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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

on December 16 and 17, 1998

STRATEGIC POLICIES AND PRIORITIES COMMITTEE

REPORT No. 27



1Future of the Hummingbird Centre - Enactment of theProposed Hummingbird Legislation

City of Toronto

REPORT No. 27

OF THE STRATEGIC POLICIES AND PRIORITIES COMMITTEE

(from its meeting on December 15, 1998,

submitted by Councillor Case Ootes, Chair Pro Tem)

As Considered by

The Council of the City of Toronto

on December 16 and 17, 1998

1

Future of the Hummingbird Centre - Enactment of the

Proposed Hummingbird Legislation

(City Council on December 16 and 17, 1998, adopted this Clause, without amendment.)

The Committee recommends the adoption of the recommendations of the Board of Directors of the Hummingbird Centre for the Performing Arts contained in the following report (December 11, 1998) from the City Clerk:

Recommendations:

The Board of Directors of the Hummingbird Centre for the Performing Arts, on December 11, 1998, unanimously recommended to the Strategic Policies and Priorities Committee and Council:

(1)adoption of the report (December 10, 1998) from the City Solicitor wherein it is recommended that authority be granted to continue to pursue the process now engaged in by City and Board staff with the Province which would lead to the enactment of the proposed Hummingbird Centre legislation, based on the proposed model of legislation previously approved by the Council of the former Municipality of Metropolitan Toronto, subject to the modifications outlined in this report; and

(2)having regard that the Provincial Legislature will be considering the proposed legislation for the new Hummingbird Centre on the morning of Thursday, December 17, 1998, that the matter be considered by Council as the first item of Business on Wednesday, December16,1998.

Background:

The Board of Directors of the Hummingbird Centre for the Performing Arts, at its meeting held on December 11, 1998, had before it a copy of a report (December 10, 1998) from the City Solicitor addressed to the Strategic Policies and Priorities Committee.

The Strategic Policies and Priorities Committee also submits the following report (December10, 1998) from the City Solicitor:

Purpose:

(1)to provide a progress report respecting the requested enactment of the proposed Hummingbird Centre legislation, previously approved by the Council of the former Municipality of Metropolitan Toronto;

(2)to obtain authority to make the changes outlined below to the proposed Hummingbird Centre legislation, from those terms previously approved by the Council of the former Municipality of Metropolitan Toronto.

Funding Sources, Financial Implications and Impact Statement:

The proposed change to the realty tax status of the Hummingbird Centre, as outlined below, should the Centre not meet the requirements of the tax exemption provisions of the Assessment Act, also outlined below, could potentially result in the imposition of a tax liability on the City should the new Hummingbird Corporation, created by the enactment of the proposed Hummingbird Centre legislation, default in payment of any realty taxes assessed under its lease with the City.

Recommendation:

Authority be granted to continue to pursue the process now engaged in by City and Board staff with the Province which would lead to the enactment of the proposed Hummingbird Centre legislation, based on the proposed model of legislation previously approved by the Council of the former Municipality of Metropolitan Toronto, subject to the modifications outlined in this report. At its meeting of December 11, 1998, the Board of Directors of the Hummingbird Centre for the Performing Arts unanimously approved this recommendation.

Council Reference/Background/History:

By its adoption, as amended, of Clause No. 1 of Report No. 6 of the Environment and Public Space Committee at its meeting of April 24, 1996, the Council of the former Municipality of Metropolitan Toronto adopted the proposal for the restructuring of the relationship between the former Metropolitan Corporation and the Board of Management of the (then) O'Keefe Centre as set out in the document entitled "Report and Business Plan for the Board of Management of the O'Keefe Centre for the Performing Arts (December, 1995)" (the "Business Plan"), as amended by the transitional steps outlined in the body of the report, to be implemented substantially in accordance with the model described in the draft legislation attached to that report. Authority was granted for a request to be made to the Province of Ontario to enact legislation in accordance with that model and substantially in the form of the draft legislation appended to such report.

The Business Plan was premised on several fundamental conditions, including the continuation of the municipal property tax exemption, and the draft legislation incorporated a provision which would grant municipal tax exemption to any property to be vested in or leased by the new corporation created by the legislation.

The draft model of legislation also incorporated a provision whereby the new Hummingbird Corporation would be deemed to be an employer for the purposes of the Ontario Municipal Employees Retirement System Act ("OMERS"), thereby permitting the employees of the new corporation to continue to participate in the OMERS plan.

The Private member's bill incorporating the changes suggested by the Ministry as set out in this report, was tabled on December 10, 1998, and is scheduled for first reading in the Ontario Legislative Assembly on December 17, 1998. A copy of the bill is attached as Appendix "A".

Comments and/or Discussion and/or Justification:

Mr. Tony Silipo, MPP for Dovercourt, has agreed to sponsor, as a private member's public bill, the proposed legislation for the new Hummingbird Centre. Proposed draft legislation was forwarded by this office to Mr. Silipo who in turn forwarded it to the Ministry of Municipal Affairs and Housing (the "Ministry"), for review and comment by appropriate Ministry staff.

Overall, a favourable response was received from the Ministry to the proposed enactment of the legislation, with the following exceptions:

1.Realty Taxes:

The Centre is currently exempt from municipal taxation pursuant to section 66(2) of the City of Toronto Act, 1997 (No. 2) which provides that the Hummingbird Board's occupation and management and control of the Hummingbird Centre is deemed, for the purposes of paragraph 9 of section 3 (now section 3(1)) of the Assessment Act ("the Act") to be occupation, management and control by the City. Paragraph 9 of section 3(1) of the Act provides for an exemption from taxation for municipally owned property. Accordingly, the Centre is currently exempt and is not subject to municipal taxation, subject to the following.

