6.    2012 Tax ratios and other tax policies

 

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2012

 

 

COMMITTEE RECOMMENDATIONS

 

That Council approve:

 

1.   The adoption of the following optional property classes in 2012:

·         Shopping centre commercial property class

·         Parking lots and vacant lands commercial property class

·         Office building commercial property class

·         Large industrial property class

·         New multi-residential property class

·         Professional sports facility class

 

2.   The adoption of the following tax ratios for 2012:

 

Tax Class

Ratios  **

Residential

1.000000

Multi-Residential

1.700000

New Multi-Residential

1.000000

Farm

0.200000

Managed Forest

0.250000

Pipeline

1.539271

Commercial Broad Class

1.924496

 - Commercial *

1.826951

 - Office Building *

2.207164

 - Parking Lots and Vacant Land – Commercial*

1.197053

 - Shopping Centre *

1.519664

 - Professional Sports Facility

1.826951

Industrial Broad Class

2.428169

 - Industrial *

2.574494

 - Large Industrial *

2.210831

* including new construction classes for BET purposes

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

 

3.   The adoption of the following tax ratios and by-laws for the mandatory property subclasses and the tax rate percentage reduction for farmland awaiting development:

·         Commercial excess land (i.e. commercial, office and shopping centre tax classes) - 70% of the applicable commercial property class tax ratio

·         Vacant industrial land, industrial and large industrial excess land - 65% of the applicable industrial property class tax ratio

·         Farm lands awaiting development subclass I - 75.0% of the residential property class tax ratio and the corresponding tax rate percentage reduction for the awaiting residential, multi-residential, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction

 

4.   That the tax rates for 2012 be established based on the ratios adopted herein.

 

5.   That the 2012 capping and clawback provisions be as follows:

 

a)    That capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2011 Current Value Assessment (CVA) taxes;

 

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

 

c)    That properties which have reached their CVA during 2011 or crossed over from the clawed back category to the capped category remain at CVA taxes and be excluded from any further and future capping adjustments;

 

d)   That properties that cross over from the capped category to the clawed back category remain subject to claw back adjustments.

 

6.    That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2012 and future taxation years.

 

7.    That the property tax mitigation programs be continued and endorsed for 2012, including the charitable and vacancy rebate programs, the Farm Grant Program and the Low Income Seniors and Disabled Persons Complete Tax Deferral Program as previously approved by Council; and

 

a)    the associated policies be received and endorsed; and

 

b)   that any future municipal capital facility agreements be presented to FEDCO for review and recommendation to Council for approval.

 

8.   a)   Changes to the Urban Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to include properties within Document 1 – Fire Zone 41 and within Document 2 – Fire Zone 47.

 

      b)  Changes to the Rural Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to exclude properties within Document 1 – Fire Zone 41 and to exclude properties within Document 2 – Fire Zone 47.

 

9.   a)   That City Council give direction to City staff, interested stakeholders such as Eastern Ontario Landlord Organization (EOLO)  to work together and attempt to find, refine or develop generally accepted methods of demonstrating the tax burden on multi-residential properties as compared to residential properties so that City Council can address the multi-residential tax ratio question.

 

      b)  That City Council request the Province investigate the use of a more sophisticated valuation model of income capitalization for the Multi-Residential properties by the Municipal Property Assessment Corporation (MPAC) to facilitate the determination of the equivalent tax burden between the residential and multi-residential property tax classes and among the various property types within the multi-residential property tax class.

 

 

RECOMMANDATIONS DU COMITÉ

 

Que le Conseil approuve ce qui suit:

 

1.   utilisation en 2012 des catégories optionnelles de biens fonciers suivantes:

·         Centres commerciaux

·         Terrains de stationnement et terrains commerciaux vacants

·         Immeubles de bureaux commerciaux

·         Grand industriel

·         Nouveaux immeubles à logements multiples

·         Installations sportives professionnelles

 

2.   adoption des coefficients fiscaux suivants pour 2012:

 

Catégorie fiscale

Coefficient  **

Résidentiel

1.000000

Logements multiples

1.700000

Nouveaux logements multiples

1.000000

Ferme

0.200000

Forêt aménagée

0.250000

Pipeline

1.539271

Catégorie commerciale générale

1.924496

 - Commercial *

1.826951

 - Immeubles de bureaux *

2.207164

 - Terrains de stationnement et terrains commerciaux vacants *

1.197053

 - Centre commerciaux *

1.519664

 - Installations sportives professionnelles

1.826951

Catégorie industrielle générale

2.428169

 - Industriel *

2.574494

 - Grand industriel*

2.210831

* y compris les nouvelles catégories de construction aux fins de la répartition des taxes scolaires

 ** sous réserve de révisions mineures finales à la conclusion de l'OPTA

 

3.    adoption des coefficients fiscaux et des règlements municipaux suivants pour les sous-catégories de biens fonciers obligatoires et de la réduction procentuelle du taux de taxation pour les terres agricoles en attente d'aménagement:

 

·         Terrains commerciaux excédentaires (c.-à-d. des catégories Commercial, Immeuble de bureaux et Centre commercial) : 70% du coefficient fiscal applicable à la catégorie Commercial

·         Terrains industriels vacants et terrains industriels et grands industriels excédentaires: 65% du coefficient fiscal applicable à la catégorie Industriel

·         Terres agricoles en attente d'aménagement, sous-catégorie I : 75 % du coefficient fiscal applicable à la catégorie Résidentiel et la réduction procentuelle correspondante du taux de taxation pour les terrains en attente d'aménagement des catégories Résidentiel, Logements multiples, Commercial et Industriel; terres agricoles en attente d'aménagement, sous-catégorie II : pas de réduction du taux de taxation

 

4.    Que les taux d'imposition pour 2012 soient basés sur les coefficients fiscaux adoptés par les présentes.

 

5.   Que pour 2012, les paramètres de récupération fiscale et de plafonnement soient les suivantes :

a)   que le plafonnement soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d'après l'ÉVA de 2011, le plus élevé de ces deux montants étant retenu;

 

b)   que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale et dont l'écart entre les taxes annualisées recalculées et les taxes établies d'après l'ÉVA est de moins de 250 $ soient taxées d'après leur ÉVA cette année;

 

c)    que les propriétés qui ont atteint l’ÉVA en 2011 et/ou qui sont passées de la catégorie de la récupération fiscale à celle des propriétés plafonnées demeurent taxées d’après leur ÉVA et soient exclues de tout autre rajustement relatif au plafond;

 

d)   que les propriétés qui sont passées de la catégorie des propriétés plafonnées à la catégorie des propriétés de la récupération fiscale soit assujetties au rajustement relatif à la récupération.

 

6.   Que le niveau de taxes sur les propriétés " nouvellement bâties " soit établi au niveau minimal de 100% des taxes d'après l'ÉVA en 2012 et pendant les années d'imposition subséquentes.

 

7.    Que les programmes d'allégement des taxes foncières décrits dans le présent rapport soient maintenus en 2012 tel qu’approuvé par le Conseil dans les années antérieures y compris les programmes pour les organisations caritatives, propriétaires de bien-fonds vacants commerciaux et industriels, de subventions pour terres agricoles et de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées; et

           

a)    que leurs politiques connexe de subventions soient reçues et approuvés; et

 

b)  que les prochains accords relatifs aux immobilisations municipales soient présentés pour examen du Comité des finances et du développement économique, qui formulera une recommendation à l’intention du Conseil.

 

8.    a)   Que les changements au secteur des services spéciaux du service des incendies en milieu urbain aux fins de prélèvement d’impôt conformément à l’article 326 de la Loi de 2001 sur les municipalités, L.O. 2001, chapitre 25, pour l’inclusion des propriétés tels que définis dans le rapport ci-joint et dans le document 1 – Zone d’incendie 41 et document 2 – Zone d’incendie 47.

 

b)   Que les changements au secteur des services spéciaux du service des incendies en milieu rural aux fins de prélèvement d’impôt conformément à l’article 326 de la Loi de 2001 sur les municipalités, L.O. 2001, chapitre 25, pour l’exclusion des propriétés tels que définis dans le rapport ci-joint et dans le document 1 – Zone d’incendie 41 et document 2 – Zone d’incendie 47.

 

9.    a)   Que la Ville demande au personnel municipal et aux intervenants concernés, tels que l' Eastern Ontario Landlord Organization (EOLO), de travailler ensemble et de tenter de trouver, de préciser et d'élaborer des méthodes généralement reconnues pour déterminer le fardeau fiscal des logements multiples, comparativement à celui des propriétés résidentielles, afin d'enrichir l'examen que fera le Conseil municipal de la question du coefficient fiscal appliqué aux logements multiples.

