Property Tax Relief for Low-Income Seniors

and Disabled Persons

 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)a tax deferral program be approved to provide relief from assessment-related tax increases for eligible low-income seniors and low-income disabled persons, pursuant to the Fair Municipal Finance Act;

(2)the following eligibility criteria for low-income seniors be adopted:

 To be eligible as a low-income senior, a person:

 (i)must be 65 years of age or older, or in the case of a widowed person receiving the Spouse's Allowance, between the age of 60 and 64; and

(ii)must have owned and occupied the residential property for one year; and

(iii)must be receiving the Guaranteed Income Supplement (GIS) under the Old Age Security Act, and in the case of widowed person between the age of 60 and 64, receiving a Spouse's Allowance under the Old Age Security Act;

 (3)(a)the following eligibility criteria for low-income disabled be adopted:

 To be eligible as a low-income disabled person, a person:

 (i)must have owned and occupied the residential property for one year; and

(ii)must be receiving disability benefits under: (a) the Ontario Disability Support Program (ODSP); or (b) the Family Benefits Act (FBA); or (c) the Guaranteed Annual Income System (GAINS);

 (b)the Chief Financial Officer and Treasurer and the Commissioner of Community and Neighbourhood Services strike a working group that includes staff and representatives from community organizations including ARCH to develop criteria for an enhanced residential property tax relief program in respect of all or part of assessment-related tax increases for low-income disabled persons and report back to the Task Force by September, 1998;

 (4)the Province be requested to enact special legislation with an effective date of January 1, 1998, to authorize the City to pass by-laws providing for residential tax deferrals whether or not a residential property's assessment increases as a result of the implementation of Current Value Assessment, and that such legislation provide for the amount of taxes paid by the City to the school board to be reduced accordingly;

 (5)eligible low-income seniors and low-income disabled persons be also permitted to apply for a deferral of up to $600.00 per year of the owner's residential tax bill in the program described in Recommendation 4 above;

 (6)(i)the interest rate provided for the assessment-related deferral program in recommendation (1) be set at 0.0 percent;

 (ii)the interest rate provided for the non-assessment related $600.00 tax deferral program in recommendations (4) and (5) be set at 0.0 percent;

(7)the administrative terms and conditions set out in the report (June 30, 1998) from the Chief Financial Officer and Treasurer, as amended by the recommendations above be adopted;

 (8)authority be granted for the introduction of the necessary Bills in Council to give effect to the tax deferral program; and

 (9)the appropriate City officials be authorized and directed to take the necessary action to give effect thereto.

 The Task Force reports having requested the Chief Financial Officer and Treasurer to report directly to City Council on July 21, 1998, providing an analysis of the cost implications to the City leading up to maturity of the tax relief programs noted above.

 Background:

 The Assessment and Tax Policy Task Force had before it a report (June 30, 1998) from the Chief Financial Officer and Treasurer providing a policy respecting property tax relief for low-income seniors and low-income disabled persons, pursuant to the Fair Municipal Finance Act.

 The Task Force also had before it the following communications respecting the Current Value Assessment and property tax relief for low-income seniors and disabled persons:

(a)(July 3, 1998) from Councillor Anne Johnston, Chair, The Seniors' Task Force;

 (b)(July 6, 1998) from Mr. Harry Beatty, A Legal Resource Centre for Persons with Disabilities;

 (c)(July 1, 1998) from Mrs. Verna M. Averill; and

 (d)(July 3, 1998) from Mr. George Thull.

 (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 agenda of the Assessment and Tax Policy Task Force and copies thereof are on file in the office of the City Clerk.)

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 (Report dated June 30, 1998, addressed to

the Assessment and Tax Policy Task Force from the

Chief Financial Officer and Treasurer)

 Purpose:

 To provide a policy respecting property tax relief for low-income seniors and low-income disabled persons, pursuant to the Fair Municipal Finance Act.

 Funding Source, Financial Implication and Impact Statement:

 The recommended property tax deferral program for low-income seniors and low-income disabled persons, with interest being charged on deferred amounts, has no direct funding implications.

 There are funding impacts associated with other tax relief schemes. The amount of the impact is contingent on the type of the program, the eligibility criteria, actual participation rates, and whether or not any phase-in policy is adopted for the residential property class. These other schemes may result in an annual impact ranging from several thousand dollars for a deferment program in which an interest subsidy is provided, to tens of millions of dollars for cancellation programs, to be funded from the operating budget.

 Recommendations:

 It is recommended that:

 (1)a tax deferral program be approved to provide relief from assessment-related tax increases for eligible low-income seniors and low-income disabled persons, pursuant to the Fair Municipal Finance Act;

 (2)the following eligibility criteria for low-income seniors be adopted:

 To be eligible as a low-income senior, a person:

 (i)must be 65 years of age or older, or in the case of a widowed person receiving the Spouse's Allowance, between the age of 60 and 64;

(ii)must have owned and occupied the residential property for the past three years; and

(iii)must be receiving the Guaranteed Income Supplement (GIS) under the Old Age Security Act, and in the case of widowed person between the age of 60 and 64, receiving a Spouse's Allowance under the Old Age Security Act;

 (3)the following eligibility criteria for low-income disabled be adopted:

To be eligible as a low-income disabled person, a person:

 (i)must have owned and occupied the residential property for the past three years; and

(ii)must be receiving disability benefits under: (a) the Ontario Disability Support Program (ODSP); or (b) the Family Benefits Act (FBA); or (c) the Guaranteed Annual Income System (GAINS);

(4)the Province be requested to enact special legislation to authorize the City to pass by-laws providing for residential tax deferrals whether or not a residential property's assessment increases as a result of the implementation of Current Value Assessment, and that such legislation provide for the amount of taxes paid by the City to the school board to be reduced accordingly;

 (5)subject to the special legislation referred to in recommendation (4) being enacted, eligible low-income seniors and low-income disabled persons be permitted to apply for a deferral of up to $600.00 per year of the owner's residential tax bill;

 (6)the amounts deferred be subject to simple interest at a rate not to exceed the market rate as determined by the City as authorized by the Fair Municipal Finance Act;

 (7)the interest rate provided for in recommendation (6) be set at 6.0 percent for 1998;

 (8)authority be granted for the introduction of the necessary Bills in Council to give effect to the tax deferral program; and

 (9)the appropriate City officials be authorized and directed to take the necessary action to give effect thereto.

 Council Reference/Background:

 Pursuant to the Fair Municipal Finance Act, 1997 (No.1 and No. 2 - the Act), Council must pass a by-law providing for deferrals or cancellation of, or other relief in respect of all or part of assessment-related tax increases on property in the residential/farm property class for owners who are, or whose spouses are, low-income seniors or low-income persons with disabilities as defined in the by-law. The Act provides Council some discretion respecting the adoption of a criteria for "low-income", "senior", and "disabled person", as well as in defining the form of tax relief, provided it is in respect of assessment-related tax increases.

