7. 2008 TAX RATIOS AND OTHER TAX POLICIES

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2008

Committee RecommendationS

That Council approve:

1. The adoption of the following optional property classes in 2008:

· 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; and

· Professional sports facility class.

2. The adoption of the following tax ratios for 2008:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.800000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.543789
Commercial Broad Class	2.256425
- Commercial *	2.146121
- Office Building *	2.592757
- Parking Lots and Vacant Land – Commercial *	1.406182
- Shopping Centre *	1.785152
- Professional Sports Facility *	N/A
Industrial Broad Class	2.566261
- Industrial *	2.746772
- Large Industrial *	2.358772

* including new construction classes for BET purposes identified in the Ontario Budget subject to their legislative approval

** 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 farm land 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, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction.

4. That the tax rates for 2008 be established based on the ratios adopted herein.

5. a) That the 2008 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2007 CVA taxes; and

b) That for 2008 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year.

6. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2008 and future taxation years.

7. That the property tax mitigation programs currently in place and detailed in this report be continued for 2008, including the Farm Grant Program and the new Low Income Seniors and Disabled Persons Complete Tax Deferral Program.

8. That the additional $1.7 million of provincial revenue for paramedic services be used to offset the decreased taxation revenue resulting from lower growth.

RecommandationS du comité

Que le Conseil approuve ce qui suit :

1. L’utilisation en 2008 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 2008 :

Catégorie fiscale	Coefficient **
Résidentiel	1,000000
Logements multiples	1,800000
Nouveaux logements multiples	1,000000
Ferme	0,200000
Forêt aménagée	0,250000
Pipeline	1,543789
Catégorie Commercial général	2,256425
- Commercial *	2,146121
- Immeubles de bureaux *	2,592757
- Terrains de stationnement et terrains commerciaux vacants *	1,406182
- Centre commerciaux *	1,785152
- Installations sportives professionnelles *	S/O
Catégorie industrielle générale	2,566261
- Industriel *	2,746772
- Grand industriel*	2,358772

* y compris les nouvelles catégories de construction aux fins de la répartition des taxes scolaires indiquée dans le budget de l'Ontario sous réserve de son approbation législative.

** 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 : 70 % 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, 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 2008 soient basés sur les coefficients fiscaux adoptés par les présentes.

5. a) Que les paramètres de plafonnement de 2008 soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d’après l’EVA de 2007, le plus élevé de ces deux montants étant retenu;

b) Que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale en 2008 et dont l'écart entre les taxes annualisées recalculées et les taxes établies d'après l’EVA est de moins de 250 $ soient taxées d'après leur EVA cette année.

6. Que le niveau de taxes sur les propriétés « nouvellement bâties » soit établi au niveau minimal de 100 % des taxes d'après l’EVA en 2008 et pendant les années d’imposition subséquentes.

7. Que les programmes d'allégement des taxes foncières actuellement en place et décrits dans le présent rapport, y compris le programme de subventions pour terres agricoles et le nouveau programme de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées, soient maintenus en 2008.

8. Que le 1,7 million de dollars de fonds supplémentaires de revenu provincial des services paramédicaux soit utilisé pour contrebalancer la baisse des revenus fiscaux due au ralentissement de la croissance.

Documentation

1. City Treasurer’s report dated 7 April 2008 (ACS2008-CMR-FIN-0015).

2. Extract of Draft Minutes, 15 April 2008.

Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council/et au Conseil

7 April 2008/le 7 avril 2008

Submitted by/Soumis par : Marian Simulik, City Treasurer/trésorière municipale

Contact Person/personne-ressource : Ken Hughes, Manager of Revenue/gestionnaire, Recettes

Financial Services/Services financiers

613-580-2424, ext./poste 13485, ken.hughes@ottawa.ca

City Wide/à l'échelle de la Ville

Ref N°: ACS2008-CMR-FIN-0015

SUBJECT:	2008 TAX RATIOS and other tax policies
OBJET :	COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2008

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend Council approve:

1. The adoption of the following optional property classes in 2008:

· 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; and

· Professional sports facility class.

2. The adoption of the following tax ratios for 2008:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.800000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.543789
Commercial Broad Class	2.256425
- Commercial *	2.146121
- Office Building *	2.592757
- Parking Lots and Vacant Land – Commercial *	1.406182
- Shopping Centre *	1.785152
- Professional Sports Facility *	N/A
Industrial Broad Class	2.566261
- Industrial *	2.746772
- Large Industrial *	2.358772

* including new construction classes for BET purposes identified in the Ontario Budget subject to their legislative approval

** 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 farm land 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, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction.

4. That the tax rates for 2008 be established based on the ratios adopted herein.

5. a) That the 2008 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2007 CVA taxes; and

b) That for 2008 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year.

6. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2008 and future taxation years.

7. That the property tax mitigation programs currently in place and detailed in this report be continued for 2008, including the Farm Grant Program and the new Low Income Seniors and Disabled Persons Complete Tax Deferral Program.

8. That the additional $1.7 million of provincial revenue for paramedic services be used to offset the decreased taxation revenue resulting from lower growth.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil d’approuver ce qui suit :

1. L’utilisation en 2008 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 2008 :

Catégorie fiscale	Coefficient **
Résidentiel	1,000000
Logements multiples	1,800000
Nouveaux logements multiples	1,000000
Ferme	0,200000
Forêt aménagée	0,250000
Pipeline	1,543789
Catégorie Commercial général	2,256425
- Commercial *	2,146121
- Immeubles de bureaux *	2,592757
- Terrains de stationnement et terrains commerciaux vacants *	1,406182
- Centre commerciaux *	1,785152
- Installations sportives professionnelles *	S/O
Catégorie industrielle générale	2,566261
- Industriel *	2,746772
- Grand industriel*	2,358772

* y compris les nouvelles catégories de construction aux fins de la répartition des taxes scolaires indiquée dans le budget de l'Ontario sous réserve de son approbation législative.

** 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 : 70 % 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, 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 2008 soient basés sur les coefficients fiscaux adoptés par les présentes.

5. a) Que les paramètres de plafonnement de 2008 soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d’après l’EVA de 2007, le plus élevé de ces deux montants étant retenu;

b) Que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale en 2008 et dont l'écart entre les taxes annualisées recalculées et les taxes établies d'après l’EVA est de moins de 250 $ soient taxées d'après leur EVA cette année.

6. Que le niveau de taxes sur les propriétés « nouvellement bâties » soit établi au niveau minimal de 100 % des taxes d'après l’EVA en 2008 et pendant les années d’imposition subséquentes.

