9. 2009 Tax ratios and other tax policies

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2009

COMMITTEE RECOMMENDATIONS

That Council approve:

1. The adoption of the following optional property classes in 2009:

· 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 2009:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.750000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.541308
Commercial Broad Class	2.163992
- Commercial *	2.056746
- Office Building *	2.484783
- Parking Lots and Vacant Land – Commercial *	1.347621
- Shopping Centre *	1.710810
- Professional Sports Facility *	N/A
Industrial Broad Class	2.540952
- Industrial *	2.699959
- Large Industrial *	2.318571

* 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 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, multi-residential, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction

4. That the tax rates for 2009 be established based on the ratios adopted herein.

5. a) That the 2009 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2008 Current Value Assessment (CVA) taxes;

b) That for 2009 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 for 2009, properties which have reached CVA during 2008 and/or crossed over from the clawback to the capping category or vice versa in 2009 remain at CVA taxes and be excluded from any further and future capping/clawback adjustments.

6. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2009 and future taxation years.

7. That the property tax mitigation programs currently in place and detailed in this report be continued for 2009, including the Farm Grant Program and the new Low Income Seniors and Disabled Persons Complete Tax Deferral Program and the due date for the low-income seniors and disabled persons complete tax deferral program be changed to February 28 of the relevant tax year.

8. That Council endorse a risk-based flexible collection process with respect to repayment options for those property owners in arrears.

9. That a budget adjustment of $5.0 million between taxable revenues and payment in lieu of taxes be recorded to reflect the change in classification of Federal properties that were sold and leased back.

10. That a budget adjustment of $2.5 million between taxable revenues and tax remissions be recorded to reflect the delay in assessment changes that won’t be processed until after the final tax billing.

RECOMMANDATIONS DU COMITÉ

Que le Conseil approuve :

1. L'utilisation en 2009 des catégories optionnelles de biens fonciers suivantes :

Ÿ Centres commerciaux

Ÿ Terrains de stationnement et terrains commerciaux vacants

Ÿ Immeubles de bureaux commerciaux

Ÿ Grand industriel

Ÿ Nouveaux immeubles à logements multiples

Ÿ Installations sportives professionnelles

2. L'adoption des coefficients fiscaux suivants pour 2009:

Catégorie fiscale	Coefficient **
Résidentiel	1.000000
Logements multiples	1.750000
Nouveaux logements multiples	1.000000
Ferme	0.200000
Forêt aménagée	0.250000
Pipeline	1.541308
Catégorie commerciale générale	2.163992
- Commercial *	2.056746
- Immeubles de bureaux *	2.484783
- Terrains de stationnement et terrains commerciaux vacants *	1.347621
- Centre commerciaux *	1.710810
- Installations sportives professionnelles *	s.o.
Catégorie industrielle générale	2.540952
- Industriel *	2.699959
- Grand industriel*	2.318571

* 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 2009 soient basés sur les coefficients fiscaux adoptés par les présentes.

5. a) Que les paramètres de plafonnement de 2009 soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d'après l'EVA de 2008, le plus élevé de ces deux montants étant retenu;

b) Que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale en 2009 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.

c) Que, pour 2009, les propriétés qui ont atteint l’EVA en 2008 et/ou qui sont passées de la catégorie de la récupération fiscale à celle des propriétés plafonnées ou l’inverse en 2009 demeurent taxées d’après leur EVA et soient exclues de tout autre rajustement relatif au plafond ou 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'EVA en 2009 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 2009 avec la date dû le 28 février de l’année courante.

8. Que le Conseil approuve un mode de perception souple fondé sur le risque comme formule de remboursement pour les propriétaires dont le compte affiche un arriéré.

9. Qu’un rajustement budgétaire de 5 millions de dollars entre les revenus imposables et les paiements tenant lieu de taxes foncières soit enregistré de manière à refléter le changement de classification des propriétés fédérales qui ont été vendues puis louées à bail.

10. Qu’un rajustement budgétaire de 2,5 millions de dollars entre les revenus imposables et les remises de taxes soit enregistré de manière à tenir compte des modifications aux évaluations qui ne pourront être traitées avant la production de la facture finale de taxes.

DOCUMENTATION

1. City Treasurer’s report dated 30 March 2009 (ACS2008-CMR-FIN-0017).

2. Extract of Draft Minutes

Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

30 March 2009 / le 30 mars 2009

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

Contact Person/Personne ressource : Ken Hughes, Deputy City Treasurer/

Trésorier municipal adjoint

Corporate Revenue/Revenus municipaux

(613) 580-2424 x 13485

City Wide / À l’échelle de la Ville

Ref N°: ACS2009-CMR-FIN-0017

SUBJECT:	2 009 Tax ratios and other tax policies

OBJET :	COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2009

REPORT RECOMMENDATION

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

1. The adoption of the following optional property classes in 2009:

· 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 2009:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.750000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.541308
Commercial Broad Class	2.163992
- Commercial *	2.056746
- Office Building *	2.484783
- Parking Lots and Vacant Land – Commercial *	1.347621
- Shopping Centre *	1.710810
- Professional Sports Facility *	N/A
Industrial Broad Class	2.540952
- Industrial *	2.699959
- Large Industrial *	2.318571

* 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 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, multi-residential, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction

4. That the tax rates for 2009 be established based on the ratios adopted herein.

5. a) That the 2009 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2008 Current Value Assessment (CVA) taxes;

c) That for 2009 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year;

d) That for 2009, properties which have reached CVA during 2008 and/or crossed over from the clawback to the capping category or vice versa in 2009 remain at CVA taxes and be excluded from any further and future capping/clawback adjustments.

6. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2009 and future taxation years.

8. That Council endorse a risk-based flexible collection process with respect to repayment options for those property owners in arrears.

10. That a budget adjustment of $2.5 million between taxable revenues and tax remissions be recorded to reflect the delay in assessment changes that won’t be processed until after the final tax billing.

