FAIR MUNICIPAL FINANCE ACT, 1997 / LOI DE 1997 SUR LE FINANCEMENT ÉQUITABLE DES MUNICIPALITÉS
THUNDER BAY CHAMBER OF COMMERCE
BRUNO'S CONTRACTING (THUNDER BAY) LTD
NORTHWESTERN ONTARIO SMALL BUSINESS ASSOCIATION
DOWNTOWN HEART OF THE HARBOUR BUSINESS INPROVEMENT AREA
ONTARIO HOTEL AND MOTEL ASSOCIATION
CONTENTS
Monday 14 April 1997
Fair Municipal Finance Act, 1997, Bill 106, Mr Eves / Loi de 1997 sur le financement équitable des municipalités, Projet de loi 106, M. Eves
Thunder Bay Chamber of Commerce
Ms Rebecca Johnson
Mr Doug Smith
Mr Peter Zandstra
Bruno's Contracting (Thunder Bay) Ltd
Mr John Simperl
Northwestern Ontario Small Business Association
Mr Douglas Guinn
Mr Mark Lawrence
Mr Jim Doherty
Downtown Heart of the Harbour business inprovement area
Mr Mario Simonaitis
Ontario Hotel and Motel Association
Mr Michael Meady
Mr Porter Bailey
Mr Grant Nuttall
Valhalla Inn, Thunder Bay
Mr Edward Meijer
Mr Paul Anthony Pepe
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Mr TedChudleigh (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Mr TimHudak (Niagara South / -Sud PC)
Ms IsabelBassett (St Andrew-St Patrick PC)
Mr JimBrown (Scarborough West / -Ouest PC)
Mr TedChudleigh (Halton North / -Nord PC)
Mr JosephCordiano (Lawrence L)
Mr Douglas B. Ford (Etobicoke-Humber PC)
Mr TimHudak (Niagara South / -Sud PC)
Mr MonteKwinter (Wilson Heights L)
Mr TonyMartin (Sault Ste Marie ND)
Mr GerryMartiniuk (Cambridge PC)
Mr GerryPhillips (Scarborough-Agincourt L)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr E.J. DouglasRollins (Quinte PC)
Mr JosephSpina (Brampton North / -Nord PC)
Mr WayneWettlaufer (Kitchener PC)
Substitutions/ Membres remplaçants:
Mr MichaelGravelle (Port Arthur L)
Clerk / Greffier: Mr Franco Carrozza
Staff / Personnel: Ms Alison Drummond, research officer, Legislative Research Service
The committee met at 0859 in the Valhalla Inn, Thunder Bay.
FAIR MUNICIPAL FINANCE ACT, 1997 / LOI DE 1997 SUR LE FINANCEMENT ÉQUITABLE DES MUNICIPALITÉS
Consideration of Bill 106, An Act respecting the financing of local government / Projet de loi 106, Loi concernant le financement des administrations locales.
The Chair (Mr Ted Chudleigh): Welcome to Thunder Bay. I thank the committee and deputants for their promptness this morning.
THUNDER BAY CHAMBER OF COMMERCE
The Chair: We welcome the Thunder Bay Chamber of Commerce, Rebecca Johnson, president. We have 20 minutes to spend together, Ms Johnson. If you would introduce your associate for the purposes of Hansard, we'll begin with your presentation and fill any remaining time with questions.
Ms Rebecca Johnson: Thank you, Mr Chair. I'll defer to the chair of the board, Doug Smith.
Mr Doug Smith: Good morning, ladies and gentlemen. My name, as Rebecca said, is Doug Smith, chairman of the board of directors for the Thunder Bay Chamber of Commerce. With me this morning is our president, Rebecca Johnson. We welcome the members here to Thunder Bay, an area that we consider very special and, as the centre of northwestern Ontario, we're very excited about our future. I might just start by saying it's a pleasure to see government back at work.
We are pleased to have the opportunity to address the standing committee on Bill 106 this morning, dealing with the Fair Municipal Finance Act under finance and economic affairs. Our chamber of commerce, for your information, represents some 950 member organizations in our community of Thunder Bay, a population of about 120,000, and over 1,300 voting representatives.
The general focus of our chamber of commerce during the past couple of years has been, and continues to be through 1997, a focus on municipal issues. The Fair Municipal Finance Act is one of those issues which is of great importance to our membership and to our business in general within the region of northwestern Ontario. We realize the impact on all facets of our province through the passage of this bill but specifically the impact on our business communities.
Bill 106 is long overdue from the business perspective. Methods on the way businesses are assessed are outdated. The province does need to create a fair property tax system for everyone in Ontario. You are aware that many property assessments have not been updated in several years, with businesses paying, in many cases, more property taxes than they can afford in order to stay competitive in a changing environment.
We have noted on several occasions that the Thunder Bay Chamber of Commerce applauds the government of the day for looking at ways to eliminate duplication, overregulation and blurred responsibilities between the provincial and municipal governments. With this in mind, we are pleased that the Who Does What panel recommended the province have an updated property tax system that is fair, effective and stable.
The Thunder Bay Chamber of Commerce supports the elimination of the business occupancy tax, the BOT, as it is considered by the business community to be unfair, outdated and discriminatory. It does not reflect the realities of Ontario's current economy. The elimination of the BOT should assist to correct the current inequities of taxes between municipalities. Indeed, the Thunder Bay Chamber of Commerce is aware of local and regional businesses that have chosen to take their enterprises to other jurisdictions because of the outdated tax system that we operate in today.
As identified in the Ontario Chamber of Commerce submission to your hearings, we agree that the introduction of a common assessment base across the province will restore fairness to property taxation. Annual property reassessments will keep the system current and the legislative provision for a three-year rolling average will help smooth out potential fluctuations in property assessment values. It is also important to note that the new legislation will give municipal governments tools to manage the tax changes for businesses as they deem necessary. This will be a challenge for our municipal leaders as it would then be up to them to determine the tax ratio for each property class. It is imperative that the province establish guidelines for our municipalities to work within.
The government, with the many changes proposed with the transfer of responsibilities, indicated that there would not be a tax increase. This must not happen with the changes proposed. The Thunder Bay Chamber of Commerce will continue to monitor our municipal tax plans with an eye to no tax increases.
With the chamber of commerce membership comprised of small businesses, which is approximately 75% of our membership, it is important to note that these businesses should be paying the same amount of tax if their properties have the same value. With the proposed legislation of annual assessment updates, businesses can then plan properly for the future.
Chambers of commerce have recognized for several years that business confidence must be improved in our province. Our provincial government must continue its efforts to create a more competitive environment for businesses in the global economy. This will allow businesses planning to enter the Ontario marketplace to be better informed as to the arena of fair taxation and the taxation they'll be considering.
The Thunder Bay Chamber of Commerce supports the introduction of a simplified appeal process dealing with disputes over property assessments or classifications. The Ontario Chamber of Commerce addresses the issue of the goal for this process, which is dispute resolution and a reduction in the backlog of cases. They also note their concern that this factor might not address the issue of revenue shortfalls. We have been fortunate here in Thunder Bay, where our municipal government has recognized the business sector's request for a no-tax increase. They are to be complimented for adhering to this no-tax increase through an increase in user fees or by other methods like examining their administration costs. Other municipalities have been forced, we understand, to increase their tax rates to help pay for local services. It is not fair that businesses pay more taxes because unnecessary appeals are generated by an outdated assessment system and thus make the economy less efficient.
Property tax inequities must also be eliminated. A streamlined assessment appeals process, combined with the stabilization of the assessment tax base, are two of the keys to returning fairness to our system of property taxation.
Under the fair assessment system, the concept of a value added assessment system where every property will be assessed based on current values is supported by the Thunder Bay Chamber of Commerce. Businesses require a fair, understandable and open tax structure. We also support having municipalities reduce unfair differences in tax rates in a manageable way but not being able to increase existing differentials in current tax burdens between property classes. An overall tax reduction would help to stimulate new investment in our province.
The Thunder Bay Chamber of Commerce supports the direction taken by the Ontario Chamber of Commerce in the use of variable mill rates as an acceptable means of implementing many of the changes proposed in Bill 106. Municipal governments will have more options when deciding what tax rates to apply to each property class, making it easier for them to make consistent improvements in steps that are acceptable to local taxpayers.
Smaller businesses such as neighbourhood shopping malls and small retail stores should benefit from the plan, allowing municipalities to set lower tax rates on lower-valued commercial properties. Municipalities, with proactive management, will be able to provide a more supportive tax climate for all businesses. In fact, municipalities can give tax reductions solely to business classes if that choice best suits their local needs.
Here in Thunder Bay, these new plans will provide an opportunity for the city of Thunder Bay to address the current situation in the two downtown core areas by providing tax incentives to new businesses for a period of time. Bill 106 provides for creative solutions to current challenges facing the business community.
Although not a top priority issue, it is recognized that Bill 106 is planning to use language more understood by the common citizen. We note that the act proposes to use the term "tax rate" rather than "mill rate" in expressing a percentage of the assessed value of property. This is commendable.
Farm lands and eligible managed forests will now be valued in a similar manner to each other as a class of property. We understand that eligible conservation lands will be exempted from property taxation. We are pleased to see both of these occurring. The north recognizes the value of these properties as an enhancement of our ecotourism opportunities.
Railway or utility rights of way are currently assessed based on the value of abutting land, which has created considerable tax inequities. Our Ontario Chamber of Commerce has requested the government to review the manner in which railway rights of way are treated for the purposes of property tax assessment. Rail is a vital mode of transportation here in the north. Government must ensure that they are dealt with fairly when being assessed, in a manner that is consistent with other modes of transport.
We note that you have included the Canadian airport authorities in Bill 106. It is also important for these authorities to know what they can expect for tax treatment as they continue to evolve into non-profit organizations.
As we have previously stated in our presentation this morning, the municipal finances have been in need of updating for several years. We are hopeful that the proposed legislation under Bill 106 will eliminate the inequities in the amount of property taxes paid by the business sector. Property tax is the single largest tax for which businesses are responsible and should be an incentive for doing business in Ontario and in northwestern Ontario and not a disincentive.
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Small businesses such as those represented by the Thunder Bay Chamber of Commerce must have an environment where they can create jobs and compete effectively in the global marketplace.
The Thunder Bay Chamber of Commerce once again extends its thanks to the members of the standing committee for coming to Thunder Bay. We support the direction being taken by Bill 106, and we leave you with our comments as you move towards improving the property tax laws in our province.
The Chair: That leaves us about three minutes per caucus for questions, and we'll begin with the official opposition.
Mrs Lyn McLeod (Fort William): I know if Gerry Phillips, our finance critic, were here, as he will be very shortly, he would want to begin by saying that we agree with you in terms of the inequities in the current tax assessment system having to be corrected. It's with that same approach that we are looking at this legislation. I particularly appreciate your making mention of some of the unique concerns of northern Ontario and the way in which the tax changes will affect northern Ontario, in some cases in a beneficial way. In some cases you raise concerns like the rail lands and the airport authority that are obviously going to be concerns for us.
One of the issues that we have a real concern with, though, is one that you've actually touched on and see as a positive, and that's the business occupancy tax. I'd like to just explore that with you for a minute. It's not so much the withdrawal of the business occupancy tax that we might object to but the fact that the province, in withdrawing it, is withdrawing municipal revenue, and the expectation is that the municipality is then going to have to raise that revenue in other ways. It's an area that the CFIB has raised some very real concerns with, as has Gerry Phillips.
The analysis of it seems to suggest that if the revenue is regained through the realty tax, the very large businesses would indeed see a net reduction in their taxation, because they were paying a lot at the high end of the business occupancy tax, but the small businesses could end up with an increase in actual taxation because they were being taxed differentially under the business occupancy tax. I know you, as a chamber, and we in this community have a particular focus on the survival of our small businesses. I'm just wondering whether or not you've had a chance to look at that in terms of who the beneficiaries might be, whether we have large businesses that might be beneficiaries from this and whether there are small businesses that could be hurt.
Mr Smith: We're still waiting to determine that, but we share your concerns very much, especially in terms of small business. As we tried to mention, when all the changes come down, to increase taxes to any of the sectors is detrimental in terms of what should occur for the future so that we remain competitive, especially small business. There's no question that small businesses are at the brink in terms of what they're paying for taxation. So whenever the plan shuffles out, it's very important that the net result not be an increase in taxation. We're very concerned about that and very interested in the figures, to compile and analyse them and lobby so that doesn't occur.
Mrs McLeod: I agree with you. I think it's a little unknown when you come into a community like this. In downtown Toronto where they have the bank towers, the bank towers are certainly going to be beneficiaries. We don't have a bank tower, so it's a little hard to extend the comparison, to know exactly who would benefit and who would potentially be hurt by that kind of differential.
Mr Gilles Pouliot (Lake Nipigon): Welcome, Rebecca and Mr Smith. There will be winners and losers. I take it that your membership is made up mostly of medium-sized and small businesses, am I right?
Mr Smith: Correct; 75% is small business.
Mr Pouliot: I also note, with respect, that you are philosophically in favour of what the government intends to propose.
Mr Smith: Yes. We understand that things have to be changed so that the business community is more competitive.
Mr Pouliot: I also understand that you would be opposed to any increase in taxes for your community.
Mr Smith: Businesses, especially small businesses, are at the brink right now with what they are paying for taxation.
Mr Pouliot: I'm sure, Mr Smith, that you have factored in not only what is being said under Bill 106 but the shift in responsibilities. Some will call it downloading; some will call it an exchange of services, if you wish. In the future, it seems the business community will still be responsible for the education portion. The residential levy will benefit from an exchange -- well, benefit or not, but will be subjected to an exchange. They will forgo their responsibilities vis-à-vis education, but they will pick up the slack for responsibilities.
This exercise is not revenue-neutral. The government needs the cash. The winners will be the large corporations because of the business-occupancy-tax philosophy, the approach to it. Someone will have to pick up the slack. The local politicians will have to decide whether they pass it on to the residential levy, to the homeowners, and/or to the small business community.
When you factor everything in, it might well be that you will not see a decrease in commercial taxes but quite the opposite indeed, an increase. Would that change your mind in terms of supporting Bill 106, if you were to be subjected to an increase?
Mr Smith: With Bill 106, as you have indicated, the municipalities become more of a player in terms of setting their policies. I think we here in northwestern Ontario have confidence in our municipal government, as long as they have a fair and flexible guideline to work with, that we can work with them to deal with those possible inequities and be able to meet the needs of our communities both from a small business perspective and a big business perspective.
Ms Isabel Bassett (St Andrew-St Patrick): Thanks for your supportive remarks about Bill 106; they're very instructive too. I just want to make sure that we emphasize or re-emphasize what you said in your presentation, that eliminating the business occupancy tax is not going to be harmful to small businesses. You place enormous confidence in the municipalities' desire to create a good business climate. Perhaps you'd just re-emphasize, given the fact that we are allowing them to create a two-tier tax system, that they are going to be doing what is best for business and that the small business operator will not be harmed.
Mr Smith: I would agree with that, again, as long as they have a good, fair playing field they can operate from, with good guidelines and flexibilities. I believe, especially up here in northwestern Ontario, we are quite capable of setting our direction and implementing that direction given proper guidelines. I think it's a positive opportunity for us to look at all sides, knowing exactly what we're dealing with, and then come up with what's fair.
Mr Joseph Spina (Brampton North): Doug, we're back; good to see you again. Thanks for the report, by the way. You covered many issues. In particular, you addressed a couple that are not often addressed by other associations, and that is the railway and utility rights of way and the airports. You're asking that the government review this whole situation of tax inequity for railroad properties and abutting properties, and I want to assure you that we are in the process of doing that, and it will probably be an adjustment in some later bill as a follow-up to Bill 106.
It is an issue that's being seriously considered, because we do realize the importance of rail transit, rail transport, particularly for the north here and also certain sections in southern Ontario as well. But we know it's an important element, so I just want to assure you that it is in the process of being reviewed. If you have any recommendations or input you would like to proffer, we would certainly welcome it. Any ideas you would have that we should keep in mind as part of this review, we would certainly welcome that input. Thanks for coming.
The Chair: Thank you, Mr Smith and Ms Johnson, for taking the time and presenting to the committee today. We certainly appreciate your input. Thank you very much.
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PETER ZANDSTRA
The Chair: We now welcome Peter Zandstra. Welcome to the standing committee on finance and economic affairs. We have 20 minutes to spend together. If you would like to make a presentation, we'll fill any remaining time with questions.
Mr Peter Zandstra: Thank you, Mr Chairman, committee members. First of all, I think I should apologize for not having my presentation typed out and distributed, but time was of short supply, so I'll read it and maybe later on I can pass it around.
I thank you, first of all, for giving me the opportunity to comment on Bill 106, dealing with the financing of local government. My name is Peter Zandstra. I am a retired dairy farmer. I do not represent an organization or a group, but I am speaking as a citizen interested in municipal structure and financing.
The municipal and education tax system has always been somewhat of a mystery to me. When still farming, I observed sometimes big differences in the amount of taxes paid by similar farms located in different townships.
Many farmers have little or no control over the prices they receive for their product and are sometimes unable to recoup these costs. To alleviate the burden, farm tax rebates have been provided by the Ministry of Agriculture and Food on a year-to-year basis. Like all subsidies and rebates, there is little or no incentive to keep costs down by fighting for a lower mill rate or a lower assessment. I believe Bill 106 to be a very attractive alternative to these rebates.
Farmers do use municipal services and should pay their fair share. The proposed 25% of the residential rate on land and production facilities seems very reasonable. The inclusion of managed forests in the above rate is an excellent idea. This may enhance the conversion of idle land into forestry use and provide low-cost access for timber users. The total elimination of tax on conservation land, mainly swamp and bog, will be of immense benefit to the wildlife and the waterfowl populations.
The new assessment system based on current value is long overdue. For many years some residents have been getting a free ride by paying only a fraction of their share needed to cover municipal expenses. I remember a report in our local newspaper about a resident of an unorganized township annexed by Geraldton. The person's tax bill was less than $50 per year before amalgamation, $550 thereafter. Naturally, the person so affected will scream at the rise of 1,000% in the tax bill. But who subsidized this taxpayer for all those years?
This scene will repeat itself many times in the greater Toronto area, where many buildings are taxed on their value in the 1940s. Bill 106 or its equivalent should have been introduced and passed long ago, but previous governments were apparently not disposed to tackle the problem. Therefore, inequities persist up to now. The changes could cause hardship to people on fixed incomes, but a provision of deferral would alleviate or eliminate that concern.
The removal of mill rate and its replacement by tax rate is another good feature of Bill 106. It will make our tax bill much easier to understand. It will take time for our municipalities to adjust to some of these radical changes. I would like to propose that all needed support be generously extended by our provincial government. Seminars should be held to instruct and familiarize our elected municipal representatives and their officials.
To sum up, Bill 106 is an excellent piece of legislation. Long overdue, it should be passed without delay. Thank you.
