Tenant Tax Notification

(City Council on November 25, 26 and 27, 1998, deferred consideration of this Clause to the next regular meeting of City Council to be held on December 16, 1998)

--------

(Clause 9 of Report No. 24 of The Strategic Policies and Priorities Committee)

The Strategic Policies and Priorities Committee recommends that:

(1)the Option titled "Group A" contained in the following report (November 13, 1998) from the Chief Financial Officer and Treasurer be approved as the method of notifying landlords and tenants of tax changes in 1998, which reads:

"Group A - Notices of Automatic Rent Reductions

(1)Mandatory - Multi-Residential$8,400.00

(2)Discretionary - Residential$106,326.00

Total$114,726.00

(2)the Chief Financial Officer and Treasurer be requested to prepare a uniform advertisement and notice of the tax changes for distribution to Members of Council to assist them in informing their constituents; and

(3)the appropriate civic officials be authorized and directed to take whatever actions are necessary give effect thereto.

The Strategic Policies and Priorities Committee submits the following report (November13,1998) from the Chief Financial Officer and Treasurer:

Purpose:

In response to the request by the Budget Committee, this report further clarifies the cost of the tenant tax notification program for 1998.

Recommendation:

That this report be received for information.

Background:

At its meeting on July 21 and 23, 1998, City Council adopted Clause 2 of Strategic Policies and Priorities Committee Report No. 13 entitled "Multi-Residential Property Class - Tax Policy Options." The report recommended, among other things, that all tenants be informed of any tax increases and decreases due to reassessment or tax policy changes by the City and that a plan for such notification be developed by the Chief Financial Officer and Treasurer and that a budget for this undertaking be produced and submitted to Council through the Budget Committee and Strategic Policies and Priorities Committee, after consultation with the Federation of Metro Tenants Associations ("the FMTA").

At its meeting on November 9, 1998, the Budget Committee had before it the report "ATenant Tax Notification" (November 4, 1998). The Committee requested the Chief Financial Officer to report to Council to further clarify the options available with regard to notifiying landlords and tenants of tax changes and to break out the cost for both the mandatory requirements and the discretionary options. The Budget Committee also recommended the deletion of advertising costs. These costs have been removed from the figures contained in this report

Comments:

The table below sets out the cost of providing the mandatory and discretionary notices for all tenants and landlords in the residential and multi-residential property classes as requested by Council. There are six different notices that could be mailed to landlords and tenants, depending on the tax change experienced by the property. The Tribunal has approved a form for Notices of Automatic Rent Reductions (Items 1 and 2 below) which must be used by the City. The estimated cost of the tenant tax notification program approved by Council at its meeting held on July 21 and 23,1998 is $429,054. These costs have been amended to exclude the media advertising costs as struck out by the Budget Committee. Appendix A has the details.

Contact Names:

Giuliana Carbone, 392-8065, Lynne Ashton, 397-4203, Paul Wealleans, 397-4208.

--------

Appendix A

The Strategic Policies and Priorities Committee also submits the following transmittal letter (November 11, 1998) from the City Clerk:

Recommendation:

The Budget Committee on November 11, 1998 recommended to the Strategic Policies and Priorities Committee and Council the adoption of the report (November 4, 1998) from the Chief Financial Officer and Treasurer regarding tenant tax notification, subject to the following:

(1)deleting "Communications - Newspaper Advertisements" in "Appendix 'C' Summary of Estimated Costs - 1998 Tenant Tax Notification", at a savings of $24, 346.00; and

(2)the Chief Financial Officer and Treasurer providing a report to Council outlining all available options.

Background:

The Budget Committee on November 10, 1998, had before it a report (November 4, 1998) from the Chief Financial Officer and Treasurer regarding tenant tax notification.

--------

(Report dated November 4, 1998, addressed to the

City of Toronto Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

This report provides information on the automatic rent reduction notices and notices of changes in municipal taxes which will be sent to all residential and multi-residential tenants for the 1998 tax year and requests that funds for this notification process be provided from corporate contingency.

Financial Implications:

In order to provide tax notices to all tenants, funds in the amount of $453,400.00 are required to be provided ($8,400.00 for mandatory notices and $445,000.00 for additional discretionary notices per Council's direction) from corporate contingency.

Recommendations:

(1)That Council approve the process for sending notices of 1998 property tax changes to all tenants as outlined in this report.

(2)That funds in the amount of $453,400.00 be provided from corporate contingency.

(3)That the funds in the amount of $453,400.00 be allocated for the increased level of service for annual tenant notification of tax changes and included in the Finance Department's 1999 Operating Budget if Council wishes to continue this extent of notification in 1999 and future years.

