ASSOCIATION OF MUNICIPALITIES OF ONTARIO
BOARD OF TRADE OF METROPOLITAN TORONTO
TORONTO ASSOCIATION OF BUSINESS IMPROVEMENT AREAS
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
ONTARIO SPECIALTY TENANT TAX COALITION
CONTENTS
Wednesday 3 June 1998
Small Business and Charities Protection Act, 1998, Bill 16, Mr Eves / Loi de 1998 sur la protection
des petites entreprises et des organismes de bienfaisance, projet de loi 16, M. Eves
Ministry of Finance briefing
Mr Tom Sweeting, assistant deputy minister, office of the budget and taxation
Ms Ann Langleben, director, tax design and legislation branch
Association of Municipalities of Ontario
Ms Janice Laking
Board of Trade of Metropolitan Toronto
Ms Louise Verity
Mr Bob Sniderman
Mr John Bech-Hansen
Citizens for Local Democracy
Mr John Sewell
Toronto Property Tax Freeze
Mr Michael Opara
Mr Michael Walker
Mr Norm Gardner
Toronto Association of Business Improvement Areas
Mr Alex Ling
Association of Municipal Clerks and Treasurers of Ontario
Ms Cathie Best
Mr Bob Heil
Canadian Federation of Independent Business
Ms Judith Andrew
Mr Ted Mallett
City of Toronto
Mr John Adams
Ms Wanda Liczyk
Ontario Specialty Tenant Tax Coalition
Mr Michael Sherman
Mr Phil Gillin
Mr John Barnoski
Mr Larry Derocher
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président
Mr Garry J. Guzzo (Ottawa-Rideau PC)
Vice-Chair / Vice-Président
Mr Wayne Wettlaufer (Kitchener PC)
Mr Ted Arnott (Wellington PC)
Mr John R. Baird (Nepean PC)
Mr Jim Brown (Scarborough West / -Ouest PC)
Mr Garry J. Guzzo (Ottawa-Rideau PC)
Mr Monte Kwinter (Wilson Heights L)
Mr Gerry Phillips (Scarborough-Agincourt L)
Mr E.J. Douglas Rollins (Quinte PC)
Mr Tony Silipo (Dovercourt ND)
Mr Wayne Wettlaufer (Kitchener PC)
Substitutions / Membres remplaçants
Mr John Gerretsen (Kingston and The Islands / Kingston et Les Îles L)
Mr Steve Gilchrist (Scarborough East / -Est PC)
Mr Ernie Hardeman (Oxford PC)
Mr Morley Kells (Etobicoke-Lakeshore PC)
Also taking part / Autres participants et participantes
Mr Gerald Sholtack, senior counsel, revenue, office of legal services,
Ministry of Finance
Mr Scott Gray, counsel, municipal and planning law,
Ministry of Municipal Affairs and Housing
Clerk / Greffière
Ms Tonia Grannum
Staff / Personnel
Mr Ray McLellan, research officer, Legislative Research Service
Mr Mark Spakowski, legislative counsel
The committee met at 0905 in room 151.
SMALL BUSINESS AND CHARITIES PROTECTION ACT, 1998 / LOI DE 1998 SUR LA PROTECTION DES PETITES ENTREPRISES ET DES ORGANISMES DE BIENFAISANCE
Consideration of Bill 16, An Act to give Tax Relief to Small Businesses, Charities and Others and to make other amendments respecting the Financing of Local Government and Schools / Projet de loi 16, Loi visant à alléger les impôts des petites entreprises, des organismes de bienfaisance et d'autres et à apporter d'autres modifications en ce qui a trait au financement des administrations locales et des écoles.
The Chair (Mr Garry J. Guzzo): The first item of business is the subcommittee report. May I have a motion, please, to accept the subcommittee report? Mr Phillips, seconded by Mr Rollins. Any discussion?
Mr Tony Silipo (Dovercourt): I just want to be clear whether the minister will be attending this morning.
The Chair: We have a letter dated June 2, 1998, from the minister's office indicating that he is tied up at a cabinet briefing this morning, but staff will make a presentation on his behalf.
Mr Silipo: So he won't be appearing.
The Chair: He will not be personally appearing.