7. Que les programmes d'allégement des taxes foncières actuellement en place et décrits dans le présent rapport, y compris le programme de subventions pour terres agricoles et le nouveau programme de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées, soient maintenus en 2008.

8. Que le 1,7 million de dollars de fonds supplémentaires de revenu provincial des services paramédicaux soit utilisé pour contrebalancer la baisse des revenus fiscaux due au ralentissement de la croissance.

EXECUTIVE SUMMARY

The purpose of this report is to present recommendations regarding 2008 property tax policy issues that the Municipal Act requires Council to deal with prior to April 30 of each year. These decisions determine the tax burdens on the various tax classes for the 2008 taxation year.

The first tax policy that requires Council approval is the adoption of optional tax classes. In the past, Council has elected to employ all of the optional property classes including:

· Shopping Centres,

· Office Buildings,

· Parking Lots and Vacant Lands,

· New Multi-residential,

· Large Industrial, and

· Professional Sports Facility.

The use of optional tax classes allows for different levels of taxation within a class. Eliminating any of the optional tax classes would likely shift the tax burden among properties within the broad tax class. There has been discussion at Committee, Council and most recently during the Administrative Review exercise about reducing some of the optional property tax classes or changing the allocations of the tax burden. Staff will prepare an information report on the effects of any changes to the optional property tax classes at a later date.

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. As there was no re-assessment performed by the Municipal Property Assessment Corporation (MPAC) for taxation year 2008, there are no tax shifts to mitigate. The tax ratios for 2008 are the same (other than broad class recalculations) as 2007.

Commercial, Industrial and Multi-residential properties are covered by a mandatory capping program. This program limits the tax increases from re-assessment. Council has approved changes to the capping levels in 2005, 2006 and again in 2007. These changes were accepted by Council in prior years and are being recommended again for 2008. These changes will accelerate the movement of capped properties to their actual taxes (based on CVA).

As the tax ratios for the multi-residential and industrial classes are below the Provincial thresholds, these tax classes and the residential tax class can bear all of the levy increase approved by Council.  The commercial class tax ratio however is above the provincial threshold.  Therefore, for 2008, the commercial property tax class may bear only one-half of any budgetary tax increase approved by Council.  Only when the Commercial tax ratio is below the provincial threshold will the tax class bear the full Council approved budgetary tax increase.  The effect of this restriction is to increase the effect of the 4.9% budgetary increases approved by Council to 5.2% for an urban residential property owners ($132 for the average home) and 3.6% for an urban commercial property owner. , 6.1% Ffor a rural transit zone a residential property owners the average home will see an increase of $124 (6.1%) and 6.2% $122 (6.2%) for the average home in rural transit zone B residential property owners. The high increase in the rural areas is the result of the Para-Transpo cost increases and the disproportionate share that police is of the total rural levy.

The report also recommends the continuation of the various tax mitigation programs including rebates to: charitable organizations, owners of vacant commercial or industrial properties, and the deferral of taxes for low-income seniors and the disabled. After the approval of the 2006 Tax Policy submission Council approved a tax mitigation program for farmers because of the economic challenges they were facing. The Farm Grant Program (FGP) allowed eligible farmers to defer payment of their final tax bill (normally due in June) to December. While the take-up on this program was limited (530 of 4,000 farm properties) in 2007, in response to rural concerns, the program is being recommended for 2008.

In April of 2007, City Council directed Revenue Division to implement a second property tax deferral program that would allow qualified seniors and disabled persons to defer the total amount of taxes levied until the property is sold or transferred. The new program was launched on October 15, 2007. Of 70 applicants 62 were approved under the program and more than $150,000 of the property taxes levied in 2007 have been deferred. A similar amount for 2008 will also be deferred. The income threshold for the 2009 taxation year will be increased to $35,770 from $35,000.

There will be no re-assessment until the 2009 taxation year. The last two Provincial budgets have announced changes to the processes around assessments for residential property owners (although some changes have not yet received legislative approval). Assessment increases for all tax classes will be phased in over four years while assessment decreases will be passed on immediately (subject to legislative approval). As a result, staff is not expecting to see the significant tax shifts between properties within tax classes that occurred in prior years. Inter class tax shifts among the property tax classes will continue. Staff recommends that Council continue to lobby the Provincial government to ensure that the City has the tools to mitigate the tax shifts on a permanent basis and to ensure that the property tax system reflects the needs of municipalities.

In 2006, Council directed staff to revise the property tax relief provided to Scotiabank Place. The agreement that ensued is in place for the 2007 through 2010 taxation years. By 2010 the annual taxation will be increased to $1.6 million from about $700,000 in 2006. As per the terms of the agreement, Council cannot unilaterally decide to review the tax agreement before 2010. The taxation for Scotiabank Place will be $ 1,071,248 for 2008.

In approving the 2008 tax supported budget on March 26, Council approved an increase in property tax revenues of 4.9%. A number of adjustments should be incorporated into the budget before finalizing the calculation of the 2008 tax rates. These adjustments are based upon a further review and analysis of the final assessment roll and on information received related to the additional provincial funding for Paramedic services.

RÉSUMÉ

L’objet de ce rapport est de présenter des recommandations au sujet des politiques d’imposition foncière de 2008 dont la Loi sur les municipalités impose au Conseil municipal de s’occuper avant le 30 avril de chaque année. Ces décisions déterminent le fardeau fiscal des diverses catégories de propriétés pour l’année d’imposition 2008.

La première politique fiscale qui requiert l’approbation du Conseil est l’adoption de catégories de propriétés optionnelles. Antérieurement, le Conseil avait choisi d’utiliser toutes les catégories optionnelles de biens fonciers, en particulier les suivantes :

· Centres commerciaux

· Immeubles de bureaux

· Terrains de stationnement et terrains vacants

· Nouveaux immeubles à logements multiples

· Grand industriel

· Installations sportives professionnelles

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. Il a été discuté, au cours des réunions du Comité et du Conseil, et tout récemment dans le cadre du processus des examens administratifs, de réduire certaines catégories optionnelles de biens fonciers ou de modifier les allocations du fardeau fiscal. Plus tard dans l’année, le personnel rédigera un rapport d’information sur les répercussions qu’entraînerait toute modification aux catégories optionnelles de biens fonciers.

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. Étant donné que la Société d’évaluation foncière des municipalités (SEFM) n’a fait aucune réévaluation en 2007 pour les fins de l’année fiscale 2008, il n’y aura aucune répercussion fiscale à atténuer. Les coefficients fiscaux pour 2008 resteront les mêmes qu’en 2007.

