September 24, 1999

To:Policy and Finance Committee

From:City Clerk, Assessment and Tax Policy Task Force

Subject:Property Tax Relief for Low-Income Disabled Persons - Criteria and Program Enhancement

Recommendations:

The Assessment and Tax Policy Task Force recommends that:

(1)the report (September 21, 1999) from the Chief Financial Officer and Treasurer be adopted; and

(2)the Mayor be requested to write to the Premier of Ontario requesting the provincial government to expedite the special legislation requested by the City respecting deferral of property tax for low income persons and seniors.

Background:

The Assessment and Tax Policy Task Force, on September 22, 1999, had before it a report (September 21, 1999) from the Chief Financial Officer and Treasurer respecting Property Tax Relief for Low-Income Disabled Persons - Criteria and Program Enhancement, and recommending that:

"(1)The following expanded eligibility criteria for low-income disabled persons or the spouse of such a person 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 any one of the following: Ontario Disability Support Program (ODSP), Canada Pension Plan, Workplace Safety Insurance Board (WSIB), Unemployment Insurance Sickness Benefit, Motor Vehicle Accident Insurance, Private Disability Insurance Plan, Employer Disability Insurance Plan or disability programs provided by Professional Associations.

(2)A graduated deferral program for low-income disabled persons be implemented based on the income levels as set out in this report.

(3)No interest be charged on the deferred tax amount.

(4)The changes to the tax deferral program for low-income disabled persons, as set out in this report, be applied retroactively to January 01, 1998 and the applications already received for the 1998 and 1999 tax years be reviewed based on the expanded criteria and program.

(5)All administrative terms and conditions of the current low-income senior and low-income disabled tax deferral program, as established by By-law No. 603-1998, apply to the expanded eligibility criteria for low-income disabled persons.

(6)Authority be granted for introduction of necessary bills in Council.

(7)The appropriate civic officials be authorized and directed to take the necessary action to give effect thereto."

The Task Force's recommendations are noted above.

City Clerk,

Assessment and Task Policy Task Force

Frances M. Pritchard/fmp

990922.3

Septemer 21, 1999

TO:Assessment and Tax Policy Task Force

FROM:Chief Financial Officer and Treasurer

SUBJECT:Property Tax Relief for Low-Income Disabled Persons - Criteria and Program Enhancement

Purpose:

This report is to provide a policy respecting tax relief for low-income disabled persons under enhanced criteria.

Financial Implications:

If Council adopts the expanded criteria and tax deferral program, as set out in this report, an estimated $1.6 million in taxes will be deferred annually, of which the City share is $1.0 million. There are no long term financial implications to the City because deferred amounts become payable at the time of sale or change in ownership of the property. The total deferred taxes are treated as a long term receivable and could potentially range between $723,000 for 1998 to $1.6 million for 2000.

The taxes deferred will result in lost interest revenue and the City will incur a cumulative interest expense of between $0.577 million and $1.23 million over a 10-year period, or $57,700 to $123,000 annually depending on the interest rate from year to year.

Recommendations:

It is recommended that:

1. The following expanded eligibility criteria for low-income disabled persons or the spouse of such a person 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 any one of the following: Ontario Disability Support Program (ODSP), Canada Pension Plan, Workplace Safety Insurance Board (WSIB), Unemployment Insurance Sickness Benefit, Motor Vehicle Accident Insurance, Private Disability Insurance Plan, Employer Disability Insurance Plan or disability programs provided by Professional Associations.

2.A graduated deferral program for low-income disabled persons be implemented based on the income levels as set out in this report.

1. No interest be charged on the deferred tax amount.
2. The changes to the tax deferral program for low-income disabled persons, as set out in this report, be applied retroactively to January 01, 1998 and the applications already received for the 1998 and 1999 tax years be reviewed based on the expanded criteria and program.
3. All administrative terms and conditions of the current low-income senior and low-income disabled tax deferral program, as established by By-law No. 603-1998, apply to the expanded eligibility criteria for low-income disabled persons.
4. Authority be granted for introduction of necessary bills in Council.
5. The appropriate civic officials be authorized and directed to take the necessary action to give effect thereto.

