April 20, 1998

  TO:The Assessment and Tax Policy Task Force

 FROM:City Clerk

 RE:Property Assessment and Tax Policy System Implemented by the Provincial Government

Preliminary Reports - Property Tax Relief for Low-Income Seniors and Low-Income Disabled Persons and Property Tax Rebates for Charitable and Similar Organizations

  The Budget Committee on April 20, 1998 was informed that The Assessment and Tax Policy Task Force is looking at the impact of possible phase-ins or deferrals for property tax relief for eligible low-income seniors and low-income disabled persons.

 The Budget Committee advises that while it recognizes the problem, there are no funds available in the 1998 budget, or in the foreseeable future, that can accommodate any type of cancellation program for tax relief. Therefore, the Task Force should be advised that if such a cancellation program is approved, it would likely create a need for a tax increase.

 Background:

 The Budget Committee on April 20, 1998 had before it the following:

 (a)report (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force regarding the Property Assessment and Tax Policy System recently implemented by the Provincial Government;

 (b)communication (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force and report (April 2, 1998) from Chief Financial Officer and Treasurer regarding a preliminary report on property tax relief for low-income seniors and low-income disabled persons;

     (c)communication (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force and report from (April 2, 1998) from Chief Financial Officer and Treasurer regarding a preliminary report on property tax rebates for charitable and similar organizations.

 City Clerk

 Barbara Liddiard/rc/cp

Item No. 10, 18 and 19

Attachment

 c.Chief Financial Officer and Treasurer

Chief Administrative Officer

 April 21, 1998

   To:Strategic Policies and Priorities Committee

 From:City Clerk

 Subject:Property Assessment and Tax Policy System Implemented by the Provincial Government

Preliminary Reports - Property Tax Relief for Low-Income Seniors and Low-Income Disabled Persons and Property Tas Rebates for Charitable and Similar Organizations

 Recommendations:

 The Budget Committee on April 20, 1998 reports having advised the Assessment and Tax Policy Task Force that:

 1.while it recognizes the problem, there are no funds available in the 1998 budget, or in the foreseeable future, that can accommodate any type of cancellation program for tax relief; and

 2therefore, if such a cancellation program is approved, it would likely create a need for a tax increase.

 Background:

 The Budget Committee on April 20, 1998, had before it the following:

 (a)report (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force regarding the Property Assessment and Tax Policy System recently implemented by the Provincial Government;

 (b)communication (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force and report (April 2, 1998) from Chief Financial Officer and Treasurer regarding a preliminary report on property tax relief for low-income seniors and low-income disabled persons;

 (c)communication (April 8, 1998) from the Chair of the Assessment and Tax Policy Task Force and report from (April 2, 1998) from Chief Financial Officer and Treasurer regarding a preliminary report on property tax rebates for charitable and similar organizations.

 City Clerk

 Barbara Liddiard/rc/cp

Item No. 10

Attachment

 c.Chief Financial Officer and Treasurer

Chief Administrative Officer

(Report dated April 8, 1998 addressed to the

Strategic Policies and Priorities Committee and the Budget Committee from

The Assessment and Tax Policy Task Force)

 Recommendations:

 On behalf of the members of the Assessment and Tax Policy Task Force who were present on April 6, 1998, I am forwarding the following recommendations to the Strategic Policies and Priorities Committee for consideration:

 1.That Council request the Government of Ontario and Legislature to hold public hearings on the announced new legislation to address problems with the new Current Value Assessment (CVA) system;

 2.That Council authorize the Chair of the Assessment and Tax Policy Task Force and the Chief Financial Officer and Treasurer to make representations to the Ontario Government and Legislature on recommended changes to provincial legislation and regulations regarding property assessment and property taxes; and

 3.That Council request the Government of Ontario and Legislature to amend the appropriate legislation to establish the preliminary tax rate study as a public record within the meaning of the Freedom of Information and Protection of Personal Privacy Act.

 Comments:

 The Assessment and Tax Policy Task Force, having regard for the fact that no quorum was present at the specified time and in view of the fact that notice had been placed in the newspaper that a public hearing would be held April 6, 1998, on the Property Assessment and Tax Policy System recently implemented by the Provincial Government, heard presentations from the public on this matter.

 For the information of the Strategic Policies and Priorities Committee, the members of the Task Force who were present on April 6, 1998, also requested the Chief Financial Officer and Treasurer:

 (1)to report directly to Council for its meeting on April 16, 1998, if possible:

 (i)on the tax-dollar impact of applying the uniform tax rate for education established by the Province on the preliminary tax rate, including coloured maps, ward by ward for the residential and multi-residential categories of property, based upon assessment portions;

 (ii)on the fairness or unfairness of the uniform tax rate for education;

 (iii)with new maps, ward by ward, for the residential and multi-residential categories based upon the tax dollar changes, up or down, on assessment portions;

 (iv)on a proposal for changes to provincial legislation and regulations to help the City of Toronto deal with the CVA program;

(v)with a summary of the relevant provincial regulations not yet published in any form and those regulations published only in draft form;

 (vi)on changes to the overall assessment values by category (residential, multi-residential, commercial, industrial and linear properties) from the 1988 MVA (modified as necessary), the 1997 assessment base, and the 1998 CVA;

 (vii)with a revised work plan for setting 1998 tax policies and tax rates in light of the announcement of the Ontario Minister of Finance delaying the process for one month; and

 (viii)on the cash flow problems caused to the City by the provincial delays in returning the 1998 Tax Roll, including an estimate of the province-wide costs to all municipalities;

 (ix)on the evident Asoftness@ of the 1998 Assessment Notices distributed by the Provincial Government and the potential impact on the 1998 tax rates; and

 (2)to report directly to Council for its meeting on April 16, 1998, if possible and to the Budget Committee for its meeting on April 20, 1998, on the impact (if any) on the 1998 Operating Budget of the Council=s policy choices regarding tax relief for seniors, physically handicapped persons, and businesses in special cases as announced by the Ontario Minister of Finance.

