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TABLE OF CONTENTS

REPORTS OF THE STANDING COMMITTEES

AND OTHER COMMITTEES

As Considered by

The Council of the City of Toronto

at its Special Meeting

on July 21 and 23, 1998

STRATEGIC POLICIES AND PRIORITIES COMMITTEE

REPORT No. 12

1Provincial Property Tax System



City of Toronto

REPORT No. 12

OF THE STRATEGIC POLICIES AND PRIORITIES COMMITTEE

(from its meeting on April 7, 1998,

submitted by Mayor Mel Lastman , Chair)

As Considered by

The Council of the City of Toronto

at its Special Meeting

on July 21 and 23, 1998

1

Provincial Property Tax System

(City Council at its Special Meeting on July 21 and 23, 1998, received this Clause.)

(Note:

City Council on June 3, 4 and 5, 1998, by its adoption, without amendment, of a Notice of Motion by Councillor Adams, seconded by Councillor Augimeri, cancelled the June22 and 23, 1998, Special Council Meeting on assessment and tax policy issues and rescheduled such meeting to July21and23, 1998.)

(City Council on May 13 and 14, 1998, deferred consideration of this Clause to the Special Meeting of Council to be held on June 22 and 23, 1998.)

--------

(Clause No. 1 of Report No. 7 of the Strategic Policies and Priorities Committee)

(City Council at its Special Meeting on April 28 and May 1, 1998, deferred consideration of this Clause to the next regular meeting of Council to be held on May 13, 1998.)

--------

(Clause No. 12 of Report No. 4 of the Strategic Policies and Priorities Committee)

(City Council on April 16, 1998, deferred consideration of this Clause to the Special Meeting of Council to be held on Tuesday, April 28, 1998.)

The Strategic Policies and Priorities Committee:

(1)recommends the adoption of Recommendation (2) embodied in the following transmittal letter (March 26, 1998) from the Assessment and Tax Policy Task Force as follows:

"(2)that the Province of Ontario be requested to:

(a)end the business education tax rate that forces Toronto businesses to pay more education tax than other businesses in Ontario; and

(b)re-evaluate in 1998, commercial and industrial properties, with the idea of having an average of the 1996 and 1998 figures as being the property assessments to be used.";

(2)submits without recommendation, the following Recommendation (1) embodied in the aforementioned transmittal letter to Council:

"(1)that the following resolution be adopted:

WHEREAS there have been problems identified with the methodology utilized by the Province of Ontario in the creation of the new Current Value Assessment (CVA); and

WHEREAS highest and best use is an unfair assessment tool; and

WHEREAS there is insufficient time before the return of the Tax Roles (April30) to explore meaningful measures for long term solutions to assist those hardest hit by the negative impacts of CVA in the business community; and

WHEREAS it is generally believed that Graduated Commercial Rates would result in an unfair and unworkable tax system;

THEREFORE BE IT RESOLVED that the Province of Ontario be requested to defer implementation of the commercial, industrial, residential and multi-residential components of CVA for at least one year to allow time to explore measures for long term solutions."

The Strategic Policies and Priorities Committee submits the following transmittal letter (March 26, 1998) from the Assessment and Tax Policy Task Force:

Recommendations:

The Assessment and Tax Policy Task Force on March 23, 1998, recommended to the Strategic Policies and Priorities Committee and Council:

(1)that the following resolution be adopted:

Whereas there have been problems identified with the methodology utilized by the Province of Ontario in the creation of the new Current Value Assessment (CVA); and

Whereas highest and best use is an unfair assessment tool; and

Whereas there is insufficient time before the return of the Tax Roles (April 30) to explore meaningful measures for long term solutions to assist those hardest hit by the negative impacts of CVA in the business community; and

Whereas it is generally believed that Graduated Commercial Rates would result in an unfair and unworkable tax system;

Therefore be it resolved that the Province of Ontario be requested to defer implementation of the commercial, industrial, residential and multi-residential components of CVA for at least one year to allow time to explore measures for long term solutions"; and

(2)that the Province of Ontario be requested to:

(i)end the business education tax rate that forces Toronto businesses to pay more education tax than other businesses in Ontario; and

(ii)re-evaluate in 1998, commercial and industrial properties, with the idea of having an average of the 1996 and 1998 figures as being the property assessments to be used.