 

b)  Que le Conseil municipal demande à la province d’examiner la possibilité d’utiliser un modèle d’évaluation plus élaboré de la capitalisation du revenu des propriétés à logements multiples de la part de la Société d’évaluation foncière des municipalités (SÉFM), afin de faciliter la détermination du fardeau fiscal équivalent entre les catégories d’impôt foncier visant les résidences et les propriétés à logements multiples, et entre les divers types de propriété au sein de la catégorie d’impôt foncier visant les propriétés à logements multiples.

 

 

 

DOCUMENTATION

 

1.    City Treasurer’s report dated 24 April 2012 (ACS2012-CMR-FIN-0015).

 

 

 

Report to/Rapport au :

 

Finance and Economic Development Committee

Comité des finances et du développement économique

 

and Council / et au Conseil

 

24 April 2012 / le 24 avril 2012

 

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

 

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

Finance Department/Service des finances

613-580-2424 ext./poste 13485, Ken.Hughes@ottawa.ca

 

City Wide/à l'échelle de la Ville

Ref N°: ACS2012-CMR-FIN-0015

 

SUBJECT:

 

2012 Tax ratios and other tax policies

 

OBJET :

 

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2012

 

 

REPORT RECOMMENDATIONS

That the Finance and Economic Development Committee recommend Council approve:

 

1.         The adoption of the following optional property classes in 2012:

·         Shopping centre commercial property class

·         Parking lots and vacant lands commercial property class

·         Office building commercial property class

·         Large industrial property class

·         New multi-residential property class

·         Professional sports facility class

 

2.         The adoption of the following tax ratios for 2012:

 

Tax Class

Ratios  **

Residential

1.000000

Multi-Residential

1.700000

New Multi-Residential

1.000000

Farm

0.200000

Managed Forest

0.250000

Pipeline

1.539271

Commercial Broad Class

1.924496

 - Commercial *

1.826951

 - Office Building *

2.207164

 - Parking Lots and Vacant Land – Commercial*

1.197053

 - Shopping Centre *

1.519664

 - Professional Sports Facility

1.826951

Industrial Broad Class

2.428169

 - Industrial *

2.574494

 - Large Industrial *

2.210831

* including new construction classes for BET purposes

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

 

3.         The adoption of the following tax ratios and by-laws for the mandatory property subclasses and the tax rate percentage reduction for farmland awaiting development:

·         Commercial excess land (i.e. commercial, office and shopping centre tax classes) - 70% of the applicable commercial property class tax ratio

·         Vacant industrial land, industrial and large industrial excess land - 65% of the applicable industrial property class tax ratio

·         Farm lands awaiting development subclass I - 75.0% of the residential property class tax ratio and the corresponding tax rate percentage reduction for the awaiting residential, multi-residential, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction

 

4.         That the tax rates for 2012 be established based on the ratios adopted herein.

 

5.         That the 2012 capping and clawback provisions be as follows:

 

a)  That capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2011 Current Value Assessment (CVA) taxes;

                

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

 

c)     That properties which have reached their CVA during 2011 or crossed over from the clawed back category to the capped category remain at CVA taxes and be excluded from any further and future capping adjustments;

 

d)     That properties that cross over from the capped category to the clawed back category remain subject to claw back adjustments.

 

6.            That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2012 and future taxation years.

 

7.            That the property tax mitigation programs be continued and endorsed for 2012, including the charitable and vacancy rebate programs, the Farm Grant Program and the Low Income Seniors and Disabled Persons Complete Tax Deferral Program as previously approved by Council; and

 

a)     the associated policies be received and endorsed; and

 

b)     that any future municipal capital facility agreements be presented to FEDCO for review and recommendation to Council for approval.

 

8.            a)    Changes to the Urban Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to include properties within Document 1 – Fire Zone 41 and within Document 2 – Fire Zone 47.

 

            b)    Changes to the Rural Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to exclude properties within Document 1 – Fire Zone 41 and to exclude properties within Document 2 – Fire Zone 47.

 

9.            a)  That City Council give direction to City staff, interested stakeholders such as Eastern Ontario Landlord Organization (EOLO)  to work together and attempt to find, refine or develop generally accepted methods of demonstrating the tax burden on multi-residential properties as compared to residential properties so that City Council can address the multi-residential tax ratio question.

 

            b)   That City Council request the Province investigate the use of a more sophisticated valuation model of income capitalization for the Multi-Residential properties by the Municipal Property Assessment Corporation (MPAC) to facilitate the determination of the equivalent tax burden between the residential and multi-residential property tax classes and among the various property types within the multi-residential property tax class.

 

 

RecommandationS du rapport

Que le Comité des finances et du développement économique recommande au Conseil d'approuver ce qui suit :

 

1.         L'utilisation en 2012 des catégories optionnelles de biens fonciers suivantes:

·         Centres commerciaux

·         Terrains de stationnement et terrains commerciaux vacants

·         Immeubles de bureaux commerciaux

·         Grand industriel

·         Nouveaux immeubles à logements multiples

·         Installations sportives professionnelles

 

2.         L'adoption des coefficients fiscaux suivants pour 2012:

 

Catégorie fiscale

Coefficient  **

Résidentiel

1.000000

Logements multiples

1.700000

Nouveaux logements multiples

1.000000

Ferme

0.200000

Forêt aménagée

0.250000

Pipeline

1.539271

Catégorie commerciale générale

1.924496

 - Commercial *

1.826951

 - Immeubles de bureaux *

2.207164

 - Terrains de stationnement et terrains commerciaux vacants *

1.197053

 - Centre commerciaux *

1.519664

 - Installations sportives professionnelles

1.826951

Catégorie industrielle générale

2.428169

 - Industriel *

2.574494

 - Grand industriel*

2.210831

* y compris les nouvelles catégories de construction aux fins de la répartition des taxes scolaires

 ** sous réserve de révisions mineures finales à la conclusion de l'OPTA

 

3.            L'adoption des coefficients fiscaux et des règlements municipaux suivants pour les sous-catégories de biens fonciers obligatoires et de la réduction procentuelle du taux de taxation pour les terres agricoles en attente d'aménagement:

 

·         Terrains commerciaux excédentaires (c.-à-d. des catégories Commercial, Immeuble de bureaux et Centre commercial) : 70% du coefficient fiscal applicable à la catégorie Commercial

·         Terrains industriels vacants et terrains industriels et grands industriels excédentaires: 65% du coefficient fiscal applicable à la catégorie Industriel

·         Terres agricoles en attente d'aménagement, sous-catégorie I : 75 % du coefficient fiscal applicable à la catégorie Résidentiel et la réduction procentuelle correspondante du taux de taxation pour les terrains en attente d'aménagement des catégories Résidentiel, Logements multiples, Commercial et Industriel; terres agricoles en attente d'aménagement, sous-catégorie II : pas de réduction du taux de taxation

 

4.            Que les taux d'imposition pour 2012 soient basés sur les coefficients fiscaux adoptés par les présentes.

 

5.         Que pour 2012, les paramètres de récupération fiscale et de plafonnement soient les suivantes :

a)    que le plafonnement soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d'après l'ÉVA de 2011, le plus élevé de ces deux montants étant retenu;

 

b)     que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale et dont l'écart entre les taxes annualisées recalculées et les taxes établies d'après l'ÉVA est de moins de 250 $ soient taxées d'après leur ÉVA cette année;

 

c)     que les propriétés qui ont atteint l’ÉVA en 2011 et/ou qui sont passées de la catégorie de la récupération fiscale à celle des propriétés plafonnées demeurent taxées d’après leur ÉVA et soient exclues de tout autre rajustement relatif au plafond;

 

d)     que les propriétés qui sont passées de la catégorie des propriétés plafonnées à la catégorie des propriétés de la récupération fiscale soit assujetties au rajustement relatif à la récupération.

 

6.          Que le niveau de taxes sur les propriétés " nouvellement bâties " soit établi au niveau minimal de 100% des taxes d'après l'ÉVA en 2012 et pendant les années d'imposition subséquentes.