Mr Silipo: I just want to put on the record not only my disappointment but that I find that completely unacceptable. In a situation like this, on a bill as important as this, with the way the government has chosen to deal with this by time-allocating this bill, by bringing it here in this way, it's completely unacceptable that the minister would not have the courtesy to come before the committee to defend the bill and explain the amendments he's going to make to this important piece of legislation.
Ministers are always busy, but one of the traditions of this place has been that they show courtesy to the committees of the Legislative Assembly when those committees are dealing with legislation, particularly a piece of legislation as important as this, particularly given, as I say, that the government has chosen, of its own volition, to first of all refuse for weeks and weeks to have committee hearings, and then has bowed to pressure and come down to one day of committee work on this bill. Even in that situation the government refuses to send the minister here, or the minister refuses to come here and sit in front of the committee and explain to us why he's proceeding in this way, why he's not proceeding with some amendments, or perhaps he is proceeding with some amendments. We will find that out, I suppose, during the course of the day.
I find it completely unacceptable, an affront to the whole process, an affront to our role as a committee -- not just from the opposition side but I would say to all committee members -- that the minister would not, on a piece of legislation as important as this, deem it important enough to be here.
Mr Gerry Phillips (Scarborough-Agincourt): Just to comment on it as well, the government set this agenda, the government said that this was the day they wanted to meet to discuss this. It wasn't as if this was some imposed day. Surely the minister, and he was responsible for setting this meeting, would have known whether he was available. Let's recognize what we're dealing with. This has become a comedy.
We've got Bill 106; then we've got Bill 149, amending Bill 106; Bill 164, amending Bill 149; now Bill 16 amending those bills, and I'm told we have a series of amendments that the government's going to propose. The government wanted to deal with them in private at 8 o'clock this morning. From our caucus point of view, we didn't think that was appropriate. We thought the public should know what these amendments are and we should deal with them in public now. This is $16 billion of tax revenue; this is huge. We fully expected that the minister could free himself up for half an hour to come and explain to the public what he's doing here.
This has become a comedy. The municipalities were waiting on Friday for the assessment rolls; the mayors were waiting for the assessment rolls. They already are six weeks late. It's costing the taxpayers at least $40 million. We are costing the taxpayers over $1 million a day by this delay because they can't get their bills out. It's literally $1 million a day. If the members opposite don't understand that, we have a significant problem. For the life of me, I can't understand why he couldn't spend half an hour with the public to explain the bill, to explain what changes he's planning in the bill.
In a few moments, we're going to have nine groups -- we only have time for nine -- present and they're going to want to know what amendments are planned for the bill and what changes.
The government was in charge of this timetable. We said, at least five weeks ago if not six weeks ago, "Let's get into committee hearings." The government planned no committee hearings, told us there would be no committee hearings, until they were forced last Wednesday to recognize that there are flaws in the bill. There are flaws in the bill that have to be fixed and we don't even have the minister here to explain that.
I find it unusual that on something this fundamental the minister couldn't -- I guess he's around the building somewhere. He's going over some agenda for some meeting that's going to take place some time down in the future and won't come here to explain the bill to us.
The Chair: Let me clarify it for the record. I don't think you intended to suggest that the committee would start at 8 o'clock this morning behind closed doors.
Mr Phillips: No, I'm sorry. You can see by the letter, I think, that the minister's staff said they would like to brief us on the amendments at 8 o'clock. We felt it was more appropriate for the public to be briefed on the amendments at 9 o'clock.
The Chair: Thank you for clarifying that.
Mr John R. Baird (Nepean): With respect to the comments made by my colleagues, to Mr Silipo, with the greatest respect, to walk in here and look surprised when you were informed yesterday that regrettably the minister was unavailable this morning --
Mr Silipo: I wasn't surprised.
Mr Baird: With the greatest of respect, that was clearly the impression you tried to leave with this committee when you were told before the subcommittee --
Mr Silipo: No, I was checking to make sure --
Mr Baird: I listened to you.
The Chair: Order, please. Mr Silipo, you'll have an opportunity later.
Mr Baird: We waited for 10 minutes because you were late, sir.
Mr Silipo: That's fine. If you want to put on the record that I was late, I was late.
Mr Baird: With the greatest of respect, you were told that regrettably the minister was unable to be here, but you wanted to invite him in some sort of political grandstanding gesture, and I think it's important to put that on the record.
Interjections.
The Chair: Order, please. Mr Baird has the floor.