The Chair: Thank you very much. We appreciate your presentation. That leaves us about four minutes per caucus for questions. Could we start with the NDP?
Mr Pouliot: Thank you, Mr Zandstra, and good morning. I'm fully appreciative of Mr Zandstra, the citizen, this morning, who commends the government on what you foresee as a good piece of legislation which is long overdue. While we too wish to focus on the positive and to commend the government for good pieces of legislation, our task asks us to go beyond the headlines and to start digging. We find out that what you gain on the farm, the few dollars that you can reinvest, you lose on the property, because this is not even a tradeoff. The city of Thunder Bay has indicated that it will lose anywhere from $15 million to $30 million -- aside from the closing of the hospital; I don't want to talk about this, Mr Zandstra. The money will have to come from someplace. That's the other shoe that's about to fall.
I too would wish to expedite this legislation. It's not my role to delay anything. We all work together. However, before I would do this as a representative, I would want to see the bigger picture, and that bigger picture is not a pretty picture. The sky is very low. There are no stars. It's very dark out there. Maybe that's the true agenda.
I would wish, with respect -- while I conclude and thank you for your excellent presentation and your faith in the future -- that the good side, the other side, comes through, but I fear that when all is said and done many of us will wake up one day with a very unpleasant surprise, because this benefits the big corporations, those who have power, those who are rich, at the expense of those who don't have as much power, who aren't as rich. So I caution you, but I thank you for your presentation.
The Chair: Would you have any comment to that, Mr Zandstra, or should we move on to the next question?
Mr Zandstra: I would comment on it in so far as, and I think I mentioned it in my presentation, if there is a rebate and a grant, it's taken for granted. If it comes out of your pocket, you're going to fight it. That's one of the reasons I believe our education taxes are so high, because if there is an increase and if you kick, the first thing you're being told: "Are you against our children? Our kids are going to suffer." So reluctantly you pay. But in municipal taxes it's different. You know your councillors, you know the people, and if they are raising your taxes, you tell them: "Cut that. You have to be re-elected. Make sure you are careful with our money." I think that is the difference. That's why I think it's better this way.
Mr E.J. Douglas Rollins (Quinte): Thanks for your presentation. I think there are a lot of farmers who feel quite a lot the same way as you, that the rebate you had to apply for could have been used in putting crops in in the spring rather than sending that cheque off and waiting until later on in the year, or tying up those dollars in that rebate that was coming but it wasn't left in the bank for you to be able to use and reinvest in seed and fertilizer and everything else that you have to do in the spring to make sure that you continue that extra crop and farming.
Do you see that the 25% will keep our coverage of our costs as far as the rest of the municipal tax is concerned?
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Mr Zandstra: I haven't actually thought this through because I was a little pressed for time and I have not consulted with other farmers and farm organizations, so I could not actually answer this question at this time.
Mr Rollins: One of the things we have put in the bill is that there is some money set aside for areas, maybe not so much up here but in some other municipalities, where a large portion of the municipality is under farming, so it will lighten their impact as far as the municipality is concerned to collect taxes.
Thanks again for making the presentation.
Mr Douglas B. Ford (Etobicoke-Humber): Mr Zandstra, I understand, the way you're talking there, your deep concerns about the inequities, because you mentioned assessments in the 1940s. We're very well aware of them. It's like a dog's hind leg, this tax system, and you know what a dog's hind leg looks like: There are all kinds of twists and turns in it.
What this government is trying to do is balance the inequities across the province, and we're on a positive course on that. Yes, we are getting lots of criticism, but my astrologer friend there who was gazing at the stars and different things like that -- no, we're gazing at fact and this is what we're trying to do: give equity across the board for people like yourselves all over the province, not just in one central core. This is what we're trying to do.
Mr Gerry Phillips (Scarborough-Agincourt): I appreciate the presentation. The challenge on the farm issue is this: The province used to fund the farm tax rebate, as you know; $165 million, $170 million out of the provincial revenue went for that. They are now transferring that to the municipalities and saying, "You pick up the $165 million or $170 million. We're wiping our hands of it," like that.
Here's the problem we run into, and I'd like your advice: AMO, the Association of Municipalities of Ontario, have blown the whistle and said: "Listen, this might be good policy but you're dumping it all on the property taxpayer. It is dumping provincial farm policy right on to the property taxpayer. You're wiping your hands of it and dumping it on to the hard-pressed, hardworking, taxpaying property taxpayers."
As a matter of fact, the Ontario Federation of Agriculture was in last week to present to us and raised this concern. They said they need some ironclad guarantees that the province isn't simply dumping on to the property taxpayers. So far we can't get that guarantee out of the government. What advice do you have for us in terms of making sure that this isn't simply a cost dumped on to, as I say, the hard-pressed property taxpayers?
Mr Zandstra: You see, the education tax has been removed from the system. I know there are other taxes like subsidized housing and welfare costs being added to the municipalities instead. But I believe, like I mentioned before, that at the local level we are much more able to control costs than when it just comes as a grant or a rebate. It's human nature: "The government pays for it anyway." You're not going to fight for the last dollar. If it comes out of your own pocket, you're going to fight. I know; I was a farmer and you're not parting with hard-earned money just like that. That's why I think we should give it a chance, see how it works out. I believe it's going to work out all right.
Mr Phillips: Do you think we should build a guarantee in, that the province -- they've dumped about $1 billion on to property taxes -- isn't going to dump another --
Mr Zandstra: I believe there is a slush fund for these emergencies.
Mr Phillips: No, that includes it. The association of municipalities has taken all that into account and it says they're dumping another $175 million on us.
Mr Zandstra: Of course, that's their perception.
Mr Phillips: I sort of trust them a bit.
Mr Zandstra: I believe that the general population will tell them where to cut the costs and where they can save. Maybe not all of it, but that is my way of looking at things.
Mr Phillips: Your advice to us is not to worry about the dumping of another $175 million on the property tax?
Mr Zandstra: I would not worry about it until the time comes.
Mr Phillips: Might it be too late then?
Mr Zandstra: I don't think so. We can change anything. Rebates can always be reinstated either at the farm or the municipal level if things go wrong but, like I said, I believe the common people have more control over expenses when it comes out of their pockets direct than when it comes from the government.
Mr Phillips: The Canadian Federation of Independent Business, a very well-regarded organization dealing with small business, has said overall property taxes on business will go up, small firms will be harder hit by the changes. In other words, the bill hits small business. That worries us, anyway, in the Liberal caucus. Does it concern you at all that small business is going to be hit disproportionately on this bill?
Mr Zandstra: I believe there is quite a bit of conjecture in this, what could happen. It may not happen. We should give it a chance and see how it develops. If there is hardship in any way, I believe the government is there to step in if it doesn't work out. Like I said, let's give it a chance and let the common people try to keep these costs under control so taxes will not increase.
Mr Phillips: You think we should ignore the Canadian Federation of Independent Business's concerns then?
Mr Zandstra: I couldn't answer that question, actually, because I have not studied this thing this far.
Mr Phillips: Well, we have.
The Chair: Thank you very much, Mr Zandstra, for coming in and taking the time to present to the committee. We appreciate it very much.
BRUNO'S CONTRACTING (THUNDER BAY) LTD
The Chair: We now welcome Bruno's Contracting Ltd, Mr Simperl. Welcome to the committee, sir. We have 20 minutes to spend together. If you'd like to make a presentation, we can fill any remaining time with questions.
Mr John Simperl: Thank you very much. Good morning, ladies and gentlemen. I would like to take the time to thank you for providing us the opportunity to come before you and speak on the proposed Bill 106 amendments. I won't take up very much time here this morning. There are just a few items I'd like to talk about.
First, I'd like to commend the government for taking the initiative to review the outdated and inconsistent property tax and assessment act. We've been for too long saddled with a very unfair and inequitable property tax valuation system and are looking forward to the proposed fair market value. It was very evident that the assessment valuation did not in any way represent a current market valuation, which makes it hard for the taxpayers to understand the assessments when they don't reflect the current value of their property. This also makes it hard to compete with similar businesses when taxed differently.
It's our understanding that the proposed changes will now reflect current market rates, presumably what a property was purchased for, which will be easier for taxpayers to understand. When they get their tax bill and they've just paid $100,000 for the property, that's what they're going to get taxed on, not $150,000 or some outdated valuation.
Second, the elimination of the business occupancy tax is seen as a plus, as most businesses really don't understand and didn't understand what the tax is for and why it's in place. This will be a significant plus for most small businesses, as they will no longer carry this additional operating burden.
Third, it was very difficult for some people to understand why they only had 21 days to appeal an assessment notice, when they actually didn't receive their tax bill until some time later. We believe by extending the deadline to March 31 annually, the appeal process by most citizens will be a much fairer position. They'll actually be able to see their assessment, see what tax amount they'll pay and then make a decision on appeals or what they're looking at. So they should be able to make a much better informed decision.
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Additionally, this simplified process will permit a significant number of complaints to be resolved through discussions between the ratepayer and the assessor. If, during the discussion, an agreement cannot be reached, the taxpayer still has the opportunity to make a formal appeal. We feel this process will significantly improve the relationship between the two. We, however, believe that the number of these appeals will decrease dramatically, as the process is far more equitable and clearer now. The assessor will have some more defined information to make a judgement upon and the decision as to what the property will be valued at will be quite clear if the gentleman has an appraisal or a current market valuation to make an assumption.
Additionally, this new simplified assessment appeal process should permit a much more cost-effective system, mainly because a lot of the appeals should be able to be resolved directly between the assessor and the ratepayer.
In closing -- that's about all I have to say -- we believe the proposed amendments will provide a much fairer and more equitable tax assessment. I thank you for giving me the opportunity to relay these ideas to you. We'll answer any questions you may have.
The Vice-Chair (Mr Tim Hudak): Thank you, Mr Simperl. That does leave us with some time for questions from all the parties, about six minutes each, as a matter of fact, beginning with the government side.
Ms Bassett: Thank you so much. I'm interested to hear your presentation. It's very favourable to where we're going. All of us have been saying for a long time that this had to happen. All three parties have one way or another realized what you say is true.
I want to follow up on the appeal process, because some people wonder that it won't be as easy. I was happy to hear you say that the appeal process will be greatly enhanced. You said you figured that the number of appeals will decrease. Do you have any idea of what the number of appeals is now in this area?
Mr Simperl: No, I'm not familiar with the exact number of appeals in this area. I know just about every year our company has a number of appeals ourselves, so we're basing it on our past experience.
Ms Bassett: Our understanding is that the appeal process will decrease radically after an initial bump, when people naturally would be questioning the new system.
Mr Simperl: Our position is that once you can sit down with the assessor and discuss the situation with him, because you're on a fair market value, if the gentleman has an appraisal or he just bought the property, that represents what the fair market is so it should be a lot clearer to him based on the assessed value of the property and what he's paying in taxes.
Mr Spina: Thank you, Mr Simperl, for your presentation. I had a question -- and I know it will be coming from probably Mr Phillips or Mr Gravelle -- and it has to do with the level of trust that business has with the municipal council. We've had a couple of expressions of confidence in the city of Thunder Bay council, who apparently would like to have a 0% increase.
I'm looking for your level of confidence in the municipal government to try to create a system that when you combine the additional categories of property assessment, the options of variable tax rates -- do you have confidence enough that the city of Thunder Bay will be able to balance that off so that businesses could be essentially neutral, particularly small businesses? What they may not have to pay in occupancy tax might come back as property assessment, which seems reasonable, but at least it would be equitable.
Mr Simperl: Yes, what we're looking at is an equitable system. I believe the municipal government, once they know all the parameters of exactly what they're dealing with, will be able to deal with it in a proper and efficient manner. I don't think there will be any injustices or variations where they're deemed to favour one position or the other. The city has to realize that the administration is there for the benefit of the citizens in the city and sure, at some points there might be inefficiencies because of downtown cores not operating to the extent they should be or a realignment of residential areas or commercial areas. I think they have to look at what is best for the city. Sure, there may have to be some variance or change in whether they charge for building permits or whether they charge you the fee and it's reimbursed after the building or structure is up in certain areas to attract more individuals or business to that specific area to make the city in itself more functional. I think the city council needs some of those parameters for it to deal effectively with the city itself and make it a lot more prosperous place, and beneficial.
Mr Spina: So is it fair to say, then, that if they really are concerned about a good, thriving business community, they will institute a formula that would be equitable so that the business can survive, as opposed to trying to run them into the ground, as was speculated by some fearmongers?
Mr Simperl: That's right. I think all businesses at one time or another need some kind of support, and if you're looking at most of the small businesses, people just want to be treated equitably with everybody else on that. They would like to know what their parameters are so they know how to work out what their operating costs are to survive.
Mr Phillips: Thank you very much for being here today and for your thoughtful comments. I appreciate it. The first issue is the business occupancy tax. Currently, as you know, it tends to be more heavily on big business than small business. This bill eliminates the business occupancy tax and, as virtually every municipality and business group believes, it will now be put back on to the realty tax for business. Every business group has told us that when you redistribute that equally, it will go more heavily on to small business, because small business pays a smaller percentage of business occupancy tax; when you redistribute it, it would be equal. That's no surprise. It is a matter of trust.
I believe what the Association of Municipalities of Ontario tells us. They say, "When this law passes, we'll have to and we will distribute it right across the board." So it will come as no surprise to anyone, this will take property tax up on small business, down on large business.
I just want to be clear that I understand. You still support the tax even though that's the outcome of it, because you believe it's a clear tax or a fair tax.
Mr Simperl: Yes, I believe it's a lot more equitable system. Unless I misread the information in the act, it's going to be distributed through all the property in the city, which would include residential as well. So you're looking at --
Mr Phillips: In theory you're right; in practice, nobody believes that's going to happen. What I'm trying to do is tell you what other witnesses have told us, so when it happens you're not surprised and you say, "I was there supporting it because I thought it was going to do one thing," when it's going to do another thing.
Mr Simperl: What I've done is made my presentation based on the information and what is said is going to be done on that. When you look at the broader base of the total taxable property in the city, it's a much fairer system for everybody to carry their own weight.
Mrs McLeod: I just want to understand. Your sense is that the municipality will get back the revenue that it has now lost by the province cancelling the business occupancy tax by distributing that same amount of money in taxing homeowners as well as business, so that basically the residential homeowner would pick up a chunk of what business was paying before.
Mr Simperl: That's correct.
Mrs McLeod: So your sense is that business tax would go down but homeowners' taxes would go up.
Mr Simperl: That's right.
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Mrs McLeod: I know one of the real concerns in this area is the fact that we haven't had any new home starts. The home starts have been flat for a very long time. Without any overall increase in taxes, just redistributing that lost revenue equally between homeowners and businesses and raising homeowners' taxes as a result, what would that do to the prospect for new home starts in the area?
Mr Simperl: In that respect, most people who are looking at new homes -- and we are one of the larger residential land developers in the city as well as a home builder. What we've seen is that the biggest concern with people looking at new housing is job stability and security, and knowing what the costs are. One of the questions first thing when they buy a lot or look at the size of house we're putting on it is, "How much are the taxes?" because that's equated into their affordability price, based on wages and their other commitments.
It's our feeling that as long as they know that up front, it's not going to significantly affect the new home market at all. It should basically enhance it, because now they know they're being taxed at a fair market value -- what they're paying for the house is what they're being taxed on -- and everybody else in the city will be taxed equally. It's a little disconcerting to some people from new houses to older houses that when you get into some of the older areas, the taxes are significantly lower than a new residential subdivision. With this coming on board now, it should flatten that out, where it's equally taxed for the people in older sections as in new ones.
Mrs McLeod: I'm not sure that's one of the outcomes. It would depend on an area, obviously. If you're living in the heart of Rosedale in an older house, there may be some shift of taxation towards those houses. I'm not sure it would be applicable here in some of our older areas.
Mr Michael Gravelle (Port Arthur): If I could just respond somewhat to what Mr Spina was saying in terms of, "Trust the municipalities," I don't think it's a question of trust. We've heard this at all the hearings, certainly last week on the libraries and the firefighters and everything else too, that municipalities will do their best to make sure everything evens out. The fact is that there's still a great deal of confusion. They have to regain the revenue they're going to lose. There is this gap in revenue in terms of the $1.5 billion, which certainly now our own mayor in Thunder Bay is quite quick to point out whenever he has the opportunity that there is a gap. There still is a great deal of information that people don't have in terms of what the downloading is going to be.
It's unfortunate that you view it as being something in terms of trusting the municipalities. It's more a question of their ability and the position they're being put in and not being able to necessarily do what they would do. I notice this pattern in terms of suggesting that there's this level of mistrust. It isn't that at all; it's literally their ability to handle what is going to obviously be a massive downloading. This is a somewhat separate part of that issue, but you've got to make up the revenue you lose. That's the concern.
Mr Pouliot: Good morning, John. How's business?
Mr Simperl: Fine so far.
Mr Pouliot: Good, good. When we talk about Bruno's Contracting, we're talking about a medium-sized business, right? I've followed your career throughout the years.
Mr Simperl: Yes, sir.
Mr Pouliot: We're going through the province -- I thank you for your time and presentation -- we listen to citizens pretty well a full day and then we travel to the next community and do the same. Some of the presenters represented municipalities: mayors, reeves, council members. Not one of them so far is of the opinion -- when we ask them, "The 1998 taxes, residential, commercial, industrial, will they go up, will they stay the same or will they go down?" everyone says it will go up. The reason is simple. Because the government is giving a personal income tax break, the money has to come from someplace. They also have to tackle the deficit, so again, the money's coming up from the same place. We can't have it eight different ways here.
What they do is they try to convince people like myself to congratulate and yet blame the local council whenever anything happens. They're willing to take the hit in year two of their mandate, but in year three, "Don't come to me, go and see the local council." The local council will have all kinds of new responsibilities that they don't want or need. So the big people under Bill 106 will gain, right? Because you're rid of the occupancy tax, but it has to come out in the wash.
There's a $2-billion shortfall which is going to be made up by small business and residential and when we say we'll go to the local council and rely on their wisdom -- you see, there are some local councils that will be asked on the one hand to look at the small business community and say, "Well, they just got a break; maybe we have the right," and they do, "to introduce a new tax because we need the money."
They'll see one small business person and then they'll see 500 houses on three different streets and they will come lobbying as well. It's the residential levy. They will be asked to make a choice because they are there to serve all citizens. The big ones got a break. You can't touch them, they are the untouchables. I don't know many of those people. They're on a first name basis with members of the government, but I'll leave it at that. I'm not here to criticize.
The ordinary people and the small are about to get it in the neck. This is what's going to happen, and I'll be here apologizing if I'm wrong: Bruno's Contracting in January next year, eight months from now, gets a tax bill from the city of Thunder Bay. It's called the interim tax levy. It's half of what you paid the year before. Then comes spring, a year from today, approximately a year, when you've got to make up the difference. Then, when you look at your tax bill, I ask you to compare it with the tax bill you're getting. It's going to come all at once.