Reference/Background:

Section 373 of Municipal Act allows municipalities to pass by-laws to provide tax relief through deferrals or cancellations in respect of all or part of assessment related tax increases for low-income disabled persons.

At its meeting of July 21 and 23, 1998, City Council adopted the recommendations of the Tax Policy Task Force to implement a tax deferral program for tax increases due to reassessment for properties owned by low-income disabled persons (Strategic Policies and Priorities Committee Report No. 13, Clause 3). Council passed By-law No. 603-98 at its meeting on July 29, 30 and 31, 1998 to implement this program. In addition, Council requested the Chief Financial Officer and Treasurer and the Commissioner of Community and Neighbourhood Services to strike a working group that includes staff and representatives from community organizations including ARCH (A Legal Resource Centre for Persons with Disabilities) to develop criteria for an enhanced residential property tax relief program in respect of all or part of assessment-related tax increases on residential property owned by low-income disabled persons.

Comments:

In response to Council's request, a work group was struck comprising representatives from ARCH, North York Community House, the Centre for Independent Living in Toronto and staff from the Finance and Community and Neighborhood Services Departments, the Access/Equity Centre, Policy and Program Division of Urban Planning and Development Services and Corporate Planning of CAO's office. The first meeting of the work group was held on June 3, 1999. The intent of this meeting was to formulate possible expanded criteria and report to the Assessment and Tax Policy Task Force. A second meeting of this workgroup was held on July 22, 1999.

The Current Program:

Eligibility for the current tax deferral program for low-income disabled home owners includes only applicants receiving disability benefits under the Ontario Disability Support Program (ODSP), the Family Benefits Act (FBA) and the Guaranteed Annual Income Systems (GAINS). ODSP, which was introduced in 1998, replaced both the FBA and GAINS. The ODSP, which is both asset-tested and income-tested, is made up of a Basic Need Allowance and a Shelter Allowance. The Shelter Allowance includes property taxes as a cost component. If property taxes are deferred, shelter costs may be reduced, thereby reducing the ODSP Shelter Allowance. Therefore, a property tax deferral may result in a disadvantage for many ODSP benefit recipients. Under the current program, although the City received 650 applications from disabled low-income home owners for 1998 and 1999, only 40 were qualified to receive tax deferral in this two-year period. These facts justify expansion of the current program to include other disability insurances in the criteria so that a larger number of disabled home owners could receive tax relief.

The Expanded Program:

Firstly, the workgroup identified the following disability insurances to be included in the expanded criteria: Ontario Disability Support Program (ODSP), Canada Pension Plan, Workplace Safety Insurance Board (WSIB), Unemployment Insurance Sickness Benefit, Motor Vehicle Accident Insurance, Private Disability Insurance Plans, Employer Disability Insurance Plans and disability benefits provided by Professional Associations.

It should be noted that eligibility for some of the disability benefits noted above are not income-tested and a person may receive benefits regardless of their level of income. Therefore, a graduated tax deferral program with income thresholds similar to the current senior's program is recommended for low-income disabled persons. In addition, under the expanded program, qualification for application requires proof of receipt of disability benefits from identified donor organizations and proof of income of applicants. The recommended graduated tax deferral program is as follows:

Table 1. Expanded Tax Deferral Program for Low-Income Disabled Persons -

Amount of Tax Deferral as Percentage of Assessment-Related Tax

Increase (Various Household Income Levels)

The workgroup also agreed that the City need not develop a unique definition to define 'disability', and the criteria for the relief program should be based on qualifications adopted by the various disability insurance agencies to determine disability benefit eligibility. The workgroup agreed that City staff should not be required to do their own needs assessment when evaluating deferral applications. Therefore, a tax deferral applications would be approved so long as the applicant is in receipt of any of the disability benefits noted above, with the amount of taxes eligible to be deferred determined based on the level of household income.

