4. 2010 Tax ratios and other tax policies

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2010

COMMITTEE RECOMMENDATIONS, AS AMENDED

That Council approve:

1. The adoption of the following optional property classes in 2010:

· Shopping centre commercial property class;

· Parking lots and vacant lands commercial property class;

· Office building commercial property class;

· Large industrial property class;

· New multi-residential property class; and

· Professional sports facility class;

2. The adoption of the following tax ratios for 2010:

Tax Class	Ratios **
Residential	1.000000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.540536
Commercial Broad Class	2.042619
- Commercial *	1.942063
- Office Building *	2.346232
- Parking Lots and Vacant Land – Commercial *	1.272478
- Shopping Centre *	1.615414
- Professional Sports Facility *	N/A
Industrial Broad Class	2.496569
- Industrial *	2.651790
- Large Industrial *	2.277207

* 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; and

· 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 2010 be established based on the ratios adopted herein;

5. a) That the 2010 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2009 Current Value Assessment (CVA) taxes;

b) That for 2010 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year;

c) That for 2010, properties which have reached their CVA during 2009 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; and

d) That for 2010, 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 2010 and future taxation years;

7. That the property tax mitigation programs currently in place and detailed in this report be continued for 2010, including the Farm Grant Program and the Low Income Seniors and Disabled Persons Complete Tax Deferral Program; and

8. That By-Law 2007-476 be amended to reflect the move of the Royal Canadian Legion branch to their new location in Barrhaven.

RECOMMANDATIONS MODIFIÉES DU COMITÉ

Que Conseil approuve ce qui suit :

1. L'utilisation en 2010 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; et

· Installations sportives professionnelles;

2. L'adoption des coefficients fiscaux suivants pour 2010:

Catégorie fiscale	Coefficient **
Résidentiel	1.000000
Nouveaux logements multiples	1.000000
Ferme	0.200000
Forêt aménagée	0.250000
Pipeline	1.540536
Catégorie commerciale générale	2.042619
- Commercial *	1.942063
- Immeubles de bureaux *	2.346232
- Terrains de stationnement et terrains commerciaux vacants *	1.272478
- Centre commerciaux *	1.615414
- Installations sportives professionnelles *	N/A
Catégorie industrielle générale	2.496569
- Industriel *	2.651790
- Grand industriel*	2.277207

* 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; et

· 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 2010 soient basés sur les coefficients fiscaux adoptés par les présentes;

5. a) Que les paramètres de plafonnement de 2010 soient établis à 10 % des taxes annualisées de l'année précédente ou à 5 % des taxes d'après l'ÉVA de 2009, le plus élevé de ces deux montants étant retenu;

b) Que les propriétés plafonnées ou auxquelles s'applique un seuil de récupération fiscale en 2010 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 pour 2010, les propriétés qui ont atteint l’ÉVA en 2009 et/ou qui sont passées de la catégorie de la récupération fiscale à celle des propriétés plafonnées en 2010 demeurent taxées d’après leur ÉVA et soient exclues de tout autre rajustement relatif au plafond; et

d) Que pour 2010, 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 2010 et pendant les années d'imposition subséquentes;

7. Que les programmes d'allégement des taxes foncières actuellement en place et décrits dans le présent rapport, y compris le programme de subventions pour terres agricoles et le programme de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées soient maintenus en 2010; et

8. Que le Règlement 2007-476 soit modifié afin de refléter le déménagement de la filiale de la Légion royale canadienne à son nouvel emplacement dans Barrhaven.

Documentation

1. City Treasurer’s report dated 12 April 2010 (ACS2010-CMR-FIN-0025).

2. Extract of Draft Minute, 20 April 2010.

Report to/Rapport au :

Audit Budget and Finance Committee

Comité de vérification, du budget et des finances

and Council / et au Conseil

12 April 2010 / le 12 avril 2010

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

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

Trésorier municipal adjoint, Revenus municipaux

Finance Department/ Service des finances

(613) 580-2424 x 13485, ken.hughes@ottawa.ca

CITY-WIDE / À L’ÉCHELLE DE LA VILLE

Ref N°: ACS2010-CMR-FIN-0025

SUBJECT:	2010 Tax ratios and other tax policies

OBJET :	COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2010

REPORT RECOMMENDATIONS

That the Audit, Budget and Finance Committee recommend Council approve:

1. The adoption of the following optional property classes in 2010:

· Shopping centre commercial property class;

· Parking lots and vacant lands commercial property class;

· Office building commercial property class;

· Large industrial property class;

· New multi-residential property class; and

· Professional sports facility class;

2. The adoption of the following tax ratios for 2010:

Tax Class	Ratios **
Residential	1.000000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.540536
Commercial Broad Class	2.042619
- Commercial *	1.942063
- Office Building *	2.346232
- Parking Lots and Vacant Land – Commercial *	1.272478
- Shopping Centre *	1.615414
- Professional Sports Facility *	N/A
Industrial Broad Class	2.496569
- Industrial *	2.651790
- Large Industrial *	2.277207

* 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; and

4. That the tax rates for 2010 be established based on the ratios adopted herein;

5. a) That the 2010 capping parameters be approved at the higher of 10% of the previous year’s annualized tax or 5% of the 2009 Current Value Assessment (CVA) taxes;

e) That for 2010 capped/clawback properties whose recalculated annualized taxes fall within $250 of their CVA taxation be moved to their CVA tax for the year;

f) That for 2010, properties which have reached their CVA during 2009 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; and

g) That for 2010, properties that cross over from the capped category to the clawed back category remain subject to claw back adjustments;

