To:Strategic Policies and Priorities Committee

From:City Clerk, Assessment and Tax Policy Task Force

Subject:Owner-Occupied Condominiums

Recommendation:

The Assessment and Tax Policy Task Force recommends that the administrative process set out in the report (September 12, 1998) from the Chief Financial Officer and Treasurer be approved.

Background:

The Assessment and Tax Policy Task Force, on September 29, 1998, had before it a report (September 12, 1998) from the Chief Financial Officer and Treasurer respecting Owner-Occupied Condominiums, and recommending that the report be received for information.

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

-(September 1, 1998) from Councillor Rae, requesting the Chief Financial Officer and Treasurer to prepare a report for the next meeting of the Assessment and Tax Policy Task Force outlining the problems raised re owner-occupied condominiums and steps to be taken to resolve them;

-(August 25, 1998) from Andre Bratu, requesting that Toronto City Council and the Province work towards rectifying the increase in property tax for his condominium; and

-(September 23, 1998) from Councillor Silva, addressed to the Chief Financial Officer and Treasurer

The Task Force's recommendation is noted above.

City Clerk

Frances M. Pritchard/

980929.9

September 21, 1998

To:Assessment and Tax Policy Task Force

Origin:Chief Financial Officer and Treasurer

Subject:Owner-Occupied Condominiums

Purpose:

This report provides additional information regarding the impact of Current Value Assessment and the City`s phase-in program on newly owner-occupied condominiums.

Financial Implications:

It is estimated that 2,400 of these condos became owner-occupied in 1997 and therefore, should be adjusted in 1998 to be consistent with the former administrative practices of the Regional Assessment Office. The total cost of these adjustments is estimated at $4.288 million for 1998.

Recommendations:

It is recommended that this report be received for information.

Comments:

Prior to 1998, tenanted condominiums were assessed at two or three times the level of owner occupied condominiums and included in the multi-residential property class while owner-occupied condominiums were assessed in the residential class. When a tenanted condominium was sold, and the new owner subsequently moved in, it was the Province_s policy to reclassify the condominium to the residential property class and reduce the assessment to the owner-occupied assessment level for taxation in the following year.

From the 1998 Interim Assessment Tape, it has been determined that 4,166 condominiums were assessed as tenanted and included in the multi-residential property class in 1997. Appendix 1 shows the number of these condominiums by ward. The total tax decrease for these condominiums is $7.917 million. Of this amount, it is estimated that $7.066 million of the decreases relate to the change in property class, while $850,666 relates to changes in property values. It has been determined that 2,400 condominiums became owner-occupied in 1997 and should be adjusted in 1998 to remain consistent with the former administrative practices of the Reginal Assessment Offices. The total cost of these adjustments is estimated at $4.288 million. For the remaining 1,766 condos that have become owner-occupied in 1998, the adjustment of $2.78 million should be processed in 1999.

Under Current Value Assessment, all condominiums are in the residential class. This has resulted in substantial tax reductions in 1998 for condominiums that were assessed as tenanted in 1997, due mainly to the change in property class. However, a number of these condominiums were purchased and became occupied by their new owners in 1997. In some of these cases, the Province did not reduce the assessments of these condominiums to the owner-occupied level on the 1998 Interim Assessment Tape. Since Council adopted a phase-in plan for the residential property class and the data on the 1998 Interim Assessment Tape formed the basis of any phase-in amount, some condominium owners are having their reductions due to the change in property class being phased-in in conjunction with any tax change due to Current Value Assessment.

The phase-in data supplied by the Province, which set out for each property the old, or prephase in, assessment and the Current Value Assessment, was used by the City to calculate its final tax bills and determine the 1998 phase-in amounts. Ministry of Finance staff have advised that there is no legislative mechanism by which the prephase-in assessments of these condominiums can be changed to reflect a change in occupancy. However, if there had been no reassessment in 1998, condos that became owner-occupied in 1997 would have had their assessments reduced by the Regional Assessment Office on the year-end assessment roll. These changes were administrative in nature and were done annually at year-end without the owner having to file an assessment appeal. While this administrative procedure did not reflect in-year changes, condominium owners benefitted from the reduced assessment in the year following occupancy.

The Deputy Minister of Finance has been contacted, in writing, to request that these changes to the phase-in file be made annually by the City based on the values forwarded by the Toronto Regional Assessment Offices, consistent with the administrative practices previously used by the Province_s Regional Assessment Offices prior to the reassessment. The Regional Assessment Offices in Toronto have advised that they can provide the 1997 values that would have applied if these occupancy changes had been reflected. The Deputy Minister's reply has been requested by the end of September.

In the interim and in the interest of fairness, the Finance Department will be contacting each of the 2,400 condominium owners that took occupancy in 1997 over the next two months to inform them that they will likely have their taxes adjusted for 1998. Staff at the area tax offices were instructed to advise any condominium owner who took occupancy of a previously tenanted unit in 1997 that payment of the September and October instalments would not be required. Once the revised assessments are received from the Regional Assessment Offices, we will process the appropriate adjustments. It is anticipated that any necessary adjustments will be processed before the November 2nd instalment date. As noted above, it is estimated that 2,400 of these condominiums became owner-occupied in 1997 and therefore, should be adjusted in 1998 to be consistent with the former administrative practices of the Regional Assessment Offices. The total cost of these adjustments is estimated at $4.288 million for 1998. These adjustments will continue annually for the duration of the phase-in period. However, based on the final assessment roll data, it appears that the bulk of the adjustments will be made in 1998.

The 1,766 of the condominiums that became owner-occupied in 1998 will have their taxes adjusted starting in 1999 with an estimated total adjustment of $2.78 million.

The administrative process described in this report relates only to the tax decreases resulting from the change in property class. Residual increases or decreases due to changes in property values would still be phased-in under Council's phase-in plan for the residential property class.

Contact Names:

Lynne Ashton, 397-4203

Paul Wealleans, 397-4208

Wanda Liczyk,

Chief Financial Officer and Treasurer

Appendix 1

Condominiums Assessed as Tenanted in 1997

Notes:

1. Decreases due to change in property class estimated based on average assessment level for tenanted condominiums being twice that of comparable owner-occupied units.
2. Tax changes (exclusive of decreases due to change in property class) would continue to be phased-in under Council's phase-in program for the residential property class.