Administrative Terms and Conditions:

The administrative terms and conditions for the tax deferral programs adopted by Council in 1998 would apply to the expanded eligibility criteria and program for low-income disabled persons that is recommended in this report. The current administrative terms and conditions of the tax deferral program for both low-income seniors and disabled persons include the following:

• To qualify for tax deferral, applicants must have owned and occupied the property for a minimum of one year. Proof of residency must be provided.
• Tax deferral is allowed on the principal residence only.
• Tax deferral applies to current taxes and not tax arrears.
• Tax deferral amounts are only advanced (or deferred) after payment is received in full for any current or past year amounts payable.
• Application for tax deferral must be made annually.
• For properties held jointly, 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.
• Tax deferral amounts provided under the by-law are not transferrable to the estates of deceased persons.

• 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 amount become a debt payable to the City, including part-year portions.

The full terms and conditions, as amended and adopted by Council at its meeting on July 21 and 23, 1998, are set out in Strategic Policies and Priorities Report No. 13, Clause 3 and By-law No. 603-1998.

Analysis of Financial Implications due to Criteria and Program Enhancement:

Appendix 1 shows estimates of total tax deferred for various income groups among disabled homeowners in Toronto for 1998, 1999 and 2000. The analysis is based on the information provided by Statistics Canada for 1991. This is the latest available statistical data on persons with disabilities. An actuarial analysis regarding age groups and expected program take-up other than that included in this report cannot be done with information currently available.

Column 3 of the appendix shows the disabled person population for various income levels in 1991 in Ontario. Column 4 is an estimate of similar population distribution in Toronto for the same year. This estimate is based on the Toronto to Ontario population ratio of 0.22 in 1991. In 1991, Statistics Canada reported an increase of 2.3% in disabled persons' population in the five years since 1986. Based on this information, it is estimated that the disabled person's population in Toronto could rise by an additional 4.6% to 214,962 by 2000.

Statistics Canada reported a total of 562,015 disabled persons within the age groups between 15 and 64 years owned accommodation in Ontario in 1991. This was 60% of the total disabled population in Ontario at that time. From this, it is estimated that 129,330 disabled persons or 60% will own homes in Toronto in 2000 (Column 6). Based on the same Statistics Canada report, 20% of disabled persons in Ontario (186,826) received some kind of disability benefits in 1991. It can therefore be anticipated that 25,866 disabled homeowners may receive disability benefits in Toronto in 2000.

In the City of Toronto for 1998, 44% of the residential properties had an assessment-related tax increase due to reassessment. The average increase was $670 per household. Assuming that 30% (3,414) of the disabled homeowners who receive disability benefits and have annual incomes less than $35,000 would apply for a tax deferral, it is estimated a total of $1.6 million in taxes may be deferred annually. The City's share would be $ 1.0 million.

As noted above, there were 650 applications for 1998 and 1999 for the current tax deferral program for low-income disabled persons, of which 40 were approved based on the existing program criteria. If Council approves the expanded criteria and graduated tax deferral program recommended in this report, all of the remaining 610 applications in house would likely be approved due to the expansion of the criteria to include receipt of any disability benefit. However, income verification would still be required to determine the amount of taxes eligible for deferral. If all of the applicants qualify for a full deferral, the estimated amount of taxes deferred would $183,000 for 1998 and $366,000 for 1999, of which the City's share would be $120,578 and $241,156 respectively.

Analysis of Financial Implications - Interest Expense on Borrowing:

As reported previously, there is an interest cost to the City of the no interest deferral programs adopted by Council. The estimated cumulative interest lost on the deferred taxes receivable at no interest due to the implementation of the expanded deferral program is $0.577 million to $1.23 million in year 10, or $57,700 to $123,000 per year. The total deferred taxes would be treated as a receivable and could potentially range between $723,000 for 1998 to $1.6 million for 2000.