Les propriétés des catégories Commercial, Industriel et Logements multiples sont protégées par un programme de plafonnement obligatoire. Ce programme limite le montant des augmentations de taxes consécutives à la réévaluation des propriétés. Le Conseil a approuvé des modifications des niveaux de plafonnement en 2005, 2006 puis de nouveau en 2007. Ces changements ont été acceptés par le Conseil au cours des années précédentes et on recommande de les reconduire de nouveau en 2008. Ils permettront d’accélérer le mouvement des propriétés plafonnées vers leur niveau d’imposition réel (basé sur l’EVA).

Les catégories Logements multiples et Industriel sont en deçà des seuils provinciaux et peuvent donc, tout comme la catégorie Résidentiel, absorber les augmentations du taux d’imposition approuvées par le Conseil. Le taux d’imposition de la catégorie Commercial est cependant au‑dessus du seuil provincial. Par conséquent, pour 2008, cette catégorie pourrait absorber la moitié seulement des augmentations budgétaires approuvées par le Conseil. Ce n’est que lorsque son taux d’imposition sera inférieur au seuil provincial que cette catégorie devra absorber la totalité de l’augmentation budgétaire approuvée par le Conseil. L’effet de cette restriction sera d’accroître les augmentations budgétaires de 4,9 % approuvée par le Conseil à 5,2 % pour le propriétaire d’un bien résidentiel en milieu urbain (132 $ pour une résidence moyenne) et à 3,6%  pour le propriétaire d’un bien commercial en milieu urbain. Pour le propriétaire d’un bien résidentiel dans une zone rurale transitoire A, la résidence moyenne sera dotée d’une augmentation de 124 $ (6,1 %) et de 122 $ (6,2 %) pour une résidence moyenne située dans une zone rurale transitoire B. L’augmentation considérable dans les secteurs ruraux est liée aux augmentations des frais du service de Para Transpo et au partage inégal des coûts liés aux services de police qui relèvent en entier des prélèvements du secteur rural.

Le rapport recommande également le maintien des divers programmes d’allégements fiscaux, y compris ceux dont bénéficient les organisations caritatives, les propriétaires de biens-fonds vacants, commerciaux ou industriels, et les reports pour les personnes âgées à faible revenu et les personnes handicapées. Suite à l’approbation du mémoire sur la politique fiscale de 2006, le Conseil a adopté un programme d’allégements fiscaux pour aider les agriculteurs à relever les défis économiques auxquels ils étaient confrontés. Le Programme de subventions pour terres agricoles (PSTA) permettait aux agriculteurs admissibles de reporter jusqu’en décembre le versement final de leurs taxes foncières, normalement dû en juin. Peu de gens se sont prévalus de ce programme en 2007 (530 propriétaires sur un total de 4 000 fermes) mais, considérant les préoccupations du milieu rural, on recommande de le maintenir en 2008.

En avril 2007, le Conseil a donné instruction à la Division 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. Ce nouveau programme a été lancé le 15 octobre 2007. Sur 70 demandes dans le cadre de ce programme, on en a approuvé 62 et reporté par conséquent 150 000 $ d’impôts fonciers pour l’année 2007. En 2008, on reportera aussi un montant similaire. Le seuil de revenu de l’année d’imposition 2009 sera porté de 35 000 $ à 35 770 $.

Aucune réévaluation des propriétés n’aura lieu avant l’année d’imposition 2009. On a annoncé dans les deux derniers budgets de la province des modifications du processus d’évaluation des propriétés résidentielles. L’augmentation des évaluations pour toutes les catégories fiscales sera étalée sur quatre ans alors que les diminutions prendront effet immédiatement (sous réserve de leur approbation législative). Le personnel ne s’attend par conséquent pas à un transfert important de l’impôt entre les propriétés dans une même catégorie comme les années précédentes. Il recommande au Conseil de continuer à faire pression sur le gouvernement provincial pour s’assurer que la Ville ait en permanence le moyen d’alléger les transferts d’impôts et que le système municipal d’imposition foncière réponde à ses besoins.

En 2006, le Conseil a donné instruction au personnel d’examiner l’allègement d’impôts accordé à Place Banque Scotia. Une entente connexe est maintenant en place pour les années fiscales 2007 à 2010. D’ici 2010, le niveau annuel d’imposition passera des 700 000 $ qu’il était en 2006 à 1,6 million de dollars. Selon les termes de l’entente, le Conseil ne peut unilatéralement décider de revoir cette entente fiscale avant 2010. Les impôts fonciers de Place Banque Scotia s’élèveront à 1 071 248 $ en 2008.

En approuvant, le 26 mars dernier, le budget de 2008 financé par les taxes, le Conseil a approuvé une augmentation des recettes de l’impôt foncier de 4,9 %. Un certain nombre d’ajustements doivent être intégrés au budget avant la finalisation des calculs des taux d’imposition de 2008. Ces ajustements seront fondés sur un nouvel examen et une nouvelle étude du rôle d’évaluation final, de même que sur les renseignements reçus concernant le financement provincial supplémentaire destinés aux services paramédics.

BACKGROUND

The Municipal Act requires that Council approve a number of tax policy decisions before April 30 of each year. This report details each of the required tax policies.

The property tax system is primarily driven from the assessed values determined by the Municipal Property Assessment Corporation (MPAC) based on provincial legislation. The City uses these individual valuations to determine the taxes for all properties. MPAC did not conduct a re-assessment in 2007. The next re-assessment will be conducted in 2008 for the 2009 taxation year. Accordingly, the assessed values with the valuation date of January 1, 2005, are to be used again in 2008. This means that there will be no shifts of tax burden in 2008.

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.

Staff recommends that Council continue to adopt all of the following optional classes:

i) New Multi-residential – an optional class within the
Multi-residential class;

ii) Shopping Centres, Office, Parking Lots and Vacant Land Commercial – optional classes within the Commercial broad class;

iii) Large Industrial – an optional class within the Industrial broad class; and

iv) Professional Sports Facility – an optional class.

Any changes to these optional property tax classes and their ratios would affect the tax burden on other properties within the tax class. There has been significant discussion at Committee, Council and most recently during the Administrative Review exercise about reducing some of the optional property tax classes or changing the allocations of the tax burden. Staff will prepare an information report on the effects of any changes to the optional property tax classes at a later date.

2. TAX RATIOS

The setting of tax ratios allows a municipality to distribute the property tax burden among the various tax classes. The proposed tax ratios for 2008 are the same (other than broad class recalculations) as 2007. Municipalities are subject to limits on their levy increases for some tax classes where the tax ratio for the year was above the provincial threshold. A municipality can apply a municipal tax increase to those classes, but only by an amount that is no more than half of any tax rate increase applied to the residential class. This modification to the levy restriction policy provides the ability to share some of the burden of any municipal tax increase across all property classes, while continuing to reduce the gap between business and residential property taxes.

