Business Reference Group

The Strategic Policies and Priorities Committee recommends:

(1)the adoption of the Recommendations of the Assessment and Tax Policy Task Force, embodied in the communication (April 1, 1999) from the City Clerk;

(2)that the composition of the Business Reference Group be referred to the Mayor, the Chair of the Assessment and Tax Policy Task Force, and the Chief Financial Officer and Treasurer; and

(3)that, in future, all matters respecting the Tax Assessment and Policy Task Force be referred to the Policy and Finance Committee for consideration:

The Strategic Policies and Priorities Committee submits the following communication (April1,1999) from the City Clerk:

Recommendation:

The Assessment and Tax Policy Task Force recommends that:

(1)the report (March 30, 1999) from the Chief Financial Officer and Treasurer be adopted; and

(2)Council consider this matter to be a major public policy issue.

The Task Force reports, for the information of the Strategic Policies and Priorities Committee, having:

(1)requested the Chief Financial Officer and Treasurer to report to the Strategic Policies and Priorities Committee, or directly to Council as necessary, on time lines, staffing and funding for this project, so that the project will be completed by December, 1999; and

(2)referred the following motions to the Chief Financial Officer and Treasurer for consideration in her report requested above:

By Councillor Flint:

"That one full-time staff be dedicated to this project, and that sufficient funds be provided to the Finance Department in order for the task to be completed in December, 1999, including the cost of consultants, as required."

By Councillor Bossons:

"That two full-time staff be assigned to this project."

Background:

The Assessment and Tax Policy Task Force, on April 1, 1999, had before it a report (March30,1999) from the Chief Financial Officer and Treasurer, regarding the Business Reference Group, and recommending:

(1)That the Terms of Reference as outlined in this report be adopted as the basis for the Business Reference Group;

(2)That the Business Reference Group be formed by, and report through, a three member Steering Committee and then to the Assessment and Tax Policy Task Force; and

(3)That the Business Reference Group be composed of at least 3 major panels - commercial, industrial and multi-residential - with further subgroups to be determined by the main panel following its first meetings.

The following persons appeared before the Assessment and Tax Policy Task Force in connection with the foregoing matter:

-Mr. David R. Carefoot, Hudson's Bay Company; and

-Mr. Frank S. Zinner, Current Chairman, Ontario Chapter, Canadian Property Tax Association.

The Task Force's recommendations are noted above.

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(Report dated March 30, 1999, addressed to the

Assessment and Tax Policy Task Force

from the Chief Financial Officer and Treasurer)

Purpose:

To provide recommendations regarding the establishment of a Business Reference Group to assist in the development of comprehensive tax policies for business properties for the next municipal property tax reassessment in 2001 in Ontario to be based on 1999 Current Value Assessment.

Financial Implications:

None.

Recommendations:

(1)that the Terms of Reference as outlined in this report be adopted as the basis for the Business Reference Group;

(2)that the Business Reference Group be formed by, and report through, a three member Steering Committee and then to the Assessment and Tax Policy Task Force; and

(3)that the Business Reference Group be composed of at least 3 major panels - commercial, industrial and multi-residential - with further subgroups to be determined by the main panel following its first meetings.

Background:

At its meeting of July 21 and 23, 1998, City Council had before it Clause No. 4 of Report No. 13 of the Strategic Policies and Priorities Committee entitled "Commercial and Industrial Property - Tax Policy Options". Among others, Council adopted the following recommendation,

"a work plan be developed to formulate comprehensive tax policies in advance of the return of the 1999 current value assessment, including the establishment of a Business Reference Group to assist in the process."

It is recommended that the Business Reference Group report through the Assessment and Tax Policy Task Force.

The implementation of Current Value Assessment in Ontario in 1998 has subsequently resulted in numerous pieces of legislation being enacted by the Provincial Legislature to provide municipalities with options to deal with the impacts of CVA. The City of Toronto carried out significant research and analysis of this impact on all property classes in Toronto prior to Council's adoption of its tax policies in July 1998.

For the years 1998 to 2000, City Council adopted a capping mechanism to mitigate the impacts of CVA on multi-residential, commercial and industrial properties, and in particular, to provide protection for "small business" operators facing large tax increases. The capping provisions also resulted in limiting tax decreases due to CVA to meet legislated requirements that the any capping program within each class be revenue neutral. The capping extends to charitable and non-profit organizations located in the commercial and industrial classes.

A variety of tax relief mechanisms were made available to Ontario municipalities to offset CVA impacts, including:

(a)limit tax increases resulting from tax reform to no more than 2.5 percent per year for the next three years (1998 to 2000) and would be funded by limiting the amount of tax decreases;

(b)phase-in of tax increases and decreases up to a maximum of eight years;

(c)graduated tax rates;

(d)creation of new property classes: office buildings, shopping centres, parking lots and vacant land as well as large industrial properties; and

(e)tax rebate program.