8. That the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2010 and future taxation years;

9. That the property tax mitigation programs currently in place and detailed in this report be continued for 2010, including the Farm Grant Program and the Low Income Seniors and Disabled Persons Complete Tax Deferral Program;

8. a) A four-year phasing-out of registered Canadian amateur athletic associations from the tax rebate program for eligible charities following the rebates for the 2010 tax year (2010: full 40% rebate; 2011: 30% rebate; 2012: 20% rebate; 2013: 10% rebate; 2014: no rebate);

b) The immediate removal of organizations created by the federal government and deemed to be charities solely for the purposes of the Income Tax Act from the tax rebate program for eligible charities; and

c) That staff be directed to refer late applications (for reasons of extenuating circumstances) for rebates under the tax rebate program for eligible charities to Council; and

9. That By-Law 2007-476 be amended to reflect the move of the Royal Canadian Legion branch to their new location in Barrhaven.

RECOMMANDATIONS DU RAPPORT

Que le Comité de vérification, du budget et des finances recommande au Conseil d'approuver ce qui suit :

1. L'utilisation en 2010 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; et

· Installations sportives professionnelles;

2. L'adoption des coefficients fiscaux suivants pour 2010:

Catégorie fiscale	Coefficient **
Résidentiel	1.000000
Nouveaux logements multiples	1.000000
Ferme	0.200000
Forêt aménagée	0.250000
Pipeline	1.540536
Catégorie commerciale générale	2.042619
- Commercial *	1.942063
- Immeubles de bureaux *	2.346232
- Terrains de stationnement et terrains commerciaux vacants *	1.272478
- Centre commerciaux *	1.615414
- Installations sportives professionnelles *	N/A
Catégorie industrielle générale	2.496569
- Industriel *	2.651790
- Grand industriel*	2.277207

* 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

5. 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; et

6. Que les taux d'imposition pour 2010 soient basés sur les coefficients fiscaux adoptés par les présentes;

6. Que le niveau de taxes sur les propriétés " nouvellement bâties " soit établi au niveau minimal de 100% des taxes d'après l'ÉVA en 2010 et pendant les années d'imposition subséquentes;

8. Que les programmes d'allégement des taxes foncières actuellement en place et décrits dans le présent rapport, y compris le programme de subventions pour terres agricoles et le programme de report d’impôts pour les personnes âgées à faible revenu et pour les personnes handicapées soient maintenus en 2010;

9. a) Que le retrait sur quatre ans aux associations de sport amateur canadiennes du statut de bénéficiaires du programme d’allégements fiscaux consentis organismes de bienfaisance admissibles, après l’année d’imposition 2010 (2010 : allégement total de 40%; 2011 : allégement de 30%; 2010 : allégement de 20%; 2013 : allégement de 10%; 2014 : aucun allégement);

b) que le retrait immédiat du statut de bénéficiaires du programme d’allégements fiscaux consentis au organismes de bienfaisance admissibles dans le cas des organismes constitués par le gouvernement fédéral et considérés comme des organismes de bienfaisance aux seules fins de la Loi de l’impôt sur le revenu; et

c) que le personnel reçoive instruction de soumettre au Conseil les demandes d’allégements présentées tardivement dans le cadre du programme d’allégements fiscaux consentis aux organismes bienfaisance admissibles; et

10. Que le Règlement 2007-476 soit modifié afin de refléter le déménagement de la filiale de la Légion royale canadienne à son nouvel emplacement dans Barrhaven.

EXECUTIVE SUMMARY

The purpose of this report is to present recommendations regarding 2010 property tax policy issues that the Municipal Act requires Council to deal with prior to June 30 of each year. These decisions determine the tax burdens on the various tax classes for the 2010 taxation year.

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

· Shopping Centres

· Office Buildings

· Parking Lots and Vacant Lands

· New Multi-residential

· Large Industrial

· Professional Sports Facility

The use of optional tax classes allows for different levels of taxation within a class. Eliminating any of the optional tax classes would likely shift the tax burden among properties within the broad tax class.

The second policy that must be adopted by Council each year is the determination of tax ratios for various tax classes. Tax ratios are the tools that allow different tax burdens between the different property classes. A re-assessment was conducted by the Municipal Property Assessment Corporation (MPAC) for taxation years 2009 through 2012. Any re-assessment will cause tax shifts among the tax classes unless they are mitigated. As has been done in the past, staff is recommending the adoption of neutral ratios (except for the small change to the multi-residential tax class ratio to keep at 1.700000) for 2010 to eliminate any tax shifts.

Commercial, Industrial and Multi-residential properties are covered by a mandatory capping program. This program limits the tax increases from re-assessment. Council has approved changes to the capping levels in 2005 through to 2009. These changes were accepted by Council in prior years and are being recommended again for 2010. These changes will accelerate the movement of capped properties to their actual taxes (based on Current Value Assessment - CVA).

The report also recommends the continuation of the various tax mitigation programs, including rebates to: charitable organizations, owners of vacant commercial or industrial properties, and the deferral of taxes for low-income seniors and the disabled. After the approval of the 2006 Tax Policy submission, Council approved a tax mitigation program for farmers because of the economic challenges they were facing. The Farm Grant Program (FGP) allowed eligible farmers to defer payment of their final tax bill (normally due in June) to December. While the take-up on this program remains limited (532 of 4,000 farm properties) for 2009, in response to rural concerns, the program is being recommended for 2010.

