September 24, 1999

Background:

The Assessment and Tax Policy Task Force, on September 22, 1999, had before it a report (September 15, 1999) from the Chief Financial Officer and Treasurer respecting Fair Tax Policy for Ethno-cultural Centres and Similar Organizations, and recommending that:

The Task Force’s recommendation is noted above.

City Clerk,

Assessment and Task Policy Task Force

990922.4

September 15, 1999

Purpose:

To provide a fair tax policy for Ethno-Cultural Centres and Similar organizations.

Funding Source, Financial Implications and Impact Statement:

The cancellation/rebate of current and retroactive property taxes to December 31, 1999 in the amount of $4.4 million (City share), pursuant to the motions adopted by the Councils of the former Metropolitan Toronto and the former local municipalities, will be funded from the Tax Deficiencies account for the nine cultural organizations that have received the support of the former Councils regarding Private Bill legislation, and for whom property tax relief has yet to be provided, and for two additional organizations that would be eligible under the eligibility criteria embodied in this report and who have also requested similar treatment.

Adoption of a fair tax policy for Ethno-Cultural Centres and Similar Organizations, as embodied in this report, will require funding in the amount of $1.0 million for the City share of taxes to be transferred from Tax Deficiencies in the 2000 Operating Budget for the purposes of continuing the new program of Property Tax Rebates for Ethno-Cultural and Similar Organizations for the above organizations.

Recommendations:

It is recommended that:

Council Reference:

At is meeting of July 21 and July 23, 1998, during consideration of Clause No. 5 of Report No. 13 of the Strategic Policies and Priorities Committee – "Property Tax Rebates for Charitable and Similar Organizations", Council further moved that the Chief Financial Officer and Treasurer submit a report to Council, through the Strategic Policies and Priorities Committee, on a fair tax policy for ethno-cultural centres.

Background:

At present, there are nine cultural organizations for which a decision of Council is pending respecting property tax relief. Prior to the amalgamation of the municipalities, these organizations had previously sought and received the support of the Councils of the former upper (Metro) and the respective lower tier municipalities for support for the introduction of private legislation in the Provincial Legislature. Private legislation was enacted by the Province in late 1997 for seven of these organizations, which legislation authorized the municipalities to cancel taxes by by-law under the rules in existence at that time. With the changes in provincial legislation and policy respecting Private Members bills in late 1997 and 1998, the other two organizations missed the window of opportunity for enactment of private legislation. Since then, two additional organizations have come forward seeking similar treatment.

The total current value assessment (CVA) of the subject properties is estimated at $66.0 million. The property taxes that would otherwise be payable by these organizations amounts to approximately $1.4 million per year under full CVA, of which the municipal portion would be approximately $0.8 million per year. Table 1(a) shows the outstanding requests by ethno-cultural and similar organizations for property tax relief.

Table 1(a)

New Private Legislation and Requests to Provide Tax Relief in Toronto

The private bills for 4588 Bathurst (Bathurst Jewish Centre) and 750 Spadina Avenue Association provides for the municipality to continue with providing property tax relief for the former Jewish Community Centre at these two facilities, as a name change arising from their reorganization negated their tax exempt status provided by their private bill of 1951. The private bills for the Japanese Canadian Cultural Centre and for the Korean Canadian Cultural Association provides for the municipality to continue providing property tax relief to these organizations, as a change of location negated their tax exempt status provided by their private bills of 1982 and 1993, respectively. The private bills for the National Ballet of Canada, Chinese Canadian Cultural Centre of Greater Toronto Foundation, and the Jamaican Canadian Cultural Centre provides for the cancellation of taxes on properties that are presently taxable. The request by the Tamil-Eelam Society of Canada is for tax relief on a taxable property owned by the organization, for which no private bill has been enacted. The request by the Armenian Community Centre is to extend tax relief to an additional adjacent property owned and used by the organization that is presently taxable. The requests by the Cypriot Community of Toronto and the First Portuguese Canadian Cultural Centre are post-1997 requests for similar treatment for properties owned and occupied by these organizations for ethno-cultural purposes.