Conclusion:

The current tax deferral program for low-income disabled home owners includes property ownership with a minimum residency period of 1 year, and Ontario Disability Support Program (ODSP) as the only criteria for qualifying applications along with the requirement that an applicant must have owned and occupied the residential property for one year. In order to expand this program a working group comprised of ARCH, North York Community House, the Centre for Independent Living in Toronto and staff from the Finance and Community and Neighbourhood Services Departments, the Access/Equity Centre, Accessibility Planning of Urban Developing Service and Corporate Planning of CAO's office of the City of Toronto was established.

The workgroup recommends that eligibility for current tax deferral program for low-income disabled persons be extended to those persons in receipt of disability benefits under the Canada Pension Plan, Workplace Safety Insurance Board (WSIB), Unemployment Insurance Sickness Benefit, Motor Vehicle Accident Insurance, Private Disability Insurance Plan, Employer Disability Insurance Plan and disability programs provided by Professional Associations.

A graduated tax relief program similar to that currently available for low-income seniors should be established. The expanded program could benefit an estimated 9,268 low-income disabled homeowners in Toronto. This report recommends that the changes to the tax deferral program for low-income disabled persons, as set out in this report, be applied retroactively to January 01, 1998 and the applications received for the 1998 tax year be reviewed based on the expanded criteria and program.

Assuming 30% of this population or 2,780 disabled homeowners participate in the program, an estimated $1.6 million in annual taxes may be deferred, of which the City share is $1.0 million. The taxes deferred will result in lost interest revenue and the City will incur a cumulative interest expense of between $0.577

million and $1.23 million over a 10-year period, or $57,700 to $123,000 annually depending on the interest rate from year to year. The total deferred taxes would be treated as a receivable and could potentially range between $723,000 for 1998 to $1.6 million for 2000.

Contact Names:

Raj Mathavan, 395-6738

Lynne Ashton, 397-4203

Wanda Liczyk

Chief Financial Officer and Treasurer

APPENDIX 1

Estimated Deferred Tax Amounts -

Various Income Groups of Disabled Homeowners in Toronto (1998, 1999 and 2000)

Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12
Household Income Level	Percentage of Assessment Related Tax Increase	Yr 1991 Ontario (i)	Yr 1991 Toronto (ii)	Yr 2000 Toronto (iii)	Dis Persons Owning Households (iv)	Benefit Recipients owning Households (v)	Assume 44% with Tax Increases	Assume 30% Apply	Avg. Assess. Related Tax Increase
									1998 $300	1999 $600	2000 $670
Less than or equal to $20,000	100% of the assessment related tax increase	552,245	121,494	127,083	76,458	15,292	6,728	2,018	$605,549	$1,211,099	$1,352,394
Greater than $20,000 but less than or equal to $25,000	75% of the assessment related tax increase	79,440	17,477	18,281	10,998	2,200	968	290	$65,331	$130,662	$145,906
Greater than $25,000 but less than or equal to $30,000	50% of the assessment related tax increase	63,500	13,970	14,613	8,792	1,758	774	232	$34,815	$69,629	$77,753
Greater than $30,000 but less than or equal to $35,000	25% of the assessment related tax increase	65,535	14,418	15,081	9,073	1,815	798	240	$17,965	$35,930	$40,122
Greater than $35,000	0% of the assessment related tax increase	173,410	38,150	39,905	24,009	4,802	2,113	634	$0	$0	$0
Total		934,130	205,509	214,962	129,330	25,866	11,381	3,414	$723,660	$1,447,320	$1,616,174
Based on Statistics Canada Cat. No. 82-555 2.Based on population ratio of Toronto to Ontario in 1996 census 1996 census Population of Ontario = 10,753,573 Population of Toronto = 2.4 m (ratio = 0.22) = 4.6% population increase among disabled persons in Ontario for every 10 yrs = 60.16% of disabled population in age group 15 to 64 yrs own households in Ontario = 20% of disabled population received some kind of disability benefits in Ontario							City Share		$459,404	$936,220	$1,047,477
							Education Share		$264,256	$511,100	$568,697
							Total Taxes Deferred		$723,660	$1,447,320	$1,616,174