In April of 2007, City Council directed Corporate 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 March 2010, there were 64 taxpayers on the program. On average, the annual deferral is about $3,100. The amount of taxes deferred for those taxpayers in 2009 will be approximately $198,000. Their total deferral is just under $475,000. The income threshold for the 2010 taxation year will be increased to $37,648 from $36,593. The application deadline for this program remains at February 28 of the relevant tax year.

Council has dealt with 3 property tax specific issues over the last 2 months. A new proposal has been accepted for the Scotiabank Place, staff has been provided direction on the negotiation for a new agreement for the National Arts Centre and a separate report was submitted for Council approval to deal specifically with the Multi-Residential Tax Ratio.

In approving the 2010 tax supported budget, Council approved an increase in property tax revenues of 3.77%.

SOMMAIRE

L’objet de ce rapport est de présenter des recommandations au sujet des politiques d’imposition foncière de 2010 dont la Loi sur les municipalités impose au Conseil municipal de s’occuper avant le 30 juin de chaque année. Ces décisions déterminent le fardeau fiscal des diverses catégories de propriétés pour l’année d’imposition 2010.

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

· Centres commerciaux

· Immeubles de bureaux

· Terrains de stationnement et terrains vacants

· Nouveaux immeubles à logements multiples

· Grand industriel

· Installations sportives professionnelles

L’utilisation des catégories de propriétés optionnelles permet d’établir différents taux d’imposition dans une même catégorie. Si l’on éliminait une catégorie optionnelle, le fardeau fiscal serait réparti entre toutes les propriétés de la catégorie générale.

La deuxième politique qui doit être adoptée par le Conseil chaque année est la détermination du taux d’imposition des diverses catégories de propriétés. Les taux d’imposition sont les outils qui permettent l’établissement de fardeaux fiscaux différents pour les diverses catégories de propriétés. Une réévalution a été effectuée par la Société d’évaluation foncière des municipalités (SEFM) pour les années d’imposition 2009 à 2012. Toute réévalution causera une répartition fiscale entre les catégories de propriété, sauf si les taxes sont atténuées. Comme par le passé, le personnel recommande pour 2010 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) afin d’éliminer toute répartition fiscale.

Les propriétés des catégories Commercial, Industriel et Logements multiples sont protégées par un programme de plafonnement obligatoire. Ce programme limite le montant des augmentations de taxes consécutives à la réévaluation des propriétés. Le Conseil a approuvé des modifications des niveaux de plafonnement pour 2005 à 2009. Ces changements ont été acceptés par le Conseil au cours des années précédentes et on recommande de les reconduire de nouveau en 2010. Ils permettront d’accélérer le mouvement des propriétés plafonnées vers leur niveau d’imposition réel (basé sur l’ÉVA).

Le rapport recommande également le maintien des divers programmes d’allégements fiscaux, y compris ceux dont bénéficient les organisations caritatives, les propriétaires de biens-fonds vacants, commerciaux ou industriels, et les reports pour les personnes âgées à faible revenu et les personnes handicapées. Suite à l’approbation du mémoire sur la politique fiscale de 2006, la Conseil a adopté un programme d’allégements fiscaux pour aider les agriculteurs à relever les défis économiques auxquels ils étaient confrontés. Le Programme de subventions pour terres agricoles (PSTA) permettait aux agriculteurs admissibles de reporter jusqu’en décembre le versement final de leurs taxes foncières, normalement dû en juin. Peu de gens se sont prévalus de ce programme en 2009 (532 propriétaires sur un total de 4 000 fermes) mais, considérant les préoccupations du milieu rural, on recommande de le maintenir en 2010.

En avril 2007, le Conseil a donné instruction à la Direction des Revenus municipaux de mettre en place un deuxième programme de report des impôts fonciers qui permettrait aux personnes âgées et aux personnes handicapées de reporter le montant total de leurs impôts fonciers jusqu’au moment de la vente ou du transfert de leur propriété. À la fin du mois de mars 2010, environ 64 contribuables s’étaient prévalus de ce programme. En 2010, le montant des taxes reportées pour ces contribuables représentera environ 198 000 $. Leur total reporté se situe juste au-dessous de 475 000 $. Le seuil de revenu de l’année d’imposition 2010 sera porté de 36 593 $ à 37 648 $.

Le Conseil a traité trois dossiers précis concernant les taxes foncières au cours des deux derniers mois. Une nouvelle entente a été acceptée dans le cas de la Place Banque Scotia, le personnel a reçu instruction de négocier une nouvelle entente pour le Centre national des Arts et un rapport séparé portant expressément sur le taux d’imposition pour les immeubles multirésidentiels a été soumis pour approbation.

En approuvant le budget 2010 financé par les taxes, le Conseil a approuvé une hausse des recettes tirées des taxes foncières de 3,77 %.

BACKGROUND

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

The property tax system is primarily driven from the assessed values determined by the Municipal Property Assessment Corporation (MPAC) based on provincial legislation. The City uses these individual valuations to determine the taxes for all properties. MPAC conducted a re-assessment in 2008 for the 2009 through 2012 taxation years. Any re-assessment will cause tax shifts between the tax classes unless they are mitigated. The detail around the re-assessment and recommended mitigation measures can be found in the report.

DISCUSSION

1. OPTIONAL PROPERTY TAX CLASSES

To provide maximum flexibility to Council for tax policy decisions, the City of Ottawa has, in previous years, adopted all the optional tax classes. These optional tax classes, if adopted by a municipality, represent subsets within the broad commercial and industrial tax classes and through the use of different tax ratios impose different tax burdens within the broad tax class.

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

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

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

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

iv) Professional Sports Facility – an optional class.

Any changes to these optional property tax classes and their ratios would affect the tax burden on other properties within the broad tax class.