Table 1 -Tax Ratios and Provincial Thresholds

Property Tax Class	Provincial Threshold	2007 Ratios	Proposed 2008 Ratios **
Residential		1.000000	1.000000
Multi-Residential	2.7400	1.800000	1.800000
New Multi-Residential		1.000000	1.000000
Farm		0.200000	0.200000
Managed Forest		0.250000	0.250000
Pipeline		1.543789	1.543789
Commercial Broad Class	1.9800	2.254348	2.256425
Commercial-Residual *		2.146121	2.146121
Office Building *		2.592757	2.592757
Parking Lots and Vacant Land – Commercial *		1.406182	1.406182
Shopping Centre *		1.785152	1.785152
Professional Sports Facility *		N/A	N/A
Industrial Broad Class	2.6300	2.574531	2.566261
Industrial – Residual *		2.746772	2.746772
Large Industrial *		2.358772	2.358772

*2008 only - includes new construction classes for BET purposes identified in the Ontario Budget subject to their legislative approval

** Subject to final minor revisions upon OPTA close-off

Table 1 shows that the tax ratios for the multi-residential and industrial classes were below the Provincial thresholds, which means these tax classes and the residential tax class can bear all of the levy increase approved by Council. As the commercial class is above the provincial threshold, for 2008 the commercial property tax class may bear only one-half of any budgetary tax increase that is approved by Council. Only when the Commercial tax ratio is below the provincial threshold will the tax class bear the full Council approved budgetary tax increase.

Staff recommends that Council approve the tax ratios for all property classes.

 3. RATIOS – MANDATORY SUBCLASSES

There are two subclasses of farm land awaiting development. The first, farm land awaiting development subclass I, is defined as farm land currently used solely for farming but there exists an approved and registered subdivision plan on the lands yet no actual development has 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 land awaiting development, subclass II, currently receives no tax rate reduction and that practice is recommended to continue.

Staff recommends the adoption of the following tax ratios and by-laws for the mandatory property subclasses and the tax rate percentage reduction for farm land 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, 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 2008 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.

Staff recommends that the tax rates be established based on the ratios established in this report.

5. CHANGES TO THE CAPPING REGULATIONS

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 bill 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 land awaiting development;

· Provincial and municipal property that is subject to payments in lieu of taxes (PILTs). (However, commercial tenants in provincial or municipal owned properties would be protected by the limits); and

· Certain power generation and transformer facilities.

The limit does not apply to properties in the residential, farmland, managed forest, new multi-residential, professional sports facility and pipeline property classes.

The individual properties that are protected by the tax cap generate a “foregone revenue”. This 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, and 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, 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 2008 are summarized as follows:

Capping parameter to be 10% of Annualized tax - One of the major disadvantages of the capping program and a continuous cycle of re-assessments is that many of the capped properties within the City and the Province of Ontario will never fully 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 approved this change for 2006 in the 2006 tax policy submission and again in 2007. Staff recommends this change for 2008 as well. A decision not to implement this option each year would mean the capping parameter would revert to 5%.

Staff recommends that the capping parameter be 10% of the annualized tax in 2008.

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 have been 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.

Staff recommends that the capping parameter of 5% of the CVA taxes be continued for the 2008 taxation year.

$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 that 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.

Staff recommends that for 2008 (as in 2007) 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 generates the “foregone revenue”. Council must approve this percentage, known as the clawback percentage. In 2008, the clawback will decrease. A recovery by-law to approve the final clawback percentages will be submitted for Council approval at a later date.

6. TAX TREATMENT FOR NEW CONSTRUCTION PROPERTIES

The tax responsibility for eligible “new construction” properties is 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 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 is to gradually move towards the maximum through a phase in. This phase in will be accomplished with the use of the following minimum tax levels approved by Council in 2006:

2007 – 90% of CVA taxes

2008 – 100% of CVA taxes

This option accelerates the progress towards the CVA taxes, which initially was the ultimate goal of the capping program. However, it is important to note that for the properties reaching their CVA tax level, they would still continue to receive tax capping protection from ongoing re-assessment fluctuations.

Staff recommends that the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2008 and future taxation years.

7. TAX MITIGATION PROGRAMS

A number of other mitigation programs have been established in prior years. It is recommended that these mitigation programs be continued. These programs include:

1) The provision of a 40% tax rebate to charitable organizations as defined and required in the legislation;

2) Tax rebate of:

a) 100% to any church leasing space to houses of refuge and registered charities;

b) 40% to Registered Canadian Amateur Athletic Associations; and

c) 100% for non-profit, non-home based licensed child care centres for space occupied for child care purposes;

3) 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.

4) The provision of a tax relief (increase deferral) program for low-income seniors and disabled persons.

5) The provision of a complete tax deferral program for low-income seniors and disabled persons and a

6) Farm Tax Grant Program.

After the approval of the 2006 tax policy submission the Revenue Division 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. This program returns almost $3 million of taxes to eligible charities. After offering this training and pre-filling the applications for the charities, staff estimate that about half of these charities complete the application themselves. This allows the charities to keep all of the rebate. The training sessions will be offered again for the next tax year.

In April of 2007, City Council directed Revenue Division to implement a second property tax deferral program that would allow qualified seniors and disabled persons 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 disabled persons the ability to stay in their homes longer and have a better quality of life. The new program was launched on October 15, 2007. To date, we have received 70 applications. Of the applications received, 62 were approved and more than $150,000 of the property taxes levied in 2007 have been deferred. A similar amount for 2008 will also be deferred. On average, the annual deferral is about $2,400. The income threshold for the 2009 taxation year will be increased from $35,000 to $35,770. The deadline for receipt of applications for the 2009 taxation year is December 31, 2008.

In 2006 Council approved a tax mitigation program for farmers because of economic challenges facing farmers. The Farm Grant Program (FGP) allowed eligible farmers to defer payment of their final tax bill (normally due in June) to December. Over 530 of just under 4,000 farm properties took advantage of the program in 2007. The program cost about $25,000 for printing, mailing and staff time. While the take-up on this program is small, in response to rural concerns, the program is being recommended for 2008.

A one-time tax deferral was provided to assist businesses impacted by the demolition work and road closures undertaken to ensure public safety surrounding Somerset House at 352 Somerset Street West. Properties that are part of and subject to the Bank Street and Somerset Street Business Improvement Areas have an additional five months to pay their interim and final taxes.

