3.             Multi-residential tax policy

 

                politique fiscale sur les logements multiples

 

 

 

COMMITTEE RECOMMENDATION

 

That Council maintain the existing Multi-Residential Tax Ratio at 1.7000.

 

 

RECOMMANDATION DU COMITÉ

 

Que le Conseil de maintenir le coefficient fiscal des logements multiples actuel à 1,7000.

 

 

 

 

 

 

DOCUMENTATION

 

1.         City Treasurer’s report dated 12 March 2010 (ACS2010-CMR-FIN-0013).

 

2.         Extract of Draft Minute, 22 March 2010.

 

Report to/Rapport au :

 

Audit Budget and Finance Committee

Comité de Vérification, du budget et des finances

 

and Council / et au Conseil

 

12 March 2010 / le 12 mars 2010

 

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

 

Contact Person/Personne ressource : Ken Hughes,
Deputy City Treasurer, Revenue/ Trésorier Municipal Adjoint

Finance Department/Service des finances

(613) 580-2424 x 13485, Ken.Hughes@ottawa.ca

 

City Wide/à l'échelle de la Ville

Ref N°: ACS2010-CMR-FIN-0013

 

 

SUBJECT:

Multi-residential tax policy

 

 

OBJET :

politique fiscale sur les logements multiples

 

 

REPORT RECOMMENDATION

 

That the Audit Budget and Finance Committee recommend Council maintain the existing Multi-Residential Tax Ratio at 1.7000.

 

 

RECOMMANDATION DU RAPPORT

 

Que le Comité de la vérification, du budget et des finances recommande au Conseil de maintenir le coefficient fiscal des logements multiples actuel à 1,7000.

 

 

Executive Summary

 

Since the adoption of the new property taxation system for the Province of Ontario in 1998, the tax levy for a property is calculated by applying tax rates for municipal and education purposes to its Current Value Assessment (CVA).  All of the various types of properties across Ontario are grouped into seven major classes and a few sub-classes.  In order to maintain some pre-existing tax burdens, 1998 tax ratios were then regulated for each of the non-residential classes by municipality as compared to the Residential class.  The Provincial Government at the time prescribed a range of fairness for tax ratio levels for each non-residential class.  The provincial interpretation of tax fairness and equity was based solely on all property types paying the same tax levels based on their valuation.  By default, the tax ratio target level for most classes is set to a ratio of no more than 1.1000 when compared to the Residential class.  The major shortcoming, however, is the lack of flexibility for Council to compensate for the variations of tax burden within the large number of property types covered by one class.  With seven property tax classes, inevitably many property types that are not homogenous are grouped together.

 

The services of Municipal Tax Equity (MTE) Consultants Inc were engaged to update studies originally conducted in 2005 and 2006.  The study, “Comparing the Tax Burden of Multiple Unit Residential Properties” (Updated) February 23, 2010), provides an overview of the various issues and comparison methodologies with similar residential properties.

 

Some of the relevant findings are:

 

Staff is therefore recommending that the MR tax ratio remain unchanged at 1.7000. 

 

 

SOMMAIRE

 

Depuis l'adoption du nouveau régime de taxation foncière par l'Ontario en 1998, les taxes sur un bien-fonds sont calculées en appliquant le taux des taxes municipales et scolaires à sa valeur actuelle (VA). Tous les divers types de bien-fonds à travers l'Ontario ont été groupés en sept grandes catégories et quelques sous-catégories. Afin de maintenir certains des fardeaux fiscaux préexistants, les coefficients fiscaux de 1998 ont ensuite été réglementés, par municipalité, pour chacune des catégories non résidentielles par rapport à la catégorie résidentielle. À l'époque, le gouvernement provincial avait prescrit une fourchette d'équité pour les coefficients fiscaux applicables à chacune des catégories non résidentielles. L'interprétation donnée par les autorités provinciales de la justice et l'équité fiscales reposait uniquement sur le principe que tous les types de bien-fonds devraient payer le même niveau de taxes, basé sur leur évaluation. Cela signifie, par défaut, que le niveau cible du coefficient fiscal de la plupart des catégories s'établit en dessous de 1,1000 de celui de la catégorie résidentielle. Cependant, la principale faiblesse de ce régime est qu'il prive le Conseil de la souplesse voulue pour compenser les variations du fardeau fiscal entre les nombreux types de bien-fonds regroupés dans une même catégorie. Avec seulement sept catégories de bien-fonds, il y a inévitablement de nombreux types de bien-fonds non homogènes qui sont groupés ensemble.

 

Les services de Municipal Tax Equity (MTE) Consultants Inc. ont été retenus pour mettre à jour les études réalisées à l'origine en 2005 et 2006. La nouvelle étude, intitulée « Comparing the Tax Burden of Multiple Unit Residential Properties » (mise à jour le 23 février 2010), donne un aperçu des divers enjeux, ainsi que des méthodologies de comparaison avec les biens-fonds résidentiels similaires.

 

En voici les principales constatations :

 

Le personnel municipal recommande donc que le coefficient fiscal de la catégorie Logements multiples demeure inchangé à 1,7000.

 

 

BACKGROUND

 

Since the adoption of the new property taxation system for the Province of Ontario in 1998, the tax levy for a property is calculated by applying tax rates for municipal and education purposes to its Current Value Assessment (CVA).  All of the various types of properties across Ontario are grouped into seven major classes and a few sub-classes. In order to maintain some pre-existing tax burdens, 1998 tax ratios were established and regulated for each of the non-residential classes by municipality.  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.

 

The Provincial Government at the time prescribed a range of fairness for tax ratio levels for each non-residential class.  This range of fairness is defined as a range of tax ratios for each property class as determined by the Province.  This range is included in the MTE study Document 1, Table 1.  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).  The Provincial interpretation of tax fairness and equity was based solely on all property types paying close to the same tax levels based on its valuation.  By default, the tax ratio target level for most other classes is set to a ratio of no more than 1.1000 when compared to the residential class. 

 

One of the major shortcomings of this goal relates to the lack of flexibility for Council to compensate for the variations within a large number of property types covered by one class, building construction and/or geographic areas.  For example, the Residential class covers many property types such as vacant land, residential homes, condominiums, retirement homes, hobby farms just to name a few.  In the same way, the MR class includes all properties with more than six residential units under one legal title but nonetheless covers disparate property types like row housing, walk-up apartments, mid to hi-rise buildings and mixed apartment structures with small commercial units or any combination thereof.

 

The problem is further compounded with the different valuation methodology used for non-residential properties where few sales occur.   Income capitalization is utilized for the valuation of rental properties, such as the MR class, while replacement cost can be used for commercial and industrial properties.  Once factors are tabulated at the City and neighbourhood level, the property specific valuation is estimated.  The value may still vary from its potential resale value by type and location based on market condition and property specific attributes.

