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HomeMy WebLinkAboutCS 19-02 Ciú/ 01 REPORT TO THE FINANCE & OPERATIONS COMMITTEE 67 Report Number: CS 19-02 Date:September 11 ,2002 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Recommendation: 1. That it is recommended that report CS 19-02 of the Director, Corporate Services & Treasurer be received for information and that: 2. The 2002 tax rates for the non residential properties for the City of Pickering be approved as contained in Schedule A to By-Law #6019/02 attached hereto; 3. The attached By-Law #6019/02 providing for the imposition of the Non Residential tax rates approved under Recommendation 1 above, be read three times and approved; 4. The Director, Corporate Services & Treasurer be authorized to issue the FINAL 2002 Tax Bills for commercial, industrial and multi-residential properties with a due date of October 29th, 2002; 5. The Director, Corporate Services & Treasurer be authorized to make any changes or undertake any actions necessary, including altering the due date, in order to ensure the tax billing process is completed; and, 6. The appropriate officials of the City of Pickering be given authority to give effect hereto. Executive Summary: Adoption of the above recommendations and passing the attached By-Law provides for the final 2002 tax billing for the commercial, industrial and multi-residential properties. Financial Implications: The attached By-law is for the FINAL billing of 2002 property taxes for commercial, industrial and multi-residential properties. This billing will raise approximately $19.8 million in property taxes for the City, Durham Region and School Boards. 68 Report CS 19-02 Date: September 11, 2002 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Page 2 Residential Realty Tax Classes and Tax Rates Background: The City of Pickering will soon be in a position to issue the final 2002 property tax bill in accordance with the capping provisions of Bill 140 Continued Protection For Property Taxpayers Act, passed by the Province on December 4,2000 and implemented through various regulations. This legislation was put in place to limit assessment reform related increases to 5% per year on commercial, industrial and multi-residential properties. Under this legislation, property owners facing increases due to property assessment reform had their increases "capped" (reduced). Conversely, those properties experiencing decreases were limited to that permitted under the legislation. This meant that taxes have to be "clawed back" from those experiencing decreases to fund the loss of revenue resulting from the capped increases. The funding of the capping protection is "paid for" on a Region wide basis. The Region of Durham acts like a banker in this process. In other words, the total cost of the capping protection for example the commercial tax class is paid for by the other commercial properties throughout the Region by having a portion of their related property tax decrease withheld (clawed back). As part of the Region wide process, City of Pickering uses a Provincial database program called "Online Property Tax Analysis" or OPT A to verify non residential assessment data. Every municipality within Durham Region uses the OPT A system. The OPTA system became operational in mid-July and taxation staff worked throughout the summer verifying the data and investigating the discrepancies. On August 28, 2002, the data in the OPT A data base was frozen which meant that the area municipalities would have completed their specific identification and were satisfied with the quality of the data to be use for billing purposes. On September 11, 2002, Durham Region Council approved Report #2002- F-55, and its corresponding By-Law 42-2002 where Durham Region Council approved the "clawback percentages" for the various property classes. This then allowed us to draft this report and recommendations. For this year, the City of Pickering issued an interim tax bill to these realty property tax classes with two installment dates (February 27th and April 26th). The proposed final installment date of October 29th, provides these tax classes with some additional time to pay their tax bill. Schedule A below, provides a breakdown of the final billing dates for the non residential tax classes from 1999 to 2001 . Schedule A Non Residential Final Billing Dates Year Number of Installments One One One Date 1999 2000 2001 December 15, 1999 October 13, 2000 October 29,2001 Report CS 19-02 Date: September 11, 2002 69 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Page 3 As Schedule A indicates, the proposed 2002 final due date follows the pattern established during the last three years. The one installment date will assist the City in managing its cash flow due to the fact a School Board payment of approximately $9.9 