2. TAX RATIOS

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

The goal was to reach ratio parity for all classes with the exception of farmland and managed forest. However, most municipalities and municipal 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 $165 million in additional tax burden to the residential class during a time of significant budgetary pressures on the tax base.

At every reassessment cycle, changes in valuation may trigger potential tax shifts among the tax classes and among the properties within a tax class. In order to provide relief and some stability to annual reassessments, the Province deferred the reassessments scheduled for 2007 and 2008 and adopted a 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 would be phased in equally for the upcoming taxation years 2009 to 2012. While it does not avoid changes in valuation and its associated tax impact, it does spread the increase over the next 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 residential valuation increase over and above the other classes that resulted in a tax shift of $21 million from the other classes to residential, which caused a 6.5% tax increase to the Residential\Farmland classes. In 2004, when this change in tax burden was experienced more broadly at the provincial level, municipalities and various municipal associations pressed the new government for a tool to offset these tax shifts. The Minister then passed a special regulation allowing municipalities to adopt “neutral” ratios to preserve the existing tax levels and thus eliminate any inter-class tax shifts. The City of Ottawa has adopted the neutral ratio option for each of the two previous reassessment cycles of 2004 and 2006 and the first phase-in year of this new cycle in 2009.

In the fall of 2009, staff reported the assessment changes for the first year of reassessment. Table One has been updated to show the valuation changes by class for 2010 and the total change over the next four years. While the City does not benefit from any changes in valuation, annual shifts between classes would occur depending on how they differ from the weighted average increase of approximately 4%.

The tax shifts between classes are estimated for 2010 in Table Two below. Similar effects would occur in each of the following years from 2011 to 2012 unless neutral ratios are adopted in each of these years.

Staff are therefore recommending that neutral ratios be adopted for the taxation year 2010. 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 in 2009

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

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

Options to Adopting Neutral Ratios

Getting the commercial tax ratio to the provincial threshold would remove the restriction that only allows the Commercial class to receive 50% of any budgetary increase. This restriction has been in effect since 2004. The benefit of this restriction is that the commercial class has been able to avoid about $69 million of cumulative tax increases to date, which have had to be borne by all other classes, of which residential is the largest. Not adopting neutral ratios would result in $5.3 million of taxes being shifted off of the residential property class to the commercial property tax class. The commercial class would still be subject to half of this year’s budgetary increase. However, the adoption of neutral ratios does accelerate the movement of the commercial ratio towards the provincial threshold. The ratio is expected to be below the threshold by 2011 at the earliest and ultimately results in the Commercial class paying 100% of any future increases.

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 but there exists an approved and registered subdivision plan on the lands, yet no actual development has taken place. Ontario regulation 383/98 provides direction on the calculation of the tax rate for these types of farmlands while permitting a move of 10% in either direction. In practice, this type of property is held as speculative land and is seldom registered as a subdivision for extended periods of time prior to development.

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

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

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

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

· Farm lands awaiting development subclass II - no tax rate reduction.

4. TAX RATES

Tax rates are determined through calculations, which involve the budgetary tax levy requirement approved in the 2010 budget setting exercise, the total current value assessment by class and the effects of the setting of tax ratios within this report. The resultant tax rates, as calculated by staff, will be submitted to Council at a later date for approval with applicable By-Laws.

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

5. CHANGES TO THE CAPPING REGULATIONS

Subsequent to the change to the current value assessment process in 1998, the Province imposed mandatory limits on assessment-related property tax increases over 1997 taxation levels for commercial, industrial and multi-residential properties. In December 2000, the Continued Protection for Property Taxpayers Act, 2000 was enacted, which legislated that for 2001 and subsequent years, all municipalities are required to limit the assessment-related property tax increases on commercial, industrial and multi-residential properties to 5% of the previous year’s annualized taxes. For 2005 and subsequent years Council can increase this limit to 10%.

This limit is generally referred to as the “tax cap” and is calculated each year based on the previous year’s taxes. The “tax cap” will remain in place until properties reach a property tax bill based on its current value assessment (known as CVA tax). Municipal levy changes (essentially changes to the tax rate as a result of budget decisions) are then applied in addition to the limit.

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

· Farm lands awaiting development;

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

· Certain power generation and transformer facilities.

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

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

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

The capping options for 2010 are summarized as follows:

Capping parameter to be 10% of Annualized tax – The major disadvantage of the capping program and a continuous cycle of re-assessments is that many of the capped properties within the City and the Province of Ontario will never reach their full CVA taxes. In order to rectify this situation, the Ministry has provided flexibility to Council to increase the 5% parameter up to 10%. Council provided notification in the 2005 tax policy submission that this change would be implemented for 2006 and subsequent years. Council has approved this change for each year since 2006 as part of the tax policy submission process. Staff recommends this change for 2010 as well. A decision not to implement this option each year would mean the capping parameter would revert to 5%.

Staff recommends that the capping parameter be 10% of the annualized tax in 2010.

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

Staff recommends that the capping parameter of 5% of the CVA taxes be continued for the 2010 taxation year.

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

Staff recommends that for 2010 (as in 2009) 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 2010, the clawback requirement will decrease (see discussion of new capping option for properties at CVA tax level below). A recovery by-law to approve the final clawback percentages will be submitted for Council approval at a later date.

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

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

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

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

· 5% of the current CVA taxes

· a $250 minimum threshold

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

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

Multi-Residential Class

The chart in Table Four below shows the increase in the capping required at each of the earlier reassessment cycles. The phased in increases for 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 10 properties requiring $90,600 in protection for 2010 and ultimately seven properties with $45,762 by 2012. Properties denied their full tax decrease total 134 or 10% to self-finance the program.