 

Ratios can be a blunt municipal tool to adjust the tax level by class for any perceived differential in current value for any class.  Its purpose however is more aligned with providing Council with the ability to establish policy and direction to address the tax level and burden of various classes.  Albeit limited in its usefulness due to the restrictions placed by the prescribed range of fairness and the broad range of property types grouped together, Council can effect some change to address certain goals.  These include maintaining tax fairness and equity for similar type of properties, promoting the construction of various types of building or providing relief to some classes.

 

For instance, Council approved the New Multi-Residential class in 2001 with a reduced ratio of 1.0000.  This was intended to promote the construction of additional apartment rental buildings with the objective to ease the pressures on the low vacancy rate and rent levels experienced by tenants over the years.  This tool was also used to provide relief starting in 2004 to the Farm Tax class by dropping the ratio from 0.2500 to 0.2000.  It should be noted that with the lack of alternative municipal revenue sources, any significant reduction in ratios of other classes result in a tax shift primarily onto the residential class.

 

As part of the adoption of the Tax Policy report in April 2009 and a MR tax ratio drop from 1.7500 to 1.7000, Council directed staff once again to investigate the tax burden levels of the MR class and report their findings for 2010. 

 

 

DISCUSSION

 

Some of the biggest challenges in evaluating the appropriate tax burden and effective ratio for the MR class include the different assessment methodology, unpredictable changes during the reassessment cycles and the limitations of comparative models with the Residential class.  This issue is compounded by the fact that non-homogeneous property types are grouped by a handful of broad classes leaving Council with little flexibility to correct real or perceived inequities by the use of a single ratio applied to the MR class or others.  The balance of this report will address those comparisons and conclusions towards recommending the appropriate tax ratio level for the class.

 

The services of Municipal Tax Equity (MTE) Consultants Inc have been engaged to update studies originally conducted in 2005 and 2006.  This leading consulting firm provides expertise to several municipalities in the field of property taxation in Ontario, including Ottawa.  The attached study Document 1, “Comparing the Tax Burden of Multiple Unit Residential Properties” (Updated) February 23, 2010, provides an overview of the various issues and comparison methodology with similar residential properties.

 

The study covers several different aspects of this MR tax burden issue.  The tax ratio history of the class is provided showing the steady decrease Council has approved over the years.  An inter-municipal comparison is also included to provide some context on how the City of Ottawa can be measured against others across the Province.  Overall the City of Ottawa has the lowest MR ratio, at 1.7000, of any large or small urban centres in Ontario with the exception of the Region of York.  As for the comparison of similar properties, the study focused on the largest sub-group covering apartment buildings and similar condominiums units.  

 

One of the shortcomings of previous findings with respect to the average CVA and tax per unit, related to the lack of adjustment for variations in unit size between the 2 groups.  Extensive quantitative and qualitative work was expended to carry the analysis one step further to establish a tax per square foot measure.  In addition, the significant number of properties and associated units included in the study mitigates against any uncertainty on how the findings can be interpreted.  Overall, with the latest round of Council reductions of 2009, the tax per square foot of the average MR apartment unit has dropped below the equivalent tax per square foot for the average condominium unit by about 10%, which will be detailed later in the report. 

 

Impact of Multi-Residential Tax Ratio Changes

As demonstrated in the MTE study Document 1, Table 2, the original MR Ratio was first set at 2.3359 for 1998 to 2000.  With the several decreases approved by Council over the years, the current 2009 ratio of 1.7000 represents an overall drop of 27%.  While the MR assessment's proportion of the tax base from 2000 to 2009 has experienced a small decline from 6.7% to 6.0%, the MR share of the total municipal tax levy has dropped significantly from 12.5% to 8.5%.  This is due to a combination of factors, including the drop in ratio and the lack of growth in the class since the adoption of the new MR class. 

 

Should the 2009 levy be recalculated using the 2000 ratio, it would have resulted in a comparable MR levy of $129.4 Million instead of the actual 2009 MR levy of $95.6 Million or an impact of $86 per average home annually.  As part of this, with the 2000 tax burden of $94.2 Million being virtually unchanged, the class has experienced next to no tax increases over the 10 year period.  The tax avoidance component is estimated to be in the magnitude of $20 Million or impact of $51 per average home. 

 

In 2001, Council adopted a new MR class with a ratio of 1.0000 to ease some of the pressures on the apartment rental market.  This lower ratio is equivalent to annual municipal tax savings in 2009 of $1.5 Million.  A review of the twenty-two buildings in this class and the 1,559 units has shown there is a significant range between buildings in both their unit CVA and tax level.  For example, 4 out of the 14 apartment buildings covering 47% of units consist of upscale apartments with full amenities.  On the other hand, the other eight properties consisted of Ottawa Community Housing projects.  In light of the limited sample size and impact of a few properties on the results, it would be difficult to derive any conclusions relevant to the current MR class.

 

One further indicator as to the tax burden of the class relates to the property tax burden relative to the estimated annual rental income. Automatic rent reductions, as per the Residential Tenancies Act and the Landlord and Tenant Board, has an implicit threshold that property taxes represent approximately 20% of its rental income.  While MR properties in Ottawa had an estimated tax burden of about 20% in 2000 this level had dropped to about 15.4% in 2008.  These tax reductions appear to have made an impact on the rental rates in Ottawa.  The increases by type of apartment vary from 10.6% to 12.5% for the period 2001 to 2009, well below inflationary levels.

 

Inter-Municipal comparison

A comparison to other municipalities in the province of Ontario is also covered in the MTE study Document 1, Figures 1 & 2.  The City of Ottawa, with a MR ratio of 1.7000, is one of the lowest in the Province for 2009 for any urban centre.  Figure 2 in the study includes the ratio of 34 municipalities with an average of 2.1250.  In a separate analysis researched by staff, the 2008 overall provincial effective ratio was 2.8053 for all municipalities and 2.0818 when excluding both Ottawa and Toronto. 

 

Other than small towns and townships, only the Region of York has a lower MR Ratio as an alternative to adopting the New Multi-Residential class.  York Region covers Newmarket, Vaughan and Markham.  It has a ratio of 1.0000 with the MR class accounting for a fraction of its total assessment base at 1.1% compared with Ottawa’s MR class representing 6.2% of its base.  York’s MR assessment for the class represents only 10% of Ottawa’s class.  It should be noted that Toronto has a MR ratio of 3.3799, or twice that found here in Ottawa.  This provides some of the explanation for the lower residential taxes in Toronto as the elevated Commercial, Industrial and Multi-Residential Tax Ratio levels results in a significant tax burden shouldered by these classes.