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 2009 des catégories optionnelles de biens fonciers suivantes :

Ÿ Centres commerciaux

Ÿ Terrains de stationnement et terrains commerciaux vacants

Ÿ Immeubles de bureaux commerciaux

Ÿ Grand industriel

Ÿ Nouveaux immeubles à logements multiples

Ÿ Installations sportives professionnelles

2. L'adoption des coefficients fiscaux suivants pour 2009:

Catégorie fiscale	Coefficient **
Résidentiel	1.000000
Logements multiples	1.750000
Nouveaux logements multiples	1.000000
Ferme	0.200000
Forêt aménagée	0.250000
Pipeline	1.541308
Catégorie commerciale générale	2.163992
- Commercial *	2.056746
- Immeubles de bureaux *	2.484783
- Terrains de stationnement et terrains commerciaux vacants *	1.347621
- Centre commerciaux *	1.710810
- Installations sportives professionnelles *	s.o.
Catégorie industrielle générale	2.540952
- Industriel *	2.699959
- Grand industriel*	2.318571

* 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

· 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

4. Que les taux d'imposition pour 2009 soient basés sur les coefficients fiscaux adoptés par les présentes.

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 2009 et pendant les années d'imposition subséquentes.

8. Que le Conseil approuve un mode de perception souple fondé sur le risque comme formule de remboursement pour les propriétaires dont le compte affiche un arriéré.

10. Qu’un rajustement budgétaire de 2,5 millions de dollars entre les revenus imposables et les remises de taxes soit enregistré de manière à tenir compte des modifications aux évaluations qui ne pourront être traitées avant la production de la facture finale de taxes.

EXECUTIVE SUMMARY

The purpose of this report is to present recommendations regarding 2009 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 2009 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

· 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.

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 a further small change to the multi-residential tax class ratio) for 2009 to eliminate any tax shifts.

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 through to 2008. These changes were accepted by Council in prior years and are being recommended again for 2009. These changes will accelerate the movement of capped properties to their actual taxes (based on Current Value Assessment - CVA).

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 (558 of 4,000 farm properties) in 2008, in response to rural concerns, the program is being recommended for 2009.

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 approximately $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 $1,309,197 for 2009.

According to the Ontario Municipal Benchmarking Index (OMBI), the City of Ottawa has one of the better property tax collection rates in the province. It may be more challenging to maintain a high tax collection rate in 2009 with current economic uncertainty. Staff will continue to pursue properties in arrears using a risk-based process and will offer payment arrangements for those affected adversely by the economic downturn.

In approving the 2009 tax supported budget, Council approved an increase in property tax revenues of 4.9%. Some adjustments should be incorporated into the budget before finalizing the calculation of the 2009 tax rates. These adjustments are based upon a further review and analysis of the final assessment.

SOMMAIRE

L’objet de ce rapport est de présenter des recommandations au sujet des politiques d’imposition foncière de 2009 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 2009.

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.

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 réévalution a été effectuée par la Société d’évaluation foncière des municipalités (SEFM) pour les années d’imposition 2009 à 2012. Toute réévalution causera une répartition fiscale entre les catégories de propriété, sauf si les taxes sont atténuées. Comme par le passé, le personnel recommande pour 2009 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) afin d’éliminer toute répartition fiscale.

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 pour 2005 à 2008. Ces changements ont été acceptés par le Conseil au cours des années précédentes et on recommande de les reconduire de nouveau en 2009. Ils permettront d’accélérer le mouvement des propriétés plafonnées vers leur niveau d’imposition réel (basé sur l’EVA).

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, la 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 2008 (558 propriétaires sur un total de 4 000 fermes) mais, considérant les préoccupations du milieu rural, on recommande de le maintenir en 2009.

En avril 2007, le Conseil a donné instruction à la Direction des Revenus municipaux 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 mars, environ 70 contribuables s’étaient prévalus de ce programme. En 2009, le montant des taxes reportées pour ces contribuables représentera environ 160 000 $. Leur total reporté se situe juste au-dessous de 385 000 $. Le seuil de revenu de l’année d’imposition 2010 sera porté de 36 843 $ à 35 770 $.

En 2006, le Conseil a donné instruction au personnel d’examiner l’allègement d’impôts accordé à Place Banque Scotia. Une entente avait donc été conclue pour les exercices financiers 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 1 309 197 $ en 2009.

Selon les données découlant de l’Initiative d’analyse comparative des services municipaux de l’Ontario (OMBI), la Ville d’Ottawa enregistre l’un des meilleurs taux de perception de l’impôt foncier dans la province. Compte tenu de l’incertitude économique actuelle, il risque d’être plus difficile de maintenir un taux de perception élevé en 2009. Le personnel continuera de chercher à obtenir le paiement des arriérés de taxes par l’application d’un processus fondé sur le risque et offrira des modalités de paiement aux propriétaires affectés par le ralentissement économique.

En approuvant le budget 2009 financé par les taxes, le Conseil a approuvé une hausse des recettes tirées des taxes foncières de 4,9 %. Un certain nombre de redressements devront être intégrés au budget avant de parachever le calcul des taux d’imposition pour 2009. Ces redressements seront fondés sur un examen et une analyse supplémentaires de l’évaluation finale.

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 conducted a re-assessment in 2008 for the 2009 through 2012 taxation years. Any re-assessment will cause tax shifts between the tax classes unless they are mitigated. The detail around the re-assessment and recommended mitigation measures can be found in the report.

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 broad tax 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, 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 20% tax increase or $141 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 reassessments scheduled for 2007 and 2008 and adopted a 4 year phase-in of assessment changes for all tax classes. The increase between the valuation periods of January 1, 2005 and January 1, 2008 would be phased in equally for the upcoming taxation years 2009 to 2012. While it does not avoid changes in valuation and its associated tax impact, it does spread the increase over the next 4 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 residential valuation increase over and above the other classes that resulted in a tax shift of $21 million from the other classes to residential which caused a 6.5% tax increase 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.

In the fall of 2008, staff reported the changes as shown in Table One. The table shows the valuation changes by class for 2009 and the total change over the next four years. 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 4%.