(4)That the appropriate civic officials be authorized and directed to take whatever actions are necessary to give effect to the foregoing.

Background:

At its meeting on July 21 and 23, 1998, City Council adopted Clause 2 of Strategic Policies and Priorities Committee Report No. 13 entitled "Multi-Residential Property Class - Tax Policy Options." The report recommended, among other things, that all tenants be informed of any tax increases and decreases due to reassessment or tax policy changes by the City and that a plan for such notification be developed by the Chief Financial Officer and Treasurer and that a budget for this undertaking be produced and submitted to Council through the Budget Committee and Strategic Policies and Priorities Committee, after consultation with the Federation of Metro Tenants Associations ("the FMTA").

Comments:

Under the provisions of the Tenant Protection Act ("the TPA"), the City is required to send notices of property tax decreases to landlords and tenants by December 15, 1998 where the tax decrease in 1998 is more than 2.49 percent. City Council adopted the recommendation of the Assessment and Tax Policy Task Force that the City expand the required level of service to notify tenants in all residential properties (including tenants occupying properties with less than seven units) of tax changes resulting from reassessment implemented in 1998. As a result, notices will also be mailed to tenants and landlords where the tax decrease is 2.49 percent or less (not an automatic rent reduction) and where taxes have increased (not an automatic rent increase; the landlord would have to apply for an above guideline increase).

Notices of Automatic Rent Reductions:

(1)The TPA provides for automatic rent reductions where:

(a)municipal taxes decreased by 2.49 percent or more; and

(b)there are seven or more units in the residential complex (i.e. multi-residential property tax class).

Municipalities are required under the Act to notify both landlords and tenants of these rent reductions. For 1998, the deadline for the City to provide these notices is December 15, 1998. Automatic rent reductions for eligible tenants would take effect January 1, 1999.

The Ontario Rental Housing Tribunal has produced a form that municipalities are required to use when notifying landlords and tenants about automatic rent reductions. A sample of the form to be sent to landlords is attached as Appendix B for information. A similar form must be used to notify tenants of automatic rent reductions. The Tribunal has also written a public information brochure entitled "Automatic Rent Reductions and Tax Decreases" for landlords and tenants but has not yet released the brochure for distribution. It is anticipated that this brochure will be reproduced by the City for inclusion with the Notices of Automatic Rent Reductions.

Capping tax increases at 2.5 percent in the multi-residential property class has significantly reduced the number of multi-residential properties that qualify for automatic rent reductions. Legislation requires that capping be funded within the property class and multi-residential properties with tax deceases have had their decreases reduced in order to fund the caps. There are 126 properties in the multi-residential property tax class (11,857 units) that received tax decreases of greater than 2.49 percent in 1998 (i.e. mandatory notices). The average 1998 tax decrease received by these properties is 3.16 percent, which will result in average automatic rent reductions of 0.63 percent.

There are 55,126 rented properties in the residential property class, (82,097 units) that received tax decreases of 2.49 percent or more in 1998. The average 1998 tax decrease received by these properties is 7.73 percent, which will result in average automatic rent reductions of 1.55 percent. Although only landlords and tenants of multi-residential properties are required to be notified under the Act, Council's direction in July 1998 will result in a total of 137,223 discretionary Notices of Automatic Rent Reduction being mailed by the City in 1998 to include other tenanted properties in the residential property class.

The cost of producing and mailing Automatic Rent Reduction notices is borne entirely by the municipality. The Tribunal has approved a form and produced a brochure, but will not be supplying the City with sufficient copies for all eligible tenants and landlords. As a result, the City must incur the expense of reproducing the forms and brochures for notices of tax decreases greater than 2.49 percent. The cost of producing and mailing 149,206 notices of Automatic Rent Reduction is estimated to be $104,593.00.

(2)Discretionary Notices - Tax Decreases Less Than 2.49 percent and Tax Increases:

In response to Council's direction, additional notices will be mailed to landlords and tenants of properties with tax decreases in 1998 of less than 2.49 percent. An information letter or brochure will be designed to inform tenants of the process by which they can have their rents reduced due to the decrease in taxes. Tax decreases of less than 2.49 percent do not result in automatic rent reductions. The tenant would need to either negotiate a reduction in their rent with their landlord, or must apply to the Tribunal for an order reducing their rent (the application fee is $45.00).