 

Staff is only aware of one other major study or report conducted in another municipality or by property taxation consultants in Ontario with respect to the MR class tax burden.  A City of Hamilton report in 2009 recommended and re-confirmed maintaining their existing ratio at 2.7400.  Staff will report on the findings on any other similar studies and reports if they are developed. 

 

Multi-Residential vs Condominium tax per square foot

The MTE study Document 1, Table 9 updated previous historical average assessment and tax per unit.  While an argument can be made that the average MR unit CVA and tax level may not align directly with an average condominium unit, the study has gone a step further with a comprehensive square foot analysis of these apartment buildings.  The study has compensated for the different way the square foot data is compiled at the unit versus building level between the two groups of properties.

 

It should be noted from Table 11 that the municipal taxes per square foot, once adjusted, was fairly comparable between the average condominium unit and a MR apartment for 2004 of $1.71 versus $1.73, 2005 $1.80 versus $1.80 and 2006 $1.78 versus $1.80. The latest ratio drop in 2009 however shows a difference between the $2.07 per sq ft for a condo unit versus $1.88 per sq ft for an apartment unit, or a tax level at 91% of residential.  Once the lower education tax level is factored in, the overall comparative burden of the MR unit shows a level at 83% of residential.

 

These findings conclude that on a tax per square foot basis, the average MR apartment units now pay less than similar residential properties.  These findings do not support any further drop to the MR tax ratio.

 

Other Multi-Residential versus Condominium comparison

The MTE study in Part Two, Measuring Relative Tax Burden, provides a description of the various methodologies that can be used to compare the MR and Residential groups.  These include per dollar of assessment, comparing similar buildings, conversion to condos, proxy assessment values, sales ratio analysis, per unit and per square foot assessment & tax analysis.  A methodology matrix is also provided with some of the strengths and weaknesses for each model.

 

The weaknesses of some models vary between the small number of similar buildings being compared, very few condo conversions in Ottawa, the differential in value associated with the ownership structure and status of the property and the unavailability of some measurement data for some properties.  Each of these models can and will yield different ratios.  Unfortunately, they would be less than representative or conclusive towards recommending a single ratio for the entire MR class.  It would also be limited to the current assessment cycle being reviewed and would fluctuate depending on how the two groups are affected by economic conditions.

 

Equivalent ratios based on sales

Since amalgamation, some of the 1,332 MR properties have been sold.  Of these, 439 were deemed to be arms length transactions that have been analyzed in order to establish an effective sales ratio.  These sales were then compared to the assessment on file with an equivalent sales to CVA ratio determined to be 1.32.  This sales ratio was 1.26 for Row Housing, 1.26 for Walk-ups and 1.37 for Medium and High Rise Apartment buildings.  Overall, with a higher proportion of High Rise Apartment buildings within the class, the effective sales ratio is likely closer to 1.40 over this period.  Although there were some variations due to the narrowing of sample size, the results by year were consistent with several years being close to the 1.40 value.

 

The major shortcoming of the sales ratio approach for these properties is that it does not deal with the concept that a MR building with single ownership has a lesser value than a comparable condominium building with separately registered and owned units.  This fails to measure the relative tax burden in relation to similar properties in the residential class. 

 

Comparable properties

Some would advocate measuring and tracking comparable side by side properties in each class and deriving an effective ratio based on this sample.  This was one approach identified in the 2009 Cushman & Wakefield Lepage study presented to Council by the Eastern Ontario Landlord Organization (EOLO).  Comparable side by side properties in the City of Ottawa are few and, in some instances, the residential property may not be typical of separately assessed individually owned condominiums.  Some specific observations with regards to the seven comparable properties are listed below.

 

In the EOLO study provided last year, several comparisons were unique in nature.  One apartment tower for the Ottawa Community Housing was compared against a co-op housing project under a single registered title.  Another referred to small walk-up apartment blocks of eight units. Staff’s observation are that small buildings have a much tighter assessment ratio between the two groups due to the ease of comparability with others in the residential class.  Two other towers covered higher end rental MR and condo units but nonetheless had a ratio relatively close to the current existing MR ratio.  Finally an apartment building was measured against a partially converted single property retirement home not individually owned, which was only partially assessed in 2009.  Any conclusions based on this information would be suspect.

 

Based on the uniqueness and small number (seven) of properties in this comparison, staff would suggest it would be difficult to derive a broad class ratio representative of the 1,330 properties.  The entire MR class consists of 76,500 rental units covering a variety of different property types in different geographical locations across the City.  Findings from this approach would make it statistically inconclusive both from the lack of random selection, small sample size and the inability to interpret any standard deviation from the expected results.

 

Multi-Residential versus Condominium unit distribution

Although the tax per square foot analysis in the MTE study demonstrates the MR apartment units are now paying a lower level of taxes, staff wanted to interpret the impact of these findings.  To better evaluate the results of this study, a basic question can be asked:  How does the entire MR class align with similar condominium properties.  In order to answer this question, staff prepared a side by side municipal tax by unit distribution for both apartment buildings and row housing projects. 

 

This distribution is portrayed graphically in Charts 1 and 2, attached below.  One observation is that the MR unit distribution is fairly compact and clustered at the lower level of the tax range.  In comparison, the condominium distribution is flatter and more stretched out to reflect the variations in condominium size and values spread out across the City.  The other observation relates to how most MR units stack up against the condominiums with the lowest tax levels.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Chart 3 has been prepared to demonstrate how some of the key percentiles for each group align.   The median 50th percentile level MR unit pays the equivalent of $1,260 in municipal property taxes.  This compares with some of the smallest and most modest condominium units at the 10th percentile level of taxes or $1,330.  These overall findings were also consistent by type of unit for both apartment buildings and row housing properties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


At this stage, both the MTE results and the municipal tax distribution by unit support that the MR class remain at the existing ratio of 1.70000.  This would ensure the MR units pay comparable municipal taxes at a level similar to equivalent smaller and lower taxed condos.  Staff would therefore recommend:

 

That the Audit Budget and Finance Committee recommend Council maintain the existing Multi-Residential Tax Ratio at 1.7000.

 

Reassessment cycles affect changes to various property groups’ valuation in different ways, depending on their sensitivity to real estate listings, market conditions, rental vacancy rates and neighbourhoods.  The next four year phase-in cycle will occur in 2012 for the taxation years from 2013 to 2016.  An update to this study and an assessment of the existing tax ratio level at the time would be considered timely and appropriate.