You're going to get the downloading. You're going to pay for seniors, for drugs if people are on social assistance, 50% of it. You're not used to this. You're going to pay for the demographics, the aging population. I want you to know that. You'll still pay your education tax. You won't even get a bit of a tradeoff. The only thing you'll have is that in your case you'll have gotten a break by virtue of the development tax. The municipality is now going to pick up sewer and water, new subdivision. You're off the hook but someone has to pay. There is no secret formula here. Your mayor is saying, $15 million to $30 million. Where is that money going to come from?
As I thank you for your presentation, I would wish for all of us to have the bigger picture, all of it. We can't get the information from the government and we're are about nine months before there are 900,000 appeals that will be pending. There are 330,000 on the books now. They predict there'll be an additional 600,000. I want to wish you well, but please be vigilant. We want you to be in business.
It's very difficult to deal with under the veil of secrecy, committing a multitude of sins. I hope I'm not too bold or too strong, but I came there as a citizen quite naïve and candid, believing that they were going to march forward. They've organized a revolution. We all have to get together and organize a counterrevolution, because I don't feel that they are hands-on regarding this bill, so please be careful. I was fooled. I don't want you to be fooled. Thank you, sir.
The Chair: Thank you very much. We do appreciate your coming in to present to us, Mr Simperl.
I understand that Mr Guinn is here, but he is making a phone call. He'll be with us. Perhaps we could take a very brief recess. We're in recess for two or three minutes.
The committee recessed from 0958 to 1000.
NORTHWESTERN ONTARIO SMALL BUSINESS ASSOCIATION
The Chair: We now welcome the Northwestern Ontario Small Business Association, Douglas Guinn. Welcome to the committee, sir. We have 20 minutes to spend together. I would ask you to introduce your associate for the purposes of Hansard.
Mr Douglas Guinn: This is Mark Lawrence. He's the treasurer with our association.
Mr Mark Lawrence: Our interest in this new legislation is twofold: First, we are interested in any legislation that will more fairly distribute the tax burden for our business community; and second, any improvement in the level of outdated assessed value throughout the province will mean an equalized tax burden for every resident in the province.
The elimination of the business occupancy tax is of particular interest to our membership since it has long been felt that this tax is a deterrent to business, and due to its arbitrary levies of from 25% to 75% based on the type of business, it has been considered an unfair and unequal tax.
Our initial interpretation of the new model seems to indicate that the annual municipal requirement for funding will be determined at the beginning of each fiscal budget year and then the required tax ratio applied to newly assessed property values in order to raise the necessary funds. This model will improve the existing model if cost savings are rewarded and a zero-based budget model is employed each year.
Further, as we understand it, all classes of property will share the tax burden equally based on assessed value alone and not on any other arbitrary indices. Given that the education tax component will be removed entirely from the residential responsibility and continued as a portion of the business responsibility, we are fearful that we might lose our grip on what the actual cost of education is to the business community.
With specific regard to the proposed changes, we would like to voice some opinions and concerns with what we consider to be our preliminary take on the proposed legislation:
That the new tax ratios be designed to tax the residential and the commercial-industrial sectors equally. We think it should limit the discretion of the municipalities with regard to the tax ratios so that certain areas of the city are not taxed to the benefit of other areas of the city, nor that the municipality be allowed to affect the equity between business and residential tax burdens through a wide variety of tax ratios that might benefit one sector over the other.
That a user-pay system be implemented for such services as garbage collection and that the amount of these levies be removed from taxes.
That landlords be required to disclose to their tenants the amount of apportioned municipal tax within blended rents and that landlords be allowed to increase rents by the amount of any future tax increases regardless of the strictures imposed by existing long-term leases.
The level and amount of the new education levy should be disclosed separately on the business tax bill. As well, an indication should be made as to the level of total education funding required for the year for this city, together with the amount the province will be paying expressed as a percentage of the total municipal education funding requirement for the current year, that is, are we sharing the cost 50-50, 60-40, that sort of thing.
Consideration should be given to financing major infrastructure projects and other capital expenditures through a type of funding vehicle found in the United States. Municipal bonds are issued by the municipality for the amount of the capital required and the interest received by the holder of these bonds is tax-free in their hands. While the tax issue may need some assistance from the federal government, this form of financing allows the municipality to borrow at a low cost and allows a tax-free return for the bondholder.
We agree that conservation lands should not be taxed, but further we recommend that consideration be given to not taxing municipal property such as parking garages, since the added costs result in higher fees for parking and other user fees. Further, we think consideration should be given to broadening the requirement of churches to pay taxes on their entire realty holdings, not just the rectories and manses etc. Consideration should also be given to including off-reserve native realty holdings that are located in areas under municipal jurisdiction and receiving municipal services.
We continue to oppose government grants for business. We also take exception to the government-sponsored education programs to foreign countries, where our resources, both financial and human, are being applied in the training of our future competition. These resources could be applied here at home for our own residents and entrepreneurs.
Vacant land and vacant premises should have preferred status under the new model of ratios. Reduce the tax on vacant land until the owner has built a building or otherwise created a means to generate income from the property.
I include another section, just other aspects we would like to consider:
Taxation should be related to business activity, and to this end and in view of the increasing difficulty being encountered by small business, we feel consideration should be given to assisting small businesses with their tax burden in bad years through the existing Ontario tax credit system. When the small business owner files his federal and provincial tax return, the amount of his business property tax could be included as part of the input on the existing Ontario tax credit form. The credit will directly benefit those with low incomes and will be similar to allowances in place for the residential taxpayers on low incomes.
We feel the intent of this, and all legislation, should be proactive and encourage and support the formation and continuation of business, with as few bureaucratic and legislative restrictions as possible. We feel the best overall equalizer is a free and unencumbered market.
Based on the numbers we have obtained, the current level of education funding being carried by the residential ratepayers will go a long way towards paying for the downloaded social spending the municipalities are required to pay for when the province assumes responsibility for education funding.
Municipalities should be restricted in the number of tax classes they can establish under the new model. Fewer classifications mean a more equitable distribution of the tax burden and continued emphasis on spending reductions, rather than tax increases.
Perhaps the flexibility municipalities need during the adoption of the new model could be achieved by allowing a temporary, say a three-year, period of additional transitional tax ratios to bridge the gaps for funding requirements.
In conclusion, I would like to thank this committee for allowing us to make our views known and that our association is in favour of the intent and spirit of this legislation. The tax system has needed fresh thinking for many years, an impression that has been borne out by many surveys and government studies in the past. We believe the new model will generate the required funding in a more equitable and fairer way, and that the impact of the reassessment of our real estate will not unduly burden either the residential or commercial-industrial sectors negatively or disproportionately. Thank you.
The Chair: Thank you very much. That leaves about four minutes per caucus for questions. We start with the official opposition.
Mr Phillips: I appreciate the views of the small business association and thank you for the work you do on behalf of the small businesses.
Everybody agrees there's a need for change. That's not debatable. It's just whether this bill does more harm than good, or whether it does unnecessary harm. What we're worried about in our caucus is the impact on small business.
The Canadian Federation of Independent Business has watched this bill for some time, and as they look at the bill and its outcome, they say, "Ironically, it is likely that the elimination of the business occupancy tax will harm our sector, will increase taxes on small business."
I know you mention in here even vacant land, or vacant building and land. This dramatically takes the taxes up on them, by the way; I will just tell you that right at the start. But if it were the case that the result of this bill, for whatever reason, was to shift the burden from larger business to smaller business, would you still support the bill or would you think we would need to make some changes in it?
Mr Lawrence: Based on the provisions for different ratios, I think that shouldn't happen. We want it to be shared equally and not pay more than we're paying now.
Mr Phillips: I know this bill a bit just because I've got some time to study it, but the ratios simply say: "Here's what business currently is paying in our community," whatever community it is. "It can't go above that ratio." But every municipality has said, "We are going to redistribute the taxes against that business sector."
As you well know, the business occupancy tax ranges from 75% to 30%. It will average 42%, so anybody paying less than 42% will pay more; anybody paying more than that will pay less. That's the way the bill is structured. We believe there will be a natural outcome of this bill and the federation of independent business feels there will be, unless there are changes made to it. If it were the case that in your community the larger businesses would pay less and smaller businesses more, should we be trying to change the bill or would you say that's acceptable because it allocates taxes across the business class regardless of size?
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Mr Lawrence: It's supposedly not going to impact negatively on existing taxes that are being paid now, so if the small sector is paying X number of dollars, they should still pay X number of dollars, and the ratio should be adjusted accordingly if that's not going to happen.
Mr Phillips: Okay, because right now, the bill, if it passes as it is --
Mr Lawrence: No sector should be impacted negatively or more disproportionately than they are now. We're willing to pay our existing level of tax, although we want spending reductions and lower taxes of course, but each sector should not be paying less than they are now.
Mr Phillips: Okay. Then we'll have to look at some amendments to the bill.
My second question, and we haven't debated this enough at committee, is that the way the bill is written right now, it calls for assessing a property on the basis not of its current use but on the basis of the value if it were sold. That's quite a change from what the Who Does What panel recommended.
Many of my business friends are worried about that because they say: "I have a business and right now my property has a value compared to other similar businesses, but I'm located in an area where if I sell it on the market it would be used for a different use and a much higher value." It will be assessed on the basis of, "Current value is the amount of money a parcel of property would realize" -- property being land and building -- "if sold at arm's length by a willing seller to a willing buyer," not at what it's actually worth, but at what it would sell for on the market.
Some people are worried about that, because they say: "I have a retail business in a community where I'm assessed at the use compared to other similar retail businesses, but I'm in an area where if I sold it, the value of the land could go up dramatically. I'm going to be assessed at that and I'm going to be forced to sell." Has your organization looked at that, and do you have a view on that at all?
Mr Lawrence: We're of the opinion that the current market value would be the fairer value. We haven't seen any situations where the opposite would be true. On the other hand, he could have a thriving business in a lower-value area and realize a higher return, even though his assessed value is lower. We're going to let the market value sort of determine that's the true value of his business.
On the other hand, I've seen situations where we're all lumped together. Say, for instance, a vacant piece of land is assessed higher than its selling price. We also feel that if the property or the business is sold in an arm's-length transaction, that that be included in their values to reduce the taxes. We've seen cases where properties, even vacant land, have sold below the assessed value.
Mr Pouliot: Gentlemen, thank you. I'm intrigued by some parts of your presentation, although I welcome it. On your page 2, "That a user-pay system be implemented for such services as garbage collection," you say "such services" and as one example you point out garbage collection. That would be a levy that would be imposed by the municipality, I take it.
Mr Lawrence: Yes. Something like the per-bag stickers. We haven't really determined the mechanism, but that sort of thing. People who are using the service more would pay more and it would be withdrawn from the average, general assessment.
Mr Pouliot: But the big-ticket items such as schools, including post-secondary, and hospitals are not included in the user fee, are they?
Mr Lawrence: No. That was the only thing I could think of at the time, that type of service.
Mr Pouliot: But given time, since you used the plural, you would have thought of others.
Item 6, "Municipal bonds are issued by the municipality for the amount of the capital required, and the interest received by the holder of these bonds is tax free." You've given a lot of thought to that.
Mr Lawrence: It's a very successful system in the United States. It allows the people of the community to invest in their community and receive that income tax-free.
Mr Pouliot: So the approach here would be that if you issue a bond or a debenture tax-free, you would issue it at a lower rate.
Mr Lawrence: Right. Exactly.
Mr Pouliot: And the municipality would do that?
Mr Lawrence: In the States that's the way it is, yes.
Mr Pouliot: Are you talking in terms of a coupon bond or a strip bond?
Mr Lawrence: I don't know exactly how the system is set up, but I would say probably a coupon or some sort of system where they submit their coupons and get their interest.
Mr Pouliot: Okay, so you're talking about both the residual and they would pay every six months or every year, whatever.
Mr Lawrence: Right.
Mr Pouliot: Who would determine the amount that they could issue, that they could float?
Mr Lawrence: I'm not sure how it works, but I would imagine there would be some provincial guidelines on that. From my experience it's been used to fund sewer and water infrastructure, commercial office buildings for doctors, medical situations.
Mr Pouliot: But surely there would have to be an authority that decides how much they can float in the marketplace. If a municipality is in debt, the bond rating agencies would demand a premium in order to recommend their bonds, right?
Mr Lawrence: It would take probably the same structure as the current provincial system where the rate is based on the rating.
Mr Pouliot: They would be competing directly with other borrowing authorities such as the province of Ontario.
Mr Lawrence: Right.
Mr Spina: Gentlemen, good to see you again. Thank you for a well-researched presentation, because you cover a number of areas and touch on most or all of the real key issues relating to small business.
I just wanted to assure you -- on page 3 it says, "We continue to oppose government grants for business." You know, sir, this province can tell you they are gone.
Mr Lawrence: Yes, and we agree.
Mr Spina: I wanted to get back to the argument that my friends in the opposition here keep bringing up, and that is the concern of the CFIB with regard to small businesses being unfairly taxed as opposed to large businesses which will get a break. I didn't know whether you were aware that there are a couple of elements with regard to the municipal power in setting tax policy; that is, in setting the tax rates, municipalities will be required to follow provincially set tax ratio ranges. I don't know if you're aware of that. Furthermore, it says, "For 1998, the Ministry of Finance will determine the transition ratios" or the starting ratios for those tax rates. "The transition ratios are the actual ratios that exist as of January 1, 1998, and are based on the effective tax rate for each property class."
You indicated you were concerned that there would be too many class categories, particularly with business. I think if you look at the bill closely, you'll see that they go from the current four to a maximum of six. The municipality does have flexibility with these tax ratio ranges to vary the tax rate within each of those categories. Again, there's a limit by which they can wrestle with that because it has to be within a certain range of the existing ratios.
We are quite confident that there is sufficient guideline, or defence perhaps, to reduce the opportunity for the municipalities to, shall we say, put the blocks to small business and increase their taxes substantially. Removing the BOT, we're hoping and trusting that because of these ratios it will be able to remain at a reasonably consistent level. It's just a shift; instead of writing two cheques, you write one.
The big businesses may or may not benefit from this, but at least the municipality will have, in the back of its mind, I would think -- and please tell me if you disagree -- the fact that if it's paying a 75% rate now, that will continue to exist. The difference is that instead of a BOT, it will be all in their realty tax.
Mr Lawrence: That was our understanding, that we wouldn't be any worse off and that the taxes would be blended basically into one tax based on assessed value with the municipality adjusting their requirements by the ratios. All we want to make sure is that this is monitored and we aren't going to be penalized.
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Mr Phillips: That's factually incorrect. I think we should get clarification on that before we finish.
The Chair: Are you raising a point of order, Mr Phillips?
Mr Phillips: Yes. What Mr Spina said there is factually incorrect. If one of us is wrong and if I've misinterpreted the bill, I want to know that. I think what he just said is factually incorrect.
The Chair: Perhaps we could ask for clarification from the research officer.
Mr Phillips: Good.
Mr Spina: My quotes, Chair, came from the presentation that was done by the staff to our committee on the very first day that we began the public hearings.
Mr Phillips: What they said was that the commercial sector will be given --
The Chair: I'm sorry, this debate is not appropriate at this time.
Mr Phillips: Sorry.
Mr Spina: It's not fair to take up their time.
The Chair: I think when we get to clause-by-clause you can have a good go at this.
Mr Pouliot: I agree with Mr Phillips, so that's 2 to 1.
The Chair: Mr Spina, you were finished your questioning?
Mr Spina: Yes, I'm finished, thank you.
The Chair: Did you have a response to Mr Spina?
Mr Lawrence: Just to make sure I had my point made. Under the new model, at least the way we see it, we don't think we're going to be any worse off. Each sector will pay basically the same amount of tax on a blended rate, rather than the two separate taxes as they are now. We just wanted to make sure the municipality didn't have too much freedom in adjusting the ratios so that they could gain more revenue out of one section of the city versus another section. If this is going to be monitored, then that should be revisited from time to time to make sure that doesn't happen.
The Chair: Did you have a brief question, Mr Brown?
Mr Jim Brown (Scarborough West): Very brief. Just a short preamble about my NDP colleague Mr Pouliot, who was talking about coupon bonds and strip bonds. He sounds so much like a banker, I'm very impressed.
The tax-free municipal bonds work very well in the States. I guess one of the things that controls both the amount that's being borrowed and the interest rate is the market. The municipality would of course like to get the cheapest cost of capital and finance the most possible. I think you envision that as giving more autonomy to the municipality, where if the municipality wanted to do some infrastructure it wouldn't have to rely on the provincial bureaucracy to grant them some money for capital cost.
Mr Lawrence: Right. Our understanding is that the local municipality would have a better handle on the local need and the ability to pay. The market can include insurance companies that buy these types of instruments. They're not going to overburden the municipality with debt, because they still want to get paid; even though it is tax-free, they still have responsibilities to people who have invested the money through them. We thought the local level would have a better handle on what's required and would be better able to determine what they're willing to pay and at what rate they can afford to pay it.
The Chair: Thank you very much, Mr Lawrence, Mr Guinn. We appreciate your coming in and making a presentation today.
JIM DOHERTY
The Chair: We now welcome Jim Doherty. Welcome to the standing committee on finance and economic affairs.
Mr Jim Doherty: Thank you very much, Mr Chairman, committee members. I'd like to begin by thanking the committee for this opportunity to make a presentation on the Fair Municipal Finance Act, 1997, Bill 106.
As an aside, I was able to access the Ontario Legislature Web site to get a copy of the bill, and I'd like to compliment the Legislature on the quality of their Web site and the amount of material that's available. It certainly allowed me to very quickly get a copy of the bill, print it off, download it, and I really appreciate that opportunity. I urge the Legislature to continue to expand that Web site. It certainly makes the democratic process much more available to citizens who are able to get on the Internet.
Furthermore, as far as computers and such, I noticed on my last reading that any spelling mistakes are the fault of my spellchecker. I think Microsoft Office and Mr Gates should take responsibility for that, but I will make a few corrections as we go through.
The introduction of this bill comes at a time when my city is facing some very serious problems in its downtown core areas.
My name is Jim Doherty, and I am firstly a taxpayer and concerned citizen who resides in the city of Thunder Bay. Secondly, I am the president of the Ontario Progressive Conservative Party Port Arthur riding association. I was born in Thunder Bay, or rather in Fort William, and I have resided here for most of my life. It is my fond hope that my daughter will be able to continue to live and work in this city. However, my hope for my daughter will only be possible if my whole city is a viable and thriving entity. I believe that the Fair Municipal Finances Act, 1997, will make it possible for her to grow up and earn a living in her home town.