 The members of the Task Force who where present also referred the following motions to the Chief Financial Officer and Treasurer for report back to the Task Force:

 Motion by Councillor Augimeri

 Whereas bank vaults are difficult to remove once they are installed, and increase the value of a property; and

 Whereas bank vaults in Toronto were, until this year, considered by the Provincial Assessment Office as adding to the value of a commercial property under the assessment rules; and

 Whereas, for purposes of the 1998 assessment, the Province has decided that bank vaults will no longer be assessed, but rather be considered moveable assets; and

 Whereas many property owners both residential and commercial will be seeing tax increases this year, and this decision will help to offset the increases to the banks;

 Therefore be it resolved that Chief Financial Officer and Treasurer:

 (i)research the new assessment guidelines as they relate to this issue and inform the Assessment and Tax Policy Task Force on the impact of this change;

 (ii)research any other significant changes and their potential impacts on the tax base of the City; and

 Be it further resolved that the City of Toronto request that the Province of Ontario return to the old system of assessment for bank vaults and the vaults of other financial institutions.

 Motion by Councillor Kinahan

 1.That the proposals from the Board of Trade set out in the communication (April 6, 1998) presented by Mr. John Bech-Hansen, be referred to the Chief Financial Officer and Treasurer for report back in due course.

 2.That the Chief Financial Officer and Treasurer report on whether the industrial tax effective rate should be equalized with the commercial tax rate and the time frame for phasing in such.

 Motion by Councillor Nunziata

 Whereas the business occupancy tax has been removed and an equivalent amount (averaged to 42%) added to the property tax; and

 Whereas in multiple use properties (i.e. malls, office buildings and strip plazas) the tax has been assigned exclusively to the building and land without regard to the individual component business; and

 Whereas Assessment will no longer be calculated as the total of a number of individually assessed businesses and data for individual businesses will no longer be calculated; and

 Whereas this data after re-assessment will no longer be available; and

 Whereas this information is required for many city functions, including economic development and mailing labels for planning notification; and

 Whereas the proposed cap of 22% will be calculated on the total of the most recent complete data; and

 Whereas the responsibility for apportioning the tax among the tenants now falls to the landlord; and

 Whereas there are no specific rules that govern the amount of tax a landlord may assign a commercial tenant;

 Therefore be it resolved that:

 1.the City take whatever steps that may be necessary to preserve the most recent complete data that indicates assessments on individual businesses;

 2.Council request the Province to continue to collect assessment data on this basis and staff report on how the City can replace the loss of this data base and at what cost;

  3.Council request the Province to amend the legislation to specify how landlords of commercial, industrial and multi-residential buildings shall apportion property tax among commercial tenants or the Province continue to provide commercial tenants with direct information about their property tax; and

 4.Council request the Province to amend the legislation to prohibit landlords from adding service charges to tax bills.

 The members of the Task Force who were present also referred a communication (April 3, 1998) from Councillor Johnston respecting CVA and other matters to the Chief Financial Officer and Treasurer for report back to the Task Force.

 Background:

 The members of the Task Force had before them the following communications respecting the property assessment and tax policy system recently implemented by the Provincial Government:

 (a)(March 18, 1998) from Mr. Alan Sugarman

 (b)(March 16, 1998) from Mr. Jim Campbell, formerly M.T.S.B. Implementation

Co-ordinator, P.E.A.R. Department

 (c)(undated) from Mr. Sidney Chelsky, obo Better Business Bureau of Metropolitan Toronto

 (d)(April 6, 1998) from Mr. David Hui, Toronto Fair Tax Chinatown Committee addressed to the Minister of Finance

 (e)(April 6, 1998) from Mr. John Bech-Hansen, Economist, Toronto Board of Trade

 (f)(April 6, 1998) from Mr. Sean Goetz-Gadon, obo Anne Golden, United Way of Greater Toronto

 (g)(April 3, 1998) from Councillor Johnston

 The following persons addressed the members of the Task Force:

 -Mr. Gerald Weiss

-Mr. Sidney Chelsky, obo Better Business Bureau of Metropolitan Toronto

-Mr. Peter Clutterbuck, Community Social Planning Council of Toronto

-Mr. Mario Calla, Executive Director, COSTI

-Ms. Gail McCullough, East York Learning Experience

-Mr. Sean Goetz-Gadon, obo Ms. Anne Golden, United Way of Greater Toronto

-Pat McKendry, Kensington Market Working Group

-Mr. Howard Tessler, Executive Director, Federation of Metro Tenants= Associations

-Mr. John Bech-Hansen, Economist, Toronto Board of Trade

-Ms. Reva Landau

-Mr. Joe Perna

-Mr. Larry Chilton, President, Toronto Rooming House Association

-Mr. David Joy, Annex Property Group

-Mr. Douglas Adamson, obo Ward One Residents for Local Democracy

-Ms. Marilyn Whiddon

-Mr. Jim Stephens

 (Communication dated April 8, 1998 addressed to the

Chief Financial Officer and Treasurer and the City Solicitor from

Councillor John Adams, Chair, Assessment and Tax Policy Task Force)

 At an informal meeting of the Assessment and Tax Policy Task Force on April 6, 1998, the members who were present had before them a report (April 2, 1998) from the Chief Financial Officer and Treasurer providing an initial context for the development of a policy respecting property tax relief for low-income seniors and low-income disabled persons pursuant to the Fair Municipal Finance Act.

 The members of the Task Force who were present also had before them a communication (March 30, 1998) from Councillor Bossons respecting the abovementioned matter.

 The members of the Task Force who were present took the following action:

 1.Referred the following motions to the Chief Financial Officer and Treasurer for report back to the next meeting on April 20, 1998:

 (i) By Councillor Bossons

 That the Chief Financial Officer and Treasurer report on the implications of the following property tax deferral schemes, one for persons of age 60 and over, and one for persons of age 65 and over, regardless of income, under conditions similar to the B.C. scheme:

 (a)For CVA-related tax increases

(b)For the full property tax; and

 That persons participating in tax deferral programs be requested to pay each year, the annual borrowing costs.

