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HomeMy WebLinkAboutCS 18-03 Ciú/ 0# -- Report Number: CS 18-03 Date: March 21, 2003 CONFIDENTIAL REPORT TO FINANCE & OPERATIONS COMMITTEE From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: Filing of Assessment Appeals Recommendation: 1. It is recommended that Report CS 18-03 of the Director, Corporate Services & Treasurer be received and that; - 2. Council authorize the Director, Corporate Services & Treasurer to proceed to direct the firm of Poole Milligan LLP to file Assessment Appeals for 2003 for Roll Number 1801 020 022 06800 0000 (OPG - Pickering Nuclear Facility) and for Roll Number 1801 020 022 09100 0000 (901 McKay Road) and any other assessment appeals necessary to protect the financial interests (tax base) of the municipality; 3. Council confirm the actions of the Director of Corporate Services & Treasurer in the filing of the Assessment Appeals for Roll Number 1801 020 022 06800 0000 for the years 1999 to 2002 inclusive, and for Roll Number 1801 020 022 09100 0000 for the year 2002 and all related litigation matters; and, 4. the appropriate officials of the City of Pickering be authorized to take the necessary action to give effect hereto. Executive Summary: Several property tax agents in various parts of Ontario have recently brought Motions forward to the Assessment Review Board (ARB) asking the ARB to dismiss assessment appeals filed by the Tax Collector or Treasurer of the municipality. In their motion, the Agents state that in their opinion, staff did not have the approval of Council to file the appeal. While these Motions have not received a ruling as yet and while the by-law appointing the Treasurer should be sufficient it has been recommended by our Legal Counsel that the above Recommendations should be adopted by Council before March 31, 2003 in order to ensure the City's interests are protected. -- Confidential Report to Finance & Operations Committee CS 18-03 Date: March 21,2003 .-.. Subject: Filing of Assessment Appeals Page 2 Financial Implications: The filing of these appeals will protect the City's financial plan for the current and future years. The 2003 Budget currently includes an estimated $870,000 as additional revenue due to the OPG appeal. The cost of the appeals is funded from the Assessment Appeal Reserve in the Corporate Services Department and therefore, there is no direct impact on the 2003 tax levy. Background: The City's primary financial resource is the property tax base which funds approximately 62% of the City's 2003 current expenditures. In recent years in municipalities across Ontario many commercial and industrial taxpayers have hired consultants to appeal their assessment which in some situations has resulted in a decrease in property tax revenue. For the 2002 taxation year, assessment reductions in Pickering (due to Assessment Appeals and Minutes of Settlement) were approximately $17.7 million which is equivalent to a loss of 78 residential homes (based on an average assessment of $225,000). The City must be in a position to be both reactive and proactive in dealing with this situation. .-.. Currently, the City is able to retain the education property taxes for Payment-in-Lieu (PIL) properties. The education component as shown in Table One represents a significant revenue gain for Pickering. Table One Breakdown of 2002 Property Tax Components By Selected Property Classes T ax Class City Education Region % % % Commercial 15.4 54.8 29.8 Industrial 16.2 52.4 31.4 Larç¡e Industrial 17.5 48.7 33.8 As the above table indicates, for commercial properties, the City, including the education taxes will be able to retain over 70.2% of the property taxes. Obviously, it is in the City's best interest to maximize its PIL revenues. The two roll numbers specifically addressed in Recommendation 2 are PIL properties for taxation purposes. Recommendation 2 will authorize the Treasurer to proceed to direct the firm of Poole Milligan LLP to file a protective defensive appeal for the OPG property roll number 1801 020 06800 0000 for 2003 and to continue our investigative appeal for roll number 1801 020 022 09100 0000 located at 901 McKay Road. This Recommendation has been reviewed with our lawyer Richard Poole who concurs. - Confidential Report to Finance & Operations Committee CS 18-03 Date: March 21,2003 - Subject: Filing of Assessment Appeals Page 3 Recent Challenqes to Municipal Authority During the last few years, municipalities have become more diligent and proactive regarding the management of the property tax base as evident in Pickering's situation with the OPG appeal. With the elimination of various Provincial grants, municipalities have focused on maximizing their assessment tax base by filing assessment appeals. Property tax agents are now throwing up "road blocks" questioning the authority of the Treasurer of the local municipality to file assessment appeals. There is currently a motion at the Assessment Review Board (ARB) to have the appeal dismissed because the Treasurer filed the appeal without Council's specific authority. Regardless of the outcome at the ARB, it is expected that the decision will be appealed to the Ontario General Court. As a precautionary measure, our lawyer has advised us to have Council approve Recommendations 2 and 3. Attachment 1 provides a brief explanation of the current situation. Investiqative Appeal- 901 McKay Road JIIIIIto.. Attachment 2 provides a briefing note on the City's appeal of the property at 901 McKay Road. As the briefing note indicates, the Region of Durham filed an assessment appeal in 2001 trying to reduce the assessment of the Water Control Pollution Plant. After hearing nothing from the Region, the City appealed the 2002 assessment to protect its interests. Current Status of the Appeal The City has filed a Statement of Issues regarding the assessment deficiencies of the plant. Based on the current information received from MPAC, it appears that the plant is under assessed and expansions have not been included. Also, there is a water pipe going from the plant into Lake Ontario that has not been assessed. From the City's Planning Department, staff have learned that the water pipe is 1.1 kilometers in length and 3050mm in diameter. It is staff's understanding that the construction cost of the plant was well over $100 million but the facility's current assessment value is $34.3 million. (Any additional property tax revenue as a result of the appeal would be applied to the 2004 or 2005 taxation year). - The City has asked the Assessment Review Board to allow the City's property assessment consultant to inspect the property to verify that all of the assessable items have