Report
to/Rapport au :
Finance and
Economic Development Committee
Comité des finances et du développement économique
and Council / et au Conseil
24 April 2012 / le 24 avril 2012
Submitted
by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale
Contact Person/Personne
ressource : Ken Hughes, Deputy City Treasurer, Revenue – Trésorier Municipal
Adjoint, Recettes
Finance Department/Service des
finances
613-580-2424 ext./poste 13485,
Ken.Hughes@ottawa.ca
|
SUBJECT: |
|
OBJET : |
COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2012 |
REPORT RECOMMENDATIONS
That the Finance and Economic
Development Committee recommend Council approve:
1. The
adoption of the following optional property classes in 2012:
·
Shopping centre commercial property class
·
Parking lots and vacant lands commercial
property class
·
Office building commercial property class
·
Large industrial property class
·
New multi-residential property class
·
Professional sports facility class
2. The
adoption of the following tax ratios for 2012:
Tax
Class
|
Ratios
** |
|
Residential |
1.000000 |
|
Multi-Residential |
1.700000 |
|
New
Multi-Residential |
1.000000 |
|
Farm |
0.200000 |
|
Managed
Forest |
0.250000 |
|
Pipeline |
1.539271 |
|
Commercial
Broad Class |
1.924496 |
|
- Commercial * |
1.826951 |
|
- Office Building * |
2.207164 |
|
- Parking Lots and Vacant Land – Commercial* |
1.197053 |
|
- Shopping Centre * |
1.519664 |
|
- Professional Sports Facility |
1.826951 |
|
Industrial
Broad Class |
2.428169 |
|
- Industrial * |
2.574494 |
|
- Large Industrial * |
2.210831 |
*
including new construction classes for BET purposes
** Subject to final minor revisions upon OPTA
close-off
3. The
adoption of the following tax ratios and by-laws for the mandatory property
subclasses and the tax rate percentage reduction for farmland awaiting
development:
·
Commercial excess land (i.e. commercial,
office and shopping centre tax classes) - 70% of the applicable commercial
property class tax ratio
·
Vacant industrial land, industrial and large
industrial excess land - 65% of the applicable industrial property class tax
ratio
·
Farm lands awaiting development subclass I -
75.0% of the residential property class tax ratio and the corresponding tax
rate percentage reduction for the awaiting residential, multi-residential,
commercial and industrial property classes; and Farm lands awaiting development
subclass II - no tax rate reduction
4. That the
tax rates for 2012 be established based on the ratios adopted herein.
5. That the 2012 capping and clawback
provisions be as follows:
a)
That capping parameters be approved at the higher of 10% of the previous
year’s annualized tax or 5% of the 2011 Current Value Assessment (CVA) taxes;
b)
That capped/clawback properties whose
recalculated annualized taxes fall within $250 of their CVA taxation be moved
to their CVA tax for the year;
c) That properties which have reached their CVA during
2011 or crossed over from the clawed back category to the capped category remain
at CVA taxes and be excluded from any further and future capping adjustments;
d) That properties that cross over from the capped
category to the clawed back category remain subject to claw back adjustments.
6.
That the tax
level for “new construction” properties be set at a minimum level of 100% of
their CVA taxes for 2012 and future taxation years.
7.
That the property tax mitigation programs be
continued and endorsed for 2012, including the charitable and vacancy rebate
programs, the Farm Grant Program and the Low Income Seniors and Disabled
Persons Complete Tax Deferral Program as previously approved by Council; and
a)
the associated policies be received and
endorsed; and
b)
that any
future municipal capital facility agreements be presented to FEDCO for review
and recommendation to Council for approval.
8.
a) Changes
to the Urban Fire Special Service area for tax levy purposes pursuant to
section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the
attached report to include properties within Document 1 – Fire Zone 41 and
within Document 2 – Fire Zone 47.
b) Changes
to the Rural Fire Special Service area for tax levy purposes pursuant to
section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the
attached report to exclude properties within Document 1 – Fire Zone 41 and to
exclude properties within Document 2 – Fire Zone 47.
9.
a) That
City Council give direction to City staff, interested stakeholders such as Eastern Ontario Landlord Organization (EOLO) to
work together and attempt to find, refine or develop generally accepted methods
of demonstrating the tax burden on multi-residential properties as compared to
residential properties so that City Council can address the multi-residential
tax ratio question.
b) That
City Council request the Province investigate the use of a more sophisticated
valuation model of income capitalization for the Multi-Residential properties
by the Municipal Property Assessment Corporation (MPAC) to facilitate the determination
of the equivalent tax burden between the residential and multi-residential
property tax classes and among the various property types within the
multi-residential property tax class.
RecommandationS du rapport
Que le Comité des finances et du développement économique recommande au
Conseil d'approuver ce qui suit :
1. L'utilisation en 2012 des catégories
optionnelles de biens fonciers suivantes:
·
Centres commerciaux
·
Terrains de stationnement et terrains commerciaux vacants
·
Immeubles de bureaux commerciaux
·
Grand industriel
·
Nouveaux immeubles à logements multiples
·
Installations sportives professionnelles
2. L'adoption des coefficients fiscaux
suivants pour 2012:
Catégorie
fiscale
|
Coefficient ** |
|
Résidentiel |
1.000000 |
|
Logements multiples |
1.700000 |
|
Nouveaux logements multiples |
1.000000 |
|
Ferme |
0.200000 |
|
Forêt aménagée |
0.250000 |
|
Pipeline |
1.539271 |
|
Catégorie commerciale générale |
1.924496 |
|
- Commercial
* |
1.826951 |
|
- Immeubles
de bureaux * |
2.207164 |
|
- Terrains de
stationnement et terrains commerciaux vacants * |
1.197053 |
|
- Centre
commerciaux * |
1.519664 |
|
-
Installations sportives professionnelles |
1.826951 |
|
Catégorie industrielle générale |
2.428169 |
|
- Industriel
* |
2.574494 |
|
- Grand
industriel* |
2.210831 |
* y compris les nouvelles catégories de construction aux fins de la
répartition des taxes scolaires
** sous réserve de révisions
mineures finales à la conclusion de l'OPTA
3.
L'adoption des
coefficients fiscaux et des règlements municipaux suivants pour les
sous-catégories de biens fonciers obligatoires et de la réduction procentuelle
du taux de taxation pour les terres agricoles en attente d'aménagement:
·
Terrains commerciaux excédentaires (c.-à-d. des
catégories Commercial, Immeuble de bureaux et Centre commercial) : 70% du
coefficient fiscal applicable à la catégorie Commercial
·
Terrains industriels vacants et terrains industriels
et grands industriels excédentaires: 65% du coefficient fiscal applicable à la
catégorie Industriel
·
Terres agricoles en attente d'aménagement,
sous-catégorie I : 75 % du coefficient fiscal applicable à la catégorie
Résidentiel et la réduction procentuelle correspondante du taux de taxation
pour les terrains en attente d'aménagement des catégories Résidentiel, Logements
multiples, Commercial et Industriel; terres agricoles en attente d'aménagement, sous-catégorie II :
pas de réduction du taux de taxation
4.
Que les taux
d'imposition pour 2012 soient basés sur les coefficients fiscaux adoptés par
les présentes.