 

7.            Que les programmes d'allégement des taxes foncières décrits dans le présent rapport soient maintenus en 2012 tel qu’approuvé par le Conseil dans les années antérieures y compris les programmes pour les organisations caritatives, propriétaires de bien-fonds vacants commerciaux et industriels, de subventions pour terres agricoles et de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées; et

           

a)    que leurs politiques connexe de subventions soient reçues et approuvés; et

 

b)  que les prochains accords relatifs aux immobilisations municipales soient présentés pour examen du Comité des finances et du développement économique, qui formulera une recommendation à l’intention du Conseil.

 

8.            a)   Que les changements au secteur des services spéciaux du service des incendies en milieu urbain aux fins de prélèvement d’impôt conformément à l’article 326 de la Loi de 2001 sur les municipalités, L.O. 2001, chapitre 25, pour l’inclusion des propriétés tels que définis dans le rapport ci-joint et dans le document 1 – Zone d’incendie 41 et document 2 – Zone d’incendie 47.

 

b)   Que les changements au secteur des services spéciaux du service des incendies en milieu rural aux fins de prélèvement d’impôt conformément à l’article 326 de la Loi de 2001 sur les municipalités, L.O. 2001, chapitre 25, pour l’exclusion des propriétés tels que définis dans le rapport ci-joint et dans le document 1 – Zone d’incendie 41 et document 2 – Zone d’incendie 47.

 

9.            a)   Que la Ville demande au personnel municipal et aux intervenants concernés, tels que l' Eastern Ontario Landlord Organization (EOLO), de travailler ensemble et de tenter de trouver, de préciser et d'élaborer des méthodes généralement reconnues pour déterminer le fardeau fiscal des logements multiples, comparativement à celui des propriétés résidentielles, afin d'enrichir l'examen que fera le Conseil municipal de la question du coefficient fiscal appliqué aux logements multiples.

 

b)  Que le Conseil municipal demande à la province d’examiner la possibilité d’utiliser un modèle d’évaluation plus élaboré de la capitalisation du revenu des propriétés à logements multiples de la part de la Société d’évaluation foncière des municipalités (SÉFM), afin de faciliter la détermination du fardeau fiscal équivalent entre les catégories d’impôt foncier visant les résidences et les propriétés à logements multiples, et entre les divers types de propriété au sein de la catégorie d’impôt foncier visant les propriétés à logements multiples.

Executive Summary

The purpose of this report is to present recommendations regarding 2012 property tax policy issues that the Municipal Act requires Council to deal with each year.  These decisions determine the tax burdens on the various tax classes for the 2012 taxation year.

 

The 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

·         Parking Lots and Vacant Lands

·         Office Buildings

·         Large Industrial

·         New Multi-residential

·         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 shift the tax burden among properties within the broad tax class. 

 

The second policy that must be adopted by Council each year is the determination of tax ratios for various tax classes.  Tax ratios are the tools that allow different tax burdens between the different property classes.  A re-assessment was conducted by the Municipal Property Assessment Corporation (MPAC) for taxation years 2009 through 2012.  Any re-assessment will cause tax shifts among the tax classes unless they are mitigated.  As has been done in the past, staff are recommending the adoption of neutral ratios (except for the small change to the multi-residential tax class ratio to keep at 1.700000 instead of 1.702203) for 2012 to eliminate any tax shifts.  The next reassessment cycle will phase in value changes from January 1, 2008 to January 1, 2012 over the 2013 to 2016 taxation cycle.  City staff will report the key findings and impact of these changes in the fall of this year to Council including a communication plan for those property owners affected the most.

 

Following the April 13, 2011 meeting of Council, a working group was established to develop a consensus position, if possible on the issue of the multi-residential tax ratio.  Although no consensus was reached on this particular issue, the group did agree on having Council requesting the province to investigate the use of a more sophisticated valuation model of income capitalization to facilitate the determination of the equivalent tax burden between the residential and multi-residential classes and among the various property types within the class.  It is also recommended that City Council give direction to City staff, interested stakeholders such as EOLO  to work together and attempt to find, refine or develop generally accepted methods of demonstrating the tax burden on multi-residential properties as compared to residential properties so that City Council can address the multi-residential tax ratio question.

In 2011, Council approved the adoption of a Professional Sports Facility (PSF) tax ratio equivalent to the commercial tax ratio.  When combined with the minutes of settlement signed in December 2011, it yielded an equivalent tax levy for these properties.  Staff are recommending the adoption of the equivalent commercial tax ratio for the PSF class.

 

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 2011.  These changes were accepted by Council in prior years and are being recommended again for 2012.  These changes will accelerate the movement of capped properties to their actual taxes (based on Current Value Assessment - CVA).

 

The report also recommends Council continue the various tax mitigation programs and endorse their associated policies. These include 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 remains limited (514 of 4,000 farm properties) for 2011, in response to rural concerns, the program is being recommended for 2012.

 

In April of 2007, City Council directed the Revenue Branch to implement a second property tax deferral program that would allow qualified seniors and people with disabilities to defer the total amount of taxes levied until the property is sold or transferred. This program would allow qualified low-income seniors and low-income people with disabilities the ability to stay in their homes longer and enjoy a better quality of life. As of the end of February 28, 2012 there were 77 taxpayers on the program. On average, the annual deferral is about $3,135. The amount of taxes deferred for those taxpayers in 2012 will be approximately $226,000. On February 28, 2012, the total taxes deferred amounted to $909,000. The income threshold for the 2012 taxation year will be increased to $38,407 as required by By-Law. There is no application deadline for first time applicants and for those already on the program, the renewal deadline remains at February 28 of the relevant tax year.

 

Council has approved report ACS2011-CMR-FIN-0049 in September 2011 phasing out the extension of the charitable rebate program to the Registered Canadian Amateur Athletic Association.  This level would fall to 20% for 2012, 10% for 2013 and 0% for 2014 with savings being directed to the Recreation and Culture Fee Support Program.

 

Changes are required for property tax purposes to special service areas to reflect an increase in fire service level for a small number properties in 2012 as identified in Document 1 and Document 2.  Finally, a recommendation is included for all Municipal Capital Facility Agreements to be presented to this Committee for review and recommendation to Council for approval.

 

Following the adoption of the following changes and recommendations, By-Laws establishing the 2012 tax rates incorporating the overall 2.39% budgetary increase will be prepared for Council approval.  Most urban and rural taxpayers will experience a tax increase of 2.39% or less on their municipal share and 2.0% on their overall tax bill once the education levy is factored in with an average impact of approximately $70.  It should be noted that this increase may vary depending on those areas subject to changes in the service levels they receive.  In addition, although the City does not benefit from any annual reassessment changes, individual properties are impacted differently based on how the change in their property value has changed relative to the overall change in the class.  The tax increase, change due to reassessment and the tax distribution by services are listed on the back of each tax bill.

 

SOMMAIRE

L’objet de ce rapport est de présenter des recommandations au sujet des politiques d’imposition foncière de 2012 dont la Loi sur les municipalités impose au Conseil municipal de s’occuper chaque année. Ces décisions déterminent le fardeau fiscal des diverses catégories de propriétés pour l’année d’imposition 2012.

 

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

·         Terrains de stationnement et terrains vacants

·         Immeubles de bureaux

·         Grand industriel

·         Nouveaux immeubles à logements multiples

·         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 réévaluation a été effectuée par la Société d’évaluation foncière des municipalités (SEFM) pour les années d’imposition 2009 à 2012. Toute réévaluation causera une répartition fiscale entre les catégories de propriété, sauf si les taxes sont atténuées. Comme par le passé, le personnel recommande pour 2012 l’adoption de coefficients fiscaux neutres (sauf pour une petite modification qui reste à apporter au coefficient qui s’applique à la catégorie Logements multiples au coefficient existant de 1,700000 au lieu de 1,702203) afin d’éliminer toute répartition fiscale. Le prochain cycle de réévaluation foncière intégrera progressivement au cours du cycle de taxation 2013-2016 les variations de valeurs survenues entre le 1er janvier 2008 et le 1er janvier 2012. Le personnel municipal présentera l'automne prochain au Conseil un rapport faisant état des constatations et répercussions clés de ces variations, ainsi qu'un plan de communication à l'intention des propriétaires les plus touchés.

 

Par suite de la réunion du Conseil du 13 avril 2011, un groupe de travail a été créé pour élaborer si possible une position de consensus relative à la question du coefficient fiscal des propriétés à logements multiples. Même si aucun consensus n’a été obtenu sur cette question en particulier, le groupe s’est entendu pour suggérer au Conseil de demander à la province d’examiner la possibilité d’utiliser un modèle d’évaluation plus élaboré de la capitalisation du revenu des propriétés à logements multiples, afin de faciliter la détermination du fardeau fiscal équivalent entre les catégories d’impôt foncier visant les résidences et les propriétés à logements multiples, et entre les divers types de propriété au sein de la catégorie.