 "Assessment-related" tax increases means tax increases beginning in 1998. If a tax increase is reduced as a result of a by-law to phase-in increases and decreases, then the relief can only be given on the portion of the assessment-related increase phased-in in any given year. For example, an $800.00 increase in conjunction with an eight-year phase-in would result in a first-year tax increase of $100.00 which would qualify for a tax relief program. In the second year, the qualifying amount would be $200.00. A municipality is not required to give relief in respect of the full amount of an assessment-related tax increase, but may instead choose to give relief in respect of only part of such an increase.

 The Act further provides for, where there is a deferral, the Treasurer to issue a tax certificate in respect of the property for which taxes have been deferred, and to show the amount of the deferred taxes and any accrued interest on the certificate. Interest may be charged on taxes deferred at a rate not exceeding the market rate as determined by the municipality.

 As part of a deferral or cancellation of tax increases, or any other relief in respect of tax increases, the amount of taxes paid by the municipality to the school board shall be reduced accordingly. When any deferred taxes and interest are paid back to the municipality, the municipality must pay the school board its share thereof. The tax relief program can also be provided as part of future reassessments.

 Overview:

 This report, after consideration of the options provided for by Act, as well as numerous other options requested by the Assessment and Tax Policy Task Force, recommends a program providing for the deferment of assessment-related tax increases for eligible persons, with interest being charged on amounts deferred. In this way, the City will be effectively providing funds to the homeowner in the amount of the assessment-related increase, the amount of which will be registered against title to the property and recouped with interest when the property is sold or from the estate. This would result in no funding impact to the City.

 Such a program achieves the goal of striking a balance between providing those seniors and disabled persons deemed to be in the most need of financial assistance while avoiding any burden on current taxpayers, and is within the available legislative framework. The tax deferment program is also supported by the Municipal Finance Officers Association of Ontario (MFOA), whose perspective is to help achieve consistency of application of the provisions of the Act across Ontario's municipalities.

 The key difference between a tax deferral program and a tax cancellation program is that, under a deferral, the City will ultimately recoup the amounts deferred when the property is sold or from the estate, whereas with a cancellation, the amount cancelled is not recoverable and must be funded entirely from the operating budget. From a financial accounting perspective, deferred amounts would be accrued as a receivable. All else being the same, an eligible person will be equally well off since he or she would not be paying that portion of the tax in either case. It does, however, affect the estate. Under a deferral, the accumulated deferred amounts would be a debt obligation of the estate, while under a cancellation, there would be no such debt obligation.

 Based on a review of other public sector programs, the most common definition of "low-income senior" was found to mean a person 65 years of age or older who is receiving the Guaranteed Income Supplement (GIS) under the Old Age Security Act (the GIS is described in greater detail starting on page 16). The advantage of this definition is that the determination of eligibility is administered by Human Resources Development Canada, thereby eliminating the need for the City to establish and administer its own income means test, and would be the least intrusive for seniors seeking financial assistance. Applicants need only demonstrate proof of GIS benefits to be eligible for tax relief. This definition is supported by the MFOA, which found these criteria defining low-income seniors as the most commonly used throughout Ontario. This report recommends the above criteria of "low-income senior" based on the foregoing reasons.

 The MFOA also suggested a definition of "disabled" as "a person with substantial physical or mental impairment that is continuous or recurrent and expected to last one year or more, effects the person's ability to attend to his or her personal care and his or her function in the community and workplace, and that the impairment and its likely duration and the restriction in the person's activities of daily living have been verified by a physician". A low-income disabled person would be receiving disability benefits under the Ontario Disability Support Program (ODSP) or the Family Benefits Act (FBA) or the Guaranteed Annual Income System (GAINS). This report also recommends the foregoing criteria for "low-income disabled person".

 Discussion:

 The Act provides Council with flexibility in developing a mandatory tax relief program, provided that any such relief is in respect of assessment-related tax increases. A definition of "low-income", "senior" and "disabled", and the type of the program (i.e., deferral, cancellation, or other) are required to be adopted by Council.

 Various eligibility criteria and various tax relief programs can be considered. Variables include the eligibility age and income, the type of program (i.e., deferral, cancellation, or other), and in the case of deferment, whether or not interest is to be charged and at what rate. Various combinations of eligibility criteria and programs, along with estimates of the financial impact of each combination are shown in the Appendices:

 Appendix 1 - Analysis of assessment-related tax deferral and tax cancellation options

Appendix 2 - Analysis of general tax relief options

Appendix 3 - Analysis of uniform tax credit options

 Appendix 1 describes options available to Council, pursuant to the Act. This includes tax deferral, tax cancellation, or a combination thereof, provided that such relief is in respect of assessment-related increases. The Act provides for the cost of such programs to be shared with school board in proportion to their share of tax revenue that would otherwise be levied (on a preliminary basis, the City's share amounts to approximately 63 percent of the taxes levied on the residential property class).

 Appendix 2 describes those options that provide for tax relief whether or not an assessment increases. This includes tax deferral (such as the $600.00 annual tax deferral program previously available in the cities of Etobicoke and York), tax cancellation, or a combination thereof, irrespective assessment-related tax changes. Since the Act does not provide any authority to effect such programs, the City would need to seek legislative changes or the enactment of special legislation if any such program is recommended. It should be noted that in these cases, it is likely the City would have to bear the entire cost of the program unless a cost sharing provision respecting the school board is provided for in the legislative changes or special legislation.

 Appendix 3 describes those options that provide for a uniform tax credit against property taxes for eligible low-income seniors, pursuant to the existing Municipal Elderly Assistance Act. This option would be similar to the program previously in place in the former City of Toronto, whereby eligible low-income seniors could apply for an annual $100.00 rebate against their property taxes. Council could choose another amount for the uniform tax credit. No additional legislation is required to effect such a program. It should be noted that the school board is not required to share in the cost of this program.

 (A)Analysis of Potential Applicants (Low-Income Seniors):

 This section provides an overview of population demographics in the City of Toronto respecting low-income seniors, based on age and income, as part of developing a tax relief program.

 Table 1 provides an estimate of the number of senior owner-occupied households by income distribution in Toronto. Two age criteria defining seniors is shown: 65 years of age and over, and 60 years of age or older. Column 1 provides an estimate of the total number of owner-occupied senior households by income range. Column 2 provides an estimate of the number of these households projected to experience a tax increase. Column 3 provides an estimate of the total amount of the tax increase due to reassessment. Appendices 4 and 5 provide additional information respecting the 65 and 60-year old age groups, respectively, showing estimates of eligible households, participating households and amount of assessment-related tax increases, which has been tabulated by income range. The information was compiled by cross-referencing Revenue Canada's Income Tax Filer data with Statistics Canada demographic data at the ward level. This information was further referenced with assessment data, also at the ward level. Income information is not available, and would be confidential, at the individual property level.

table 1 - 65 years of age or older

If "senior" is defined as 65 years of age or older, it is estimated that there may be in the range of 32,000 to 50,700 households (column 1) whose household income is less than $20,000.00 per year (the income figure represents a typical upper limit for household income in order to qualify for the GIS). Of these households, it was projected that 12,700 to 20,100 households may experience tax increases due to reassessment (column 2). The total amount of the tax increase due to reassessment (column 3) is estimated to be in the range of $6.5 million to $10.4 million, of which the City's portion would be $4.1 million to $6.6 million. The average senior-household assessment-related tax increase was estimated to be in the order of $570.00 per household.