5. Que
pour 2012, les paramètres de récupération
fiscale et de plafonnement soient les suivantes :
a) que le plafonnement soient établis à 10 %
des taxes annualisées de l'année précédente ou à 5 % des taxes d'après l'ÉVA de
2011, le plus élevé de ces deux montants étant retenu;
b) que les
propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale
et dont l'écart entre les taxes annualisées recalculées et les taxes établies
d'après l'ÉVA est de moins de 250 $ soient taxées d'après leur ÉVA cette
année;
c) que les propriétés qui ont atteint l’ÉVA en 2011 et/ou
qui sont passées de la catégorie de la récupération fiscale à celle des
propriétés plafonnées demeurent taxées d’après leur ÉVA et soient exclues de
tout autre rajustement relatif au plafond;
d) que les propriétés qui sont passées de la catégorie
des propriétés plafonnées à la catégorie des propriétés de la récupération
fiscale soit assujetties au rajustement relatif à la récupération.
6. Que le niveau de taxes sur les
propriétés " nouvellement bâties " soit établi au niveau minimal de
100% des taxes d'après l'ÉVA en 2012 et pendant les années d'imposition
subséquentes.
7.
Que les programmes d'allégement des taxes foncières décrits
dans le présent rapport soient maintenus en 2012 tel qu’approuvé par le Conseil
dans les années antérieures y compris les programmes pour les organisations
caritatives, propriétaires de bien-fonds vacants commerciaux et industriels, de
subventions pour terres agricoles et de report d’impôts pour les personnes
âgées à faible revenu et pour les personnes handicapées; et
a)
que leurs politiques connexe de subventions soient reçues
et approuvés; et
b) que les prochains accords relatifs aux
immobilisations municipales soient présentés pour examen du Comité des finances
et du développement économique, qui formulera une recommendation à l’intention
du Conseil.
8.
a) Que les changements au secteur des services
spéciaux du service des incendies en milieu urbain aux fins de prélèvement
d’impôt conformément à l’article 326 de la Loi
de 2001 sur les municipalités, L.O. 2001, chapitre 25, pour l’inclusion des
propriétés tels que définis dans le rapport ci-joint et dans le document 1 –
Zone d’incendie 41 et document 2 – Zone d’incendie 47.
b)
Que les
changements au secteur des services spéciaux du service des incendies en milieu
rural aux fins de prélèvement d’impôt conformément à l’article 326 de la Loi de 2001 sur les municipalités, L.O.
2001, chapitre 25, pour l’exclusion des propriétés tels que définis dans le
rapport ci-joint et dans le document 1 – Zone d’incendie 41 et document 2 –
Zone d’incendie 47.
9.
a) Que la Ville demande au personnel municipal
et aux intervenants concernés, tels que l' Eastern Ontario Landlord
Organization (EOLO), de travailler
ensemble et de tenter de trouver, de préciser et d'élaborer des méthodes généralement
reconnues pour déterminer le fardeau fiscal des logements multiples,
comparativement à celui des propriétés résidentielles, afin d'enrichir l'examen
que fera le Conseil municipal de la question du coefficient fiscal appliqué aux
logements multiples.
b) Que le
Conseil municipal demande à la province d’examiner la possibilité d’utiliser un
modèle d’évaluation plus élaboré de la capitalisation du revenu des propriétés
à logements multiples de la part de la Société d’évaluation foncière des municipalités (SÉFM), afin de
faciliter la détermination du fardeau fiscal équivalent entre les catégories
d’impôt foncier visant les résidences et les propriétés à logements multiples,
et entre les divers types de propriété au sein de la catégorie d’impôt foncier
visant les propriétés à logements multiples.
Executive Summary
The
purpose of this report is to present recommendations regarding 2012 property
tax policy issues that the Municipal Act requires Council to deal with
each year. These decisions determine the
tax burdens on the various tax classes for the 2012 taxation year.
The use of
optional tax classes allows for different levels of taxation within a
class. Eliminating any of the optional
tax classes would shift the tax burden among properties within the broad tax
class.
The second policy that must be adopted by Council each year is the
determination of tax ratios for various tax classes. Tax ratios are the tools that allow different
tax burdens between the different property classes. A re-assessment was conducted by the
Municipal Property Assessment Corporation (MPAC) for taxation years 2009
through 2012. Any re-assessment will
cause tax shifts among the tax classes unless they are mitigated. As has been done in the past, staff are
recommending the adoption of neutral ratios (except for the small change to the
multi-residential tax class ratio to keep at 1.700000 instead of 1.702203) for 2012 to eliminate any tax shifts. The next reassessment cycle will phase
in value changes from January 1, 2008 to January 1, 2012 over the 2013 to 2016
taxation cycle. City staff will report
the key findings and impact of these changes in the fall of this year to
Council including a communication plan for those property owners affected the
most.
Following the April 13, 2011 meeting of Council, a
working group was established to develop a consensus position, if possible on
the issue of the multi-residential tax ratio.
Although no consensus was reached on this particular issue, the group
did agree on having Council requesting the province to investigate the use of a
more sophisticated valuation model of income capitalization to facilitate the
determination of the equivalent tax burden between the residential and
multi-residential classes and among the various property types within the
class. It is also recommended that City Council
give direction to City staff, interested stakeholders such as EOLO
to work together and attempt to find, refine or develop generally
accepted methods of demonstrating the tax burden on multi-residential
properties as compared to residential properties so that City Council can
address the multi-residential tax ratio question.
In April of 2007, City Council directed the
Revenue Branch to implement a second property tax deferral program that would
allow qualified seniors and people with disabilities to defer the total amount
of taxes levied until the property is sold or transferred. This program would
allow qualified low-income seniors and low-income people with disabilities the
ability to stay in their homes longer and enjoy a better quality of life. As of
the end of February 28, 2012 there were 77 taxpayers on the program. On
average, the annual deferral is about $3,135. The amount of taxes deferred for
those taxpayers in 2012 will be approximately $226,000. On February 28, 2012,
the total taxes deferred amounted to $909,000. The income threshold for the
2012 taxation year will be increased to $38,407 as required by By-Law. There is
no application deadline for first time applicants and for those already on the
program, the renewal deadline remains at February 28 of the relevant tax year.
Council has
approved report ACS2011-CMR-FIN-0049 in September 2011 phasing out the
extension of the charitable rebate program to the Registered Canadian Amateur
Athletic Association. This level would
fall to 20% for 2012, 10% for 2013 and 0% for 2014 with savings being directed
to the Recreation and Culture Fee Support Program.
Changes are required for property tax
purposes to special service areas to reflect an increase in fire service level for
a small number properties in 2012 as identified in Document 1 and Document
2. Finally, a recommendation is included
for all Municipal Capital Facility Agreements to be presented to this Committee
for review and recommendation to Council for approval.
Following
the adoption of the following changes and recommendations, By-Laws establishing
the 2012 tax rates incorporating the overall 2.39% budgetary increase will be
prepared for Council approval. Most urban and rural taxpayers will
experience a tax increase of 2.39% or less on their municipal share and 2.0% on
their overall tax bill once the education levy is factored in with an average
impact of approximately $70. It should be noted that this increase may
vary depending on those areas subject to changes in the service levels they receive.
In addition, although the City does not benefit from any annual reassessment
changes, individual properties are impacted differently based on how the change
in their property value has changed relative to the overall change in the
class. The tax increase, change due to reassessment and the tax
distribution by services are listed on the back of each tax bill.
SOMMAIRE
L’objet de ce rapport est de présenter des
recommandations au sujet des politiques d’imposition foncière de 2012 dont la Loi sur les municipalités impose au
Conseil municipal de s’occuper chaque année. Ces décisions déterminent le
fardeau fiscal des diverses catégories de propriétés pour l’année d’imposition
2012.
L’utilisation des catégories de propriétés
optionnelles permet d’établir différents taux d’imposition dans une même
catégorie. Si l’on éliminait une catégorie optionnelle, le fardeau fiscal
serait réparti entre toutes les propriétés de la catégorie générale.