In their support of the application for Private Members bills, the Councils of the former lower tier municipalities passed resolutions to cancel the local portion of taxes, subject to the enactment of the relevant bills by the Province, and requested that Metropolitan Toronto and the Metropolitan Toronto School Board pass resolutions to cancel their share of taxes. The Metro level of government, in its support of the application for Private Members bills, authorized the cancellation of the Metro portion of property taxes payable to the end of 1997, also subject to the enactment of the relevant legislation by the Province. Given the late timing of the private bills being enacted and the end of the term for Council, the local portion of taxes payable to the end of 1997 were cancelled for only two organizations, located in the former City of Toronto (the National Ballet of Canada and 750 Spadina Avenue Association). The Private Members bills that were enacted provided for retroactive cancellation of taxes to the date that the subject properties became taxable. Given Councils support of the Private Members bills, there may have been an expectation by some of the organizations that the taxes would be cancelled retroactively, and as such, in certain cases taxes were not paid. Table 1(b) shows the estimated total tax arrears, penalties and interest owing, notwithstanding the retroactive cancellation of taxes.

Table 1(b)

Estimated Taxes Paid, Arrears, Penalties and Interest Owing

Councils support for Private Members bills for cultural organizations was generally on an ad-hoc basis, although the former Toronto and Metro followed a broad criteria that support only be provided to "unique, one-of-a-kind facilities in the opinion of Council".

With the amalgamation of the former municipalities, there is no longer a distinction between the local and Metro portions of the tax bill. During 1998, the new Council’s priorities included property assessment and taxation reform, which included consideration of property tax relief for charitable and similar organizations. The legislation with respect to the latter evolved during 1998, culminating with the enactment of the Small Businesses and Charities Protection Act, 1998 (Bill 16). In the end, Council adopted a capping provision for the commercial/industrial property classes, negating the necessity for a policy to protect charities and similar organizations from the impacts of assessment and taxation reform. Consequently, no new policy respecting property tax relief for cultural centres was established in 1998.

Property tax relief for cultural and similar organizations falls into three categories: exemptions, cancellations, and rebates. Prior to 1994, organizations such as ethno-cultural centres that were not eligible for the specific types of exemptions listed in the Assessment Act could seek to obtain tax exempt status through private legislation, which were being approved on an ad hoc basis by the Province’s Private Bills Committee and then enacted by the Provincial Legislature. To date, staff have identified twenty-nine organizations occupying forty-four property locations that have been granted tax exempt status through private bill legislation, as shown in Table 2(a). The total CVA of these exempted properties is estimated at approximately $167.0 million. It is estimated that the tax implication for these exempt properties amounts to approximately $7.4 million per annum (based on current tax rates), with the municipal portion being $4.2 million, as shown in Table 2(b).

Table 2(a)

Existing Private Bills Providing for Property Tax Exemptions in Toronto

Private Bill Enacted

Organization

No. of Exempted Locations

Total Assessed Value

1868-1909		Toronto Young Men’s Christian Association		4		$ 38,970,000
1942		Ina Grafton Homes		1		355,700
1946		Canadian Legion of the British Empire League		1		4,350,000
1951		Jewish Community Centre of Toronto*		1		36,576,000
1960-1961		Young Women’s Christian Association of Canada		3		5,844,000
1976		Dovercourt Baptist Foundation		1		Not Found
1980		Italian-Canadian Benevolent Corporation		9		50,577,109
1981		Armenian Community Centre (45 Hallcrown)		1		5,896,000
1981		Latvian Canadian Cultural Centre		1		2,059,000
1982		Japanese Canadian Cultural Centre* (123 Wynford)		1		1,148,000
1982		Ukrainian Cultural Centre		1		2,198,000
1983		Armenian-General Benevolent Union (Alex Manoogian Cultural Centre)		1		4,137,000
1983		Bernard Betel Centre for Creative Learning		1		Not Found
1983		Hungarian Canadian Cultural Centre (Hungarian House)		1		2,611,000

1983		New Horizons Day Care Centre		1
276,000 1983		Massey Hall		1		11,147,000
1983		Roy Thompson Hall		1		18,650,000
1983		Frontier College		1		2,889,000
1983		The Missionary Church, Canada East		1		Not Found
1984		Scandinavian Canadian Centre		1		317,000
1984		United Jewish Welfare Fund		1		3,862,000
1984		Enoch Turner Schoolhouse Foundation		1		196,000
1986		Children’s Oncology Care of Ontario (Ronald McDonald House)		2		4,725,000
1987		Canadian Opera Company		4		2,539,000
1989		Sisters of Social Service		1		Not Found
1991		Royal Conservatory of Music		1		4,523,000
1992		Cholim Bikur		1		411,000
1993		Korean Canadian Cultural Centre*		1		332,000
TOTAL				44		$ 166,532,809