Commercial

The chart in Table Five shows the slow progress towards CVA of the earlier reassessment cycles for the commercial class. The effect of phasing in assessment over a four-year cycle prevents a large increase in capping in 2010 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 303 properties requiring $8.4 Million in protection for 2010 and ultimately 179 properties with $5,066,576 by 2012. Properties denied their full tax decrease to fund this requirement are 1,552 or 16% in 2010 then drops to 1,331 or 14% by the last year.

Industrial

The chart in Table Six shows the impact earlier reassessments have had on the amount of taxes subject to capping, including the 2010 reassessment. Again, the impact of phasing in assessment over a four year period smoothes the impact in 2010 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 212 properties requiring $1.0 Million in protection for 2010 and ultimately 149 properties with $620,683 by 2012. Properties denied their full tax decrease total 86 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 significantly reduce the capping requirement for all classes for 2010 and the next 2 years. This reduced capping requirement will relieve some of the pressures on the clawed back properties by allowing more properties to pay only their CVA tax level. The clawback % has yet to be finalized and varies by year based on the annual requirement and the number of properties left in the program. As such, all numbers are preliminary and will be finalized over the next few weeks as part of the Ontario Property Tax Analysis cut-off procedures.

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

Staff recommends that for 2010 (as in 2009) properties which have reached their CVA during 2009 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.

Staff also recommends that for 2010 (as in 2009) properties 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 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.

2009 – 100% of CVA taxes

2010 – 100% of CVA taxes

Staff recommends that the tax level for “new construction” properties be set at a minimum level of 100% of their CVA taxes for 2010 and future taxation years.

7. TAX MITIGATION PROGRAMS

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

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

· Tax rebate of:

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

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

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

d) 100% of education portion for properties used and occupied by the Royal Canadian Legion and The Polish Combatant’s Association of Canada, further identified in Schedule “A” of By-Law no. 2007-476 as amended

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

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

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

· Farm Tax Grant Program.

After the approval of the 2006 tax policy submission, the Corporate Revenue Branch was asked to provide a training session for the eligible charities on the tax rebate program. The purpose of the training session was to assist the eligible charities in completing their applications to maximize the benefit to the charities. This program returns almost $3 million of taxes to eligible charities. After offering this training and pre-filling the applications for the charities, staff estimate that almost all charities complete the application themselves. This allows the charities to keep the entire rebate. The training sessions will be offered again for the next tax year.

In 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 just under 4,000 farm properties took advantage of the program in 2009. The program costs about $25,000 for printing, mailing and staff time. While the take-up on this program is small, in response to rural concerns, the program is being recommended for 2010.

Staff recommends that Council endorse the property tax mitigation programs currently in place and detailed in this report be continued for 2010, including the Farm Grant Program and the Low Income Seniors and Disabled Persons Complete Tax Deferral Program.

10. CHARITABLE REBATE

The City of Ottawa has a tax rebate program for eligible charities that is required by s. 361 of the Municipal Act, 2001. The Municipal Act requires the City to rebate at least 40% of the property taxes paid for property occupied by an eligible charity. An organization is eligible if it is a registered charity as defined in s. 248 (1) of the Income Tax Act (Canada) that has a registration number issued by the Canada Revenue Agency and the property is in one of the commercial or industrial classes.

As the National Capital, the City of Ottawa is home to the national head office of many charitable organizations. This has resulted in the highest rate of charitable rebate across the province, followed by the City of Toronto. The Ottawa taxpayers are in effect subsidizing charitable organizations over and above any other municipality.

Registered Canadian Amateur Athletic Associations (RCAAAs)

Registered Canadian Amateur Athletic Associations (RCAAAs) have special status under the Income Tax Act as organizations that promote amateur athletics on a nation-wide basis. This status is not available to organizations that promote athletics on a local or regional basis. The RCAAA designation under the Income Tax Act is a separate designation from that of a “registered charity”. While RCAAAs issue charitable tax receipts under Canada’s Income Tax Act, they are not “registered charities” as defined in subsection 248(1) of the Income Tax Act and are therefore not “eligible charities” for the purposes of the charitable rebate program under the Municipal Act.

In 2001, Council accepted a recommendation to continue the policy of the former Regional Municipality of Ottawa-Carleton to extend the 40% property tax rebate to RCAAAs. In 2008, the City rebated $73,340 to 15 of these organizations. The rebate for 2009 to be paid in 2010 will be about the same.

The City provides numerous services and facilities for organizations that promote local athletics; however they are not included in the rebate program for eligible charities. If the local government does not give the rebate to local athletic organizations it is inconsistent to give the rebate to national organizations. Removal of the RCAAAs from the tax rebate program would reduce municipal expenditures by about $40,000 in current dollars in all future tax years.

Staff recommends the phasing out of the RCAAAs from the charitable rebate program over four years following the 2010 tax year. This rebate would be reduced by 25% in each of the years 2011 – 2013. This will allow the organizations time to compensate for the change.

Federally Created and Deemed Charities

Since the creation of the tax rebate program, four organizations created by the Federal Government have applied for and received property tax rebates. They are listed in the table below with the amount of rebate they received for the 2008 tax year.

Organization	2008 Rebate
A national health awareness organization	$12,426
A national arts council	$355,915
A Crown Corporation involved in international development	$652,367
A national accreditation Crown Corporation	$41,365
Total	$1,062,073

Staff recently determined that although these organizations have charitable registration numbers from the Canada Revenue Agency, they are not registered charities as defined by s. 248(1) of the Income Tax Act and are therefore not eligible charities under s. 361 of the Municipal Act. The federal acts that created these organizations deemed them to be charities solely “for the purposes of the Income Tax Act”.