La deuxième politique qui doit être adoptée par le Conseil
chaque année est la détermination du taux d’imposition des diverses catégories
de propriétés. Les taux d’imposition sont les outils qui permettent
l’établissement de fardeaux fiscaux différents pour les diverses catégories de
propriétés. Une réévaluation a été
effectuée par la Société d’évaluation foncière des municipalités (SEFM) pour
les années d’imposition 2009 à 2012. Toute réévaluation causera une répartition
fiscale entre les catégories de propriété, sauf si les taxes sont atténuées.
Comme par le passé, le personnel recommande pour 2012 l’adoption de
coefficients fiscaux neutres (sauf pour une petite modification qui reste à
apporter au coefficient qui s’applique à la catégorie Logements multiples au
coefficient existant de 1,700000 au lieu de 1,702203) afin d’éliminer toute
répartition fiscale. Le prochain cycle de réévaluation foncière intégrera
progressivement au cours du cycle de taxation 2013-2016 les variations de
valeurs survenues entre le 1er janvier 2008 et le 1er janvier
2012. Le personnel municipal présentera l'automne prochain au Conseil un
rapport faisant état des constatations et répercussions clés de ces variations,
ainsi qu'un plan de communication à l'intention des propriétaires les plus
touchés.
En avril 2007, le Conseil a donné
instruction à la Direction des Recettes de
mettre en place un deuxième programme de report des impôts fonciers qui
permettrait aux personnes âgées et aux personnes handicapées de reporter le
montant total de leurs impôts fonciers jusqu’au moment de la vente ou du
transfert de leur propriété. À la fin du mois de février 2012, environ
77 contribuables s’étaient prévalus de ce programme. En moyenne, 3 135 $
d’impôts fonciers annuels sont reportées. En 2012, le montant reporté pour
l’année était de 226 000 $ pour un total des taxes reportées de 909 000 $ pour
ces contribuables. Le seuil de revenu de l’année d’imposition 2012 sera
augmenté à 38 407 $. Pour ceux qui présentent une première demande, il n'y
a pas de date limite de présentation; dans le cas de ceux déjà inscrits au
programme, le délai de renouvellement demeure le 28 février de l'année fiscale
visée.
Le
Conseil a adopté en septembre 2011 le rapport ACS2011-CMR-FIN-0049, qui prévoit
l’élimination progressive de l’application du Programme de remboursements
offerts aux organismes de bienfaisance dans le cas de l’Association canadienne
de sport amateur. Le niveau de remboursement passerait à 20 % en 2012, à
10 % en 2013 avant d’être supprimé en 2014. Les sommes ainsi économisées
seraient affectées au Programme d’aide financière pour les activités sportives
et culturelles.
Il est nécessaire, à des fins de taxation
foncière, d'apporter des changements aux secteurs de services spéciaux de façon
à refléter l'accroissement du niveau des services d'incendie pour quelques
propriétés en 2012, indiquées dans les documents 1 et 2. En dernier lieu,
il est recommandé que tous les accords relatifs aux immobilisations municipales
soient présentés pour examen au Comité, qui formulera une recommandation à
soumettre à l'approbation du Conseil.
À la suite de l'adoption des modifications et
recommandations suivantes, les règlements reflétant l'augmentation budgétaire
générale de 2,39 % sur les taux de taxation de 2012 seront rédigés en vue
d'être soumis à l'approbation du Conseil. La plupart des contribuables
urbains et ruraux subiront une hausse de taxes de 2,39 % ou moins pour la
part municipale de leur facture de taxes et de 2,0 % sur l'ensemble de
leur facture, après inclusion des taxes scolaires pour un impact d’environ $70
en moyenne. Il importe de signaler que cette augmentation pourra varier
selon les changements des niveaux de services survenus dans différents
secteurs. De plus, bien que la Ville ne tire pas bénéfice des changements
annuels qui résultent de réévaluations foncières, celles-ci se répercutent
différemment sur les propriétés individuelles en fonction de la variation de
leur valeur foncière par rapport à l'ensemble de la catégorie à laquelle elles
appartiennent. L'augmentation de taxes, le changement résultant de la
réévaluation foncière et la répartition des recettes fiscales par service
figurent au verso de chaque facture de taxes.
Background
The Municipal
Act requires that Council approve a number of tax policy decisions each
year. This report details each of the
required tax policies.
DISCUSSION
1. Optional Property Tax Classes
To provide maximum flexibility to Council for
tax policy decisions, the City of Ottawa has in previous years, adopted all the
optional tax classes. These optional tax
classes, if adopted by a municipality, represent subsets within the broad
commercial and industrial tax classes and through the use of different tax
ratios impose different tax burdens within the broad tax class. Any changes to these optional property tax
classes and their ratios would affect the tax burden on other properties within
the broad tax class.
Staff recommends that Council continue to adopt all
of the following optional classes:
·
Shopping centre
commercial property class
·
Parking lots and
vacant lands commercial property class
·
Office building
commercial property class
·
Large industrial
property class
·
New
multi-residential property class
·
Professional sports
facility class
2. Tax
Ratios
Since 1998
and the passage of the Ontario Fair Assessment System, the two mill rate system
and the business occupancy tax was effectively replaced with multiple tax
classes, optional sub-classes and variable tax rates. The proportion by which the class and
sub-class tax rates differ from the residential class and its own ratio of
1.000000 is known as the ratio for the corresponding class. In 1998, each municipality in Ontario
inherited transition ratios equivalent to the previous 1997 tax level with a
range of fairness target set by the Province.
The goal was
to reach ratio parity for all classes with the exception of farmland and
managed forest. However, most
municipalities and Councils faced such parity decisions knowing the impact
would be a tax increase on the Residential Tax Class. In Ottawa, it is estimated that this ratio
parity would result in a 22% tax increase or $178 million in additional tax
burden to the residential class during a time of significant budgetary
pressures on the tax base.
At every
reassessment cycle, changes in valuation may trigger potential tax shifts among
the tax classes and among the properties within a tax class. In order to provide relief and some stability
to annual reassessments, the Province deferred the annual reassessments
scheduled for 2007 and 2008 and adopted a four year phase-in of assessment
changes for all tax classes. The
increase between the valuation periods of January 1, 2005 and January 1, 2008
was phased in equally for the upcoming taxation years 2009 to 2012. The increase between the valuation periods of
January 1, 2008 and January 1, 2012 would be phased in equally for the upcoming
taxation years 2013 to 2016. While it
does not avoid changes in valuation and its associated tax impact, it does
spread the increase over four years.
This provides taxpayers with some stability and knowledge of how they
will be impacted during this period.
In 2003,
only the City of Ottawa saw a significant residential valuation increase over
and above the other classes that resulted in a tax shift of $21 million and an
equivalent 6.5% tax increase from the other classes to the Residential\Farmland
classes. In 2004, when this change in
tax burden was experienced more broadly at the provincial level, municipalities
and various municipal associations pressed the new government for a tool to
offset these tax shifts. The Minister
then passed a special regulation allowing municipalities to adopt “neutral”
ratios to preserve the existing tax levels and thus eliminate any inter-class
tax shifts. The City of Ottawa has adopted
the neutral ratio option for each of the two previous reassessment cycles of
2004 and 2006 and the first three phase-in years of this new cycle in 2009,
2010 and 2011.
