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To:Strategic Policies and Priorities Committee

From:City Clerk, Assessment and Tax Policy Task Force

Subject:Ontario Property Assessment Corporation - Recovery of 1998 Costs

Recommendations:

The Assessment and Tax Policy Task Force recommends that:

(1)the report (September 15, 1998) from the Chief Financial Officer and Treasurer be adopted;

(2)the Mayor, and interested Members of Council, be requested to meet with the Minister of Finance to ensure that the City of Toronto has the number of members on the Board of Ontario Property Assessment Corporation proportional to the percentage of its levy;

(3)Councillor Chong be appointed an ex-officio member of the Assessment and Tax Policy Task Force; and

(4)Council's position be forward to the Association of Municipalities of Ontario with the request that it endorse the City's position.

Background:

The Assessment and Tax Policy Task Force, on September 29, 1998, had before it a report (September 15, 1998) from the Chief Financial Officer and Treasurer respecting Ontario Property Assessment Corporation - Recovery of 1998 Costs, and recommending that:

(1)The City of Toronto pay the Ontario Property Assessment Corporation (OPAC) the budgeted amount of 24.7 million that was highlighted in the April 1998 Provincial downloading estimates and that the OPAC Board of Directors be advised that the additional $1.2 million requested of the City of Toronto is unacceptable at this time of the year when two thirds of our fiscal year is complete.

(2)The OPAC Board of Directors be advised to continue to pursue funding of the $7 million in extra costs of operation of OPAC with the Province of Ontario and not pass through this cost to municipalities.

(3)The OPAC Board of Directors be advised that the City of Toronto requests that the levy amount for 1999 be set by December 31, 1998 in order to meet City of Toronto budget deadlines.

(4)The OPAC Board of Directors be requested to review the cost of operation of OPAC with a view to reduce costs and not increase future levies at or below the level of inflation particularly for 1999 and 2000.

(5)OPAC be requested to provide detailed cost breakdowns of its expected $130 million total cost of operations; to provide detailed information on the cost of the four Toronto regional offices and to outline the service level standard that accompanies the $25.9 million prior to the due date of the first installment of the 1998 bill; that the 1998 invoices not be paid until the Chief Financial Officer and Treasurer is satisfied with the costs; that interest not be charged by OPAC until November 1, 1998 in light of the lateness of their invoice.

(6)The OPAC Board of Directors, AMO and the Province of Ontario be requested to dedicate 20 percent of the seats on the OPAC Board to be representatives of the City of Toronto, and that City of Toronto staff be requested by OPAC to participate to the fullest extent possible in the development of service level standards for OPAC.

The Task Force's recommendations are noted above.

City Clerk

Frances M. Pritchard/

980929.6

September 15, 1998

To:Assessment and Tax Policy Task Force

From:W. A. Liczyk

Chief Financial Officer & Treasurer

Subject:Ontario Property Assessment Corporation - Recovery of 1998 Costs

Purpose:

To outline the costs billed to the City of Toronto for 1998 property assessment services and support costs and a set of recommendations to deal with the recent billing.

Financial Implications:

Funds in the amount of $24.7 million are budgeted in Corporate Expenditures. Total billing for 1998 will be $25,946,916 which exceeds the budgeted amount by $1.2 million.

Recommendations:

It is recommended that:

The City of Toronto pay the Ontario Property Assessment Corporation (OPAC) the budgeted amount of 24.7 million that was highlighted in the April 1998 Provincial downloading estimates and that the OPAC Board of Directors be advised that the additional $1.2 million requested of the City of Toronto is unacceptable at this time of the year when two thirds of our fiscal year is complete.

The OPAC Board of Directors be advised to continue to pursue funding of the $7 million in extra costs of operation of OPAC with the Province of Ontario and not pass through this cost to municipalities.

The OPAC Board of Directors be advised that the City of Toronto requests that the levy amount for 1999 be set by December 31, 1998 in order to meet City of Toronto budget deadlines.

The OPAC Board of Directors be requested to review the cost of operation of OPAC with a view to reduce costs and not increase future levies at or below the level of inflation particularly for 1999 and 2000.

OPAC be requested to provide detailed cost breakdowns of its expected $130 million total cost of operations; to provide detailed information on the cost of the four Toronto regional offices and to outline the service level standard that accompanies the $25.9 million prior to the due date of the first installment of the 1998 bill; that the 1998 invoices not be paid until the Chief Financial Officer & Treasurer is satisfied with the costs; that interest not be charged by OPAC until November 1, 1998 in light of the lateness of their invoice.

The OPAC Board of Directors, AMO and the Province of Ontario be requested to dedicate 20% of the seats on the OPAC Board to be representatives of the City of Toronto, and that City of Toronto staff be requested by OPAC to participate to the fullest extent possible in the development of service level standards for OPAC.

Discussion:

Cost of Assessment Services.

As part of the Provincial downloading that was originally announced in October 1997, costs for property assessment services are to be paid by the municipalities of the Province. Original estimates for the City of Toronto in October 1997 were $28.5 million which were subsequently adjusted to $24.7 million in April 1998. This amount of $24.7 million was budgeted in Corporate Expenditures.

On August 28, 1998, the Ontario Property Assessment Corporation sent its first billing to the City. This bill was received on September 9, 1998 and is comprised of two payments of $12,973,458 due October 1, 1998 and $12,973,458 due December 15, 1998 totalling $25,946,916. This amount is $1.2 million higher than was budgeted.