In addition to these four federally deemed charities, the National Arts Centre is another such organization located in Ottawa. However, it has not received rebates under the program because it makes an annual ex-gratia payment pursuant to the agreement that was negotiated between the City and the NAC.

The four federally created organizations have a national or international focus for the work they do and they receive the bulk of their funding from the Federal Government. Given that the Federal Government has created and supports these organizations for the benefit of the nation as a whole, it is not fair that the citizens of Ottawa, through the City, provides further support in the nature of property tax relief. The City’s expenditures will decrease by more than $547,000 per year if rebates to these organizations are eliminated.

Financial services staff recommends the immediate removal of organizations created by the federal government and deemed to be charities for the purposes of the Income Tax Act from the tax rebate program for eligible charities.

Late Applications

According to the Municipal Act, s. 361(3)(7), organizations must apply for charitable and vacancy tax rebates after January 1 of the year and no later than the last day of the February following the tax year. In the past, the City could not accept late applications. This year, the Municipal Act has been amended to allow the City to accept late applications “if, in the opinion of the municipality, extenuating circumstances justify the applicant being unable to make the application by the deadline.” Without a set of unambiguous criteria to use to determine what circumstances are extenuating this determination is not one that should be made by staff.

Financial Services staff recommends that Council make the determination of whether extenuating circumstances justify accepting a late application as part of the legislative process as it is an open and transparent process.

11. ROYAL CANADIAN LEGION

Since 2007 Council has approved the tax exempt status of the Royal Canadian Legion branches. By-Law 2007-476 lists the specific location of all such branches covered by this exemption. Effective May 1, 2010 the RCL branch in Barrhaven will be moving to their new location. An amendment to By-Law 2007-476 is proposed to update the location of the RCL Barrhaven branch.

Financial Services staff recommends that By-Law 2007-476 be amended to reflect the move of the Royal Canadian Legion branch to their new location in Barrhaven.

12. OTHER PROPERTY SPECIFIC POLICIES

Council has dealt with three property specific issues over the past two months. The agreement for the Scotiabank Place was due to expire by 2010 with a tax level reaching $1,600,000. A new agreement has since been approved by Council on February 24. The four year extension of this agreement from 2011 to 2014 will see the taxes payable increase to $2,315,250. As for the National Arts Centre, staff has received direction to negotiate an agreement to provide for a reasonable increase to the current $2,000,000 annual ex gratia payment. Staff has proposed for consideration the annual CPI, annual tax levy increases and any other method that could yield mutual agreement.

Staff has also provided Council on April 14, 2010, a Multi-Residential Tax Ratio report recommending that the existing ratio of 1.700000 be maintained for 2010. This ratio or any changes adopted by Council would be factored into this report and the applicable tax rates.

13. 2010 OTHER TAXATION ISSUES

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 2010 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 $2.2 million or about $10 for an average single-family dwelling. The benefit of this annual shift to the Multi-Residential class is estimated at $198,000.

The Business Education Tax (BET) Rates have also been reset for the commercial and industrial class. Although this will not result in any education tax reductions, the Province did pass in 2007 a graduated decrease towards a provincial rate of 1.60% in 2008, which has been restated to 1.52% for 2009 and 1.43% for 2010. This rate applies immediately to new construction in those classes and will result in savings of $217,000 for these properties but is expected to escalate as new buildings are assessed. The BET rate reductions also targeted existing rates for minor reductions in the first few years towards the lower universal provincial rate and the final large reduction in 2014. These savings are estimated at $492,000 for 2010 for the Commercial properties in Ottawa and $115,000 for Industrial properties.

Since municipalities in Ontario retain the BET on PILT properties, this reduction will reduce City revenues by approximately $168,000 in 2010 eventually increasing to a total loss of $8.8 million in 2014. The Province has agreed to find a solution to this loss of taxes for municipalities with PILT properties.

New assessment notices were sent to all property owners in late 2008 and to any new owners in 2009. Assessment increases are to be phased in over four years. Any assessment decreases were realized immediately.

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

CONSULTATION

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

LEGAL/RISK MANAGEMENT IMPLICATIONS

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

FINANCIAL IMPLICATIONS

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

RURAL IMPLICATIONS

N/A

SUPPORTING DOCUMENTATION

DOCUMENT 1 - Glossary of Terms

DISPOSITION

Finance will use the tax ratios and rates to calculate and issue the 2010 final tax bills.

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

2010 Tax ratios and other tax policies

COEFFICIENTS FISCAUX ET AUTRES POLITIQUES D’IMPOSITION DE 2010

ACS2010-CMR-FIN-0025 city-wide / À l’Échelle de la ville

Ms. Marian Simulik, City Treasurer, introduced Mr. Ken Hughes, Deputy City Treasurer of Revenue and Mr. René Bisson, Manager of Billing & Tax Policy. Mr. Hughes then spoke to a PowerPoint presentation, which served to provide Committee with an overview of the report. A copy of his presentation is held on file with the City Clerk.

Responding to questions from Councillor El-Chantiry with respect to impacts on commercial property taxation, Mr. Hughes explained that under the current levy restriction, the City was not entitled to pass through to the commercial tax classes any more than one half of the levy increase approved by Council through the budget process. He advised that this would change next year. He advised that there was no relationship between this and capping. However, staff had highlighted that the value of the cap was decreasing as was the number of properties that were capped, which was good news for owners of properties that had seen their reductions clawed back, primarily small commercial enterprises, as a result of the caps on other properties.

