February 10, 1998
To: Strategic Policies and Priorities Committee
From: Chief Administrative Officer and Chief Financial Officer and Treasurer
Subject: Process to Develop Property Tax Implementation Plan
Purpose:
This report proposes a process and timeframe for the development and consideration of a property tax implementation plan by Council. The activities comprising the process address the various tax policies required of Council pursuant to the Fair Municipal Finance Act, 1997 (Nos. 1 and 2) B the Act.
Funding Sources, Financial Implications and Impact Statement:
The new Ontario Fair Assessment System and taxation reforms contained in the Act will affect property taxes paid by all residents and businesses throughout the City of Toronto. The process to study and analyze tax policy options does not require special funding beyond currently budgeted staff resources. The companion report contains an information and communication plan that identifies a budget for anticipated information dissemination activities and communications to the public.
Recommendations:
It is recommended that:
(1) Council adopt the process outlined in this report to develop the taxation policies and administrative details necessary to support a tax implementation plan for its consideration;
(2) Council establish a task force or committee on taxation policy and approve the related terms of reference identified in this report; and
(3) the appropriate City of Toronto officials be authorized to take the necessary actions to give effect thereto.
Background:
The Act establishes that property taxes in Ontario starting in 1998 will be based on the new Ontario Fair Assessment System (OFAS). Municipal councils, as part of the significant taxation reforms contained in the legislation, are required to determine several new policies that affect property taxes in general as well as specific types of properties and taxpayers. The new decisions and policies and that Council is required to make include the following.
In terms of establishing tax burdens among property classes, Council must:
(i) decide how to recoup, through taxation of the various property classes, tax revenues previously derived from the Business Occupancy Tax;
(ii) develop tax ratios to establish how the overall tax burden is distributed among property classes, while addressing the issue of current inequities between the residential class and all other property classes;
(iii) for each property class, decide whether to adopt the transition ratio (i.e. maintain existing tax burdens) or move closer to the provincially-determined range of tax ratios; and
(iv) set a tax rate for each separate property class; and decide whether to opt for a new multiple residential property class.
With respect to managing the tax burden within the commercial property class, Council must:
(i) decide how many bands of assessment to create within the commercial property class;
(ii) establish threshold values between these bands of assessment; and
(iii) determine the tax rate for each band.
In providing a program of tax relief for low-income seniors and low-income persons with disabilities from tax increases resulting from assessment, Council must:
(i) determine the form of relief it will provide;
(ii) determine the method of financing the relief program; and
(iii) if a tax deferral program is chosen, a by-law must be passed to define Alow-income@ and Apersons with disabilities@ to determine eligibility.
Other assessment and taxation matters for Council=s review include:
(i) pass a by-law, if phase-in property options to tax changes related to assessment are proposed, that identifies the number of years over which tax changes are phased-in as well as the amount of allowable tax increases and decreases each year;
(ii) develop a policy and a by-law on assistance to eligible charitable and similar organizations in the form of tax rebates; and
(iii) decide whether to opt for regulations providing that, in specific cases, the current value of eligible land be based on its current use.
The policies and details required to address the above issues must be adopted prior to the issuance of the final tax bills expected in May or June.
Discussion:
The next two months represent a very intensive period of activity in the design and development of the necessary details to consider as part of a proposed tax implementation plan. The development of the tax plan involves a process that consists of the activities shown in Exhibit 1. The final tax rate approval date of May 13 already established as part of this year=s budget process, requires that the tax plan be presented to Council in just over two months. A delay in Council=s approval of the tax plan beyond mid-May will delay the issuing of final tax bills. In addition, the Minister of Finance has set May 15 as the date by which municipalities must adopt transition ratios. This adds further importance to Council=s approval of the tax implementation plan no later than that date.
Exhibit 1
Process to Develop Tax Implementation Plan
In order to ensure that the proposed tax implementation plan is both reviewed in a timely manner and receives sufficient direction and input from Council and the public, a task force or committee of Council members should be established. The monthly meeting cycle of the Strategic Policies and Priorities Committee limits its ability to consider tax policy options on a timely basis. Alternatively, a task force/committee could meet more frequently in an informal basis and as well, could dedicate its time and focus on the specific issues as required. The task force approach is consistent with the motion adopted by Council at its meeting on February 4 and 5, 1998, which recommended the establishment of a task force to address tax policy matters.
The mandate of the task force/committee would be directed by the following terms of reference.
1. To meet informally as a working reference group to provide political direction to finance officials in the preparation of the tax policies and administrative details pursuant to the Fair Municipal Finance Act, 1997 (Nos. 1 and 2) for Council=s consideration, including:
2. To develop a process to consult interested stakeholders on tax policy proposals included in the tax implementation plan; and
3. To report back to the Strategic Policies and Priorities Committee and recommend a tax implementation plan for its consideration, and subsequent submission to Council, no later than by the first week in May.
The process identified in the report provides an action plan and timeframe in which to develop and review the details comprising a tax implementation plan. The timeframe in which to approve the tax plan is very limited, with final tax rates to be established by mid-May. A task force or committee is recommended to assist staff develop a proposed tax plan and to expedite the process.
Michael R. Garrett Wanda Liczyk
