about Tax Decreases

 (4)Municipal Property Tax Appeals

 (5)Vacancy Decontrol and Maximum Rent

 Comments:

 (1)Administrative Issues:

 The May 28, 1998 report outlined a number of regulatory amendments relating to administrative issues for the City. Landlord and Tenant representatives supported the requests. In particular, there was support for having clarity in the regulations about municipal ability to rescind and amend incorrect notices.

 (2)Threshold for Automatic Rent Decreases:

 The proposed regulations set out that tenants would be entitled to an automatic rent decrease where the municipal property tax decrease is 5 percent or greater. The May 28, 1998, recommendation was that the threshold be reduced to 2.5 percent. Landlord representatives agreed with the reduction and, in fact, suggested that it be reduced to 0 percent.

 (3)Notification about Tax Decreases:

 The City has sought methods of ensuring that new tenants are made aware of mandatory rent reductions resulting from tax reductions. Landlord representatives supported the concept of posting the notices in general, but were concerned about having posting as a legislated requirement. They did not believe that they could guarantee that the notice would remain posted. They suggested that landlords could serve a copy of the notice on any new tenant along with their lease. Although landlords were willing to entertain several notification options, landlords could not reach a clear agreement on including any notification option in the regulations as a requirement.

 (4)Municipal Property Tax Appeals:

 On May 28, 1998 the Task Force made recommendations about changes to the regulations to ensure that tenants receive, retroactively, the benefit of any tax savings resulting from appeals. Landlords did not agree to support those recommendations citing administrative burden and complexity. There was some discussion on the part of the landlords about retroactively raising rents to cover the cost of filing tax appeals or the cost of tax increases resulting from appeals. Landlords raised doubts about whether tenants who left the unit owing back rents or damages should have the right to make a claim on retroactive rent reductions. No landlord groups were prepared to formally support any program that facilitated access to retroactive rent reductions even where appeals resulted in retroactive tax reductions.

 (5)Vacancy Decontrol and Maximum Rent:

 The most complex issue was that of maximum rent and vacancy decontrol.

 Tenant Protection Act, 1997 (TPA) requires landlords to reduce rents whenever a tax reduction above 5 percent occurs. However, the TPA also allows landlords to raise the rents of sitting tenants if the current "lawful rent" is below the "maximum rent". (The maximum rent is fixed by the province in accordance with their rent increase formula.) A rent reduction resulting from a tax reduction would automatically take the rent below the "maximum". The landlord would be entitled to raise the rent by that amount within one year, effectively eliminating the mandatory rent reduction.

 Vacancy decontrol allows landlords to set rents at any level once a unit is vacant. Again, rent reductions resulting from tax reductions do not limit the power of landlords to raise the rents to any level and recoup some or all of the mandatory rent reduction.

 There was no agreement from the landlords to support the City in lobbying the province to remove maximum rent and vacancy de-control provisions from TPA. Some landlords expressed the belief that the maximum rent provisions no longer apply to many of units, however, subsequent discussions with the Province confirm that these provisions apply even when maximum rent has been reached. (See Appendix "A")

 FRPO expressed a strong belief that rents would fall and stay low once a tax reduction occurred. FRPO believed that market forces provided an adequate guarantee of long term lowered rents, and that the market was the only appropriate mechanism for protecting tenants. They stated flatly that FRPO was unwilling to support any efforts to reverse this tendency in the legislation.

 Other representatives express more varied views. A number of alternate ideas and proposals about maximum rent and vacancy decontrol were put forward as follows:

 (1)One-time Change to Maximum Rent:

 It was proposed that maximum rent on units be allowed to decrease or increase on a one time basis to reflect tax changes. Some questions were raised about whether a one-time only adjustment would be sufficient. Landlords indicated flexibility about whether future changes could also be contemplated.

 However, landlords were not prepared to eliminate the power to raise rents using maximum rent ceilings other than those created by a tax cut. Since the most recent studies indicate that roughly 50 percent of all units are below maximum rent, a significant number of units would still be subject to the re-raising of rents following a tax based rent reduction.

 In addition, this proposal fails to provide any mechanism for ensuring that rents stay reduced when a new tenant moves in. FRPO's argument that rents would stay low because tax decreases would drive down the market raises many questions. Market rents are dependant on several variables, however, it is difficult to imagine that the market will push down rent levels for new tenants while Toronto's vacancy rate is just .8 percent. Vacancy rates are forecasted to go lower, and remain well below the healthy vacancy rate, in the range of 2.5 percent to 5 percent.

 (2)Voluntary Lowered Maximum Rent:

 Mary MacDonald of the MDSA proposed a system of voluntary compliance, whereby individual landlords would agree to lower their maximum rent to the current lawful rent, in exchange for which, the City would classify them at a lower tax rate.

 Ms. MacDonald's support for the elimination of maximum rent provisions did not receive any clear support from other landlords. Ms. MacDonald's proposal also violates the City's statutory obligation to set a single rate for multi-residential tax class, and would prove difficult to enforce.

 (3)"De-Linking":

 A tenant representative suggested that the City separate property taxes from rents. The landlords would act as tax collectors, issuing a bill for rent and a second bill for taxes. This "de-links" property taxes from rents and ensures savings are passed on to tenants.

 There are precedents for this model in the treatment of land-lease communities and mobile home parks. Tenants own their units and rent the land and services. While this provides some advantages, problems arise when taxes not paid or liens attached (i.e. one could not attach a lien against the trailer or an apartment for unpaid taxes).

Under this model the tenants would directly receive benefit of tax decreases, however, this would require several legislative amendments and significant shift in treatment of property taxes. It would create an administrative burden in terms of tax collection for the landlord and for the municipality and would result in very limited options for the municipality when taxes were not paid. There was no clear support for this model form the landlords' representatives.

 None of the models proposed met the objectives of the City and had broad support among the landlords' and tenants' representatives. Only a "market forces" approach received strong support from landlords.

 The Tenant/Landlord Coalition agreed with the position of the landlords. The Federation of Metro Tenants Associations, by far the largest tenant body, strongly opposed the positions taken by the landlords. FMTA felt that there was no way to ensure that tenants benefited from any tax cuts over the long term under the current law and indicated its opposition to tax cuts under the current circumstances. (see appendix "B")

 While there are several proposals now circulating, including proposals for legislative and regulatory changes adopted by Council, there is no consensus at this time on any of the major points considered critical to ensuring tenants benefit from multi-unit residential tax reductions. It may be possible to develop a broader consensus over the 1998-2001 period that caps would apply to multi-unit residential properties.

 Conclusion:

 The Multi-Residential Working Group was established to "initiate discussion with landlords in order to obtain their support for regulatory changes that would ensure that reductions in multi-unit residential taxes result in benefit to tenants".

 After meetings with landlord and tenant representatives, we were unable to reach agreement on anything but minor administrative issues. Landlords' representatives are unwilling to support legislative changes that would address the concerns raised by the City.

 (Copies of Appendices A and B referred to above were previously circulated to all Members of Council with the agenda of the Assessment and Tax Policy Task Force, and copies thereof are on file in the office of the City Clerk.)