 

En 2011, le Conseil a approuvé l'adoption d'un coefficient fiscal pour les installations sportives professionnelles (ISP) équivalent à celui appliqué à la catégorie commerciale. Ce coefficient, combiné aux résultats du procès-verbal de transaction signé en décembre 2011, a donné un prélèvement de taxes équivalent sur ces propriétés. Le personnel recommande, pour la catégorie ISP, d'adopter l'équivalent du coefficient fiscal appliqué aux propriétés commerciales.

 

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 2011. Ces changements ont été acceptés par le Conseil au cours des années précédentes et on recommande de les reconduire de nouveau en 2012. Ils permettront d’accélérer le mouvement des propriétés plafonnées vers leur niveau d’imposition réel (basé sur l’ÉVA).

  

Le rapport recommande que le Conseil continue les différents programmes d’allègement des taxes et appuient les politiques connexes, ce qui comprend également le maintien des divers programmes d’allégements fiscaux, y compris ceux dont bénéficient les organisations caritatives, les propriétaires de bien-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 2011 (514 propriétaires sur un total de 4 000 fermes) mais, considérant les préoccupations du milieu rural, on recommande de le maintenir en 2012.

                                                    

En avril 2007, le Conseil a donné instruction à la Direction des Recettes de mettre en place un deuxième programme de report des impôts fonciers qui permettrait aux personnes âgées et aux personnes handicapées de reporter le montant total de leurs impôts fonciers jusqu’au moment de la vente ou du transfert de leur propriété. À la fin du mois de février 2012, environ 77 contribuables s’étaient prévalus de ce programme. En moyenne, 3 135 $ d’impôts fonciers annuels sont reportées. En 2012, le montant reporté pour l’année était de 226 000 $ pour un total des taxes reportées de 909 000 $ pour ces contribuables. Le seuil de revenu de l’année d’imposition 2012 sera augmenté à 38 407 $. Pour ceux qui présentent une première demande, il n'y a pas de date limite de présentation; dans le cas de ceux déjà inscrits au programme, le délai de renouvellement demeure le 28 février de l'année fiscale visée.

 

Le Conseil a adopté en septembre 2011 le rapport ACS2011-CMR-FIN-0049, qui prévoit l’élimination progressive de l’application du Programme de remboursements offerts aux organismes de bienfaisance dans le cas de l’Association canadienne de sport amateur. Le niveau de remboursement passerait à 20 % en 2012, à 10 % en 2013 avant d’être supprimé en 2014. Les sommes ainsi économisées seraient affectées au Programme d’aide financière pour les activités sportives et culturelles.

 

Il est nécessaire, à des fins de taxation foncière, d'apporter des changements aux secteurs de services spéciaux de façon à refléter l'accroissement du niveau des services d'incendie pour quelques propriétés en 2012, indiquées dans les documents 1 et 2.  En dernier lieu, il est recommandé que tous les accords relatifs aux immobilisations municipales soient présentés pour examen au Comité, qui formulera une recommandation à soumettre à l'approbation du Conseil.  

 

À la suite de l'adoption des modifications et recommandations suivantes, les règlements reflétant l'augmentation budgétaire générale de 2,39 % sur les taux de taxation de 2012 seront rédigés en vue d'être soumis à l'approbation du Conseil.  La plupart des contribuables urbains et ruraux subiront une hausse de taxes de 2,39 % ou moins pour la part municipale de leur facture de taxes et de 2,0 % sur l'ensemble de leur facture, après inclusion des taxes scolaires pour un impact d’environ $70 en moyenne. Il importe de signaler que cette augmentation pourra varier selon les changements des niveaux de services survenus dans différents secteurs. De plus, bien que la Ville ne tire pas bénéfice des changements annuels qui résultent de réévaluations foncières, celles-ci se répercutent différemment sur les propriétés individuelles en fonction de la variation de leur valeur foncière par rapport à l'ensemble de la catégorie à laquelle elles appartiennent. L'augmentation de taxes, le changement résultant de la réévaluation foncière et la répartition des recettes fiscales par service figurent au verso de chaque facture de taxes.

 

 

Background

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

 

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.  The next reassessment is being performed in 2012 to be phased in over the 2013 through 2016 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 this 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.  Any changes to these optional property tax classes and their ratios would affect the tax burden on other properties within the broad tax class.

 

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

·         Shopping centre commercial property class

·         Parking lots and vacant lands commercial property class

·         Office building commercial property class

·         Large industrial property class

·         New multi-residential property class

·         Professional sports facility class

 

2.  Tax Ratios

 

Since 1998 and the passage of the Ontario Fair Assessment System, the two mill rate system and the business occupancy tax was effectively replaced with multiple tax classes, optional sub-classes and variable tax rates.  The proportion by which the class and sub-class tax rates differ from the residential class and its own ratio of 1.000000 is known as the ratio for the corresponding class.  In 1998, each municipality in Ontario inherited transition ratios equivalent to the previous 1997 tax level with a range of fairness target set by the Province.

 

The goal was to reach ratio parity for all classes with the exception of farmland and managed forest.  However, most municipalities and Councils faced such parity decisions knowing the impact would be a tax increase on the Residential Tax Class.  In Ottawa, it is estimated that this ratio parity would result in a 22% tax increase or $178 million in additional tax burden to the residential class during a time of significant budgetary pressures on the tax base. 

 

At every reassessment cycle, changes in valuation may trigger potential tax shifts among the tax classes and among the properties within a tax class.  In order to provide relief and some stability to annual reassessments, the Province deferred the annual reassessments scheduled for 2007 and 2008 and adopted a four year phase-in of assessment changes for all tax classes.  The increase between the valuation periods of January 1, 2005 and January 1, 2008 was phased in equally for the upcoming taxation years 2009 to 2012.  The increase between the valuation periods of January 1, 2008 and January 1, 2012 would be phased in equally for the upcoming taxation years 2013 to 2016.  While it does not avoid changes in valuation and its associated tax impact, it does spread the increase over four years.  This provides taxpayers with some stability and knowledge of how they will be impacted during this period.

 

In 2003, only the City of Ottawa saw a significant residential valuation increase over and above the other classes that resulted in a tax shift of $21 million and an equivalent 6.5% tax increase from the other classes to the Residential\Farmland classes.  In 2004, when this change in tax burden was experienced more broadly at the provincial level, municipalities and various municipal associations pressed the new government for a tool to offset these tax shifts.  The Minister then passed a special regulation allowing municipalities to adopt “neutral” ratios to preserve the existing tax levels and thus eliminate any inter-class tax shifts.  The City of Ottawa has adopted the neutral ratio option for each of the two previous reassessment cycles of 2004 and 2006 and the first three phase-in years of this new cycle in 2009, 2010 and 2011.

 

In the fall of 2008, staff reported the assessment changes for the first year of reassessment. Table One has been updated to show the valuation changes by class for 2012 and the total change over the four year period. While the City does not benefit from any changes in valuation, annual shifts between classes would occur depending on how they differ from the weighted average increase of approximately 3.5%.

 

TABLE ONE - CVA CHANGES BY CLASS

(in millions)

 ANNUAL

4 YR

CLASS

 CVA_2008

 CVA_2011

 CVA_2012

 CHG

 CHG

Commercial

         13,958

         16,669

         17,591

5.53%

26.0%

Industrial

            974

         1,144

         1,204

5.25%

23.7%

Multi-Resid

         5,553

         6,082

         6,261

2.95%

12.7%

Resid/Farm

       75,849

       83,593

       86,213

3.13%

13.7%

Other

            217

            240

            247

3.14%

13.9%

Total

       96,551

     107,728

     111,517

3.52%

15.5%

 

The potential tax shifts between classes are estimated for 2012 in Table Two below before any budgetary increases should neutral ratios not be adopted.  The 2013 to 2016 potential tax shifts will be reported once the reassessment data is made available later this year to Council including a communication plan for those property owners mostly affected.