Mr Baird: That is a fact and I'm going to put that on the record. With respect to the other issues, as a matter of courtesy, as always been the case, we offered technical briefings to members of the committee. I believe a good number of members of the committee, and one of the opposition members, took advantage of that briefing, which is regularly accorded, so we would have more time to hear from the public. I would have preferred to have had three or four more presentations from the public.
With respect to money being lost to the taxpayers, there is no lost $40 million here. That money is resting in the hands of the taxpayers. It's not being wasted. It's being thrown down the line. The whole thought, to think that tax dollars staying in the hands of taxpayers is somehow lost money, that money, the interest costs are remaining in the taxpayers' pockets. Let's not leave any impression with the public that that money has somehow been dumped down the sewer somewhere, when it clearly hasn't. It's remaining in the pockets of taxpayers.
Interjections.
The Chair: Please, Mr Baird has the floor. We're dealing with the subcommittee report. I'm being very lenient.
Mr Baird: Each party has spoken. I think we should get on with the presentations so we can hear from the public.
The Chair: Any other comments with regard to the subcommittee report?
Mr Silipo: I am not going to go back at this issue Mr Baird has raised. I do want to make a point with respect to another piece in this report. I want to say that if the government were serious about actually hearing from people, they would have taken up our offer of some three to four weeks ago, which would have allowed ample time in this committee for this bill to be properly dealt with and still have been back in the House by the same time lines that this bill is going to back in the House, which is later this week or next week. Let's put that on the record as well.
Before we proceed with the presentation from the ministry, given that the minister isn't going to be with us, that in that ministry presentation -- I've just glanced through the paper that's in front us -- I don't see unless I've missed it, and I hope I've missed it, an outline of the amendments the government is going to be moving. I appreciate that the deadline for tabling amendments is not until 2 o'clock this afternoon, but as Mr Baird will know, and as you will recall from the subcommittee meeting, we indicated that we think it would be very useful, before we begin the limited hearings we have this morning, that we all understand what amendments the government is prepared to move.
Rather than the ministry staff spending their time giving us 20 pages of background, which I appreciate having, I would ask that we focus on the amendments that the government is prepared to make so we know what the starting point is, and then we can talk with people as they present.
We purposely tried, in the groups we invited to come here, to get as good a cross-section as we could given the limited time. To make the process as useful as possible, it would be very useful to know what amendments the government is prepared to make, to see whether that responds to some of the concerns we have raised, and more importantly, that the groups that are going to be appearing in front of us have raised. Then we could focus our attention on the issues that might be outstanding.
I seek some clarification on that from Mr Baird or whomever you think is appropriate to tell us. I would make that as a request, that that be the focus of the presentation.
The Chair: If I might, I would tell you that I think it might be appropriate to hear from the public before we deal with the issue of the amendments. We have invited, on the subcommittee's instructions, the ministry to make a presentation. We allotted 45 minutes: 30 minutes for the presentation and 15 minutes for some comments by the committee after the presentation. We've selected nine groups for the express purpose of allowing 15 minutes per group. I intend, as a courtesy to those groups, to allow for that time. It's now 17 minutes after 9 by my timepiece, so I would tell you that I am not prepared to tell the ministry at this point what it is that we want to hear. We've given them written instructions as to what we wanted, that we wanted an overview presentation.
Mr Silipo: And a presentation of the amendments, Chair. That was part of the discussion we had at the subcommittee. I'm not injecting this as new information now. That was exactly what we requested.
The Chair: I have a copy of my letter to the ministry in front of me. Let me read it into the record:
"On Tuesday, 2 June 1998 the subcommittee of the standing committee on finance and economic affairs met and agreed that the committee invite the Minister of Finance and staff to appear on Wednesday, 3 June 1998 at 9 am to present a 30-minute briefing on Bill 16, the Small Business and Charities Protection Act, 1998.
"Your briefing would be followed by a 15-minute questions-and-comments period.
"The subcommittee is therefore requesting 45 minutes of your time.... It would be appreciated if -- "
Mr Phillips: Chair, this may be helpful, perhaps. The reason we're here is that the government wants to make amendments to the bill. The presenters will be trying to figure out what the government plans to do with the bill. We are going to waste the time of the presenters if the government doesn't say, "Here are the changes we plan on the bill."
