To:Strategic Policies and Priorities Committee

From:City Clerk, Assessment and Tax Policy Task Force

Subject:Veterans' Clubhouses and Legion Halls

Recommendation:

The Assessment and Tax Policy Task Force recommends that the report (September 22, 1998) from the Chief Financial Officer and Treasurer be amended by deleting the words, "November 15, 1998" from Recommendation No. (6) and replacing them with "November 11, 1998" , and that the report, as amended, be adopted.

The Task Force advises that it has requested the Chief Financial Officer and Treasurer to provide to the Task Force a list of all service clubs and agencies for which a property tax exemption has been provided.

The above recommendation carried unanimously as follows:

Yeas:Councillors Adams, Augimeri, Balkissoon, Bossons, Davis, Flint, Kinahan, Nunziata, Ootes and Walker.

Background:

The Assessment and Tax Policy Task Force, on September 29, 1998, had before it a report (September 22, 1998) from the Chief Financial Officer and Treasurer respecting Veterans' Clubhouses and Legion Halls, and recommending:

(1)That the exemptions for City purposes for 1998 in the amount of $145,539 for the Veterans' Clubhouses, Canadian, British and Allied Forces be continued as set out in Appendix 3 of this report be granted;

(2)That the grants for 1998 in the amount of $140,050 for Veterans' Clubhouses, Canadian, British and Allied Forces as set out in Appendix 3 of this report be approved;

(3)That the 1998 grants be deemed by Council to be in the interest of the municipality;

(4)That authority be granted for the introduction of the necessary bills in Council;

(5)That, for 1999, 2000 and 2001 exemptions for City taxes in the amount of $314,023 annually for all Veterans' Clubhouses, Canadian, British and Allied Forces as set out in Appendix 4 of this report be granted; and that each organization provide financial information annually to the CFO including membership lists;

(6)That the City exemption be reviewed in three years, with such review to include examination of the membership and financial status of such organizations to determine continued exemption;

(7)The Province of Ontario be requested to exempt the education portion of taxes for all Veteran's Clubhouses, Canadian, British and Allied Forces as set out in Appendix 3 of this report, or, failing that, authorize the City of Toronto to cancel the education portion of taxes for these properties;

(8)That the Province of Ontario be requested to reply to the City's request noted in Recommendation 7 (noted above) no later than November 15, 1998;

(9)That the Chief Financial Officer and Treasurer be directed to report to the Municipal Grants Review Committee once the response from the Province is received and on the disposition of grants for 1999 and future years;

(10)That the appropriate civic officials be authorized and directed to take whatever action is necessary to give effect to the foregoing.

During consideration of the foregoing matter, the Task Force also had before it the following communications:

-(September 14, 1998) from Mr. Robert Dollack, Immediate Past President, Naval Club of Toronto; and

-(September 29, 1998) from Ms. Charlcie Stickley, Branch 31, Royal Canadian Legion

The following persons appeared before the Task Force in connection with the foregoing matter:

-Ms. Charlcie Stickley, obo RCL Branch #31, Mount Dennis;

-Mr. Robert F. Dollack, obo Naval Club of Toronto;

-Mr. Sam Leslie, obo RCL Branch #3;

-Mr. John Jeffery, obo RCL Branch #614, Zone D5; and

-Mr. Marty Venman, obo Baron Byng Branch #1, RCL Zone D3.

The Task Force's recommendation is noted above.

City Clerk

Frances M. Pritchard/

980929.1

October 1, 1998

To:Assessment and Tax Policy Task Force

Origin:Chief Financial Officer and Treasurer

Subject:Veterans' Clubhouses and Legion Halls

Purpose:

This report provides information regarding the impact of CVA on veterans' clubhouses and legion halls and suggests a policy to address the previous tax relief programs provided by the former municipalities in Toronto.

Financial Implications:

For the 1998 tax year, it is recommended that grants and exemptions to offset realty taxes be approved by City Council for Veterans' Clubhouses that previously received such grants and exemptions in 1997. The amount of tax relief totals $285,589. Of this total, the amount of taxes foregone as a result of the exemptions is $145,539, while the amount of grants to be provided totals $140,050. Funds for the grants have been allocated in the 1998 Operating Budget.

For 1999, 2000 and 2001, it is recommended that Council exempt all veterans' clubhouses from the city portion of taxes. The additional $171,929 amount of taxes that would be foregone as a result of the proposed expanded exemption is for 1999 and for each year thereafter.

