November 19, 1998.

To:Strategic Policies and Priorities Committee

From:City Clerk

Re:Current Value Assessment - Tax Capping

Recommendation:

The Budget Committee on November 18, 1998 reports having received as information the communication (September 30, 1998) from the General Secretary, Toronto Transit Commission, and the report (November 16, 1998) from the Chief Financial Officer and Treasurer.

Background:

The Budget Committee on November 18, 1998, had before it the following:

1.communication (September 30, 1998) from the General Secretary, Toronto Transit Commission forwarding Toronto Transit Committion Report 20d from the Chief General Manager, Toronto Transit Commission, regarding Current Value Assessment - Tax Capping; and

2.a report (November 16, 1998) from the Chief Financial Officer and Treasurer regarding Toronto Transit Commission (TTC) - Current Value Assessment.

City Clerk

Barbara Liddiard/cp

Item No. 7

Attachment

c.Chief Financial Officer and Treasurer

Director of Budgets

Chief Administrative Officer

Chief General Manager, Toronto Transit Commisison

General Secretary, Toronto Transit Commisison

(Communication dated September 30, 1998 addressed to the

Budget Committee from the

General Secretary, Toronto Tranisit Commission)

At its meeting on Wednesday, September 23, 1998, the Commission considered the attached memorandum dated September 23, 1998 from David L. Gunn, Chief General Manager entitled, "Current Value Assessment - Tax Capping."

The Commission received the above memorandum and requested that a copy be forwarded to the City Budget Committee for information.

(Report No. 20d from theToronto Transit Commission addressed to:

Chair Howard Moscoe

Vice-Chair Rob Davis

Commissioner Brian Ashton

Commissioner Blake Kinahan

Commissioner Chris Korwin-Kuczynski

Commissioner Joe Mihevc

Commissioner David Miller from the

Chief Gneral Manager, Toronto Transit Commission)

At its meeting of April 8, 1998, the Commission requested staff to report on "whether the proposed cap of 2.5% on commercial and industrial realty assessments will include the TTC."

This will confirm that Council decided in late July to cap tax increases at 2.5% of 1997 taxes per year for three years, to be funded by withholding a compensating amount of tax decreases ("clawback"). In addition, the tax capping measures are applicable to both taxable properties and properties whose owners make payments-in-lieu (mainly public entities), including the TTC.

Our previous expectations that the impact of CVA on the Commission's properties will be neutral have been confirmed with the release of the tax bills in late August. There is still disarray at the tax offices with some "grants lists" (the equivalent of tax bills for payments-in-lieu) still not being issued and their staff being difficult to reach for assistance. Nevertheless, based on earlier information received and the protection of tax capping, any further adjustments that could arise should have no material impact and staff will continue to pursue discussions with staff at the tax and assessment offices.

I wish to also inform you that we've retained a property tax consulting firm (Yeoman & Associates Inc.) on a limited fee basis to review our property portfolio for opportunities to minimize our current or future tax bills. On the advice of these experts, protective tax appeals were filed on all our non-subway properties (subway properties are exempt from tax) before the August 31 deadline for appeals. Staff will report as additional information becomes available.

(Report dated November 16, 1998 addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To provide additional information regarding the impact of Current Value Assessment on Toronto Transit Commission (TTC) properties.

Funding Sources, Financial Implications and Impact Statement:

There are no direct funding implications associated with this report.

Recommendation:

That this report be received for information.

Background/History:

At its September 23, 1998 meeting, the Toronto Transit Commission received a report (dated September 23, 1998) from the Chief General Manager of the Toronto Transit Commission regarding capping of tax increases in the City of Toronto as a result of the implementation of Current Value Assessment in 1998. That report is on the agenda of this meeting of the Budget Committee for information and this report provides additional information as to the impact of CVA on TTC properties.

Comments:

The property tax relief mechanisms (capping and phase-in provisions) adopted by City Council at its meeting of July 23, 1998 (Strategic Policies and Planning Report No. 13, Clauses 1, 2, and 4) apply to TTC properties whether they are taxable or whether they are eligible for a payment-in-lieu of taxes. The differentiation between the two categories is determined under provincial assessment and tax policy and legislated statutes. In general, property owned by the TTC for its purposes is either eligible for a payment-in-lieu or exempt while property leased to tenants becomes taxable.

Under the provisions of the Assessment Act, all property in Ontario is liable for assessment with certain exemptions from taxation. Subject to Section 27 of the Act, land belonging to a municipality or vested in or controlled by a public commission or local board is exempt from taxation. Although exempt from tax, Section 27 (3) of the Act requires the commission to pay to the municipality an amount equal to the tax that would be payable and deems the land to be in the commercial property class. Section 40 of the City of Toronto Act, 1997 (Part 2) exempts lands and easements owned by the City or the Toronto Transit Commission (TTC) used by the TTC as subway or other rapid transit or as car yards or shops in connection with subway or rapid transit uses. Any buildings or structures on such lands and easements are exempted from realty taxes and the TTC is not liable for payments-in-lieu as specified under Section 27 of the Assessment Act. As of 1998, realty taxes and payments-in-lieu would include an equivalent amount for business tax.