I do not speak as an expert on taxation and assessment, but I am an expert at paying taxes. I pay taxes in every form imaginable on a daily basis and have done so for all of my working life, some 27 years. Sometimes I am amazed at the percentage of income I pay in taxes. I often wonder why I bother to keep on working if it is just to pay more taxes. However, I suppose my lot in life is to be an expert at paying taxes, and that is a cross I must bear.
Thunder Bay has been using market value as the basis for municipal assessment for a number of years. Some municipal taxpayers have seen reductions in their municipal taxes, but other municipal taxpayers did suffer from sticker shock when the new system was put into place. A Thunder Bay family I know that operates a small restaurant and who are personal friends of my family saw a rise of some 2.5 times in their property and business taxes when the market value system of taxation came to Thunder Bay. This instantaneous and very large rate of rise was a great hardship. My friends' restaurant survived, but only at the cost of great stress, strain and very long and hard hours. The phase-in period for tax increases and decreases that is incorporated into Bill 106 should alleviate this very serious concern. I see this phase-in period as an example of a well-crafted piece of legislation that will bring equitable municipal taxation to all Ontario municipalities.
Through my position as the PCPO riding association president, I have recently discussed the current problems that exist with the municipal tax structure with a city councillor and some small business owners. The city councillor explained to me that the possible closure of the Eaton's department store in the downtown Port Arthur core could impact very severely on the remaining retail operators that have relied on Eaton's to act as an anchor store for that downtown core.
Bill 106 will give Thunder Bay city councillors the tools they need to deal with the situation by allowing for different tax rates for the struggling downtown cores versus the burgeoning intercity area. At this point in time the city cannot vary the commercial tax rate to suit the conditions in various parts of the city. There are many examples of cities that have allowed the core areas to deteriorate at the expense of suburban or, in this case, intercity zones. My city as a whole will suffer if this is allowed to occur, and I think the passage of Bill 106 will help to prevent just such a decline.
I have also been very fortunate to be able to discuss the downtown core situation with two friends who operate a very valuable retail business in the Port Arthur downtown. I use the term "valuable" in that their small shop acts as a magnet for many consumers, be they local shoppers or visiting tourists. I urge the committee members who are aficionados of fine antiques at reasonable prices to visit their shop and others like it while you are visiting our city.
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My two friends are very active in their business improvement association and the Heart of the Harbour event. The existing rigidity in the municipal tax system impacts directly on their business and on their efforts within the BIA to keep the Port Arthur core alive and well. If the core declines, their livelihood will decline and our city will lose them as entrepreneurs and commercial taxpayers. The city will thus also lose one more reason for tourists to stay and spend in our city. I believe this type of trend is known as a vicious circle: Decline begets deterioration, which in turn fuels further decline and deterioration.
Our city council cannot at this point come to the aid of these two entrepreneurs with tax-rate or assessment relief. The passage of Bill 106 will rectify this situation. Therefore, I urge committee members to work to ensure the speedy passage and implementation of Bill 106, the Fair Municipal Finance Act, 1997.
Thank you very much for your time. I hope my short presentation will be of service to you when you are deliberating on this legislation.
The Chair: Thank you very much. That leaves us with about four minutes per caucus for questions. We begin with the third party.
Mr Pouliot: Thank you, Mr Doherty. You speak from the heart, as you see things, and you're an expert taxpayer.
Mr Doherty: Yes. I'm the bottom end of the feeding chain. I pay all the taxes.
Mr Pouliot: Yes, indeed. You're from Thunder Bay?
Mr Doherty: Yes, I am.
Mr Pouliot: My father used to tell me that an expert is someone who comes from out of town, but I guess you can be an expert and pay taxes in Thunder Bay.
Mr Doherty: I've heard a different definition too. I've heard an "ex" is a has-been and a "spurt" is a drip under pressure.
Mr Pouliot: I need your help further. On page 2 of your presentation, "The phase-in period for tax increases and decreases that is incorporated into Bill 106 should alleviate this...serious concern," the concern being that there not be any dislocation. In the event that a municipality needs money, a 20-minute meeting of council, including the resolution, would get rid of the phase-in. If I need money to pay people who pick up the garbage, to pay the fire people, for sewer and water, I need the money tout de suite. I don't have the facility to wait five, six, seven or eight years.
The irony of it is that people who have been paying too much will be pressuring their council and saying, "I want my break now," and people who are deemed to be paying too little will say, "I want it delayed as long as possible." Council, in its wisdom, will have to decree.
Our understanding -- and you're an expert taxpayer -- from reading this bill is that when we include the new responsibilities, the tradeoffs and the tax break for the business occupancy tax, simply put, the money will have to be found somewhere. All the reeves and mayors and council members in municipalities throughout the province are saying, "Our taxes are likely to go up."
You, first as a taxpayer and second as the president of the riding association -- but I will not approach that; you're here as a taxpayer -- will be hard-pressed to support this legislation, because you make your plea on having been devastated by the taxes, and you conveniently bring your daughter into it, whom you love very dearly and very much.
Mr Doherty: Absolutely.
Mr Pouliot: Okay, and that's fair, that's great; that's the essence of life, the community spirit etc. If your property taxes go up or your business taxes go up, will you support this document?
Mr Doherty: From what I've seen of our city council, they have done very well by me as a taxpayer. I believe they have managed to keep zero tax increases, for the most part, going through. They've run a very fine administration. I'm fully confident that with the rules and regulations that come with this bill they will be able to protect me.
Mr Pouliot: But you see, they have to find $15 million to $30 million in one year. That's going to be very hard for them. They'll be looking for that cheque in the mail.
The Chair: If we turn to the government side, Mr Rollins.
Mr Rollins: Thanks for your presentation. Like a lot of us, I think we've all paid our fair share of taxes over time. I see in here that Thunder Bay readjusted to market value assessment -- what? -- two years ago?
Mr Doherty: No, I think Thunder Bay's been at it for quite some time, about 15 years, I believe. When it first started coming through we were about three or four years behind, but we have been on it for quite some time.
Mr Rollins: Are they raising those adjustments each year to revalue up to current value assessment?
Mr Doherty: I believe right at the moment we're on 1993. I think we've just had a new reassessment that came through to 1993.
Mr Rollins: So you're three or four years behind, but probably further ahead than many parts of the province.
Mr Doherty: Yes. Like I say, I think we've gone through the pain of readjustment, and under the old system there was a lot of pain. My friends in their restaurant were just shocked and dismayed that their taxes went from something like $3,000 to $8,000.
Mr Rollins: You mentioned here your friend in the restaurant business had two and a half times. Were they one of the fortunate people for a long time paying an extremely low tax?
Mr Doherty: That would appear to be the case. They were in a residential section of the city that hadn't been reassessed for some time. Then, when the level playing field was put forward with current market value assessment, they were really hit because they weren't in the downtown core.
Mr Rollins: Did you have any friends who were rich friends, like friends with Mr Pouliot, who were paying a lot of taxes and theirs were decreased?
Mr Doherty: No, I don't have too many rich friends.
Mr Rollins: Thank you very much for your presentation.
Mr Ford: I know where you're coming from when you're talking high taxes and small businesses and aficionados and antiques. I'm sort of a collector myself and I know the difficulties that some of these people run into with the taxes not being equal across the whole spectrum of Ontario. This is what this government is trying to do, get equity across the board.
I notice you're talking about the downtown areas. Right across the province, every medium to major city has these problems with the downtown core, because they attract certain people and some of these people aren't everyday types who go out with lunch bucket and brown bag and briefcase, but they work and sometimes they get laid off because of their professions. These are the difficulties we've run into across this province and this is what this government is trying to straighten out, and I mentioned this before, to get equality across the board in the province.
When you start talking about small business owners, which I have been part of, I understand the difficulties, that this happens. But I don't knock big business, because a lot of small business feeds off large companies. I just wanted to make that point, sir.
Mr Phillips: Thank you very much for being here. What I want to try and do is to avoid your friends being disappointed in you, because every business group that has come before us, without exception, has said -- because right now the bill does not mandate what you want, which is the two classes of commercial. As a matter of fact, every business group says, "Don't do that," so I suspect the government won't do that. I don't want to have you embarrassed with your friends when the government doesn't do that.
If this bill in the end didn't permit what you want, which is an opportunity for a lower tax on some of the businesses downtown, would you still think it's a good bill or would you think we should try and build what you want into the bill?
Mr Doherty: What I understand is this bill does allow about six different classes of taxation.
Mr Phillips: One commercial class.
Mr Doherty: What I also understand is that it will allow the municipality to have differential tax rates in various parts of the city. If I'm wrong in that assumption, then -- they certainly do need it. If that's a required amendment, I would certainly like to see it go through.
Mr Phillips: You think they should go against all the business groups' advice and permit that. But right now the bill does not mandate that. You have to apply, and the minister may or may not. All the advice we're getting from the business community is, "Don't do it." Do you think we should have that built into the bill, that the minister must, when a local council applies, grant that? Because it looks right now that the business community doesn't want it done.
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Mr Doherty: I really can only speak for my friends who have businesses and what had happened to them under this. I can only speak as a residential taxpayer. I don't think I'm really qualified to speak on the intricacies of what will occur in this as far as business legislation goes.
Mr Phillips: The second thing is, you were probably sitting here when one of the government members explained how the tax ratios work.
Mr Doherty: Yes.
Mr Phillips: I have a different interpretation that I'll give, because he gave his. The way it works in the bill is that a municipality raises a certain amount of money from the commercial sector. They will be allowed to raise that amount of money the next year, in simple terms. But if somebody's paying a business occupancy tax at 75%, they're going to pay a lot less. That's the way the bill works. Somebody paying 30% business occupancy tax will pay more. That's the way the bill works.
Again I ask, just because I know you're going to have to defend this to your friends, according to your presentation, if the result of this bill was that those paying the 75% business occupancy tax got a nice tax cut -- and they'll thank the government for that -- but the people paying the 30% got a fairly substantial increase in tax, would you still think the bill should be put together that way?
Mr Doherty: But I understand that going from four classes to six classes will adjust for those inequities. That's what I've been told.
Mr Phillips: No. They will give Thunder Bay, as soon as they get all the tax rolls and their tax ratio -- they'll take all the property tax paid by the commercial sector in 1996, move it into 1997 and say, "You can't go above that amount of money, adjusted." So Thunder Bay's going to have to say: "All right. We've still got to raise that amount of money, but the one paying the high business occupancy tax will pay less. The one paying less business occupancy tax will pay more." They're going to still raise the same amount of money, but the tax ratios will be determined on the basis of 1996 commercial assessment. If that resulted in small businesses paying more taxes and large ones paying less, that's still okay with you?
Mr Doherty: From what I understand, that's not going to happen. From what I understand, the different classes will take care of those adjustments and allow municipalities to recover the lost business occupancy tax --
Mr Phillips: We may not have enough time, but I'll talk to you later about that because I have a different interpretation of the bill. Let's be charitable there.
Mr Doherty: Undoubtedly, yes.
Mr Phillips: I think I may be right, but they think they're right. You should be clear on it, just so you don't get in a position of supporting something and then finding that it's a little bit different than you thought.
The Chair: Thank you very much. We appreciate your coming in, Mr Doherty, making a presentation to us and taking the time.
DOWNTOWN HEART OF THE HARBOUR BUSINESS INPROVEMENT AREA
The Chair: We now have the Downtown Heart of the Harbour, Mr Simonaitis. Welcome to the standing committee on finance and economic affairs, sir.
Mr Mario Simonaitis: My name is Mario Simonaitis. I'm the chairman of the Downtown Heart of the Harbour BIA. I have forwarded you a letter for your perusal, along with some information concerning our concerns at Downtown Heart of the Harbour. If you haven't had a chance to read it, I'll read it for you. This is concerning Bill 106.
Bill 106 will enable local municipalities to set their own mill rates. Referral to the commercial tax assessments based on 1996 public school rates -- we have attached assessments in our downtown in the Thunder Bay areas, through all the areas, for you right there so you can look at it. It'll show that Thunder Bay's two downtown cores, the main cores, the town centres and the north core specifically are paying significantly higher taxes than the intercity area, an area which is zoned industrial and one that has been consistently favoured with zoning changes for commercial development over the last few years. Our city planners have made these zoning changes and amendments in our light industrial areas to allow for new commercial development and office relocation, I may say with little consideration for the resulting negative economic impact and decimation of our downtown core areas.
These zoning changes have resulted in an inequity in tax assessment. Areas which are enjoying new construction and economic growth are paying lower taxes -- as you'll see on the sheet here, and I'll take you through that -- than the established core areas. The downtown areas have supported the city with high tax payments for years and are now looking at a reduction in their services.
The core areas represent the social and economic heart of the city and we must ensure their survival. High taxes and a dwindling tax base, along with greatly diminished appraisal values, create hardship for the land owners and, in turn, the tenants. Many buildings in the downtown areas have been up for sale for years. The result is a decaying core area in our downtown cores. Our downtowns need to get the revitalization process jump-started, and we're looking to the government to initiate that, and give the land owners a much-needed tax break. The city of Thunder Bay needs a revised assessment that will take the recent planning and zoning changes and their dire consequences into consideration.
Bill 106, we believe, will put the responsibility for tax assessment in the core areas squarely on the shoulders of those who have engineered their decline. Business people and developers will be able to take their tax concerns directly to the publicly elected officials of city and have them addressed and dealt with, instead of the city blaming the province. We'd like to let the voters decide on this. Thank you.
The Chair: Thank you very much. That leaves us about five minutes per caucus for questions and we begin with the government side. Are there any questions from the government side? Shall we move to the opposition?
Mr Phillips: Thank you. I appreciate the work you do, and my colleagues tell me good work too. I just want to understand your belief in this bill. Is virtually your concern about what your properties are assessed at and the assessed value and therefore you think that moving the assessment function from the province to the municipalities will help you?
Mr Simonaitis: That's my belief. I feel that moving the assessment to the municipality would give them direct control of what happens on a year-to-year or so basis. We feel that the decline of the downtown cores is probably one of the major concerns throughout the country. I think if the municipalities have control with the tax assessments in those areas, they would be able to better address the issue and to change it. It makes it more of a level playing field for all parties so people in the downtown cores can get a tax break, put up façades, get something happening, revitalize the cores.
Mr Phillips: The intent of the bill, I might say, is to use a uniform assessment across the province, so the intent of it is to not permit local deviations. Again, the business groups we've talked to all say, "Listen, we need a common thread."
The bill also requires the assessors to assess the property at the basis on which it could be sold in the marketplace, not on the basis of its value and existing use. Has your organization had a chance to look at that and do you have an opinion on whether --
Mr Simonaitis: We've looked at it and my opinion is, if you base it on what it could be sold at, that says that there's potential in the areas and here's what's happening. There's a basis for that, so I don't see any concerns from our part as far as what it could be sold as.
Mr Phillips: Some organizations are extremely worried about that, but I gather you're not. The funding of the BIA, how is that funded? Is that off business occupancy?
Mr Simonaitis: Yes. The downtown businesses are assessed a levy through the city and that levy is what we use as a basis for our funding.
Mr Phillips: And it's off the business occupancy tax?
Mr Simonaitis: Yes.
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Mr Phillips: The CFIB and other business groups are concerned as the business occupancy tax goes -- everybody believes it's an obsolete tax that has to be changed, but as it goes, they're worried, as they say, that the remedy may be worse than the disease in that it looks like it will penalize small business and reward larger businesses. Does your organization have any concerns about that?
Mr Simonaitis: I think our small businesses, speaking from our downtown core, have been penalized. If you look at the rates of assessment and the taxes that we pay, just a small downtown core, the Port Arthur core -- that's Downtown Heart of the Harbour -- pays a total tax of $3.374 million as compared to -- if you've been around the city -- the intercity area, including Wal-Mart and so on and so forth, which pays $2.7 million. So we've been penalized as it stands over the last few years.
Mr Phillips: Right. You do know that chains pay a higher business occupancy tax than independents. Wal-Mart would pay a higher business occupancy tax than an independent. So when that's gone, it does redistribute it.
Mr Simonaitis: They may pay a higher business tax, like a Wal-Mart in that area, but I'm looking at the total package. We're looking at getting people back to the downtown cores. Wal-Marts don't add any character to any city that I know of.
Mr Phillips: My concern is that the business occupancy tax right now, when you get rid of it and you redistribute it on to existing businesses, does change and that a chain will pay less and an independent will pay more. But I'm just trying to get from you advice for us on whether we should be worried about that and trying to find some way of amending the bill to take that into account, to provide some relief for smaller businesses.
Mr Simonaitis: That's our main concern and I'm not sure how to approach that. With Bill 106, if it addresses that, I think our business community, again speaking from the Downtown Heart of the Harbour, is just looking for a level playing field. I think if people look at that and the government looks at providing a level playing field, we'll be able to handle it in the business community. We've been survivors up to now, so we don't mind competition. As long as it's a level playing field, we'll deal with it.
Mr Pouliot: Thank you kindly. Listening to presentation after presentation, there are words that I've become accustomed to on account of people say them often and they say them with all the sincerity at their command. One of them is, "Our situation is unique." Another is: "Don't get me wrong. I'm not opposed to paying taxes, but I want a fair shake at it."
As we see that, we compare our situation vis-à-vis that of another, not unlike property. We in the opposition see no difference between current value assessment, market value assessment, actual value assessment. The bottom line is, it's called assessment. It's the assessed value of a property vis-à-vis another within a certain vicinity at one time.
In your case, you're fairly current. The assessment took place so we can't expect too many peaks and valleys, but what you can expect under the proposed legislation is a shift. It's a given that the bigger you are, the more benefit you will extract from the business occupancy tax. If you're a huge bank tower and you occupy so many thousand square feet, if you're a big industrial, if you're a big retailer, if you're a large hotel operator, if you're a significant apartment building owner, those are the people who benefit. The people who will pay will be those who are the victims of the shifts. There will be winners; there will be losers.
On top of it, you don't have a revenue-neutral situation. It will cost more for municipalities to operate in the future than it does at present because they're taking on new responsibilities. At the residential level you get a break because you no longer have to pay school levy, education levy. But let's make no mistake about this. All the municipalities that we've met so far, when asked, "Are your taxes going to stay the same, go up or go down?" inevitably people have said, "They will go up." Then council will have to make the decision what apportionment, what application can they make to pick up the slack. If a tax is reduced, they'll make an application, they'll establish a sideshow to go and get a new levy. They won't be able to do it; they don't have the same flexibility as the big ones. Then they will have to count heads, especially when the writs are issued close to the election, how many business people, big business, small business and residential. They will do that expeditiously.
What I'm afraid will happen here is that after the interim tax levy has been done in 1998 and all the changes -- in some cases a new assessment comes up by April 1998 and the new fiscal responsibilities begin January 1998. With the difference in the fiscal year, is you'll have a very short transition time to go from one system to a significantly different one. You won't have your interim tax levy flexibility, because we're talking about past years. You will have one big adjustment come a year from today, in the spring of 1998. There is no flexibility given in the legislation to cushion. What you will have is peaks and valleys and you will have a distortion, and also in some cases -- hopefully there won't be too many -- you'll have dislocation by virtue of a tax literally doubling on some entity.