Pursuant to recent amendments contained in section 27.1 of the Act, the Centre could potentially be liable to make certain payments in lieu of taxes. This section provides that the owner of a large commercial theatre that is located in the City of Toronto and that is not liable to taxation, shall pay the City of Toronto an amount calculated in accordance with the formula set out therein. "Large commercial theatre" is defined in that section of the Act such that it would include the Hummingbird Centre, if the Centre were used, other than by a charitable or non-profit organization, on a total of a least 183 days in the taxation year to present live performances with the intention of generating a profit. It is my understanding from Hummingbird staff that the Centre currently does not fall into that category and, therefore, does not currently make the prescribed payments in lieu of taxes. However, the potential that the Centre would have to make such payments exists should the mix of programming change in the future so as to bring the Centre within the definition of "large commercial theatre". A copy of all relevant legislation is attached as Appendix "B"

This new section of the Act also provides that the City of Toronto shall pass a by-law permitting a deduction from the above payments of all or a portion of the revenue from the use of the theatre other than by non-charitable or non profit organization that is used to fund not for profit activities in the theatre.

Staff in the Ministry have indicated that the Ministry is not prepared to support the enactment of a provision granting the Hummingbird Centre an exemption from municipal taxation, as set out in the draft legislation. The Ministry has however indicated that it would be willing to support the inclusion of a provision in the legislation such that the Centre could become tax exempt if it met the conditions set out in paragraph 27 of subsection 3(1) of the Act, which provides that land used as a theatre that contains 1,000 seats or more and that is used to present, on a total of at least 183 days in the taxation year, live performances of drama, comedy, music or dance, including opera or ballet, that are not presented with the intention of generating profit, shall be exempt from taxation. This provision of the Act provides that this exemption applies only if the theatre is owned and operated by a non-profit corporation without share capital. The provision the Ministry has suggested be included in the draft legislation would deem any property leased to the new Hummingbird Corporation and occupied for its purposes as set out in the draft legislation, to be owned by the Hummingbird for the purposes of that provision of the Act. The Centre would therefore become tax exempt should it meet the requirements of the above provision. The General Manager and Chief Administrative Officer, Hummingbird Centre for the Performing Arts, has advised that the Business Plan would still be viable should the Centre's tax liability change to that proposed by the Ministry.

Under the new structure, the proposal is that the Hummingbird Board would be a tenant of the City, having severed most of its financial and legal ties to the City. The risk therefore to the City in adopting the Ministry's proposal is that, should the Hummingbird Centre not meet the requirements of the tax exemption in any given year, and should the new Hummingbird Corporation default in the payment of its taxes, the City would be fully liable for the payment of those taxes. In order to minimize this risk to the City, it is recommended that provisions be incorporated in the lease agreement with the new Hummingbird Corporation, as follows:

(1)The new Corporation would be responsible for payment of any and all realty taxes, and that, upon failure by the new Corporation to make such payment, the lease may be terminated by the City and the City would regain possession of the Centre. As municipally owned property, the Centre would then become tax exempt pursuant to the provisions of the Act, unless and until it was leased to another tenant who would not be otherwise tax exempt if the tenant owned the property.

(2)The affairs and management of the new Corporation be structured such that any net income from operations of the Corporation be required to be placed into reserve funds, so that in fact the Corporation does not make a profit and the Centre would therefore be captured by the tax exemption provision outlined above. The Hummingbird currently has two reserve funds, the Stabilization Reserve Fund where operating surpluses are held in the event they are required to offset operating losses, and the Capital Reserve Fund, where ticket surcharges are held for capital improvements.

2.OMERS:

The current Board of Directors of the Hummingbird Centre is eligible to participate in OMERS pursuant to subsection 66(6) of the City of Toronto Act.

Recent changes to the OMERS legislation by the enactment of Bill 35 have resulted in the addition of a provision to that act whereby the Lieutenant Governor in Council could designate a person or association of persons as an "associated employer". An associated employer so designated is eligible to participate in the OMERS plan pursuant to the provisions of the OMERS Act.

As part of the Ministry's review of the draft Hummingbird legislation referred to above, staff have indicated that it is the Ministry's position that there be no reference to participation in OMERS in the Hummingbird legislation, but rather, the matter be dealt with by way of the above mentioned designation. Staff in the Ministry have indicated that Ministry staff would be willing to recommend that the designation be made. However, the decision whether or not to make the designation is a decision of Cabinet and not the Ministry. Although obtaining such a designation would have the same effect as the enactment of the provision incorporated in the Hummingbird draft legislation respecting participation in OMERS, the risk to the new Hummingbird Corporation is that the Lieutenant Governor in Council would ultimately not make the required designation. It should be noted however, that staff of the Ministry have indicated that in their opinion the risk is not great. However, if the designation were not made and the Hummingbird legislation were enacted without the pension provision, the new Hummingbird Corporation would not be eligible to participate in OMERS and those Hummingbird employees currently enrolled in OMERS would no longer be eligible to participate.

Conclusions:

Adoption of the above recommendations will result in the City being able to give effect to the Business Plan by proceeding with enactment of the required legislation.

Contact Name:

Alison Fowles, Solicitor, 392-8434.

--------

(Copies of Appendix A respecting the Private member's bill and Appendix B respecting all relevant legislation mentioned in the foregoing report, were circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Report for its meeting of December 15, 1998, and copies thereof are on file in the office of the City Clerk).

Respectfully submitted,

CASE OOTES,

Chair Pro Tem

Toronto, December 15, 1998

(Report No. 27 of The Strategic Policies and Priorities Committee was adopted, without amendment, by City Council on December 16 and 17, 1998.)

 

   
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