Recommendations:

1. That the exemptions for City purposes for 1998 in the amount of $145,539 for the Veterans' Clubhouses, Canadian, British and Allied Forces be continued as set out in Appendix 3 of this report be granted;
2. That the grants for 1998 in the amount of $140,050 for Veterans' Clubhouses, Canadian, British and Allied Forces as set out in Appendix 3 of this report be approved;
3. That the 1998 grants be deemed by Council to be in the interest of the municipality;
4. That authority be granted for the introduction of the necessary bills in Council;
5. That, for 1999, 2000 and 2001 exemptions for City taxes in the amount of $314,023 annually for all Veterans' Clubhouses, Canadian, British and Allied Forces as set out in Appendix 4 of this report be granted; and that each organization provide financial information anually to the CFO including membership lists;

1. That the City exemption be reveiwed in three years, with such review to include examination of the membership and financial status of such organizations to determine continued exemption;
2. The Province of Ontario be requested to exempt the education portion of taxes for all Veteran's Clubhouses, Canadian, British and Allied Forces as set out in Appendix 3 of this report, or, failing that, authorize the City of Toronto to cancel the education portion of taxes for these properties;
3. That the Province of Ontario be requested to reply to the City's request noted in Recommendation 7 (noted above) no later than November 15, 1998;
4. That the Chief Financial Officer and Treasurer be directed to report to the Municipal Grants Review Committee once the response from the Province is received and on the disposition of grants for 1999 and future years;
5. That the appropriate civic officials be authorized and directed to take whatever action is necessary to give effect to the foregoing.

Summary:

For the 1998 taxation year, this report recommends that grants and exemptions to offset realty taxes be approved by City Council for certain Veterans' Clubhouses to maintain the status quo for those clubhouses and legion halls that received tax relief from some of the former area municipalities in 1997. The total amount of taxes foregone as a result of the exemptions is $145,539, while the total amount of grants to be provided total $140,050. The total amount of tax relief recommended to be provided in 1998 (grants and exemptions) is $285,589.

This report also sets out four options with respect to continuing, or phasing-out, tax relief for veterans' clubhouses in 1999 and subsequent years; and recommends that any change to the tax relief provided to these organizations begin in the 1999 tax year so that these organizations can make whatever financial arrangements are necessary based on Council's decision on this issue.

Comments:

There are 46 veterans' clubhouses located across the City of Toronto. Appendix and 2 shows the amount of total taxes billed and paid in 1997 as well as the impact of reassessment on these organizations. Based on the final assessment roll for 1998, 36 clubhouses or 78% will receive tax decreases while 10, or 22% will receive tax increases as a result of reassessment. The average decrease is $11,920 or 56.8% and the average increase is $13,765 or 113.2%.

Owned vs. Leased Premises:

The regulations set by the Province regarding property class definitions show that non-profit service, recreational and private clubs that own and occupy their property are assessed in the residential class. As a result, veterans' clubhouses that own their property should be assessed as residential, while clubhouses that lease space in commercial property should be assessed as commercial.

Final assessment roll data show that some veterans' clubhouses have been incorrectly classified. These properties include nine clubhouses that should be classified as residential but are assessed as commercial even though they own and occupy the property, and one clubhouse that leases property and is currently classified as residential but should be classified as commercial. To rectify these situations, the individually affected legions will have to file an appeal with the Province to ensure their property classifications are reviewed and corrected. Finance Department staff will be contacting those legions affected regarding the need to appeal. The appeal deadline is very likely to be extended to October 30, 1998 so that for any clubhouse that has not yet appealed, the opportunity to appeal exists.

Property Tax Relief - Former Municipalities:

Three of the six former area municipalities provided tax relief to veterans' clubhouses prior to 1998. Of the 46 clubhouses across the new City, 32 clubhouses or 70% received some form of tax relief. The former City of Toronto was the only municipality that provided a significant level of property tax relief, (approximately 74% of 1997 total taxes) which included City, Metro and school board taxes. The former cities of York and Etobicoke provided grants to veterans' clubhouses but their grants were limited to the City share of taxes only. The former cities of Scarborough, North York and the Borough of East York did not provide any property tax relief for Veterans' clubhouses.

Appendix 1 summarizes the tax relief provided by the former municipalities to these organizations in 1997. The mechanisms for providing property tax are detailed below:

Former City of Toronto:

Property tax relief for veterans' clubhouses was provided through two mechanisms. Exemptions from general purpose rates only (City and Metro shares - excluding school board share) were made under the provisions of the City of Toronto Act and the Municipal Act for veterans' clubhouses that occupied owned premises. The exemptions were treated as tax cancellations, with the cost shared between the City and Metro through the charge back of tax deficiencies.

Grants were made to offset the school board share of taxes or to offset property taxes for those veterans' clubhouses which occupied leased premises. The amount of the exemptions and grants were provided only for taxes which related to the portion of the property that was actually used as a clubhouse.