Notices are also to be mailed to landlords and tenants of properties that experienced a tax increase in 1998. Where taxes increase, rents do not automatically increase. Instead, the landlord would need to file an application with the Tribunal requesting a rent increase above the guideline (in 1998, the guideline is 3 percent). As part of filing the application, the landlord must pay a filing fee, and must provide information to tenants in the residential complex about the grounds for that application (including advising tenants that a property tax increase has occurred). In determining the rent increase to be allowed because of the property tax increase, the Tribunal is required to consider the portion of the tax increase which exceeds a certain percentage (three-year moving average inflation rate for municipal taxes and charges in Ontario; the rate for 1998 was 1.57 percent - O.Reg. 195/98).

There are no Tribunal-approved forms for notices of tax decreases less than 2.49 percent or tax increases. The Finance Department, in consultation with the Housing Division of the Community and Neighbourhood Services Department, will have to produce two separate forms and information packages to notify tenants of these tax changes.

The information packages will include information about landlord and tenant rights and obligations under the new TPA with respect to rent decreases and increases that may result from changes in municipal taxes. For tenants in multi-residential properties with tax increases, no tenant should face a large rent increase due to increases in municipal taxes since tax increases are capped at 2.5 percent for 1998, 1999 and 2000. However, there are tenants in residential properties whose rents may be affected by tax increases resulting from the reassessment since tax increases in the residential property class are phased-in, not capped. These tenants may also need to be informed of their rights under the TPA with respect to how these increases may impact on their rent (for example, tenants receiving tax increase notices need to understand that these notices do not mean that their rent automatically increases).

Discretionary Tenant Notices - Issues:

There are several issues that Council should be made aware of with respect to mailing the discretionary notices to tenants and landlords. There are limited benefits. Tenants receiving the notices of small tax decreases cannot automatically reduce their rent, and may need to file an application (at a cost of $45.00) to realize any benefit at all. This can be offset for sitting tenants with a maximum rent which is higher than the rent they currently pay. For example, the average rent for a two-bedroom unit in the City is $821.00 (1997). A tax decrease of 2.49 percent (the maximum amount on this type of notice) may result in a rent decrease of $4.00 per month; it would take almost a year of paying rent for the tenant to recover the cost of the application fee.

In addition, mailings to tenants in the former City of Toronto have resulted in confusion for many tenants, where feedback from tenants ranged from confusion as to whether the notice was a tax bill to be paid, there was incorrect data on the assessment roll or concerns that it was an inappropriate use of tax dollars.

A notice indicating that a unit has had a tax increase does not necessarily mean the tenant will receive an automatic rent increase, however, it is possible that recipients may draw that conclusion and tenants may end up paying more rent than they should. As mentioned earlier, the landlord cannot increase the rent automatically as a result of a tax increase. The landlord must file an application with the Tribunal, and as part of that process must provide notice to the tenants about the tax increase (likely the same information that would be on the notice of tax increase). In other words, if the City had opted not to send notices of Tax Increase, tenants would either be notified by their landlord about the increase as part of the application process, or tenants would not be notified because the landlord has decided not to increase the rent.

Tenanted properties in the residential class could experience large tax increases even with the phase-in, but landlords must apply to the Tribunal to increase rents above the guideline. Due to the capping of tax increases for properties in the multi-residential class, and the legislated method for converting tax changes to rent changes (multiply by 20 percent), the maximum impact of a tax increase on rent will be .5 percent and may be too small to warrant an extra allowance even if the landlord were to file an application with the Tribunal.

There are also concerns regarding the accuracy of the tenant information on the assessment roll. Due to the transient nature of tenants and the lack of regular tenant information updates by the Ministry of Finance's Regional Assessment Offices, the tenant information on the assessment roll is not accurate. As a result, the notices will include the name of the assessed tenant as set out on the roll but will also be addressed to the "The Occupant". It is anticipated, based on the experience in the former City of Toronto, that 10 percent of all tenant notices will be returned as undeliverable. It was not possible to determine whether the remaining notices were read by the tenant or discarded.

Tenant Notices - Proposed Process and Estimated Cost:

The estimated cost of providing the notices is set out below:

The average estimated cost per notice is $0.75, which includes postage, envelopes, paper, as well as the design and printing of three landlord and tenant information brochures. The notices will be produced and mailed by an outside printing firm, with data supplied by the City. A total of 520,109 notices will be mailed to landlords and tenants across the City at a total cost of $453,400.00. Of this amount, 100,462 notices will be mailed to owners/landlords and 419,647 notices will be mailed to tenants.