Table 2(b)

Estimated Tax Implication of Tax Exempt Properties

By 1994, the preferred form of such private legislation was revised to provide for tax cancellation as opposed to tax exemption, as is the case for seven of the organizations listed in Table 1(a). This change in treatment was important in four ways. First, it required that property tax relief be granted by the cancellation of taxes through municipal by-law rather than directly through exemption by the Province. As such, it provided the municipalities and school boards with a say in decisions which affected their tax base. Second, the cancellation did not remove the property from the tax assessment roll, and therefore did not affect the apportionment of taxes for upper tier and education purposes. Third, the bill allowed that the tax cancellation be subject to any such conditions as may be set out by Council in the by-law. The latter is significant because, whereas a tax exemption is effectively an invisible grant in perpetuity and is not accounted for in municipality’s budgetary process, the cancellation necessitates that the amount of taxes cancelled be included in the annual expenditures of the municipality. As such, a cancellation is equivalent to a grant, in a monetary sense, for each and every year that the cancellation is in effect, and thus provides for some accountability.

In 1998, the introduction of Bill 16, the "Small Business and Charities Protection Act", fundamentally changed the rules governing property tax relief for charitable and similar organizations. The most significant change was that this Act transferred the decision-making and responsibility to the municipalities, who are now empowered to provide property tax relief by way of a tax rebate. In addition to owned-facilities, the Act further provides the municipality with the discretionary power to rebate taxes to charitable and similar organizations in leased premises. The definition of "similar" is at the discretion of Council.

Comments/Discussion:

The provision of property tax relief for cultural centres is a complex issue. The matter has been complicated by the varying manner in which these requests have been treated over many years. Attempting to redress many years of perceived inequity is a difficult task.

Consideration of this matter will likely attract other organizations to seek similar treatment. Council’s action in this regard can result in long term consequences for the City. This report attempts to balance policy objectives with the financial pressures that the City faces. This report is premised on a definition of fair as being that "all similar organizations be treated in an equitable manner; that one organization should not be treated differently than another organization in a similar position".

Tax Cancellation verses Tax Rebate:

The enactment of the Small Business and Charities Protection Act, 1998 (Bill 16), as amended, provides the City with the authority and responsibility to provide property tax relief by way of a tax rebate to Cultural and Similar organizations, as defined by Council, in both owned and leased premises. Given this legislative change, it is our understanding that the province will no longer enact private bills under such circumstances. Thus any new requests for property tax relief by cultural and similar organizations can only be dealt with under the tax rebate mechanism. A policy in this regard is presented in a subsequent section of this report.

However, of the nine organizations whose requests for property tax relief have yet to be addressed, Council has two mechanisms available to address the seven organizations for whom private bills have been enacted: through a cancellation pursuant to the private bill; or through a tax rebate as permitted under Bill 16, which also requires a by-law. While either approach achieves the same end objective of providing property tax relief, there are subtle differences. For one, under the tax rebate approach (Bill 16), the by-law must provide a definition of eligible cultural or similar organizations. Upon receipt and review of applications, any organization meeting the eligibility criteria would be eligible for a tax rebate. Under the tax cancellation approach, only those organizations for whom private legislation is enacted would be eligible for property tax relief. For another, tax rebates may be extended to organizations in leased premises. Historically, Private Members bills have only been enacted for owned premises. Another difference is that the Private Members bills enacted since 1994 prescribe that the School Board "may", but is not required to, cancel their share of taxes. The Province has indicated their intent to cancel the School Board share of taxes should the City adopt by-laws under the Private Members bills. Under Bill 16, the legislation requires that the School Board share, in their proportion of taxes, in any rebate of taxes under the rebate program. As a final point, it is noted that the seven Private Members bills provide for the retroactive cancellation of taxes, in two cases to 1995, pursuant to the spirit of the motions passed by Council in 1997. The City Solicitor advises that rebates under Bill 16 may be extended only as far back as 1998, since the section authorizing such rebates was only enacted in 1998.

There are also similarities in both approaches. Under either approach, the by-law would be in effect essentially in perpetuity, unless the by-law was conditional to annual review, amended or repealed. For another, the tax cancellation/rebate need not be 100 percent of the taxes payable, but cannot be more than 100 percent of the taxes payable.