 (ii)By Councillor Walker

 (a)That Council recommend a tax cancellation program to provide tax relief to low-income senior(s) and low-income disabled person(s) and that the Chief Financial Officer and Treasurer report to Council on mechanisms to implement this.

 (b)That the Chief Financial Officer and Treasurer report further on what the income range is for a couple under the Guaranteed Annual Income System (GAINS)

    (iii)By Councillor Kinahan

 That the Province be requested to permit municipalities the power to have tax deferral programs for seniors and the disabled, whether or not an individual=s home assessment increases, similar to the programs that were in place in the City of Etobicoke and City of York for seniors, prior to amalgamation.

 (iv)By Councillor Adams

 (a)That the Province be requested to make legislative changes so that the cost of the low-income seniors/disabled program is paid for by the Province as in B.C. and failing that

 (b)That the Province be requested to make the appropriate legislative changes so that the cost of this program is paid for/spread out across the residential property class.

 2.deferred the report (April 2, 1998) from the Chief Financial Officer and Treasurer to its next meeting on April 20, 1998.

 (Report dated April 2, 1998 addressed to the

Assessment and Tax Policy Task Force from the

Chief Financial Officer and Treasurer)

Purpose:

 This report provides an initial context for the development of 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:

 A tax relief program, respecting assessment-related tax increases, for low-income seniors and low-income disabled persons is yet to be approved and outlined by by-law. Preliminary analysis estimates that assessment-related tax increases for low-income seniors, prior to any phase-ins, may be in the order of $6.5 to $10.4 million annually. Council can provide a deferral, cancellation, or other relief, for all or part of the assessment-related increase. A deferral program will cause financing pressures on the budget, while a cancellation program has a direct operating budget impact. The financial impact of a tax deferral or cancellation program is contingent on the phase-in plan yet to be considered.

 Recommendations:

 It is recommended that:

 (1)the Tax Deferral Program, as outlined in this report, be approved to provide relief from assessment-related increases for eligible low-income seniors and low-income disabled persons;

 (2)the eligibility criteria, for low-income seniors and low-income disabled persons, as outlined in this report, be adopted. Specifically, to be eligible, a person:

 ( i)must be 65 years of age or older; and

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

(iii)must be receiving the GIS (or in the case of a disabled person, receiving benefits under the Ontario Disability Support Program or the Family Benefits Act or the Guaranteed Annual Income System).

 (3)the amount deferred be subject to interest at a rate as may be provided by by-law;

 (4)the Administrative Terms and Conditions for the Tax Deferral Program, as outlined in this report, be approved in principle; and,

 (5)a further report be provided on the funding implications of the tax deferral program once the phase-in plan provisions have been considered by the Assessment and Tax Policy Task Force.

 Council Reference/Background:

 The Fair Municipal Finance Act (the Act) legislates that the council of a municipality, other than a lower-tier municipality, 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,

 ( i)low-income seniors as defined in the by-law; or

(ii)low-income persons with disabilities as defined in the by-law.

 AAssessment-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 increase in any given year is the amount phased-in. 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.

 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. The tax relief program can also be provided as part of future reassessments.

 During Council=s consideration of Clause 4 of Strategic Priority and Policies Committee Report No. 3 on March 4, 5, and 6, 1998, (respecting the cancellation and replacement of the former Seniors Tax Credit Program and Seniors Tax Deferral Program), Council further recommended:

 (1)Athat the Chief Financial Officer and Treasurer submit a report thereon to the Assessment and Tax Policy Task Force as soon as possible, such report to address whether similar programs to those previously provided can be provided, whether or not an individual=s home assessment increases@; and

 (2)Athat such new program not provide benefits that are less than the benefits previously in existence@.

 Discussion:

 Previous Assistance to Low-Income Seniors:

 Programs to provide relief from property taxes for low-income seniors is not new to the City. The former City of Toronto had a Seniors Tax Credit program which provided a property tax credit to eligible seniors in the amount of $100.00 against the City=s portion of realty taxes. This program was initiated in 1974 through enactment of the Municipal Elderly Resident=s Assistance Act, and subsequent City of Toronto by-law. To qualify for this program, applicants must:

 -be 65 years of age or over; and,

-have owned and occupied a home in the City of Toronto for the past five years; and,

-be receiving a monthly Guaranteed Income Supplement (GIS) under the Old Age Security Act.

 In 1997, there were 4,138 eligible applicants in the former City of Toronto, for which a total of $413,800 was refunded as a credit against the final tax bill.

 The former Cities of Etobicoke and York provided an alternate form of financial relief for low-income seniors. Etobicoke offered a $600.00 annual tax deferral program, while York offered a $150.00 annual tax deferral program. The eligibility criteria was identical to that of the Toronto program, with the exception that the residency requirement was only three years. However, this program differed in that 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, and 43 liens registered in York, with an amount receivable of $25,800. A tax deferral program was also instituted by the former City of North York until the end of 1988. As of 1997, there were 51 liens with an amount receivable of $38,050.

 No program to provide property tax relief to low-income persons with disabilities existed previously in the former municipal governments in Toronto.

 While a tax relief program for low-income seniors and low-income disabled persons is mandated by the Act for assessment-related increases, Council may also, under the Municipal Elderly Residents Assistance Act, pass a by-law providing for tax credits to eligible seniors (as provided by former City of Toronto), whether or not there is an assessment-related increase. This assistance would be separate from the tax relief program for assessment-related increases mandated under the Fair Municipal Finance Act. Extending the $100.00 Tax Credit program of the former City of Toronto to all eligible seniors in the new City of Toronto would result in a funding requirement in the range of $1.2 to $2.0 million, however, the credit would result in a reduction in Province=s grant under the Ontario Pensioners Property Tax Assistance Act that the owner would otherwise be eligible for.