In the fall
of 2008, staff reported the assessment changes for the first year of
reassessment. Table One has been updated to show the valuation changes by class
for 2012 and the total change over the four year period. While the City does
not benefit from any changes in valuation, annual shifts between classes would
occur depending on how they differ from the weighted average increase of
approximately 3.5%.
|
TABLE ONE - CVA
CHANGES BY CLASS |
||||||
|
(in millions) |
||||||
|
ANNUAL |
4 YR |
|||||
|
CLASS |
CVA_2008 |
CVA_2011 |
CVA_2012 |
CHG |
CHG |
|
|
Commercial |
13,958 |
16,669 |
17,591 |
5.53% |
26.0% |
|
|
Industrial |
974 |
1,144 |
1,204 |
5.25% |
23.7% |
|
|
Multi-Resid |
5,553 |
6,082 |
6,261 |
2.95% |
12.7% |
|
|
Resid/Farm |
75,849 |
83,593 |
86,213 |
3.13% |
13.7% |
|
|
Other |
217 |
240 |
247 |
3.14% |
13.9% |
|
|
Total |
96,551 |
107,728 |
111,517 |
3.52% |
15.5% |
|
The
potential tax shifts between classes are estimated for 2012 in Table Two below
before any budgetary increases should neutral ratios not be adopted. The 2013 to 2016 potential tax shifts will be
reported once the reassessment data is made available later this year to
Council including a communication plan for those property owners mostly
affected.
|
TABLE TWO -
POTENTIAL TAX SHIFT BY CLASS |
||||
|
(in millions) |
||||
|
LEVY WITH |
|
|||
|
NEUTRAL |
RESTATED |
2012 |
TAX |
|
|
TAXABLE CLASS |
RATIO |
WITH SHIFT |
TAX SHIFT |
CHANGE |
|
Commercial |
$ 318 |
$ 324 |
$ 6 |
1.89% |
|
Industrial |
$ 26 |
$
26 |
$ - |
0.00% |
|
Multi-Residential |
$ 100 |
$ 99 |
$ (1) |
-1.00% |
|
Residential/Farm |
$ 813 |
$ 808 |
$ (5) |
-0.62% |
|
Other |
$ 3 |
$ 3 |
$ - |
0.00% |
|
NET IMPACT |
$
1,260 |
$
1,260 |
NIL |
0.00% |
Financial
staff are therefore recommending that neutral ratios be adopted for the
taxation year 2012.
This
recommendation is being made for the following reasons:
·
inter-class tax shifts are eliminated
·
this would be consistent with prior
assessment cycles 2004, 2006 and for 2009/2011
·
neutral ratios have accelerated the movement
of the tax ratio for the Commercial broad class below the 1.98 provincial
threshold resulting in a lifting of the 50% levy restriction for that class.
The ratio
history by class is demonstrated in Table Three below, including the
recommended neutral ratios for 2012.
|
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The neutral
ratio for the Multi-Residential (MR) class is 1.702203. It is the only ratio that would increase
slightly over the 4 years as part of setting neutral ratios. Keeping the ratio at the same level of
1.700000 as adopted last year results in a small shift of $119,000 to the other
classes for a total of $475,000 over this four year cycle.
As
demonstrated in Table Three, the MR ratio has decreased 27% from 1998 when the
ratio was 2.3359. The impact of this
decrease on the average home in 2011 was estimated at $86 on an annual
basis. Some of the challenges in
establishing the MR ratio relate to the different assessment methodology,
unpredictable changes during reassessment cycles and the limitation of comparative
models with the Residential class. This
issue is compounded by the fact that non-homogenous property types are grouped
by a handful of broad classes leaving Council with little flexibility to
correct real or perceived inequities by the use of a single ratio applied to
the MR class or others.
In March
2011, Council re-approved the existing multi-residential ratio of 1.700000 in
report ACS2011-CMR-FIN-0013. The report
looked at several factors including a review of the inter-municipal ratios
across the Province, the tax per square foot level between an average MR
apartment and condominium unit and a percentile comparison between the 2
groups. The inter-municipal comparison
showed that the City of Ottawa had the lowest ratio in the province with the
exception of the Region of York and some very small municipalities. The tax per square foot of an average MR
apartment was 10% lower than the average condominium. The analysis also indicated that the 50%
percentile level of the MR unit paying the equivalent of $1,260 in municipal
property taxes was paying at a level lower than the smallest and most modest
condominium units at the 10th percentile level of $1,330. Based on these findings, staff recommended
that the MR tax ratio remain at its level of 1.700000. Change to the MR ratio is limited in its
ability to target reductions for a specific type of property or housing within
the class.
At the April
13, 2011 meeting of Council, Councillor Hume presented the following motion:
Moved by Councillor P. Hume
THEREFORE BE IT RESOLVED
that the Finance and Economic Development Committee and Council authorize the
striking of a working group to develop, if possible, a consensus position on
the issue of the multi-residential tax ratio;
That the working group be
comprised of interested City Councillors, City staff and interested
stakeholders such as EOLO; and
That the Finance and
Economic Development Committee and Council delegate to the Mayor the
responsibility of striking the working group.
CARRIED
The
Working Group was composed of Councillors Clark, Fleury and Hume, Mr. John
Dickie, Chair, Eastern Ontario Landlord Organization (EOLO), Mr. Glenn Lucas,
Property Tax Review Services who represents a number of owners of
multi-residential property owners and two members of staff (Mr. René Bisson,
Manager Billing and Tax Policy and Mr. Ken Hughes, Deputy Treasurer).
The
members of the working group reviewed and discussed the various studies
previously provided to Council and other relevant documents. The findings and recommendations are
presented in this report.
While
the working group could not agree on how the tax burden on equivalent
residential and multi-residential properties could be determined, all members
agreed that work should continue to find or develop generally accepted methods
of comparing the tax burden.
The
limitations of the current assessment valuation model used by the Municipal
Property Assessment Corporation (MPAC) were discussed in detail by the working
group. MPAC values multi-residential properties
by applying a Gross Income Multiplier (GIM) to the total of the base rents for
a property. This method is used for all
of the income properties in the multi-residential property tax class. While this model is simple to administer, it
does appear to result in inequities within the class where some properties are
under-assessed and others are over-assessed when compared to selling prices for
properties that have been sold.
Several
limitations of this valuation approach were identified. For example, the lack of stratification by
quality, age or condition of the building prevents the grouping of similar
types of buildings. Also, the GIM model
has only three categories of condition - Good, Average and Poor, with the
majority falling within the Average category for most of Ottawa. Finally, the
lack of sales in the three main classifications of high-rise, walk-up and row
house can result in the same GIM applied irrespective of type.
The
working group agreed that these deficiencies could be addressed with the use of
the more sophisticated valuation model of income capitalization. The income capitalization model is currently
used within the commercial class for most income properties. For a significant
number of multi-residential properties this would result in a closer
approximation of their value as the net income model factors in operating costs
such as heating, air-conditioning, utilities and repair and maintenance costs
which would be reflected in the property’s value.
The
working group failed to reach any conclusion or consensus on the tax ratio
required to produce an equal tax burden on equivalent residential and
multi-residential properties. The group
was also unable to reach a consensus on whether the tax burden should be the
same on equivalent residential and multi-residential properties. EOLO does not agree that an equal tax burden
on equivalent residential and multi-residential properties should be the goal.
In
summary, there was no consensus on the following points:
- The goal should be equal tax burden
between similar properties in the residential and multi-residential
property tax classes;
- the appropriate tax ratio for the
multi-residential property tax class; and
- the appropriate method to demonstrate
the tax burden on similar properties in the residential and
multi-residential property tax classes.