TABLE ONE - CVA CHANGES BY CLASS

			ANNUAL		TOTAL
TAXABLE CLASS	2008 CVA	2009 CVA	CVA CHG	2012 CVA	CVA CHG

COMMERCIAL	13,550,702,544	14,329,218,372	5.75%	17,001,182,186	25.46%
INDUSTRIAL	1,173,521,799	1,236,727,917	5.39%	1,464,016,309	24.75%
MULTI-RESIDENTIAL	5,636,723,365	5,804,434,642	2.98%	6,357,136,490	12.78%
RESIDENTIAL\FARM	69,687,412,805	72,044,714,915	3.38%	79,398,835,995	13.94%
OTHER	209,769,770	217,102,328	3.50%	239,100,000	13.98%

TOTALS	90,258,130,283	93,632,198,174	3.74%	104,460,270,980	15.74%
		Weighted CVA chg	4.00%

The tax shifts between classes are estimated for 2009 in Table Two below. Similar effects would occur in each of the following years from 2010 to 2012 unless neutral ratios are adopted in each of these years.

TABLE TWO - POTENTIAL TAX SHIFT BY CLASS

TAXABLE CLASS	LEVY WITH	RESTATED	2009	TAX
	NEUTRAL RATIO	WITH SHIFT	TAX SHIFT	CHANGE

COMMERCIAL	$ 288,679,214	$ 293,601,382	$ 4,922,168	1.71%
INDUSTRIAL	$ 26,991,736	$ 27,245,079	$ 253,343	0.94%
MULTI-RESIDENTIAL	$ 93,235,329	$ 92,503,425	$ (731,904)	-0.79%
RESIDENTIAL\FARM	$ 667,354,476	$ 662,165,822	$ (5,188,654)	-0.78%
OTHER	$ 3,430,454	$ 3,414,136	$ (16,318)	-0.48%

SUB-TOTAL	$ 1,079,691,209	$ 1,078,929,844	$ (761,365)

		IMPACT ON OTHER PROPERTIES	$ 761,365

		NET IMPACT	NIL

Staff are therefore recommending that neutral ratios be adopted for the taxation year 2009. This recommendation is being made for the following reasons:

· inter-class tax shifts are eliminated

· this would be consistent with prior assessment cycles (2004 and 2006)

· neutral ratios accelerate the movement of the tax ratio for the Commercial broad class to the 1.98 provincial threshold by as early as 2011

The ratio history by class is demonstrated in Table Three below, including the recommended neutral ratios shaded in gray.

TABLE THREE - YEAR BY YEAR TAX RATIOS 2001 TO 2009
									2009
Class	2001	2002	2003	2004	2005	2006	2007	2008	NEUTRAL**

Residential	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000
Multi-Residential	2.1780	2.1780	2.1780	2.1520	2.1520	1.8000	1.8000	1.7500	1.7500*
New Multi-Residential	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000	1.0000
Farm	0.2500	0.2500	0.2500	0.2000	0.2000	0.2000	0.2000	0.2000	0.2000
Managed Forest	0.2500	0.2500	0.2500	0.2500	0.2500	0.2500	0.2500	0.2500	0.2500
Pipeline	1.1326	1.1326	1.1326	1.3960	1.3934	1.5438	1.5438	1.5438	1.5413
Commercial Borad Class	1.9800	2.0055	1.9800	2.2831	2.2241	2.2900	2.2543	2.2564	2.1640
- Commercial	1.9288	1.9288	1.8846	2.1695	2.1572	2.1754	2.1461	2.1461	2.0567
- Office Building	2.3309	2.3309	2.2775	2.6210	2.6062	2.6281	2.5928	2.5928	2.4848
- Parking Lots	1.2639	1.2639	1.2349	1.4215	1.4135	1.4235	1.4062	1.4062	1.3476
- Shopping Centre	1.6044	1.6044	1.5676	1.8046	1.7944	1.8095	1.7852	1.7852	1.7108
Industrial Broad Class	2.1220	2.0925	2.0775	2.4032	2.3994	2.5719	2.5745	2.5663	2.5410
- Industrial	2.2439	2.2439	2.2439	2.5705	2.5705	2.7468	2.7468	2.7468	2.7000
- Large Industrial	1.9269	1.9269	1.9269	2.2074	2.2074	2.3588	2.3588	2.3588	2.3186
* Same ratio as 2008
** Subject to final minor revisions upon OPTA close off

A neutral ratio for the Multi-Residential class would be 1.754266. It is the only ratio that would increase slightly over the next 4 years as part of setting neutral ratios. Keeping the ratio at the same level as adopted last year, results in a small shift to the other classes. As Council specifically reduced the multi-residential ratio in 2008 to 1.75 it is proposed that the same ratio be maintained in 2009, resulting in a tax shift of $216,000.

Annually, Multi- Residential properties have to pass on rent reductions when the taxation level drops more than 2.49% of the previous year's tax level. It is estimated that the ratio for this class would need to drop to 1.60 in order to achieve this target and result in a shift of $8 million in taxes on other property classes or just below a 1% tax increase to all taxpayers. As Council in the past has identified that the objective of adjusting the tax burden for multi-residential is to help tenants, any reduction to the ratio for the multi-residential class that does not trigger rent reductions is not recommended.

Options to Adopting Neutral Ratios

Getting the commercial tax ratio to the provincial threshold would remove the restriction that only allows the Commercial class to receive 50% of any budgetary increase. This restriction has been in effect since 2004. The benefit of this restriction is that the commercial class has been able to avoid about $45 million of cumulative tax increases to date which have had to be borne by all other classes of which residential is the largest. Not adopting neutral ratios would result in $5 million of taxes being shifted off of the residential property class to the commercial property tax class. The commercial class would still be subject to half of this year’s budgetary increase but the adoption of neutral ratios accelerates the movement of the commercial ratio towards the provincial threshold, which is expected to be below the threshold by 2011 at the earliest.

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 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 II - no tax rate reduction.

4. TAX RATES

Tax rates are determined through calculations which involve the budgetary tax levy requirement approved in the 2009 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);

· 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 2009 are summarized as follows:

Capping parameter to be 10% of Annualized tax – The major disadvantage 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 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 and 2008. Staff recommend this change for 2009 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 2009.