People should brace for this. I'm not here to sell fear, but you cannot come up with $5.4-billion reduction in the PIT over four instalments -- the third one coming up. You cannot reconcile an $11-billion deficit and assume $3 billion of lack of transfers from the federal government without downloading on the next common denominator, which is the municipalities, and the municipalities will pass the buck to the final entity. I certainly hope I'm wrong, but it just, in my humble opinion, does not add up. There's only so much in the system.
I don't meet anyone who is not opposed to change. We know that the BOT, the business occupancy tax, is no good, but I feel the government is overestimating society's capacity for changes. You are too nice -- and I was like you at one time -- to tell that lot there to put the brakes on, exercise the same determination. Everybody wants to balance the books, but you don't have to do it by dislocating the system. Maybe they'll listen to you, but they don't listen to me.
The Chair: Thank you very much, Mr Simonaitis. We appreciate your presentation today.
Mrs McLeod: Mr Chairman, may I ask a question for information perhaps provided by the researcher at an appropriate point in time? It comes back to the question that was asked in a general way by Mr Phillips for a response in terms of just how the redistribution of the business occupancy tax would work.
One of the issues crucial in this community is the whole question that was raised by the last presenter of the shift between -- again, we don't have bank towers. In our situation it might be the retail chains that are in our intercity core and the small, independent retailers that are in our downtown cores. I wonder if it would be possible to get some specific local data or an analysis of how chains like Wal-Mart and Superstore in an intercity area would be affected -- I notice there are two clauses of the bill and I'm not sure which would affect it; it would be either clause (c) or clause (e) of section 7 -- and whether they would experience likely a decrease versus the small independent retailers in the downtown cores.
The Chair: We can ask the researcher.
Mr Tim Hudak (Niagara South): Just to add to that, that isn't a very fair comprehension of the BOT, because in my opinion it hasn't been portrayed very accurately at all by the Liberal Party, particularly in the case of small manufacturers. It would be helpful to me, and I think some other members as well, to give a better understanding of the BOT and how different classes are affected. To say small businesses are in one sector and big are in the other is very misleading, and unfortunately I think it has been misleading a few of the delegates here today. I think of a group of small manufacturers, for example, and some of the small businesses, credit unions and such that are in the higher range of the BOT. It would be very helpful to get a full understanding for the committee of how the BOT affects businesses, small, large, small manufacturing, large manufacturing and so on.
Mrs McLeod: Mr Chairman, I hope that suggestion of misleading was not applied to the question I was asking. I was asking from a local perspective. We don't have small manufacturers in our downtown core; we have small retailers and restaurant and motel owners.
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Mr Phillips: I think it's unfair to accuse the CFIB of being misleading.
The Chair: I think "confusion" might be another word that might be used.
Mr Hudak: An accurate understanding of what the BOT does to various classes of businesses.
Mr Phillips: The federation of independent business is a well-regarded organization, and it shouldn't be accused of misleading.
The Chair: Just a moment, Mr Phillips. I have Mr Spina. On the same point of order, Mr Spina.
Mr Spina: With respect, Chair, I can appreciate the request to clarify the various categories and the impact. My concern is having the legislative researcher analysing specifics to each particular community, because to me that kind of research would probably be better coming from either the local municipal government or the local chamber of commerce as opposed to our legislative researcher. That's my concern. From a provincial perspective, unquestionably we could ask the legislative research to do that, but on a local, city-by-city basis, I think it would be an undue burden.
Mrs McLeod: That's fair enough, Mr Chair. I would redirect the question. I think legislative research could provide clarification, but I would redirect the question to the ministry, because I assume that the ministry has that data community by community and can make it available.
Mr Phillips: That's good.
ONTARIO HOTEL AND MOTEL ASSOCIATION
The Chair: We now welcome the Ontario Hotel and Motel Association of Thunder Bay, Mr Meady, president. Welcome to the standing committee on finance and economic affairs, Mr Meady. We have 20 minutes to spend together.
Mr Michael Meady: Thank you, Mr Chair. My name is Michael Meady, and I am the chairman of the Ontario Hotel and Motel Association. I am also a principal with the East Side Mario's group here in Thunder Bay. I would like to thank you for the opportunity to speak on Bill 106.
The Ontario Hotel and Motel Association, or the OHMA, is a provincial trade association representing the accommodation and hospitality industry in Ontario. As an association, we represent approximately 1,000 members from across the province. These properties range in size from the largest operators who individually employ well over 1,000 employees, to the small family-run businesses of two or three employees.
In our East Side Mario's operation here in Thunder Bay, we have been fortunate enough not to have laid off any employees in the past few years, but the overall levels of taxation that we have incurred severely limit our opportunities for expansion and/or capital improvements that we have in our location site. We do have expansion plans, we do have capital improvement that we'd like to get under way, and this would solidify our place in the marketplace here in Thunder Bay, as well as give us an opportunity to hire new employees, and we would like to get under way in regard to that.
A fair and equitable property tax system is something that everyone would support. Generally speaking, Bill 106 is a positive move in that direction. I do have some concerns and believe the government needs to address them to ensure the full benefits of the legislation flow through and are permanent in nature. Bill 106 introduces a new system of assessment: actual value assessment. Some critics would argue that this is just market value assessment in disguise, but there is a difference. Our experts tell us that for the vast majority of the province which has already gone through the market value process, this issue is not important.
What Bill 106 does is provide assessments based over a three-year period. This should provide a fairer method of assessment no matter what the class of property, as it will avoid or help avoid the highs and lows of inherent property values that occur today. Depending on what a particular property may fall into, this might be good or bad in the short term. However, given that this is playing Russian roulette with the important part of everyone's business or living cost, I believe it is much more equitable to have the basis of the assessment spread over a three-year period.
As a business person, what I require is a predictable and stable level of cost including property taxes, which for many of my members is the largest uncontrollable cost.
The legislation proposes an end or an adjustment in regard to the business occupancy tax. Given that there is a large percentage of this tax that goes uncollected, this results in a higher mill rate setting by the municipalities to make up for the shortfall. We would expect that municipalities would be able to set a truer tax rate that represents real cash requirements.
In this area, we do have a concern relating to how the municipalities recapture the lost revenue. We strongly urge the government to ensure that any municipality that moves to recapture the lost revenue must do so on a fair and equitable basis. A municipality should not be able to target one sector or segment disproportionately.
With an important segment of our members being in Metropolitan Toronto, I would be remiss if I did not comment on the legislation as it relates to them. The hotel industry in that region has been held hostage by this system for over 25 years by having its level of assessment approximately twice that above other commercial properties. It has resulted in a string of bankruptcies and it has had a major negative impact on jobs and capital reinvestment.
It is our understanding that with the passage of this legislation in Metropolitan Toronto the level of assessment will be the same as other commercial properties. This fairness is long overdue, in that it provides these hotels with the same treatment as accorded the industry virtually all across the province. I would like to voice a major concern and propose an amendment which I suggest will improve the legislation. Bill 106 proposes to allow the Minister of Finance the power to create new classes of property that would be subject to a different rate of tax upon request from a municipality. The legislation should be amended so that any new classes of property are created through legislation.
As currently proposed, we believe the legislation could put undue pressure on the Minister of Finance of the day. If a municipality has as its objective the creation of a special class which it deems to be in the public interest, we strongly suggest that there should be no concern with it proceeding through the normal legislative process where it would receive fair and full public hearing. We have an inherent fear this section in the future could undo some of the fairness that this bill introduces and protects.
We are also very concerned in regard to the new variable tax rate setting process Bill 106 introduces. Our concern is that, if not set with real foresight, these new tax rates, formerly called mill rates, would not provide tax fairness to the commercial and industrial sectors. Residents vote, businesses don't, in the eyes of many municipal politicians. Following on that line of reasoning, municipal politicians have shown some predilection to load a disproportionate share of the property tax load upon businesses.
I urge the government as it moves forward on this rate-setting process to ensure that the range is narrowed between business and residential classes, or at the very least, that it doesn't widen. The business sector creates wealth and jobs in our communities. We need the provincial government to be a leader in this area in educating municipalities, as it is relative to the importance of their businesses and the important function property tax means as to locating, expanding or remaining.
Finally, a comment on phase-in provisions. We would have preferred a straight adjustment, but do ask that any municipality opting for the phase-in must do so in a way that they cannot withhold a major tax change until the end of the eight-year period.
I thank you for this opportunity to appear to you today and I would remind you that I am not a tax accountant or a business lawyer, but these are the concerns of both my members and the principals in my operation here.
The Chair: That leaves us about three and a half minutes per caucus.
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Mr Phillips: Thank you for a thoughtful presentation. One of your last points was to say to the government, don't permit different classes of commercial assessment, where you'd have within the commercial sector a couple of different classes. Every business group that's come before us, including your organization, has recommended the same thing. The problem is that they're telling people like Mr Doherty that they are going to do that, so he supports the bill because he's been told they are going to permit that; business groups have been told it's not likely to happen, so they're supporting the bill. The reason I raise this is because right now your members, I gather, pay 30% business occupancy tax, 30% of realty tax.
Mr Meady: Depending on if the member's a chain property or an independent property.
Mr Phillips: But an independent property would be up to 30%?
Mr Meady: I believe so, in that range.
Mr Phillips: It is clear from everything we've been told that municipalities are going to put the business occupancy tax back on to the commercial-industrial realty tax. Every mayor and reeve has told us that. So your members that are paying the 30% business occupancy tax are going to pay more. It's just a given. In spite of that, you are supportive of the bill. Do you think we should be doing anything within the bill to try and cushion that blow for the small independent business people?
Mr Meady: I'm not sure if anything does address the opportunity for cushioning the blow for those who are going to get an increase in regard to the business occupancy tax or something else in recapturing that type of revenue. Our independent smaller properties do understand that there is going to be an equitable levelling of the field and actually do agree with the fact that that should go forward. Some businesses in the higher or chain property taxes that are paying a higher percentage don't believe that is fair and they understand that there is going to be an equitable levelling of the field. As far as cushioning the blow, I don't know what has been proposed or suggested, but I think we'd be amenable to take a look at any type of cushioning format for them.
Mr Phillips: One of our roles in opposition is to make sure there are no surprises, that people a year from now don't say, "Why didn't you tell us that our taxes were going to go up?"
The second thing I'd like to talk a little bit about is that education is still on the business property tax. I gather it may be coming off the residential property tax, although it looks like $1 billion increased cost going on to property tax, so that's in question a bit right now. What is your understanding, because we can't get clarity from the government, of how your education business property taxes will be assessed to your members?
Mr Meady: It would be difficult to do it on an individual basis from municipality to municipality.
Mr Phillips: But just generally.
Mr Meady: Generally speaking, the level of taxation is going to remain relatively the same, with some increases in some areas and some decreases in some areas, but we believe as a whole that it's going to be relatively fair on an equitable basis from municipality to municipality as well as from member property to member property.
Mr Phillips: Do your members think there will therefore be a uniform educational mill rate for businesses across the province? In other words, if you have --
Mr Meady: I think it's going to be relative to the educational cost needs in the individual communities on what has been recaptured in the past and what are their needs in the future. I believe that there's going to be some equity. As to what a municipality captures for its educational percentage of tax in that individual community, I couldn't give you any definites on what the percentage would be, but I believe it would be fairly constant as far as what they had captured in the past and just a different presentation on how they recapture those types of costs in order to provide the needs of the community.
Mrs McLeod: As decided by Queen's Park?
Mr Meady: I'm sorry?
Mrs McLeod: So Queen's Park would decide on a differential mill rate for education in each different community?
Mr Meady: I think each municipality is going to determine what their needs are in terms of delivering that. How it's going to be delivered through Queen's Park to each of the municipalities I have no idea. I couldn't comment on that.
Mr Pouliot: Mr Meady, I need your help to develop a theme. An average room, let's say at the Valhalla or the Airlane, would pay how much municipal tax per year, per room? Would you know?
Mr Meady: This Valhalla property? No, I couldn't give you the exact dollar per tax per room, but I believe Edward's speaking later. You could ask him. He's the manager of this property.
Mr Pouliot: I'm trying to find out what the difference would be between what is being paid now and what the assumption is will be paid in the future. I think it's quite important to know, that so much per square foot, if I occupy room 100 or whatever, how much of my occupancy cost as a tourist, as a guest, goes towards paying municipal taxes of all sorts.
Mr Meady: I couldn't tell you the exact numbers for this hotel property. What I can tell you is that as a trade association one of our jobs is to educate our members and our property members with regard to the level of taxation that they are incurring in their individual communities. The member properties involved in our association know there's a gross inequity with regard to a hotel room here in Thunder Bay compared to a hotel room in downtown Toronto compared to a hotel room in Ottawa. The level of taxation that's incurred by each individual property is at such a high variance, between big lows and large highs that this is one of the reasons we need to address this.
Mr Pouliot: You draw a correlation, a parallel between outstanding arrears in the taxes and the rate of taxes. To what extent do you believe this is accurate? Is it one component out of many factors: interest rates, cycles and the economy etc? Surely it would be an invitation if you are in tax arrears because the taxes are too high? Is that what you were mentioning, that more people would pay their taxes on time if taxes were lower?
Mr Meady: That's really not what I was making reference to. Are you making comments with regard to the business occupancy tax being recaptured by the municipalities? Is that what you're referring to?
Mr Pouliot: I'm talking about, for instance, the Valhalla not paying their municipal taxes. The reason they're not paying their municipal is that taxes are too high. Do you feel that's valid?
Mr Meady: I couldn't comment on the individual property, but if that's the statement that was made.
Mr Pouliot: How many people, FTEs, full-time equivalents, does your industry employ in Thunder Bay, hotel and motel operators?
Mr Meady: In Thunder Bay, there are about 276 licensed properties that are involved in some form and fashion, ranging from hotel properties that employ about 400 all the way down to ma-and-pa operations. The exact numbers I haven't compiled for you.
Mr Pouliot: Without imputing motive, simply candidly speculating, if the government doesn't amend and move to restrict additional classes of taxes, do you feel that there's a good chance that some municipalities would become innovative and impose a new class of tax to get the taxes what they lost in the first instance by virtue of the differences in the BOT?
Mr Meady: I believe that's something that has to be watched with a very careful eye. That's one of the reasons we made a recommendation that if new classes are to be developed and the municipalities want to go through getting new classes, that they go through a legislative process which is most fair and equitable so that all players can play along.
Mr Pouliot: If we give fewer classes, there's no option or fewer options, and the industrial gets a break, what they refer to as a more level playing field, and the commercial gets a break, who is going to pay?
Mr Meady: In regard to where they're going to recapture those dollars?
Mr Pouliot: The money has to come from someplace --
Mr Meady: Obviously if some are paying too high, some are paying not enough.
Mr Pouliot: No, but if they do, there's a distortion here. There's a discrepancy, I should say. Under your proposal there's less money coming out of the commercial --
The Chair: Thank you very much, Mr Pouliot. I'm afraid our time has expired. If we could move to the government side.
Mr Spina: Thank you, Mr Meady, for your presentation. I think you appreciate, and I just wanted to re-emphasize, the fact that this government's objective is not to jam taxes into businesses' laps or even into the residential. What we want to achieve out of this whole exercise, whether it's Bill 106 or whether it's any of the other Who Does What initiatives, is to create a fairer balanced tax assessment system, both revenue and expenditure. That is our objective. It always has been and will continue to be.
Our efforts are really geared to try to develop a structure that will help us together, both as a province and as a municipal government, to achieve that objective, and I hope you appreciate that. You know we've done many things like eliminating the employer health tax, which I think would be a great help, particularly to the operators and members of your association, things like that. You had an interesting recommendation which I think was brought up earlier and that was that any additional classes of property assessment would only be able to be created through provincial legislation. Did I understand that correctly?
Mr Meady: That's correct.
Mr Spina: Do you have a problem with the increase now from the four basic categories to the six?
Mr Meady: I don't believe so as a whole. It depends on how it gets applied and who gets attributed into those additional classes.
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Mr Spina: There is a series of safeguards against municipal governments jamming either large or smaller business in particular with more taxes. That is what I brought up earlier, and that is that the province will define the tax ratio range for each class of property. We are confident that any of the transition ratios that are outside of those ranges would be retained, but future changes in those ratios are going to have to move closer towards the ranges that the province would like to have. Do you feel that is a strong enough safeguard within the legislation to be able to protect that small business person?
Mr Meady: Actually I do not. It is a safeguard. I don't believe it is strong enough because of the fact that in some municipalities the shortfall can be great as far as where they're going to be recapture it from and determining if they're a strong industrial base area or not. I believe that the development of new classes with limited safeguards is not a strong enough process for them or to protect the small businessman from municipalities. They can come up with creative ways to recapture those lost revenues through the development of different classifications and specifically targeting those individual businesses.
Mr Spina: So even if we set the range within each of those categories, you think that the municipality can override that somehow?
Mr Meady: No.
Mr Spina: That's what I'm trying to understand.
Mr Meady: From my understanding, the development of a new class as far as a ceiling on that new class development or new class for the assessment on it, that's where I think the danger lies.
Mr Spina: I understand that. Good. Thank you.
Mr Hudak: Thank you, sir, for your presentation; very intelligently delivered, I think, and also very consistent with what the CFIB has said in terms of creating a level playing field by scrapping the BOT. Like I said, there are some small retail sectors, for example, that pay less than the blended rate would pay if the whole thing was put back on to the commercial sector, but at the same time small financial companies, small manufacturers, small media, builders, engineers, architects and those in the legal profession, all those would see a blended tax at a lower rate than they're currently paying for the BOT. So I appreciate your position on a level playing field.
The CFIB's position from that is that they would suggest that the taxes be spread out among all property classes instead of the BOT being put right back on realty. What we've decided to do is give municipalities the option to decide how best to raise revenues to meet local demands and local concerns. Would your feeling be to let municipalities decide how to replace the BOT or should the province, as the CFIB suggests, mandate that it comes from broad-based classes?
Mr Meady: Obviously once again our fear does rely on -- I don't know where the municipalities are going to recapture that from on the loss of the BOT. We believe that it would be best implemented by the provincial government on their legislative -- at least some safeguards with regard to overseeing that. Now how that is applied I don't know. I haven't looked at the CFIB's presentation as far as their broad base, but I would like to take a look at it.
The Chair: Thank you very much. We appreciate the hotel and motel association for coming and making a presentation today. Thank you very much.
PORTER BAILEY
The Chair: We now welcome Mr Bailey to the standing committee on finance and economic affairs. We have 20 minutes. If you'd like to make a presentation, we can fill any remaining time with questions. Please proceed.
Mr Porter Bailey: I have a fairly brief presentation, but at any rate, good morning, committee members. I'd like to welcome all the committee members to Thunder Bay and note that some of you may have had misgivings last week that you would ever be up here this week. However, I expect most members of the committee are relieved to be out of the Legislature for the time being.