 

TABLE TWO - POTENTIAL TAX SHIFT BY CLASS

(in millions)

 LEVY WITH

 

NEUTRAL

RESTATED

2012

TAX

TAXABLE CLASS

RATIO

 WITH SHIFT

 TAX SHIFT

CHANGE

Commercial

 $               318

 $               324

 $                   6

1.89%

Industrial

 $                 26

 $                 26

 $                    -  

0.00%

Multi-Residential

 $               100

 $                 99

 $                 (1)

-1.00%

Residential/Farm

 $               813

 $               808

 $                 (5)

-0.62%

Other

 $                   3

 $                   3

 $                    -  

0.00%

  NET IMPACT

 $            1,260

 $            1,260

NIL

0.00%

 

Financial staff are therefore recommending that neutral ratios be adopted for the taxation year 2012. 

 

This recommendation is being made for the following reasons:

·         inter-class tax shifts are eliminated

·         this would be consistent with prior assessment cycles 2004, 2006 and for 2009/2011

·         neutral ratios have accelerated the movement of the tax ratio for the Commercial broad class below the 1.98 provincial threshold resulting in a lifting of the 50% levy restriction for that class.

 

The ratio history by class is demonstrated in Table Three below, including the recommended neutral ratios for 2012.

 

TABLE THREE - TAX RATIO SNAPSHOT 1998 TO 2012

1998-

2012

OVERALL

Class

2000

2011

NEUTRAL**

% CHG

Residential

1.0000

1.0000

1.0000

Multi-Residential

2.3359

1.7000

1.7000*

-27%

New Multi-Resid

N/A

1.0000

1.0000

Farm

0.2500

0.2000

0.2000

-20%

Managed Forest

0.2500

0.2500

0.2500

0%

Pipeline

1.1325

1.5399

1.5393

36%

Commercial Broad Class

2.0368

1.9568

1.9245

-6%

  - Commercial

1.9576

1.8635

1.8270

-7%

  - Office Building

2.3659

2.2513

2.2072

-7%

  - Parking Lots

1.2830

1.2210

1.1971

-7%

  - Shopping Centre

1.6286

1.5501

1.5197

-7%

Industrial Broad Class

2.1220

2.4563

2.4282

14%

  - Industrial

2.2441

2.6109

2.5745

15%

  - Large Industrial

1.9270

2.2421

2.2108

15%

* Same ratio as 2011

** Subject to final minor revisions upon OPTA close off

 

The neutral ratio for the Multi-Residential (MR) class is 1.702203.  It is the only ratio that would increase slightly over the 4 years as part of setting neutral ratios.  Keeping the ratio at the same level of 1.700000 as adopted last year results in a small shift of $119,000 to the other classes for a total of $475,000 over this four year cycle.

 

As demonstrated in Table Three, the MR ratio has decreased 27% from 1998 when the ratio was 2.3359.  The impact of this decrease on the average home in 2011 was estimated at $86 on an annual basis.  Some of the challenges in establishing the MR ratio relate to the different assessment methodology, unpredictable changes during reassessment cycles and the limitation of comparative models with the Residential class.  This issue is compounded by the fact that non-homogenous property types are grouped by a handful of broad classes leaving Council with little flexibility to correct real or perceived inequities by the use of a single ratio applied to the MR class or others.

 

In March 2011, Council re-approved the existing multi-residential ratio of 1.700000 in report ACS2011-CMR-FIN-0013.  The report looked at several factors including a review of the inter-municipal ratios across the Province, the tax per square foot level between an average MR apartment and condominium unit and a percentile comparison between the 2 groups.  The inter-municipal comparison showed that the City of Ottawa had the lowest ratio in the province with the exception of the Region of York and some very small municipalities.  The tax per square foot of an average MR apartment was 10% lower than the average condominium.  The analysis also indicated that the 50% percentile level of the MR unit paying the equivalent of $1,260 in municipal property taxes was paying at a level lower than the smallest and most modest condominium units at the 10th percentile level of $1,330.  Based on these findings, staff recommended that the MR tax ratio remain at its level of 1.700000.  Change to the MR ratio is limited in its ability to target reductions for a specific type of property or housing within the class.

 

At the April 13, 2011 meeting of Council, Councillor Hume presented the following motion:

Moved by Councillor P. Hume

 

THEREFORE BE IT RESOLVED that the Finance and Economic Development Committee and Council authorize the striking of a working group to develop, if possible, a consensus position on the issue of the multi-residential tax ratio;

 

That the working group be comprised of interested City Councillors, City staff and interested stakeholders such as EOLO; and

 

That the Finance and Economic Development Committee and Council delegate to the Mayor the responsibility of striking the working group.

 

CARRIED

 

The Working Group was composed of Councillors Clark, Fleury and Hume, Mr. John Dickie, Chair, Eastern Ontario Landlord Organization (EOLO), Mr. Glenn Lucas, Property Tax Review Services who represents a number of owners of multi-residential property owners and two members of staff (Mr. René Bisson, Manager Billing and Tax Policy and Mr. Ken Hughes, Deputy Treasurer).

 

The members of the working group reviewed and discussed the various studies previously provided to Council and other relevant documents.  The findings and recommendations are presented in this report.

 

While the working group could not agree on how the tax burden on equivalent residential and multi-residential properties could be determined, all members agreed that work should continue to find or develop generally accepted methods of comparing the tax burden.

 

The limitations of the current assessment valuation model used by the Municipal Property Assessment Corporation (MPAC) were discussed in detail by the working group.  MPAC values multi-residential properties by applying a Gross Income Multiplier (GIM) to the total of the base rents for a property.  This method is used for all of the income properties in the multi-residential property tax class.  While this model is simple to administer, it does appear to result in inequities within the class where some properties are under-assessed and others are over-assessed when compared to selling prices for properties that have been sold.

 

Several limitations of this valuation approach were identified.  For example, the lack of stratification by quality, age or condition of the building prevents the grouping of similar types of buildings.  Also, the GIM model has only three categories of condition - Good, Average and Poor, with the majority falling within the Average category for most of Ottawa. Finally, the lack of sales in the three main classifications of high-rise, walk-up and row house can result in the same GIM applied irrespective of type.

 

The working group agreed that these deficiencies could be addressed with the use of the more sophisticated valuation model of income capitalization.  The income capitalization model is currently used within the commercial class for most income properties. For a significant number of multi-residential properties this would result in a closer approximation of their value as the net income model factors in operating costs such as heating, air-conditioning, utilities and repair and maintenance costs which would be reflected in the property’s value.

 

The working group failed to reach any conclusion or consensus on the tax ratio required to produce an equal tax burden on equivalent residential and multi-residential properties.  The group was also unable to reach a consensus on whether the tax burden should be the same on equivalent residential and multi-residential properties.  EOLO does not agree that an equal tax burden on equivalent residential and multi-residential properties should be the goal.

 

In summary, there was no consensus on the following points:

 

There was consensus on the following points:

 

The lack of flexibility derived by a single ratio for this class and the inability by MPAC to group properties by type of structure, age, quality or location could potentially be addressed by changes to the valuation methodology used by MPAC for the multi-residential property tax class.  Should this issue be addressed, better models and analyses could potentially be derived by municipalities in their attempt to determine the equitable tax burden not only between the residential and multi-residential property tax classes but also among the various property types within the multi-residential property tax class itself.

 

Accordingly, the multi-residential working group recommends that:

 

City staff and interested stakeholders such as EOLO work together to attempt to find, refine or develop generally accepted methods of demonstrating the tax burden on multi-residential properties as compared to residential properties so that City Council can address the multi-residential tax ratio question.

 

The Finance and Economic Development Committee (FEDCO) ask City Council to request the Province investigate the use of a more sophisticated valuation model of income capitalization for the Multi-Residential properties by the Municipal Property Assessment Corporation (MPAC) to facilitate the determination of the equivalent tax burden between the residential and multi-residential property tax classes and among the various property types within the multi-residential property tax class.

 

Options to Adopting Neutral Ratios

 

Since the commercial tax ratio is now below the provincial threshold, the City is no longer restricted from levying only 50% of the budgetary tax increase to the Commercial class. This restriction was in effect from 2004 to 2010.  The problem with this restriction is that the commercial class has not been subject to full tax increases over the years. The shortfall had to be borne by all other classes including the residential class which is the largest.  Not adopting neutral ratios would result in $5 million of taxes being shifted off of the residential property class for a total shift of $6 million to the commercial property tax class.

 

 

3.         Ratios – Mandatory Subclasses

 

There are two subclasses of farm lands awaiting development.  The first, farm lands awaiting development subclass I, is defined as farm land currently used solely for farming where there exists an approved and registered subdivision plan on the lands prior to actual development taken place.  Ontario regulation 383/98 provides direction on the calculation of the tax rate for these types of farmlands while permitting a move of 10% in either direction.  In practice, this type of property is held as speculative land and is seldom registered as a subdivision for extended periods of time prior to development.