We were told yesterday that at 8 o'clock this morning the government was prepared to present its amendments to us in private. I don't like that. I think they should be presented at 9 o'clock in public. The government has its amendments in those binders back there. For the clerks and treasurers, for example, to make their presentation, they should know what the government is planning to do to amend the bill so they can gear their comments to that.
While it may not be in the minutes, certainly I agree with Mr Silipo that our discussion was that the main reason for the staff to be here was to explain what changes they plan in Bill 16, so that all these presenters can gear their comments to the bill as the government sees it amended. Otherwise it becomes a bit of a farce. The presenters will be trying to guess what the government has planned for the bill when you already know what you have planned for the bill. Surely, in being honest with these presenters, you should say, "Here are the amendments we've got." We know you've got them because you said you would present them to us at 8 o'clock this morning. Why not spell them out so the people here from AMO and from the clerks and treasurers and from the city of Toronto and elsewhere can look at those at amendments and say, "We're pleased to see that you have accommodated our concerns," or "We still have these concerns."
This is really a very unfortunate process because we're going to hear from presenters up until noon and all amendments have to be in by 2 o'clock. It becomes a bit farcical to try and expect that amendments can be written from 12 until 2 o'clock and then given to the clerk and distributed.
In terms of trying to add some credibility to this process the government really should table its amendments immediately, and then the groups can understand where you're going with the bill.
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Mr Baird: With respect to the comment, certainly the government has some amendments that we intend to present. We offered, as a matter of courtesy, to give you a technical briefing on those amendments. The two critics declined that opportunity.
The consultation is not beginning at 9:45 this morning. The consultation has been ongoing. We had some very good meetings with the clerks and treasurers, with the city of Toronto, with AMO, with the board of trade over the last number of weeks and months, and some of the comments and concerns they've suggested will undoubtedly be a part of those amendments. But to suggest that they're somehow going to come here and gear their comments when we've already got a few of the presentations that were submitted yesterday to the committee in advance of today's presentation --
Mr Phillips: Just table the amendments.
Mr Baird: We can talk about this and go around this till the cows come home, but we want to get on with getting the presentations from the groups we've requested to come before the committee. The committee itself has said that we will table amendments at 2 o'clock. That's in the subcommittee report that you moved the adoption of, to table them at 2 o'clock.
We offered you, as a matter of courtesy, some technical briefings so you would know the direction we're going in. They will be presented in full in public hearings this afternoon on a more formal basis.
We will be hearing from nine groups this morning, and we'll obviously weigh those with the amendments we've had drafted, and maybe there will be some additions, some deletions or some minor clarifications to those amendments based on what we hear.
We have already met with a good number of the groups that are coming before us: AMO, the clerks and treasurers, the city of Toronto, the CFIB, the Specialty Tenant Tax Coalition, the Toronto Association of Business Improvement Areas, the board of trade -- have heard concerns and representations from a whole host of groups. I think we're just talking around the issue and we should get on with it.
Mr John Gerretsen (Kingston and The Islands): I've heard a number of times now that the staff was prepared to meet with individual members at 8 o'clock to discuss the amendments. That is not true. I had a meeting with the staff people at 8 o'clock. It was a very fruitful meeting, but they were not prepared to discuss the amendments or the technical aspects of the amendments with me. It is absolute nonsense to suggest that the staff was prepared to discuss the amendments with the members of the opposition. I had a meeting with two very fine people from the finance department, but they were not prepared to discuss the amendments with me.
Mr Baird: We offered a technical briefing on the amendments to both the official critics. Mr Gerretsen, I don't dispute what you've said with respect to your briefing this morning; it's factual. What I'm saying is that we offered briefings to the two critics and they said no. That's a fact.
Mr Gerretsen: Come on. Briefings were offered to our caucus. Mr Phillips and I are both members of our caucus, we are both members of the committee. He had other business to attend to at that time. I was there at the meeting at 8 o'clock and your staff was not prepared to discuss the amendments, and that's the way it is. I specifically asked them, "Could you tell me what amendments there are?" They said: "They will be presented later on today. We cannot discuss them" -- period.
Mr Baird: Because your critics said they didn't want them presented, that's why.
The Chair: Mr Gerretsen, you've made your point, and I thank you very much. The matter before me is the motion by Mr Phillips with regard to the subcommittee report. I'd like to deal with it.