 If "senior" is defined as 60 years of age or older, it is estimated that there may be in the range of 37,800 to 59,900 households where the household income is less than $20,000.00, of which 15,000 to 23,800 households are projected to experience tax increases due to reassessment. The total amount of the tax increase due to reassessment was estimated to be in the range of $7.9 million to $12.4 million, of which the City's portion would be $5.0 million to $7.8 million. Since the GIS is payable to pensioners aged 65 and older, adopting an age criteria of 60 would necessitate that the City implement its own income means test if income is to be a criteria.

 (B)Analysis of Potential Applicants (Low-Income Disabled Persons):

 Information has been received from the Ministry of Community and Social Services respecting caseload statistics for the disabled, which indicates approximately 1,120 disabled persons in receipt of the Family Benefit Allowance (FBA) and owning their own home. Projections, as shown in Table 2, suggest approximately 400 low-income disabled households may experience an assessment-related tax increases, with the total amount of the tax increase estimated to be in the order of $0.2 million, of which the City's portion would be $0.15 million. As with the seniors, the average assessment-related increase was estimated to be $570.00 per household.

 Table 2 - Estimated Number of Low-Income Disabled Persons

 ** Average assessment-related tax increase estimated to be $570.00 per senior household; City portion would be 63% of Column 3

 (C)Analysis of Options to Provide Relief from Assessment-Related Tax Increases:

 Part I - Options Providing Relief from Assessment-Related Tax Increases

The options available to Council within the existing legislative framework include: (i) deferring all or any portion of the assessment-related increase for eligible seniors or disabled persons; (ii) cancelling all or any portion of the assessment-related increase for eligible seniors and disabled persons; or (iii) other relief from assessment-related increases, which may include a combination of cancellation and deferral.

 (i)Deferral of Assessment-Related Increases (Options Labeled "A" in Appendix 1):

 Options A.1 to A.10 in Appendix 1 provide estimates of the projected number of participants and the financial impact of a deferral program respecting assessment-related tax increases, using various age, income and interest rate criteria. A participation rate of 5.0 percent was used to derive estimates for low-income seniors, and a 50.0 percent participation rate was used to derive estimates for low-income disabled persons since this latter group tend, generally, to be in a greater need of financial assistance. The 5.0 percent participation for seniors would appear to be reasonable given that in the B.C.'s seniors' assistance program, which provides a subsidized interest rate without an income test, results in a 3.0 percent participation rate. The former cities of Etobicoke and York tax deferral program experienced similar participation rates, estimated to be in the range of 2.0 to 3.0 percent.

 The deferral options analyzed in this section considered various combinations of the following conditions:

 (i)age criteria of 65 years of age and older, and 60 years of age and older;

(ii)qualifying household income criteria of less than $20.0 thousand (approximate income to qualify for the GIS), $25.0 thousand, $30.0 thousand, $35.0 thousand, and no income test;

(iii)interest charged on deferred amounts at 8.0 percent, 6.0 percent, 4.0 percent, 2.0 percent and 0.0 percent (no interest charged); and

(iv)deferrals apply only to assessment-related tax increases.

 If a deferral program is instituted, it would be anticipated that after an initial outflow of funds over the first several years, some sales of these properties would occur and the deferred taxes plus interest would be paid back to the City so that at some point, the outflows and inflows could match and the program could be self-sustaining if new deferrals approximated the funds being received from sold properties. While there is no actual experience for the City of Toronto, the experience with the Province of British Columbia's tax deferral program (discussed latter in the report) suggests an average term of six years in the program.

 With tax deferrals, the amounts deferred may be funded through a variety of cash management techniques with minimal or no impact on the current budget. One technique would involve the use of working capital to fund deferred amounts, in a manner similar to the treatment of other tax receivables. Working capital arises naturally during the course of business during periods when current assets exceed current liabilities, providing a source of temporary funds. Alternatively, a reserve fund could be also established to finance the program with initial funding being borrowed or transferred from another appropriate reserve and paid back at a later date.

 The Act further provides for interest to be charged on amounts deferred at a rate not exceeding the market rate as determined by the municipality. The Municipal Act permits only simple interest to be applied against tax arrears. The City's short-term earnings rate over the past several months has been in the range of 4.6 to 4.8 percent, while the rate of return on the longer-term reserve and reserve fund investments has been around 6.65 percent. To the extent that deferred amounts may be funding by a combination of working capital and/or reserves, then a blended rate of approximately 6.0 percent may be reflective of the opportunity cost associated with funding this program. Alternatively, one could use the prime rate as a measure of the cost of funds, and the 6.0 percent figure would represent prime less one-half percent. The City of Kingston uses prime less one-quarter percent as the interest charge for its deferral program. If interest is charged on the deferred amounts at the City's imputed rate of return (i.e., 6.0 percent), then there would be no funding impact to current taxpayers. If the interest rate charged on deferred amounts was less than the City's imputed rate, then the difference would be effectively an interest subsidy to the deferees, which would have a negative impact on investment earnings and thus the operating budget.

 Based on projections, it is estimated that approximately 854 to 1,225 households of an eligible 13,078 to 20,494 households may participate in such a program where the age criterion is 65 years and the income criterion is receiving the GIS (Option A.1.a). Participation rates would be higher should the eligibility criteria be made less restrictive. Depending on whether or not interest is charged and at what rate, the funding impact may range from $0.0 to $115.0 thousand in the first year, for a 6.0 percent and 0.0 percent interest rate, respectively, escalating to $689.0 thousand per annum by the sixth year. At that time, the cumulative amount deferred could be as much as $11.5 million, depending on the chosen criteria.

 The estimates in Appendix 1 are exclusive of the phase-in of assessment-related tax increases, if any. Any phase-in policy would reduce the first-year impact proportionately to the phase-in period, but in latter years, the impact would be the same. Chart 1 below shows the accumulated deferred taxes over a 15-year period under a no phase-in, a 3-year phase-in, and an 8-year phase-in scenario. This example is based on an age criterion of 65 years, an income criterion of receiving the GIS, and assumes that interest equivalent to the City's imputed rate of return is charged on deferred amounts.