 

The second category of farm lands awaiting development, subclass II, currently receives no tax rate reduction and that practice is recommended to continue.

 

Financial staff recommends the adoption of the following tax ratios and by-laws for the mandatory property subclasses and the tax rate percentage reduction for farmland awaiting development:

·         Commercial excess land (i.e. commercial, office and shopping centre tax classes) - 70% of the applicable commercial property class tax ratio;

·         Vacant industrial land, industrial and large industrial excess land - 65% of the applicable industrial property class tax ratio;

·         Farm lands awaiting development subclass I - 75.0% of the residential property class tax ratio and the corresponding tax rate percentage reduction for the awaiting residential, multi-residential, commercial and industrial property classes; and Farm lands awaiting development subclass II - no tax rate reduction.

 

 4.        Tax Rates

 

Tax rates are determined through calculations which involve the budgetary tax levy requirement approved in the 2012 budget setting exercise, the total current value assessment by class and the effects of the setting of tax ratios within this report.  The resultant tax rates as calculated by staff will be submitted to Council at a later date for approval with applicable By-Laws.

 

By-Laws establishing the 2012 tax rates will incorporate the  2.39% budget increase.  Most urban and rural taxpayers will experience a tax increase of 2.39% or less on the municipal share of the tax bill and 2.0% on the total bill including the education levy. The result is an average increase of approximately $70.  It should be noted that this increase may vary depending on location as certain taxes are delineated by service level and that service level may have changed.  In addition, although the City does not benefit from any annual reassessment changes, individual properties are impacted differently based on the change in their property value relative to the overall change in the class.  The budgetary tax increase, any change due to reassessment and the tax distribution by service are listed on the back of each tax bill.

 
Financial staff recommends that the tax rates for 2012 be established based on the ratios adopted herein.

 

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 levy based on its current value assessment (known as CVA tax).  Municipal levy changes (essentially changes to the tax rate as a result of budget decisions) are then applied in addition to the limit.

 

The limit applies to all property in the commercial, industrial and multi-residential classes, subject to the following exclusions:

·         Farm lands awaiting development;

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

·         Certain power generation and transformer facilities.

 

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

 

The individual properties that are protected by the tax cap generate a “foregone revenue or taxation shortfall”.  This “taxation shortfall” is the difference between the amount of taxes that the current value assessment would generate and the cap over the previous year’s taxes.  This uncollected amount has to be recovered from other taxpayers.  A mechanism that is available, which has been chosen by Council each year since 1998, is to “clawback” some of the decreases from those individual properties within the property class that are experiencing a decrease in taxes.  In other words, taxpayers who would be entitled to a reduction in their taxes pay the tax not being paid by another taxpayer because of the capping limit.

 

In order to address some of the limitations associated with the capping regime and to reduce the number of properties not paying full CVA taxes, and taking into account the prolonged period required for some properties to reach full CVA taxes, the Minister introduced new capping options in Bill 83, the Budget Measures Act, 2004.  Although these new options will not address all inequities inherent in a program that limits some properties from paying their full share of taxes, they will nonetheless accelerate the move towards more properties attaining full CVA taxes more quickly.

 

 

The capping options for 2012 are summarized as follows:

 

Capping parameter to be 10% of Annualized tax – The major disadvantage of the original capping program and a continuous cycle of re-assessments is that many of the capped properties within the City and the Province of Ontario would never reach their full CVA taxes.  In order to rectify this situation, the Ministry has provided flexibility to Council to increase the 5% parameter up to 10%.  Council provided notification in the 2005 tax policy submission that this change would be implemented for 2006 and subsequent years.  Council has approved this change for each year since 2006 as part of the tax policy submission process.  Staff recommends this change for 2012 as well.  A decision not to implement this option each year would mean the capping parameter would revert to 5%.

  

Capping parameter increase to 5% of CVA tax – With the annual restriction applying the capping parameter to the previous year’s annualized taxes only, any property that has a significant disparity between their annualized and CVA taxes would be capped for an extensive period.  In order to alleviate this situation, a new capping option was provided for these properties to have their taxes increased by up to 5% of their previous year’s CVA tax (prior to levy change).  Only a small number of properties that pay a fraction of their CVA taxes (less than 50% of their CVA taxes) would be affected.  This would reduce by half the length of time required to reach their full CVA taxes.

 

Financial staff recommends the 2012 capping parameters (as in 2011) be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2011 Current Value Assessment (CVA) taxes.

 

$250 Threshold Option - Administratively, several of the small businesses and Multi-residential properties were being capped or clawed back by very small amounts due to the fact there was no minimum threshold established.  A new option was provided allowing municipalities to pass a by-law to move capped properties whose recalculated annualized taxes fall within $250 of the current year’s CVA tax to their CVA tax for the year.  This means that if the differential between the CVA taxes and the tax limit is between $0 and $250 (higher or lower) the taxpayer is automatically moved to their CVA tax.

 

Financial staff recommends that for 2012 (as in 2011) capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year.

 Clawback Recovery - In order to determine how much taxation has to be “clawed back” from those taxpayers in the class whose taxes were decreasing, a percentage is calculated which when added to their taxes, finances the “taxation shortfall”.  Council must approve this percentage, known as the clawback percentage.  In 2012, the clawback requirement will decrease (see discussion of new capping option for properties at CVA tax level below).  A recovery by-law to approve the final clawback percentages will be submitted for Council approval at a later date.

 

New capping option for properties at CVA tax level - Since 1998, the capping program has offered protection for any assessment related tax increases to certain classes.  While there was significant tax impact on certain properties at the time, the Province anticipated that after a few years, the new values would be fully integrated and taxes would be at their full CVA tax level.  Significant progress was made in the earlier years but had reached a plateau in the last few years.  The goal of a property to pay its share of taxes based on a simple formula of valuation applied to a ratio driven tax rate had remained elusive for most municipalities in Ontario. 

 

In order to finance the protection provided to properties with large increases, other properties are denied their full tax decrease by a clawback mechanism (see Clawback Recovery discussion above).  Historically, the number of clawed back properties can be several times the level of properties being protected.  This would imply that a smaller number of large properties benefit from the protection relative to a larger number of smaller properties being denied their lower taxes.  Experience had demonstrated that whatever gains are made during a non-reassessment year could be lost during a reassessment year with new properties being brought into the protected category.  If a property is significantly undervalued in any given year and subsequently corrected, it will not only have benefited from lower taxation for all of the previous years, but will also be protected for many years to follow.

 

The Province has acknowledged these concerns and while it will not support a full exit of the program in the foreseeable future, it enacted several new options in 2005.  The options previously discussed included:

 

·         doubling the increase parameter from 5% to 10% of the previous taxes

·         5% of the current CVA taxes

·         a $250 minimum threshold

 

In 2008, the Province went further and introduced a new option for 2009 more in line with the intent of the original program that was to bring properties paying their full CVA tax level over a short time period.  Municipalities now have the option to exclude any properties that reach CVA taxes in the previous year and/or crossover during the current year between the clawed back and capped categories.  In addition, the combination of the four-year phase-in of the multi-year change in value from January 1, 2005 to January 1, 2008 with the 10% annual increase parameter has significantly reduced the pressure on existing properties requiring additional capping protection.

 

The impact on the protected commercial and industrial classes is significant.  The multi-residential is less affected due to the fact that its base has been more stable and closer to full CVA in previous years than any other class.  Not only do the new options prevent new properties with valuation issues to enter the capping/clawback program, it also significantly curtails the capping requirement, increases the properties at CVA and allows more of the tax reductions to the properties in the clawed back category.  The following results by class are detailed below.

 

 

Multi-Residential Class

 

The chart in Table Four below shows the increase in the capping required at each of the earlier reassessment cycles.  The phased in assessment changes for 2009 to 2012 will prevent any such large increase during this cycle.  The original capping protection was $1.4 million in 2001, which decreased in non-reassessment years but increased in the reassessment years of 2003 and 2006.

 

With the new option to exclude properties at CVA tax level, the number of properties requiring capping protection will eventually drop to zero.  The program would see 6 properties requiring $28,000 in protection for 2012.  Properties denied their full tax decrease total 58 or 4% to self-finance the program.