The City's analysis recommended that, of all the options available for tax relief, and given the tight time frame available for a Council decision in 1998, a capping program would be the most effective option for the next three years. Council adopted the capping program for 1998 to 2000. It is, however, an interim step toward comprehensive tax policy development for the commercial and industrial classes. A similar program was later imposed by the Ontario Government on other municipalities to ensure that business properties do not experience a property tax increase greater than 10 percent in 1998 and 5 percent in both 1999 and 2000.

The purpose of the Business Reference Group is to provide input to the Task Force with potential recommendations to the province for legislative changes.

Comments:

This report concentrates on the issues relating to business properties, particularly in the commercial and industrial classes in preparation for the next reassessment in 2001. Multi-residential properties will also be included in the analysis.

Long term tax policies to be developed by the City require input from the commercial and industrial sectors as well as business associations and other stakeholders. A key component will the establishment of a Business Reference Group.

Structure of Business Reference Group:

The Group should be directed by a Steering Committee. To ensure continued focus for the Group, it is recommended that a three member Steering Committee be struck comprised of the Chair of the Assessment and Tax Policy Task Force (or designate) who would chair the Committee, the Mayor (or designate) and one non-elected representative from a stakeholders group. The Group would report to the Steering Committee and then the Task Force. The chair of the Group should be the City Treasurer (or designate).

The Steering Committee would develop broad guidelines under which the Business Reference Group would operate and would develop a process to appoint members to the Group. To best review the various sectors, it is recommended that the Business Reference Group be composed of various panels, each with a specific forum. For example, the Business Reference Group could be structured along the following lines:

CommercialIndustrialMulti-residential

- small retail- small - landlord

representative

- office towers- large- tenant

representative

- shopping centres

- non-profit

- banks

- anchor stores

Each of the three panels could be further categorized to review specific sectors, such as shopping centres, small strip retail or office sector. In addition, provincial assessment and finance officials should be invited to take part. Each panel would develop sector specific recommendations and then combined for overall consistency.

Business Reference Group - Membership:

Representatives from the following groups should be considered for inclusion: Toronto Board of Trade, Canadian Federation of Independent Business, Shopping Centres (tenant and landlord), Toronto Office Tower Coalition, Toronto Association of BIAs (TABIA), Retail Association (such as the Ontario and Toronto Automobile Dealers Association, small retailers), representative of a charitable and non-profit organization (such as the United Way), large and small industrial groups, Canadian Bankers Association, Toronto Real Estate Board, department stores, restaurant and hotel association, and at large qualified property assessment specialists.

The Group will need to be supported by City staff resources and possible special funding to obtain specialized reports from outside expertise. It is expected that expertise from various City Departments will be utilized, including Finance, CAO, Economic Development, Facilities and Real Estate of Corporate Services and Shelter, Housing and Support Division. Membership of the Group from outside the City should be limited only to the degree such that the Group does not become too large and unwieldy to reach consensus or debate. It is recommended that total membership of the Group not exceed fifteen. Ample opportunity, however, must be provided to interested persons or organizations to permit input through open meetings.

Terms of Reference:

Specific detail of the Group's work plan should be developed by the group itself, but general Terms of Reference for the Group should be established and adopted by the Task Force. It is recommended that the following be considered as Terms of Reference:

(a)development of a comprehensive tax policy to provide an equitable tax burden for various sectors included in both the commercial and industrial property classes;

(b)review of options, including a reduction of tax rates of the commercial and industrial classes, to reduce the tax burden of these classes relative to the residential/farm class;

(c)review the effects of the Income Tax Act and the Corporations Tax Act to establish true tax burden relationships between residential properties and business properties including multi-residential properties.

(d)review and model Provincially established tax policy tools, either separately or in combination, as alternatives to the current capping policy. Such tools to include: phase-in, capping, separate property sub-classes, graduated tax rates, tax rebate, etc;

(e)recommend legislative change in advance of 2001 including a demonstration to the Province of the need for change;

(f)develop a definition of "Small Business" and determine whether it can be utilized in the development of tax policy;

(g)review of different tax rates for different types of business properties;

(h)education tax burden;

(i)report regularly to the Assessment and Tax Policy Task Force with a final report no later than December 1999; and

(j)to ensure a streamlined and effective result, membership of the Group be limited to no more than fifteen, excluding staff support.

Conclusion:

To ensure that long term comprehensive tax policies for the commercial and industrial property classes are developed for the City of Toronto, City Council has directed that a Business Reference Group be created to assist in policy formulation. The Business Reference Group should be composed of at least 3 major panels - commercial, industrial and multi-residential - and possibly a number of smaller subgroups to be determined following the initial meeting of the Business Reference Group. It is recommended that these panels report to a three member Steering Committee and then to the Task Force.

It is also recommended that the general Terms of Reference for the Business Reference Group, as outlined in this report, be adopted as the basis for a work plan.

Contact Names:

Paul Wealleans, 397-4208

Bill Wong, 392-9148