The information for the notices, including the names and addresses of both tenants and landlords, will be obtained from the 1998 Assessment Roll. The assessment roll includes individual tenant names and apartment unit numbers. However, due to concerns regarding the accuracy of this data, the notices will include the name of the assessed tenant as set out on the roll but will also be addressed to the "The Occupant".

Ontario Rental Housing Tribunal:

The Ontario Rental Housing Tribunal currently provides information to the public through local offices (former Rent Control Offices) at various locations in the Greater Toronto Area. These offices will continue to provide the client services similar to those provided by the former Rent Control Offices, including the provision of information regarding landlord and tenant laws, administration of applications concerning rent increases, rebates and landlord and tenant matters, and investigation of complaints about illegal rents or charges. The information is given to both landlords and tenants.

The Tribunal can be reached 24 hours a day by calling a toll-free number. Staff at the Tribunal have advised that they will be adding an additional line to respond to the influx of inquiries that will occur when municipalities across Ontario begin sending out the notices of automatic rent reduction to meet the December 15th deadline. It is recommended that all inquiries about automatic rent reductions be referred to the Tribunal.

Tenant Hotline:

It is anticipated that the mailing of these notices will generate a significant number of inquiries from tenants and landlords. Staff in the local tax offices can provide information regarding property tax changes. However, they do not have the expertise to provide detailed information about the new rules under the Tenant Protection Act or other tenant and landlord issues. In addition, the deadline for mailing the mandatory Notices of Automatic Rent Reductions of December 15, 1998 coincides with the mailing of the City's first supplementary billing and preparation for the 1999 interim billing. Due to CVA and the changes that have occurred for all taxpayers this year, tax office staff have been responding to an unprecedented number of inquiries relating to property tax issues. The additional task of providing information related to tenant/landlord issues will be onerous and will result in reallocating tax office staff to non-tax requirements.

Staff in the Housing Division of the Community and Neighbourhood Services Department are very knowledgeable about landlord and tenant issues, but the Division does not have the capacity to handle large-volume inquiries, nor does it have the tax information needed to respond to questions about changes to property taxes. The Division occasionally receives calls from tenants regarding landlord/tenant issues, but most calls are referred to the FMTA.

The City currently provides assistance to tenants through the funding of the Tenant Hotline Service which is administered by the FMTA. The primary function of the Tenant Hotline is to provide free information and counselling to tenants regarding their rights and obligations in their landlord and tenant relationships, and about any changes in the existing tenant-related legislation. The information and counselling given usually covers topics such as eviction, termination of tenancy by tenants, maintenance responsibilities, rent increases, discrimination, privacy and conversion and/or demolition of rental units. Other services provided by the Tenant Hotline include information/advice to tenants who wish to form a tenants' association, and referrals to specified agencies such as the four local Tribunal Customer Service offices, the City's property inspection office, and legal aid clinics.

The FMTA has advised that they are already fielding an overwhelming number of calls regarding the TPA and are not able to assist the City in responding to inquiries that will result from the mailing of the tenant notices. The FMTA has suggested that Tim Welch and Associates may be able to provide, on a fee for service basis, tenant communication services required. A proposal by this firm to provide tenant communication services has been submitted. Their proposal to provide these services, at an estimated cost of $27,520.00, is as follows:

(a)provide a dedicated tenant hotline services and hire two staff persons for a period of 8 weeks to provide information to tenants;

(b)conduct several tenant information sessions at various locations across the City;

(c)provide advice and assistance to the City in preparing forms and information packages; and

(d)provide a training session for councillors and their staff on the communication work being done, as well as an overview of the automatic rent reduction provisions of the TPA if requested.

Information for Landlords:

An increased number of inquiries at local area tax offices from landlords, particularly as a result of the discretionary notices, is also anticipated. As with tenant inquiries, if landlord inquiries venture into areas such as the application process, landlord and tenant obligations, and other matters not related to just the tax notices themselves, staff will have to refer the callers to either to the Tribunal or to an information and advocacy group. Landlord organizations, such as the Greater Toronto Apartments Association (GTAA), have already begun an education program for landlords about mandatory requirements under the TPA for property tax decreases. GTAA has advised that they are willing to handle landlord inquiries referred by City staff, however, they acknowledge that this will create additional work -- especially to revise existing education materials so as to include information about discretionary notices. The GTAA has advised that, with $10,000.00 funding from the City, they would also be able to provide the following consultation and inquiry services:

(a)hire one staff person for a period of 10 weeks following the City's mailing to respond to inquiries;

(b)revise existing educational materials and literature;

(c)prepare and mail a landlord fact sheet about the discretionary notices to be mailed to all landlords by the City;

(d)conduct one large public seminar for all landlords (not just members);

(e)put in a dedicated telephone line to answer inquiries; and

(f)provide advice and assistance to the City in preparing forms and information packages.

