HomeMy WebLinkAboutCS 03/01
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REPORT TO COUNCIL
FROM:
Gillis A. Paterson
Director, Corporate Services & Treasurer
DATE: January 15, 2001
REPORT NUMBER: CS 03-01
SUBJECT: Bill 140 - Continued Protection for Property Taxpayers Act, 2000
RECOMMENDATION:
It is recommended that Report CS 03-01 of the Director, Corporate Services & Treasurer be
received by Council for information.
ORIGIN:
Director, Corporate Services & Treasurer
AUTHORITY:
The Municipal Act, RSO 1990
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FINANCIAL IMPLICATIONS:
Not applicable
EXECUTIVE SUMMARY:
On November 1 i\ a memo was sent from the Director, Corporate Services & Treasurer
regarding the introduction of Bill 140. The memo also included the Province's press release and
a compendium briefly explaining Bill 140. This report is an update and expands the discussion
into the City's 2001 Budgets and taxes.
BACKGROUND:
In 1998, the Province of Ontario introduced the new Ontario Fair Assessment System (OFAS).
Property was now going to be assessed at "current value," uniformerly across the Province. The
-purpose of the new assessment system was to eliminate the historical inconsistent measure of
property values across the Province. Prior to 1998, each municipality within Durham Region
used a different assessment base year for determining assessment. The new OF AS used
property values as of June 30, 1996, for the Province wide re-assessment. These property
assessment values based on the June 30, 1996 valuation date were used for the 1998, 1999 and
2000 taxation years.
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In November, 2000, the Ontario Property Assessment Corporation (OP AC) mailed out the
revised assessment notices on a Province wide basis. The revised assessment used June 30, 1999
as the valuation date. The June 30, 1999 valuation date will be used for property assessment for
the 2001 and 2002 taxation years.
A summary of the results of the re-assessment are found in table one. (The information reflected
under the column "new assessment" reflects the data from the returned assessment roll as
Report to Council CS 03-01
Date: January 15,2001
Subject: Bill 140 - Continued Protection for Property Taxpayers Act, 2000
Page 2
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provided on December 16th, 2000. The changes are directly attributable to the change in
valuation dates from June 1996 to June 1999. Taxation staff fielded over five hundreds queries
from local taxpayers regarding the revised re-assessment. Staff did spend some time explaining
the two appeal options which are the: Request for Reconsideration and Assessment Review
Board Appeals.
Table One
City of Pickering New Assessment
Increase
(Decrease)
%
Chan2e
Realty Tax Class*
OLD NEW
ASSESSMENT ASSESSMENT
Office Building $19,565,560 $19,634,745 $69,185 0.35%
Shopping Centre 230,065,717 212,055,066 -18,010,651 -7.82%
Industrial 127,596,620 153,336,000 25,739,380 20.17%
Large Ind 48,944,881 57,817,776 8,872,895 18.130%
Multi-Res 33,355,705 47,550,075 14,194,370 42.55%
Residential 4,803,880,535 5,428,632,584 624,752,049 13.00%
Managed Forests 1,402,395 1,851,100 448,703 31.99%
."",......
Commercial 451,017,724 506,55l.733 55,534,009 12.31 %
TOTAL $5.715.829.137 $6.427.429.079 $711.599,942 12.44%
*Excludes the exempt realty property tax class. This realty class includes property such as
schools and churches.
There are several keys points regarding the above information:
. The assessment numbers include "real assessment growth," such as construction as well
as general increases and decreases in property values.
. The decrease in assessment for the Shopping Center class is mainly due to a decrease in
the property valuation of a large shopping center complex. Assessment values for office
buildings, shopping centers are usually determined by rental income.
. The large increase in Industrial tax class is mainly due to a change in assessment value
for land. The per acre land value under the old assessment was $97,000 and the revised
assessment is $162,000.
. The Office Building class excludes a new office tower located at Pickering Parkway and
Liverpool Road.
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. The increase in the Multi-Residential tax class is mainly due to the "watering down" of
rent controls which has translated into higher rental income and therefore, has increased
the assessed value of the various properties.
Report to Council CS 03-0 I
Date: January 15,2001
Subject: Bill 140 - Continued Protection for Property Taxpayers Act, 2000
Page 3
Lel!:islation Chanl!:es - Son of Bill 79 - Bill 140 Continued Protection for Property
Taxpavers Act
After the municipal election, the Province tabled "son of Bill 79," the Continued Protection for
Property Taxpayers Act (Bill 140). The major thrust of the Act is to maintain the tax protection
provided to the Industrial, Commercial and Multi-Residential realty tax classes. Tax protection
was introduced originally in December 1998 (Bill 79), to mitigate the effects of large tax
increases as a result of property tax reforms introduced by the Provincial government in the early
part of 1998.