 

 

Commercial class

 

The chart in Table Five shows the slow progress towards CVA of the earlier reassessment cycles for the commercial class.  The effect of phasing in assessment over a four-year cycle prevented a large increase in capping in 2009 for this class.  The original capping protection provided to this class was $57 million in 2001 and was down to $13 million in 2007 but up to $16 million in 2008 due to assessment shifts between sub-classes triggering an increase in the requirement.  The capping program would see 133 properties requiring $2.3 Million for 2012.  Properties denied their full tax decrease to fund this requirement are 971 or 10%.

 

 

Industrial class

 

The chart in Table Six shows the impact earlier reassessments have had on the amount of taxes subject to capping.  Again, the impact of phasing in assessment over a four year period smoothes the impact in 2009 and beyond but does not eliminate it altogether.  The original capping protection provided in 2001 was $4.9 million which diminished but then increased in both 2003 and 2006 with almost no gain in reduction.  The regular capping program would see 126 properties requiring $0.6 Million in protection for 2012.  Properties denied their full tax decrease total 78 or 7%.

 

In summary, the option to exclude properties that have reached CVA or crossed over from the clawed back to the capped category will continue to significantly reduce the capping requirement for all classes for 2012 and the next year.  This reduced capping requirement will relieve some of the pressures on the clawed back properties by allowing more properties to pay only their CVA tax level.  The clawback % has yet to be finalized and varies by year based on the annual requirement and the number of properties left in the program.  As such, all numbers are preliminary and will be finalized over the next few weeks as part of the Ontario Property Tax Analysis (OPTA) cut-off procedures.

 

The new option of excluding properties at or crossing over from the clawed back to the capped category is therefore recommended to be continued.  This accelerates the progress towards attaining the goal of more properties reaching their CVA tax level and decreasing the number of properties burdened by the claw back mechanism.

 

Financial staff recommends that properties (as in 2011) which have reached their CVA during 2011 or crossed over from the clawed back category to the capped category remain at CVA taxes and be excluded from any further and future capping adjustments.

 

Financial staff also recommends that properties (as in 2011) that cross over from the capped category to the clawed back category remain subject to claw back adjustments.

 

6.         Tax Treatment For New Construction Properties

 

Previously, the tax burden for eligible “new construction” properties was established by comparing the average tax level of comparable properties (up to six) to the CVA taxes of the eligible property.  Under this regime, the maximum tax level for the new property can only be at the CVA tax level (i.e. current assessment value times the applicable tax rate).  However, no minimum tax level had been set, occasionally resulting in abnormally low taxes for a new property.  This only served to continue the distortion caused by the capping program.  In 2005 legislation was introduced to establish a minimum tax level (%) of the CVA tax liability for the eligible new construction properties.  The minimum tax level was increased gradually towards the maximum through a phase in.  This phase in has now been completed with new construction properties paying at their full CVA tax level since 2009.

 

Staff recommends that the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2012 and future taxation years.

 

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. The Auditor General has also recommended some of the associated policies in the attached documents be endorsed by Council. These programs include:

 

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

·         Tax rebate of: 

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

b)    20% to Registered Canadian Amateur Athletic Associations for 2012, 10% for 2013 and 0% for 2014;

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

d)    100% of education portion for properties used and occupied by the Royal Canadian Legion and The Polish Combatant’s Association of Canada, further identified in Schedule “A” of By-Law no. 2007-476 and amendments to reflect changes in physical locations, including the 2012 relocation of the Strathcona-Ottawa Branch to 1940B Bank St.

·         The provision of a vacancy tax rebate program with the rebate rate set at 30% of the tax attributable to the vacant space in commercial buildings, and 35% of the tax attributable to the vacant space in industrial buildings

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

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

·         Farm Tax Grant Program

·         Municipal Capital Facility Agreements

 

 

Charitable Rebate Program

 

In Ontario, charitable organizations are not exempt from property taxation.  However, as required by the Municipal Act, 2001, section 361, Rebates for Charities, the City of Ottawa has a program to provide property tax rebates of 40% or more to eligible charities. To be eligible, an organization must occupy space in the commercial or industrial tax class and be a registered charity under the federal Income Tax Act.

 

This program was implemented following the adoption of the Fair Assessment System in 1998. With the Business Occupancy Tax (BOT) being removed and rolled up into the commercial and industrial property taxes, charities are now subject to a higher level of municipal taxes recovered through their leases.  Previously, charities had been exempted from the BOT portion only.  In addition, most charities that own and occupy their properties are subject to the lower residential tax rates in most cases.

 

The Revenue Branch administers the Charitable Rebate Program under the Charitable Rebate Program Policy attached as Document 3.   Highlights of the policy include:

 

 

Late applications may be accepted due to extenuating circumstances as authorized by the Municipal Act and directed by Council in October 2010.

 

After the approval of the 2006 tax policy submission the Revenue Branch was asked to provide a training session for the eligible charities on the tax rebate program.  The purpose of the training session was to assist the eligible charities in completing their applications to maximize the benefit to the charities.  After offering this training and pre-filling the applications for the charities, staff estimate that almost all charities complete the application themselves.  This allows the charities to keep the entire rebate.  The training sessions are offered at each tax year.

 

 

Council has approved report ACS2011-CMR-FIN-0049 in September 2010 phasing out the extension of the charitable rebate program to the Registered Canadian Amateur Athletic Association.  This level would fall to 20% for 2012, 10% for 2013 and 0% for 2014 with savings being directed to the Recreation and Culture Fee Support Program.

In 2010, a total of 151 rebate applications amounting to $3,200,000 (municipal & education portions) were processed. The 2011 rebate applications can be received up to February 29, 2012 and have yet to be finalized. Specific details relating to charitable rebates are on file with the Deputy City Treasurer, Revenue.

 

Vacancy Rebate Program

 

Prior to 2001, vacant units were identified on the Assessment Roll, and determined by the fact that units had been vacant in the previous year for a specified period of time (ex. July to September).  The Government of Ontario decided to adopt a real-time approach for 2001 and subsequent years.  To facilitate, the Municipal Act, 2001 included the new section 364 (Vacant unit rebate) along with the accompanying Ontario Regulation 325/01.

 

The Municipal Act requires the City of Ottawa to provide a property tax rebate for eligible vacant units.  The main criteria for eligibility are:  the unit (or portion) was vacant for more than 90 consecutive days during the taxation year and the property is in any of the commercial or industrial classes.  In order to claim the vacancy rebate, property owners must submit an application before the last day of February of the year following the taxation year in respect of which the application is made.  This mandatory program provides a 30% rebate of taxes for eligible property in the commercial classes and a 35% rebate for eligible property in the industrial classes. 

 

The Revenue Branch administers the Vacancy Rebate Program under the Vacancy Rebate Policy attached as Documents 4.  Highlights of the policy include:

 

 

Tax Deferral Program

 

Since the launch of the Full Property Tax Deferral for Low-Income Seniors and Low-income People with Disabilities in 2007, the amount of property taxes deferred have increased by 195 per cent as at December 31, 2011.  This program allows qualified low-income seniors and low-income people with disabilities the ability to stay in their homes longer and enjoy a better quality of life.  The increase in the number of applicants on this program has been gradual.  During the last four years, some properties have been removed from this program due to sale of the properties or death of applicants. 

 

As at December 31, 2011, there were 77 taxpayers on the program and the number of applications received since the program was introduced totals 123.  On average, the annual deferral is about $3,135. The amount of taxes deferred for those taxpayers in 2011 will be approximately $226,000.  On December 31, 2011, the total taxes deferred amounted to $909,000. The income threshold for 2012 will be $38,407.  There is no application deadline for first time applicants and for those already on the program, the renewal deadline remains at February 28 of the relevant tax year.

 

Farm Grant Program

 

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 532 of the 4,000 farm properties took advantage of the program in 2011.  The program costs about $30,000 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 2012.

 

Municipal Capital Facility Agreements

 

Section 110 of the Municipal Act, 2001 allows Council to designate lands (or part thereof) within the classes of lands described in Ontario Regulation 603/06, as a municipal capital facility.  These consist of properties intended for use in a service or function that may be provided by the municipality.  Eligible portion of the designated facility may be exempted from taxation for both municipal and education purposes.  As tax exemptions have financial implications, it is recommended that such future requests be addressed at the Finance and Economic Development Committee for review and recommendation to Council.  This would provide a consistent approach for approving municipal capital facility agreements and granting tax relief for eligible properties.

 

8.         Special Service Areas

 

For 2012, a few administrative changes are required to implement Special Service Area changes approved by Council or to reflect small changes in zones for properties receiving an improved service level.