Correspondence from the Transition Leader of the Ontario Property Assessment Corporation (OPAC) (attached) indicates that the estimated cost of operation for OPAC is $130 million which is higher than the $123 million cost of the function which was provided by the Province in its downloading estimates. The Transition Leader states:

"The 1998 billing for assessment services has been set by the Board of Directors of the Ontario Property Assessment Corporation at $130 million. We understand that this amount is, regrettably higher than the $123 million cost of the function which was provided in the 'who does what' discussions. The Board believes, however, based on its knowledge of the function to date and its current understanding of future requirements and the needs of its municipal members, that the $130 million billing level is required immediately for the function to be sustainable into the future."

While OPAC is pursuing increased funding from the Community Reinvestment Fund to recoup the increase in costs of $7 million, it is unacceptable that at this late date in municipalities' fiscal years, that the increased cost be passed in their entirety to municipalities. It is recommended that OPAC be advised that the City of Toronto has only budgeted $24.7 million and is not in a position to pay any additional costs and that the Province of Ontario be requested to pay the increased costs. Failing the Province paying the increased costs, it is recommended that the Board of Directors of OPAC be advised to seek cost efficiencies to meet their original $123 million budgeted costs.

It is also requested that OPAC advise each municipality of its cost share of 1999 assessment services by December 31, 1998 in order to meet deadlines for preparing municipal budgets.

The OPAC Board is anticipating that increases in future years' levies should be at or below the level of inflation. At a time when municipal budgets have been frozen, the OPAC Board should be strongly urged to freeze costs of OPAC at 1998 levels of $123 million for 1999 and 2000 and in fact be directed to find cost efficiencies and strive to reduce costs of operation.

Basis of Costs Allocation.

As noted, OPAC is budgeting $130 million as its cost of operation for 1998. The City of Toronto share is billed at $25.9 million. This represents 20% of the cost of OPAC's operation. The billing formula for OPAC is comprised of two components (a) Toronto's share of total assessed values (25.36%) averaged with (b) Toronto's share of total properties (14.56%).

The supporting information for the calculation of 1998 property assessment services and support costs is deficient in several respects;

There is no breakdown of what comprises the $130 million total cost of operations

There is no breakdown of the cost of assessment services currently provided to the City of Toronto through its 4 existing regional offices.

There is no description of the service levels and quality of service to be provided for the $25.9 million billed amount.

The billing received from OPAC should not be paid until the above supplementary information is received and reviewed to the satisfaction of the Chief of Financial Officer & Treasurer.

According to the OPAC Board, the Province has already allocated $33 million towards defending the 1998 appeals. The Board, believing that the allocation of $33 million for appeals is inadequate, has raised concerns with the Province.

Membership in OPAC

The Province announced the creation of a municipal corporation for assessment services in their 1996 budget. The Ontario Property Assessment Corporation (OPAC) was created under Bill 164, the Tax Credits to Create Jobs Act, which received Royal Assent on December 18, 1997. All municipalities in Ontario are members of OPAC which is a municipal corporation responsible for assessment services delivery starting on January 1, 1998.

OPAC, funded by the municipalities on a cost recovery basis, is governed by a fourteen-member board who are appointed by the Minister of Finance. The Board is comprised of twelve municipal representatives (six of whom are elected municipal officials and six municipal employees) and two provincial representatives.

Currently the OPAC Board of Directors is comprised as follows:

Name

Title, Municipality or Organization Term

Municipal Representatives
Jean Jones Clerk-Treasurer and Tax Collector

Townships of Carden and Dalton, Victoria County

One-year
Jerry Labossiere Treasurer

Town of Jaffray Melick, District

One-year
Jack MacDonald Deputy Reeve

Township of Somerville, Victoria County

One-year
Pat Richardson Mayor

Town of Marathon, District of Thunder Bay

One-year
Lucille Bish Manager, Planning Information

Regional Municipality of Waterloo

Two-year
John Geoghegan Mayor of Woodstock and Councillor

Oxford County

Two-year
Gordon Landon Regional Councillor

Regional Municipality of York

Two-year
Brian MacRae City Manager

City of Thunder Bay

Two-year
Bonnie Gibson Assessment Review Manager

City of Mississauga

Three-year
Emil Kolb

(Chair)

Regional Chair

Regional Municipality of Peel

Three-year
Chuck Wills Chief Administrative Officer

City of Windsor

Three-year
Peter Hume Regional Councillor

Regional Municipality of Ottawa-Carleton

Three-year
Provincial Representatives
Gordon Chong Councillor

City of Toronto

Two-year
Bryan Davies Senior Vice President, Corporate Affairs

Royal Bank of Canada

Three-year

As noted the City of Toronto has 25% of the total assessed values in the Province of Ontario and 15% of the total number of properties and is therefore paying 20% of the cost of OPAC. It follows that the City of Toronto should have representation on the Board equal to its proportionate cost share. The City of Toronto should have a say for what it is expected to pay particularly given the significance and complexity of the City of Toronto assessment base. Based on a 20% share of costs, the City of Toronto should have three seats on a fourteen person board. Currently, the City is represented by Councillor Chong who is sitting on the Board as one of the two Provincial representatives. It would be fair for the City to request that at least an additional City of Toronto representative be added to the Board and that two City of Toronto representatives are always sitting on the Board.

Conclusion:

The City of Toronto has just received its 1998 billing from the newly established Ontario Property Assessment Corporation (OPAC). The invoice amount exceeds the amount budgeted by $1.2 million and does not provide sufficient information to support a $25.9 million payment. The City of Toronto will be paying 20% of the cost of OPAC and should have equivalent representation on the OPAC Board.

Contacts:

Giuliana Carbone, Director of Revenue Services:392-8065

W. A. Liczyk

Chief Financial Officer & Treasurer

 

   
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