 

 

CONSULTATION

 

In preparing this report, staff contacted and consulted with representatives from Eastern Ontario Landlord Organization (EOLO), MPAC and other municipalities and engaged the services of Municipal Tax Equity (MTE) Consultants Inc.

 

 

LEGAL/RISK MANAGEMENT IMPLICATIONS:

 

There are no legal or risk management impediments to approving the recommendation in this report.

 

 

FINANCIAL IMPLICATIONS

 

There are no financial implications for 2010.

 

 

RURAL IMPLICATIONS

 

N/A

 

 

SUPPORTING DOCUMENTATION

 

DOCUMENT 1 –    “Comparing the Tax Burden of Multiple-unit Residential Properties” Study prepared by Municipal Tax Equity (MTE) Consultants Inc. (previously issued to all members of Council and held on file with the City Clerk)

 

 

DISPOSITION

 

Finance staff maintain the current ratio of 1.7000 and corresponding 2010 property tax rates to be presented to Council as part to the 2010 Tax Policy report and appropriate By-Laws.

 

Multi-residential tax policy

politique fiscale sur les logements multiples

ACS2010-CMR-FIN-0013                            city-wide / À l’Échelle de la ville

 

Ms. Marian Simulik, City Treasurer, introduced Mr. Ken Hughes, Deputy City Treasurer of Revenue and Mr. René Bisson, Manager of Billing & Tax Policy.

 

Mr. Ken Hughes then spoke to a PowerPoint presentation, which served to provide Committee with an overview of the report.  A copy of his presentation is held on file with the City Clerk.

 

Responding to a series of questions from Councillor El-Chantiry, Mr. Hughes confirmed that if the multi-residential tax ratio was reduced, the tax burden avoided by the multi-residential tax class would primarily go to the residential class.  He advised that the previous year, when Council reduced the multi-residential ratio from 1.75 to 1.7, the amount that was shifted towards the residential tax class was approximately $2.5M.  Therefore, he submitted that if Council were to reduce the ratio by a full point, the impact would be about $5M.  He indicated the City of Ottawa had the second lowest multi-residential tax ratio in the province and the lowest, amongst large urban centres.

 

Councillor El-Chantiry noted members of Council hear all the time that reducing the multi-residential tax ratio would benefit tenants.  He asked staff to explain this and to advise as to the amount by which Council would have to lower the ration in order for it to translate into savings for tenants.  Mr. Hughes believed the Councillor was referring to the automatic rent reduction program and explained the way the program worked:  actual taxes for the property had to be 2.5% lower than they were in 2009, so the reduction would have to be enough to reduce it 2.5%, but also enough to avoid the effect of the 3.77% budget increase approved by Council during the recent budget process.  Therefore, he estimated that adding up the 2.5% with the 3.77% would mean that about $6.5M would have to be reduced to trigger the automatic rent reduction. 

 

In response to a follow-up question from the Councillor, Mr. Hughes confirmed that the automatic rent reduction program would only apply to a tenant in 2010 who was also a tenant at the same location in 2009. 

 

Councillor Deans referenced flyers that had been anonymously placed in multi-residential buildings in her ward.  She believed the information contained therein had left many residents with the wrong impression and she wished to clarify the fact.  To that end, she indicated the flying offered as a fact that tenants currently paid nearly twice as much property tax as homeowners.  She asked whether or not this was a fact.  Mr. Hughes stated this was not a fact.  He referenced slide 8 of his presentation, noting that even at the 75% percentile, 75% of multi-residential properties, on a per unit basis, were pay9ing taxes at $1400.  He indicated this did not compare to the bottom 25% of condominium owners.  Therefore, he re-iterated that the information was untrue.

 

Councillor Deans advised that the flyer stated Council was planning to increase tenants’ property taxes by 4%.  She recalled that Council had approved a 3.77% tax increase for all properties.  She went on to quote the flyer as saying the tax increase would increase tenants’ rent.  She indicated she had been under the impression this was not the case.  She believed the Province had rent increase guidelines at 2.1% so landlords could not pass that through to tenants.  She wondered if she was wrong about this.  Mr. Hughes indicated the Councillor was correct.  He explained the board obviously assumed there would be some budgetary increase, and those numbers provided for tax increases.  He added that for any increases beyond this limit, applications had to be made to the board by the landlord to increase rents above that level. 

 

Responding to a follow-up question from the Councillor, Mr. Hughes indicated he did not have information as to the frequency or rate of success of such applications but that staff could obtain same.

 

Councillor Cullen referenced slide 8, which showed a significant amount of property taxes by condos.  He wondered if he would be correct in assuming that the assessment for these condos far outstripped the assessment for the individual apartments.  Mr. Hughes explained that the assessment for the residential property class was based on sales transactions whereas the assessment for the multi-residential class was based on income.  That being said, he confirmed that the assessment for apartments was lower because they were calculated on a different basis.

 

Councillor Cullen looked at the 2009 average, noting the average assessment for condominium was almost three times that of apartments.  Consequently, based on assessment, condominiums would be paying more taxes.  He remarked that apartments, on the other hand, had a far lower assessment.  He indicated he was trying to compare this with their ability to pay, noting that the average household income for a homeowner was $105,000, according to 2006 census, whereas the average household income for renters was around $44,000.  Mr. Hughes submitted that the assessment process did not take into account ability to pay.

 

Mr. John Dickie, Eastern Ontario Landlord Organization, stated there was no question that most Ontario municipalities brutally overtaxed residential tenants.  He indicated the fact that this was wrong had been recognized for more than 20 years, adding the Ontario Fair Tax Commission had recommended all residential property be assessed on the same basis, whether the property was occupied by an owner or tenant, as “there is no justification for a distinction in tax rate policy on the basis of the type of tenure enjoyed by the occupant of the dwelling unit under consideration.”  Mr. Dickie went on to say that Chief Justice Layton had concluded there was no rationale for treating owners and renters differently in their property taxes, other than the difficultly of replacing the revenue that would be lost by abandoning it.  He recognized that the problem did not exist only in Ontario, however he submitted the problem was limited largely to Ontario.  He reminded Committee that the City of Ottawa had studied tenants’ tax burden and decided that it was fair and right to reduce the tax burden on renters until it was equal to the tax burden on similar property in the residential class.  He noted the Municipal Tax Equity (MTE) Consultants’ Inc. report assumed condominiums and rental apartments were similar in all relevant respects other than size.  It indicated the average condo was 976 square feet, while the average rental apartment was 703 square feet, a difference of 32.5%.  He remarked that the City’s report used chart 3 as a valid and useful way of comparing the tax burden of comparable property in the two property classes.  He maintained it was wrong to assume that the average condominium was similar to the average rental apartment in all relevant respects.  Mr. Dickie provided Committee with a detailed written submission, a copy of which is held on file with the City Clerk.