Mr Phillips: I'm going to move an amendment to that, that the amendments that the government says are available, says they were prepared to give to the critics privately at 8 o'clock, be now presented to the public, at 9:25.
The Chair: Do you understand the amendment? Mr Phillips is now moving the subcommittee report and amending it with the suggestion that any amendments, I assume --
Mr Phillips: What I said was the government amendments --
The Chair: That any government amendments available now be presented to the public at --
Mr Phillips: That's not what I said. I said that the government amendments that they were prepared to present privately at 8 o'clock this morning now be presented publicly at 9:25 to the committee.
Mr Ernie Hardeman (Oxford): On a point of order, Mr Chair: I don't purport to be an expert on that, but I would find it inappropriate that this committee would amend a report. If that was the direction the member wanted to take, he should move a motion for this committee to make that decision, not to amend a report that came from a committee that was here for approval or non-approval.
The Chair: It's a valid point. We're dealing with a subcommittee report. I suppose we either deal with the subcommittee report, and then if you'd like to make a separate --
Mr Phillips: Surely the reason for the report to come here is to either be adopted or amended. It surely was in order.
The Chair: I feel it's a matter to be dealt with, ab initio, by this committee. I'll deal with the subcommittee report and I'll entertain your motion if you'd like to make it at that time.
Any further comment on the subcommittee report? Are you ready for the question? All those in favour?
Mr Baird: Of the amendment?
The Chair: No, of the subcommittee report. All those in favour? Contrary, if any? Carried.
Mr Phillips: I would move that the government amendments that they wanted to present privately at 8 o'clock this morning now be presented publicly to this committee.
The Chair: Any comment? It has been moved by Mr Phillips that any government amendments that were to be presented at 8 am this morning now be presented to this committee.
Mr Silipo: Just briefly, I'm in support of that motion. I indicate to the government members that it would be in everyone's best interests, including the government members' best interests, that we know, going into this morning, what those amendments are. I would much rather have the ministry staff or Mr Baird, however you want to deal with it, take us through the amendments than spend the next 15 minutes going through a presentation by the ministry staff on the content of the bill, which I think we're generally all familiar enough with.
I think it would make the very limited time we have as a committee as useful as we could humanly make it by actually knowing what the government is prepared to do in the way of amendments, and then we can go from there. The rest of the morning and the afternoon will flow in a much more useful fashion if you do that than if you try to block us from knowing what those amendments are going to be, and particularly to try to block the people presenting from knowing what those amendments are going to be. They're written; you know what they are. Tell us what they are.
Mr Baird: We don't have a final -- we had offered them to the two critics, if they wanted a briefing on where we intended to go. You said you didn't want it. Therefore, we proceeded --
Mr Phillips: I said I want a public --
The Chair: Just a minute, please, Mr Phillips.
Mr Baird: We proceeded on the basis of the subcommittee report --
Interjection.
The Chair: Excuse me. Mr Silipo, please. I've got to have some order here. Please continue.
Mr Baird: I call the question.
The Chair: Any further comment with regard to the motion by Mr Phillips?
Mr Gerretsen: I think he hasn't got the amendments yet.
The Chair: Are you ready for the question?
Mr Phillips: Recorded vote.
Ayes
Gerretsen, Phillips, Silipo.
Nays
Arnott, Baird, Gilchrist, Hardeman, Rollins.
The Chair: The motion is defeated.
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MINISTRY BRIEFING
The Chair: I now propose to deal with the presentation of the finance department staff. We are limited to 15 minutes. Please come forward and introduce yourselves, if you would.
Mr Tom Sweeting: Good morning. My name is Tom Sweeting. I'm assistant deputy minister, office of the budget and taxation, Ministry of Finance. On my left is Mr Gerald Sholtack, who's senior counsel in the legal branch at the Ministry of Finance. On my right is Ann Langleben, who's a director of the tax design and legislation branch in the Ministry of Finance.
The Chair: Welcome. I apologize that we are now in the position that you're limited to 15 minutes. I intend to hold you to that, because the public that has been responded to in an affirmative manner by the committee is going to be backed up and waiting otherwise. I apologize on behalf of the committee. Please proceed, sir.
Mr Sweeting: Given your instructions, there is a presentation that has been made available to committee members that we had planned to make today. We will shorten that presentation to meet the 15-minute time line.