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 2009 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 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 2009 (as in 2008) 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 2009, 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 has 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 has 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 3 to 4 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 has demonstrated that whatever gains are made during a non-reassessment year can 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 significantly reduces the pressure on new properties requiring 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 does the new option 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 increases for the 2009 reassessment prevent such a large increase in 2009. The original capping protection was $1.4 million in 2001, which decreased in non-reasessment years but increased in the reassessment years of 2003 and 2006. The regular program would see 49 properties requiring $270,483 in protection for 2009 and ultimately 10 properties with $66,021 by 2012. Properties denied their full tax decrease total 244 or 18%.

With the new option to exclude properties at CVA tax level, the number of properties requiring capping protection drops to 17 for a value of $142,317 in 2009, and drops to 6 properties and $46,227 by 2012. A smaller number of 155 clawed back properties or 12% are required for the self-financing of the program for the class.

Commercial

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 prevents 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 regular capping program would see 924 properties requiring $13,360,192 in protection for 2009 and ultimately 192 properties with $4,337,942 by 2012. Properties denied their full tax decrease to fund this requirement are 2,865 or 29% in 2009 then drops to 2,520 or 26% by the last year.

With the new option to exclude properties at CVA tax level, this drops to 405 properties needing $10,069,740 in 2009 dropping to 192 properties and $3,154,048 by 2012. A smaller number of 1,807 clawed back properties or 18% are required for self-financing of the program for the class that trails down to 1,477 and 15.1% by 2012.

Industrial

The chart in Table Six shows the impact earlier reassessments have had on the amount of taxes subject to capping including the 2009 reassessment. Again, the impact of phasing in assessment over a four year period smoothes the impact in 2009 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 332 properties requiring $2,365,431 in protection for 2009 and ultimately 161 properties with $912,305 by 2012. Properties denied their full tax decrease total 258 or 20%.

With the new option to exclude properties at CVA tax level, this drops to 262 properties needing $1,267,204 in 2009 dropping to 137 properties and $574,050 by 2012. A smaller number of 79 clawed back properties or 6% are required for self-financing of the program for the class in the earlier year dropping to 64 and 5% by 2012.

In summary, the option to exclude properties that have reached CVA will significantly reduce the capping requirement for all classes for 2009 and the next 3 years. The Commercial class drops from $13.3 million to $10.1 million, Industrial class from $2.4 million to $1.3 million, with a smaller decrease in the Multi-Residential class from $270,000 to $142,000 due to the small number of properties affected. 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 cut-off procedures.

The new option of excluding properties at or crossing CVA is therefore recommended. This will accelerate 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.

Staff recommends that the new capping option to exclude properties at the CVA tax level in 2008 or crossing over CVA taxes for the 2009 taxation year be adopted to exclude those properties from the 2009 capping program.

6. TAX TREATMENT FOR NEW CONSTRUCTION PROPERTIES

Previously, the tax responsibility 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 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 2008.

2008 – 100% of CVA taxes

2009 – 100% of CVA taxes

Staff recommends that the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2009 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:

· 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) 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;

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.

· 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.

After the approval of the 2006 tax policy submission the Corporate 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. 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 almost all charities complete the application themselves. This allows the charities to keep the entire rebate. The training sessions will be offered again for the next tax year.

In April of 2007, City Council directed Corporate Revenue Branch 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. As of the end of March 2009 there were 70 taxpayers on the program. On average, the annual deferral is about $2,400. The amount of taxes deferred for those taxpayers in 2009 will be about $160,000. Their total deferral is just under $385,000. The income threshold for the 2010 taxation year will be increased to $36,593 from $35,770. Previously the application deadline for this program was the end of December of the prior year. Staff believe that changing the deadline to February 28 of the relevant tax year would increase the number of taxpayers taking advantage of the program.

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 558 of just under 4,000 farm properties took advantage of the program in 2008. 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 2009.

Staff recommends that Council endorse the property tax mitigation programs currently in place and detailed in this report be continued for 2009, including the Farm Grant Program and the new Low Income Seniors and Disabled Persons Complete Tax Deferral Program. That the due date for the low-income seniors and disabled persons complete Tax Deferral Program be changed to February 28 of the relevant tax year.

8. TAX COLLECTION PRACTICES

According to the Ontario Municipal Benchmarking Initiative (OMBI), the City of Ottawa has one of the better property tax collection rates in the province. As at December 31, 2008 the City’s property taxes receivable as a percentage of the current year levy was about 3%. The average of other municipalities is about 5%. The outstanding balance at year-end of $58 million ($68 million in 2007) has already been included as revenue in our prior year annual budgeted revenues as property taxes are a lien on the land, recovery is almost guaranteed. Only crown liens take precedence over the municipal tax lien.

Staff have identified a number of risk conditions for tax accounts in arrears and reviews are conducted quarterly. Properties with certain risk conditions are identified for collection action. Under the Municipal Act, a municipality may prepare and register a tax arrears certificate on title when property taxes are more than three years in arrears. The costs incurred for the collection process are added to the tax account and once the property is registered the payment options for the property owner are severely reduced. Generally, because of these factors, mutually acceptable payment arrangements are made prior to the requirement to register the property.

Occasionally, agreements cannot be made and a property is registered for tax sale for non-payment of taxes. If within the next year the outstanding amounts are not paid arrangements are made for a “tax sale”. Fortunately, there has only been the requirement for one tax sale (for nine properties) in the last few years. After an advertising process dictated by legislation, the sealed bids are opened and arrangements are made to transfer the property to the highest eligible bidder.

It may be more challenging to maintain a high tax collection rate in 2009 with current economic uncertainty. Staff will continue to pursue properties in arrears using a risk-based process and will offer payment arrangements for those affected adversely by the economic downturn.

Staff recommends that Council endorse a risk-based flexible collection process with respect to repayment options for those property owners in arrears.

9. 2009 BUDGET ADJUSTMENTS

The 2009 budget assumed assessment growth of 2% for 2009, but the roll returned by MPAC in late 2008 initially showed growth of 2.7%. Upon further analysis it was determined that the additional 0.7% does not represent true growth but rather a change in property classification and growth that will be lost through the assessment appeal process.

In 2007 the Federal government sold certain properties in Ottawa and leased them back from the private sector. As there is often a delay in the transfer of properties to and from the list of those properties eligible for PILT payments from senior governments, a budget adjustment of $5.0 million between taxable revenues and payment in lieu of taxes is required to reflect the change in classification of these Federal properties.