 The Ontario Pensioners Property Tax Assistance Act provides eligible seniors with a grant, based on income, of up to $600 annually towards their property taxes. The Province=s grant is calculated after any municipal credit, and the Province=s grant would be reduced by a like amount. The offering of any municipal credit program directly off-loads the cost from the Province to the Municipality.

 Eligibility Criteria B Low-Income Seniors:

 The common eligibility criteria of the former local municipalities= programs required that to qualify, applicants must be 65 years of age or older, and be receiving the GIS. The general criteria defining Alow-income@ as receiving the GIS and Asenior@ as being 65 years of age or older is widely used as a test to qualify for a number of financial assistance or benefits programs, such the Canada Pension Plan. The GIS is payable by the Province to seniors whose income is less than approximately $21,000.

 The general age and low-income criteria is supported by a survey carried out in 1997 by the Municipal Finance Officers Association of Ontario (MFOA), which found the above criteria defining low-income seniors as the most commonly used throughout Ontario. The survey was specifically conducted in order to develop definitions and criteria for tax treatment provisions for seniors and the disabled, pursuant to the Act, and to help achieve consistency of application of these provisions across Ontario=s municipalities.

 The MFOA survey also identifies an alternate criteria for low-income based on the Guaranteed Annual Income System (GAINS), a provincial program administered by the Ontario Ministry of Community and Social Services. However, the GAINS income test is more restrictive than that required under the GIS.

 Eligibility Criteria B Low-Income Disabled Persons:

 The Act also legislates that the by-law include consideration of providing for deferral or cancellation of, or other relief in respect of all or part of assessment-related tax increases on residential properties for owners who are low-income disabled persons as defined in the by-law.

 The MFOA survey also identified generally accepted definitions and criteria for low-income disabled persons, as outlined below:

 Definition:

 A person is a person with a disability if:

 (i)the person has a substantial physical or mental impairment that is continuous or recurrent and expected to last one year or more; and

(ii)the direct and cumulative effect of the impairment on the person=s ability to attend to his or her personal care, function in the community and function in a workplace; and

(iii) results in a substantial restriction in one or more of these activities of daily living; and

(iv)the impairment and its likely duration and the restriction in the person=s activities of daily living have been verified by a person with the prescribed qualifications.

  Eligibility Criteria:

 In order to receive property tax relief, a disabled person:

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

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

-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.

 Preliminary Analysis of Potential Applicants:

 This section provides an overview of population demographics in the City of Toronto respecting low-income seniors, as defined in the eligibility criteria outlined earlier. Due to the lack of availability of information respecting low-income disabled persons, this group is not included in the analysis at this time. Information has been requested from the Province with respect to this specific group of property owners.

 Column 1 of Table 1 provides an estimate of the number of senior owner-occupied households by income distribution in Toronto. Column 2 provides an estimate of the number of these households projected to experience a tax increase. 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 at the individual property level. From this analysis, it is estimated that there may be in the range of 30,000 to 50,000 households that may be eligible to receive the GIS, of which it was projected that in the range of 12,000 to 20,000 households may experience tax increases due to reassessment. The total amount of the tax increase due to reassessment (Column 3) was estimated to be in the range of $6.5 million to $10.4 million.

 Table 1 B Estimated Number of Seniors Owner-Occupied Households by Income Range

 * Approximate upper Limit of Income test in order to qualify for the GIS

Options for Consideration:

 Pursuant to the Act, Council is required to pass a by-law providing for deferrals or cancellation of, or other relief in respect of assessment-related tax increases for eligible low-income seniors and low-income disabled persons.

 The significant advantage of a tax deferral is that it provides benefits to seniors who are Aasset-rich and income-poor@ while at the same time minimizing the financial impact to the municipality. The taxes and the costs of the deferral are ultimately recoverable. However, tax cancellations are essentially write-offs, the costs of which are borne by current taxpayers.

 Council may choose any one of the tax relief mechanisms. There are also options, as detailed below, within each of the tax relief mechanisms.

 1.Tax Deferral Options:

 ( i)With a threshold value in which an initial specified amount of tax increase would be allowed or passed through to the owner, and the remainder would be eligible for deferral. For example, if the first $100 of tax increase (i.e., the threshold) were passed through, it is estimated that $6.4 to $10.2 million would need to be deferred. If the threshold was $250, then the estimate would be $5.9 to $9.4 million.

(ii)Without a threshold value in which the entire amount of the tax increase would be eligible for deferral. It is estimated that $6.5 to $10.4 million would need to be deferred.

(iii)Whether or not interest would be charged on the deferred amounts, and the rate of interest.

 With tax deferrals, the amounts deferred may be funded through borrowing with costs to the operating budget. The financial impact of a tax deferral program is contingent on the phase-in plan yet to be considered.

 2.Tax Cancellation Options:

 ( i)With a threshold value in which an initial specified amount of tax increase would be allowed or passed through to the owner, and the remainder would be cancelled and funded from current property tax revenues.

(ii)Without a threshold value in which the entire amount of the tax increase would be cancelled and funded from current property tax revenues.

 Under the tax cancellation options, the same estimated amounts identified under the tax deferral option, either with or without a threshold, would need to be funded from current property tax revenues annually.

 It should be noted that any amount of taxes cancelled would result in a reduction in Province=s grant under the Ontario Pensioners Property Tax Assistance Act that the owner would otherwise be eligible for.

 3.Other:

 ( i)A combination of tax deferral and cancellation, with or without thresholds, may be provided.

 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.

After a review of the MFOA criteria, the following administrative terms and conditions are recommended:

 Administrative Terms and Conditions

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

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

(b)Tax assistance 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 relief applies to current taxes only (not tax arrears).

(d)Tax relief amounts are only advanced (or deferred) after payment in full is received for any current or past year amounts payable.

(e)The amount of the assessment-related increase shall be determined by the City.