million is required on September 30th. 2002 Tax Rates for Non Residential Tax Classes The final 2002 tax rates for the non residential tax classes (commercial, industrial and multi-residential) are submitted to Council for approval in the form of the 2002 Non Residential Tax Levy By-Law (Appendix A). Table One below, provides a comparison of the property tax rates levied on the various non residential tax classes. Table One 2001 & 2002 Non Residential Property Tax Rates Property 2001 2002 % Tax Class T ax Rate T ax Rate Chanç¡e Commercial .03563111 .03625530 1.8 Office Buildinç¡ .05520550 .03625530 -34.3 Shoppinç¡ Centre .02904059 .03253900 12.1 Industrial .04825947 .05253551 8.9 Large Industrial .07717928 .06253915 -19.0 Multi-Residential .02992862 .03028512 1.2 As the above table indicates there were some significant tax rate shifts among the various tax classes especially for the Office Building, Shopping Centre and Large Industrial Tax Classes. The significant changes are mainly due to the change in tax ratio's and to a smaller degree the change in education rates. Table Two provides a breakdown of the tax ratios changes for this year. Table Two T ax Ratio Changes Property 2001 2002 % Tax Class Tax Ratio T ax Ratio Chanç¡e Large Industrial 3.6104 2.9000 -19.68 Office Building 2.2960 1.4819 -35.46 Shopping Centre 1.2078 1.3300 10.12 Multi Residential 2.4900 2.4000 -3.61 As Table Two indicates, the changes to the tax ratios translated into significant tax rate changes. (Tax ratios are used to define the rate or each property class in relation to the tax rate for the residential/farm class of property. As a benchmark, the residential 7 0 Report CS 19-02 Date: September 11, 2002 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Page 4 tax rate is set at 1.) The lowering of tax ratios was partially offset by the budgetary increases approved both by the City of Pickering and the Region of Durham. Impact of Tax Ratio Chanqes on the 2002 & 2003 Budqet In March of this year, Durham Region Council approved Report #2002-F-18 recommending a long term strategy regarding tax rate policy. The long term goals of the strategy are: elimination of the large industrial tax class and the multi- residential tax class be gradually reduced until it reaches the commercial class. The Large Industrial tax class attracted the highest taxes within the current property tax structure. The previous large industrial tax ratio of 3.6104 translated into Durham Region having the highest large industrial taxes within the GTA. In Durham Region, the large industrial property owners have formed the Large Industrial Alliance and they are continuing to pressure Durham Region elected officials and staff to reduce the tax rate through the tax ratio. As the tax ratio is reduced, the tax responsibility is shifted to the remaining property taxpayers and in Pickering the shift is made primarily to the residential property owner (being the largest property tax class). It is staffs understanding that the Large Industrial Alliance is continuing to ask for the large industrial tax ratio to be adjusted downward even after such a significant decrease this year. In addition, the previous large industrial tax ratio was above the Provincial average and therefore, Durham Region municipalities could not pass along municipal budget increases in the form of increased taxes to the industrial property owners. The reduction of the tax ratio this year, permits the passing of budgetary increases to the large industrial taxpayer. The Durham Region 2001 office building tax rate was the highest the GT A due to the high tax ratio. The decrease in the tax ratio for the 2002, have made our office building tax rate competitive within the GT A. The City of Pickering currently has fourteen properties classified under the multi-residential tax class category and the decease in the 2002 tax ratio had a minimal impact on this year's taxes. The decrease in the office building and large industrial tax rates have a negative impact on our current 2002 and 2003 fiscal plan. As Council is aware, the City is able to retain the education portion of the property taxes for the Payment-in-Lieu (PIL) properties such as the Ontario Power Generation (OPG) Nuclear Plant. The estimated loss for this year on PIL properties is estimated to be approximately $550,000. (A preliminary estimate of the shortfall was provided in Council report CS 12-02). It is anticipated that this shortfall may be offset by anticipated successful assessment appeals currently under way by the City. When Council passed the 2002 budget in April 2nd, of this year, taxation staff did not have the final 2002 education rates. These 2002 education rates were finalized during the last week of June. If the PIL tax loss was incorporated into the 2002 budget, the 2002 budget would have