Bill 140 also introduced changes to: management of vacancies in their application to property
tax, property tax reductions due to hardship; and, technical amendments regarding the treatment
and billing of taxes. Many of the technical details regarding implementation of these changes are
missing and therefore the information presented below will be more of a general nature. The
information that is missing will come in the form of Provincial Government "Regulations". It
is interesting to note, that in Bill 140, that there are over 100 references regarding future
Regulations to be issued.
Business Property Vacancies
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Prior to Bill 140, any business property or unit that was classified as vacant received a reduction
in their tax rate of 30% for commercial or 35% for industrial. (On the returned assessment roll
for 2001 property taxation, all commercial and industrial properties are reflected as fully
occupied.) Previously, business property owners had to apply to OPAC for a vacancy tax status
if their property or units were vacant for the months of July to September. If they were vacant,
the property or unit would receive a tax break for the following year. (OP AC would usually send
out an assessor to verify the vacancy.) The business property owners complained that this system
was unfair and lobbied the government to change the system.
Bill 140 introduces a "real-time" approach to vacancy taxation management. The property
owner will now submit an application to the local municipality for a rebate. Applications
may either be filed during the year or up to February 28th of the following year. A key concern
for Finance staff is the verification of the vacancy after an application has been made in the
following year. There exists a potential for taxation revenue erosion. Until the Regulations are
issued, Finance staff can only speculate regarding the management of this program. In any event,
there will most likely be a significant increase in workloads of some staff for at least part of the
year.
Optional Relief from Hardship
Local municipalities will now have the option of providing property tax reductions or refunds to
owners of residential property who are in an economic hardship position. Municipalities would
determine the amount of relief and eligible criteria. School Boards would automatically share in
the relief and the upper tier municipally has the option of participating in this program.
At first glance this program appears to be one that could benefit the local taxpayers and can be
viewed as a social assistance program. However, from an administration perspective this
program could turn out to be a pandora's box. As with any social assistance program, a key
element regarding accountability is "income testing" of applicants. Finance staff have concerns
in this regard although we might employ criteria already in place with senior levels of
government. Taxation staff, in conjunction with staff from the local Durham Region
municipalities, will be developing a tax relief program.
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New 5% Cap
Bill 140 would limit property tax increases due to property assessment related reforms to the
commercial, industrial and multi-residential properties to 5% per year. The 5% cap will continue
for all future re-assessments. One of the more interesting features of the Bill 140 cap is that there
Report to Council CS 03-01
Date: January 15, 2001
Subject: Bill 140 - Continued Protection for Property Taxpayers Act, 2000
Page 4
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is no time limit on the cap and allows properties to re-enter capping protection due to Province
wide re-assessment changes. For example: a property receiving no capping protection this year,
but due to Province wide re-assessment in the future may find themselves as a candidate for
capping protection due to a substantial increase in assessment. Therefore, a property can now
exit and enter capping protection with re-assessment changes.
Municipal Budt!:etarv Increases
Under Bill 79, municipal levy increases (budget increases) could be added to the capped
properties tax bill. Therefore, the capped property tax classes continued to pay their "fair share"
of budgetary increases. Under Bill 140, there appears to be the possibility of a municipal levy
increase not being distributed to the capped classes. Bill 140 allows municipalities to add
budgetary tax increases to the capped classes if the existing tax ratio for that class is lower than
the benchmark "average" ratio as defined bv the Province.
An example may help to illustrate the previous statement. The Durham Region tax ratio for the
Multi-Residential class is 2.71 times that of the Residential tax class. In other words, for every
tax dollar a residential property owner pays, the multi-residential taxpayer would pay $2.71. The
2.71 tax ratio is the highest within the 905 regions. Therefore, staff are fairly confident that the
current 2.71 multi-residential tax ratio would be above the Provincial benchmark ratio. Under
this scenario, the budgetary increase for Pickering and the Region would not be added to the
multi-residential tax bill. Instead, the multi-residential portion of the increase would be re-
directed to the other realty tax classes. The Residential tax class is approximately 73.% of the
tax base and therefore, for every tax dollar that is re-directed - seventy-three cents flows to the
Residential tax class.
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Newspaper articles have referenced the term "hard cap." The hard cap term is basically when a
municipality can not pass a budgetary increase on to a capped property class. (This would occur
when the tax ratio for the class is above the provincial average.) As the above example
illustrates, the mulit-residential property class would fall under the hard cap. The introduction of
the hard cap, translates into lower rates of tax increases for the capped classes when compared to
the non capped residential property classes. Municipal budgetary increases would not be passed
on to the "hard capped" realty tax classes.
It appears from the preliminary information that we have received regarding Bill 140, that
the Residential Property Tax Class will experience the largest changes in property taxes.
ATTACHMENTS:
Not applicable
Prepared By:
ApprovedJEndorsed By:
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Stan Karwowski,
Manager of Finance
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Gillis A. Paterson,
Director, Corporate Services & Treasurer
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GAP:vw
Recommended for the consideration of Pickering
City Council
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Thomas J. Quinn, Chief Administrative Officer