I'd like to say in beginning that Bill 16 is a piece of legislation in a series of legislative changes aimed at introducing property tax reform in Ontario. This committee has already heard previously the reasons and rationale for changing property tax reform in Ontario, rooted in the inequitable and unfair system that had developed over the years, due primarily to outdated assessments in many parts of the province. Property tax reform grows out of the recommendations of the David Crombie Who Does What panel, who were asked by the government to examine a variety of issues of interest to local finance, including property tax reform, and made a number of recommendations on the property tax system.
As has been pointed out already this morning, there have been a number of bills. Bill 106, Bill 149, Bill 160, Bill 164 and currently Bill 16 are all part of the fabric of introducing property tax reform in Ontario. I'd like to remind the members briefly of the elements of those bills because it is a series of building changes aimed at implementing a comprehensive new assessment in property tax system.
Bill 106 required all properties across the province to be assessed at the current value to ensure consistent valuation. Assessments were done at values as of June 30, 1996, for the years 1998, 1999 and 2000; June 30, 1999, for the years 2001 and 2002; and June 30, 2001, for 2003. In years after that, they will be done annually. Once they're done annually, the assessments will be based on three-year rolling averages.
Bill 106 created standard property tax classes for use by municipalities. It eliminated the business occupancy tax and it introduced a number of concepts to substantially increase local autonomy to make decisions to suit local needs, including the ability to set different tax rates for different classes of property within parameters set by the province to ensure that municipal decisions to make changes move in the direction of greater fairness. It also allowed for an optional phase-in of up to eight years. It required that there be a program at the municipal level regarding increases to low-income seniors and property owners.
Bill 149, which was the second step in reform, added some key provisions including graduated tax rates for commercial properties; rebates to charitable and similar organizations; classifications of properties into subclasses for farmlands pending development, vacant land, and vacant units and excess land. It made provisions that would allow transition ratios to operate effectively in areas undergoing annexation. It brought clarity to a number of property tax exemptions, many of which had been confusing and subject to considerable litigation, and it brought consistency and clarity to the assessment and to the treatment of utility and railway rights of way.
Bill 160 introduced the education portion of property tax reform. Under that bill, the province took control of education tax rates. It introduced a uniform tax rate for residential and multiresidential properties, and also the power to determine appropriate education tax rates for commercial and industrial properties. The purpose of education taxes would be that taxes raised in a municipality would stay in that municipality for school board purposes.
Bill 164, which is the Tax Credits to Create Jobs Act, was the mechanism by which the government introduced the foundation for returning the administration of assessment to municipalities. I might add also that in the 1998 budget, the government made a commitment to reduce business education property taxes over eight years, starting with a reduction of $64 million in 1998. The reduction would be delivered to businesses and municipalities where they currently pay taxes that are above the provincial average for commercial and industrial.
Which brings us to Bill 16. In response to these previous bills and the implementation of reform, small business expressed concerns about the amount and pace of change that was expected to occur in some municipalities. The government developed a plan that provides additional protection against those large effects resulting from reassessment, while continuing to move towards a fairer structure. In doing so, the minister reiterated that the Ontario fair assessment system is the best way to ensure a fair property tax system, especially once the system is based on annual updates with a three-year rolling average. The proposals in Bill 16 provide municipalities with more options to move forward in manageable steps towards a fairer, consistent and sustainable property tax system.
The bill protects small businesses and charities by addressing several issues including the possibility of large tax increases for small businesses at low effective tax rates, which typically occur in very outdated assessment bases; the issue of the tax burden on charities required to pay higher taxes due to the elimination of business occupancy tax; the corresponding increases in commercial taxes; and the inability of landlords to recover business occupancy tax and BIA charges under existing gross leases.
My colleague Ann Langleben will now briefly discuss the key features of the bill that has been designed to deliver on this government's policy intentions.
Ms Ann Langleben: I'm not sure how much time I have, but I'll try to go through this as quickly as possible. One of the first key features is an enhanced rebate for charities. Municipalities are required to rebate at least 40% of property taxes paid by charities occupying business properties.
There's a cap on property tax increases for commercial, industrial and multiresidential classes. The cap is at 2.5% of 1997 taxes.
There are additional optional commercial classes that municipalities can choose to use: office building, shopping centre, parking lot, vacant land and large industrial.
There's the extension of tiering to industrial properties, and this is in addition to commercial properties.
There's a municipal rebate option to further protect small business.