increased from 7.66% to approximately 9.8% increase. If the Region continues to decrease the large industrial tax rate, the City may lose an additional $250,000 for the 2003 taxation year. Report CS 19-02 Date: September 11, 2002 71 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Page 5 Therefore, property taxes may have to increase next year to make up for the Durham Region taxation policy changes. Recommendation 5 will allow the Director of Corporate Services & Treasurer some latitude, limited by Provincial legislation, in effecting whatever may be necessary in order to ensure the taxes are billed properly and in a timely fashion. Any revised due date established by the Treasurer would be governed by Section 399 subsection (6) of the Municipal Act that states that the due date is fixed as 21 days after the billing date. Bill 140 Statistics Bill 140 basically limits the 2002 tax increase to 5% of the 2001 taxes plus the municipal budgetary increase. In other words, Bill 140 puts a cap or ceiling on municipal tax increases. Therefore, for the shopping center class, their 2002 taxes are based on 2001 taxes plus 5% plus the budgetary increase. In other words, the increase in the shopping center tax ratio is offset by capping protection. The capped increase is paid for by those property owners who have their assessment related decrease clawed back or with held. The cost of capping protection is funded with-in the same property tax class. This means that the capping protection provided to the industrial tax class is "paid for" by clawing back or with holding assessment related property decreases from industrial property owners. The Region wide claw back percentages for 2002 are presented below in Table One. Table Three Comparison of Property Tax Claw back Percentages for 1998 to 2002 Col. A Col. B Col. C Col. D Col. E 1998 1999 2000 2001 2002 Property Class Multi-Residential 67.6% 66.5% 48.8% 100.0% 37.3% Industrial 79.9% 66.7% 60.3% 29.6% 20.7% Commercial 74.2% 57.7% 45.9% 59.2% 69.2% For 2002, an industrial property owner will be able to keep 79.3% (1 - 20.7%) of their assessment related decrease. The claw back percentage increased for the commercial tax class due to the change in tax ratio for the shopping center class and problems associated with the treatment of new construction properties. New Construction Properties In the 1999 Ontario Budget, the Provincial government made a commitment to level the playing field between newly constructed business properties and capped properties. The reason for the change was due to the fact a new business could be paying higher taxes then a comparable property located across the street receiving capping Report CS 19-02 Date: September 11, 2002 72 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Page 6 protection. The Province fulfilled its commitment by passing the "More Tax Cuts for Jobs, Growth and Prosperity Act" in December 1999, to change the tax treatment of newly-constructed business properties under the existing capping legislation. In December 2000, the Province passed Bill 140 the "Continued Protection for Property Taxpayers Act which expanded the definition of those properties that are eligible to be deemed as new construction and changed the methodology for the tax treatment of these properties. Under the new rules, taxes for properties deemed as newly constructed would be taxed at the the lower of: . Current value assessment multiplied by the tax rate. . The average level of taxation for up to six similar properties in the vicinity of the subject property. (Municipal Property Assessment Corporation (MPAC) is responsiblefor providing up to six comparable properties). The six comparable properties could be capped and therefore, indirectly, capping protection is being provided to the new constructed property. Under Bill 140, the Province expanded the definition of new construction to include the following significant changes: . Newly constructed commercial, industrial and multi-residential properties; . Commercial, industrial and multi-residential land that undergoes subdivision or severance; . Commercial, industrial and multi-residential properties that undergo a renovation or addition that increases the assessed value of the property by 50% or more; . Properties that change classificiation from an uncapped class to a capped class or between classes; . Property that used to be emempt from taxation and becomes taxable in the commercial, industrial or multi-residential class. With the expanded definition of the new construction category, more properties are now eligible for the potential beneficial tax treatment of new construction properties. Unfortunatley, current Provincial legislation, does not permit new construction properties to be clawed back. Therefore, the capping protection provided to properties deemed as new construction is funded by the existing property taxpayers and in turn increases the amount clawed back. Report CS 19-02 Date: September 11, 2002 7:1 Subject: 2002 Final Tax Due Dates for Commercial, Industrial and Multi- Residential Realty Tax Classes and Tax Rates Page 7 Attachments: 1. 