 

Transit Areas

On November 9th, 2011, Council approved report ACS2011-ICS-TRA-0023 REVISION OF TRANSIT TAX AREAS FOR 2012.  The change in these transit zones will be enacted for the 2012 taxation year.  

 

Hydro Lines Ward 4

On May 26, 2010, Council approved the burying of the hydro lines along Kanata Avenue where overhead lines were originally planned, roughly from the Goulbourn Forced Road to the Richardson Side Road (report ACS2011-CCS-TRC-0013).  This was followed by the formal adoption by Council of Ward 4 as a Special Service Area pursuant to section 326 of the Municipal Act 2011, S.O. 2001.  City staff have now tabulated the final costs and will be applying this levy for the first time in 2012.

 

Urban/Rural Fire Special Service Areas

In 2011, Council approved zone changes to reflect the change in Fire Services level associated with Station 46 becoming operational.  Some further minor changes are required in 2012 to the zones affecting about 200 rural properties receiving full urban fire services to reflect the opening of Station 47 and its extended service outside of Barrhaven and a small area serviced by Station 41 to a new subdivision previously undeveloped.

 

Financial Services staff recommend changes to the Urban Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to include properties within Document 1 – Fire Zone 41, within Document 2- Fire Zone 47 and changes to the Rural Fire Special Service area for tax levy purposes pursuant to section 326 of the Municipal Act 2001, S.O. 2001, Chapter 25 as defined in the attached report to exclude properties within Document 1 – Fire Zone 41 and exclude properties within Document 2 – Fire Zone 47.

 

9.         Professional Sports Facility Class

 

The professional sports facility, first known as the Palladium, opened in January 1996.  It was subsequently renamed to the Corel Centre and then Scotiabank Place in 2005.  With the Club experiencing financial difficulties prior to amalgamation, the City of Kanata and the Regional Municipality of Ottawa-Carleton opted to use the new Professional Sports Facility (PSF) class to reduce the property tax burden.  Over the years, 4 multi-year agreements were approved by Council increasing the tax burden from $700K per year to $1.6 Million in 2010.  Each agreement stipulated that should the taxes in the commercial tax class be lower than the agreed taxes the lower amount would apply. 

 

Although the current value of $127 Million would appear to have generated a much higher commercial tax level, its value was disputed and under appeal by the property owner with the Assessment Review Board (ARB) since 2004.  Properties of this nature have experienced significant reductions in value over the last decade.  It was clear that the value on the assessment roll which reflected increases from the initial cost of construction was too high. 

 

There were many challenges faced by MPAC and the Assessment Review Board in determining a value for such a unique property.  These included the lack of comparable properties within or outside the municipality, these properties are often not sold for prolonged periods and when sales do occur they frequently include both the property and the professional sports team (as was the case with Scotiabank Place).  Values under consideration at the hearing ranged from $27M to $60M with a final settlement of $51M being signed by the property owner, MPAC and the City of Ottawa in December 2011.  When combined with Council approving a tax ratio for the Professional Sports Facility class equivalent to the commercial tax ratio, it yielded an equivalent tax levy for these properties.  As the value has been established the special agreement is no longer required.

 

The recommendation to adopt a 2012 tax ratio for this class equivalent to the commercial tax ratio is included as part of this report.

 

10.       2012 Other Taxation Issues

 

Education Provincial Tax Shift

 

The 2007 and 2008 Provincial budgets have introduced significant changes to the property tax assessment system in Ontario.  The education tax rate for the residential, farm and multi-residential properties is set at the provincial level.  A drop in the rate for 2012 is based on a provincial assessment change of between 19% and 20% phased in over the 4 years versus a City wide average change of about 14%.  The estimated annual benefit of the education tax shift away from the Residential Class in the City of Ottawa is estimated at $2.0 million or about $8 for an average single-family dwelling.  The benefit of this annual shift to the Multi-Residential class is estimated at $179,000.

 

Business Education Tax

 

The Business Education Tax (BET) Rates are also reset for the commercial and industrial class to factor in annual reassessment values.  Although this process does not result in any education tax reductions, the Province also passed in 2007 a graduated decrease towards a provincial rate of 1.60% in 2008 which has been restated to 1.52% for 2009, 1.43% for 2010, 1.33% for 2011 and 1.26% for 2012.  This rate applies immediately to new construction in those classes and will result in savings of $225,000 for these properties but is expected to escalate as new buildings are assessed.  The BET rate reductions also targeted existing rates for minor reductions in the first few years towards the lower universal provincial rate and the final larger reduction originally scheduled for 2014.  The Minister of Finance has proposed changes to effectively delay the 2013 and 2014 BET reductions until such time the provincial budget is balanced.

 

Since municipalities in Ontario retain the BET on PILT properties, this amounted to a compounded reduction in City revenues of approximately $180,000 per year from 2008 to 2012 for a permanent reduction in PILT revenues of $900K over this period.  The impact would have accelerated in 2013 and 2014 for a total reduction of $8.8 million in City Revenues over this period and a drop in the annual revenue projected to be $6.1 million by 2014.  If the delay for any further BET reductions is legislated, this pressure on the City’s PILT revenues could also be delayed over the next 3-5 years.  Irrespective of this delay, the Province has agreed to find a solution to this loss of taxes for municipalities with PILT properties.

 

Property Reassessment Cycle

 

New assessment notices were sent to all property owners in late 2008 and to any new owners in 2009 to 2012 or subject to any assessment changes.  The current value increases between January 1, 2005 and January 1, 2008 were phased in equally over the four taxation years 2009 to 2012.  Any assessment decreases were realized immediately. 

 

The next reassessment cycle will phase in value changes from January 1, 2008 to January 1, 2012 over the 2013 to 2016 taxation cycle.  City staff will report the key findings and impact of these changes in the fall of this year to Council including a communication plan for those property owners affected the most.

 

The assessment appeal system has also been modified.  The Request for Reconsideration is now the first part of the appeal process (large commercial properties will not be required to first file a Request for Reconsideration) with the final stage being the formal appeal to the Assessment Review Board.  The filing deadlines are March 31 of each year or 90 days after the Request for Reconsideration decision from MPAC.

 

Provincial Offences Collections

 

With the introduction of Section 441.1 of the Municipal Act, the Provincial Offences (POA) Collections section has the authority to tax roll amounts outstanding for defaulted fines.  In 2011, Revenue staff implemented the tax rolling process to secure defaulted POA fines on the tax roll.  The process has become seamless whereby the POA Collections Section identifies the delinquent fines held by property owners and then work with the Tax and Water Collections Section to then tax roll the balance owing to the offenders property tax roll.

 

Tax rolling of POA defaulted fines commenced in January 2011 and the Collections Section has tax rolled $355,000 worth of defaulted fines on 99 properties in the past year. Of the $355,000 tax rolled in 2011, $129,000 has been paid in full within that same year.  This provides a 36% collection rate and proves tax rolling to be a very effective collection method.  Tax rolling will continue to be used in 2012 to collect defaulted and unpaid POA fines. City Council and staff continue to ask the Province for additional collection tools.

 

 

RURAL IMPLICATIONS

There are no rural implications associated with this report.

 

 

CONSULTATION

Finance staff has consulted over the last year with Legal Services, The Ministry of Finance, The Ministry of Municipal Affairs & Housing and The Municipal Property Assessment Corporation in preparing this report.

 

 

Comments by the Ward Councillor(s)

There were no comments provided by Ward Councillors.

 

 

LEGAL IMPLICATIONS

Part VIII of the Municipal Act, 2001 provides that Council must deal with various property tax policy issues on an annual basis. These decisions determine tax levies for various tax classes in the relevant taxation year.

 

 

RISK MANAGEMENT IMPLICATIONS

There are no risk management impediments to implementing the recommendation in this report.

 

 

FINANCIAL IMPLICATIONS

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

 

 

ACCESSIBILITY IMPACTS

There are no accessibility impacts of this report.

 

 

 

Environmental Implications

There are no environmental implications of this report.

 

 

Technology Implications

There are no technical implications to implementing the recommendation in this report.

 

 

City Strategic Plan

There are no implications to the City’s Strategic Plan.

 

 

SUPPORTING DOCUMENTATION

Document 1 – Fire Zone 41

Document 2 – Fire Zone 47

Document 3 – Charitable Rebate Policy

Document 4 – Vacancy Rebate Policy

Document 5 – Glossary of Terms

 

 

DISPOSITION

Finance will use the tax ratios and rates to calculate and issue the 2012 final tax bills.

 

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