 

Responding to a question from Councillor Cullen, Mr. Dickie confirmed that the organizations listed at page 9 of his written submission had committed to passing any tax savings onto tenants if Council moved the rate at least down to 1.65 and as long as those reductions would be more than $1.

 

Councillor Cullen believed the 3.77% tax increase approved by Council through the budget would entitle landlords to apply for above-guideline rent increases.  He asked what the delegation’s understanding was about how the rental tribunal worked and how it dealt with above-guideline increases related property tax increases.  Mr. Dickie explained the process and formula used by the tribunal to assess above-guideline rent increase applications and confirmed that, as long as the increase was higher than 1.5 times the guideline in the year in question, such applications would be approved. 

 

Councillor Cullen advised that he had a motion to move the ratio to 1.6.  However, he believed his colleagues may be tempted to go for 1.65, given Council’s history of recognizing the inequity and marching down towards some form of equitable level.  He noted the delegation’s suggestion that 1.6 would be better for renters and he asked why.  Mr. Dickie indicated it would be better for renters because it would actually generate some tax decreases and thus rent reductions.

 

Responding to a follow-up question from the Councillor, Mr. Dickie confirmed that moving to 1.6 would reduce the number of above-guideline increases, adding that 1.65 would largely reduce the above-guideline increases and may generate a few reductions.  He submitted 1.6 would move the average property into a small decrease and would generate rent reductions, which would be mandatory under provincial rules. 

 

Councillor Cullen noted that this discussion had been an annual ritual at Committee and Council.  He remarked that from time to time, a concern was expressed about Council overshooting the target because once the ratio was lowered, it could not be increased again.  He referenced the notion of equity and recalling that any multi-residential building constructed since 2001 was taxed at the residential rate.  He submitted that this had created two classes of tenants, which he felt was totally unfair.  Because of the difference in the way the two difference classes were valued, he believed equity lied somewhere around a ratio of 1.31 or 1.5.  He wondered if he had the correct number.  Mr. Dickie stated there was more to it than that.  He stated that under provincial rules, when there was a value shift, Council could raise the tax ratio.  He noted that last year, the City had the option to raise it from 1.7 to 1.72 but did not do it.  However, he recognized that it was true Council could not raise the ratio simply because it chose to.  As for what the Councillor estimated to be an equitable ratio, he confirmed that last year’s Cushman/Wakefield study had shown that to be somewhere around 1.3 to 1.4.  He maintained that he did not understand the fear of going from 1.7 to 1.6 since one theory suggested it should be 1.3 and another theory put it a 1.0.

 

Responding to a follow-up question from the Councillor, he confirmed that moving to 1.6, in his opinion, did not bring the City to the point of no return.

 

Mr. Barry Nabatian, Manager of Market Research Corporation, distributed copies of a report his firm had prepared on behalf of Paramount Property Management Inc., a copy of which is held on file with the City Clerk.  He explained that in conducting the study, his firm had reviewed a number of reports and did field research of 3 condominiums and 3 apartment buildings.  He noted that the staff presentation had not made any distinction between the quality, finishes and other amenity differences between the average condominium unit and the average rental unit.  He believed staff and the MTE study had assumed that the typical rental unit was equal to the typical condominium unit.  In his view, this was completely inaccurate.  He remarked that most rental apartments were built before 1975, whereas most condominiums were built after 1970.  He indicated rental units were typically smaller, their designs were inefficient or poor because of the older architectural practices, whereas condominium units tended to be larger, better designed, more efficient.  He advised that the typical apartment had little or no amenities, whereas condominiums had many amenities and those amenities tended to be of much better quality than those in rental buildings.  He added the typical apartment may be renovated only once every 20 to 30 years whereas condominiums tended to be renovated once every 10 to 15 years.  For these reasons, he concluded that a typical rental unit was lower in quality and value than a typical condominium.  He explained that when developers approached his firm asking for advice about costs, they would tell them that to build a condominium, the various costs could be anywhere from 15% to 50% higher than to build an apartment.  He submitted this was one of the basis on which developers made their decision as to what type of development to build.  Next, Mr. Nabatian talked about four specific examples he had researched, the specific details of which were outlined in a table within his written submission.  He drew members’ attention to chart 3.  He began by noting that it was difficult to find comparable condominiums and rentals in the same place and that location was very important in determining value and taxes.  He chart 3, he pointed to 641 Bathgate Drive, a rental property, which was noted at the top.  He explained that the arrow went down towards the condominium, at 665 Bathgate.  He advised that these two buildings were next to each other, were both built in 1977 and that the unit sizes contained therein were identical.  However, he indicated the condominium building was much more updated, it had better upkeep, all the windows had been replaced, the elevators had been upgraded, it had more amenities and it had better quality amenities than the rental.  He advised that the rental property was paying $2210 in taxes whereas the condominium was paying $1613.  In other words, an inferior rental property is paying 37% more in taxes than a superior condominium property.  The next example I referenced was 100 Bronson, a high-end rental property.  He noted that the building was more than 40 years old and was paying $2143 in taxes.  He submitted that if the same building were a condominium, it would be paying less in taxes.  As his last example, he referenced 2019 Bank Street, a condominium property paying $1048 in taxes.  He indicated this was a low-end condominium and would be typical of the average rental property.  He submitted that if it was a rental property, it would have to pay 20% more in taxes than was it was currently paying as a condominium.  He maintained there were many other such examples where the average rental property was paying more taxes than condominiums.  In conclusion, he stressed that condominium units and apartment units were not the same in quality, in upkeep, in amenities or in value and that there were far too many rental properties paying more in taxes.  He felt that if Council wished to create some sort of equality, the tax ratio had to be reduced substantially.

 

Councillor Cullen referenced the buildings at 665 Bathgate and 641 Bathgate and submitted that this proved the point.  He maintained these folks were consuming the same municipal services.  Therefore, he wondered why one should pay more than the other for the consumption of municipal services, which was the purpose of taxation.

 

When asked to comment on table 1 of Mr. Nabatian’s written submission, Mr. Hughes advised that staff could not comment on it as they had not seen it.

 

Councillor Harder wondered if condominiums were assessed in the same kind of timeframe as single residential properties.  Mr. Nabatian stated they were taxed using different methods but that he was not sure about the timing. 