There
was consensus on the following points:
- Work should continue to find, refine or
develop generally accepted methods of demonstrating the tax burden;
- the valuation model used by MPAC for
multi-residential properties does not consistently deliver representative
values; and
- this problem could be addressed with the
use of the more sophisticated valuation model of income capitalization
which is currently used within the commercial class for most income
properties.
The
lack of flexibility derived by a single ratio for this class and the inability
by MPAC to group properties by type of structure, age, quality or location
could potentially be addressed by changes to the valuation methodology used by
MPAC for the multi-residential property tax class. Should this issue be addressed, better models
and analyses could potentially be derived by municipalities in their attempt to
determine the equitable tax burden not only between the residential and multi-residential
property tax classes but also among the various property types within the
multi-residential property tax class itself.
Accordingly,
the multi-residential working group recommends that:
City
staff and interested stakeholders
such as EOLO
work together to attempt to find, refine or develop generally accepted methods
of demonstrating the tax burden on multi-residential properties as compared to
residential properties so that City Council can address the multi-residential
tax ratio question.
The
Finance and Economic Development Committee (FEDCO) ask City Council to request
the Province investigate the use of a more sophisticated valuation model of
income capitalization for the Multi-Residential properties by the Municipal
Property Assessment Corporation (MPAC) to facilitate the determination of the
equivalent tax burden between the residential and multi-residential property
tax classes and among the various property types within the multi-residential
property tax class.
Options to Adopting
Neutral Ratios
Since the
commercial tax ratio is now below the provincial threshold, the City is no
longer restricted from levying only 50% of the budgetary tax increase to the
Commercial class. This restriction was in effect from 2004 to 2010. The problem with this restriction is that the
commercial class has not been subject to full tax increases over the years. The
shortfall had to be borne by all other classes including the residential class
which is the largest. Not adopting
neutral ratios would result in $5 million of taxes being shifted off of the
residential property class for a total shift of $6 million to the commercial
property tax class.
There are two subclasses of farm lands
awaiting development. The first, farm
lands awaiting development subclass I, is defined as farm land currently used
solely for farming where there exists an approved and registered subdivision
plan on the lands prior to actual development taken place. Ontario regulation 383/98 provides direction
on the calculation of the tax rate for these types of farmlands while
permitting a move of 10% in either direction.
In practice, this type of property is held as speculative land and is
seldom registered as a subdivision for extended periods of time prior to
development.
The second category of farm lands
awaiting development, subclass II, currently receives no tax rate reduction and
that practice is recommended to continue.
Financial staff recommends the adoption of the following tax ratios and
by-laws for the mandatory property subclasses and the tax rate percentage
reduction for farmland awaiting development:
·
Commercial excess
land (i.e. commercial, office and shopping centre tax classes) - 70% of the
applicable commercial property class tax ratio;
·
Vacant industrial
land, industrial and large industrial excess land - 65% of the applicable
industrial property class tax ratio;
·
Farm lands awaiting
development subclass I - 75.0% of the residential property class tax ratio and
the corresponding tax rate percentage reduction for the awaiting residential,
multi-residential, commercial and industrial property classes; and Farm
lands awaiting development subclass II - no tax rate reduction.
4. Tax Rates
Tax rates
are determined through calculations which involve the budgetary tax levy
requirement approved in the 2012 budget setting exercise, the total current
value assessment by class and the effects of the setting of tax ratios within
this report. The resultant tax rates as
calculated by staff will be submitted to Council at a later date for approval
with applicable By-Laws.
By-Laws
establishing the 2012 tax rates will incorporate the 2.39% budget increase. Most urban and
rural taxpayers will experience a tax increase of 2.39% or less on the
municipal share of the tax bill and 2.0% on the total bill including the
education levy. The result is an average increase of approximately $70.
It should be noted that this increase may vary depending on location as certain
taxes are delineated by service level and that service level may have changed.
In addition, although the City does not benefit from any annual reassessment
changes, individual properties are impacted differently based on the change in
their property value relative to the overall change in the class. The budgetary
tax increase, any change due to reassessment and the tax distribution by
service are listed on the back of each tax bill.
Financial staff recommends that the tax rates for 2012 be established based on
the ratios adopted herein.
Subsequent
to the change to the current value assessment process in 1998, the Province
imposed mandatory limits on assessment-related property tax increases over 1997
taxation levels for commercial, industrial and multi-residential
properties. In December 2000, the Continued Protection for Property Taxpayers
Act, 2000 was enacted which legislated that for 2001 and subsequent years,
all municipalities are required to limit the assessment-related property tax
increases on commercial, industrial and multi-residential properties to 5% of
the previous year’s annualized taxes.
For 2005 and subsequent years Council can increase this limit to 10%.
This
limit is generally referred to as the “tax cap” and is calculated each year
based on the previous year’s taxes. The “tax cap” will remain in place until
properties reach a property tax levy based on its current value assessment
(known as CVA tax). Municipal levy
changes (essentially changes to the tax rate as a result of budget decisions)
are then applied in addition to the limit.
The limit
applies to all property in the commercial, industrial and multi-residential
classes, subject to the following exclusions:
·
Farm lands awaiting development;
·
Provincial and municipal property subject to
payments in lieu of taxes (PILTs).
(However, commercial tenants in provincial or municipal owned properties
would be protected by the limits);
·
Certain power generation and transformer
facilities.
The
limit does not apply to properties in the residential, farmland, managed
forest, new multi-residential, and pipeline property classes.
The
individual properties that are protected by the tax cap generate a “foregone
revenue or taxation shortfall”. This
“taxation shortfall” is the difference between the amount of taxes that the
current value assessment would generate and the cap over the previous year’s
taxes. This uncollected amount has to be
recovered from other taxpayers. A
mechanism that is available, which has been chosen by Council each year since
1998, is to “clawback” some of the decreases from those individual properties
within the property class that are experiencing a decrease in taxes. In other words, taxpayers who would be entitled
to a reduction in their taxes pay the tax not being paid by another taxpayer
because of the capping limit.
In
order to address some of the limitations associated with the capping regime and
to reduce the number of properties not paying full CVA taxes, and taking into
account the prolonged period required for some properties to reach full CVA
taxes, the Minister introduced new capping options in Bill 83, the Budget
Measures Act, 2004. Although these
new options will not address all inequities inherent in a program that limits
some properties from paying their full share of taxes, they will nonetheless
accelerate the move towards more properties attaining full CVA taxes more
quickly.
The
capping options for 2012 are summarized as follows:
Capping parameter to be 10% of Annualized tax – The major
disadvantage of the original capping program and a continuous cycle of
re-assessments is that many of the capped properties within the City and the
Province of Ontario would never reach their full CVA taxes. In order to rectify this situation, the
Ministry has provided flexibility to Council to increase the 5% parameter up to
10%. Council provided notification in
the 2005 tax policy submission that this change would be implemented for 2006
and subsequent years. Council has
approved this change for each year since 2006 as part of the tax policy
submission process. Staff recommends
this change for 2012 as well. A decision
not to implement this option each year would mean the capping parameter would
revert to 5%.
Capping parameter increase to 5% of CVA tax – With the
annual restriction applying the capping parameter to the previous year’s
annualized taxes only, any property that has a significant disparity between
their annualized and CVA taxes would be capped for an extensive period. In order to alleviate this situation, a new
capping option was provided for these properties to have their taxes increased
by up to 5% of their previous year’s CVA tax (prior to levy change). Only a small number of properties that pay a
fraction of their CVA taxes (less than 50% of their CVA taxes) would be
affected. This would reduce by half the
length of time required to reach their full CVA taxes.