Some personal notes and background: My name is Porter Bailey. I grew up in Thunder Bay and I'm currently working in the computer and information processing field within the construction and development industry. I'm quite familiar with commercial property management and have had constant exposure to the area of municipal property taxation over the last 20 years. This includes everything from dealing with assessors on a one-to-one basis in providing information on properties through to participating in property tax appeals.
I intend to make a relatively brief presentation this morning, as I am of the opinion that the changes proposed are very straightforward and generally very sensible and practical for all parties concerned. To my mind, in some senses, these are more like housekeeping amendments that should have found their place into the system long ago through the general evolution of the tax system and the passage of time.
In reviewing our current municipal tax system, we see a system that is in essence a simple cost-recovery mechanism. Each year the municipalities set a budget for the upcoming year to determine their total funding requirement. This amount must then be assigned into the assessment base which is a known amount. Certain classes of property are allocated at a higher rate than others. Based on simple arithmetic, the total required amount is then assigned to the classes and hence the properties that compose each class and the tax base.
All municipalities carry out the process in pretty much an identical manner. However, where a certain problem arises is in the determination of assessed values within the classes, which represent the pools of similar properties. The determination of the value of each individual property is the fundamental unit, which is then accumulated to determine the total within the classes, as well as the overall total of the assessed base. In Thunder Bay, the assessment of properties has been on a current value basis for many years; in fact, I remember when the change to this basis was made some 10 or 15 years ago.
Apparently this is the practice in the majority of municipalities in Ontario. It is not so in Toronto. Having moved into the current value system here, I am aware that it is a reasonable system. I do not see any reason why Toronto should not be on a like system. In fact, I am unable to have any sympathy for those in Toronto who are complaining about the changes proposed. I suspect that they are complaining mostly because they would like to maintain a personal advantage that they may have realized under the old system.
Anyhow, the market value system has been well tried in what I'll call the warm-up stage in the outlying municipalities and now it is time to bring it to the big city. From the point of view of managing a very large municipal tax-gathering system in Ontario, it is obviously of benefit to have a consistent approach across the entire province.
Property values do fluctuate significantly over time, as anyone acquainted with the real estate industry is aware. The legislation calls for the use of a three-year moving average to set values, and I believe this is quite a useful feature in setting values. Furthermore, the valuation system will move away from the handbook and formula approach to valuation to a basis in actual sales of properties and the use of the selling price. This is the best possible basis, one that everyone understands and one for which the evidence is very solid. There is no doubt that this brings the greatest amount of equity into the system and, secondly, it is a system that is easy for everyone to deal with.
In respect of the business occupancy tax, I wish to make a few observations. As noted earlier, the entire system is based on cost recovery for municipal services with the fundamental notion that usage of services is tied to the size and hence the value of a property. On this basis, it is most equitable to base the cost recovery on the property itself, not on the property plus an extra levy if a business happens to be using some of the property. Certainly the usage of the municipal cost base is not necessarily affected by the type of activity within a property.
Another factor relates to the highly variable nature of businesses. In the current business environment, simple occupancy of a number of square feet of space in a building is absolutely no determination of the economic substance or impact of the business itself. Some businesses use very little space and generate very large economic activity, where others have low returns on large amounts of space. However, the current occupancy tax is simply a reflection of the size of premises being used in the process.
In most modern business leases, the lease is developed on a triple net basis with the tenant being required to cover the property taxes that run with the premises. This tends to be the most effective way to have the cost recovery of municipal services allocated to the users of a premises.
There is a bias in certain parts of the political spectrum that believes that businesses ought to be required to cover a disproportionate part of the municipal cost base. I disagree with this entirely; however, the proposed legislation affords any municipality with an opportunity to assign the various assessment pools at varying rates. Consequently, if the above principle of tilting the tax levy against business is thought to be proper, there is the ability to address it.
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The legislation proposes to move away from the old term "mill rate," and to simply express tax as a straight percentage of assessed value. This appears to be an excellent idea, so as to remove as much as possible the mystery that goes into making up the property tax.
One of the biggest problems over time has always been the inability to understand the workings of the property tax. First there was the assessment, which was anything but the actual value of the property, usually a small fraction thereof. Then there was the mill rate, which was often not understood by taxpayers. Next there was the concept of classes, which had varying degrees of participation in the total. Needless to say, very few people were able to relate to their position in the entire scheme of things. Making the tax a percentage of assessed value will be very helpful.
In summary, I believe that the proposed legislation is a very useful piece of legislation that brings a much greater degree of equity and certainty to the tax base. I do not think the legislation has a particularly large effect on Thunder Bay. There is obviously a larger effect in Toronto. However, I think that from our experience here, there is no reason at all to not proceed with these changes in Toronto, and I'm pleased to see the government and this committee getting on with it.
The Chair: That leaves us about three minutes per caucus. If we could start with the NDP.
Mr Pouliot: Mr Bailey, I'm surprised that you're so familiar with the situation in the city of Toronto. I represent the riding of Lake Nipigon, and we seldom have two bad political days in a row, because on the second day we hit Toronto. It has proven over the years to be a fairly good recipe for political rewards.
You perhaps are right that Thunder Bay, by being current, has averted the risk of some severe fluctuations, if you wish. You're an expert in this endeavour, in this field. How important do you feel property taxes are? From all indications that I'm getting as I decipher, as the bill comes under scrutiny, more and more evidence points out that when all is said and done, when this is implemented, the residential taxpayer, the property owner, will be asked to carry the ramifications, asked to carry the guilt, will get hit between the eyes, more so than anyone else. They are the losers in all this.
In terms of value of property, how important is the tax component? For instance, if my property taxes were to go up between 15% and 30%, does it play a large part in the marketplace when it's time to sell the property?
Mr Bailey: I think you're working on an assumption that the municipality in question is going to allocate additional amounts to the residential pool, but I don't see where that comes out of the matter at hand.
Mr Pouliot: But under the same scenario -- and why not? -- if the municipalities were asked to pay more, to generate more tax dollars because they have to pay more services -- because in the switch here, there's some downloading. Every municipality in Ontario says, "It's going to cost us more to render the service."
Mr Bailey: This bill doesn't address the amount that is going to be downloaded or not downloaded; this addresses how the given services are allocated among the taxpayers themselves. First the municipality has to determine its tax base, then it allocates them. That's all this bill seems to deal with, that I'm able to read.
Mr Pouliot: This bill, with respect -- and I respect your interpretation -- is webbed; it is meshed. This is one bill that is a key, a mechanism to enact policies. They have many bills that are advancing at the same time. This does not stand in isolation, sir. It does not. This is part of a bigger agenda. It's one component. That's what we try to keep in mind as we're seeking more information from the government. To this day, eight months before the sky falls for some, we still don't have the information that is necessary. So yes, I impute motive. I suspect, having worked with those people for some 12 years, that I'm beginning to have a better understanding of incompetence or dishonesty. Oh, I'm sorry, I'll withdraw "incompetence."
The Chair: Thank you very much. Perhaps with that we could move to the government caucus.
Mr Hudak: I have two questions, the first dealing with a potential class for small business. We've heard in some discussion here today, and certainly the discussions we had last week, some people have suggested there should be a small business class, which would be at a different rate than the regular commercial. Other groups have suggested that would be a bad idea, that since we've already tried to get rid of the BOT to level the playing field for all businesses, we should keep that theme and have only one commercial class. What are your feelings on whether there should be two types of commercial classes or a single one?
Mr Bailey: I don't have a strong feeling on that, and the reason is that once the classes are determined, they are still based on the actual value of the buildings within the classes. Presumably, the yardstick for determining the value of a building is the same whether you're in class 1 or class 2 or class 6, as the case may be. The valuation of a residential property is its market valuation. The valuation of a business property is its market valuation, be it a small business or a large business. Given that the valuations are accurate and reasonable, then it becomes the municipality's role to determine whether to assess a little greater proportion to this proposed small business class versus the proposed big business class.
I don't necessarily see that it needs to be allocated between them at a slightly differing rate. I don't find that to be totally compelling. I still believe every person should stand up on his own two feet and bear his fair share of the costs. If he costs, he costs. This is a cost recovery system. It's an idea. I'm certainly not against it, but I don't see it as the best thing.
Mr Hudak: Fair enough. My second question is, just to follow up, you talked about the Toronto hearings we had last week. I don't know if you had a chance to watch it on the assembly channel. There is a group of taxpayers, particularly from the Rosedale area, a relatively affluent part of Toronto, who rejected the idea of a current value assessment based on the value of the property in favour of what they called a unit value, which would be on the square footage of the property and the building on the property. What are your feelings on that?
Mr Bailey: I can see a certain amount of reasonableness to it, but you've got more classes than a residential class. You have factories and you have office buildings and so on. You need a yardstick that tends to be consistent across society and across all real estate entities. There are things like hydro thoroughfares etc.
To try to get a yardstick that works, that there isn't a lot of scrapping about -- actual market value based on selling prices and so on is a very strong yardstick. People can go out and get a list of properties -- that sold for that, that sold for that, that sold for that -- and they can extract their property as to where it would be. So you're working on a fairly firm footing, whatever you're dealing with. Granted that if my house on a 100-foot lot is worth $150,000 and yours on a 100-foot lot is worth $100,000, we both probably use up the same amount of municipal services, but I see market value as something that cuts across a lot of ranges and therefore is a good way to use.
Mr Hudak: Others have pointed out too -- the presentation slips my mind now, but I think it might have been the Toronto board of trade or Metro board of trade -- that only 10% of the municipal bill is actually the hard services and about 90% now is more the soft services: the fire, the police and that sort of thing. They made the argument then that your taxes aren't based on use of the hard services but on the broader municipal services.
Mr Bailey: That's true. Really, this bill is contemplating: "There's a municipal budget. That's what it costs to run the municipality. How is the money to be returned back to the municipality to meet that cost?" It doesn't address what they want to spend the money on, it simply addresses that this is the amount of money they need. So if they expand their soft services or contract their soft services, this only says there's a number that has to be retrieved from the community. I'm not really getting into what the municipalities ought or ought not to spend their money on. They do spend it and they have to get it back.
Mr Rollins: Thanks for your presentation. It's quite obvious that you haven't just come on to this thinking of the way this bill is being brought into process at this time, that this is something that has been talked over and argued over for at least the last two or three governments, if not the last 10 or 15 governments. Do you see it as a lot more level playing field?
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Mr Bailey: I see it as a more level playing field. I remember the debate and discussion that went on in Thunder Bay when we went from the handbook way of determining assessment to the valuation method of determining assessment. There was a certain amount of controversy, but it all died away long since and nobody gets into that, "Jeez, under a handbook I could have gone in this column in that row and I would have come out a little bit less." People recognize the market valuation and that controversy has long since died.
Mr Rollins: Also, since about 1904, when the BOT was brought in, it has been a tax that I think everybody has agreed shouldn't be there. Thank you very much for your presentation.
Mr Phillips: Thank you very much for being here. I just have a comment on the unit value. It was actually Mike Harris's pretty good pals the Canadian Taxpayers Federation who were pushing that value, and they're a little bit unhappy with him right now.
In any event, you commented on the business occupancy tax, around the use of what services property tax should pay. The bill that we're being asked to support here is designed to support certain municipal services now, and it happens that education's staying on the business sector, which is a bit unusual. But they're also adding, as you know, seniors' housing on to property tax, so all the seniors in Ontario now rely on the business property tax for support; all the ambulance services now are going to move on to business property tax -- and residential, I might add there -- social assistance, child care, long-term care, all of the in-home care for seniors.
The reason I raise this is that we are approving a tax system designed to raise money for those things, and as I listened carefully to your presentation, you were implying that property tax should raise money to pay for property services. I gather you're in support of moving seniors, ambulances, nursing homes on to the business property tax.
Mr Bailey: First of all to address the implication, I did not mean to imply that certain municipal services should be carried one way and certain municipal services should be carried another way. I'm not really addressing, in my mind, the area of what municipal services are carried. I realize that the municipal services come to a certain dollar total, whatever they may be, and those are applied across the property tax bill system that I believe is being addressed here. I don't think I'm trying to say that ambulance service should be carried one way and fire services or sewer and water should be carried another way. I don't think I'm addressing that.
Mr Phillips: The reason I raise this is that actually Mr Pouliot's right: We are dealing with a package. The government's fond of saying -- they carry around the Who Does What binder. It's got all their stuff in there about all these bills, because they're interwoven. We're being asked to approve a tax bill designed to raise money to provide the services that the province has decided it's going to load on to municipalities. We have to design a system that will pay for seniors, nursing homes, child care, social assistance for children who need social assistance for clothing and housing and food.
My question is -- because I listened to your comment that the business occupancy tax originally was designed for one way -- are we putting the right services on to the property tax and therefore designing a property tax system to service -- are you supportive of your property taxes going to support long-term care?
Mr Bailey: I wouldn't be surprised that some of my thinking is a lot like yours. When you get your property tax bill you'd rather it was lower, and I think everybody in this entire room would rather that they didn't have as much tax expense to bear. You're looking at the many-bills issue and I've come here looking at this particular bill, but that's fine.
There's a change between what a year ago, two years ago had been covered under the property tax system and what is proposed next year or the year after to be covered under the property tax system. One of the main features has to do with education, bigger than all of the other features. I support the change in the way that education is going to be carried, with funding through the province, and so corollary to that I see this other means of having services carried by the municipality to be a satisfactory offset to the changes in education which I think needed to be made.
The Chair: We have exhausted our time. We thank you very much, Mr Bailey, for your presentation today.
GRANT NUTTALL
The Chair: We now welcome Mr Nuttall to the standing committee on finance and economic affairs. Welcome, sir. We have 20 minutes to spend together. If you would like to make your presentation, we can fill any remaining time with questions.
Mr Grant Nuttall: Mr Chairman and members of the committee, it's a real pleasure to be here from Dryden, Ontario, four hours away, to make a presentation to the committee. I would like to first of all tell you a little bit about myself. I was president of the chamber of commerce -- we had 200 members -- in 1984-85 and 1995. I was also a town councillor in 1980-82 and 1989-1991. I find this Bill 106 is exactly what we were looking for when I was on council, because in 1989 we asked for a reassessment of our properties. I can say I voted against it, because I was very fearful of what it would do to our town and our business community.
After we did the reassessment -- we reassessed for 1984 -- we found that there was an equal balance between the businesses and the realty of the owners of the housing. We had one hotel owner, in fact, when his reassessment was done his taxes went down by $6,000, so there was not an equal playing ground there and we found that when we did do the reassessment we were very pleased with the results. After that, I certainly did support the council to do it, but they didn't because of the fact I wasn't on council.
This thing has been studied since 1967 by the Smith committee, the Blair commission in 1977, the Robarts commission, and the Fair Tax Commission in 1993. I think it's been studied to death. I think it's time that we moved ahead and did the reassessment. I'm sure in our town alone -- we have the main industry of Avenor; it pays 51% of our tax base. I can tell you that if we can work in any settlement with Avenor in the business tax, it would help us to create jobs. We know in our town that we rely heavily on Avenor, but it is a company that we can be proud of because it does a lot of support for the town.
The concern I have with the bill, and it's only one concern -- and I say this as a councillor from the town of Dryden when I was on there. Councils can make decisions and mayors can make decisions, but I can tell you that the difficult time that I had was administration. They always like to get that little extra tax grab. I think there should be something in this bill that if you do assess a senior's home or a disabled person's home, that the municipality cannot charge interest on the taxes that they defer. It's very disturbing when you find that when you're in tax arrears that this happens and then your tax bill in three years is actually doubled, because municipalities have the tendency to charge more. I used to fight that all the time but it was a losing cause because the administration sometimes tries to rule the roost. The concern I have with the seniors and the disabled, it's good that they can live in their homes as long as they possibly can. In Dryden we have an older community and the seniors like to live in their homes, so that is one concern.
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Also I have a concern with the business community. I do own a business. I own a building. It's a funeral home. It's a dead business but it's a good business. I can tell you that I will probably be assessed business tax, which I'm prepared to take on, but also I think that the municipalities have to be taught a lesson here. I remember when I was on council, every year we used to write off business tax, either because the business closed or it moved out of town. Our business taxes were at a high one time of $20,000. This is money that we couldn't collect because the businesses were out of business or moved out of town.
I am prepared to take on the business tax providing that the municipalities get their act together and make sure that we're not burdened with the extra costs.
That is the only concern I have with the bill. The other thing I like about the bill is that they're going to have assessment updates. This is something that we really need.
On the lighter side, I was down in Toronto last month and I happened to attend one of the megacity meetings just to hear what was going on, and I had a chap sitting next to me. He said to me, "You know, I really hate this Harris government," and I said, "Why?" He said, "Because they're going to reassess my house." I said, "Oh, what's the problem?" and he said, "I paid $50,000 for my house." I said, "That's great," and he said: "Yeah, it was a good buy. Now they want to reassess me, and they will probably reassess it at $250,000." I said, "What's wrong with that?" He said, "That's too much." I said, "If I wanted to buy your house, how much would you sell me your house for?" He said, "For $300,000." I said: "I think you have to get with the real world here. There seems to be a problem. You're getting off scot-free."
Also, I'd like to close off by saying, in case anybody asks me, I'm the president of the PC association in Kenora.
Mr Phillips: Oh, no.
Mr Nuttall: There's nothing wrong with that.
Mr Phillips: That's great.
Mr Nuttall: I was elected.
Mr Phillips: Perfect.
Mr Nuttall: But let's be up front about it. You know that, Gilles.
Mr Phillips: The other one said that before you. Mr Doherty was here before you.
The Chair: Thank you. Your time will come.
Mr Nuttall: You had that. I drove four hours, though. Nobody paid me to drive, see, because I'm concerned as a past councillor.
The Chair: Maybe we could get back to some kind of formal process here.
Mr Nuttall: I was just trying to give him a lesson of the north, that's all.
The Chair: I hope the lesson wasn't lost. If we could move to the formal question period, with the PC Party starting first.
Mr Spina: Good to see you again, Mr Nuttall. There are two things that surfaced here. One is that you made a comment that in your years on municipal council governments have analysed this, have studied it almost to death, and yet no one had the guts to address it. In particular, the Liberals and the NDP both buckled under pressure from Toronto because Toronto did not want a fair tax assessment process. Will the sky fall on January 1, as the honourable member for Lake Nipigon claims? Is this a tax grab bill or is it a balanced, fair tax assessment bill in your opinion?
Mr Nuttall: As a past councillor, I can tell you that when we had the reassessment done, the sky didn't fall. Nothing happened. Everybody was quite pleased; there were some increases. I think when this is put through, the people who should pay are going to pay, and there's nothing wrong with that. I know I've heard them talk about downloading. When I was on council, one of the things we used to say is that we want more power. We're getting it. So what are we bitching about?