 From Appendix 1, it can be observed that deferral programs are of the least costly of options available to the City.

chart 1

(ii)Tax Cancellation Options (Options Labeled "B" in Appendix 1):

 Under the tax cancellation options, the amounts cancelled would need to be funded from current property tax revenues annually. Tax cancellation options have the greatest impact on current funding requirements.

 It should be noted that the recently enacted Small Businesses and Charities Act, 1998 (Bill 16), will have an affect on the current funding requirements of tax cancellation options. This Act introduces the option for Council to cap property tax increases in the commercial, industrial and/or multi-residential property classes at 2.5 percent per year for the years 1998, 1999 and 2000. The adoption of the capping option would limit the City's ability to raise general tax increases from the capped property classes. Should Council wish to cancel taxes, then the entire amount of taxes cancelled would have to borne by the uncapped property classes. If the capping option is not adopted, the cancellation would be a general tax levy increase incorporated in the annual budget and borne by all property classes in proportion to their respective tax ratio.

 Options B.1 to B.2 in Appendix 1 provides an estimate of the projected number of participants and the financial impact of a cancellation program respecting assessment-related tax increases, using similar combinations of age and criteria as used for tax deferrals on page 8. For estimation purposes, a 100 percent participation rate was assumed for these options.

 Depending on the chosen criteria, the cancellation of assessment-related tax increases for eligible persons would have an estimated current funding impact to the City of $4.2 million to $38.3 million per annum. For example, if an age criteria of 65 years of age or older, and an income criteria of being in receipt of the GIS (approximately $20.0 thousand) is used (option B.1.a), then it is estimated that a total of $6.5 million to $10.4 million in assessment-related tax increases would be cancelled for approximately 13,078 to 20,494 eligible persons (City share $4.1 million to $6.5 million). These funds are not provided for in the 1998 Operating Budget, and would result in a 0.4 to 0.7 percent increase in the residential tax rate if the burden is maintained within that class (i.e., if capping is adopted for the commercial, industrial and multi-residential property classes).

 The above estimates are exclusive of the phase-in of assessment-related tax increases, if any.

 A tax cancellation program would be the one of the most expensive of the options available to the City.

 (iii)Other Options Providing for Relief from Assessment-Related Increases (Options Labeled "C" in Appendix 1):

 Other options can be considered that includes combinations of deferrals and cancellations, such as providing for the cancellation of assessment-related tax increases for eligible low-income seniors, where low-income is defined as receiving the GIS, and providing tax deferrals for eligible seniors whose income is above the GIS level. The options labeled "C" in Appendix 1 describe these options under various eligibility criteria, along with the financial impacts.

 The financial impacts are essentially the cumulative effect of the impact of a cancellation and a deferral. The cancellation component would result in a direct current funding impact as previously described in (ii) above. Depending on whether or not interest is charged in the deferral component, there could be a funding impact as a result of lost interest earnings as previously described in (I) above.

 Such a program may result in a funding impact to the City from $4.3 million to $7.9 million in the first year of the program, to $4.3 million to $8.9 million by the sixth year of the program. Appendix 1 indicates that combination programs of this nature would also be one of the more costly of options available to the City.

 Part II - Analysis of Other Tax Relief Schemes (Legislative Changes or Special Legislation Required):

 This section covers other tax relief schemes that would apply whether or not an individual's assessment increased. These options are labeled as options "D", "E" and "F" in Appendix 2. There is no existing legislative authority for the City to provide property tax relief other than that for providing relief from assessment-related tax increases. Such programs may include one where a tax deferral is provided for the entire property tax bill (similar to the British Columbia scheme), or one where a fixed amount of taxes is deferred (similar to the programs previously in place in the former cities of Etobicoke and York), or one where 50 percent of the tax bill is deferred (similar to the City of Kingston scheme), or some combination thereof. The variables considered include the same as those outlined earlier under the tax deferral program.

 (i)$600.00 Tax Deferral Program (Options Labeled "D" in Appendix 2):

 The former Cities of Etobicoke and York provided a $600.00 tax deferral programs for low- income seniors. The eligibility criteria was that, in order to qualify for the program, seniors must be 65 years of age or over, have owned and occupied a home in the City for the past 3 years, and must receive a monthly Guaranteed Income Supplement under the Old Age Security Act. The amount deferred was treated as a lien against the property, to be repaid without interest when the property changed title. As of 1997, there were 159 liens in Etobicoke, with a total amount receivable of $285,800.00, and 43 liens in registered in York, with the receivable being $25,800.00. These figures suggest a 2 to 3 percent participation rate of potentially eligible seniors.

 Authority for the City to provide for such a tax deferral program requires special legislation. For example, the City of York applied for and was granted special legislation to enable it to establish the aforementioned tax deferral program for senior citizens (Bill Pr44, "An Act Respecting the City of York, 1995").

 The options labeled "D" in Appendix 2 describe the $600.00 tax deferral program using various eligibility criteria along with the financial impacts. It is estimated that this program may result in a first year funding impact of up to $454.0 thousand (age 60 and no income test), which may be expected to escalate to up to $2.7 million per annum by the sixth year. The total amount of deferred taxes at this time may be in the order of $7.8 to $11.1 million (age 65 receiving GIS) to $28.6 to $45.4 million (age 60 and no income test). Chart 2 on the following page shows an example the accumulation of deferred amounts, as well as the affects of a three-year and an eight year phase-in, should a phase-policy be adopted for the residential property class. The example uses the criteria of 65 years, receiving the GIS, and that interest is charged on deferred amounts at the City's imputed rate of return (Option D.1.a).

 As previously noted, special legislation would be required to authorize the City to provide for such a program since it goes beyond the scope of assessment-related increases. It should be noted that the school board would not be required to participate in the financing of such a deferral program.

chart 2

(ii)Deferral of Total Tax Bill (Options Labeled "E" in Appendix 2):

 This is a program similar to that offered by the Province of British Columbia, which provided a province-wide program allowing eligible residents to defer the payment of annual municipal or rural property taxes on their home. The age criterion is 60 years or over. The program is also available to homeowners of any age who are widowed spouses, or who receive a disability allowance or benefit under the Disability Benefits Program Act. Applicants are not income tested.

 Deferees must be either a Canadian citizen or landed immigrant who have lived in British Columbia for at least one year before applying for deferment benefits. Deferees must be the registered owner of the property and must maintain at least 25 percent owner equity in the home. Deferees may defer all or a portion of their property taxes, after deducting their homeowner grant entitlement, if applicable. The deferred taxes are paid by the province to the taxing authority (municipality), on behalf of the Deferee, who is required to fully repay the deferred taxes to the province, with interest, either:

 (i)before their home can be legally transferred to a new owner, other than their surviving spouse; or,

 (ii)upon their death, with repayment through their estate.

 Deferees are charged simple interest, at a rate not greater than 2 percent below the prime rate at which the province borrows money. The interest rate is set semiannually by the Minister of Finance and Corporate Relations. The rate through to September 20, 1997, was 2.75 percent.

