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Home My WebLink AboutCS 09/99 - otI \' OF "/(' ;oW% iE :LIil. ~ ~ REPORT TO COUNCIL FROM: Gillis A. Paterson Director, Corporate Services & Treasurer DATE: December 7, ]999 REPORT NUMBER: CS 09/99 SUBJECT: Loss of Federal Payments-in-Lieu Revenues RECOMMENDATION: That Report CS 09/99 of the Director, Corporate Services & Treasurer be received by Council for infollllation and that: ]. the amount of $142,577 be transferred from the Reserve for Contingencies to ] 999 General Revenues to offset the loss of] 998 Federal P]L revenue. ORIGIN: Director, Corporate Services & Treasurer - AUTHORITY: \ The Municipal Act, R.S.O., 1990 as amended FINANCIAL IMPLICATIONS: The three year loss of Federal I'lL revenue is estimated to be $387,000. The revenue loss is the result of the Federal Government unilaterally capping its property assessment refOlm increases. EXECUTIVE SUMMARY: Not Applicable BACKGROUND: .- The Province and the Federal Government provide payment-in-lieu of taxes (I'lL's) directly to lower-tier municipalities as compensation for the loss of taxation that result from govelllment ownership of the applicable properties. In 1997, the P]L properties classified as commercial DID NOT pay the business occupancy tax (BOT). In 1998, with the introduction of property assessment reform, PI L tax calculations were based on assessment multiplied by the corresponding tax rate. There was no special treatment provided for the Federal, Provincial or Municipal I'lL tax calculations. On December 18, 1998, the Province passed Bill 79 (Faillless to Taxpayers Act) to limit assessment reform related increases to 10% in 1998 ancl 5% in each of 1999 and 2000 on comlJ1ercial, industrial and multi-residential propcrties. When Bi II 79 passed, Federal and Provincial properties were made excmpt from the capping provisions of Bill 79. Howcver, the Federal Government announced that they would like to be treated "like any other capped taxnavcr" and therefore. would like lhe protection offered hy capping. (Province of Ontario can Report to COlllle i I CS ()')/')') Date: December 7, 1999 Subject: Loss of Federal Payments-in-Lieu Revenues Page 2 ,,... not pass legislation that would govern the actions of the Government of Canada.) The Province and the Federal Government reached an understanding regarding the treatment of PILS for 1998, 1999 and 2000. The Federal Government has agreed to increase its expenditures over its actual 1997 paymellts based on the following schedule: 1998 - 43% 1999 - 49.5% 2000 - 56% At first glance, the agreement appears to be a "windfall" for the Town of Pickering. However, property assessment reform increased the Federal PIL tax liability above the agreed upon percentage increases between the Federal and Provincial governments. (The increase is due to the assessment reform and not to lower tier municipal tax increases. Assessment reform placed the entire Province on a common assessment base for the purposes of property taxation that translated in many cases, substantial assessment changes.) The end result is that the Town of Pickering has lost approximately $387,000 over three years due to the Federal Government agreement. This loss is due to the capping of the tax increases. As members of Council arc aware, for the non PIL realty tax class, the dollar decrease for the capped taxpayer was funded by all increase in taxes for the clawback taxpayer. The Town of Pickering did not lose or gain under Bill 79. However, the Federal Govel11ment appears to have applied a menu approach in tax policy by selecting the capping option and ignoring the clawback mechanism. Table One reflects the gross dollar change between the two billing methodologies. The year 2000 calculations were based on the assumptions that the assessment and tax rates would not change. - T ABLE ONE \ Comparison of Federal I'lL Tax Billinl?:s Pro\>erlv Tvpe t 998 Taxes t 999 Taxes Estimated Total 2000 Taxes Canada Post Originally Billed $39,274.00 $38,120.21 $38,120.21 $115,514.42 Revised 20,487.31 21,418.55 22,349.79 64,255.65 Shortfall 18,786.69 16,701.66 15,770.42 51,258.77 Federal Government Originnlly Billed 1,677,997.00 *1,729,310.91 1,729,310.91 5,136,618.82 Revised 1,495,319.00 1,569,323.77 1,574,537.77 4,639,180.54 Shortfall 182,678.00 159,987.14 154,773.14 497,438.28 Total Shortfall ~2Q.L464,69 $J 76.688.80 $170.543.56 $548.697.05 * The assessment on Federal Government property increased by $2.05 million over t 998 and therefore, increased the amount billed. - Finance staff are currently seeking clarification from the Province and Public Works Canada regarding the 1999 increase in assessment and its corresponding application to the tax calculation. Staff believe that the 1997 tax base should be adjusted upwards to reflect the assessment increase of 1999. Table Two provides an allocation of the shortfall between the Town and the Region. Under /1'\., . n _1. ~ ,t,....~II"'\n_r .1___ '\.A..__:__:.__.I A. ~_. '\ .L_ 'T'~_~..~ ~r n:....l..........:.....,.. Report [0 Council CS 09/99 Date: December 7, 1999 Subject: Loss of Federal Payments-in-Lieu Revenues Page 3 .