Mr Hudak: Grant, good to see you again, too. I want to follow up on some questions I asked the previous presenter, especially with your experience as a municipal councillor and obviously your wisdom from holding a PC membership and being the president of your party.
This bill gives a lot of flexibility to municipalities on how to address their particular tax needs. For example, we're scrapping the BOT, which is an arbitrary tax, and letting municipalities decide then how to collect the tax; if they want to recapture that revenue, how best to do it. Some groups have suggested that it should be put right back on business. Others have suggested that it be broad-based. Do you think it should be the municipal government's decision as to how to collect taxes or should the province set very strict guidelines?
Mr Nuttall: It should be up to the municipality. I can tell you, too, that when our municipality did this reassessment, there were a lot of complaints. We were really concerned about the flak we were going to take. We took no flak, to speak off. I think with the business tax, we have to look at balancing it out. The municipalities have to have the power to spread it out but the municipalities also have to understand that the amount of tax we used to write off, say $20,000 or $25,000 a year, should be taken into account, that we don't have to put that in the bases, because let's face it, we're going to lose that $25,000 anyway. I can tell you that our municipality in 1989 had $4,000,000 in the reserve fund. We were good business people, I felt. On our own initiative we did the reassessment.
Mr Hudak: I appreciate that point, too, about the difficulty in collecting the BOT. That hasn't been brought up enough in this committee, so I appreciate your insight into that.
My second question had to do with the idea of a separate rate for small commercial business. The BOT elimination levels the playing field across those sectors. Some groups have suggested, again, that there should be a separate rate for small businesses, maybe a downtown area or something like that. What are your feelings on that idea?
Mr Nuttall: I agree with that, because I'll tell you right now, our downtown is dying because everything is moving to the highway. I don't like to use that word, "dying," but it's bad, it's really bad, and a lot of municipalities are facing the same problems. I think they have to look at the small businesses, because they're the ones who create jobs. Big businesses create jobs, but the little guys create a lot of jobs.
Mr Phillips: I appreciate your being here. Actually, it's irrelevant to me who's the president and what not, but you're the second one who has made quite a --
Mr Nuttall: I like to tell you that up front.
Mr Phillips: Mr Doherty in his brief said he was the president of his Conservative riding association. We're pleased that you could be with us.
I'm a fan of AMO, the Association of Municipalities of Ontario, and I'm a big believer that local municipalities know things well. I used to be a businessperson, had 300 employees, three companies, all that sort of stuff, and I would never take a business decision without some study on the impact of it. AMO points out:
"Since there were no impact studies done before making the tax policy change, it is difficult to know what the overall impacts will be. The impact of the Who Does What reform is also an unknown variable in determining the aggregate impact on property tax. AMO strongly recommends that such an impact analysis be done prior to the bill's third reading."
In other words, they're saying, as you said in your brief, change is needed, let's make change, it's been studied. But strangely enough, for some reason or other, the government refuses to issue an impact study on what the impact's going to be. You, as a councillor, and me, as a provincial member -- don't you think AMO's right, that we should have some idea of what this is going to mean before we sign our name to it, or is AMO all wet?
Mr Nuttall: I think every municipality knows how much business tax it collects. I used to know how much it was when I was on council.
Mr Phillips: Why would AMO say this, then?
Mr Nuttall: You're talking about AMO as -- the biggest organization that AMO has is in Toronto. We're little guys up here in northwestern Ontario. We have a representative from Rainy River on there. Perhaps he doesn't agree with AMO. As you probably know, we don't agree with AMO all the time because we tried to get a member up there as president and the big-city Toronto people voted us down.
Mr Phillips: So you don't think we need any impact studies before we approve the bill?
Mr Nuttall: What kind of impact studies are you talking about? You could study yourself to death.
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Mr Phillips: But suppose I said to you, "Your small business tax is going to go up and large business property tax is going to go down." That's what I believe, that's what my own internal work says. The government says, no, I'm wrong. Don't you think maybe we should produce some numbers to say who's right and who's wrong before we approve this thing? Or, is it just, Mike Harris must be right and so --
Mr Nuttall: I didn't say Mike Harris is right or wrong. I'm just saying it's a good bill and it should be done. Then again, you're fearmongering. That's what the Liberals and the NDP and their coalition seem to think.
Mr Phillips: No, excuse me. I'm saying I want the facts. I think I'm right.
Mr Nuttall: Do you know the facts in Dryden, what the effect would be?
Mr Phillips: I'm assuming, because they don't issue an impact study, that we don't have the facts or they're hiding the facts; one of the two things.
Mr Nuttall: I can tell you, as a past councillor, I can't see anything hidden here. Because we know how much the business tax is, we know how much the property taxes are, when I was on council, and we sat there with a big surplus.
Mr Phillips: Will your business tax go up or down?
Mr Nuttall: If we have a good council in, it should go down. But if they're Liberals, they'll go up. I had to give you that little dig.
Mr Pouliot: We met before. It's a renewed pleasure. I too spent some 10 years at municipal council and I've been travelling the North Shore with this job for 12 years now. Our riding is the largest geographical riding in the province of Ontario. It's made up of very small towns, not unlike Dryden, smaller than Dryden but similar in nature. I can appreciate that you drove four hours to get here and you did so at your own expense. I hope, sooner rather than later, that if you don't get compensation for mileage --
Mr Nuttall: I don't expect to.
Mr Pouliot: No, no, excuse me. Would you please, kindly, and I will listen to you.
Mr Nuttall: Sure.
Mr Pouliot: I think that's fair, that you might get another reward. Who knows? There are all kinds of twists in the future, and in the short term it looks rather promising.
You've mentioned Domtar paying 51% --
Mr Nuttall: Domtar? Did they sell out? I didn't know that.
Mr Pouliot: Avenor. I'm sorry. I made a mistake. I apologize -- Avenor, paying 51% of --
Mr Nuttall: Tax base.
Mr Pouliot: Tax base. Is that both general purpose and education?
Mr Nuttall: I don't know what their education tax is, but I know their tax rate is 51%.
Mr Pouliot: So in the case of this legislation, in Dryden, Avenor would pay less because you've mentioned that they would be able to create jobs, right?
Mr Nuttall: That's good. Yes.
Mr Pouliot: So they would pay less money?
Mr Nuttall: They probably would.
Mr Pouliot: That's right. Kimberly-Clark in Terrace Bay, for both general and education purposes, pays about 65% or 68%; Domtar in Red Rock pays about 60%; James River in Marathon; Hemlo gold field; all contribute what seems to be a disproportionate amount. But if you take away that ability -- and they don't seem to be complaining a lot; and they do pay a high proportion but everything has to be put into perspective -- who will pay the difference?
Mr Nuttall: Like I say, again, when I was on council, we had a very balanced budget. We had lots of money in reserves. As far as education, I know the education is going to cost us a lot less with the education bill that's coming through, which is great, because we're not going to have the trustees to bill. I really can't say. As a past councillor, if we don't have that money coming in, I think we would look to some other places to probably collect it, if we have to. But you're just saying we have to. You're not sure.
Mr Pouliot: The consensus that I'm getting at the present time -- most small municipalities, for instance, don't pay for OPP service, don't pay for policing. They only pay for 20% of the welfare. They don't pay for senior housing. When they balance this against the education portion, what they pay for education, they come up anywhere between 30% and 100% increase in taxes. They're very vulnerable.
With this, if you have a decrease from the main employer, you need a lot of assessment to make up for this; and they're not growing; they're lucky if they stay the same. Small business creates jobettes; big business creates jobs. There's a big difference between the minimum wage in most instances, not because you are not well intended but because you cannot pay more, a difference at the main factory or at the main mill, which is the heart of the business community.
I have some difficulties, and I would have more if I didn't know that this is downloading. Get ready. What the province is doing is taking over a predictable cost, that of education, and handing you the vulnerability of demographics and those who are more subject to impose a high cost on the system. Let's make no mistake about it. No government which is elected in the western world would endeavour to take the political risk associated with this and other documents if it was revenue-neutral. If there are five people they haven't antagonized so far, they'll just look to the Yellow Pages and ask them to make a presentation. I'm just wondering, what will happen to the government side when they run out of presidents of riding associations.
Mr Nuttall: Is that a question, or did I get a speech?
The Chair: I didn't hear a question, but if you would like to comment, you're at your own risk.
Mr Nuttall: I don't like to comment on his speeches. I've watched him in the House the odd time and it's the same thing: You can go on and on and say nothing. As far as I'm concerned, as a past councillor for six years, we're big boys. We've been asking for everything -- not downloaded, but given to us so that we have more power so we can do things. But the Liberals and the NDP never gave us that power. They always said: "No, we can't do that. That's politically insane."
The Chair: Thank you very much, Mr Nuttall. We certainly appreciate your taking your time and driving that distance to make a presentation to the committee. We do appreciate your input.
The committee has no further business this morning, so we will stand in recess until 2 pm this afternoon. We have had a further cancellation and we have been able to move our 1:40 up to 2 pm. Our 2 pm is cancelled. So we will commence --
Mr Spina: Mr Chair, I've seen two lists. Is the 2:40 cancelled or on?
The Chair: On your list, the 1:20 is cancelled, the 2 o'clock is cancelled, and the 2:40 is cancelled. Our 1:40 has moved to 2 pm. The committee stands in recess until 2 pm.
The committee recessed from 1207 to 1357.
VALHALLA INN, THUNDER BAY
The Chair: I trust we all had a lovely lunch. We now welcome Mr Meijer from this hotel, the manager. Welcome to the committee, sir. We have 20 minutes together. We have copies of your presentation, I believe, and if you'd like to make some comments or read your presentation, we'll fill in any remaining time with questions.
Mr Edward Meijer: I'd like to read the presentation. Good afternoon, Mr Chairman, members of the committee. I'd like to thank you for the opportunity to appear before you today. As I said, my name is Edward Meijer and I'm the managing director of the Valhalla Inn and, I might add, a partner in the ownership group of this hotel.
Our hotel would be classed as a medium operation, catering for the most part to the business, leisure and convention trade. We have 267 sleeping rooms, 16,500 square feet of meeting space and employ approximately 255 employees.
Bill 106 proposes for the most part a fairer and more equitable system of property taxation. It does, however, contain some proposals which require amending and clarification.
In introducing the assessment process, the concept that it is to be based on a three-year rolling average is a positive step. The current system is open to the vagaries of the fluctuating market which can and do result in assessment being unrealistic to the market. The taxpayer is then forced to wait for three years for reassessment or goes through an expensive and time-consuming appeal process.
We do not mind paying our fair share, the key word being "fair." What we do need is that it be predictable and stable so that we can budget accordingly. Certainly we could win on a low in the business cycle but we can also be forced to weather the high point, as I experienced in the 1988 assessments from my days in Toronto. It is difficult, if not impossible, to weather such unfairness. So I can attest personally to the benefits of the levelling aspects the rolling average process will provide.
Because of the differences between actual value assessment and market value assessment, we do not believe it worthwhile to enter the debate. Suffice it to say there is a difference, but for the vast majority of us in the province who have experienced the market value process it's not a major issue.
We do have a concern, however, with the proposal that would enable the minister to create new classes of property upon the request of a municipality. Residents vote, businesses don't, and we have a concern that municipal council could easily develop a policy which it deems in its best interests, for example, to tax hotels higher than other commercial property. Having spent a number of years in Toronto, as I mentioned earlier, I am familiar with what the type of unfairness can mean and what the impacts are. Such unfairness has been catastrophic, and I would not want to see this potential possibility happen here.
Clause 2(2)(e) should be amended so that any new property class is created by legislation. Amending the legislation would provide us with an insurance policy that we suggest is required, given the track record of some municipal thinking over the years. If the municipal request is in the public interest, then that municipality, the government and the Minister of Finance should want to take it through the legislative process, which includes public consultation.
I am also concerned about the proposed variable tax -- mill -- process. That concern relates to how those rates are set vis-à-vis the differences between residential rates and commercial-industrial rates. Municipal politicians will naturally want to maintain, or even possibly increase, the differential between residential and business-commercial rates.
We strongly urge you to ensure that differentials be narrowed, and at the very least, not widened. The government must become the leader in communicating the negative impacts of lost jobs and tax revenues which result from unfairly taxing businesses. We are the means to providing the economic lifeblood of our community. We do not mind paying our fair share, but fair is fair.
Dropping the business occupancy tax, the BOT, is more than likely a good thing. With a relatively large percentage uncollected yearly, municipalities will know that they can count on collecting 100% of their assessment. This should allow the municipalities to lower their requirements and thus result in lower taxes.
We are concerned, as municipalities move to recapture their lost revenue, that it is done fairly. A hotel's BOT currently is 30% of its property tax bill. We believe it unfair if a municipality is to disproportionately load more than the amount back on to our tax bill. We urge you to ensure that if municipalities do move to recapture this tax, it is done fairly and equitably. Having witnessed first hand the subsidization process our industry endured in Toronto, I don't want to see this as the start of another subsidization, this time province-wide, municipality by municipality.
This legislation obviously is not the hot issue it is in Toronto, or the other few areas that have not undergone market value reassessment. However, it's important to the rest of the province as it does introduce a new assessment process and, with it, new regulations.
We urge you, the government, to ensure it moves forward on our suggested changes. We believe it will not only make the legislation better, but it will help to guarantee that the benefits flow through to the taxpayers. That concludes my presentation.
The Chair: That leaves us about five minutes per caucus. Mr Phillips, would you start us off, please.
Mr Phillips: You have your finger on one of the problems in the bill, and that is that it is a reality, the business occupancy tax is gone. The government's already announced that. All of the municipalities tell us that they have to recoup that and they're all saying they will recoup it from the sector that currently pays it, commercial-industrial.
The Canadian Federation of Independent Business gave us a little chart showing that it will average, when it's put on to realty tax, the equivalent of a 42% increase in realty tax when the business occupancy tax is transferred on to the realty tax. Those who are paying over 42% BOT will benefit; those paying less will pay some more. I don't think we should kid ourselves. That's what's going to happen. Every business group has told us, without exception, I think, "Don't allow for these variable commercial mill rates," the classes that properties have as the bill prescribes right now, one commercial.
The problem we run into is that everybody says, "Get rid of the business occupancy tax." Okay, but that isn't the issue. The issue is, how do we assure some fairness when it's reapplied. It's a 93-year-old tax, I think. Now it's gone but being put back on in a different way. Your recommendation here, as I recall, is to ensure it's done fairly and what not. The bill essentially will result in it being done the way I say, in my opinion. If that were to happen, would you still say, "Listen, we know we may pay some more, but overall we still think the bill is solid and should proceed as it is?"
Mr Meijer: What we're saying is that we would expect it to be not increased to what we're paying now because as far as our industry is concerned, it's 30% of our total tax bill. If that obviously were to increase by 12%, it would be pretty devastating.
Mr Phillips: I'm in opposition. That's the result of the bill, in my opinion. Our caucus has produced some numbers that say that's a result of the bill. I urge you, I suggest to government members, you should get the numbers. If you disagree with our numbers, you get the government to table the numbers, because that's the result of all of this without any question of a doubt.
You mention in here the difference between actual value and market value. You say that you don't plan to comment on it, so maybe I'll move on. It is a big issue, by the way.
Mr Meijer: It's not so much here because we've been reassessed. I'm speaking basically from our business as I'm sitting here and I know that in Toronto there was a very serious problem. I think we're moving in the right direction.
Mr Phillips: The issue there will be that the Who Does What panel recommended one approach; the government's decided to take another approach that will have a fairly profound impact on properties. The Who Does What panel said, "Assess property on the basis of its current use." This bill calls for assessing it on the basis of what the property could be sold for on the market, which means -- imagine you're in a retail store and you're being assessed on what this building and land is worth vis-à-vis other similar retail stores, but if that land could be redeveloped for an office tower, you'll be assessed at the rate of the office tower, not at the rate of your current one.
But the other point you make here is your very strong recommendation of not permitting, other than through the legislation, the establishment of any other commercial classes.
Mr Meijer: That's right.
Mr Phillips: Could you expand a little bit on that for us?
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Mr Meijer: It's a hypothetical thing, but say for example the city was to have problems with the budget, hypothetically speaking. They could say, "Well, okay, let's increase the tax base," and they could basically class a hotel a different class by applying to the minister and the minister could say yes, and bang, it's done.
What we're suggesting is that it become a legislative item so at least we have an opportunity to speak up and not that it's done arbitrarily without our input. That's basically what we're saying, that we'd like to have some input in it if they decide in their wisdom. Sometimes with local municipalities, as I mentioned, the public votes, but we don't vote. They can easily get a majority.
As I say, we're sitting at a corner. We spent $2.2 million, but we did it out of necessity, not because we're the fat cats of the community. This property went into bankruptcy in 1995 from January 18, basically because it was a desperate struggle. We had to inject the money, but you hear people now say, "Oh, well, you people can afford it" because we look sort of opulent, but we have to do that to stay in business. We're concerned that the municipality will not necessarily view it in that manner.
Mr Pouliot: As always, it's a renewed pleasure. Thank you, as a guest, for your ongoing hospitality through the many, many years.
Mr Meijer: Thank you.
Mr Pouliot: You're a risk-taker. You're here and you say residents vote, businesses don't, and we have a concern that municipal council could easily develop a policy which it deems to be in the best interest, for example, to tax hotels higher than commercial property. That's a fact. Municipal councils represent everyone under their jurisdiction, and lobbying and pressure -- all positive stuff. When you put things on a scale, you might be asked to recoup the tax. Your business occupancy tax is 30% of the overall tax that you pay to the municipality. You're asking that changes be governed by legislation; in other words, opening up the act as opposed to doing things by regulations, which gives legislation the light.
This is more difficult but not impossible for the government. That's one mechanism, but there's really none. If you had a different government next time, or should this government take a different approach, even at the risk of opening the act, they could well do that if they had the support of the House. It's one more checkmark, but it's far from being foolproof, and I know you understand that. But it's more visible, because you can see it.
Mr Meijer: That's right. It's better than not having it at all.
Mr Pouliot: That's right. I like the assessment approach and the introduction of a three-year roll as opposed to one year to avoid, like you say, vagaries and variations, fluctuations, peaks and valleys. I think across the province that point has been well taken. It's been mentioned quite often. It does not in any way jeopardize the integrity of the legislation. It certainly is not a major deterrent and it establishes a balance. It's a sign of goodwill as well. With three years you avoid that. Especially after the first year, if you haven't been reassessed or assessed for some time, then you could be the benefactor because the marketplace can be rather harsh in judging these things.
I'm always intrigued. You pay little attention to market value or current value or actual value assessment. Some legislative forensic and DNA experts, if there were any such thing, would have a great deal of difficulty telling us the difference between what is MVA, what is current value and what is market value. You see, market value is what the market will bear, by definition. Everything I buy is market value. A cup of coffee I buy, I buy it today, so it's market value. Current value, I take it by looking at Webster's and at Oxford, means the same thing. For the people out there, for me, it means the same thing.