There's an expansion of the phase-in to allow all property tax changes related to property tax and assessment reform and not just assessment-related changes. This will capture tiering, for example, allowing landlords with gross leases to pass on a part of their realty taxes and business improvement area charges to their tenants.
The rebate to charities: Municipalities are required to rebate at least 40% of property taxes paid by those registered charities occupying commercial or industrial property. It changes the current charitable rebate provisions from permissive to mandatory. Eligible charities are those that are registered under the Income Tax Act. For municipalities that apply the 2.5% cap, the charity rebate becomes optional, since charities would be protected by the cap. The rebate must be at least 40% of the property taxes paid by a charity.
Municipalities have the flexibility to rebate up to 100% of the total tax paid by a charity and expand the rebate program to include other similar organizations. The cost of the rebates will be shared by municipalities and school boards. In an upper-tier municipality, the lower-tier municipality would also share the cost.
Moving to the 2.5% cap on property tax increases, section 30 of the bill adds part XXII.1, which allows municipalities to limit tax increases on occupants of business properties to 2.5% per year for three years. Business properties include commercial, industrial and multiresidential properties. If municipalities choose to cap tax increases on any of the three general classes, that is, commercial, industrial or multiresidential, they must also cap increases on any of the new optional business classes that are derived from those broader classes.
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Tax decreases will be phased in to finance the limit to the tax increase, and the amount of taxes paid will also be affected by a general decrease in the municipal tax rate.
The decision to cap must be made in 1998. The cap is not exclusive. Municipalities can choose to use the other broad range of measures that are offered before applying that cap. The limit will be applied to individual tenants who were in occupation prior to 1998 so that the 1997 property taxes of each tenant of a business property can't increase by more than 2.5% per year. For multiresidential properties, the cap would be applied on a property basis and the landlord would be subject to the Tenant Protection Act to ensure that tenants are protected.
Municipalities would maintain a frozen assessment listing which would be based on 1997 assessments. They would include the total assessments; the commercial assessment, including industrial; the business assessment; the vacant commercial assessment; and the non-business assessment.
If a municipality chooses to cap, taxes may increase by more than 2.5% a year, but only in the following circumstances:
(1) There's a physical change in the property. In other words, there's new construction or additions or renovations, or property is added to the assessment role.
(2) There's some change in the vacancy; either vacant property becomes occupied or occupied property becomes vacant.
(3) The property is a mixed-use property and a portion of the property is in a class where the cap doesn't apply.
There are special rules for additions and renovations, new developments and changes in use. For new and changed properties, there is a need to create a proxy for determining 1997 taxes. Similarly, there are special calculation rules for vacancies so that where vacancies increase, there's a reduction to 1997 commercial and business assessment by the percentage change in the vacancies; where vacancies decrease, there would be an increase in the 1997 commercial assessment by the percentage change in vacancies.
A decision to limit taxes cannot be delegated by upper-tier municipalities to lower-tier municipalities. Municipalities would continue to have the option to provide rebates to charities in capped classes, but municipalities cannot provide municipal rebates in capped classes.
Mr Sweeting: At this point I would ask if there's time remaining to discuss these. We can simply highlight very quickly the last couple of pages.
The Chair: You have about two minutes, sir.
Ms Langleben: Let me just continue. The province would make four new property classes available to municipalities. Municipalities may choose to use any, all or none of the classes. Those classes are listed on page 17. They are the office building class, the shopping centre class, parking lots and vacant land, and large industrial. Decisions regarding these new optional classes would be made by the upper-tier or single-tier municipalities. As I think I mentioned earlier, the new optional classes would be created from the existing commercial or industrial class. The minister would be provided with authority to establish subclasses for these new property classes.
On the next page we discuss industrial tiering. The power to tier would be extended to industrial properties. As I'm sure you're aware, the current provisions allow tiering for the commercial class only. The bill would allow municipalities to establish up to three bands of assessment tiers in the industrial class and to set different tax rates for each band. This tiering mechanism would also allow municipalities to apply lower tax rates to lower-valued industrial properties.
The Chair: Thank you very much for your presentation. The time that we have allotted has expired, and I apologize again.
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
The Chair: We will now move to the public presentations. The first presentation will be from AMO, the Association of Municipalities of Ontario: Mayor Laking from the city of Barrie, and Casey Brendon, a policy adviser at AMO. Your Worship, thank you very much for coming. Welcome. You have 15 minutes. If you wish to save time for questions, feel free to do so.