 

Responding to a question from Councillor Harder with respect to the example highlighted by Mr. Nabatian in chart 3 of his submission, Mr. Hughes indicated one of the comments staff had always made was that tax policy was a very blunt tool.  He re-iterated that each of these property taxes classes was not homogenous.  He explained that within the multi-residential property tax class, there were high-rises, low-rises, walk-ups, row house, apartment units mixed in with commercial, etc.  He advised that the same non-homogenous situation could be seen within the residential tax class, which included apartment condominiums, town house-type condominiums, single family homes as well as properties that were six units or less.  He submitted that within each of these classes, there could very well be some inequities and that when looking at it down to the level of individual properties, it was likely to find some inequities.  He maintained that Council could not fix the inequity with a particular type of unit or some units in a particular area because when the City changed the ratio, it affected the relationship between all the properties in that tax class and all the properties in the residential tax class.  In closing, he stated that having not reviewed Mr. Nabatian’s submission, he could not comment on it.  However, he re-iterated that he would not be surprised to see some individual inequities that could, on an individual basis, prove or disprove a particular point because the classes themselves were not homogenous.

 

In response to a follow-up question from the Councillor with respect to market forces and their impact on the multi-residential market, Mr. Hughes advised that with the existing tax regime in Ontario and the broad tax classes known as multi-residential and residential, the City was not able to address inequities in terms of rental prices and stock availability.  He went on to talk about a tool sometimes discussed at tax policy called banding.  He explained this was when Council approved different tax ratios for units at different bands of values.  He advised that there were some significant problems with using tax banding whereby it solved some issues but created others.  He reminded Committee that the multi-residential tax classes was seen as a business and, under the current tax system, it was treated as other business properties, which meant multi-residential property owners had the benefit of capping, unlike residential property owners.  He re-iterated that property tax policy was a very blunt took that could not be used with surgical precision.  

 

Councillor Harder inquired about other municipalities and how they dealt with this issue.  Mr. Hughes indicated he was not aware of any municipality that had used tax banding with respect to residential and multi-residential tax classes.  He believed that every municipality would have, not only a different relationship between residential and multi-residential, but also within the multi-residential and within the residential because they would have different numbers of the particular types of units within those classes.  He submitted they would be faced with exactly the same challenges and have exactly the same blunt tax policy tool to wield in addressing it.

 

Councillor Harder estimated that lowering the ratio to 1.6, as proposed, would result in a shortfall of approximately $5M and she wondered where staff would look first to make up that amount.  Ms. Simulik confirmed that a reduction from 1.7 to 1.6 would result in a shift of $5M.  If Council wanted to make it neutral, so there was no impact on the residential tax class, the City would need to find more than $5M of the need to lower everybody’s tax requirement down.  She believed that when this had been examined last time, the City had been looking at a ratio of about 3, therefore there would need to be $15M in reductions to make it neutral on all taxpayers. 

 

Councillor Harder noted that this discussion was an annual occurrence, with essential the same group of people coming forward to speak to the item.  She wondered if this was the appropriate way to do it or whether the discussion should be had before the budget process and therefore before any tax increase was determined.  Mr. Hughes explained that the tax policy report usually came forward about the middle of April.  However, this year staff had brought forward a couple of tax policy issues separately and in advance of the general tax policy report.  He reminded Committee of their recent approval of tax policy matters dealing with Scotiabank Place and the National Arts Centre.

 

Responding to questions from Mayor O'Brien with respect to comparisons with other provinces and the notion that Ontario unique with respect to this matter, Mr. Hughes submitted it was always very difficult to compare the situation of a property being taxed in one jurisdiction versus a property being taxed in another.  He advised that the municipal property tax regimes were very different in every province.  He explained some provinces still had the old business tax that had been eliminated in Ontario in the late nineteen-nineties.  Also, he reminded Committee that the burden borne by the property owner through municipal taxation was greater in Ontario than in other provinces because social services were covered through municipal taxation.  Therefore, it was always very difficult to compare.  He confirmed that comparing the tax ratios in Ontario versus the tax ratios in other provinces was difficult and required a lot more information.

 

Mr. Pierre Azzi, Four Bridge Properties Inc., indicated the reason for his presentation was to address some of the criticism staff had made vis-à-vis his report, which he had presented as a written submission at Committee last year, when Committee and Council dealt with this same subject.  He provided copies of the referenced report: Cushman/Wakefield.  A copy of this report is held on file with the City Clerk.  Speaking to his study, he explained that in order to determine if residential and multi-residential classes had an equal tax burden, he had to look at three different methods.  He reported looking at seven condominium projects containing 1,115 individual condominium units that were fully rented out.  Because they were registered condominiums, they were valued and taxed as residential properties.  Further, these projects were located throughout the City of Ottawa.  Based on rental information, he was able to determine what the taxes would be if they were assessed and taxed as multi-residential properties.  He indicated he had discovered that the properties were valued 30-40% higher as condominiums, the average being $159,000, than if they had been multi-residential; which would have resulted in assessments of anywhere from $109-119,000.  He noted that the Municipal Property Assessment Corporation (MPAC) qualified properties as either good or average to achieve their assessed value.  He concluded that in this particular exercise, in order to achieve equal tax burden, the tax ratio would be between 1.33 and 1.46.  He reported his second method was to look at 151 properties in Ottawa that had rented from July 2007 to June 2008 but that had separate assessment; essentially condominiums and row houses.  He noted that the higher valued properties drew the highest rents.  He reported that properties assessed around $110,000 rented for $750 to $800 per month, properties assessed at $150,000 rented for $1200 per month, properties assessed around $200,000 typically rented for $1400 per month and so on.  As in the first methodology, he determined that a property, if valued as multi-residential, would have a tax ratio between 1.4 and 1.6 in this particular scenario.  For this third and final methodology, he looked at a group of similar properties where, for one reason or other, one group was assessed as residential and the other group was assessed as multi-residential.  One example related to properties at Kirkwood and Carling where he determined that in order to achieve an equal tax burden with this particular cluster of properties, a ratio of 1.18 would be required.  Another example related to properties in the Billings Bridge area where he determined that in order to achieve an equal tax burden for this particular group of properties, 1.23 would be the required ratio.  He reported looking at groups of properties in Vanier and in the Baseline/Greenbank area and reported that in the Vanier example, a tax ratio of 1.12 would be required whereas in the Baseline/Greenbank area, a tax ratio of 1.23.  In closing, he talked about looking at two buildings, one on Bayshore and one on Riverside and reported that in these cases, a tax ratio of 1.23 would be required.  In conclusion, Mr. Azzi stated that he stood by his conclusion of the previous year, that at 1.7, multi-residential properties owners were paying much higher taxes than similar residential properties.