Prior to 1992, the tax relief (exemptions and grants) provided to veterans' clubhouses represented 100% of the taxes that would have been payable for the clubhouse portion of the property. In 1992, the City began reducing the total tax relief provided to veterans' clubhouses by the same percentage as its annual budget guideline. These reductions, which applied to all outside organizations receiving grants from the City, were applied to the total tax relief received by veterans' clubhouses so by 1997, the tax relief provided represented 74% of the total taxes for the clubhouse. Of this tax relief, exemptions accounted for 48% ($122,232)) and grants accounted for 52% ($130,900).

Each clubhouse had to apply for tax relief, and the grants and exemptions were subject to annual approval by Council.

Former City of York:

The former City of York previously provided grants to veterans' clubhouses to cover the local, Metro and school board portions of realty taxes. However, in 1992 the City of York began to phase out the grants for the Metro and school board portions and by 1997, the grants received by veterans' clubhouses covered only the former city portion of realty taxes, which in 1997 represented 25%.

The grants given by York were applied to the tax account of each clubhouse automatically, prior to the mailing of the final tax bill each year.

Former City of Etobicoke:

The City of Etobicoke allocated a total grant amount for veterans' clubhouses in its operating budget. The total grant amount was originally based on the local portion of realty taxes for all veterans' clubhouses. Grants were then allocated proportionately among the clubhouses based on their property assessment. The total grant amount available for veterans' clubhouses was frozen a number of years ago. The grant amount received by veterans' clubhouses in Etobicoke in 1997 totaled 22% of total taxes.

Clubhouses in Etobicoke were required to submit grant applications annually. The applications also had to include financial statements, and other information pertaining to membership as well as proposed use and activities of the clubhouse.

Tax Relief for 1998:

The 1998 City of Toronto Operating Budget for grants was determined, at least in part, to retain the status quo so that organizations that received funding or grants from the former municipalities in 1997 would receive the same amount in 1998.

Grants totaling $194,632 for veterans' clubhouses have been included in the 1998 Operating Budget, based on the tax relief given to these organizations in 1997 by Toronto ($130,900), York ($29,262) and Etobicoke ($34,470). The amount for tax exemptions previously provided by the former City of Toronto ($122,231 in 1997) is not included as a line item in the budget but as part of the tax deficiencies budget.

It is recommended that, for 1998, Council maintain the tax relief previously given to certain veterans' clubhouses at a level consistent with the relief provided by the former municipalities for the following reasons:

• Many clubhouses, particularly in the former City of Toronto, are relying on the same level of financial assistance as provided by the former municipalities. Council's decision on this matter is occurring late in the year, which may not leave enough time for these organizations to make alternative fund-raising arrangements;
• Funds have been allocated in the City's 1998 Operating Budget;
• The level of financial assistance is consistent with the City's policy for 1998 to maintain the status quo for outside organizations.

The actual cost of providing the same level of tax relief for 1998 as was provided in 1997 is reduced due to the significant impact of reassessment on many of these properties. As a result, Council should provide tax relief in 1998 based on the percentage of tax relief given, and not actual dollars. In 1997, Toronto provided relief for 74% of the taxes levied. Etobicoke provided 22% while York provided 25% of total taxes levied. In 1998, 36 veterans' clubhouses or 78% are receiving a tax decrease. In contrast, 10 properties are receiving tax increases due to CVA. However, Council has capped tax increases for commercial and industrial properties at 2.4% for the next three years. As a result, none of these properties will receive a tax increase of greater than 2.4% in 1998.

Tax relief provided in 1998 at the same proportion as 1997 would ensure that the organizations receive the same percentage of tax relief but also ensure that the grant does not exceed 1998 total taxes. The net result is that total grants required to provide the same percentage tax relief to these organizations in 1998 are $140,050, a savings in grants of $54,582. However, as noted above, the amount for tax exemptions provided to veterans' clubhouses in the former City of Toronto was not included as a line item in the budget. In 1998, the recommended exemptions for general purposes will result in $145,539 in taxes foregone. Appendix 5 shows the comparison between the proposed 1988 relief and the impact of CVA ultimately. In 1998, $285,589 is proposed for relief which compares to a total ultimate CVA of $585,100 or $299,511 more than the 1998 level of tax relief.

Options for Harmonization of City Policy Regarding Tax Relief for Veterans Clubhouses:

Given the need to ensure that all taxpayers across the new City of Toronto are treated in a like manner, it is necessary for Council to adopt a policy with respect to veterans' clubhouses and legion halls for 1999 and future years. It may be prudent that grants for tax relief be provided only to the extent they are consistent with the City's overall corporate budget policies and guidelines. This would ensure that if Council decided that any grant programs provided by the former municipalities should be retained by the new City, the grants for tax relief for veterans' clubhouses and legions would be treated in a like manner.