2002 Final Tax Due Dates and Tax Rates for Commercial, Industrial and Multi- Residential Realty Tax Classes Prepared By: Approved I Endorsed By: Stan Karwowski Manager, Finance & Taxation < ~z~- Gillis A. Paterson Director, Corporate Services & Treasurer -'~~ ~ GAP:vw Attachment Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council , I 74 ATTACHMENT#LTOREPORT# ~SJ1-D~ THE CORPORATION OF THE CITY OF PICKERING BY-LAW NO. 6019/02 Being a by-law of The Corporation of the City of Pickering to Establish the 2002 tax rates for the Commercial, Industrial and Multi-Residential realty taxes and to levy the FINAL commercial, industrial and multi-residential taxes for the year 2002. WHEREAS it is necessary for the Council of The Corporation of the City of Pickering, . pursuant to the Municipal Act, R.S.O. 1990, ch.M.45, as amended, to pass a by-law to . levy a separate tax rate on the assessment in each property class; and, WHEREAS the property classes have been prescribed by the Minister of Finance under the Assessment Act, R.S.O. 1990, ch.A.31 , as amended and its Regulations; and, WHEREAS it is necessary for the Council of The Corporation of the City of Pickering, pursuant to the Municipal Act, to levy on the whole ratable property according to the last revised assessment roll for The Corporation of the City of Pickering the sums set forth for various purposes in Schedule "A", for the current year; and, WHEREAS the Regional Municipality of Durham has passed By-law No. 22-2002 to establish tax ratios and By-law 21-2002 to adopt estimates of all sums required by The Regional Municipality of Durham for the purposes of the Regional Corporation and By- law 25-2002 to set and levy rates of taxation for Regional Solid Waste Management and By-law No. 23-2002 to set and levy rates of taxation for Regional General Purposes and set tax rates on Area Municipalities; and, WHEREAS it is necessary for the Council of The Corporation of the City of Pickering pursuant to the Municipal Act, to levy on the whole ratable property according to the last revised assessment roll for The Corporation of the City of Pickering for the current year; and, WHEREAS an interim levy was made by the Council of The Corporation of the CitY of Pickering (pursuant to By-law No. 5951/02) before the adoption of the estimates for the current year; and, WHEREAS sub section 392(4) and (5) of the Municipal Act, as amended, permits the issuance of separate tax bills for separate classes of real property for year 2002. NOW THEREFORE THE COUNCil OF THE CORPORATION OF THE CITY OF PICKERING HEREBY ENACTS AS FOllOWS: 1. For the year 2002, The Corporation of the City of Pickering (the "City") shall levy upon the Property Classes (commercial, industrial and multi-residential) as set out in Schedule "A", the rates of taxation as set out in Schedule "A", for the City of Pickering, the Region of Durham and for Education purposes on the current value assessment as also set out in Schedule "A". Where applicable, . taxes shall be adjusted in accordance with Bill 140, as amended and its Regulations. 2. The levy provided for shall be reduced by the amount of the interim levy for 2002. . 3. The 2002 final tax calculations for the industrial, commercial and multi-residential realty tax classes is based on the "cut-off' date as of August 28, 2002. The decrease retained percentage for the realty class IS outlined below: 4. Multi residential Commercial Industrial 62.7082% 30.7558% 79.3314% 5. 75 The 2002 taxes owed for the commercial, industrial and multi-residential assessed properties shall be due in one installment on October 29, 2002 or as adjusted by the Treasurer. 6. Except in the case of taxes payable under Section 33 and 34 of the Assessment Act, RS.O. 1990, c.A31 , as amended, the percentage charge as a penalty for non-payment of taxes and monies payable as taxes shall be added to every tax or assessment, rent or rate of any installment or part thereof remaining unpaid on the first day of default and on the first day of each calendar month thereafter in which such default continues but not after December 31 of the year in which the taxes become payable, and it shall be the duty of a Tax Collector, immediately to collect at once, by distress or otherwise under the provisions of the applicable statutes all such taxes, assessments, rents, rates or installments or parts thereof as shall not have been paid on or before the several dates named as aforesaid, together with the said percentage charges as they are incurred. 