Staff recommends that a budget adjustment of $5.0 million between taxable revenues and payment in lieu of taxes be recorded to reflect the change in classification of Federal properties that were sold and leased back

With the significant system changes required by the new assessment phase in, MPAC has been unable to provide any Requests for Consideration prior to the issuance of final tax bills. These normal assessment changes will be provided by MPAC after the final billing is generated and will result in property owners receiving a remission of their taxes. Accordingly, a budget adjustment of $2.5 million between taxable revenues and the increase in tax remissions is required to reflect this delay.

Staff recommends that a budget adjustment of $2.5 million between taxable revenues and tax remissions be recorded to reflect the delay in assessment changes that won’t be processed until after the final tax billing

10. 2009 TAXATION

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 2009 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 $2.1 million or about $10 for an average single-family dwelling. The benefit of this annual shift to the Multi-Residential class is estimated at $168,000.

The Business Education Tax (BET) Rates have also been reset for the commercial and industrial class. Although this will not result in any education tax reductions, the Province did pass in 2007 a graduated decrease towards a provincial rate of 1.60% (which has been restated to 1.52% after the re-assessment). This rate applies immediately to new construction in those classes and will result in modest savings of $50,000 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 large reduction in 2014. These savings are estimated at $650,000 for 2009 for the Commercial properties in Ottawa and $62,000 for Industrial properties.

Since municipalities in Ontario retain the BET on PILT properties, this reduction will reduce City revenues by approximately $172,000 in 2009 eventually increasing to a total loss of $8.8 million in 2014. The Province has agreed to find a solution to this loss of taxes for municipalities with PILT properties.

New assessments were sent to all property owners in late 2008. Assessment increases are to be phased in over four years. Any assessment decreases are to be realized immediately.

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^st of each year or 90 days after the Request for Reconsideration decision from MPAC.

For comparative purposes, the average 2009 residential assessment has increased by 90.5% since 1993, while the average property tax bill has increased by 24.0%. The property tax increase is significantly lower in comparison to Ottawa’s CPI (Consumer Price Index), and the indexing of the Federal Superannuation Pension, which has increased over the same time period by 36.9% and 35.3% respectively. A further breakdown of property taxes by former municipality can be seen in Document 2.

11. TAXATION AT SCOTIABANK PLACE

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 $ 1,309,197 for 2009.

Staff will be bring forward a report in the fall to address the issue of tax objectives for Scotiabank Place in advance of the negotiations that will take place in 2010 for the 2011 taxation year.

CONSULTATION

The Finance staff have consulted over the last year 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.

LEGAL/RISK MANAGEMENT IMPLICATIONS

The Municipal Act, 2001 requires Council to deal with property tax policy issues prior to April 30 of each year. These decisions determine the tax burdens on the various tax classes for the relevant taxation year. Consequently, there are no legal/risk management impediments to implementing any of the recommendations set out in this Report.

FINANCIAL IMPLICATIONS

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

SUPPORTING DOCUMENTATION

DOCUMENT 1 - Glossary of Terms

DOCUMENT 2 - 1993 vs. 2009 Property Taxes by Former Municipality

DISPOSITION

Finance will use the tax ratios and rates to calculate and issue the 2009 final tax bills.

Legal Services will prepare all applicable by-laws, and assist Finance staff as required (including amending the application deadline to February 28^th of any year in Bylaw 2007-452, A By-Law of the City of Ottawa to establish a tax deferral program for low-income seniors and low-income persons with disabilities who are owners of real property in the residential/farm property class).

document 1

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 a re-assessment in 2008 co-ordinated by MPAC. These values will be used for taxation years 2009 through 2012.

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. Assessment increases will be phased in over four years. Assessment decreases will be effective in the 2009 taxation year.

DOCUMENT 2

1993 VS. 2009 PROPERTY TAXES BY FORMER MUNICIPALITY

(UNADJUSTED FOR INFLATION)

2009 Tax ratios and other tax policies

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2009

ACS2009-CMR-FIN-0017 city wide / À l’Échelle de la ville

Ms. Marian Simulik, City Treasurer, began by introducing Mr. René Bisson, Manager of the Billing and Tax Policy Unit.

Mr. Ken Hughes, Manager of Revenue, spoke to a PowerPoint presentation, which served to provide Committee with an overview of the report and its recommendations. A copy of this presentation is held on file.

Responding to questions from Councillor Cullen, Mr. Hughes confirmed that, as a result of the commercial levy restriction, the residential tax class shouldered the lion’s share of the tax increase that would have normally come from the commercial sector and that, because other communities had assessment increases higher than those in Ottawa, the City was getting a benefit on the education portion. With respect to the multi-residential tax ratio, he submitted that the actual neutral ratio for the multi-residential tax class was marginally higher than what was being recommended but that staff was recommending it remain the same as the previous year to conform with a direction given by Council to reduce it to 1.75. He noted that this cost about $217,000 of burden, which was shifted from the multi-residential tax class to residential. As to why staff was not recommending a larger decrease, Mr. Hughes indicated staff saw the benefit to Council pursuing neutral ratios because it was felt that by 2011, Council would be able to eliminate the levy restriction and tax completely into the commercial property tax class. Further, he noted that any further reduction in the multi-residential tax ratio had not been requested by Committee or Council.

Councillor Wilkinson referenced a newspaper article that encouraged residents to contact the Revenue office if they were having trouble paying their taxes. She noted one resident who had called the office was disappointed to learn that all staff was offering was the pre-paid plan. She submitted that the newspaper article had implied staff could offer more by way of assistance. Mr. Hughes maintained that under the current Council-approved by-law, the Revenue office had to charge interest on any unpaid balances. He explained the purpose of coming forward and asking Council to endorse a more flexible collection process was really to remove any anxiety property owners may have about the risk of losing their property. He noted that the Municipal Act did not allow a municipality to take the extreme collection measures of selling a property for non-payment of taxes until after three years of property taxes were in arrears. He reported that for the most part, staff and residents were able to arrive at mutually acceptable repayment arrangements but that full interest did apply.