 

Councillor Cullen noted that Mr. Azzi was a professional in the field who had been asked to conduct a study to look at the required ratio for equal tax burden between condominiums and apartment buildings.  With this in mind, he asked whether the delegation believed that moving from 1.7 to 1.6 would overshoot the mark.  Mr. Azzi responded in the negative.

 

Mr. David Lyman, representing Minto Apartments Ltd, circulated a chart to Committee members, a copy of which is held on file with the City Clerk.  He explained that he was a lawyer and heavily involved in both residential, landlord and tenant matters and with property taxes regarding multi-residential and other property classes.  He recognized that the typical condominium owner currently paid more property tax than what was paid by a typical rental unit.  However, he maintained that the typical condominium was larger, newer, nicer and twice as valuable.  He noted an observation in the staff report, that small buildings having a tight assessment ratio between the two groups, due to ease of comparability, had similar assessment.  He whole-heartedly agreed with this.  He submitted that when comparing apples to apples, it was clear that the multi-residential property paid substantially more than the condominium property.  He referenced the two previous delegations; their descriptions of their studies and of their outcomes.  He maintained that these were not outliers.  He maintained that it was not a question of the classes being non-homogenous, as had been suggested.  He stated that when one compared apples to apples, the multi-residential tax class was over-taxed and the required tax ratio was in the range of 1.3 to 1.45.  He referenced his chart and explained that he had plotted the properties indicated in Mr. Azzi’s report.  He noted that staff had been asked to look at what multi-residential properties paid compared to a similar, comparable property.  On the first page (part 1) of his hand-out, he listed co-operative properties; six-unit buildings on a single roll versus six-unit buildings on separate title, and therefore taxed as residential.  He noted a certain slope of the difference and that it was consistent with the Bathgate example referenced earlier.  He referenced the second page of his submission (part 2) wherein he had graphed what Mr. Azzi’s report indicated.  He noted the same slant when comparing properties valued as multi-residential versus those valued as condominium.  He felt it was abundantly clear that at 1.7, the multi-residential tax class was paying abundantly more and that to reach an equal tax burden would require moving in the range of 1.3 to 1.45.  He submitted what was before Committee was whether to make lower income tenants pay more, noting that condominiums were nicer and newer than the average rental.  He asked Committee to do the right thing and to continue to take steps towards fairness.  He argued that the shift would not be borne entirely by the residential class; that it would come out in the wash when Council made decisions for commercial and industrial as well.  Responding to a question posed earlier, he advised that he had 10 years of experience with the rental housing tribunal and landlord and tenant board and explained that above-guideline increase applications were slam dunks.

 

Responding to a question from Councillor Cullen, Mr. Lyman stated that in his opinion, lowering the ratio from 1.7 to 1.65 would avoid above-guideline rent increases because the tenants would be paying about the same whereas a movement to 1.6 would generate thousands of rent reductions. 

 

In reply to follow-up questions from the Councillor, Mr. Hughes advised that a reduction from 1.7 to 1.65 would result in about $2.5M being shifted primarily to the residential tax class and that the impact would be about $7 on the average home.

 

Mayor O'Brien inquired as to Mr. Lyman’s methodology and how he had calculated equivalent rents for the properties he referenced in his charts.  Mr. Lyman explained his calculations were based on Mr. Azzi’s and Mr. Nabatian’s studies and reports.

 

Mayor O'Brien believed this was a theoretical calculation.  Having said that, he asked staff to comment on the complexities of actually making such calculations.  Mr. Hughes submitted that, having seen this for the first time only a few minutes earlier and not knowing the details behind it, it was difficult for staff to comment.  However, he noted that it appeared the properties were developer-owned and, without knowing any of the properties’ details nor what had transpired at these locations, staff was ill-equipped to comment.

 

Councillor Deans posed a follow-up question to staff.  She noted Mr. Hughes’ comment about the properties being developer-owned.  She indicated that she lived in a high-rise condominium and that she had had the opportunity to look at the assessed value of her unit compared to the assessed value of units identical to hers, in the same building, but owned by developers.  She reported that the developers’ units were assessed more than $50,000 lower than hers.  Therefore, she wondered if the results could be skewed by using developer-owned condominiums that were assessed lower than identical units owned by average homeowners.  Mr. Hughes responded affirmatively.  He submitted there were a number of differences with properties owned by developers, especially if these had stayed in developer hands.  He explained that the properties may have been purchased at a lower initial price and retained for many, many years.  If they were not sold, it was difficult to find comparables.  More importantly, he remarked that whereas some individuals may not appeal their own property assessments because they felt they did not have the abilities, developers appealed pretty well all or most of their properties every year.  The taxation community, which was well represented at the meeting, was very good at bringing about reductions in assessments for their clients.  Therefore, he indicated he was not surprised with the example cited by the Councillor because Financial Services staff had noted the same thing; that properties owned by developers were valued lower than properties owned by individuals. 

 

Councillor Cullen felt this begged the question to ask Mr. Azzi, who had done the Cushman/Wakefield study; whether his study was influenced by simply looking at developer properties.  He wondered if Mr. Azzi could be asked back to the table.

 

Some Committee members objected, as Mr. Azzi had already had an opportunity to make his presentation and to respond to members’ question and Committee had since moved on. 

 

Mayor O'Brien indicated he would allow it, but only for a yes or no answer. 

 

Councillor Cullen restated his question.  Referencing the exchange that had just taken place, he presumed that Mr. Azzi’s study looked at the universe and that therefore, his conclusions still remained.  Mr. Azzi responded affirmatively. 

 

Mr. Geoff Younghusband, Tenants and Landlords for Fair Taxation, expressed dismay over the staff recommendation to keep the tax ratio for tenants at 1.7 for 2010 and beyond.  He argued that most condominiums were much more modern, better finished and larger than most rental apartments.  He felt it was unfair and inaccurate to compare what the medium apartment pays in taxes with the condominiums’ taxes without addressing the size and quality differences.  He noted that for every resident other than tenants, the taxes paid were based strictly on an assessed value of their home.  He maintained this should be the same for tenants.  He remarked that tenants had been paying more than their fair share of taxes for a number of years and he submitted it was time correct this inequity.  He asked that City Council do the right thing to correct the blatant unfairness of taxing tenants at higher rates than homeowner.  He referenced the fact that when taxes increased, landlords could raise the rent accordingly and when taxes decreased, landlords were required, by provincial law, to reduce the rent accordingly.  He referenced the fact that tenants had much lower incomes than homeowners, he suggested that tenants used less City services than homeowners and he believed tenants paid almost twice the rate as homeowners.  He felt there was no justification for the unfairness.  He noted that many members of Council had publicly complained that the provincial tax system was regressive because it was based on property values rather than ability to pay.  However, he maintained the City had decided to charge the higher tax rate to its lower income residents.  He felt this was by far the most regressive aspect of the system; that lower income taxpayers paid a higher rant than higher income taxpayers.  He submitted this would continue to happen as long as the multi-residential tax ratio remained higher than 1.0.  While he appreciated the small steps taken towards tax fairness in the past, he urged Council to continue to take further steps to reach a tax ratio of 1.0 for tenants.  In closing, he stated that tenants simply could not afford the unfair tax treatment to which they were currently subjected. 