The Assessment and Tax Policy Task Force reports, for the information of the Strategic Policies and Priorities Committee and Council, having requested the Chief Financial Officer and Treasurer to:

(1)report to the Strategic Policies and Priorities Committee and Council, on the resolution set out in the foregoing recommendation No. (1);

(2)report back to the Assessment and Tax Policy Task Force:

(i)on whether or not the City should examine an assessment system based on the average of a property's 1997 assessment (appropriately normalized), 1988 MVA assessment, and 1996 CVA assessment, and the legislative amendments that would be required to effect such;

(ii)with information as to the number of sales in each category taken into account in establishing assessed values in each category, and also the number of vacancies for commercial and industrial properties during the assessment period;

(iii)on the taxation of golf courses in the City; and

(iv)on whether or not another supplementary tax bill based on 1997 rates can be sent out;

(3)report back to Assessment and Tax Policy Task Force on the idea of City Council requesting the Province to:

(a)implement business reassessment on the basis of value in current use; and

(b)provide City Council with the power to cap total business property tax increases for individual properties; and

(4)work with the Province in detailing the regulations and legislative changes that may be required and report to the Strategic Policies and Priorities Committee and Council on the implementation of the above.

Background:

The Assessment and Tax Policy Task Force on March 23, 1998, had before it communications from the following with respect to the Provincial Property Tax System:

-(March 19, 1998) from Councillor McConnell; and

-(March 23, 1998) from Councillor Bossons.

The Chief Financial Officer and Treasurer gave a slide presentation on her findings with respect to the Commercial Graduated Tax rates, and provided copies of her report titled "1996 CVA City of Toronto Commercial Properties, Graduated Tax Rate Options", as well as a Summary of the Commercial Graduated Tax Rate Scenarios Preliminary Estimates.

Mr. Larry Hummel, Director of Appraisal Services, Property Assessment Division, Ontario Ministry of Finance, gave a slide presentation and provided copies of a document titled "Property Valuation Overview - Ontario Fair Assessment System".

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(Communication dated March 19, 1998, addressed to the

Assessment and Tax Policy Task Force, from

Councillor McConnell)

The Task Force on Assessment and Policy has done a great deal to clarify the impact of the provincial government's new tax system.

I have met with business leaders and constituents across my ward and clearly their understanding of the impact of the changes is growing. That is why, on March 12, the business people from the Chinese Chamber of Commerce in my ward marched in the streets to oppose C.V.A.

Several other business associations in Don River will be taking to the streets in the next two weeks. Business leaders in my neighbourhood are very, very angry.

They are angry about all the issues that you and our colleagues have discussed over the last several weeks: punitive education taxes; a commercial property tax class that does not distinguish between a mom and pop corner store and a 50-storey bank tower; and a hastily administered assessment system that is riddled with errors.

The business leaders in Don River are not simply angry at the province's tax system that put them in this mess. They are angry at City Council for not taking a sufficiently clear and strong stand. I believe it is time for Council to take that stand, and that we cannot wait until the next scheduled Council meeting.

I believe that most Councillors agree that there are some steps that we must take to address the most pressing issues. I recommend that the Task Force on Assessment and Tax Policy adopt the attached resolution at their next meeting.

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(Motion Regarding the Provincial Property Tax System

by Councillor McConnell)

WHEREAS the Ontario Government is the only body that can create meaningful subclasses under the new tax system; and

WHEREAS most of the new tax threatening businesses is composed of the province's education tax levy; and

WHEREAS the province's hastily-implemented system has resulted in confusion, errors and oversights that are significant enough to threaten the survival of some small businesses; and

THEREFORE BE IT RESOLVED:

(1)That the City of Toronto call on the Province of Ontario to create a separate "retail strip" subclass that would allow a separate tax rate for small businesses.

(2)That the City of Toronto call on the Province of Ontario to end the punitive business education tax rate, that forces Toronto businesses to pay more education tax than any other businesses in Ontario.

(3)That the City of Toronto demand a one-year deferral of any implementation of the new tax system, while the errors and problems of the system are resolved.

(4)That these matters be presented to a special meeting of Council to be held prior to the 4th of April, and that this special meeting resolve itself into Committee of the Whole to hear deputations from the public.

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(Communication dated March 23, 1998, addressed to

the Assessment and Tax Policy Task Force, from

Councillor Bossons)

It is clear that the effects of reassessment and other provincially mandated business property tax changes will be to destroy many independent small and mid-size businesses in retail strips throughout the New City. Key strategic businesses - particularly in the arts - which attract tourists to Toronto will be devastated.

The provincial Minister of Finance, Mr. Ernie Eves, has made it clear that these effects are as unacceptable to the Province as they are to us. We consequently have an opportunity to work with the Province to re-design the tax changes and their implementation. I believe City Council should agree on a set of principles to govern business property tax reform and on a strategy to implement these principles.