(f)Application for tax relief 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.

(g)For properties which are jointly held or co-owned by persons other than a spouse, both or all co-owners must qualify under applicable eligible criteria in order to receive tax relief.

(h)Tax relief amounts provided under the by-law are not transferable to the estates of deceased owners.

(i)Any tax relief 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.

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

Conclusion:

 The Fair Municipal Finance Act legislates that the council of a municipality pass a by-law providing for the deferral, cancellation, or other relief, for eligible low-income seniors and low-income disabled persons, in respect of all or a part of assessment related tax increases for owner-occupied properties in the residential property class. The preliminary eligibility criteria presented in this report, for low income seniors, is that they be at least 65 years of age and must be in receipt of the Guaranteed Income Supplement (GIS) under the Old Age Security Act. Low-income disabled persons must be in receipt of benefits under the Ontario Disability Support Program (ODSP), or the Family Benefits Act (FBA), or the Guaranteed Annual Income Systems (GAINS) for the Disabled.

 In addition to the eligibility criteria, there are a number of administrative details and considerations that must be considered by the City in the development of their tax relief programs for seniors and the disabled as outlined in this report. Council has options in their choice of mechanism to provide relief from assessment-related tax increases. Options include deferral or cancellation of the increases, with or without a threshold in which an initial specified amount of tax increase would be allowed to be passed through to the owner, or a combination thereof, or other relief. Preliminary analysis estimates that between 12,000 to 20,000 owner-occupied low-income senior households may experience tax increases. Deferment of these increases would necessitate borrowing in the estimated amount $6.5 to $10.4 million annually. The same amounts identified under the tax deferral option would also be applicable to cancellation, however, the amounts would have to be funded from current property tax revenues, and would result in a reduction in Province=s grant under the Ontario Pensioners Property Tax Assistance Act that the owner would otherwise be eligible for.

  Contact Name:

 Mr. Adir Gupta, 392-8071

Mr. Ed Zamparo, 392-8641

 (Communication dated April 8, 1998 addressed to the

Chief Financial Officer and Treasurer from the

Chair, Assessment and Tax Policy Task Force)

 At an informal meeting of the Assessment and Tax Policy Task Force on April 6, 1998, the members who were present had before them a report (April 2, 1998) from the Chief Financial Officer and Treasurer respecting property tax rebates for charitable and similar organizations

and providing an initial context in which to develop a policy respecting property tax rebates for charitable and similar organizations, pursuant to the Fair Municipal Finance Act.

 The members of the Task Force also had before them the following communications respecting the abovementioned matter:

 (a)(March 27, 1998) from Anne Bermonte, Associate Director, Toronto Arts Council;

(b)(April 3, 1998) fromCouncillor Miller;

(c)(April 3, 1998) from Patrick Johnston, President & CEO, Canadian Centre for Philanthropy;

 (d)(March 18, 1998) from Peter Clutterbuck, Community Social Planning Council;

 (e)(April 6, 1998) from Pat McKendry, President, Kensington Market Working Group.

 The members of the Assessment and Tax Policy Task Force who were present referred the following motions to the Chief Financial Officer and Treasurer for report:

 1.By Councillor Nunziata, as amended by Councillor Flint

 (i)That the Chief Financial Officer and Treasurer report on the feasibility of replacing the burden placed on non-profit community and arts organizations that flow from the re-alignment of the business occupancy tax (BOT) with a Aflow through@ re-alignment program, or some other process that would result in a 40% rebate not having to be paid in the first place;

 (ii)That the City consider a Taxation Adjustment Fund for short term assistance to deal with anomalies which may occur in re-alignment;

 (iii)That the Chief Financial Officer and Treasurer report on the effects of the elimination of the BOT on agencies, boards and commissions and mechanisms for dealing with these effects.

 2.By Councillor Walker

 That the Chief Financial Officer and Treasurer report on property tax rebates for lawn bowling clubs which are located on privately-owned lands.

 3.By Councillor Adams

 (i)That the Province be requested to legislate better definitions of Asimilar organizations@ and that commercial/industrial landlords not be permitted to pass through the BOT to organizations that were previously exempt from the BOT.

 (ii)That the Provincial Assessment Office and its successor organization be required to maintain, at no extra cost, as in previous years, the detailed assessment information on Aeligible charities and similar organizations@ and create a sub-class for non-profit organizations and similar organizations.

 (Report dated April 2, 1998 addressed to the

Assessment and Tax Policy Task Force from the

Chief Financial Officer and Treasurer)

 Purpose:

To provide an initial context in which to develop a policy respecting property tax rebates for charitable and similar organizations, pursuant to the Fair Municipal Finance Act.

City of Toronto officials are consulting with the Province on the potential impact of the capping provisions introduced in the March 27, 1998, provincial announcement, which may either render the tax rebate program for charitable and similar organizations unnecessary or significantly alter its application.

 Funding Source, Financial Implication and Impact Statement:

 Preliminary analysis suggests that the tax rebate program would require Council to provide in the order of $3.7 to $9.4 million for 1998 within the tax deficiencies budget to be paid to eligible charities and similar organizations in the commercial and industrial property classes. The rebate program has yet to be approved and outlined by by-law.

 The estimates presented in this report exclude the impact arising out of the March 27, 1998, announcement by the Minister of Finance, which introduced new tools including caps on tax increases for the commercial, industrial and multi-residential property classes. Details of the outcome of the discussions with Provincial Officials will be reported later.

 Recommendation:

 Subject to Council not adopting the capping option on tax increases, as recently announced by the Province, it is recommended that:

 (1)for the purposes of the tax rebate program for eligible charities and similar organizations pursuant to the Fair Municipal Finance Act, the preliminary eligibility criteria for similar organizations, as outlined in this report, be endorsed in principle;

 (2)a tax rebate program in the amount of $3.7 million be endorsed on a preliminary basis for the organizations described under Category 1 of Table 1 of this report; and,

 (3)further direction be provided respecting the application of the preliminary eligibility criteria to the Category 2 type organizations listed under Table 3.