8. 2009 TAXATION

The 2007 and 2008 Provincial budgets have introduced significant changes to the property tax assessment system in Ontario (although some changes have not yet received legislative approval). As reported previously, Business Education Taxes (BET) are to be reduced to 1.6% over 7 years. This will mean a 12% cut in the BET for the Commercial property tax class and a 26% cut in the BET for the Industrial property tax class by 2014. The reductions start in 2008. In 2008 commercial and industrial taxpayers will see reductions of $515,933 and $157,330 respectively. Since municipalities in Ontario retain the BET on PILT properties, this reduction will reduce City revenues by approximately $175,000 in 2008 eventually increasing to a loss of $6.1 million in 2014.

The assessment cycle will now be over four years, with the next assessment being done this year by MPAC for the 2009 taxation year. The valuation date will be January 1, 2008. Assessment increases for all property tax classes will now be phased in over four years. Any assessment decreases will be realized immediately (subject to legislative approval).

Upon legislative approval, the assessment appeal system will also be modified. The Request for Reconsideration is to be the first part of the appeal process. The appeal process will have two stages with the final stage being the formal appeal to the Assessment Review Board. The filing deadlines will be changed along with improved information disclosure requirements.

Staff will be preparing analysis of the assessment changes and the tax impacts when the data becomes available. Preliminary data should be available to City staff in the late summer. Property owners will receive their new assessment notices in mid to late September. A complete communications plan will be prepared to ensure staff, Councillors and property owners are aware of the changes and how they are affected.

11. TAXATION AT SCOTIABANK PLACE

In 2006, Council directed staff to revise the property tax relief provided to Scotiabank Place. An agreement was negotiated with the owners of Scotiabank Place that covers the taxation on the property until the end of the 2010 taxation year. The agreement increases the annual taxes from about $700,000 in 2006 to $1,600,000 in 2010 (subject to outstanding assessment appeals). As the agreement removed Council’s ability to unilaterally review and adjust the taxation of Scotiabank Place until the term of the agreement is over, there are no decisions to be made by Council this year. Taxes for Scotiabank Place will be $1,071,248 for 2008.

12. 2008 BUDGET ADJUSTMENTS

In approving the 2008 tax supported budget on March 26, 2008, Council approved an increase in property tax revenues of 4.9%. A number of adjustments should be incorporated into the budget before finalizing the calculation of the 2008 tax rates. These adjustments are based upon a further review and analysis of the final assessment roll and on information received related to the additional provincial funding for Paramedic services.

1) Assessment Growth

In December 2007, Council was advised that the assessment growth as reflected in the returned tax roll, was only 1.85% while the 2008 draft budget had assumed growth to be at 2.0%. The effect of this lower growth resulted in a reduction in property tax revenues from new properties of $1.5 million. Council directed that this shortfall be funded on a one-time basis in 2008 from the City's Tax Stabilization Reserve Fund.

Since December and into the first quarter of 2008, staff have been reviewing the assessment roll with MPAC to ensure that errors, additions or omissions are identified and rectified before establishing the City's 2008 property tax rates. Based on this review, a further deterioration has occurred to the projected assessment growth for 2008 resulting in a decline to 1.80%. This lower assessment growth will result in a further loss of approximately $0.5 million in property tax revenues.

2) Provincial Funding of Paramedic Services

In December 2007, the Province announced additional funding of $3.2 million for Paramedic services in the City of Ottawa. The City's budget for this service as approved by Council, had included the costs associated with an additional 38 paramedics and the related ancillary equipment. The budget had also assumed additional provincial funding of $1.575 million based on the 50/50 cost sharing formula that the province had set as their stated target. As the remaining additional provincial funds of $1.625 would have resulted in a higher percentage of the paramedic budget being funded by the Province, staff wanted to ensure that this additional funding would be forthcoming. It has been confirmed that for 2008, the Province will provide this additional revenue that will be in excess of the 50/50 cost sharing formula. These additional funds will be reflected in the final 2008 adopted budget book.

In total, the decrease in assessment growth from 2.0% to 1.80% represents a $2.0 million reduction in tax revenues. This loss can be almost entirely offset by the additional provincial funding of $1.625 million for Paramedics services and maintain the 4.9% property tax increase as adopted by Council on March 26, 2008. In keeping with Council's Fiscal Framework Policy on minimizing and eventually eliminating the use of one-time funding solutions in the budget, it is recommended that Council retain the $1.2 million in the Tax Stabilization Reserve Fund and not make the transfer as originally directed in December. The retention of these funds in the Tax Stabilization reserve fund along with the $12 million contribution in 2009 from the additional Hydro Ottawa dividend stemming from the 2008 sale of Telecom Ottawa, will allow Council to fund the one-time revenue requirement of $13 million that has been incorporated into the 2009 high level forecast.

Staff recommends that the additional $1.7 million of provincial revenue for paramedic services be used to offset the decreased taxation revenue resulting from lower growth.

CONSULTATION

The staff of Financial Services have consulted with Legal Services, The Business Advisory Committee, The Ministry of Finance, The Ministry of Municipal Affairs & Housing and The Municipal Property Assessment Corporation in preparing this report.

FINANCIAL IMPLICATIONS

The financial implications are identified in the body of this report.

SUPPORTING DOCUMENTATION

Appendix A - Glossary of Terms

DISPOSITION

Finance will use the tax ratios and rates to calculate and issue the 2008 final tax bills.

Legal Services will prepare all applicable by-laws, and assist Finance staff as required.

Appendix A

GLOSSARY OF TERMS

Assessment Base: The total current value assessments of all property within a municipality.

Assessment Update/Re-assessment: The process of updating current value assessments on all the properties in a municipality to their value as of a date specified by the Province. There was no re-assessment in 2008 but there will be one in 2009.

Capped Tax Increase Parameter: The percentage that the taxes can increase each year for properties in the commercial, industrial or multi-residential classes. The percentage is established under provincial legislation and is applied before the levy change (budget increase) for the year is added to the taxes.

Commercial Broad Class Ratio: The broad class ratio is the average ratio for commercial properties if the municipality elects to use any optional classes.

Current Use: The actual current use of the property, excluding any consideration of a potential or future use.

Current Value Assessment (CVA): Represents the value assigned to all properties by the Municipal Assessment Corporation (MPAC). The value is based on the price a property might reasonably be expected to sell for if sold by a willing seller to a willing buyer after appropriate time and exposure on an open market. For residential properties the value is derived by using a sales comparison approach and for commercial, industrial and multi-residential properties, the value is based on either the income or the cost approach.