 In 1997, the total deferment clientele was expected to increase to 11,000 households province wide. This represents a participation rate of about 3 percent of all eligible households in that province. As of 1997, the accumulated amount of deferred taxes and interest was estimated to be $84 million. The annual interest subsidy cost to the province is estimated at $1.7 million, with a further $500,000 for program administration.

 Option "E.4.e" in Appendix 2 would be comparable to the B.C. program. With an eligibility criteria of 60 years of age or older, no income test, and a 2.0 percent interest subsidy, the first-year funding impact to the City may be estimated to be in the order of $430.0 to $681.0 thousand, growing to $2.6 to $4.1 million by the sixth year. The total amount of taxes deferred may be estimated to be in the order of $21.5 million to $34.0 million in the first-year, growing to $128.9 to $204.3 million by the sixth year (the steady state level whereby it is projected that exits from the program may approximate new entries).

 Should interest be charged at the City's imputed rate of return, then there would be no funding impact. Other variations on the deferral of the total tax bill are shown under the options labeled "E" in Appendix 2. These options would be more costly than deferrals with respect to funding due to the greater number of eligible households that would be expected to participate. It should be noted that the school board would not be required to participate in the financing of such a deferral program.

 (iii)Deferral of 50 percent of Tax Bill (Options Labeled "F" in Appendix 2):

 This program was suggested as an alternative to the program of deferring the total tax bill, which is similar to a program provided by the City of Kingston. The Kingston scheme, as enacted by special legislation, allows low-income senior owners of residential property to defer up to 50 percent of the municipal tax bill (i.e., local share only) to a maximum of $1000.00 per year. Eligibility criteria for the program requires applicants to be 65 years of age or older, and receive the GIS. Interest is charged on the deferred portion of taxes a rate equivalent to the City's short-term bank borrowing rate, which they quote as prime less one-quarter percent.

 The options labeled "F" in Appendix 2 provide estimates of the financial impact of implementing such a system in the City of Toronto using various eligibility criteria. The impact of these options is approximately half that described under deferral of the total tax bill in (ii) above. It should be noted that the school board would not be required to participate in the financing of such a deferral program.

 Part III - Analysis of Other Tax Relief Schemes:

 This section describes two other tax relief schemes. The first is a scheme that provides for a $100.00 credit against taxes, similar to the program previously in place in the former City of Toronto. The second involves reverse mortgages, and this description is provided only for information.

 (i)100.00 Tax Credit Program (Options Labeled "G" in Appendix 3):

 The former City of Toronto was the only former local municipality with a program to provide a property tax credit refund in the amount of $100.00 against the City portion of realty taxes of eligible seniors. This program was initiated in 1974 through enactment of the Municipal Elderly Resident's Assistance Act, and subsequent City of Toronto by-law. In order to qualify under the former City of Toronto's program, seniors must be 65 years of age or over, have owned and occupied a home in the City for the past 5 years, and must receive a monthly Guaranteed Income Supplement under the Old Age Security Act. In 1997, there were 4,138 eligible applicants in the City, for which a total of $413,800 was refunded as a credit against the final tax bill.

 The options labeled "F" in Appendix 3 describes this option using various eligibility criteria along with the financial impact. Tax credits must funded from current revenues. If the former City of Toronto program is extended to all eligible residents in Toronto (age 65 and receiving the GIS), it is estimated the number of eligible households may be in the range of 33,095 to 51,801, and such a program would require funding from the operating budget in the order of $3.3 million to $5.2 million. The impact of using other criteria is also shown in Appendix 3.

 Through the Municipal Elderly Resident's Assistance Act, Council may by by-law provide such a tax credit program to eligible seniors. This Act is still in force. It should be noted that the school board does not share in the cost of this program. Although the Toronto by-law has not been repealed, Council at its meeting on March 4, 5, and 6, 1998, during consideration of Clause 4 of Report No. 3 of the Strategic Policies and Priorities Committee ("Seniors Property Tax Credit") cancelled the Toronto tax credit program (as well Etobicoke and York's tax deferral programs) pending the adoption of a new tax policy respecting property tax relief for low-income seniors and low-income disabled persons.

 (ii)Reverse Mortgages:

 Reverse mortgages are a relatively new concept in Canada, which is expected to grow in popularity in the next couple of decades with the aging population. Reverse mortgages are designed for seniors who have most of their equity in their home. A reverse mortgage unlocks that capital and advances a percentage of the house value to the homeowner, while allowing them to continue to own and live in the home. The advance is registered against the title of the property as a mortgage, and may be used to purchase a lifetime guaranteed income and/or as a lump sum cash payment. Revenue Canada deems the interest from the annuity as tax-free.

 A reverse mortgage varies substantially from a conventional mortgage in that no monthly repayments are required and the homeowner is not borrowing money they don't already own. Reverse mortgages are simply a means of accessing the money that is locked up in the home. The principal and accrued interest is paid back when the property is sold or from the estate. Most of the major banks are currently offering reverse mortgages in one form or another. Most of the programs require that there be a certain level of equity in the home.

 A tax deferral program is similar to a reverse mortgage. In either case, funds are advanced, the amount of which is registered against title of the property. In a tax deferral program, the amount advanced is the taxes payable on the property, while in a reverse mortgage, funds may be advanced as a lump sum or as an annuity, and the total amount that may be advanced would be some percentage of the homeowners equity, based certain actuarial calculations.

 (D)Recommended Tax Deferral Program:

 After consideration of all of these options, a program that provides for the deferral of assessment-related tax increases to eligible low-income seniors and low-income disabled is deemed to be the most appropriate for the following reasons.

With respect to deferrals versus cancellations, all else being the same, an eligible person will be equally well off since he or she would not be paying that portion of the tax in either case as long as they remain eligible for the program. However, a tax deferral has the advantage over cancellation in that the City will ultimately recoup the amounts deferred when the property is sold or from the estate. In this way, the tax deferral program achieves the goal of striking a balance between providing those seniors and disabled persons deemed to be in the most need of financial assistance while minimizing the burden on current taxpayers. Such a program is also within the available legislative framework.

 GIS Eligibility:

 With respect to income eligibility criteria, the use of the GIS has the advantage in that the determination of eligibility is administered by Human Resources Development Canada, thereby eliminating the need for the City to establish and administer its own income means test and would be least intrusive into the affairs of seniors seeking financial assistance. This also provides for administrative ease and efficiency, as applicants need only demonstrate proof of GIS benefits to be eligible for tax relief (or in the case of the disabled, proof of receipt of disability benefits under ODSP, or FBA or GAINS).

 The GIS is payable by the Federal Government to seniors whose combined household income is less than a prescribed amount. The GIS is an income-tested, monthly benefit for Old Age Security pensioners with limited income apart from the Old Age Security Pension. It is administered by Human Resources Development Canada. To qualify for the GIS, a person must be receiving the Old Age Security pension, must be a resident in Canada, and their income must be at or below the qualifying level. If the person is married (legal or common-law), then the combined income must be at or below the qualifying level.