Financial staff recommends the 2012 capping parameters (as in 2011) be
approved at the higher of 10% of the previous year’s annualized tax or 5% of
the 2011 Current Value Assessment (CVA) taxes.
$250 Threshold Option -
Administratively, several of the small businesses and Multi-residential
properties were being capped or clawed back by very small amounts due to the
fact there was no minimum threshold established. A new option was provided allowing
municipalities to pass a by-law to move capped properties whose recalculated
annualized taxes fall within $250 of the current year’s CVA tax to their CVA
tax for the year. This means that if the
differential between the CVA taxes and the tax limit is between $0 and $250
(higher or lower) the taxpayer is automatically moved to their CVA tax.
Financial staff recommends that for 2012 (as in
2011) capped/clawback properties whose recalculated annualized taxes fall
within $250 of their CVA taxation be moved to their CVA tax for the year.
Clawback Recovery - In order to determine how much taxation
has to be “clawed back” from those taxpayers in the class whose taxes were
decreasing, a percentage is calculated which when added to their taxes,
finances the “taxation shortfall”.
Council must approve this percentage, known as the clawback
percentage. In 2012, the clawback
requirement will decrease (see discussion of new capping option for properties
at CVA tax level below). A recovery
by-law to approve the final clawback percentages will be submitted for Council
approval at a later date.
New capping option for properties at CVA tax level - Since
1998, the capping program has offered protection for any assessment related tax
increases to certain classes. While
there was significant tax impact on certain properties at the time, the
Province anticipated that after a few years, the new values would be fully
integrated and taxes would be at their full CVA tax level. Significant progress was made in the earlier
years but had reached a plateau in the last few years. The goal of a property to pay its share of
taxes based on a simple formula of valuation applied to a ratio driven tax rate
had remained elusive for most municipalities in Ontario.
In order to
finance the protection provided to properties with large increases, other
properties are denied their full tax decrease by a clawback mechanism (see
Clawback Recovery discussion above).
Historically, the number of clawed back properties can be several times
the level of properties being protected.
This would imply that a smaller number of large properties benefit from
the protection relative to a larger number of smaller properties being denied
their lower taxes. Experience had
demonstrated that whatever gains are made during a non-reassessment year could
be lost during a reassessment year with new properties being brought into the protected
category. If a property is significantly
undervalued in any given year and subsequently corrected, it will not only have
benefited from lower taxation for all of the previous years, but will also be
protected for many years to follow.
The Province
has acknowledged these concerns and while it will not support a full exit of
the program in the foreseeable future, it enacted several new options in
2005. The options previously discussed
included:
·
doubling the increase parameter from 5% to
10% of the previous taxes
·
5% of the current CVA taxes
·
a $250 minimum threshold
In 2008, the
Province went further and introduced a new option for 2009 more in line with
the intent of the original program that was to bring properties paying their
full CVA tax level over a short time period.
Municipalities now have the option to exclude any properties that reach
CVA taxes in the previous year and/or crossover during the current year between
the clawed back and capped categories.
In addition, the combination of the four-year phase-in of the multi-year
change in value from January 1, 2005 to January 1, 2008 with the 10% annual
increase parameter has significantly reduced the pressure on existing
properties requiring additional capping protection.
The impact
on the protected commercial and industrial classes is significant. The multi-residential is less affected due to
the fact that its base has been more stable and closer to full CVA in previous
years than any other class. Not only do
the new options prevent new properties with valuation issues to enter the
capping/clawback program, it also significantly curtails the capping
requirement, increases the properties at CVA and allows more of the tax
reductions to the properties in the clawed back category. The following results by class are detailed
below.
Multi-Residential Class
The chart in
Table Four below shows the increase in the capping required at each of the
earlier reassessment cycles. The phased
in assessment changes for 2009 to 2012 will prevent any such large increase
during this cycle. The original capping
protection was $1.4 million in 2001, which decreased in non-reassessment years
but increased in the reassessment years of 2003 and 2006.
With the new
option to exclude properties at CVA tax level, the number of properties
requiring capping protection will eventually drop to zero. The program would see 6 properties requiring
$28,000 in protection for 2012.
Properties denied their full tax decrease total 58 or 4% to self-finance
the program.
Commercial class
The chart in
Table Five shows the slow progress towards CVA of the earlier reassessment
cycles for the commercial class. The
effect of phasing in assessment over a four-year cycle prevented a large
increase in capping in 2009 for this class.
The original capping protection provided to this class was $57 million
in 2001 and was down to $13 million in 2007 but up to $16 million in 2008 due
to assessment shifts between sub-classes triggering an increase in the
requirement. The capping program would
see 133 properties requiring $2.3 Million for 2012. Properties denied their full tax decrease to
fund this requirement are 971 or 10%.
Industrial class
The chart in
Table Six shows the impact earlier reassessments have had on the amount of
taxes subject to capping. Again, the
impact of phasing in assessment over a four year period smoothes the impact in
2009 and beyond but does not eliminate it altogether. The original capping protection provided in
2001 was $4.9 million which diminished but then increased in both 2003 and 2006
with almost no gain in reduction. The
regular capping program would see 126 properties requiring $0.6 Million in
protection for 2012. Properties denied
their full tax decrease total 78 or 7%.
In summary,
the option to exclude properties that have reached CVA or crossed over from the
clawed back to the capped category will continue to significantly reduce the
capping requirement for all classes for 2012 and the next year. This reduced capping requirement will relieve
some of the pressures on the clawed back properties by allowing more properties
to pay only their CVA tax level. The
clawback % has yet to be finalized and varies by year based on the annual
requirement and the number of properties left in the program. As such, all numbers are preliminary and will
be finalized over the next few weeks as part of the Ontario Property Tax Analysis
(OPTA) cut-off procedures.
The new
option of excluding properties at or crossing over from the clawed back to the
capped category is therefore recommended to be continued. This accelerates the progress towards
attaining the goal of more properties reaching their CVA tax level and decreasing
the number of properties burdened by the claw back mechanism.
Financial staff recommends that properties (as in 2011) which have reached their CVA
during 2011 or crossed over from the clawed back category to the capped
category remain at CVA taxes and be excluded from any further and future
capping adjustments.
Financial staff also recommends that properties (as in 2011) that cross over from the
capped category to the clawed back category remain subject to claw back
adjustments.
6. Tax Treatment For New Construction
Properties
Previously, the tax burden for eligible “new construction” properties was
established by comparing the average tax level of comparable properties (up to
six) to the CVA taxes of the eligible property.
Under this regime, the maximum tax level for the new property can only
be at the CVA tax level (i.e. current assessment value times the applicable tax
rate). However, no minimum tax level had
been set, occasionally resulting in abnormally low taxes for a new
property. This only served to continue
the distortion caused by the capping program.
In 2005 legislation was introduced to establish a minimum tax level (%)
of the CVA tax liability for the eligible new construction properties. The minimum tax level was increased gradually
towards the maximum through a phase in.
This phase in has now been completed with new construction properties
paying at their full CVA tax level since 2009.
Staff
recommends that the tax level for “new construction” properties be set at a
minimum level of 100% of their CVA taxes for 2012 and future taxation years.
A number of
other mitigation programs have been established in prior years. It is recommended that these mitigation
programs be continued. The Auditor General has also recommended some of the
associated policies in the attached documents be endorsed by Council. These
programs include:
·
The provision of a 40% tax rebate to
charitable organizations as defined and required in the legislation
·
Tax rebate of:
a) 100% to any church
leasing space to houses of refuge and registered charities;
b)
20% to Registered Canadian Amateur Athletic
Associations for 2012, 10% for 2013 and 0% for 2014;
c)
100% for non-profit, non-home based licensed
child care centres for space occupied for child care purposes;
d)
100% of education portion for properties used
and occupied by the Royal Canadian Legion and The Polish Combatant’s
Association of Canada, further identified in Schedule “A” of By-Law no.