Current Value Assessment Taxation (CVA Taxes): The taxes derived from multiplying the current value assessment of a property and the applicable tax rate for the tax class, for any given year.

Education Tax: A tax collected on the property, which goes to the Province/school boards for the provision of education services. The Province sets the tax rates that generate the education taxes.

Farm Land Awaiting Development: A sub-class that is defined as farmland used solely for farming but where there exists an approved and registered subdivision plan on the lands and development has yet to take place.

Income Approach: One of the approaches used to value property. The income approach is based on the theory that income-producing properties are bought and sold based on their income-earning potential.

Industrial Broad Class Ratio: The broad class ratio represents the average ratio for industrial properties if the municipality elects to use any optional classes.

Inter Class Tax Shift: When a portion of the total tax burden of a property class is transferred to other property classes. This type of transfer happens when:

a) the tax ratio is moved in one or more classes, or

b) the property classes do not all increase at the same rate as a result of
re-assessment.

Multi-Residential Property Class: Property that contains seven or more self-contained residential units (e.g. low rise and high rise apartment buildings, townhouses etc.). This property class also includes vacant land zoned for multi-residential development. An optional class within multi-residential is New Multi-residential which are units built since 2000.

Municipal Property Assessment Corporation (MPAC): MPAC is a non-share capital, not-for-profit corporation. Every municipality in Ontario is a member of the Corporation. It is governed by a Board that is appointed by the Minister of Finance. Its mandate is to administer and deliver a province-wide assessment system that is based on current values, in accordance to the legislation and regulations set by the Provincial Government.

Neutral Tax Ratios: Updated tax ratios during a re-assessment year applicable to each property class (excepting residential, new multi-residential, farmland and managed forest property classes) which maintains the previous year’s relative tax burden between property classes to eliminate any inter-class shifts.

Optional Tax Classes: In order to have greater tax flexibility municipalities can opt to have optional classes in the commercial, industrial and multi-residential property classes. The current optional classes available are the office building, the shopping centre, the parking lots and vacant commercial land, the professional sports facility, the large industrial and the new-multi residential property class.

Property Assessment Notice: A notification from MPAC, to all property owners to advise them of their property’s current value assessment. The Notice also contains the property’s classification and school support designation.

Property Classes: Defined classes in the Assessment Act are

· residential,

· multi-residential, (seven or more self-contained residential units)

· commercial, (The default class for all real property and vacant land that is not specially included in any other property class.)

· industrial, (Property used for manufacturing, producing or processing anything. It also includes the research and development, the on-site storage and the on-site retail sales associated with manufacturing. Vacant land zoned for industrial development and other industrial type of activities like mining, quarrying, oil and gas or anything extracted from the earth are also included in this property class.)

· pipeline,

· farm, and

· managed forests property classes.

Property Classification/Tax Class: A categorization of a property or a portion of a property according to its use, each category representing a different tax class (e.g. residential, farm, commercial, industrial).

Provincial Threshold: Threshold established by the Province in 2000 for the ratios of the commercial, industrial and multi-residential property classes. Any municipality with ratios above the threshold is prevented from passing the full budgetary tax increase to the property class (a budgetary increase of 50% of the total tax increase is allowed for the property tax classes above the threshold).

Range of Fairness: A range of tax ratios for each property class as determined by the Province. Any municipality that is above the range of fairness can only adopt ratios that are no higher than the previous year or move toward the range of fairness (unless authorized by provincial regulation).

Rural Fire Service Area: Geographically defined area outside of the urban/suburban area that receives a volunteer firefighter as a first response.

Rural Levy: Municipal and education property taxes levied in the rural area to fund citywide and special area services applicable to the area and the property.

Sales Comparison Approach: One of the approaches used to value property. This approach is based on the theory that the current value of a property is directly related to the sale price of similar properties.

Subclasses of Property Classes: For the purpose of providing tax reductions, three subclasses of real property classes are defined:

· farm land awaiting development,

· commercial and industrial vacant land, and

· commercial and industrial excess land subclass.

Tax Burden: The amount of property taxation, in any year, that a class of properties is billed. The total property taxes billed to all classes, in any year, represents the taxation required for municipal purposes (as determined through the budget setting process) and for education purposes (as determined by the Province).

Tax Ratios: Tax ratios express the relationship that the municipal tax rate for each property class bears to the tax rate for the residential property class. In doing so, tax ratios determine the relative tax burden of each property class in relation to the residential property class.

Council has the ability, on an annual basis, to adjust tax ratios and consequently the relative burdens of property taxation for municipal purposes between classes.

Urban Levy: Municipal and education property taxes levied in the urban/suburban area to fund citywide and special area services applicable to the area and the property.

Valuation Date: A date established by the Province that represents the point in time at which a property’s assessment value was based. Starting in 2006, the valuation date in Ontario will be January 1^st. For taxation years 2009 through 2012 the valuation date will be January 1^st 2008.

2008 TAX RATIOS AND OTHER TAX POLICIES

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2008

ACS2008-CMR-FIN-0015 city-wide / À l’Échelle de la ville

Appearing before Committee on this item were Ms. M. Simulik, City Treasurer, and Mr. K. Hughes, Manager of Revenue. They spoke to a PowerPoint presentation, which served to provide Committee with an overview of the staff report. A copy of this presentation is held on file with the City Clerk.

Responding to questions from Councillor Hume with respect to slides 6 and 7 of the presentation, Ms. Simulik explained that slide 6 represented only the municipal portion of the bill, whereas slide 7 included the municipal in addition to the education and the conservation authority components. She confirmed the City was benefiting from the fact that the education rate had not increased. Therefore, even though the City’s needs had increased by 5.2%, the final impact on the tax bill would be a 4.1% increase.

Councillor Jellett posed questions with respect to the possible delay related to the business education rate and the financial impact this could have on the City. Ms. Simulik indicated a one-week delay translated into approximately $150,000 in lost interest income. She noted this issue related to the Provincial government because they set the business education rate.

In response to a follow-up suggestion from Councillor Jellett that, in the event of a delay, the Province be asked to pick up the difference, Ms. Simulik confirmed staff would craft such a letter and send it to all local members of the Provincial Legislature.

Councillor Jellett referenced the sample tax bill circulated to members of Committee, a copy of which is held on file with the City Clerk. In particular, he noted that 6.48% went towards general administration. He wondered if this figure was higher or lower than last year and how it compared to other major municipalities in Ontario. He also wondered how much of “other fees” went towards general administration. Ms. Simulik indicated she did not have this information on hand but that it could be provided to members before the next Council meeting.