Principles for Business Tax Reform:

(1)Our first priority should be to prevent business closures. No business should face a property tax increase that forces it to shut down.

(2)Business property taxes should be based on businesses' ability to pay taxes out of their current income. Any tax increase based on hypothetical forecast of profits from redevelopment of a property should be postponed until such time as redevelopment actually occurs.

(3)No class of business property should benefit from business tax reform through shifting taxes to other classes.

(4)Within any class of business property, tax changes that may be reversed in a subsequent reassessment should be prevented.

Implementation Strategy:

(1)Staff should be requested to recommend subclasses of commercial and industrial property for which different average property tax rates would be required to raise the same total tax revenue from each class as at present. At a minimum, such subclasses should include:

office buildings

small retail stores

arts-related businesses (galleries, cinemas, theatres, bookstore, etc.)

malls

others, as needed

(2)In analyzing the impact of graduated tax rates within each subclass, staff should examine the equity of such graduation and the potential for tax avoidance (e.g., through creating business condominiums).

(3)City Council should request the Province to implement business assessment within the City of Toronto on the basis of value in current use, as recommended by the Crombie "Who Does What" panel. Recognizing that this will take time to implement, Council's request should be that this be done by the time of the next general reassessment (2001).

(4)In the interim, pending such reassessment, Council should cap any business property tax increase on any individual property at a maximum of 30 percent, phased in over the next three years at 10 percent each year. To do so, Council should request the Province to provide it with the power to effect this and to ensure that this cap applies to the total of education as well as municipal property taxes.

Recommendations:

(1)That City Council adopt the tax reform principles and implementation strategy set out above.

(2)That City Council request the Province (1) to implement business reassessment on the basis of value in current use by the time of the next general reassessment, and (2) provide City Council with the power to cap total business property tax increases for individual properties.

(3)That staff be requested to work with the Province in detailing the regulations and legislative changes that may be required and to report to Council on the implementation of all of the above.

The Strategic Policies and Priorities Committee also submits the following communication (April 7, 1998) from Councillor Duguid:

I understand that the Committee will be considering the above item at 3:00 p.m. this afternoon. Regrettably, due to a previously scheduled commitment, I will be unable to attend and have put my concerns about Recommendation No. 1 of Item 13 in writing for your consideration.

While I recognize the difficult position many members of Committee are in as they consider how CVA impacts on the residents of your respective Wards, I consider it a priority to move forward with residential property tax reform without delay.

Without doubt, the adjustments to CVA will impact negatively on some of the older areas of Toronto. For that reason, I support the proposal of property tax relief for low-income seniors and how-income disabled persons. However, I cannot support any proposal that would delay justice being served on residential property owners who have been paying more than their fair share of property taxes for over a decade.

The increases that property taxpayers in older parts of the City will be experiencing would quite likely pale when compared to the cumulative amount of extra property taxes that those benefitting from CVA have paid in the past.

I would like to advise the Committee of my opposition to a one year delay or any other proposal that would pre-empt those property owners entitled to a decrease from receiving that decrease immediately. These residents have waited as successive provincial governments under intense pressure from the former City of Toronto backed off property tax reform time and time again. In 1992, when Metro Council finally reached a compromise, pressure from the former City of Toronto forced the Provincial Government of the day to back down. As a result, six years later, the property tax inequities still exist.

With each delay, the injustice of our property tax system worsens. I would ask Committee members to remember that justice delayed is justice denied.

While a compromise would have been appropriate and acceptable to my residents six years ago, I believe that after so many years of injustice, they would be fiercely opposed to any delay in receiving fair and equitable treatment.

(City Council at its Special Meeting on April 28 and May 1, 1998, had before it, during consideration of the foregoing Clause, communications from the following individuals in support of capping the tax increase on residential properties at 2.5percent, as proposed for commercial and rental properties:

(i)(April 9, 1998) from the President, The South Rosedale Ratepayers' Association;

(ii)(Undated) from Mr. F. Altmann, Toronto;

(iii)(April 16, 1998) from Ms. C. Helmstadter, Toronto; and

(iv)(April 16, 1998) from Ms. J. Puncher, Toronto.)

(City Council also had before it, during consideration of the foregoing Clause, a submission on Current Value Assessment (undated) from Mr. C. Kotoulas, Toronto.)

Respectfully submitted,

MEL LASTMAN,

Chair

Toronto, April 7, 1998

(Report No. 12 of The Strategic Policies and Priorities Committee, consisting of one Clause only, was received by City Council at its Special Meeting on July 21 and 23, 1998.)

 

   
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