2007-476 and amendments to reflect changes in physical locations, including the
2012 relocation of the Strathcona-Ottawa Branch to 1940B Bank St.
·
The provision of a vacancy tax rebate program
with the rebate rate set at 30% of the tax attributable to the vacant space in
commercial buildings, and 35% of the tax attributable to the vacant space in
industrial buildings
·
The provision of a tax relief (increase
deferral) program for low-income seniors and disabled persons
·
The provision of a complete tax deferral
program for low-income seniors and disabled persons
·
Farm Tax Grant Program
·
Municipal Capital Facility Agreements
Charitable Rebate Program
In Ontario,
charitable organizations are not exempt from property taxation. However, as required by the Municipal Act, 2001, section 361,
Rebates for Charities, the City of Ottawa has a program to provide property tax
rebates of 40% or more to eligible charities. To be eligible, an organization
must occupy space in the commercial or industrial tax class and be a registered
charity under the federal Income Tax Act.
This program
was implemented following the adoption of the Fair Assessment System in 1998.
With the Business Occupancy Tax (BOT) being removed and rolled up into the
commercial and industrial property taxes, charities are now subject to a higher
level of municipal taxes recovered through their leases. Previously, charities had been exempted from
the BOT portion only. In addition, most
charities that own and occupy their properties are subject to the lower
residential tax rates in most cases.
The Revenue
Branch administers the Charitable Rebate Program under the Charitable Rebate
Program Policy attached as Document 3.
Highlights of the policy include:
- Calculation
of the amounts paid on account of taxes on a property occupied by an
eligible charity is based either on the charity’s portion of the total
square footage of the property, or, if available, on the current value
assessment of the property occupied as determined by the Municipal
Property Assessment Corporation (MPAC)
- Calculation
details are provided to the charity
- The
payment of rebates is
within the timeframes set by the Municipal
Act (at least 50% within 60 days of receipt of the application; the
balance within 120 days)
- Interest
as required by the Municipal Act
is paid if the City fails
to rebate within the mandated timelines
- Upon assessment changes, charity rebates are
recalculated and funds owed by and to charities are recovered or remitted
depending on whether the charity has had an actual change in the taxes it
paid based upon the assessment change
Late
applications may be accepted due to extenuating circumstances as authorized by
the Municipal Act and directed by
Council in October 2010.
After the approval of the 2006 tax policy submission the Revenue Branch
was asked to provide a training session for the eligible charities on the tax
rebate program. The purpose of the
training session was to assist the eligible charities in completing their
applications to maximize the benefit to the charities. After offering this training and pre-filling
the applications for the charities, staff estimate that almost all charities
complete the application themselves.
This allows the charities to keep the entire rebate. The training sessions are offered at each tax
year.
Council has
approved report ACS2011-CMR-FIN-0049 in September 2010 phasing out the
extension of the charitable rebate program to the Registered Canadian Amateur
Athletic Association. This level would
fall to 20% for 2012, 10% for 2013 and 0% for 2014 with savings being directed
to the Recreation and Culture Fee Support Program.
In
2010, a total of 151 rebate applications amounting to $3,200,000 (municipal
& education portions) were processed. The 2011 rebate applications can be
received up to February 29, 2012 and have yet to be finalized. Specific details relating to charitable
rebates are on file with the
Deputy City Treasurer, Revenue.
Vacancy Rebate Program
Prior to
2001, vacant units were identified on the Assessment Roll, and determined by
the fact that units had been vacant in the previous year for a specified period
of time (ex. July to September). The
Government of Ontario decided to adopt a real-time approach for 2001 and
subsequent years. To facilitate, the Municipal Act, 2001 included the new
section 364 (Vacant unit rebate) along
with the accompanying Ontario Regulation
325/01.
The Municipal
Act requires the City of Ottawa to provide a property tax rebate for
eligible vacant units. The main criteria
for eligibility are: the unit (or
portion) was vacant for more than 90 consecutive days during the taxation year
and the property is in any of the commercial or industrial classes. In order to claim the vacancy rebate,
property owners must submit an application before the last day of February of
the year following the taxation year in respect of which the application is
made. This mandatory program provides a
30% rebate of taxes for eligible property in the commercial classes and a 35%
rebate for eligible property in the industrial classes.
The Revenue
Branch administers the Vacancy Rebate Program under the Vacancy Rebate Policy
attached as Documents 4. Highlights of
the policy include:
- Calculation of the
vacancy rebate on eligible property based on the apportioned assessment
provided by the Municipal Property Assessment Corporation (MPAC)
- Payment of interest as
required by the Municipal Act if
the City fails to issue the rebate within stipulated deadlines
- Recalculation of vacancy rebates upon assessment
changes (for example, following an Assessment Review Board decision) and
the associated recovery of any overpayment resulting from an assessment
decrease or associated additional payment resulting from an assessment
increase
Tax Deferral
Program
Since the
launch of the Full Property Tax Deferral for Low-Income Seniors and Low-income
People with Disabilities in 2007, the amount of property taxes deferred have
increased by 195 per cent as at December 31, 2011. This program allows qualified low-income seniors and low-income people
with disabilities the ability to stay in their homes longer and enjoy a better
quality of life. The increase
in the number of applicants on this program has been gradual. During the last four years, some properties
have been removed from this program due to sale of the properties or death of
applicants.
As at
December 31, 2011, there were 77 taxpayers on the program and the number of
applications received since the program was introduced totals 123. On average, the annual deferral is about $3,135. The amount of taxes
deferred for those taxpayers in 2011 will be approximately $226,000. On December 31, 2011, the total taxes
deferred amounted to $909,000. The income threshold for 2012 will be
$38,407. There is no application deadline for first time
applicants and for those already on the program, the renewal deadline remains
at February 28 of the relevant tax year.
Farm Grant Program
Section 110
of the Municipal Act, 2001 allows Council to designate lands (or part
thereof) within the classes of lands described in Ontario Regulation 603/06, as
a municipal capital facility. These
consist of properties intended for use in a service or function that may be
provided by the municipality. Eligible portion of the designated
facility may be exempted from taxation for both municipal and education
purposes. As tax exemptions have financial implications, it is
recommended that such future requests be addressed at the Finance and Economic
Development Committee for review and recommendation to Council. This
would provide a consistent approach for approving municipal capital facility
agreements and granting tax relief for eligible properties.
For 2012, a few administrative changes are required
to implement Special Service Area changes approved by Council or to reflect
small changes in zones for properties receiving an improved service level.
Transit Areas
On November 9th, 2011,
Council approved report ACS2011-ICS-TRA-0023 REVISION OF TRANSIT TAX AREAS FOR
2012. The change in these transit zones
will be enacted for the 2012 taxation year.
Hydro Lines
Ward 4
On May 26,
2010, Council approved the burying of the hydro lines along Kanata Avenue where
overhead lines were originally planned, roughly from the Goulbourn Forced Road
to the Richardson Side Road (report ACS2011-CCS-TRC-0013). This was followed by the formal adoption by
Council of Ward 4 as a Special Service Area pursuant to section 326 of the
Municipal Act 2011, S.O. 2001. City
staff have now tabulated the final costs and will be applying this levy for the
first time in 2012.
Urban/Rural Fire Special Service Areas
In 2011,
Council approved zone changes to reflect the change in Fire Services level associated
with Station 46 becoming operational.