Councillor Cullen posed questions with respect to the commercial tax ratio and how the Province had determined this ratio. Ms. Simulik indicated the ratio of 1.98 was established in 1998 when the current value assessment system was implemented. She was unsure how they had come up with the ratio of 1.98, though she suspected it was some sort of provincial average of all the ratios in place at the time. She explained the Province had put it in place because of concerns about municipalities moving taxes off residential onto commercial property classes. She confirmed that in Toronto, the commercial tax class ratio was significantly higher than in any other municipality. The Province had implemented the ratio to limit Toronto’s ability to do anything other than move their ratio downwards, which had not happened because Toronto’s ratio had remained the same. Therefore, she submitted this may have applied 10 years ago, but it did not apply today. She felt it was antiquated and she hoped the Province would review it given that next year, every municipality in Ontario would be doing neutral tax ratios.

Councillor Cullen advised that in anticipation of this report rising to Council, he would be preparing a motion, for Council’s consideration, asking that the Province look at this issue for property tax reform.

The Councillor referenced recommendation 8 of the report, which proposed using $1.7M of Provincial revenue for Paramedic services to offset the decreased taxation revenue resulting from lower growth. He also referenced the higher than anticipated dividend from Hydro Ottawa and he wondered why the City could not use some of the additional Hydro Ottawa revenue instead of using the $1.7M for Paramedic services. Ms. Simulik indicated Council had already set the Paramedic budget based on the service needs in the community for 2008. She submitted that in the absence of re-opening the Paramedic budget to increase their services to use the additional funding, it would still flow to the bottom line as a surplus and would either be used to offset deficits in other areas or it would be a surplus, which would then be contributed to the tax stabilization reserve. She confirmed that the funding had not come with a request for increased services; that it was intended to reduce the tax requirement.

Councillor Cullen noted that re-assessments would be coming in the fall. He referenced the last cycle of re-assessments, the impacts these had on property values and the public reaction on same. He recommended coming forward with a communications plan earlier rather than later. Ms. Simulik indicated it was staff’s intention to get a communications plan to members of Council as soon as data was received from MPAC. She estimated this would happen in late August, early September.

Responding to questions from Councillor Bloess with respect to slide 6 of the presentation and the Transit increase for rural areas, Ms. Simulik explained the increase was primarily driven by Para Transpo. She referenced a 34% increase in ridership, a 5% increase in trip length, plus the 8% increase for Para Transpo itself.

In response to a question from Councillor Wilkinson with respect to the breakdown on the back of the tax bill, Ms. Simulik indicated staff could look at the possibility of separating Para Transpo and Transit. She referenced the limited space available and the fact that the breakdown on the back of the bill matched the various levies listed at the front of the bill. However, she re-iterated that staff could look at that for next year.

Responding to further questions from the Councillor, Ms. Simulik confirmed that the amount shown on the sample tax bill for conservation authorities reflected the levies approved by Committee earlier in the day. She also explained each tax bill would be different in that it would reflect whatever taxes, charges and levies applied to the particular property, whether urban, suburban or rural.

Councillor Wilkinson posed questions with respect to the tax ratios for multi-residential and new multi-residential properties. Mr. Hughes indicated the ratio for the new multi-residential property tax class was mandated by the Province at 1.0, that this ratio had been set in 1998, and that there was a requirement for all of the properties in the new multi-residential property class to remain in this property tax class for 35 years from when they started.

Councillor Doucet referenced the breakdown at the back of the sample tax bill and submitted that it posed some problems at the same time as it resolved others. He noted Culture had been grouped with Parks and Recreation and the fact that the City was often criticized for its spending on culture, even though it was down around 2%. He submitted the breakdown gave the illusion that it captured the total costs for running the City. He indicated he knew for a fact that the City spent more on roads than it did on Transit, once development charges and Provincial funding were factored in. However, he noted the breakdown on the tax bill painted a different picture. He asked staff to comment on this. Ms. Simulik began by re-iterating there was a limit to the amount of information that could be provided on the tax bill. However, she noted the breakdown directed taxpayers to an enclosed insert, which would provide more detailed information in terms of the three highlighted areas and the fact that these were outside of Council control. The insert would also stress to residents that the information presented on the tax bill represented taxes, not the total municipal budget. As an example, she referenced the $506 amount for Transit reflected on the sample tax bill and noted that transit riders were paying almost the same amount. Therefore, the tax bill breakdown did not reflect the true costs of running the Service. It only indicated how much of the tax bill was going towards Transit. She confirmed that when all things were taken into account, there were many areas where the City spent more, on a percentage basis, than what was reflected on the tax bill breakdown. She acknowledged that the City spent more than 6.72% on roads but correspondingly, she submitted Transit would also be higher in terms of the total overall budget.

Councillor Doucet asked that members of Council be provided with a break down, as a percentage of the budget. Ms. Simulik confirmed staff could provide a gross breakdown and then a net break down.

Responding to questions from Councillor Doucet with respect to the property tax class for parking lots and vacant land and the City’s ability to raise revenues from parking lots, Ms. Simulik explained the aforementioned property tax class did not include parking lots assigned to shopping centres, which were captured in the shopping centre tax class. She acknowledged the tax ratio for shopping centres could be increased. However, she advised this would have the impact of dropping the ratios in all of the other optional classes, including office towers. In closing, she indicated staff would outline all this information in a white paper.

In response to questions from Councillor Hunter with respect to the education rate, Ms. Simulik confirmed that the Provincial government set the education rate, that it was unchanged from the previous year, and that the Province would generate additional revenue based on the City’s 1.8% growth because it was a “per property” rate.

Councillor Hunter noted that residential properties were assessed based on market values. However, he wondered how commercial and multi-residential properties were valued. Mr. Hughes explained that large commercial and multi-residential properties were valued based on income and small properties were valued based on the cost to construct the property.

Responding to follow-up questions from the Councillor, Mr. Hughes acknowledged that it was difficult to make comparisons between residential and multi-residential properties because they were valued using different methods. He referenced a report released two years ago, which suggested the tax burden was fair. However, he noted the Eastern Ontario Landlord Organization (EOLO) had submitted their own data, which told a different story. He suspected this dispute would continue until there was an equitable method of valuing the two types of properties.

Councillor Hunter referenced certain types of large commercial properties, such as the airport and Scotiabank Place, and submitted the method of valuing these also presented an issue of fairness. Mr. Hughes confirmed this, adding the issue was further complicated by the fact that, in looking at comparable properties, one could find different ownership issues and encounter different tax regimes.