In the end, either approach could be made to be transparent to these cultural and similar organizations as they would receive their property tax relief to the extent and for the term deemed appropriate by Council. Under the rebate approach, property taxes could be rebated through the direct adjustment of taxes on the property tax account in order to avoid unnecessary transactions, similar to a cancellation. Given that the end objective is achieved under either approach, this report recommends that, on a going forward basis, the nine ethno-cultural organizations for which a decision regarding property tax relief is pending by Council, the tax rebate approach be followed so that the nine organizations, and subsequent applicants, are be treated in exactly the same manner. A separate by-law under the provisions of the Private Members bills will also be necessary to address the pre-1998 retroactive tax issue.

Proposed Criteria Respecting Requests for Property Tax Relief by Cultural and Similar Organizations:

For the most part, those ethno-cultural and similar organizations listed in Tables 1 and 2 of this report provide activities that promote their culture within the multicultural context of Canadian society and at the same time facilitate communication and understanding between Canada and foreign countries in culture, education, arts, and trade. For many of the organizations, their facilities and programs are available at little or no cost to the residents of Greater Toronto. Those with previous tax-exempt status through private legislation are registered charitable organizations within the meaning of the Income Tax Act.

Given the diverse range of activities and services provided by these organizations, a policy listing specific eligibility criteria for property tax relief is problematic and can inadvertently invite numerous applications, while restricting access by other worthy organizations. However, based on a review of the literature, as discussed in a report by the Chief Financial Officer and Treasurer, headed "Property Tax Rebates for Charitable and Similar Organizations" (June 30, 1998; Clause 5 of Report No. 13 of the Strategic Policies and Priorities Committee) it appears that there are a number of areas of commonality that can constitute as a framework to determine the eligibility of a "Ethno-Cultural" organization for a tax rebate. The criteria include:

All but one of the eleven subject organizations discussed in this report are registered charities, and meet the eligibility criteria discussed above. The Tamil-Eeelam Society of Canada is a not-for-profit organization. Although the Society received the support of the Council of the former Metropolitan Toronto regarding private bill legislation, it is unlikely that such legislation would have been enacted by the Province. Based on the above proposed eligibility criteria, the Tamil-Eelam Society would not be eligible for a tax rebate. To become eligible, the Tamil-Eeelam Society of Canada must register as a Charity under the Income Tax Act (Canada).

A criteria of demonstration of financial need is not recommended at this time. There are several reasons for this. For one, the criteria above includes that to be eligible, the organization must be a registered charity. For another, Council’s support for tax relief for the subject organizations did not include consideration of financial need, and to introduce it now would be unfair to other organizations vis-à-vis to these organizations. Finally, financial consideration was not a factor in the enactment of tax exempt status by the Province for the twenty-nine similar organizations listed in Table 2(a).

The inclusion of leased premises as part of the eligible group is also not recommended at this time. The intent of the policy outlined in this report is to support the promotion of culture and community belonging, and the facility generally tends to be the focal point in this activity. A visit to any of the owned cultural facilities shows the significant capital improvements that have been made and the commitment to provide a unique atmosphere for the activity of these organizations. Nonetheless, a policy is being developed by the Chief Financial Officer and Treasurer, in conjunction with the Property Tax and Assessment Business Reference Group, to provide some form of property tax relief to mitigate financial impacts resulting from reassessment and taxation reform for Charitable and Non-Profit Organizations in owned and leased facilties. The policy recommendations of the Business Reference Group in this regard are expected in mid-2000.

Implementation Issues:

Outstanding Requests by Cultural Centres for Property Tax Relief:

Keeping with the spirit of the former Councils motions, this report recommends full and retroactive property tax relief for those organizations for which a decision of the new Council is pending, subject to these organizations meeting the eligibility criteria. To settle the pre-1998 tax accounts, it is recommended that the necessary by-laws pursuant to the relevant Private Members bills be enacted to settle any outstanding tax accounts to December 31, 1997 for the seven organizations shown under heading (A) of Table 1(a). Going forward, it is recommended that a program entitled "Property Tax Rebates – Ethno-Cultural Centres and Similar Organizations" be established and that the definition of cultural centre and eligility criteria outlined in this report be adopted, and the necessary by-law be enacted pursuant to Bill 16 to rebate the 1998 and 1999 municipal and education taxes, without penalty, for the all the organizations listed in Table 1(a) of this report, subject to the eligibility criteria as proposed in this report being met.