7. If any section or portion of this By~lawis found by a court of competent jurisdiction to be invalid, it is the intent of Council for The Corporation of the City of Pickering that all remaining sections and portions of this By-law continue in force and effect. 8. Taxes shall be payable to the Treasurer, City of Pickering. 9. This By-law comes into force on the date of its final passing. BY-LAW read a first, second and third time and finally passed this 7th day of October, 2002. Wayne Arthurs, Mayor Bruce Taylor, Clerk 7R By-Law No. 6019/02 Schedule A 2002 Non Residential Tex Rates 2002 City Region Education Total Pickering Region Education TOTAL CVA Tax Rate Tax Rate Tax Rate Tax Rate WJ!!!!g WJ!!!!g !>!lli!Jg BILLING ~ Multi-Residential 47.550.075 0.00901342 0.0175417 0.00373000 0.03028512 428.589 834,109 177.362 1,440,060 Commercial 428,127,130 0.00556541 0.01083126 0.01985863 0.03625530 2,382,703 4,637,156 8,502,018 15,521,878 Commercial-Gene,al 3,523,818 0.00556541 0.01083126 XXXXXXX 0.01639667 19,611 38,167 57,779 Commercial - Excess Land 7,642,732 0.00389579 0.00758167 0.01390104 0.02537850 29,774 57,945 106,242 193,961 Commercial Vacant Land 9,185,000 0.00389579 0.00758167 0.01390104 0.02537850 35,783 69,638 127,681 233,102 Shopping Centres 208,737,885 0.00499493 0.00972102 0.01782305 0.03253900 1,042,631 2,029,145 3,720,346 6,792,122 Shopping Centres Excess Land 227,625 0.00349645 0.00680471 0.01247614 0.02277730 796 1,549 2,840 5,185 Office Building 9,903,976 0.00556541 0.01083126 0.01985863 0.03625530 55,120 107,273 196,679 359,072 Office Building Excess Land 69,612 0.00389579 0.00758167 0.01390104 0.02537850 271 528 968 1,767 InduStrial 107,850,793 0.00848688 0.01651697 0.02753166 0.05253551 913,704 1,778,230 2,964,080 5,656,015 Industrial Excess Land 4,448,911 0.00551647 0.01073625 0.01789558 0.03414830 24,542 47,765 79,616 151,923 Industrial Vacant Land 24,212,000 0.00551647 0.01073625 0,01789558 0.03414830 133,565 259,946 433,288 826,799 Large InduStrial 22,390,951 0.01089121 0.02119622 0.03045172 0.06253915 243,885 474,604 681,843 1,400,311 Large InduStrial- Excess Land 406,240 0.00707929 0.01377754 0.01979362 0.04065045 2,876 5,597 8,041 16,514 Parking Lot Full 67,000 0.00556541 0.01083126 0.01985863 0.03625530 373 726 1,331 2.429 Parkin9 Lots Excess Land 1,158,000 0.00389579 0.00758167 0.01390104 0.02537850 4,511 8,780 16,097 29,388 Pipelines 20,088,000 0.00461712 0.00898573 0.01730720 0.03091005 92,749 180,505 347,667 620,921 Total 895399748 $ 5,411,463 $ 10,531,661 $ 17,366,099 $ 33,309,223 Pavments in Ueu Prooertles Commercial Full 37,586,852 0.00556541 0.01083126 0.01985863 0.03625530 209,186 407,113 746,423 1,362,723 Commercial Full. Shared PIL 21,228,820 0.00556541 0.01083126 0.01985863 0.03625530 118,147 229,935 421,575 769,657 Commercial Full - Tax. Tenant 1.724,857 0.00556541 0.01083126 0.01985863 0.03625530 9,600 18,682 34,253 62.535 Commercial Gen 2,114,778 0.00556541 0.01083126 XXXXXXXX 0.01639667 11,770 22.906 34,675 Commercial Full - Excess Land 7,647.728 0.00389579 0.00758167 0.01390104 0.02537850 30.573 59.499 109.092 199,164 Commercial Gen. Vacant Land 1,965,000 0.00389579 0.00758167 XXXXXXXX 0.01147746 7,655 14.898 22.553 Commercial Vacant Land Full 0.00389579 0.00758167 0.01390104 0.02537850 Office8uilding Full.Shared PIL 19.611,375 0.00556541 0.01083126 0.01985863 0.03625530 109,145 212.416 389,455 711.016 Office Building Gen 0.00556541 0.01083126 XXXXXXXX 0.01639667 Office Building Excess Land Full 0.00389579 0.00758167 0.01390104 0.02537850 Office Building Excess Land Gen 0.00389579 0.00758167 XXXXXXXX 0.01147746 Industrial Full 896.945 0.00848688 0.01651697 0.02753166 0.05253551 7,612 14,815 24.694 47,121 Industriai Gen 0.00848688 0.01651697 XXXXXXXX 0.02500385 Industrial Full- Shared PIL 9,807.652 0.00848688 0.01651697 0.02753166 0.05253551 83.236 161,993 270.021 515.250 Induslrial Full- Tax Tenant 100.440 0.00848688 0.01651697 0.02753166 0.05253551 852 1,659 2.765 5,277 Ind. Exc.s. Land. Sha'ed PIL 6,712,237 0.00551647 0.01073625 0.01789558 0.03414830 37.028 72.064 120,119 229,211 Industrial Excess Land Gen 0.00551647 0.01073625 XXXXXXXX 0.01625272 Industrial Vacant Land Full 1.220.500 0.00551647 0.01073625 0.01789558 0.03414830 6,733 13,104 19.836 Industnal Vacant Land Gen 37.500 0.00551647 0.01073625 XXXXXXXX 0.01625272 207 403 609 Large Industrial Full - Shared PIL 36,331,950 0.01089121 0.02119622 0.03045172 0.06253915 395,699 770,100 1.106.370 2.272,169 Large Industrial Gen 0.01089121 0.02119622 XXXXXXXX 0.03208743 Large Ind. Exces. Land - Shared Pil 551,540 0.00707929 0.01377754 0.01979362 0.04065045 3.905 7.599 10,917 22,420 Total PILS 147,738.174 $ 1,031,348 $ 2,007.184 $ 3,235,686 6,274.219 Total Assessment 1.043,137.922 $ 6.442,811 $ 12.538,846 ~ $ 39,583.442 ~ Payments in lieu of taxes at the General Rate excludes the education tax rate component.