Councillor Feltmate inquired as to any studies looking at what cost municipalities more, shopping centres or traditional main streets. Ms. Simulik indicated she was not aware of any information on this. However, she submitted this could be looked at in the context of the white paper staff would be bringing forward.

Responding to a further question from Councillor Feltmate, Ms. Simulik indicated the “other charges” on the sample tax bill referred to a special charge for the Canterbury Community Centre, as identified on the front of the bill. She explained the “other charges” category was intended to capture any special levies or charges that were unique to a particular area.

In response to a question from Mayor O’Brien, Ms. Simulik explained that the impact of capping was completely contained within the commercial tax class. Therefore, there would be no further impacts on residential tax rates.

Mayor O’Brien referenced the ups and downs experienced during this year’s budget process and asked how staff was going to ensure this did not happen next year. Ms. Simulik expressed staff’s intention to highlight the fact that, when setting the 2009 taxes, tax policies would have an impact on who paid. She indicated staff would try to model what they saw as the various potential tax increase scenarios to demonstrate the impact of the tax policy on the distribution and provide this information to members of Council when tabling the budget so everyone would understand that, when setting the levy, it was not always spread evenly.

Mayor O’Brien referenced a written submission with respect to the multi-residential tax ratios and asked whether the taxes being applied to the owners of older multi-residential properties were tax deductible and therefore treated as an expense. Ms. Simulik confirmed this.

The Mayor wondered if there was any talk from the Province about harmonizing the multi-residential and the new multi-residential tax rates in order to come up with a fair assessment across the board. Ms. Simulik indicated she had never heard this discussed, nor did she believe it was on anyone’s radar.

Committee heard from the following public delegations.

Mr. Luigi Caparelli, Tenants and Landlords for Fair Taxation, expressed dismay over staff’s recommendation to keep the multi-residential tax ratio at 1.8. He submitted tenants had been paying more than their fair share of taxes for many years and that it was time for change. Mr. Caparelli outlined his arguments for lowering the multi-residential tax ratio, referencing flaws with the property tax system and the fact that this year’s anticipated municipal tax increase would have a disproportional impact on tenants because of the higher tax ratio for multi-residential properties. A copy of his written submission is held on file with the City Clerk.

Responding to a question from Councillor Cullen with respect to the possibility of lowering the multi-residential tax ratio to 1.6, Ms. Simulik indicated this was a decision that was within the realm of tax policies Council could set. However, she cautioned that the trade-off would be a corresponding increase to the residential tax rate. Furthermore, she referenced Mr. Hughes’ earlier comments with respect to a presumption that the taxes were unfair when one compared residential units to rental units, and she maintained that staff had not been able to draw this definitively as a conclusion.

Councillor Cullen inquired as to a current target in this regard. Ms. Simulik referenced a report from EOLO, which supported a ratio somewhere between 1.4 and 1.54. However, she indicated staff had not done any more work on this file since Council had reached its previous target of 1.8. Therefore, she did not have a new target.

Responding to questions from Mayor O’Brien with respect to ensuring any tax savings would be passed on to tenants, Mr. Caparelli maintained there was a process set by Provincial statute. He advised that each year, the City sent out notices to both tenants and landlords advising them of changes in their taxes and by law, landlords were required to pass the savings on to their tenants. Furthermore, he noted tenants were free to simply deduct it from their rent payments commencing in January of that year. Therefore, he indicated he was comfortable that there was a mechanism in place to ensure the money flowed through to tenants.

In reply to questions from Councillor Wilkinson with respect to a written submission from the EOLO, Mr. Caparelli confirmed that he was aware of the organization’s submission. He expressed support for moving closer to a ratio of 1.0 and suggested that if the taxation system moved away from value towards an equal tax burden, then he was comfortable that a ratio somewhere between 1.4 and 1.54 would be fair. He also concurred with the EOLO’s submission that a ratio of 1.75 would eliminate landlords’ ability to charge an above-guideline rent increase.

Mr. John Dickie, Eastern Ontario Landlord Organization, discussed the tax disparity between multi-residential properties, residential properties and new multi-residential properties. He reviewed some historical data with respect to this issue. He referenced this year’s anticipated municipal tax increase and recommended, in order to minimize the disproportional impact on tenants, that Council lower the multi-residential ratio to 1.75. He noted this would eliminate landlords’ ability to apply for an above-guideline rent increase and would result in approximately $2.9M in foregone revenue for the City. A copy of his written submission is held on file with the City Clerk.

Responding to questions from Councillor Wilkinson with respect to options for lowering the multi-residential tax class ratio to 1.75, Ms. Simulik maintained the result would be to shift more of the tax burden onto residential ratepayers.

Mr. Dickie submitted Council could avoid the impact on residential ratepayers by taking some money from reserves, as had been done in the past.

Councillor Wilkinson maintained she did not want landlords to be able to raise rents over and above the guidelines because of rising property taxes. Therefore, she introduced a motion to reduce the multi-residential tax class ratio to 1.75, with the short-fall to be funded from reserves.

Moved by Councillor M. Wilkinson

That the multi-residential tax class ratio be set at 1.75, to be funded from reserves.

LOST

YEAS (1): M. Wilkinson

NAYS (6): R. Bloess, R. Chiarelli, P. Hume, R. Jellett, S. Desroches, Mayor O’Brien

Committee then voted on the report recommendations.

That the Corporate Services and Economic Development Committee recommend Council approve:

1. The adoption of the following optional property classes in 2008:

· 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; and

· Professional sports facility class.

2. The adoption of the following tax ratios for 2008:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.800000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.543789
Commercial Broad Class	2.256425
- Commercial *	2.146121
- Office Building *	2.592757
- Parking Lots and Vacant Land - Commercial *	1.406182
- Shopping Centre *	1.785152
- Professional Sports Facility *	N/A
Industrial Broad Class	2.566261
- Industrial *	2.746772
- Large Industrial *	2.358772

* including new construction classes for BET purposes identified in the Ontario Budget subject to their legislative approval

** Subject to final minor revisions upon OPTA close-off

4. The adoption of the following tax ratios and by-laws for the mandatory property subclasses and the tax rate percentage reduction for farm land 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, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction.

4. That the tax rates for 2008 be established based on the ratios adopted herein.

5. a) That the 2008 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2007 CVA taxes; and

b) That for 2008 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year.

9. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2008 and future taxation years.

10. That the property tax mitigation programs currently in place and detailed in this report be continued for 2008, including the Farm Grant Program and the new Low Income Seniors and Disabled Persons Complete Tax Deferral Program.

11. That the additional $1.7 million of provincial revenue for paramedic services be used to offset the decreased taxation revenue resulting from lower growth.

CARRIED