Responding to a question from Councillor Wilkinson with respect to neutral tax ratios for the multi-residential tax class, Mr. Hughes explained that neutral ratio was a tax term meaning ratios that would mean the tax burden in a new year would be equivalent to the tax burden in the previous year in spite of re-assessment.

Councillor Wilkinson indicated she had been told that if the City went down to 1.7 instead of 1.75 for multi-residential, landlords would not be able to pass on a rent increase because of rising taxes. She wondered if this information has been provided to staff. Mr. Hughes indicated he had seen the submission from the Eastern Ontario Landlord Organization (EOLO) just prior to the meeting.

Councillor Wilkinson said she would be introducing a motion to reduce the multi-residential tax ratio from 1.75 to 1.7. She had a problem with the fact that new multi-residential properties were taxed at a ratio of 1 whereas old multi-residential properties were taxed at a ratio of 1.75. She wondered if anything was being done to address this issue with the Province. Mr. Hughes reported having discussions with the Province about the difficulty of coming up with what is a fair measure of tax burden. He noted these two classes were valued on a different basis; residential properties based on market sales and multi-residential properties based on cash flow. He remarked that there was disagreement between all of the communities as to what was an indication of fairness. With respect to the difference between new multi-residential and old multi-residential, he explained that the new multi-residential tax class was created to encourage the construction of new multi-residential properties and that the Provincial legislation did not allow Council to increase the new multi-residential ratio up to match that of the old multi-residential ratio.

In response to questions from Councillor Bloess with respect to capping and claw back provisions and the parameter being proposed in recommendation five of the report, Mr. Hughes explained that capping was initially introduced as a temporary measure and was supposed to be phased-in over three year, after which all properties would be paying their full current value assessment (CVA) tax. He indicated capping had been extended indefinitely and, under the current regime, some properties would take in excess of 20 years before paying their full CVA taxes. He reported that municipalities had been asking for some of the parameters introduced in order to progress properties through the capping program more quickly because if some property owners were paying less, others were paying more. Within each tax class, property owners that were entitled to reductions were seeing their reductions clawed back in order to make up for the taxes not being paid by properties that were capped. He confirmed that the properties being protected the most were some of the largest in the City and that, in recommendation five, staff was proposing Council adopt all of the parameters available under current legislation.

Responding to a question from Councillor Legendre, Mr. Hughes indicated it was possible for some properties to go back and forth from being clawed back to being capped. However, he explained that the new parameter would allow a municipality to take any properties that got within $250 of their CVA, either through progression or through an assessment, and remove them from the capping program. Therefore, if Council adopted this parameter and a property went from being capped last year to reaching its CVA taxes this year, that property would never again be part of the capping program.

In reply to follow-up questions from Councillor Legendre, Ms. Simulik indicated the multi-residential, commercial and industrial tax classes were all included in the capping program and therefore the new parameter was being recommended for all three classes. However, she confirmed that Council could choose to exclude one of these classes from the recommended parameter.

Councillor El-Chantiry posed questions with respect to the lost revenue, or potential lost revenue, as a result of federal government buildings being sold to private sector ownership. Mr. Hughes indicated that to date, about $4M of education tax had been lost when properties were sold by the federal government to private interests, that approximately 40 more buildings were identified for sale and once sold, these would result in another $21M of lost education tax. He explained that initially, the schedule for the sale of these properties was to be over seven years and in the last budget, the federal government indicated they would continue with this plan. He indicated staff continued to discuss this situation with the Province because the loss to the City was found revenue to the Province and they believed that this was something that could and should be fixed. The question remained as to how it would be fixed.

Councillor El-Chantiry noted that the last assessment was done in 2008 and that these values would be used for the 2009 to 2012 taxation years. He remarked that property values had declined since the aforementioned assessments and therefore, he wondered if these would be reviewed. Mr. Hughes explained that all properties in Ontario were assessed at the same date and, although the market had decreased since then, all taxpayers were taxed using the same valuation date. He maintained this was a principle of taxation used in every jurisdiction and therefore there were no plans to do another assessment. By way of example, he submitted that if it was determined that property values had decreased by 20%, then everyone’s property would drop 20% and the tax rate would adjust accordingly.

Responding to questions from Councillor Chiarelli, Mr. Hughes indicated that under existing legislation, nothing could be done in terms of special tax treatment for private schools. He explained that currently, private schools were seen as businesses and were taxed in the commercial tax class, unless their ownership was structured as a not-for-profit, in which case they were taxed in the residential property tax class. He informed Committee that this issue had been raised with contacts at the Province but he was not aware of anything in the works to change this situation and the only way it could be addressed was through Provincial legislative changes.

Councillor Jellett referenced a motion that had been circulated to reduce the multi-residential tax rate from 1.75 to 1.7 and he inquired about the corresponding impact to the residential rate. Mr. Hughes estimated the impact would be to increase the urban tax increase from 4.1% to about 4.15% and the rural tax increase from 4.6% to about 4.64%.

Mr. John Dickie, Eastern Ontario Landlord Organization, spoke from a written submission, a copy of which is held on file. He began by providing a brief overview of the organization he represented. He then explained how property taxes were transferred from landlords to tenants through the rents they paid and why EOLO cared about the taxes paid by their tenants. He referenced Council’s past decisions with respect to multi-residential tax ratios and in particular, Council’s 2005 direction to staff to develop a 2-year phase-in strategy to achieve a multi-residential tax ratio of 1.8, representing an equivalent property tax burden compared to similar residential properties. He believed the thrust of that direction was not the 1.8 tax ratio but rather the equivalent tax burden on the two groups of properties. He suggested that 1.8 had been merely an estimate based on two pairs of properties, one condominium and one rental. He maintained that if the City looked at those two pairs of properties today, an equal burden would be 1.32 or 1.53, depending on which pair, for an average of 1.42. Therefore, he submitted that the estimate was brought up to date. With two assessment cycles having since changed the properties’ values, the directive would be to move to 1.42. He stated that at a ratio of 1.75, he had no doubt that tenants were paying more than an equivalent tax burden. He indicated EOLO’s position was that tenants and homeowners should be taxed at the same rate. Therefore, he asked that Committee recommend a reduction to Council. Given that the goal had previously been to take easy steps, he proposed 1.62 as a multi-residential tax ratio for Committee’s and Council’s consideration. However, if the City wished to be more modest, he recommended a move to 1.7, which would eliminate above-guideline increases at a cost to the City of about $3M.