-.. does not have to distribute the education portion of the taxes to the school boards and therefore, the school boards do not have to absorb part oCthe shortCal1. TABLE TWO Allocation of Federal Payments Shortfall Town Region 1998 1999 Estimated 2000 $142,577.00 $124,424.00 $120,097.00 58,888.00 52,265.00 50,447.00 $201.465.00 $176.689.00 $170.544.00 Total $387,098.00 161.600.00 Total $548.698.00 The 1999 revenue loss is equivalent to approximately % of 1% of the 1999 tax levy. The 2000 budget will renect the loss of Federal revenues. Town staff can not project any further tax loss beyond the year 2000 due to the fact that the current Federal agreement parallels Bill 79 which ceases to apply on December 31, 2000. The 1998 loss of revenues totaling $142,577 will be offset by a transfer from the Contingency Reserve. The 1999 amount of $124,424 will be a reduction in revenues affecting any year end surplus. - ATTACHMENTS: \ I. Letter Crom John Clark, Vice President- Canada Post Prepared By: Approved / Endorsed By: /~ ~ ------ c ~/2~;- Gillis A. Paterson, Director, Corporate Services & Treasurer Stan Karwowski, Manager of Finance GAP:vw Attachment Recommended for the consideration of Pickering Town Council - Thomas J. Quinn, Chief Administrative Officer /" ATTACHMENT # --L TO REPnRT tiC:) O(~ ~ .-.. " . REGIONAL i ~ ~.~ ~ _,' ~',,~ .~' ._ 'I' r -:=:-"11 C' rr' :-= I'~ ~, .~ I-::-~ -- 'Ii ! I C Il.~ : c-: :' . '~) --.. . ifu JUl 2: IggS HIE REGIONAl G:lGa~ Regional Appraisal Services 6th Floor, 200 Catherine Street, Ottawa, Ontario K2P 2K9 (613) 230.2100 Fax: (613) 230.9880 TO\flm OF:;. i1!CKEriINCi ..... July 21, 1999, MUNICIPALITIES IN ONTARIO. RE: BILL 79. The Regional Group of Companies administers payment of Grants in Lieu of Taxes for Canada Post Corporation, and your records may indicate that there are outstanding payments for the 1998 calendar year. The Government of Canada through the Minister of Public Works and Government Services Canada, and the Minister of Finance of Ontario have agreed on a policy for payment of Grants in Lieu of Taxes for Federal Crown properties in Ontario. The policy is that payments will be the lesser of: a) the product of the current assessment and the applicable tax rate(s) [federal crown property qualifies for the vacant commercial tax rate where applicable], - or b) actual 1997 Grant in Lieu of Taxes increased by 30% for the equivalent of business tax, plus a 10%, 15% and 20% cap for the years 1998, 1999 and 2000 respectively. The Grant payable in these years, if capping is applicable, will be 43%,49.5%, or 56% respectively for 1998, 1999 and 2000, over the actual 1997 payment. Please recalculate your grant request also bearing in mind that the Municipal Grants act prohibits payment of interest on Grants in Lieu of Taxes. aSSi~C~ ~~ yce..fusident. - !I . JIWl The Regional Group of Companies Inc. Investment and Corporate Real Estate Consultants OTTAWA KINGSTON SASKATOON TORONTO EDMONTON WATERLOO WINNIPEG REGINA CALGARY VANCOUVER VICTORIA ~ OF AI,..., ~._\ .:aiO ~ c,-", e Corporation of the Town of Pickering CLERKS DEPARTMENT December 21, 1999 Mr. Dan MeTe ague, MP 1020 Brock Road South Suite 1005 Pickering, Ontario. L1W 3H2 Dear Mr. McTeague: .- Please be advised that the Council of the Town of Pickering passed the following resolution at its regular meeting of December 20, 1999: That Report CS 09/99 of the Director, Corporate Sen'ices & Treasurer be received by Council for information and that: 1. the amount of $142,577 be transferred from the Resen'e for Contingencies to 1999 General Revenues to offset the loss of 1998 Federal PIL revenue. Enclosed is a copy of Report CS 09/99 regarding the loss of Federal payments-in-lieu revenues which Council considered in conjunction with this resolution. When considering this item, Council expressed its concern about this loss of revenue which will have a major impact on the municipality's budgets. Pickering is affected much more than most other municipalities with respect to the Federal Government's approach in tax policy because of the amount of land owned by the Federal Government for a proposed airport. - . .. ./2 Department ('JOS) ..20-..611 Fax ('J05) ..20-%85 E-mail clerks@town.pickeringon.ccl Pickering Civic Complex, One the Esplanade, Pickering, Ontario, Canada Ll V 6K7 DirectAccess (905) 420-4660 www.town.pickering.on.ca ,- --2-- In order that the residents of Pickering are not detrimentally affected by the Federal Government's tax policy, Council has asked that the Town of Pickering be reimbursed for the shortfall it has experienced in 1998 and 1999 being: 1998: 1999: $142,577.00 124.424.00 TOTAL $267,001.00 Council has also asked that you address this issue of the Federal Government's tax policy as it relates to payments-in-lieu of municipal taxes in future years. If you have any questions with respect to this matter, please contact Mr. Gillis Paterson, Director, Corporate Services & Treasurer at 905-420-4640. Yours sincerely, - Bruce Taylor, AMCT, CMM Town Clerk Cc: Mayor and Members of Council Chief Administrative Officer Director, Corporate Services & Treasurer -