Loading...
HomeMy WebLinkAboutCS 03/01 - 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 - 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. ~. 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 - 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. .- . 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 .- 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. - 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 - 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. - 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: --:;;z---- Ii Stan Karwowski, Manager of Finance c;;:::::::-/ ~~~ Gillis A. Paterson, Director, Corporate Services & Treasurer --<::.. GAP:vw Recommended for the consideration of Pickering City Council - Thomas J. Quinn, Chief Administrative Officer