It is recommended that funding be provided in the amount of $37,520.00 for the tenant and landlord information services set out above. Also, as part of the notification process, staff will prepare and implement a communication strategy to ensure that landlord and tenant organizations and related stakeholders are aware of the notices, and can therefore be prepared for any calls they may receive. These groups include the Ontario Rental Housing Tribunal, Community Legal Clinics and Housing Help Centres. This will include newspaper advertisements in the major dailies, community newspapers and ethnic newspapers, informing landlords and tenants of this mailing. The estimated cost of these advertisements is $24,346.00.

Summary of Costs:

Appendix C summarizes the funding required to notify all tenants of the tax changes due to reassessment as set out in this report. The total cost of this notification is $453,400.00.

Tenant Tax Notices - 1999 and Future Years:

If Council requests that all tenants be notified of tax changes annually, funds in the amount of $453,400.00 should be allocated as an annual expenditure and included in the Finance Department's Operating Budget.

Conclusion:

City Council directed that tenants in all residential properties (including tenants occupying residential properties with less than seven units) be informed of tax changes resulting from reassessment implemented in 1998. In order to provide tax notices to all tenants, funds in the amount of $453,400.00 are required to provided from corporate contingency. In order to respond to the anticipated increase in landlord and tenant inquiries that will result from this mailing, it is recommended that tenant information services be provided by Tim Welch and Associates, and inquiry services for landlords be provided by the Greater Toronto Apartment Association on a fee for service basis. The cost of these services is $37,520.00 and is included in the total funds requested.

Contact Names:

Lynne Ashton 397-4203, Paul Wealleans 397-4208.

Insert Table/Map No. 1

appendix a - 1998 tenant tax notification - tennat tax notices

--------

Appendix B

Sample Automatic Rent Reduction Form - Ontario Rental Housing Tribunal

Notice of Rent Reduction

Municipal Taxes Reduced

Rent Reduction

This rent reduction is allowed under section 136 of the Tenant Protection Act because the municipal property taxes for the residential complex have decreased.

Tenants do not need permission from the landlord or the Ontario Rental Housing Tribunal (the Tribunal) to reduce the rent by this amount. However, tenants and landlords should discuss the calculation of the dollar amount of the rent reduction before the rent is reduced.

Important

Information(1)[Name of municipality} is not responsible for deciding whether the amount of the rent reduction set out above is correct or whether the rent has been reduced by the correct amount.

(2)If the landlord or tenant believes the percentage rent reduction set out above is not correct, they have until March 31, 1999 to file an application with the Tribunal for an order to vary the amount of the rent reduction.

(3)If the rent the tenant pays is not reduced in accordance with this notice, the tenant can apply to the Tribunal for an order requiring the landlord to pay them a rebate. The tenant must apply by December 31, 1999.

(4)If the tenant has already received a Notice of Rent Increase effective after December 31, 1998, it may or may not take into account the rent reduction set out above. The tenant and landlord should discuss what the tenant is required to pay on the effective date of the Notice of Rent Increase.

(5)For information about how the rent reduction set out in this notice affects the rent for a rental unit, or about applying to vary the amount of the rent reduction, please call the Tribunal at 1-888-332-3234. For information about how the percentage rent reduction was calculated, please call [name of municipality] at [phone number].

--------

Appendix C

Summary of Estimated Costs - 1998 Tenant Tax Notification

(City Council on November 25, 26 and 27, 1998, had before it, during consideration of the foregoing Clause, the following communication (November 23, 1998) from the City Clerk:

Recommendation:

The Assessment and Tax Policy Task Force on November 20, 1998, recommended to Council the adoption of the recommendation contained in the report (November 11, 1998) from the Budget Committee, addressed to the Strategic Policies and Priorities Committee.

The Task Force directed the City Clerk to advise Council that Recommendation No. 1 contained in Clause No. 9 of Report No. 24 of The Strategic Policies and Priorities Committee is out of order in that Council has already decided in July of this year to notify all tenants:

Background:

The Assessment and Tax Policy Task Force on November 20, 1998, had before it a report (November 4, 1998) from the Chief Financial Officer and Treasurer regarding tenant tax notification.

The Task Force also had before it the decision from the November 17, 1998 meeting of the Strategic Policies and Priorities Committee.)

Respectfully submitted,

MAYOR MEL LASTMAN,

Chair

Toronto, November 17, 1998

Christine Archibald

Tel. (416) 392-7031