 The GIS is payable to single, widowed or divorced pensioners earning up to a yearly income (excluding Old Age Security and GIS) of $11,616.00, beyond which the pensioner(s) is no longer eligible to receive the GIS. For married couples, where both are pensioners, the combined yearly income to qualify for the supplement must be below $15,168.00 (excluding Old Age Security, GIS, and Spouse's Allowance). For married pensioners whose spouse is not a pensioner and is not eligible for Spouse's Allowance, the combined yearly income must be below $28,128.00 (excluding Old Age Security, GIS, and Spouse's Allowance). The income cut-off is higher in this case because no Spouse's Allowance would be payable. For married couples where one is a pensioner and the other is between 60 and 64 years of age, the combined yearly income must be below $21,696.00 (excluding Old Age Security, GIS, and Spouse's Allowance). The income cut-off is lower in this case since a Spouse's Allowance to a maximum of $8,668.00 would be payable. For widowed persons who are eligible for Spouse's Allowance, the yearly income to qualify for the supplement must be below $15,912.00 (excluding Old Age Security and GIS). Table 3 illustrates the income stream for the above situations, assuming a combined yearly income apart from Old Age Security and supplement of $10,000.0 and $15,000.0 thousand.

 Table 3

Old Age Security, Guaranteed Income Supplement and Spouse's Allowance

Example of Yearly Income Apart from OAS and Supplement of $10 thousand and $15 Thousand

 Source: Human Resources Development Canada Brochure, "Income Security Programs - OAS, GIS and Spouse's Allowance - Table of Rates in effect January-March 1998"

  For the purposes of determination of eligibility for the GIS, Human Resources Development Canada determines the combined yearly income of the pensioner and spouse. Income is on a gross basis, and exclusive of payments that may be received as OAS, GIS and Spouse's allowance. Certain other income may also be included in the determination of combined yearly income. This includes Future Economic Loss awards and pensions payable by the Workplace Insurance Board (formerly WCB).

 The use of an age criteria of 65 years or older is coupled with the income criteria in that, to be eligible for the GIS, a person must be 65 years of age or older. If an age criteria of less than 65 years is considered, then the GIS income test would not be applicable, and the City would be required to administer its own income means test. Furthermore, an age criteria of 65 years of age or older defining "senior" is the most common definition used to determine eligibility in a number of financial assistance or benefits programs, such as the Canada Pension Plan. This criteria for "low-income seniors" achieves the goal of assisting those people in the greatest need of financial assistance, while also providing for administrative ease and efficiency.

 The criteria and administrative terms and conditions for the recommended program is as follows:

 Eligibility Criteria - Low-Income Seniors:

 To be eligible as a low-income senior, a person:

 (I)must be 65 years of age or older, or in the case of a widowed person receiving the Spouse's Allowance, between the age of 60 and 64;

(ii)must have owned and occupied the residence for the past three years; and

(iii)must be receiving the Guaranteed Income Supplement (GIS) under the Old Age Security Act, and in the case of widowed person between the age of 60 and 64, receiving a Spouse's Allowance under the Old Age Security Act.

 Eligibility Criteria - Low-Income Disabled Persons:

 In order to be eligible as a low-income disabled person, a person:

 (i)must be in receipt of benefits under the Ontario Disability Support Program (ODSP); or,

(ii)must be in receipt of disability amounts under the current Family Benefits Act (FBA); or,

(iii)must be in receipt of benefits under the Guaranteed Annual Income System (GAINS) for the Disabled, and be eligible to claim a disability amount as defined under the Income Tax Act (Canada).

 ODSP is a new program which replaces the former Family Benefits Act. Although the ODSP Act has received royal assent, it has yet to be proclaimed in force. The advantage of this definition is that eligibility is determined by other agencies, thereby eliminating the need for the City to administer its own means test.

 Administrative Details:

 The MFOA survey also identified a number of administrative details and considerations in conjunction with the definition and eligibility criteria for a tax relief program. The MFOA suggests that the details and considerations outlined below be considered by municipal councils in the development of their tax relief programs for low-income seniors and low-income disabled persons. The administrative details and eligibility criteria are contained in a draft of the by-law on the tax deferrals program as shown in Appendix 6.

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 Administrative Terms and Conditions

(Applicable to both low-income seniors and low-income disabled persons)

 (a)to qualify for tax deferral, applicants must have been owners of real property within the City of Toronto for three consecutive years preceding the application;

 (b)tax deferral is only allowed on one principal residence of the qualified individual or qualifying spouse. Appropriate proof of residency establishing continuous (i.e., not part-time) residency must be provided. Verification of documentation provided in conjunction with an application may be carried out independently at the discretion of the City;

 (c)tax deferral applies to current taxes only (not tax arrears);

 (d)tax deferral amounts are only advanced (or deferred) after payment in full is received for any current or past year amounts payable;

 (e)application for tax deferral must be made annually to the City to establish eligibility or continued eligibility. Applications must be made by December 31 of each year on a form prescribed by by-law;

 (f)for properties which are jointly held or co-owned by persons other than a spouse, both or all co-owners must qualify for benefits under the income means test in order to receive tax deferral (i.e. this would include married couples, even if one spouse is 60 to 64 years of age);

 (g)tax deferral amounts provided under the by-law are not transferable to the estates of deceased owners;

 (h)any tax deferral ceases to apply once the property is sold, or when the eligible applicant dies or ceases to be eligible under the criteria established by the by-law. Any deferred amounts plus applicable interest charges become a debt payable to the City, including part-year portions; and

 (i)deferred amounts are subject to interest, and attract interest at a rate specified by by-law.

 Financial Implications of Recommended Program:

 With tax deferrals, the amounts deferred may be funded through working capital and/or borrowing from reserves. If interest were charged on deferred amounts at the City's imputed rate of return, then there would be no financial impact to current taxpayers. If no interest is charged, there would be a current funding impact arising from foregone interest revenue on working capital and/or reserve amounts advanced to fund the deferrals. Any impact would also be contingent on the phase-in policy, if any, which has yet to be considered and adopted by Council. Chart 1 on page 9 provides a projection of deferred amounts under various phase-in scenarios for assessment-related deferrals, and Chart 2 on page 13 provides the same information for a general tax deferral ($600.00 per annum).

 The estimated impact of the recommended tax deferral program is shown in Table 4. An interest rate of 6 percent was used to represent the City's imputed rate of return. For estimation purposes, a 5 percent participation rate was also assumed for seniors (as deferral programs historically have resulted in low participation rates), while a 50 percent participation rate was assumed for low-income disabled persons since this latter group tends to include persons in greater need of assistance. Additional data is available under option "A.1.a" in Part 1 of Appendix 1.

