Payment in Lieu of Taxes for Provincial and

Federal Buildings

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Assessment and Tax Policy Task Force contained in the following communication (December 2, 1998) from the City Clerk:

Recommendation:

The Assessment and Tax Policy Task Force recommends that the report (November 13, 1998) from the Chief Financial Officer and Treasurer be amended by deleting the word "legislation" and inserting the word "regulation" in Recommendation No. (1), and that the report, as amended, be adopted.

Background:

The Assessment and Tax Policy Task Force on November 20, 1998, had before it a report (November 13, 1998) from the Chief Financial Officer and Treasurer respecting Utilisation Of Assessment Times Rate As An Alternative To The Method Prescribed In Section 157 of the Municipal Act For Calculation Of Payments In Lieu Of Taxes, and recommending that:

"(1)Council request the Provincial Government to approve legislation to increase the "head and bed" rate allowed in Section 157 of the Municipal Act from $75.00 to $208.50;

(2)the Association of Municipalities of Ontario (AMO) be requested to pursue recommendation 1 with the Province of Ontario; and

(3)all GTA municipalities be requested to endorse recommendation 1."

The Assessment and Tax Policy Task Force on November 20, 1998, also had before it the following communications/reports:

(a)(September 30, 1998) from Councillor Saundercook requesting the Task Force to review the matter of payment in lieu of taxes for provincial and federal buildings; and

(b)(October 9, 1998) from the City Clerk forwarding Council's action of October 1 and 2, 1998.

The Task Force requested the Chief Financial Officer and Treasurer to compile a comprehensive list of the Federal and Provincial properties that would be affected in the City of Toronto and report back to the Task Force.

The Task Force's recommendation is noted above.

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(Report dated November 13, 1998, addressed

to the Assessment and Tax Policy Task Force from

the Chief Financial Officer and Treasurer)

Purpose:

To provide information regarding the 1997 levy for public hospitals, universities and college and correctional institutions in the City of Toronto.

Financial Implications:

If a standard assessment times residential tax rate were calculated, City PIL's would increase by $17.6 million. If the existing head & bed rate was increased to $208.50, the City's PIL's would increase by $17.6 million.

Recommendations:

It is recommended that:

(1)Council request the Provincial government to approve legislation to increase the "head and bed" rate allowed in Section 157 of the Municipal Act from $75.00 to $208.50;

(2)That the Association of Municipalities of Ontario (AMO) be requested to pursue recommendation 1 with the Province of Ontario; and

(3)That all GTA municipalities be requested to endorse Recommendation No. (1).

Discussion:

Under the Assessment Act, universities, colleges of applied arts and technology, correctional institution, public hospitals, mental health facilities, and Provincial education institutions are exempt from paying property tax. However, Section 157 of the Municipal Act, allows municipalities to annually levy up to a maximum of $75.00 to each provincially rated hospital bed (public hospitals); $75.00 for each full time student (universities & colleges); and $75.00 for each resident place (correctional institutions). The capacity figures for these institutions which are used by the municipalities for this levy, are determined by the Province and forwarded to municipalities by the Ministry of Municipal Affairs. The grants are paid by the Provincial Government. The rates are specified in the Municipal Act, and were most recently changed from $50.00 to $75.00 in 1987.

Each year, the Minister of Municipal Affairs and Housing provides to the City updated capacity data for institutions designated under Section 157 of the Municipal Act. In 1998, the amount of tax and PIL generated for the City by this calculation is $9.8 million. The City normally receives payment for all of the amounts levied under Section 157.

If the City were able to use a standard assessment times tax rate calculation, the amount of tax generated would be substantially different. If the exempt assessment were considered residential, and were multiplied by the City's portion of the tax rate, the amount generated for 1998 would have been $27.4 million. Appendix 1 compares the amount received as a payment in-lieu of taxes to what the actual taxes on the property could be using the current value assessment times the city's portion of the residential tax rate. In order to generate an equivalent amount of tax and PIL under the "heads & beds" formula, the current rate of $75.00 would have to be increased to $208.50.

Changing the "head and bed" formula to an assessment-based calculation would require legislation amendments to both the Assessment Act and Municipal Act. A change to the "head bed" rate allowed under Section 157 of the Municipal Act requires an amendment to the Municipal Act.

Conclusion:

The amount of tax and PIL generated for the City under the current provisions of Section 157 of the Municipal Act is only 36 percent of the amount the City would levy if a standard "assessment" times "tax rate" calculation were used. If the exempt assessment were considered residential, and were multiplied by the City's portion of the tax rate, the amount generated for 1998 would have been $27.4 million (compared to the $9.8 million generated using the $75.00 "head and bed" rate). In order to generate an equivalent amount of tax and PIL under the "heads & beds" formula, it is recommended the Provincial government be requested to increase the current "head and bed" rate of $75.00 to $208.50.

Contact Name:

Bob Ripley, Manager, Accounting, Financial Billings & Meter Services, (416) 395-6730; Fax (416) 395-6703, Internet Email Address:bripley@city.toronto.on.ca.

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The Strategic Policies and Priorities Committee also had before it the following communications/reports which were forwarded to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting on December 15, 1998, and copies thereof are on file in the office of the City Clerk:

-(September 30, 1998) from Councillor Saundercook requesting the Task Force to review the matter of payment in lieu of taxes for provincial and federal buildings; and

-(October 9, 1998) from the City Clerk forwarding Council's action of October 1 and 2, 1998.