 Council Reference:

 The Fair Municipal Finance Act, 1997 (the Act) provides for the Municipality to pass by-laws providing for property tax rebates to eligible charities, and to any similar organizations specified in the by-law, as a means of tax relief. The cost of such rebates is shared by the municipality and school board in proportion to their revenues from the taxes otherwise payable on these properties. The Act further prescribes that:

 -the rebate shall not exceed 40 percent of the taxes that would otherwise be levied in respect of land occupied by the charity or similar organization; and

 -the amount of the rebate to each eligible charity and similar organization shall be the same, when expressed as a percentage of the taxes payable; and

 -the rebates apply only to land in the commercial property class or the industrial property class; and

 -Aeligible charity@ means a registered charity as defined by subsection 248(1) of the Income Tax Act (Canada) that has a registration number issued by the Department of National Revenue.

 Background:

 This section provides a background of the intent of the tax rebate provision of the Act.

 Section 3 of the Assessment Act, R.S.O. 1990, exempts from assessment and taxation properties owned and occupied by certain organizations prescribed in the legislation. Such organizations include churches and religious organizations, educational institutions, seminaries of learning maintained for philanthropic purposes, houses of refuge or for the care of children, incorporated charitable institutions organized for the relief of the poor or similar incorporated institutions conducted on philanthropic purposes and not for the purposes of profit or gain. In circumstances where the organization does not own the property, it would be subject to property taxation.

 Prior to the Fair Municipal Finance Act, in cases where the organizations occupied properties in the commercial or industrial property class, charitable organizations, certain not-for-profit organizations and other Anon-business use@ entities, as determined by the Province, were exempted from paying the Business Occupancy Tax (BOT) and were assessed at the residential property tax rate rather than the commercial tax rate.

 Whereas prior to 1998, the Province was responsible for establishing the tax class of these entities, enactment of the Fair Municipal Finance Act discontinues the Province=s role in this practice. Thus, those affected entities in the commercial and industrial property classes are no longer classified for treatment at the preferential rate and now find themselves taxable at the commercial or industrial rate as the case may be. In its place, the Act allows municipalities to provide similar preferential tax treatment to eligible charities and Asimilar@ organizations through a rebate program. The maximum 40 percent rebate is designed to offset the move to the commercial/industrial rate and the accompanying transfer of the burden of the former BOT amongst that class.

 Discussion:

 Registered Charities:

 Should the City pass a by-law providing for a tax rebate program, the Fair Municipal Finance Act mandates that all eligible charities be granted a tax rebate as prescribed in the by-law. AEligible charity@ means a registered charity as defined by subsection 248(1) of the Income Tax Act (Canada) that has a registration number issued by the Department of National Revenue. The rebate, if any, applies only to the properties occupied in either the commercial or industrial property class, and the rebate, if any, would apply to taxes paid by the charity.

 To qualify for registration under the Income Tax Act, an organization must be established and operated for charitable purposes, and it must devote its resources to charitable activities. The charity must be resident in Canada, and cannot have any income payable to benefit its members.

 Under the Federal Income Tax Act standards, a charity has to meet a public benefit test. To qualify under this test, an organization must show that:

 -its activities and purposes provide a tangible benefit to the public; and

 -those people who are eligible for benefits are either the public as a whole or a significant section of it in that they are not a restricted group or one where members share a private connection, such as social clubs or professional associations with specific membership; and

 -the charity=s activities must be legal and must not be contrary to public policy; and

 -the organization has to be either incorporated or governed by a trust or constitution.

 Based on 1994 Revenue Canada data, there are currently more than 75,000 registered charities in Canada, of which approximately 6,072 registered charities are located in Toronto. A request has been made to obtain this data in order to provide a better estimate of how many registered charities may be located in the affected commercial or industrial property class, and the results are to be included in a subsequent report.

 ASimilar Organizations@:

 The Fair Municipal Finance Act further provides that the rebate may be extended to Aany similar organizations specified in the by-law@. This section provides a context in which to develop criteria to determine the eligibility of organizations for the tax rebate program.

 The Ontario Law Reform Commission has released a working paper entitled AReport on the Law of Charities@ (1996). Among other things the report reviews three types of organizations (charities, non-profit corporations, and unincorporated non-profit organizations). The report discusses the difficulties with the current common-law definition of Acharity@, sets out the rudiments of a reformed definition, and identifies policy implications of that definition. The report acknowledges that there is no universally accepted definition of what constitutes activities similar in nature to charities, and the interpretation of various definitions is largely philosophical in nature.

 i)The Commission recommends against the adoption of a statutory definition of charity, and instead recommends a more liberal interpretation of the common-law definition. The Commission recognizes that the range of charitable activities is so diverse that a specific definition would be problematic. The Commission also emphasizes that these improvements to the common-law definition should be implemented by courts and public policy administrators, not by legislators. The Commission presents, as a rudimentary definition:

 Aa truly charitable act is that act whose form, actual effect, and motive are the provision of the means of pursing a common or universal good to persons who are remote in affection and to whom no moral or legal obligation is owed.@

 ii)The second type of organization reviewed by the Commission was Non-Profit Organizations (NPO=s). A NPO is not a registered charity. The key distinction is that a registered charity can issue charitable receipts for tax purposes, whereas NPO=s cannot issue tax receipts for donations or membership fees contributed. Organizations can be incorporated as NPO either federally or provincially. A NPO described in paragraph 149(1)(1) of the Income Tax Act is a club, society, or association that is organized and operated solely for:

 -social welfare; or

-civic improvement; or

-pleasure or recreation; or

-any purpose other than profit.

 Also, no part of the income of these organizations can be payable to, or otherwise available for the personal benefit of any proprietor, member, or shareholder, unless the proprietor, member or shareholder was a club, society, or association whose primary purpose was to promote amateur athletics in Canada. The provincial requirements for NPO=s essentially mirrors that of the federal requirements.