 

Mr. Rob MacDonald, Housing Help expressed concern over this issue during a time of decreasing supply of affordable housing and when rents increasing well above guidelines would result in tenants coming into his agency with much less options.  He referenced Statistics Canada data, which consistently showed tenants had half the income of homeowners.  He indicated his office saw this matter more as a social issue than as an economic issue because it targeted people with less income and caused significant hardship.  He recognized that rental housing was a business, but maintained that the taxes were paid for, at a disproportionate rate, by people who did not consider it a business; they considered it their home.  He believed most tenants were unaware of the disparity that existed, even though they paid more than 15% more in property taxes than homeowners.  He believed that if rents were broken down so tenants could see how property taxes impacted on their rent, the face of people attending Committee and Council meetings would change.  In closing, he attested to some of the arguments made previously with respect to the quality of rental housing compared to condominium housing and expressed support for reducing the multi-residential tax ratio to 1.65.

 

Mayor O'Brien referenced the motion before Committee, stating his understanding was that if the motion were defeated, Committee would be left with the staff recommendation, which was a ratio of 1.7.  Mr. R. O’Connor, City Clerk and Solicitor, confirmed this.

 

Responding to questions from Councillor El-Chantiry. Mr. Hughes confirmed that taxes paid by business property owners were deductible for income tax purposes.  He explained the difference between the assessment of multi-residential versus residential properties related to the fact that residential properties were assessed on the sales within the market whereas multi-residential properties were assessed like any other business property, based on income.

 

Councillor Deans wondered, if Committee were to accept Councillor Cullen’s recommendation, what the corresponding tax rate impact would be for residential taxpayers, given that Council had already approved a 3.77% tax increase.  Ms. Simulik estimated the tax increase would go from 3.77% to 4.27%. 

 

Councillor Cullen stressed that Committee and Council had debated this matter before and Council had decided that the share of property taxation and its allocation to the multi-residential class was unfair.  Time and again, Council had made the decision to reduce this unfairness as it moved from a 2.3359 ratio to a 1.7 tax ratio.  He reviewed many of the arguments for continuing to reduce the multi-residential tax ratio.  He urged his colleagues to continue to move down that path and, should Committee and Council choose not to continue to move down that path, he indicated he would be interested in hearing the justification for it. 

 

Councillor Harder thanked Councillor Cullen for reminded members that Council had stepped up to the plate every year.  She remarked that members of Council had listened, paid attention and responded.  However, whether it was a $7 impact or a $15 impact on residential taxpayers, she believed taxpayers in this City had reached their limit.  She feared that if it was $1, it would be too much.  She felt last November would have been a better time to have this discussion, before adopting the budget.  She talked about problems with the property assessment system and expressed her hope that this would be addressed.

 

Councillor Deans noted the complexity of this issue and the fact that members had heard two opposing views from presenters and from staff.  She felt there was not evidence to support a case on either side and that the problem lied with a complex, inexact, antiquated assessment system in need of change.  She believed Councillor Cullen’s motion sought to use tax ratios as the great equalizer for the system’s inequities.  She remarked that Council could jiggle with the system, and had tried very hard to do so by adjusting the ratio year over year, however she maintained the need to be fair to all of the City’s taxpayers.  Like Councillor Harder, she believed taxpayers were fed up.  She believed that a $7 or a $15 shift would matter to the taxpayers she represented.  She maintained that every penny mattered.  In closing, she expressed her support for the staff recommendation. 

 

On wrap up, Councillor Cullen questioned the rationale for taxing one group of residents more than another group of residents, particularly when there were clear income differences between the two groups.  He referenced various discussion in the past with respect to problems with the property assessment system and motions calling on the Province to do something about it.  He submitted this was something Council had in its hands, had recognized as a problem in the past, and had taken steps to improve.  He noted that any new multi-residential property, built since 2001, was taxed at the residential ratio, which compounded the inequities currently being discussed.  He felt it was one thing to talk about how fast Council should be moving towards a fair tax ratio, but he maintained that Council must continue to move in that direction.  In closing, he urged his colleagues to do the right thing.  

 

Moved by Councillor A. Cullen

 

WHEREAS 2006 census data shows that the average household income of renters is less than half (42.6%) the average household income of homeowners, yet renters in multi-residential buildings are taxed at a higher rate (in Ottawa at 1.7) than the residential sector;

 

AND WHEREAS in 1993, the Ontario Fair Tax Commission said “There is no justification for a distinction in tax rate policy on the basis of the type of tenure enjoyed by the occupant of the dwelling unit under consideration”;

 

AND WHEREAS since 2001, any new multi-residential buildings have been taxed at the same rate of residential homes;

 

AND WHEREAS in 2001, the City of Ottawa Task Force on Property Assessment & Property Tax Issues recommended that the multi-residential tax rate be lowered to reduce the unfair discrepancy in property taxation between renters and homeowners;

 

AND WHEREAS since 2001, the City of Ottawa has taken progressive steps to reduce this unfair discrepancy, from 2.3359 to 1.7;

 

THEREFORE BE IT RESOLVED that the multi-residential tax rate be reduced to 1.6.

 

                                                                                                LOST

 

YEAS (2):       A. Cullen, D. Holmes

NAYS (8):      D. Deans, E. El-Chantiry, P. Feltmate, J. Harder, P. Hume, R. Jellett, D. Thompson, Mayor O'Brien

 

Moved by Councillor D. Holmes

 

That the multi-residential tax rate be reduced to 1.65.

 

                                                                                                LOST

 

YEAS (3):       A. Cullen, D. Holmes, P. Hume

NAYS (7):      D. Deans, E. El-Chantiry, P. Feltmate, J. Harder, R. Jellett, D. Thompson, Mayor O'Brien

 

At this juncture, Committee voted on the report recommendation.

 

That the Audit Budget and Finance Committee recommend Council maintain the existing Multi-Residential Tax Ratio at 1.7000.

 

                                                                                                            CARRIED

 

YEAS (3):       D. Deans, E. El-Chantiry, P. Feltmate, J. Harder, R. Jellett, Mayor O'Brien

NAYS (7):      A. Cullen, D. Holmes, P. Hume, D. Thompson