Some further minor changes are required in 2012 to the zones affecting
about 200 rural properties receiving full urban fire services to reflect the
opening of Station 47 and its extended service outside of Barrhaven and a small
area serviced by Station 41 to a new subdivision previously undeveloped.
Financial Services staff recommend changes to the Urban Fire Special Service area for tax levy purposes
pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as
defined in the attached report to include properties within Document 1 – Fire
Zone 41, within Document 2- Fire Zone 47 and changes to the Rural Fire Special Service area for
tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001,
Chapter 25 as defined in the attached report to exclude properties within
Document 1 – Fire Zone 41 and exclude properties within Document 2 – Fire Zone
47.
The
professional sports facility, first known as the Palladium, opened in January
1996. It was subsequently renamed to the Corel Centre and then Scotiabank
Place in 2005. With the Club experiencing financial difficulties prior to
amalgamation, the City of Kanata and the Regional Municipality of Ottawa-Carleton
opted to use the new Professional Sports Facility (PSF) class to reduce the
property tax burden. Over the years, 4 multi-year agreements were
approved by Council increasing the tax burden from $700K per year to $1.6
Million in 2010. Each agreement stipulated that should the taxes in the
commercial tax class be lower than the agreed taxes the lower amount would
apply.
Although
the current value of $127 Million would appear to have generated a much higher
commercial tax level, its value was disputed and under appeal by the property
owner with the Assessment Review Board (ARB) since 2004. Properties of
this nature have experienced significant reductions in value over the last
decade. It was clear that the value on
the assessment roll which reflected increases from the initial cost of
construction was too high.
There were
many challenges faced by MPAC and the Assessment Review Board in determining a
value for such a unique property. These
included the lack of comparable properties within or outside the municipality,
these properties are often not sold for prolonged periods and when sales do
occur they frequently include both the property and the professional sports
team (as was the case with Scotiabank Place).
Values under consideration at the hearing ranged from $27M to $60M with
a final settlement of $51M being signed by the property owner, MPAC and the
City of Ottawa in December 2011. When
combined with Council approving a tax ratio for the Professional Sports
Facility class equivalent to the commercial tax ratio, it yielded an equivalent
tax levy for these properties. As the
value has been established the special agreement is no longer required.
The
recommendation to adopt a 2012 tax ratio for this class equivalent to the commercial
tax ratio is included as part of this report.
Education
Provincial Tax Shift
The 2007 and
2008 Provincial budgets have introduced significant changes to the property tax
assessment system in Ontario. The education tax rate for the residential, farm and
multi-residential properties is set at the provincial level. A drop in the rate for 2012 is based on a
provincial assessment change of between 19% and 20% phased in over the 4 years
versus a City wide average change of about 14%.
The estimated annual benefit of the education tax shift away from the
Residential Class in the City of Ottawa is estimated at $2.0 million or about
$8 for an average single-family dwelling.
The benefit of this annual shift to the Multi-Residential class is
estimated at $179,000.
Business Education Tax
The Business Education Tax (BET) Rates are also reset
for the commercial and industrial class to factor in annual reassessment
values. Although this process does not
result in any education tax reductions, the Province also passed in 2007 a
graduated decrease towards a provincial rate of 1.60% in 2008 which has been
restated to 1.52% for 2009, 1.43% for 2010, 1.33% for 2011 and 1.26% for 2012. This rate applies immediately to new construction
in those classes and will result in savings of $225,000 for these properties
but is expected to escalate as new buildings are assessed. The BET rate reductions also targeted
existing rates for minor reductions in the first few years towards the lower
universal provincial rate and the final larger reduction originally scheduled
for 2014. The Minister of Finance has
proposed changes to effectively delay the 2013 and 2014 BET reductions until
such time the provincial budget is balanced.
Since municipalities
in Ontario retain the BET on PILT properties, this amounted to a compounded
reduction in City revenues of approximately $180,000 per year from 2008 to 2012
for a permanent reduction in PILT revenues of $900K over this period. The impact would have accelerated in 2013 and
2014 for a total reduction of $8.8 million in City Revenues over this period
and a drop in the annual revenue projected to be $6.1 million by 2014. If the delay for any further BET reductions
is legislated, this pressure on the City’s PILT revenues could also be delayed
over the next 3-5 years. Irrespective of
this delay, the Province has agreed to find a solution to this loss of taxes
for municipalities with PILT properties.
Property
Reassessment Cycle
New
assessment notices were sent to all property owners in late 2008 and to any new
owners in 2009 to 2012 or subject to any assessment changes. The current value increases between January
1, 2005 and January 1, 2008 were phased in equally over the four taxation years
2009 to 2012. Any assessment decreases
were realized immediately.
The next
reassessment cycle will phase in value changes from January 1, 2008 to January
1, 2012 over the 2013 to 2016 taxation cycle.
City staff will report the key findings and impact of these changes in
the fall of this year to Council including a communication plan for those
property owners affected the most.
The assessment
appeal system has also been modified.
The Request for Reconsideration is now the first part of the appeal
process (large commercial properties will not be required to first file a
Request for Reconsideration) with the final stage being the formal appeal to
the Assessment Review Board. The filing
deadlines are March 31 of each year or 90 days after the Request for
Reconsideration decision from MPAC.
Provincial
Offences Collections
With the
introduction of Section 441.1 of the Municipal Act, the Provincial Offences
(POA) Collections section has the authority to tax roll amounts outstanding for
defaulted fines. In 2011, Revenue staff
implemented the tax rolling process to secure defaulted POA fines on the tax
roll. The process has become seamless
whereby the POA Collections Section identifies the delinquent fines held by
property owners and then work with the Tax and Water Collections Section to
then tax roll the balance owing to the offenders property tax roll.
Tax rolling
of POA defaulted fines commenced in January 2011 and the Collections Section
has tax rolled $355,000 worth of defaulted fines on 99 properties in the past
year. Of the $355,000 tax rolled in 2011, $129,000 has been paid in full within
that same year. This provides a 36%
collection rate and proves tax rolling to be a very effective collection
method. Tax rolling will continue to be
used in 2012 to collect defaulted and unpaid POA fines. City Council and staff
continue to ask the Province for additional collection tools.
RURAL
IMPLICATIONS
There are no rural
implications associated with this report.
CONSULTATION
Finance
staff has consulted over the last year with Legal Services, The Ministry of
Finance, The Ministry of Municipal Affairs & Housing and The Municipal
Property Assessment Corporation in preparing this report.
Comments by the Ward Councillor(s)
There were
no comments provided by Ward Councillors.
LEGAL
IMPLICATIONS
Part VIII of
the Municipal Act, 2001 provides that Council must deal with various
property tax policy issues on an annual basis. These decisions determine tax
levies for various tax classes in the relevant taxation year.
There are no
risk management impediments to implementing the
recommendation in this report.
FINANCIAL
IMPLICATIONS
The
financial implications are identified in the body of this report.
ACCESSIBILITY IMPACTS
There are no accessibility impacts of
this report.
Environmental
Implications
There are no environmental
implications of this report.
Technology
Implications
There are no technical implications to implementing the recommendation in
this report.
There are no implications to the City’s Strategic Plan.
SUPPORTING
DOCUMENTATION
Document 1 – Fire
Zone 41
Document 2 – Fire
Zone 47
Document 3 – Charitable Rebate Policy
Document 4 –
Vacancy Rebate Policy
Document 5 –
Glossary of Terms
DISPOSITION
Finance will
use the tax ratios and rates to calculate and issue the 2012 final tax bills.
Legal
Services will prepare all applicable by-laws, and assist Finance staff as
required.