New Requests and On-Going Adherence to Eligibility Criteria:

In order to ensure adequate time for review of requests, and that adequate information is provided, it is recommended that ethno-cultural and similar organizations seeking eligibility for the property tax rebate program be requested to make application to the Chief Financial Officer and Treasurer by December 31 to be considered under the tax rebate program for the following and subsequent years. All applicants will be tested against the eligibility criteria proposed in this report and attached as Appendix A. Furthermore, to ensure continued eligibilty for the program, it is recommended that organizations in the program be required to certify continued conformance with the eligibility criteria, on a form to be set by the Chief Financial Officer and Treasurer and to be sent to the organizations annually, and where necessary, City officials be granted the necessary authority to confirm continued eligibility in the program.

Given that the City received written requests in 1998 by two additional organizations (the Cypriot Community of Toronto and the First Portuguese Canadian Cultural Centre of Toronto), and that these organizations meet the eligibility criteria proposed in this report, they have been included in the rebate program retroactive to and including 1998.

Funding Impact:

As previously discussed, the cost of the rebate program recommended in this report for the City share of taxes is estimated at $0.8 million. It is noted that four of the eleven organizations mentioned in this report were previously exempted from property taxation and, notwithstanding CVA and amalgamation effects, the continuation of property tax relief for these organizations would have a negligible financial impact on the City.

However, establishing a program of property tax rebates for ethno-cultural centres will invariably attract other organizations to seek similar treatment. While the exact number of organizations that potentially may be eligible under this program is not known, and is likely to grow with time, the June 30, 1998 report of the Chief Financial Officer and Treasurer provides an estimated figure of between 60 to 70 organizations that may be similar in nature, with the annual municipal taxes estimated in the order of $1.0 million. While the figure may seem low, a review of the data suggests that most of the major facilities are already exempted under private legislation, or are one of the eleven discussed in this report. Notwithstanding the construction or acquisition of any new major cultural facility, the balance of potential applicants reside in minor facilities. As such, additional initial funding in the amount of $0.2 million is recommended as a contingency, for a total 2000 Operating Budget funding requirement of $1.0 million.

Conclusion:

At present, there are nine cultural organizations for which a decision of Council is pending respecting property tax relief. These organizations had previously sought and received the support of the Councils of the former Metro and the respective former lower tier municipality for private legislation to provide for such property tax relief prior to the amalgamation of the municipalities. Due to timing and changes in provincial legislation late in 1997 and in 1998, only seven private bills were enacted by the Province. Since then, two additional ethno-cultural organizations have come forward to seek similar treatment.

Providing property tax relief for cultural centres is a complex issue. Property tax relief for cultural and similar organizations falls into three categories: exemptions, cancellations, and rebates. Much perceived inequity has arisen as a result of the varying manner in which these requests have been treated over many years.

This report presents a fair tax policy for ethno-cultural centres and similar organizations. It is premised on a definition of fair as being that "all similar organizations be treated in an equitable manner", while at the same time attempts to balance policy objectives with the financial pressure the City faces.

Keeping with the spirit of the former Councils’ motions, this report recommends full and retroactive property tax relief for those nine organizations for which a decision of the new Council is pending, subject to the eligibility criteria proposed in this report being met, and for the two additional organizations that have requested similar treatment and also meet the eligibility criteria, which will require one time funding in the amount of $4.4 (City share) million from the tax deficiency account.

Invariably, other organizations will seek similar treatment. On a going forward basis, the tax rebate approach pursuant to Bill 16 is recommended so that the subject organizations, and subsequent applicants, are treated in exactly the same manner. The report recommends the creation of a Corporate program "Property Tax Rebates – Ethno-Cultural Centres and Similar Organizations". An eligibility criteria is proposed that includes being a registered charity, demonstrating a going concern for the promotion of culture, community accessibility, that the facility be owned, occupied and used for such purposes. Funding in the amount of $1.0 million in the 2000 Operating Budget is recommended to be transferred from the Tax Deficiencies account to a new account "Tax Rebates" for the purposes of continuing the program of Property Tax Rebates for the subject organizations and for similar organizations that meet the eligibility criteria for this program.

Contact Names:

Adir Gupta, 392-8071

Paul Wealleans, 397-4208

Giuliana Carbone, 392-8065

W. A. Liczyk

Chief Financial Officer and Treasurer

Appendix A

Criteria for Ethno-cultural Organizations for Tax Rebates

Eligibility Criteria:

Conformity Requirements: