Exemption from Phase-in By-law -

188 Eglinton Avenue East ( North Toronto - Ward 22)

The Strategic Policies and Priorities Committee recommends the adoption of the following report (December 4, 1998) from the Chief Financial Officer and Treasurer:

Purpose:

This report provides additional information regarding the communication received by the Assessment and Tax Policy Task Force at their meeting on November 20, 1998 from Goodman and Carr, solicitors for 188 Eglinton Inc., requesting that the property at 188 Eglinton Avenue East be excluded from the provisions of the City's 1998 residential phase-in policy.

Financial Implications:

Exclusion of 188 Eglinton Avenue East from the residential phase-in will result in an estimated $287,467.00 in taxes foregone in 1998.

Recommendations:

(1)That City Council approve a policy that, pursuant to subsection 372(6) of the Municipal Act (the "Act") , that where there has been a change in the classification of a property between the 1997 and 1998 tax years, and the property has been converted to residential uses for all of 1998, such property should be excluded from the phase-in of assessment-related tax increases and decreases under By-law No. 472-98; and

(2)That authority be granted for the introduction of a bill in Council substantially in the form of the draft by-law attached hereto as Appendix A.

Comments:

At its meeting on November 20, 1998, the Assessment and Tax Policy Task Force had before it a communication from Goodman and Carr, solicitors for 188 Eglinton Inc., the owners of the property at 188 Eglinton Avenue East. In their communication, the property owners are requesting that Council pass a by-law under subsection 372(6) of the Act, which will exclude this property from the phase-in program adopted by City Council for the residential/farm property class in July, 1998. A copy of their communication is attached for information.

The property was previously used and assessed as an office building. However, late in 1997, the conversion of the portion of the property above street level into 20 residential condominium units was completed and individual unit owners are scheduled to take occupancy later this year. The street level portion of the property continues to be used for commercial purposes. The total taxes for the property in 1997, when it was assessed as an office building, were $676,137.00. The property was returned on the 1998 assessment roll as an office building, with a current value of $4,727,000.00. The 1998 taxes originally levied on the property were $645,300.00.

The Regional Assessment Office has agreed to change the classification for the condominium portion of the property for all of 1998 from commercial to residential, with no change to the total current value assessment for the property. As a result of this change in classification, the revised current value taxes for the property would be $242,250.00, a decrease of $457,289.00. Of the total decrease for the property, $359,334.00 relates to the condominium portion. Under the provisions of the phase-in by-law adopted by City Council in accordance with the provisions of the Act, this property would be subject to the phasing-in of this tax decrease. If the phase-in is applied to this property, the average taxes for each condominium unit in 1998 will be approximately $16,400.00. By the end of the phase-in period, these taxes would be reduced to approximately $2,000.00 which would also be the amount of taxes payable if the property were excluded from the phase-in by-law.

Subsection 372(6) of the Act permits a municipality, by by-law, to exclude a property from the application of the phase-in, where there has been a change in the use or character of the land, or in its classification such that, in the opinion of the council of the municipality, it makes the phase-in inappropriate for such land. In this case, the change of use occurred in 1997, was not reflected for 1998 with the resulting in tax inequity for purchasers of units in the building. This section of the Act permits a municipality to correct this anomaly.

Discussions with the Regional Assessment Office staff have indicated that, while there may be other properties for which this exclusion could apply, the numbers do not appear to be significant. Exact numbers of properties are not available. In addition, the exclusion provision would only apply to those properties whose classification changes in 1998. Any properties that face similar circumstances of class change for 1999 or 2000 would not be affected by the provisions of the phase-in by-law since their phase-in would not have started in 1998.

The City Solicitor has prepared the attached draft by-law for approval should Council support the recommendations contained in this report. The attached draft by-law, if enacted, would exclude all properties which were re-classified as residential/farm for the 1998 taxation year. This approach would preclude the need for additional by-laws to further preclude any property which fits the above-mentioned criteria.

Conclusions:

This property's use changed from an office building to a condominium late in 1997 but was not reflected on the returned 1998 assessment roll and as a result the condominium portion was taxed at the commercial rate for 1998. The Regional Assessment Office has agreed to change its use for 1998 to residential but due to the phase-in provisions adopted by Council, and its CVA, taxes for 1998 would be approximately $16,400.00 per unit compared to approximately $2,000.00 without the phase-in. Since the issue is an unforeseen change in use erroneously reflected on the 1998 assessment roll creating a huge tax discrepancy, it would be appropriate to exclude this property from the phase-in by-law.

It is not expected that there are many similar situations. Any property that would be subject to a classification change from commercial to residential/farm for 1999 or 2000 would not be subject to the phase-in by-law, as the phase-in would not have commenced in 1998.

Contact Names:

Paul Wealleans, 397-4208

Lynne Ashton, 397-4203

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(Communication dated November 19, 1998, addressed to

Councillor Adams from Ms. Yvonne J. Hamlin, Goodman and Carr,

Barristers and Solicitors.)

Re:Assessment and Tax Policy Task Force

Meeting:November 20, 1998 @ 9:30 a.m.

Subject:188 Eglinton Avenue East, Toronto

We act on behalf of 188 Eglinton Inc., the owners of the property municipally known as 188 Eglinton Avenue East.

We write this letter to request that we be added as an agenda item to the meeting of your Committee scheduled to commence at 9:30 a.m. tomorrow, November 20, 1998.

The building on the subject property was converted from office to residential condominium use during late 1997. The final improvements to the building were made during 1998 and individual unit owners are scheduled to take occupancy later this month.

It has recently come to our attention that the assessment on this building for the 1998 taxation year was returned as an office building. Accordingly, purchasers' solicitors are discovering that the apportionment of the 1998 taxes among the unit owners would be based on an office-taxation rate. In particular, each of the purchasers' proportionate shares of realty taxes is some three times higher than had been estimated on the basis of occupancy for residential uses. It has become apparent, over the last few weeks, that purchasers are reluctant or unable to proceed with transactions so long as the property is assessed as an office building, insofar as they can no longer afford the property taxes and, in many cases, they would no longer qualify for their CMHC mortgages, which were based on expected realty tax burdens appropriate to residential uses.

We have had numerous conversations with the Toronto Assessment Office, and they have agreed to enter into Minutes of Settlement with us that would leave the value untouched on the assessment roll but would change the classification of the property from commercial-office to residential.

The problem with which we are concerned is that the City of Toronto has enacted a phasing by-law for residential property tax decreases. We are concerned that the decrease occasioned to the taxes for this property would, as a result of that by-law, need to be phased in over a five-year period.

It is clearly not the intention of the legislation that has been adopted by the Province, nor, we are sure, the intention of the City of Toronto, that first-time residential purchasers would carry an office-tax burden for property tax purposes because they bought in a building that had been converted from office uses.

Bill 106, which was given Royal Assent by the Provincial Government on May 27, 1997, contains the provisions relating to phase-in of tax increases and decreases. In particular, that Bill introduces section 372(6) which permits, where there has been a change in the classification of a property under the Assessment Act that in the opinion of the Council of the municipality makes a phase-in in respect of such land inappropriate, Council to, by by-law, exclude such land from the application of the phase-in.

Accordingly, we are seeking from your Committee a direction that staff prepare an appropriate report and draft by-law for the consideration of Council at its next meeting which, we understand, is scheduled for November 25, 1998.

We apologize for the urgency of this matter, but time is of the essence with respect to the occupancy of these purchasers.

Thank you for your kind attention to this matter.

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Authority:

Intended for first presentation to Council:

Adopted by Council:

CITY OF TORONTO

Bill No.

BY-LAW No. [By-law number]

To exclude Certain Properties from the Application of By-Law 472-1998,

being a By-law "To Phase-in 1998 Assessment-Related Tax Increases

and Decreases for the Residential Property Class"

WHEREAS subsection 372(1) of the Municipal Act, as amended (the "Act") provides that the council of a municipality, other than a lower-tier municipality, may pass a by-law to phase-in a 1998 Assessment-Related Tax Increase or Decrease to be determined in accordance with section 372.1 of the Act; and

WHEREAS at its special meeting of July 21 and 23, 1998, City Council enacted By-law No. 472-1998, being a by-law "To Phase-in 1998 Assessment-Related Tax Increases and Decreases for the Residential Property Class"; and

WHEREAS subsection 372(6) of the Act provides that if there has been a change in the use or character of any land or in its classification under the Assessment Act that, in the opinion of the council of the municipality, makes a phase-in or the continuation of a phase-in in respect of such land inappropriate, the council may in the by-law passed under subsection 372(1) of the Act or in another by-law exclude such land from the application of the phase-in; and

WHEREAS paragraph 7 of By-law No. 472-1998 provides that if there has been a change in use or character of any real property in the residential property class or in its classification under the Assessment Act that makes a phase-in or the continuation of a phase-in in respect of such property inappropriate, Council may by by-law exclude such property from the application of the phase-in.

WHEREAS subsection 39.1(1) of the Assessment Act, as amended, provides that a person who has received a notice of assessment under that Act may request the assessment commissioner to reconsider the person's assessment including the classification of the person's land; and

WHEREAS subsection 40(1) of the Assessment Act, as amended, provides that any person may complain in writing to the Assessment Review Board that, inter alia, the classification of the person's land or another person's land is incorrect;

The Council of the City of Toronto HEREBY ENACTS as follows:

1.A property shall be excluded from the application of By-law 472-1998, being a by-law "To phase-in 1998 Assessment-Related Tax Increases and Decreases for the Residential Property Class", upon notice thereof being provided to the City of Toronto by the Assessment Review Board, if:

(a)the property was incorrectly classified for the 1998 taxation year, as belonging to a property class other than the residential/farm property class, and

(b)as a result of a request for reconsideration pursuant to section 39.1 of the Assessment Act, or as a result of a complaint to the Assessment Review Board pursuant to subsection 40(1) of the Assessment Act, the property was re-classified as belonging to the residential/farm property class for the 1998 taxation year.

2.This by-law shall be deemed to have come into force on the 1st day of January, 1998.

ENACTED AND PASSED this day of, A.D..

MayorCity Clerk

The Strategic Policies and Priorities Committee also submits the following communication (December 2, 1998) from the City Clerk:

The Assessment and Tax Policy Task Force on November 20, 1998, had before it a communication (November 19, 1998) from Ms. Yvonne J. Hamlin, Goodman and Carr, Barristers and Solicitors respecting 188 Eglinton Avenue East and requesting that the classification of the property be changed from commercial-office to residential.

The Task Force took the following action:

(1)requested the Chief Financial Officer and Treasurer, in consultation with the City Solicitor, and, if necessary, Ms. Yvonne Hamlin, to report on the request contained in the communication (November 19, 1998) from Ms. Yvonne J. Hamlin, Goodman and Carr, Barristers and Solicitors, and to take the necessary action to ensure implementation of the change without phasing in of the tax decrease; such report to also include any outstanding matters that the City has with the developer; and

(2)requested the Chief Financial Officer and Treasurer to submit the report to the December15,1998, meeting of Strategic Policies and Priorities Committee for consideration by City Council on December 16, 1998, or earlier if possible.

Ms. Yvonne Hamlin addressed the Assessment and Tax Policy Task Force.

The Task Force's recommendations are noted above.