 Revenue Canada uses several indicators in assessing whether or not an organization is operated exclusively for non-profit purposes or is carrying on a trade or business. Revenue Canada looks to the activities of the organization and how it is operated in order to determine whether the organization is operated on a profit basis rather than a cost recovery basis.

 The Commission concludes that the current statutory provisions governing NPO=s in Ontario is in serious need of reform. First, they note that it provides for only one class of nonprofit corporation, and that class is identified by an open-ended list of non-profit purposes. Second, it is unclear whether non-profit corporations are permitted to carry on ancillary or incidental commercial activities. Thus, incorporation as an NPO is in itself not a definitive indicator of an organization meeting the Apubic benefit@ test.

 iii)The third type of organization reviewed by the Commission was unincorporated NPO=s and Associations. Of the three forms of organization available to nonprofit entities today, the unincorporated organization requires the minimum in the way of legal sophistication to create and maintain. The diverse range of activities include social clubs, debating societies, political interest groups and interest group coalitions, alumni associations, religious organizations and churches, home and school associations, sports associations, and trade associations.

 Preliminary Eligibility Criteria for ASimilar@ Organizations:

 Based on a review of the literature, including recent works, and from the foregoing discussion, it appears that there are a number of criteria have been highlighted which could constitute a definition or framework to determine the eligibility of an organization for a tax rebate, pursuant to the Fair Municipal Finance Act. The criteria, on a preliminary basis, includes:

 (i)the organization must demonstrate a concern for the relief of poverty, or for people in emotional, physical or spiritual distress; or,

 (ii)the organization must provide a clear service or benefit to the community, in that it concerns itself with the advancement of science, education, philosophy, religion, art, sports and other causes beneficial to the community (human services, culture and heritage, public health, recreation, human rights and equity); and,

 (iii)the organization must be operated on a not-for-profit basis (that is no share capital) and be accountable to the community; and,

 (iv)the services and activities must be accessible to the community as a whole or for and appreciable portion of it.

 These criteria, which arise from a liberal interpretation of the common-law definition of charity, provides a basis from which to evaluate the eligibility of the three types of organizations: charities, incorporated non-profit organizations, and unincorporated non-profit organizations, for the purpose of the tax rebate.

 The by-law outlining the details of the tax rebate could define Asimilar organizations@ by listing all the organizations deemed by Council to be eligible for the rebate. This would eliminate the administration required to determine which organizations are eligible for rebates as defined by the by-law. Alternatively, the by-law could contain clear criteria for defining a Asimilar organization@ so that the criteria can be applied effectively by staff in the Municipal Grants Committee.

 Analysis of Potential Applicants:

 As previously discussed, the Province has discontinued its role of classifying units assessed for the BOT as well as identifying those units in either commercial or industrial properties to be taxed at the preferential residential rate. In conjunction with this, the Fair Municipal Finance Act now requires that the assessment be based on property portions, whereas previously, individual units were individually assessed. As such, the phase-in tape received in February provides no information that may be used to identify units which were previously or might now be in a position to be a potential applicant for a tax rebate. Furthermore, in the case of multi-use properties, it is now the landlord=s responsibility to apportion taxes amongst tenants.

 Notwithstanding the above limitations, an analysis was performed utilizing the returned roll was used for 1997 taxation and by matching it to the 1998 phase-in tape. The 1997 tape provides information respecting all occupancies in the industrial and commercial property class that were taxed preferentially (i.e., no BOT and taxed at the residential rate). The 1998 taxes payable, at the commercial rate, were estimated assuming any tax increase or decrease was passed on proportionately to each tenant within the tax class. It is noted these are only estimates and are intended to provide an order of magnitude. The tax impact estimates presented in this report were prepared based on the CVA base case (with one tax rate for all commercial properties) Other factors, such as the number of vacant units in the property or whether the tenant is on a gross lease or a net-net lease, may also affect this estimate.

 The estimates presented in this report exclude the impact arising out of the recent announcement by the Minister of Finance, which introduced new tools including caps on tax increases, which may significantly effect the estimates presented. Revised estimates are to be presented in a subsequent report.

 The analysis revealed 3,521 locations receiving preferential treatment in 1997. This smaller file was further joined with the Planning Department=s employment survey, as well as the Community Information Centre=s ABlue Book@ listing of community service organizations within Toronto. Further examination of the occupant name, legal text, location comments, employment activity, and community service description, if any, was performed in order to better understand the nature of the occupant=s activity.

 The occupants were aggregated according to standard activity categories. For the purposes of presentation and discussion, these were further categorized whether or not they fell into a potentially eligible applicant (i.e., registered charity, non-profit incorporated community based organization, or other community based organization) according to the previously outlined eligibility criteria for Asimilar@ organizations, and other organizations. It should be noted that the number of registered charities is based on markers on the assessment roll, and is likely an understatement. Many registered charities may have been marked as Anon-profit@. On a preliminary basis, they are likely presented in the non-profit community group. A request has been made for property specific information respecting registered charities in Toronto, which is to be included in a subsequent report. A summary of the results is presented in Table 1, and issues specific to the other organizations is presented in the following section.

 Table 1

Summary of Activity Types

 Notes: Estimate based on 1997 roll and assuming landlord passes on tax increase/decrease proportionately* Further investigation suggests that a significant number of locations marked as non-profit by the Province are likely (non-profit) registered charities

** Further investigation suggests that an appreciable number of these organizations are likely incorporate

 Analysis of Category Types:

 Category 1 Organizations:

 The first category included those organizations that appear to be similar to charitable in nature, based on the limited information available, and according to the suggested eligibility criteria outlined previously. This category includes:

 - Registered Charitable Organizations,

- Non-Profit Community-Related Organizations (incorporated), and

- Other Community Related Organizations (unincorporated non-profit).