Councillor Bloess referenced the previous year’s rate decrease for the multi-residential tax class and he wondered how many property owners had applied for many above-guideline increases. Mr. Dickie explained the cycle with which such increases happened. He indicated his office handled many of them but that he did not recall handling very many above-guidelines increases specifically for taxes, though they handled many for capital expenditures.

Councillor Bloess noted that the same debate was held every year and whereas he believed the City was reaching a level of fairness at 1.75, the EOLO was presenting a whole new set of numbers this year. Mr. Dickie explained the numbers had changed because of re-assessment and the property values shifting.

Councillor Legendre noted that the delegation had made reference to studies having been updated. He wondered if staff had reviewed these to see if the earlier conclusions were still valid and whether or not the target of fairness should be revised. Mr. Hughes indicated he had received the document just prior to the meeting and had not had a chance to review it.

Councillor Legendre presumed it would be reasonable to ask staff to review the updated study and bring forward a report, on a policy basis. He expressed a desire to move to real fairness and he wondered whether a review could be completed for this year’s tax ratios. Ms. Simulik explained that the tax ratios and by-laws would be rising to Council within two weeks because of the timelines needed to produce final tax bills and mail them to property owners. Therefore, she confirmed that staff could and would undertake a review. However, she submitted that there would not be time to complete it for this year’s tax ratios.

Responding to a question from Councillor Desroches, Mr. Dickie explained the ways in which tenants benefit from multi-residential tax reductions and the processes that must be followed to ensure tax reductions are passed onto the tenants, as outlined in his written submission.

Councillor Jellett wondered, if the tax ratio dropped from 1.75 to 1.7, whether the difference would be so negligible that it would not be passed onto the tenants. Mr. Dickie responded in the negative, noting that it related to averages. He explained that if Council reduced the ratio, it would reduce the building that had a 10% tax increase down to a 7% tax increase and the landlord would be able to pass through the difference between 2.5 and 7, not 2.5 and 10, which would reach the tenant in the form of a lower than otherwise tax increase.

Councillor Jellett maintained that Committee had no information to determine how many buildings would be affected in this way. Mr. Dickie submitted staff probably had the number but had not analysed them in this way. He maintained that there was a range of buildings, particularly in a re-assessment year. Some landlords would be reduced from a big rent increase to a smaller one, others would be reduced from a moderate increase to zero and others would have a cost decrease.

Councillor Jellett submitted that in order to get the average down, Council would have to lower the ratio to about 1.6. Mr. Dickie responded affirmatively.

Mr. David Lyman, representing Minto and Transglobe, introduced Mr. Pierre Azzi of Cushman and Wakefield Property Tax Services, and provided copies of a report titled “A Study of Equal Tax Burden – 2009; Residential vs. Multi-Residential Comparison”. Mr. Lyman discussed the scope and methodology of the study, which was originally done in 2006 for the 2006, 2007 and 2008 taxation years and recently updated for the 2009 to 2012 taxation years. He indicated the study concluded that the necessary ratio had fallen and an equal tax burden would only come about if the ratio was between 1.3 and 1.45.

Councillor Legendre took the speaker’s point with respect to a new tax ratio being needed in order to achieve fairness. However, he wondered who would be hurt if Council lowered the multi-residential tax ratio. Mr. Lyman indicated that the residential and commercial tax classes would bear the costs of lowering the multi-residential tax ratio.

Mr. Rob MacDonald, Housing Help, indicated his organization was a small, non-profit agency that had been around for 20 years and helped people look for and/or maintain housing. He discussed the current vacancy rate and economic climate, noting that as the economy had worsened, the vacancy rate and decreased and rents increased. He reported that in the past year, the vacancy rate had gone from 2.3% to 1.4% and rent on a one-bedroom apartment had increased from $798 to $827. In terms of helping people find housing, he indicated these changes had made his agency’s work that much more difficult. In terms of helping people maintain housing, he reported that the agency was doing more work at the landlord tenant board around evictions due to rent arrears because tenants were struggling to survive. He maintained that tenants had less than half the income of homeowners and needed whatever help they could get from the City yet they continued to pay a disproportionate amount of their income on property taxes through their rent. In terms of fairness, he requested that the City continue to strive toward parity by reducing the property taxes on multi-residential buildings and that any tax reduction should be applied in such a way that the tenant benefits from the savings. He submitted that any time the City helped tenants save money on rent, it helped take pressure off already overtaxed services such as food banks, rent banks and shelters.

Mr. Geoff Younghusband, Tenants and Landlords for Fair Taxation, indicated he was a landlord representative and his message was a follow-up to what Mr. Dickie and Mr. Lyman had said. He maintained that it was obvious tenants paid property taxes through their rent and with the current tax ratio for multi-residential at 1.75, tenants were paying almost twice as much as homeowners. He referenced a 2005 report, which put the average annual income for homeowner families in Ontario at $101,600 compared to the average annual income for tenant families at $48,700. He noted that members of Council had complained the Provincial property tax system was regressive because it was based on property values rather than ability to pay. He submitted the fact that the City charged a higher tax rate to its lower income households was by far the most regressive aspect of this system. He expressed appreciation for the small steps taken in the past and asked that Committee and Council continue in this course so that eventually, the ratio for tenant taxpayers would be the same as for homeowners. He reminded Committee that any property tax decreases had to be passed on to the tenants in the form of reduced rent.

Ms. Estel Myhall, Tenants and Landlords for Fair Taxation, indicated she used to be a homeowner but was not a tenant. Speaking to the issue of fairness, she noted that a lot of immigrant families, seniors and students were among the tenant population and that these residents were less capable of earning extra income if needed. She appreciated that the City was moving towards lowering the ratio for multi-residential properties and she encouraged them to continue on this course. She maintained that those with less income had less ability to pay. Taking this into consideration, she asked for fairness across the residential sectors.