Of course if you've made a commitment that you will not, when you form the government, introduce market value assessment, because there are a lot of seats in Toronto, for instance, as you well know, then by changing a few small things, very minute things, you could come back with a new draft and say, "It's not market value assessment," and argue that until you're blue in the face, "It is now current value assessment." But let's face it, a duck is a duck is a duck. What you're talking about here is fairness.
Mr Meijer: That's right.
Mr Pouliot: You couldn't care less about the definition, whether it's veiled or whatever. I have to agree with you and I hope everyone who comes up with a presentation or with the preparation of legislation would emphasize an attempt and prove, demonstrate, fairness, as opposed to playing with words like a shell game that belongs to a cheap circus about to leave town, to a vaudeville or a tombola. I like your honest and commonsensical approach. The issue here is not the definition of what is or what is not, but how it hits you at the marketplace, and you wish some protection to keep the municipal people away from the long-overdue benefit in what you're getting. True?
Mr Meijer: That's right.
Mr Pouliot: I understand your presentation and I thank you.
Mr Ford: I'd like to get some idea of what you pay in tax per room here, the reason being we've had many people come before us owning hotels, managing hotels, and they gave us some indication of what it costs them per room in the Toronto area. I'd like to know what it costs you per room on the tax on an annual basis here.
Mr Meijer: My annual tax bill here is $550,263, and it translates into $2,061 per room.
Mr Ford: I realize the volume wouldn't be the same here as it would be in downtown Toronto, but downtown Toronto is paying over $5,000 per room. This is what I want to hear.
Mr Hudak: This bill is about tax fairness and finally we have a government that's willing to bring this bill in. We've had other governments, the past two or three actually, back down. When you're in Toronto you see mansions paying the same amount of property taxes as a modest home for a young couple. That's another reason when you look at the BOT why it's a tax fairness issue. You might have an insurance company of the same value next door to a small retailer, but the insurance company, just because it's selling insurance instead of shoes, is paying a higher BOT. That's why it certainly makes sense to have the one, to get rid of the BOT and have a commercial rate.
Then your concern is, you're paying the 30% now and if the municipality says, "Put it all on the commercial tax," will that change your taxes? The answer I would have is that it's the municipality's decision whether they spread it out across the base across all tax classes, if they look to have a different commercial tax rate for different kinds of businesses, even motels would be part of that.
The question I have for you is, should these decisions be made by the province? In this legislation, should we dictate how the BOT loss of revenue will be dealt with or do you leave that up to the individual municipality to make those kinds of decisions?
Mr Meijer: If it were to be my choice, you can leave it up to the municipality; however, we should have input into it. For example, at the moment it's 30%. I don't think it would be fair to now say, "Because of Toronto, we make it 42%." That in reality would be a tax grab, as far as I'm concerned. The issue and why I have brought this up is because we want to be part and parcel of the process, that we can participate in. As I mentioned, I can go to city council and it's one vote. I can have 10 people sitting beside me -- and you see it on issues of smoking and skidoo trails and you name it -- and the antis, or whatever you call it, they come in groups there and they basically take up the whole room and I'm just one vote of many. At the same time, we cannot ignore the fact that my educational taxes last year were almost $300,000. If you're going to change the tax base, I would like to have my say in it.
Mr Jim Brown: I just had something handed to me. It's got your beautiful picture on it, Gerry. You've been arguing that current value, market value, fair value, whatever you want to call it, are all the same. I'd just like to read a little bit of this into the record. This is on your 1990 campaign material.
Mr Pouliot: Let's be modern. Let's be current.
Mr Phillips: I like this part; go ahead.
Mr Jim Brown: "Honouring Metro Toronto's request, the provincial government has taken the necessary steps to permit Metro-wide reassessment of property tax under a new system of market value assessment. This will ensure equity of tax burden between newer and older homes, bringing substantial savings to taxpayers of Scarborough." Isn't that what we're doing, Gerry?
Mr Pouliot: Come on. If you're going to show us some pictures, show us some pictures.
Mr Jim Brown: It's a beautiful picture.
The Chair: With all due respect, Mr Brown, I think that's probably more appropriate for clause-by-clause.
I would like to thank you, Mr Meijer, for your presentation today. We appreciate your taking the time to make the committee aware of your feelings.
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PAUL ANTHONY PEPE
The Chair: We now welcome Mr Pepe. Welcome to the standing committee on finance and economic affairs, Mr Pepe. We're pleased you could join us today.
Mr Paul Anthony Pepe: Good afternoon, Mr Chairman and members of the committee. My name is Paul Anthony Pepe and I'm a local landscape contractor. My presentation is probably a lot briefer than many others you've seen today. I appreciate the opportunity to speak before this panel this afternoon as a supporter of the proposed changes outlined in the Fair Municipal Tax Act, known as Bill 106. My reasons for wishing to go on record for my support of these changes are many. I am a supporter of municipal restructuring and of giving more financial controls over local issues back to the community, and I feel that this bill complements other legislation regarding this.
I'm also speaking as a small business owner who knows the frustration of being overtaxed and how the layers of taxes currently levied are posing a threat to small business survival. I'm also here as a potential first-time homeowner, and finally as a citizen of Thunder Bay who's concerned with the economic future of this city. I have a personal interest in how Bill 106 and other legislation will affect the resurrection and survival of downtown core commercial properties.
I'm aware that Thunder Bay municipal tax assessments are relatively up to date and on the surface there should be little concern from local residents on the implications of this bill. However, I am also aware that almost one third of other municipalities across the province are having properties assessed at levels from the 1950s, 1960s and 1970s. While I lack the statistics to accurately put a dollar figure on what this means in lost revenue, I do know this: The reductions in transfer payments to municipalities, coupled with the shift in responsibilities by the communities for welfare, transit and other services, mean that communities must start looking to either cut services or find new revenue sources. Communities with outdated tax assessments, once reassessed, will provide the funds to adequately implement these changes.
However, there's a far more important issue and that is the issue of tax fairness. What these underassessed properties have amounted to is a subsidized property tax rate at the cost of other Ontario taxpayers. I cannot help but think that these municipal assessments being current, perhaps provincial transfer payments to these communities would have been lower as well over the last decade or two. Bill 106 will promote tax fairness that will ensure that all properties across the province will be assessed equally and more frequently, thus creating a level playing field for residential owners, farmers and business owners alike.
While I did see the danger of some of these grossly underassessed communities -- the potential exists for residential and commercial property owners to experience economic challenges pertaining to any substantial tax increases they may face -- I am pleased to see that the issue has been addressed with the inclusion of the eight-year phase-in period and a very reasonable 90-day assessment system. Furthermore, with the province taking over the funding of local school boards from the municipal tax bill, the savings to the municipalities will in some affected communities decrease the actual dollar amount of the tax increase. This, however, I believe is contingent on responsible municipal governments reinvesting tax savings and other revenues. It must be made clear to the municipal governments when dealing with the restructuring and with these new tax assessments to include any substantial tax increases within their budgets.
I believe that Bill 106 will also play an important role for small businesses. The reclassification of the properties outlined in subsection 7(2) allowing for six different classes, up from two currently, will allow for greater fairness to commercial property owners whose properties fall under more than one classification. Potentially, these would include landlords, multi-user buildings and contractors such as myself, who work from their residential properties. These properties logically should have their taxes proportioned to the size of each use as a percentage of the entire property.
This amendment to the tax law should ease confusion and confrontation between small businesses and the municipal tax offices in disputes over property use, and allow for more flexibility. This is especially important today due to the rising number of individuals like myself in the province who are self-employed and do carry out businesses out of our residences as well.
In the case of small business owners, it is unfair to tax the entire property at a higher commercial tax rate when a portion of their property also contains their residence.
I also firmly believe that the replacement of the farm tax rebates with a new lower rate of taxation is a much more simplified and cost-effective approach to the situation.
I agree with the repealing of the business occupancy tax as another step in the right direction of reducing the taxation burden to businesses, especially those who rent commercial space for their operations. It has been an unfair tax for both the landlord and tenant to shoulder. The new reality within the private sector has meant that small businesses require every tax saving available to them, not only to stay competitive but to stay solvent.
This aspect of the Fair Municipal Finance Act will prove beneficial to communities that have seen an erosion of their downtown cores as businesses have moved into newer retail and commercial environments. While the higher property taxes paid in these developments is offset by the increased revenue and better exposure, it has left a troublesome blight in communities like Thunder Bay, and that's decaying cores.
In Thunder Bay, for example, the topic of core erosion is now a daily subject for many who are searching for ways to resurrect these areas. Unfortunately, the more the commercial space is vacant, the lower the incentives are for young upstarts like myself to invest back into these areas. In time, this has eroded the market value of these properties, meaning that potentially they have been assessed a higher tax rate recently than they can realistically bring in.
By updating these commercial assessments at their current market value, these properties will become more attractive for investment, and commercial operators may now be able to rent or own with lower tax rates. Considerations made under Bill 106 allowing for assessment under the present value, not past values nor future speculation, would provide the catalyst for new development and investment from the private sector. I believe it will also go to help maintain historically active commercial neighbourhoods within the city.
Because properties under the act will be assessed on three-year rolling averages, the sharp tax increases due to sudden development surges would be minimized, offering a fair long-term rate to individuals and groups who have taken the risks of rejuvenating the downtown cores.
In Thunder Bay, we know all too well the effects of business leaving the cores and how that adversely affects consumer confidence. However, we also know that every new business that invests in one of these cores is noticeable and welcome. Offering a fair municipal tax rate is one important element in the health and growth of our community.
Changes to the equitable taxation of properties is long overdue and the introduction of Bill 106 is a positive step towards establishing a current province-wide assessment rate that will greatly benefit the ratepayer and the municipality alike. My personal interpretation of this act is that it will complement the Conservative government's agenda of restructuring municipal affairs, thus making the local governments more accountable on local issues while reducing the size of the government at the provincial level.
Bill 106 is an aid being given to the municipalities to help reduce the cost associated with this restructuring. While some may feel that there is nothing but a tax shift and responsibilities to the local level, as a taxpayer in a community with fairly current assessments, I find it unacceptable that some other communities have not kept pace with these changing times and economic growth, giving their residents a subsidized tax rate at the cost of either commercial taxpayers or the Ontario taxpayers or indirectly funding their transfer payments.
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In preparing to speak before this committee today, I had the opportunity to discuss this with many of my friends who are also small business owners. To be very honest, I find a great deal of support among local business owners and ratepayers alike, particularly among people of my generation who want fairness in taxation, not overtaxation.
I have read the bill in its entirety and while I admit that I am not an expert on the legalese of the document, I do know this: It is thoughtfully designed to bring tax fairness to Ontario municipal ratepayers and is well thought out in its approach to softening, as best can be accomplished, the increase that some Ontario ratepayers will be facing.
The bill shows great potential as a tool to aid in the rejuvenation of core properties by eliminating the business occupancy tax and basing property taxes on the current market values. By themselves they may not cause private sector investment, but they will be an important tool in aiding it.
In summing up, this bill creates an even playing field for tax assessments across the province and for the next generation of taxpayers, who, I assure you, will be more concerned with fair and effective taxation than the present generation.
The Chair: That leaves us about three minutes per caucus for questions.
Mr Pouliot: Thank you, Paul, for your presentation. You support the bill; the people you talked to are supportive of the bill. There's an expectation that the law will achieve fairness and a decrease in taxes.
The person who was here before you is the manager and part owner of the Valhalla. As a matter of public record, he mentioned that $550,000 is what he forks over as his municipal share. Out of that, 30% -- which is $165,000 -- is the business occupancy tax. The Valhalla partners will no longer have to pay this. The Airlane is the same size or slightly bigger; Avenor, a lot bigger; Bombardier, big; Abitibi -- and I can go on. If the Valhalla pays $165,000 less in municipal taxes, others will be the bigger winners, if you wish.
Somebody's going to have to pay something. You can tighten your belt and get rid of two police officers -- that's already been done, but you can do some more of that; the manager goes on half-time. But there's been some streamlining over the years. It's not as fat as it used to be.
I had lunch today -- and I want to share this with you and would welcome your comment, Paul -- with a municipal councillor from the city of Thunder Bay. He says different departments are keeping tabs. From what they know at the present time -- and it's inaccurate, because everything is subject to change, they're still negotiating with AMO etc, and what the new assessment will yield -- although in your case you're current, so that shouldn't be the major factor.
Right now on the tradeoff, they're $53 million behind. That's the way they calculate things. So take 10%, 15%, 20% off. There are a lot of people where I live, in Manitouwadge, who are expecting, because they heard it said on television by the Premier -- I mean, if you don't believe the Premier, who are you going to believe? He said by the year 2000, the reeve in the community should be able to announce that, "I will get, in my small house, a decrease in municipal taxes of 10%." Mike Harris said that.
As I travel around now, there's a little more doubt, because if I talk to the municipal leaders, they're saying: "No, no, no. Not a 10% decrease nor a 10% increase. We're costing the programs and this is not a tradeoff." They see it as more downloading.
You have expectations. You're in support of the bill, the intent and the principle, but in the final analysis when the other shoe drops -- and I want to wish you well -- I hope that in your support of the bill and your expectations as a citizen, an entrepreneur and a homeowner, you will not be disappointed when you look at the bill and you compare the final levies of April or May 1998 and you see that you're paying more taxes.
Thank you for your presentation, but please stay vigilant. Please stay alert. Old folks' homes cost a lot more money than education, perhaps; it's less predictable. So I want to wish you well. But when the big ones are paying less, somebody has to pick up the slack. There is no free lunch here.
Mr Rollins: Thanks, Paul, for your presentation and your confidence that you think it will be better. You're a landscaper. Do you have a shop you work out of?
Mr Pepe: I have a shop out of my home, yes. It's combination residence and commercial.
Mr Rollins: At the present time do you pay BOT?
Mr Pepe: No, I don't, not where I am. Many of my friends who are in retail and various other businesses in Thunder Bay do pay it. From that aspect, I do have a concern with that. Working out of my home, I do not personally experience that at all.
Mr Rollins: How much staff do you have working for you at the peak time?
Mr Pepe: Peak, in the summer: 11.
Mr Rollins: This is another thing that's quite a concern. You're running 11 people out of there at peak time; it's not year-round. It's a small business, there's no question about that; it's not a big business, but it's a good-sized business. Yet because you're running it out of your home, you miss paying that tax and as everybody says, the municipalities want more tax. They're going to be trying to make sure that we keep it on a level playing field and hopefully have enough to pay all their bills.
Do you see eventually down the road that you're probably going to have to start to pay on a different tax structure when you're working out of your home?
Mr Pepe: What my company's going through right now -- we are putting together a proposal to have a proper commercial site for my business. One of the big concerns we have is that suddenly we will be taxed at a commercial rate, which for a small business -- what I'm looking at doing is having our nursery operations, our retail operations, our service operations and my residence on one rural property, just for convenience's sake. A very real concern is the tax rates we'll be paying out of that.
Currently, if I were to have to pay some sort of business occupancy tax rate, with the competitiveness of my industry and the nature that most landscapers do operate out of their homes in the Thunder Bay area, it would probably be detrimental to the survival of my business.
Mr Rollins: Because your margins are so tight.
Mr Pepe: Our margins are very competitive and very slim, yes.
Mr Rollins: Let's hope that we do the right thing and keep your faith.
Mr Phillips: That was a very thoughtful brief. Obviously you studied the bill very well because you know it well and you went through a lot of detail. I appreciate someone having the time to do that, as well, to get into that detail.
There's an organization called the Canadian Federation of Independent Business that is well regarded. They represent businesses across Canada; they've got good research. They're worried about the bill because they're worried that, for example, as the business occupancy tax comes off, it goes right on to the realty tax. I don't know whether they will be able to get at your residential property or not, but for other people who are paying business realty taxes, it will be put on their realty tax. So there will be a levelling. If you've got a higher business occupancy tax, it'll come down. You're fairly unqualified in your support for the bill; you think it's almost good without change.
Mr Pepe: Yes.
Mr Phillips: We've got a little bit of worry on our side that it's going to hurt, as CFIB does. They say, "Ironically, it's likely the elimination will harm our small business sector." Do you think we need to be worried at all about that, or just let her rip?
Mr Pepe: No, I don't think we have to. I know with the change in the law from the two-class system to the six-class system, I have read a little bit into the spreading, what will be lost from the BOT to spreading it among the other classes.
I still believe, though, in a lot of other communities with the province taking over the education taxes -- in fact, I had a letter published in a local paper about three weeks ago about the restructuring. Just to give you a little bit of brief on that, I came with statistics for Thunder Bay, which essentially put $42.5 million back in the city coffers for the reinvestment into welfare, transit etc.
In cities like Thunder Bay and others, we can recoup and reinvest those statements adequately without any real tax increases at all. I think having the business occupancy tax removed quite honestly, especially in the downtown cores, will bring in smaller new businesses.
Mr Phillips: Actually, the experts say the opposite. I know that you've studied it, but the six classes, now -- you know what the six classes are?
Mr Pepe: Yes: farmlands, forestry, managed lands, pipelines, rights of way.
Mr Phillips: They split commercial and industrial. That's the only difference for business. Every single municipality has told us, "Take the business occupancy tax and put it on commercial-industrial, and for small businesses the taxes go up; large they go down." But for you and your friends that doesn't concern you?
Mr Pepe: No.
Mr Phillips: Okay, that's useful.
As my colleague said, as we've gone across the province talking to municipalities, they believe when everything's done, education is taken off residential property tax, all of the seniors' housing, the seniors' care, the child care, 50% of the social assistance put back down and when you take into account the funds that the province says it's going to provide, which is about $1 billion minus $666 million, it's adding about $1 billion on to property tax. When we talked to the city of Thunder Bay, they say they've added $53 million of new costs, but this was as a result of their financial people looking at it in detail. You've done your own analysis that says they're wrong on that. Am I reading you right?
Mr Pepe: No. I was drawing comparisons with this $42.5 million, the tradeoff with the province taking over education taxes.
Mr Phillips: I think they said they've subtracted that and there's a --
Mr Pepe: Even so, what I read into it, the statistics I looked at showed that it was still a substantial savings for the city to be reinvested.
Mr Phillips: You should give those statistics to the city, because their financial officials believe it's actually a substantial increased cost to them and you obviously are working on different information.
The Chair: Thank you very much, Mr Pepe. We appreciate you taking the time to come in and make a presentation to the committee today. That concludes our time in Thunder Bay.
I have one point: Earlier it was requested that the research group provide information. It's been decided, I believe with everyone's agreement, that it would be more appropriate for ministry staff to supply that information.
Mr Phillips: Perfect.
The Chair: Thank you very much. That will be done in due course.
We will stand adjourned until 9 am tomorrow morning in Ottawa.
The committee adjourned at 1442.