 Table 4 - Recommended Tax Deferral Program for Assessment-Related Increases

(Low-Income Seniors Aged 65 Years or Older on GIS and Low-Income Disabled Persons)

(6.0 Percent Interest Charge on Deferred Amounts)

(5 percent Participation Rate for Low-Income Seniors,

50 percent Participation Rate for Disabled Persons Receiving FBA)

 The recommended program will result in no direct funding impact to the City. Participation is estimated to be in the order of 854 to 1,225 households (low-income seniors and low-income disabled persons). In the first year, it is estimated that the projected deferred taxes would be in the range of $278.0 thousand to $399.0 thousand, which could easily be funded from working capital and/or from borrowing from reserves. Over the longer term, deferred taxes are projected to grow to and stabilize to a level of $1.7 million to $2.4 million by around the sixth year, at which time it is anticipated that inflows from the sale of properties would approximate new deferrals amounts. If a phase-in policy were adopted, then the amounts deferred would be reduced in proportion to the phase-in period amounts (see Chart 1 on page 9).

 Subject to the Province enacting special legislation, it is also recommended that the City provide a program for a general tax deferral (600.00 per annum) to eligible low-income seniors and low-income disabled persons, also with interest being charged on deferred amounts. When and if such a program is effected, participation is projected to increase (due to the greater number of eligible applicants) to 2,159 to 3,094 households, as shown in Table 5, with additional information shown under option D.1.a in Appendix 2. The first year deferred amounts would be estimated to be in the range of 1.3 million to $1.9 million, and should stabilize at $7.8 million to $11.1 million by around the sixth year (see Chart 2 on page 13). It should be noted that the school board is not required to participate in such a program, and hence the City would have to finance the entire program.

 Table 5 - General Tax Deferral Program ($600 per year) - Subject to Special Legislation being Enacted

(Low-Income Seniors Aged 65 Years or Older on GIS and Low-Income Disabled Persons)

(5 percent Participation Rate for Low-Income Seniors,

50 percent Participation Rate for Disabled Persons Receiving FBA)

  (E)Information and Communication Plan:

 Council approved a reassessment and tax policy information communications plan at its meeting on March 3 and 4, 1998. Phase III of the plan provides for information to be communicated in newspaper advertisements outlining the details of the proposed tax implementation plan, including details respecting property tax relief for low-income seniors and low-income disabled persons. Although this phase was originally scheduled to be initiated in early May, it has been rescheduled (tentatively) for July to accommodate the delay in the return of the 1998 roll. Subsequent to this, Phase IV of the plan will advise taxpayers of the details of the property tax plan approved by Council. This information will be communicated primarily through a brochure that will accompany the final tax bill. The brochure will also advise residential taxpayers of its tax relief plan for low-income seniors and low-income persons with disabilities and stipulate eligibility criteria and other program details.

 Conclusion:

 The Fair Municipal Finance Act mandates that Council pass a by-law providing for deferrals or cancellation of, or other relief in respect of all or part of assessment-related tax increases on property in the residential property class for low-income seniors and low-income disabled persons. The Act provides Council with flexibility in defining the program and eligibility criteria. Many options have been considered as requested by the Assessment and Tax Policy Task Force that examines the various program options (i.e., deferral, cancellation and other forms of relief), including various combinations of age and income criteria and interest rates.

 After consideration of the numerous options, a program providing for the deferral of assessment-related tax increases for eligible persons, with interest being charged on amounts deferred, is recommended. Eligibility for low-income seniors is defined as being 65 years of age or older and receiving the GIS. Eligibility for low-income disabled persons is defined as receiving disability benefits under ODSP, FBA or GAINS.

 An eligible person would be equally well off with a deferral program relative to a cancellation program because, all else being the same, he or she would not be paying that portion of the tax in either case as long as they remain eligible for the program. However, a tax deferral has the advantage over cancellation in that the City will ultimately recoup the amounts deferred when the property is sold or from the estate. With respect to income eligibility criteria, the use of the GIS has the advantage in that the determination of eligibility is administered by Human Resources Development Canada, thereby eliminating the need for the City to establish and administer its own income means test, and would be least intrusive for seniors seeking financial assistance. This provides for administrative ease and efficiency, as applicants need only demonstrate proof of GIS benefits to be eligible for tax relief (or in the case of the disabled, proof of receipt of benefits under ODSP, or FBA or GAINS). The use of an age criteria of 65 years or is coupled with the income criteria in that, to be eligible for the GIS, a person must be 65 years of age or older. If an age criteria of less than 65 is considered, than the GIS would not be applicable, and the City would then be forced to administer its own income means test.

 In this way, the tax deferral program achieves the goal of striking a balance between providing those seniors and disabled persons deemed to be in the most need of financial assistance while avoiding any burden on current taxpayers, provides for administrative ease and efficiency, and is also within the available legislative framework.

 The taxes deferred may be funded through working capital and/or borrowing from reserves. With interest being charged on deferred amounts at a rate equivalent to the imputed rate of return, then there would be no funding impact to current taxpayers. If no interest is charged, there would be a current funding impact arising from foregone interest revenue. Any impact would also be contingent on the phase-in policy, if any, which has yet to be considered and adopted by Council.

 There is a funding impact associated with other tax relief schemes. The amount of the impact is contingent on the nature of the program, the eligibility criteria, actual participation rates, and whether or not any phase-in policy is adopted for the residential property class. The annual impact may range from several thousand dollars for a deferment program in which an interest subsidy is provided, to tens of millions of dollars for cancellation programs, to be funded from the operating budget.

 Contact Name:

 Adir Gupta, 392-8071

Ed Zamparo, 392-8641.

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 Authority:Strategic and Policies Committee

Report No. *(*), June , 1998

Intended for first presentation to Council: June , 1998

Adopted by Council:

 CITY OF TORONTO

 Bill No.

BY-LAW No.

 To establish a property tax assistance program for

eligible elderly and disabled residents who are

Owners of real property in the City of Toronto.

WHEREAS Section 373 of the Municipal Act, R.S.O. 1990, c. M.45, as amended by the Fair Municipal Finance Act, 1997, the Fair Municipal Finance Act, 1997 (No. 2) and the Small Business and Charities Protection Act, 1998 provides that the Council of a municipality shall, for the purposes of relieving financial hardship, pass a by-law providing for deferrals or cancellations of, or other relief in respect of, all or part of assessment-related tax increases on property in the residential/farm property class for Owners who are, or whose spouses are either low-income seniors as defined in the by-law or low-income persons with disabilities as defined in the by-law.