The following options provide alternatives for consideration for 1999 and subsequent years:

Option 1:Provide Exemptions for All Clubhouses

Council can exempt veterans' clubhouses from general purposes taxation through the existing provisions of Section 207 of the Municipal Act or Section 3 of the City of Toronto Act, 1930. Under the legislation, exemptions can only be made for the City portion of taxes.

Based on full CVA taxes (i.e., after phase-in/capping) for the veterans' clubhouses, exempting these organizations from City taxes would result in $314,023 in taxes foregone annually. For veterans' clubhouses in the residential property class, the exemption would provide tax relief for 63% of the total taxes levied on their property. For veterans' clubhouses that lease space and are assessed in the commercial property class, the exemption would provide tax relief for 45% of the total taxes levied.

This option would provide a level of tax relief comparable to the amount of relief currently being provided to those clubhouses that received relief in 1997. It would also provide equity for the remaining clubhouses (not currently obtaining relief) in that it would ensure that the city share of taxes would be exempted for all clubhouses in Toronto. However, the City should request the Province of Ontario to exempt the education portion of taxes for the clubhouses. Should this option be adopted, the Province should will be requested to reply by November 15, 1998.

Option 2:Pool Existing Grants

The grants recommended to be provided in 1998 total $140,050. In 1999 and subsequent years, Council could maintain this level of funding, but allocate it proportionately among all the veterans' clubhouses across the new City based on each organization's share of property taxes in comparison to the total taxes for the group. The tax relief provided to each clubhouse under this option would amount to 23.9% of the total taxes levied.

Options 1 and 2 could be provided in combination, subject to the level of assistance Council decides to provide to these organizations. Combining the exemptions with the existing level of grants would provide veterans' clubhouses with relief for 77.6% of the total taxes levied. This combination of options would result in $314,023 in taxes foregone due to the exemptions and $140,050 in grants, with a total cost to the City of $494,073 annually as set out in Appendix 4.

Option 3:Eliminate Tax Relief - Operational grants provided by application to Municipal Grants Review Committee

The City could establish a general policy regarding grants for property taxes within the context of the Municipal Grants Review Committee's development of a Municipal Grants Policy. The former municipalities of Metro and the City of Toronto had adopted such policies where grants were not given solely for the purpose of offsetting property taxes but all financial support for non-profit organizations was provided through established grant programs. Grant eligibility was based on the objectives, criteria and priorities set by the municipality and determined within the context of the applicant's overall financial need and community benefit provided.

The issue of financial assistance for veterans' clubhouses for future years could be referred to the Municipal Grants Review Committee, for a policy to be developed in conjunction with its review of the entire grants program. Under this option, financial assistance to veterans' clubhouses would be reviewed annually during the operating budget process based on Council's priorities, goals and objectives set from time to time.

Option 4:Phase-out Existing Tax Relief

The impact of reassessment is significant for many of the properties owned by veterans' clubhouses and legions. As noted earlier in this report, 36 clubhouses or 78% will receive tax decreases while 10, or 22% will receive tax increases as a result of reassessment. The average decrease is $11,920 or 56.8% and the average increase is $13,765 or 113.2%.

Council could phase-out, over the next four years, the existing tax relief being provided. For the 36 clubhouses receiving tax decreases, the phase-out of the existing tax relief could coincide with the phasing-in of tax decreases due to reassessment. However, the phase-out of the tax relief will exacerbate the financial impact of the reassessment for the 10 clubhouses that are receiving tax increases. Phasing out the existing tax relief would also perpetuate the existing inequities of this program since 32 clubhouses would continue to receive tax relief, albeit at reduced levels, over the next four years, while 12 clubhouses would receive no relief.

Conclusion:

It is recommended that, for 1998, Council maintain the tax relief previously given to certain veterans' clubhouses at a level consistent with the relief provided by the former municipalities. The grants and exemptions to offset 1998 realty taxes for these clubhouses total $285,589.

For 1999, 2000 and 2001, it is necessary for Council to adopt a uniform policy with respect to financial assistance for veterans' clubhouses and legion halls. It is recommended that the clubhouses be exempted from general purpose rates (City portion) and that the Province of Ontario be requested to exempt the clubhouses from the education share of taxes; or failing that, provide the City with the authority to cancel the share of school taxes. It is further recommended that the Province be requested to respond by November 15, 1998. A further report will be submitted once a response is received from the Province.

Contact Names:

Lynne Ashton, 397-4203

Paul Wealleans, 397-4208

Wanda Liczyk,

Chief Financial Officer and Treasurer

Appendix 1

Summary of 1997 Tax Relief - Veterans' Clubhouses

Appendix 2

Impact of Current Value Assessment

* Leased premises.

- Incorrect assessment classification.

Appendix 3

1998 Tax Relief - Veterans Clubhouses

* Leased premises.

Appendix 4

Tax Relief Options 1 and 2: Cost of Exemptions and Grants