Councillor Wilkinson introduced a motion to reduce the multi-residential tax ratio to 1.7. She referenced having been told that at this rate, landlords would not be able to pass the tax increase on to the tenants and she submitted this was the next gradual step in making sure Council did not cause a lot of hardship for lower income residents.

Responding to a question from Councillor Deans, Mr. Hughes stated that last year, the multi-residential tax ratio was set at 1.75 and this year, staff was recommending it remain at 1.75.

Councillor Cullen referenced the presentations made with respect to the differential between residential and multi-residential and the fact that tenants had half the income of homeowners. He noted that year-by-year, this Council had taken steps to acknowledge the unreasonableness of this gap and to reduce it. He asked his colleagues to continue in this vain because there was no good argument to maintain the unfairness. He maintained that it was the only way to get to a point of equity and fairness between taxpayers. He referenced a commitment from the Eastern Ontario Landlord Organization to pass on the savings to their tenants and the threshold that would legally trigger such passage to tenants. He believed what was being proposed would not reach the aforementioned threshold. He reminded Committee that 40% of the City’s residents were tenants, including seniors, young families and immigrant families and that most of them were lower income. In closing, he re-iterated his request for Council to continue to move towards fairness with respect to the residential and multi-residential tax ratios.

In response to a question from Councillor Bloess, Mr. Hughes indicated that approved the motion would result in approximately a $3M shift in tax burden.

Councillor Bloess submitted that a one-to-one ratio would actually be very unfair to the residential tax class and he inquired as to the various studies on this issue, one of which was based on a very small sample and had result in a ratio of 1.8. Mr. Hughes indicated there had been another study done, based on a much larger sample and again, when the results were presented, the various groups argued with respect to the quality of the data and the reasonableness of the assumptions. He maintained that an appropriate ratio is only at a particular point in time and he indicated staff would review the study produced by Cushman and Wakefield.

Councillor Bloess felt Committee was being asked to change the ratio on a hunch. He acknowledged everyone’s desire to achieve fairness, but he believed this had to be based on substantive information. Further, he noted that maintaining the current 1.75 ratio already represented a shift in tax burden from multi-residential to residential and therefore, in the absence of a staff analysis of the study introduced by the delegations, he indicated he would be voting again the motion.

Responding to a question from Councillor Desroches, Ms. Simulik confirmed that, when filing their income taxes, landlords could claim property taxes as an expense.

Councillor El-Chantiry noted that the motion would result in a tax burden shift from one group of taxpayers to another. He also did not believe Committee should be doing this in the absence of an analysis by staff. Therefore, he indicated he would not be supporting the motion.

Councillor Cullen reminded Committee that any multi-residential building constructed since 2000 was being taxed at the residential tax rate. Therefore, he wondered how Council could perpetuate a system that everyone acknowledged was unfair to tenants in older multi-residential units. He re-iterated that this Council had consistently taken steps to reduce the gap and he asked that Committee support the modest recommendation put forward by Councillor Wilkinson in this regard.

Councillor Wilkinson argued that this change was not being proposed on a whim. She noted that Council had been dealing with this issue year after year. Last year, staff recommended a ratio of 1.8 and Council reduced it to 1.75. She submitted the same thing was happening this year and that it was partly due to the fact that the City, as a whole, was facing such a large rate increase. She maintained that her motion was intended to get to a level where the landlords would still pay the taxes and write them off as a business expense but the tenants would not have a rent increase. She felt going down to 1.7 was modest. She noted this was a city-wide issue and it was an issue with respect to how the City treated people. She believed Council should be moving in this direction and she asked Committee to support the motion.

Following these exchanges, Committee voted on a motion introduced by Councillor Wilkinson.

Moved by Councillor M. Wilkinson

That the multi-residential tax ratio be set at 1.7.

LOST

YEAS (3): R. Chiarelli, D. Deans, M. Wilkinson

NAYS (5): R. Bloess, E. El-Chantiry, R. Jellett, S. Desroches, Mayor O’Brien

At this juncture, Committee 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 2009:

· 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 2009:

Tax Class	Ratios **
Residential	1.000000
Multi-Residential	1.750000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.541308
Commercial Broad Class	2.163992
- Commercial *	2.056746
- Office Building *	2.484783
- Parking Lots and Vacant Land – Commercial *	1.347621
- Shopping Centre *	1.710810
- Professional Sports Facility *	N/A
Industrial Broad Class	2.540952
- Industrial *	2.699959
- Large Industrial *	2.318571

* 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 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

4. That the tax rates for 2009 be established based on the ratios adopted herein.

5. a) That the 2009 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2008 Current Value Assessment (CVA) taxes;

b) That for 2009 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 for 2009, properties which have reached CVA during 2008 and/or crossed over from the clawback to the capping category or vice versa in 2009 remain at CVA taxes and be excluded from any further and future capping/clawback adjustments.

6. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2009 and future taxation years.

8. That Council endorse a risk-based flexible collection process with respect to repayment options for those property owners in arrears.

CARRIED

COMMITTEE RECOMMENDATIONS

That Council approve:

· Professional sports facility class

Tax Class

c) That for 2009, properties which have reached CVA during 2008 and/or crossed over from the clawback to the capping category or vice versa in 2009 remain at CVA taxes and be excluded from any further and future capping/clawback adjustments.

10. That a budget adjustment of $2.5 million between taxable revenues and tax remissions be recorded to reflect the delay in assessment changes that won’t be processed until after the final tax billing.

Catégorie fiscale

10. Qu’un rajustement budgétaire de 2,5 millions de dollars entre les revenus imposables et les remises de taxes soit enregistré de manière à tenir compte des modifications aux évaluations qui ne pourront être traitées avant la production de la facture finale de taxes.

1. City Treasurer’s report dated 30 March 2009 (ACS2008-CMR-FIN-0017).

Report to/Rapport au :

SUBJECT:

OBJET :

REPORT RECOMMENDATION

Tax Class

RECOMMANDATIONS DU RAPPORT

Catégorie fiscale

DISCUSSION

Multi-Residential Class

CONSULTATION

LEGAL/RISK MANAGEMENT IMPLICATIONS

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

DISPOSITION

Tax Class