In summary, the TTC is responsible to make payments-in-lieu of taxes at the commercial tax rate for property it owns with the exception of lands it owns that are associated with the subway or rapid transit operations. Additionally, any land leased by the TTC would be subject to the conditions of leasing provisions whereby it may be responsible for the payment of property tax. Further, properties owned by the TTC but leased to tenants are taxable.

Analysis of the 1998 Assessment Roll shows there are 53 properties with a total CVA of $160.9 million that are owned by the TTC that are exempt from taxation and not liable for payments-in-lieu.

Appendix A illustrates the impact of CVA for the TTC properties, and shows the split between taxable properties that are either leased or owned by the TTC, and properties for which the TTC is required to make payments-in-lieu.

Based on the 1998 assessment roll data, there are 138 assessed portions in the City of Toronto for which the TTC is responsible for taxes or payments-in-lieu of taxes. Total CVA is $250.7 million with a full CVA tax and payment-in-lieu of $19.1 million which represents a decrease over 1997 levels of $4.05 million, or 17.5%. However, under the CVA capping provisions, commercial/industrial properties with tax decreases received only a portion of their full decrease in 1998 (8.27% for commercial, 26.99% for industrial). As a result, 1998 taxes and payments-in-lieu are $22.52 million, resulting in a net decrease from 1997 of $672,320 million or -2.90%. The total 1998 taxes and payments-in-lieu for which the TTC is solely responsible (properties it leases and pays tax or owns for which grants are to be paid) are $11.43 million, a decrease from 1997 of $0.28 million, or -2.39%. There are 41 properties that are owned by the TTC but leased to other tenants and the total 1998 taxes payable on these properties is $11.1 million, which is recovered by the TTC through its lease arrangements.

A further report to be tabled at the Assessment and Tax Policy Task Force meeting of November 20, 1998 will provide data regarding all grantable properties in Toronto. The report will include the impact of the reassessment on other municipally-owned properties, agencies, boards and commissions as well as provincially and federally owned properties that are liable for payments-in-lieu of taxes.

Conclusion:

The impact of CVA on TTC properties is minimal for 1998. Although full CVA taxes would have

resulted in tax and payments-in-lieu decreasing $4.05 million or 17.5%, the capping provisions actually result in an overall decrease of 2.39% or $672,320.

Contact Name:

Paul Wealleans, 397-4708

Lynne Ashton, 397-4203

Appendix A

TTC Taxable and Grantable Properties

Property Type# of Portions1997 Assessment1997

Taxes / PILsCurrent Value AssessmentCVA

Taxes / PILs1998 Capped

Taxes / PILs Payable1998 Capped

Increase / (Decrease)

$%

PROPERTIES LEASED BY TTC

Vacant Land2$216,085$120,340$1,073,215$82,023$116,927($3,413)-2.84%

Commercial6$2,980,955$1,612,754$24,113,266$1,842,916$1,567,186($45,568)-2.83%

Industrial2$45,455$18,384$2,314,000$176,854$18,825$4412.40%

Public Transportation Facilities1$38,350$17,375$220,821$16,877$17,334($41)-0.24%

Other Government1$2,630$1,465$40,033$3,060$1,500$352.39%

Sub-total - Taxable12$3,283,475$1,770,318$27,761,335$2,121,730$1,721,772($48,546)-2.74%

TAXABLE PROPERTIES

Vacant Land1$70,185$39,087$1,486,875$113,638$40,025$9382.40%

Multi-Residential2$116,470$64,801$614,430$46,959$63,401($1,400)-2.16%

Commercial23$19,410,757$10,633,384$84,821,328$6,245,596$10,237,353($396,031)-3.72%

Parking Lots2$53,750$26,546$1,757,000$134,283$27,183$6372.40%

Industrial1$139,205$77,457$884,895$67,630$76,644($813)-1.05%

Public Transportation Facilities12$1,155,205$640,707$9,294,015$709,744$637,147($3,560)-0.56%

Sub-total - Taxable41$20,945,572$11,481,982$98,858,543$7,317,850$11,081,753($400,229)-3.49%

GRANTABLE PROPERTIES

Vacant Land3$89,640$47,573$1,744,660$133,340$48,714$1,1412.40%

Multi-Residential2$64,340$34,467$806,005$57,744$35,294$8272.40%

Commercial2$1,549,875$863,141$2,711,775$207,254$808,858($54,283)-6.29%

Parking Lots18$1,353,955$737,727$33,772,785$2,581,170$755,433$17,7062.40%

Industrial4$160,395$84,590$5,462,471$417,483$84,577($13)-0.02%

Public Transportation Facilities56$14,888,057$8,170,463$79,622,060$6,302,803$7,981,540($188,923)-2.31%

Other Government0$0$0$0$0$0$00.00%

Sub-total - Grantable85$18,106,262$9,937,961$124,119,756$9,699,794$9,714,416($223,545)-2.25%

Total - Leased, Taxable and Grantable138$42,335,309$23,190,261$250,739,634$19,139,374$22,517,941($672,320)-2.90%

Notes:

1. There are 53 properties with a CVA of $160.9 million that are exempt from taxes and are not liable for a payment-in-lieu.

2. Source: 1998 Assessment Roll

3. Property Type is based on property codes on 1998 Assessment Roll.