In response to a follow-up question from the Councillor, Mr. Hughes explained that the larger commercial properties tended to benefit from capping whereas the smaller commercial properties tended to be clawed back in order to make up for the value of the capping. However, if a small business was a tenant in a large shopping centre and the shopping centre was capped, the small business therein would benefit from the cap if it paid the taxes.

Councillor El-Chantiry wondered if there was a way the City could ensure that small commercial enterprises that were tenants of large shopping centres got the benefit of any capping on the shopping centre. Ms. Hughes indicated the leases negotiated between the tenant and landlord had no relationship with the municipality. However, he advised that generally, with a tripe net lease the tenant was required to pay the taxes and therefore would benefit from the cap.

The Councillor posed questions with respect to the tax deferral program and whether it could be changed to allow people to enter even if they were not paid up to date. Mr. Hughes confirmed the program currently required that applicants have their taxes paid up to date. However, he advised that if Council wished to open the program to seniors and disabled persons who were in arrears, it could be changed. He suggested staff could come back to Committee with a report to address this issue, noting that staff still had to ensure there were no losses to the municipality.

Responding to some final questions from Councillor El-Chantiry, Mr. Hughes advised that the Supreme Court of Canada had released a decision in relation to a case that had become known as the City of Montreal case. He explained that two crown corporations in Montreal were not agreeing to pay the municipality at the same rate of tax as other property owners. He indicated the Supreme Court decision had been in the City’s favour and had made it clear that payments under the Payment in Lieu of Taxes Act had to be paid at the prevailing rate in the municipality. Secondly, the ruling had denied the crown corporations’ position with respect to one of the properties on which they were not going to make payments in lieu of taxes. In terms of any benefit to the City of Ottawa, he stated that staff welcomed the decision for a number of reasons. If the decision had gone the other way, a number of crown corporations, including the Federal Government for all its properties, could have interpreted it as giving them the ability to determine the tax rate they wished to pay. That being said, he advised that Public Works and Government Services had never given any indication that they would pay on anything other than the same tax rate as was applicable to other properties. However, he noted there were always a couple of properties where the value determined by the Municipal Property Assessment Corporation (MPAC) was not accepted by Public Works. He explained that when a privately owned property’s assessed value was not accepted by its owner, that owner could appeal to the Assessment Review Board. For payments under the Payment in Lieu of Taxes Act, questions of value could only be appealed to a Board where the members of the panel were appointed by the Minister of Public Works. Therefore, he opined the true value to the City of Ottawa of the Supreme Court ruling was that staff felt it would be helpful in their negotiations with Public Works on those properties where there was a disagreement in value. He recalled that staff had come forward in the past to report on successful negotiations with Public Works, which had brought in an extra $10M in the past couple of years. He noted these were long and complicated negotiations and he hoped the decision would facilitate matters.

In response to a series of questions from Councillor Cullen with respect to the organizations referenced in recommendations 8 b) of the report, Mr. Hughes indicated he would have to check to see how long each of the organizations had been receiving tax rebates, though he acknowledged that it may have been for a number of years. He confirmed that the organizations had not been notified of the current report and its recommendations and advised that staff would check to see whether or not the organizations could be named, under MFIPPA legislation. Mr. R. O’Connor, City Clerk and Solicitor, indicated he did not believe there was a large obstacle in this regard. However, he maintained that he wanted to ensure the City was adhering to provincial and federal legislation, for privacy purposes, prior to identifying the referenced organizations. Mr. Hughes

Councillor Cullen then posed questions with respect to the registered Canadian amateur athletic associations referenced at recommendation 8 a) of the report. He wondered whether the organizations had been notified of the current report and its recommendations. Mr. Hughes indicated they had not been notified but that a letter was ready and waiting to go out to them. He explained that those 15 organizations would receive the full rebate in 2010 and the next Council would have the opportunity to review the decision to phase-out these rebates. Therefore, there was no impact to these organizations in 2010.

The Councillor inquired as to the impact of deferring consideration of recommendations 8 a) and 8 b) in order to allow time to notify the affected organizations. Mr. Hughes indicated this would not be a major obstacle.

Councillor Cullen referenced the tax shift on the commercial side and the proposal for neutral ratios. He noted that if Council did not go with the neutral ratios, the residential sector would pay about $4.5 million dollars less in property taxes but that staff was recommending the neutral ratios, which would result in the residential sector paying $4.8 million more and the commercial sector about $5.2 million less in property taxes. He believed the trade-off related to the full effect of any tax increase for 2010, remarking that the commercial sector would not be paying the full force of this. In order to understand the trade-offs, he wondered if staff had an estimate of what the commercial sector would be paying. Mr. Hughes indicated the value of the 2010 restriction would be an additional $10 million, which would bring it up to $30 some million.

Councillor Cullen surmised the trade off was that the City was asking the residential sector to get it to a point where it would be able to levy the full affect of taxes for all its services, which would eliminate the $10 million shortfall. Mr. Hughes responded affirmatively.

Councillor Holmes was disappointed that the organizations targeted in recommendations 8 a) and 8 b) had not been notified of the current report. She was particularly interested in the Canadian amateur athletic associations. She maintained that, as the national capital, Ottawa had a responsibility to host some of these organizations. She advised that she would be voting against recommendations 8 a) and 8 b).

Responding to a question from the Councillor, Mr. O’Connor confirmed that members of Council would receive a list of the affected organizations prior to the item rising to Council.