 This category includes organizations concerned with human and community services (such as family, health, immigration, seniors, women, legal, daycare, etc.), arts and culture, recreation, and religion. Again, based on the limited information, these organizations would appear to meet the public benefit test in that they provide what appears to be a concern for the relief of poverty, or for people in emotional, physical or spiritual distress, there appears to be a clear service or benefit to the community in the areas of science, education, philosophy, religion, arts, sports or other causes beneficial to the community (human services, health, recreation, human rights and equity), the services appear to be accessible to the community, and, probably, many of these are non-profit in nature (incorporated or unincorporated). Table 2 provides a distribution of charitable activities in the first category referred to in Table 1.

 Table 2 - Category 1 Organizations

Potential Applicants B Charitable, Non-Profit, and Other Community Related Organizations

  Notes: * Non-profit consists of charitable organizations and non-profit community related organizations from Table 2

** Other Community Related consists of Other Community Related from Table 2

 Category 2 Organizations:

 The second category (AOther Organizations@) consists of those organizations, which after reviewing the limited information, do not appear to meet the suggested eligibility criteria for similar organizations, in that the activity does not appear to be charitable in nature or that the organization would appear to provide benefits to a narrow segment of the community. It should be noted that the bulk of these, some 1,400 locations are clearly outside of the scope of the tax rebate program. These include not-specified properties, consisting of properties in commercial space occupied by individuals, parking spaces, storage lockers, basements, garages, property rental offices and utility rooms, all of which the Province has previously coded as non-business use. Table 3 provides a distribution of the activities covered by these other organizations. Specific issues are discussed in the following section.

 Table 3 - Category 2 Organizations

Potential Applicants - Other Organizations *

 Note: * Other Organizations from Table 1

** Consists mainly of individuals= names

*** Consists of occupancies such as rental offices, utility rooms, etc.

 Other Organizations B Specific Issues

 The preliminary eligibility criteria, as previously outlined, would exclude the organizations within the second category (AOther Organizations@). These organizations benefitted from the tax reduction for non-business activities under the old tax system. Council can identify which, if any, of these types of organizations might also be considered for the tax rebate. The preliminary criteria would then be amended to allow the desired organization(s) to become eligible.

The following organizations have voiced concerns to data:

 Artists Studios (223 organizations, municipal rebate $157.0 thousand):

 Consists of private studios occupied by individuals or collectives (groups of artists working together under a group name) for artistic purposes. Activities include the creation of works in the area of visual arts, film and video, choreography, writing, music. Purpose may include some commercial activities, which may be incidental and subordinate in purpose to the production process.

 It is noted that the City has a grants program to assist artists. Rather than modifying the definition of Asimilar@ organizations to include activities of a limited membership or for which incidental and subordinate commercial activities may be engaged in, an alternative approach my be to modify the existing grants program in order to provide additional financial assistance. However, grants would be funded by the municipality and there would no sharing on the education side.

 Legion and Veterans Clubhouses (23 organizations, municipal rebate $113.0 thousand):

 Consists of clubhouses and halls occupied by those who served in the armed forces of Her Majesty or Her Majesty=s allies in any war.

 It should be noted that property tax relief for Veterans= Clubhouses may be provided through exemptions from general purpose rates through the Municipal Act or by a municipality=s general power to make grants.

 During 1997, the former City of Toronto provided grants to offset property taxes in the amount of $250.0 thousand to 21 Clubhouses. Prior to 1997, the former cities of York and Etobicoke provided grants to offset a portion of the taxes payable, however, these grants have since been phased out.

 Finally, it should noted that the tax rebate program under the Fair Municipal Finance Act does not affect treatment of those properties that currently enjoy either a tax exemption or a tax cancellation under a Private Members Bill.

 Amount of Rebate:

 The Fair Municipal Finance Act states that the rebate shall not exceed 40 percent of the taxes that would otherwise be levied in respect of the land occupied by the charity or similar organization. The Act further prescribes that the rebate to each eligible charity and similar organization shall be the same, when expressed as a percentage of the taxes payable. The 40 percent maximum rebate was primarily designed to offset, on average, increases arising from the distribution of the BOT amongst the commercial and industrial property class.

 Administrative Issues:

 The administrative details for the implementation of the tax rebate program have yet to be worked out. A further report on the administrative procedures relating to the tax rebate, including a process and the timing of the tax rebates will be forthcoming. The details may involve a transition process for 1998, which may be different than that proposed for future years.

 Conclusion:

 Under the Fair Municipal Finance Act, municipalities have been provided with the authority to pass by-laws granting preferential tax treatment in the form of a tax rebate to eligible charities and Asimilar@ organizations which occupy commercial or industrial buildings and previously were not levied the BOT.

 City Council may adopt a policy respecting the criteria for eligibility, and the amount of the tax rebate. Registered charities are eligible for the tax rebate. The definition of Asimilar@ organizations, however, is not specified. It is clear from the review that there is no universally accepted definition of what constitutes activities that are similar in nature to charities.

 A review of the 1997 assessment roll suggested 1,287 potential applicants that would appear to fall within the preliminary criteria (Category 1 organizations). On average, if the maximum allowable rebate of 40 percent is applied, the 1998 budgetary estimate of the rebate program would be in the order of $3.7 million to the City, and $4.8 million to the Toronto District School Board.

 A further 2,234 entities were identified, that had previously benefited from preferential tax treatment by the Province (i.e., taxed at the residential rate), but would not appear to fit within the preliminary criteria (Category 2 organizations). A further report on these organizations will be forthcoming.

 The estimates presented in this report exclude the impact arising out of the March 27, 1998, announcement by the Minister of Finance. City of Toronto Officials are consulting with the Province respecting the potential impact of the capping provisions announced, which may either render the tax rebate program for charitable and similar organizations unnecessary or significantly alter its application.

 Contact Names:

Mr. Adir Gupta, 392-8071

Mr. Ed Zamparo, 392-8641

Mr. Joe Farag, 395-6706