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CITY CLERK Clause embodied in Report No. 12 of the Policy and Finance Committee, as adopted by the Council of the City of Toronto at its meeting held on October 2, 3 and 4, 2001. 5 City of Toronto Submission Regarding the Review of Property Tax Classifications (Phase 2 of the Province's Review of the Assessment System) (City Council on October 2, 3 and 4, 2001, amended this Clause by adding thereto the following: “It is further recommended that a copy of the Clause be forwarded to the Association of Municipalities of Ontario (AMO), with a request that AMO support City Council’s position in this regard.”) The Policy and Finance Committee recommends: (1) the adoption of the report (September 11, 2001) from the Acting Chief Administrative Officer and the Acting Financial Officer; and (2) that City Council request the Province of Ontario to amend assessment legislation to require property owners, claiming vacant status for commercial and industrial buildings, to notify the municipality at the beginning of the period to be claimed, to enable the municipality to confirm the vacant status of the property. The Policy and Finance Committee submits the following report (September 11, 2001) from the Acting Chief Administrative Officer and Acting Chief Financial Officer: Purpose: To provide a submission to be presented to Mr. Marcel Beaubien, M.P.P. for Lambton-Kent- Middlesex, to be considered within the context of the second phase of the Province’s review of the assessment system. Financial Implications: None Recommendation: It is recommended that: (1) the submission presented in Appendix C of this report be adopted; and Toronto City Council 2 Policy and Finance Committee October 2, 3 and 4, 2001 Report No. 12, Clause No. 5 (2) this report be submitted to Mr. Beaubien for the provincial government’s second phase review of the assessment system. Background Initial Review of the Assessment System: On December 12, 2000, Finance Minister Ernie Eves announced the appointment of Mr. Marcel Beaubien, M. P. P. for Lambton-Kent-Middlesex, as a special advisor to conduct a review of the Ontario Property Assessment Corporation (OPAC). Mr. Beaubien’s initial review, conducted between December 2000 and March 2001, examined the relationship between OPAC and the Province; the operational structure of OPAC, including the composition of the Board of Directors; and the current regulation that establishes property tax classes in Ontario. At its meeting held on March 6, 7 and 8, 2001, City Council endorsed, as amended, a report (March 5, 2001) from the Chief Financial Officer and Treasurer entitled “City of Toronto Submission Regarding the Provincial Review of the Ontario Property Assessment Corporation (OPAC)” (now known as MPAC – Municipal Property Assessment Corporation). The City’s submission made three important points regarding the general relationship between OPAC, the province and municipalities: (1) the importance of responsive and accountable service on the part of OPAC to its municipal stakeholders must be the single most important aspect of the Province’s review. Even though the Province is undertaking the review, OPAC is fully funded by its municipal members, and was established to meet their needs and the needs of municipal ratepayers. The parts of the review that focus on the Province’s relationship with OPAC and the composition of the Board of Directors should not attempt to diminish OPAC’s primary accountability to its municipal stakeholders, nor the decision-making powers of the municipal representatives on the Board of Directors. Should the Province seek to expand its role or influence within OPAC’s corporate structure, it must be prepared to contribute financially to the corporation’s operation; (2) the Province, in their role of setting policies, must endeavour to ensure that legislation and regulations do not further erode the municipal tax base. As the tax base represents the primary component of municipal revenue, provincial policies must not constrain or arbitrarily reduce revenues that are derived from the assessment of property; and (3) the review must also seek to reaffirm that OPAC continues to meet the needs of municipal ratepayers, and that OPAC’s processes and valuations are fair, equitable and understandable. The City’s submission also provided detailed comments focusing on three main areas: (i) quality of product and service; (ii) accountability; and Toronto City Council 3 Policy and Finance Committee October 2, 3 and 4, 2001 Report No. 12, Clause No. 5 (iii) Ministry of Finance issues. Appendix A, attached, lists the recommendations that were adopted by Council at its meeting of March 6, 7 and 8, 2001 and submitted to Mr. Beaubien in March 2001. On April 2, 2001 Mr. Beaubien reported on his review of the property assessment process in Ontario. A copy of Mr. Beaubien’s final report (April 2, 2001) entitled “Final Report: Review of the Property Assessment Process” (attached as Appendix B) was distributed to Mayor and Members of Councillors, by the Chief Financial Officer and Treasurer, on May 2, 2001. Mr. Beaubien’s final report contains 19 recommendations, some of which address longstanding positions of Toronto Council (identified within the City’s submission), and others that capture Toronto’s concerns more generally. Phase Two Review – Property Tax Classifications: The property tax classification issues that were raised during Mr. Beaubien’s initial review of the assessment system were so extensive that Mr. Beaubien recommended further review and consultation on this issue. On July 18, 2001, Finance Minister Jim Flaherty announced that Mr. Beaubien’s appointment as a special advisor, had been extended to facilitate a further review of the regulation that defines property classes under the assessment system. The issues to be considered during the second phase of Mr. Beaubien’s review include: (i) the number, scope and definition of property classes and sub-classes; (ii) the assessment methodology applied to unique properties such as hotels, farms, and linear properties; and, (iii) the linkages between assessment classifications and related public policy objectives of the Government of Ontario. Mr. Beaubien will be consulting with individual taxpayers, industry organizations, municipal associations, and the Assessment Corporation. He plans to conclude this second review and report back to the Finance Minister in October 2001. Comments: The issues to be reviewed by Mr. Beaubien during this second review of the assessment system in Ontario include: (i) the number, scope and definition of property classes and sub-classes; (ii) the assessment methodology applied to unique properties such as hotels, farms, and linear properties; and, (iii) the linkages between assessment classifications and related public policy objectives of the Government of Ontario. Toronto City Council 4 Policy and Finance Committee October 2, 3 and 4, 2001 Report No. 12, Clause No. 5 As the largest municipality in Ontario, it is appropriate that the City of Toronto provide input to this second review. Appendix C, attached, provides a proposed submission to Mr. Beaubien with respect to property tax classifications and public policy objectives. Many of the issues identified in Appendix C were presented to Mr. Beaubien as part of the City’s first submission in March 2001. Of the 21 recommendations submitted by the City to Mr. Beaubien in March 2001, five pertained to the issue of property tax classifications and one pertained to the issue of assessment policy. In May 2001, as part of the 2001 Ontario Budget, the Province announced its intentions to address two of the six recommendations submitted by the City with respect to property tax classification - specifically property tax relief for heritage property owners, and the extension from 8 to 35 years for the period during which newly constructed multi-residential buildings may be taxed at a lower rate. The regulations required to implement these two announced changes have yet to be filed by the Province, however City of Toronto staff are currently consulting with provincial staff on the development of eligibility criteria for a heritage property class/sub-class. The City’s second submission provides comment and input with respect to the following seven topics: (1) Linkages between Assessment Classifications and related Public Policy; (2) Telecommunication Infrastructure within Railway Rights-of-Way; (3) Public Hospitals, Universities and Colleges and Corrections Institutions; (4) Commercial Establishments Operating in Hospitals; (5) Parking Lots – Commuter, Municipal, Private and Railway Lands; (6) Ability to Combine Tax Classes; and (7) Optional Sub-Classes or New Tax Classes. Given that the Province has recently announced plans to introduce a separate property tax class or sub-class for heritage properties, and to extend the period during which newly constructed multi-residential buildings may be taxed at a lower tax rate from 8 years to 35 years, the City’s second submission to Mr. Beaubien does not include these issues. The following is a summary of the key recommendations contained in the City’s second submission (attached as Appendix C): Recommendation No. 1: The Province must have regard to the revenue implications for municipalities of changes in provincial assessment and taxation policy, and undertake not only to repeal certain constraints Toronto City Council 5 Policy and Finance Committee October 2, 3 and 4, 2001 Report No. 12, Clause No. 5 but further, to not introduce new measures that erode the municipal tax base or constrain tax revenues. Recommendation No. 2: The Province amend the method of assessment of railway rights-of-way to exclude any and all portion of these lands that are utilized for telecommunications infrastructure to a width of one metre on either side of the cable installation, and to provide that lands so excluded be taxed at the commercial or industrial rate to reflect their business use. Recommendation No. 3: The Province be requested to increase the “heads and beds” tax rate on health, post secondary and correctional institutions so that, at the very least, increases in inflation are reflected.

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