Councillor Cullen referenced recommendation 8 c), the proposal for lat applications to be referred to Council to make a determination, for reasons of extenuating circumstances. He wondered why the City would want to open this door, noting that there was a process in place. Further, he wondered if late applications were an issue. Mr. Hughes explained that the recommendation was coming forward as a result of a legislative change introduced as part of the Fair Governance Act. He advised that “extenuating circumstances” was not defined in the legislation and would therefore be up to the municipality to determine. Finally, he confirmed that late applications were received every year and denied because of the current guidelines.

Councillor Cullen was concerned that Council would not have any standards by which to measure “extenuating circumstances”. He proposed referring recommendation 8 c) to staff for them to come back with some policy parameters in terms of the conditions under which Council might consider late applications. He also advised that he would be moving deferral of recommendations 8 a) and 8 b) to allow time for the affected organizations to be notified.

Speaking to the deferral of recommendations 8 a) and 8 b), Vice-Chair Harder asked that staff also bring forward information as to why the former Regional Municipality had gotten into these rebates in the first place and what other municipalities in Canada were doing with respect to similar organizations in their jurisdictions.

Councillor Feltmate noted Ottawa was home to many national organizations, including professional associations. She wondered if these were eligible for tax grants and why recommendation 8 a) was focusing on amateur athletics. Mr. Hughes acknowledged that Ottawa was the national headquarters for a number of professional organizations and he confirmed that a number of them received the charitable rebate. He explained the reason for this was that they absolutely met the qualifications and requirements within the Municipal Act. He advised that the four (4) organizations referenced in recommendation 8 a) and the 15 organizations referenced in recommendation 8 b) did not meet the strict requirements of the Municipal Act.

Responding to follow-up questions from the Councillor, Mr. Hughes explained the difference related to the way the organizations were incorporated and whether they were registered with Revenue Canada to issue charitable receipts. He clarified that the amateur athletic associations were entitled to issue charitable receipts under the Income Tax Act but that they were not registered charities.

Councillor Jellett believed the decisions as to whether or not organizations got the rebate should be based on whether or not they met the criteria, not whether or not Council felt the organization was worthy. However, he indicated he would support the deferral motion because he thought the affected organizations may have a different opinion as to whether or not they met the criteria. Further, he expressed some concern, from an economic development perspective, about the City losing some of these organizations and the jobs that came with them. He expressed a desire to see some analysis done on this issue.

In light of some of the questions being raised and the requests from members of Committee for additional information on different aspects of the question, Vice-Chair Harder wondered if staff would be able to have the matter back before Committee in June. Mr. Hughes confirmed that in order to provide the additional information, staff would need more time.

Councillor Cullen remarked that staff was prepared to recommend eliminating the tax rebates to these organizations as part of the current report. He maintained the intent of his motion was not to put more work on staff but simply to allow time for notification to the affected organizations. He believed staff’s recommendations still stood and that, if none of the organizations came forward following notification, then Committee and Council could move forward on the matter. However, he felt strongly that it would not be appropriate to make a decision that would affect them without first informing them.

Councillor Holmes indicated she was also interested in the athletic associations the City had already lost and whether other cities had secure them by giving them tax breaks and whether the City might lose the current organizations as a result of this recommendation. She asked that this information be provided when the report came back before Committee.

Councillor Harder referenced the deferral and referral motions and stated that in the interim, she would like to see a list provided to members of Council as well as a copy of the letter that would go out to the organizations.

Following these exchanges, Committee voted on the motions.

Moved by Councillor A. Cullen

WHEREAS the staff recommendation 8a) seeks to phase-out registered Canadian amateur athletic associations from the tax rebate program;

WHEREAS these associations have not been informed of this report (2010 Tax Ratios and other Tax Policies) and this recommendation;

THEREFORE BE IT RESOLVED that recommendation 8a be deferred to the June 2010 meeting of Audit, Budget and Finance Committee so that these associations can be informed of this report and the June meeting date when it will be considered.

CARRIED

Moved by Councillor A. Cullen

WHEREAS the staff recommendation 8b) seeks to eliminate four federal organizations from the tax rebate program;

WHEREAS these organizations have not been informed of this report (2010 Tax Ratios and other Tax Policies) and this recommendation;

THEREFORE BE IT RESOLVED that recommendation 8b be deferred to the June 2010 meeting of Audit, Budget and Finance Committee so that these organizations can be informed of this report and the June meeting date when it will be considered.

CARRIED

Moved by Councillor A. Cullen

That recommendation 8c) be referred to staff to report back to Audit, Budget and Finance Committee with recommendations on the policy framework to govern consideration of late applications for rebates under the tax rebate program for eligible charities.

CARRIED

Committee then voted on the item as amended.

That the Audit Budget and Finance Committee recommend Council approve:

1. The adoption of the following optional property classes in 2010:

· Shopping centre commercial property class;

· Parking lots and vacant lands commercial property class;

· Office building commercial property class;

· Large industrial property class;

· New multi-residential property class; and

· Professional sports facility class;

2. The adoption of the following tax ratios for 2010:

Tax Class	Ratios **
Residential	1.000000
New Multi-Residential	1.000000
Farm	0.200000
Managed Forest	0.250000
Pipeline	1.540536
Commercial Broad Class	2.042619
- Commercial *	1.942063
- Office Building *	2.346232
- Parking Lots and Vacant Land – Commercial *	1.272478
- Shopping Centre *	1.615414
- Professional Sports Facility *	N/A
Industrial Broad Class	2.496569
- Industrial *	2.651790
- Large Industrial *	2.277207