 Now, therefore, the Council of the City of Toronto HERBY ENACTS as follows:

 1.In this by-law:

 (a)"Assessment-related tax increase" means tax increases beginning in 1998, as defined under section 373 of the Municipal Act, as amended by section 55 of the Fair Municipal Finance Act, 1997, section 43 of the Fair Municipal Finance Act, 1997 (No. 2), and section 23 of the Small Business and Charities Protection Act, 1998, or tax increases beginning in a subsequent year and calculated in a similar fashion as 1998 assessment-related tax increases as further defined in section 373;

 (b)"Eligible person" means Low-income person with disabilities or a Low-income senior or the spouse of a Low-income person with disabilities or a Low-income senior:

 (c)"Low-income senior" means a person who is 65 years of age or older and in receipt of benefits under the Guaranteed Income Supplement (GIS), or in the case of a widowed spouse, being between the age of 60 and 64 and receiving the Spouse's Allowance, as provided for under Part II of the Old Age Security Act (Canada);

 (d)"Low-income person with disabilities" means a person who is disabled or who has a disability and in receipt of income support under the Ontario Disability Support Program Act (ODSP), a benefit under the Family Benefits Act (FBA), or an increment under the Guaranteed Annual Income System (GAINS) as established under the Ontario Guaranteed Annual Income Act;

 (e)"Owner" means a person assessed as the owner of residential real property, and includes an owner within the meaning of the Condominium Act;

 2.Tax relief granted pursuant to this by-law shall be in the form of a deferral of the annual assessment-related tax increase, provided that the Owner is an Eligible person and:

 (1)occupies the property, in respect of which the application for property tax assistance is made, as his or her personal residence;

 (2)has been assessed as the Owner for a period of not less than three years immediately preceding the date of application for relief;

 (3)where title to the property in respect of which the application for property tax assistance is made is held jointly, both or all Owners are Eligible persons; and

 (4)payment for all taxes payable for the current year and all previous years has been made and received in full.

 3.Tax relief granted pursuant to this by-law shall attract an interest charge on deferred amounts at a rate as may be provided from time to time by by-law passed by Council.

 4.Annual deferred amounts, plus accrued interest thereon shall be deferred until such time as an Eligible person no longer possess title to the property at which time the total deferred amounts plus accumulated interest thereon become a debt immediately due and payable to the City of Toronto.

 5.If at any time an Eligible person for which tax relief has been granted pursuant to this by-law ceases to be an Eligible person, all tax relief ceases and all such amounts plus accumulated interest thereon become a debt immediately due and payable to the City of Toronto.

 6.The tax relief granted pursuant to this by-law shall constitute a lien against the property which shall be registered on title and at the expense of the Owner.

 7.An amount received in part payment of deferred taxes and interest will be credited towards the interest before being credited toward the taxes.

 8.No tax relief pursuant to this by-law shall be allowed in respect of more residential real property than one (1) single family dwelling unit in any year.

 9.Commencing January 1, 1998, Owners who are Eligible persons may apply to the City of Toronto for tax relief with respect to their eligible property, on a form prescribed by the City of Toronto for this purpose.

 10.All applications for tax relief must be in writing on a form prescribed by the City of Toronto for this purpose, and must be submitted to the City of Toronto on or before (provide due date for applications for 1998) for deferrals of taxes levied in 1998, and on or before the last day of the year preceding the year for which tax relief is sought for deferrals of taxes levied in all subsequent years. Applications must include documentation in support thereof to establish that the applicant is an Eligible person, and that the property with respect to which the application is made is eligible for such tax relief under the terms of this by-law.

 11.This by-law shall be deemed to have come into force on January 1, 1998.

 ENACTED AND PASSED this day of , A.D. 1998.

    MayorCity Clerk

The Strategic Policies and Priorities Committee also submits the following transmittal letter (July 13, 1998) from the Budget Committee:

 Recommendation:

 The Budget Committee on July 13, 1998 submits to the Strategic Policies and Priorities Committee, and Council, without recommendation, the transmittal letter (July 12, 1998) from the Assessment and Tax Policy Task Force.

 Background:

 The Budget Committee on July 13, 1998 had before it the following:

 (a)transmittal letter (July 12, 1998) from the Assessment and Tax Policy Task Force forwarding their recommendations for a tax deferral program for low-income seniors and low-income disabled persons; and

 (b)report (July 13, 1998) from the Chief Financial Officer and Treasurer regarding the funding implication of the property tax relief program for low-income seniors and low-income disabled persons as recommended by the Assessment and Tax Policy Tax Force at their meeting held on July 11, 1998.

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 (Report dated July 13, 1998 addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

 Purpose:

 To report on the funding implication of the property tax relief program for low-income seniors and low-income disabled persons recommended by the Assessment and Tax Policy Tax Force at their meeting held on July 11, 1998.

 Funding Impact:

 The recommended tax relief program, to provide for property tax deferrals for assessment-related increases, in addition to a general $600.00 property tax deferral program whether or not an assessment increases, with no interest being charged on deferred amounts, will result in a first-year funding impact in the order of $95.0 to $135.0 thousand, to be funded from the 1998 Operating Budget. The annual impact by the sixth year of the program is estimated to be in the order of $658.0 to $944.0 thousand.

 Background/Comments:

 On July 11, 1998, the Assessment and Tax Policy Task Force considered the report "Property Tax Relief for Low-Income Seniors and Disabled Persons" (June 30, 1998), from the Chief Financial Officer and Treasurer.

 The report recommended a property tax deferral program for assessment-related increases as well as a general $600.00 property tax deferral program, in which interest would be charged on deferred amounts at the City's required rate of return of 6.0 percent (prime less one-half percent). This would result in no direct funding impact to the City.

 The Task Force has recommended no interest be charged on deferred amounts. This would result in a funding impact to the City arising from foregone interest earnings and/or from short-term borrowing costs.

 The first-year funding impact is estimated to be in the range of $95.0 to $135.0 thousand, as shown in column 3 of Table 1. The sixth-year annual impact, a point in time where it is believed the program may become self-financing, is estimated to be in the order of $658.0 to $944.0 thousand. The funding impact shown in Table 1 is calculated assuming a 6 percent imputed required rate of return for City funds, with annual compounding on the interest foregone, as recommended by the Task Force. It is noted that special legislation would have to be obtained from the Province in order to provide the $600.00 general deferral program.

  Table 1

Funding Impact of Tax Relief Program for Low-Income Seniors Aged 65 Years or Older on GIS and Low-Income Disabled Person receiving ODSP

(Various Interest Charge on Deferred Amounts - Annual Compounding)

(Assuming 6 Percent Imputed Required Rate of Return)

(5 Percent Participation Rate for Eligible Seniors, 50 Percent Participation for Eligible Disabled)

  * Estimated No. of participating households for general tax deferral program includes those experiencing assessment-related increases

** Funding impact is cumulative total of both the assessment-related deferral and the general deferral, as an eligible person would be entitled to apply for both components

 Conclusion:

 It is anticipated that the recommended assessment-related deferral program and the general $600.00 deferral program will result in 2,125 to 3,094 participating households. The funding impact as a result of no interest being charged on deferred amounts is estimated to be $95.0 to $135.0 thousand for the first-year, to be funding from the 1998 Operating Budget.