been recorded in the assessment records and that the values and property tax classifications are correct. In other words, the City's approach and philosophy has always been fair and equitable treatment of all taxpayers which includes the Region of Durham. In fact our Statement of Issues has formally requested a "detailed inspection" of the plant. On March 7, 2003, our lawyer wrote the City stating that the Region of Durham is "vigorously opposed to the City's request for an inspection". On March 13, - - - Confidential Report to Finance & Operations Committee CS 18-03 Date: March 21,2003 Subject: Filing of Assessment Appeals Page 4 2002 our lawyer received correspondence from the Region's Legal Counsel requesting confirmation of our authority to file the assessment appeal. Attachments: 1. Correspondence from AMTCO dated February 28, 2003 - Appeals to the ARB 2. Briefing note on Durham Water Control Pollution Plant Prepared I Approved I Endorsed By: ,~¿~/ = Gillis A. Paterson Director, Corporate Services & Treasurer GAP:vw Attachments Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Counci / ,I Th ATTACHMENT#..L.TOREPORT# C!.5' /fj",o3 - To Educate and Serve with Integrity February 28, 2003 To: Members of the Association of Municipal Tax Collectors of Ontario From: The AMTCO Board of Directors Re: Appeals to the Assessment Review Board, under the Assessment Act - It has come to our attention through various sources that a number of property tax agents are requesting certain appeals, filed by municipalities, be dismissed on the basis that staff did not have the authority to file the appeal. Specifically it appears to be appeals signed by a staff member (Tax Collector, Assessment Review Officer or Treasurer). The agents are stating that Council approval is required on each and every appeal. We understand that the ARB has heard one of these dismissal requests and a decision has not yet been released. The purpose of this memo is to simply make you aware of the situation, in light of the approaching appeal deadline of March 31st. It is the recommendation of the AMTCO Board that you consult with your individual legal advisors concerning any changes you may want to consider in this regard. Should any further relevant information come our way, we will share it with you as soon as possible. Respectfu lIy, grace L. :Mars/i - Grace L. Marsh, President Association of Municipal Tax Collectors of Ontario ATTACHMENT #...2- TO REPORT#.li:../7-0J ,-.. Briefing Note Duffin Creek Water Pollution Control Plant (DCWPCP) 901 McKay Road Roll Number 18 01 020 022 09100 Current Situation . In 2001, (prior to March 31st) , the Region of Durham appealed the 2001 assessment of the DCWPCP stating that the assessment was too high. (The DCWPCP is jointly owned by the Regions of York and Durham. Staff are not aware of the ownership percentage between the two parties.) . ONE YEAR LATER (March 28, 2002), after hearing nothing from the Region, the City of Pickering filed a defensive assessment appeal for the 2002 taxation year. The appeal was filed in order to protect the City's interests and options. . It is staff's understanding that sometime after the City filed its appeal, the Region of Durham withdrew its appeal of the plant. We are not certain of time as we were not directly advised. Backqround Information - . The DCWPCP property is classified as a payment-in-lieu (PIL) for taxation purposes. Therefore, the City retains the education portion of the property taxes. For every dollar the City collects, the City retains $0.70 (based on 2002 tax rates.) Obviously, it is in the City's best interest to maximize the property's assessment value because of the favorable tax treatment to the City. . During the OPG appeal, the City discovered that generally speaking, PIL properties were not thoroughly assessed by MPAC. In other words, the regular taxable properties are the top priority. As a matter of fact, the City asked MPAC to conduct a thorough audit of the OPG Pickering facility and their audit revealed that there were at least 12 buildings/structures that were not assessed/missed. In addition, taxation staff have found several errors on the assessment roll for the Federal Airport Lands . The previous owner of this property was the Ontario Clean Water Agency or OCWA. (OCWA is a Provincial Crown Agency.) As such municipalities traditionally did not pay much attention to the assessment of Provincial and Federal properties. The Next Step - . Pickering staff believe that based on MPAC's record on assessing PIL properties and in-exercising financial due diligence, it would be prudent for - the City to ensure that the property is fairly and accurately assessed. The site inspection will determine if the property is properly assessed. The site inspection involves doing an audit by comparing the existing buildings/structures to MPAC's cost cards. In addition, the audit will also ensure that the value as stated in MPAC's cost cards fairly represents an accurate assessment value. . Our experience of the OPG nuclear assessment appeal found that the structure had been under assessed and or incorrectly assessed. Staff believe that all property owners should be assessed properly to ensure equity in the property taxation system. . It is staff's understanding that the Municipality of Clarington is currently dealing with an assessment appeal with St. Marys Cement and is trying to have this property's assessment value increased. In addition, the City of Oshawa has one staff person dedicated to assessment review and the City is currently involved with the GM plant assessment appeal. Analysis - . The City of Pickering filed its appeal (one year later) after the Region of Durham appealed this property's assessment value. Pickering staff felt they had a duty and responsibility to protect the interests of the Pickering taxpayers. . The City of Pickering is currently in a limited growth scenario which has reduced the positive benefits of assessment growth associated with property taxation and therefore budgets. By pursuing property tax equity (paying fair share of taxes) the City finds itself in an unique position of increasing assessment where it is able to retain seventy cents for every tax dollar billed. In other words, for every dollar increase in PIL assessment - you would have to increase regular taxable assessment by $4.61. Another way to view the positive tax treatment is from the perspective of budgetary tax levy. In order to offset a 1 % increase in the tax levy, the City would require an increase in regular taxable assessment of $48.8 million. To generate the same amount of taxes, the City would only require an increase in PIL assessment of $10.7 million. -