Ms Janice Laking: Things are going to get more exciting, so listen up, wake up, guys. If you want to charge your coffee cup, I'll let you have coffee time out of my 15 minutes. I want you to be relaxed.
I'm Janice Laking, the mayor of the city of Barrie, a single-tier municipality, the very best kind in the world, and vice-president of AMO, the organization you should listen to very closely. With me today is Casey Brendon, the AMO policy adviser. Speaking notes are an abridged version of notes that you have, so you don't need to watch them; you can just file them and think about them. Put them under your pillow tonight and hope that osmosis works.
AMO has already identified some of the key issues with Bill 16, the Small Business and Charities Protection Act, and has communicated these to the Minister of Finance. I'm pleased, however, to be able to present AMO's concerns for consideration by this committee.
Bill 16 incorporates a number of new initiatives related to assessment and taxation and many technical amendments that are viewed as necessary to allow Ontario's new fair assessment system to be implemented. In particular, the bill contains measures to allow municipalities to protect small businesses and charities from large tax increases through the use of rebates, caps on tax increases and graduated tax rates for commercial and industrial property.
Many of the provisions of the bill directly affect the ability of municipalities to establish tax rates and tax policies once final assessment values and transition ratios are released. As such, the need to pass this bill as quickly as possible must be recognized so that municipalities can get on with the business of establishing tax policy and collecting taxes. Without property tax revenue, municipalities will face difficulties financing their operations and capital programs, so we'll be down for some more from you guys.
On May 28, AMO learned that the delivery of the final assessment roll was to be further delayed by up to two weeks, pending legislative approval of this bill. Needless to say, the impact of this delay on municipalities is enormous. Without final assessment totals, transition ratios and tax rates can't be established. Without tax rates, final tax billings can't proceed. Without tax revenues, the municipalities will find it extremely difficult to remit amounts owing to school boards and other levels of governments, such as upper tiers -- I don't have one of those -- by the stated due dates for these payments. As a result of cash flow disruptions, municipalities may be faced with borrowing funds, either from internal reserves or externally, just to meet mandated payment schedules. This in turn increases our operating costs.
Interest earned on collected taxes is an important source of revenue for us. Delays in collection translate directly into lost revenues. This decreases money available to offset general tax increases and makes provincially imposed savings targets harder to reach. In the city of London, for example, costs of this delay have been calculated to be $390,000 per month.
Many municipalities have not yet established final operating budgets for the year. They have no means of knowing what discretionary programs they will be able to fund because the costs of education funding have not been released. Similarly, capital programs in many municipalities have been put on hold pending finalization of budgets. This translates into lost opportunities, loss of potential employment opportunities and increases in the overall cost of capital programs.
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The timing of the return of the assessment roll becomes critical, as many of the dates for municipal decisions are tied to dates established by regulation. In some cases, these dates have already been determined by regulation but are based on a roll return date of May 30. Further delays reduce the time available for us to analyse their assessment data and formulate policy. This is particularly crucial in this transition year where decisions made may affect taxation systems for up to eight years hence. This is not the time to make rush or less than fully informed decisions.
We recognize the enormity of the task of reassessment and we acknowledge that the government has devoted resources to this initiative. However, timing is still a major concern for us. We can't be more resolute in our request that the necessary amendments to assessment and taxation legislation be expedited; further, that the associated regulatory framework is developed with municipal input and consultation and released as quickly as possible, together with final assessment values and transition ratios that will allow municipalities to proceed.
The intent of Bill 16 should be to provide discretionary tools to mitigate large tax increases arising from the province-wide reassessment. Unfortunately, in some cases the legislation goes beyond this, involving the provincial government in local taxation matters. The role of the province is to find a broad taxation framework, not to mandate local property tax policies.
AMO has outlined below some of the key issues arising from Bill 16.
First, municipalities have several concerns related to the 2.5% cap. In AMO's view, the capping provision must only tie the cap to assessment-related tax increases in the same manner as provisions governing amounts which may be phased in. Linking the cap to operational budgets and/or general levy increases, combined with a three-year period to which a cap must apply, severely limits future taxation options of municipalities with respect to capped tax classes. This results in a situation where any tax increases must be borne by the remaining uncapped tax classes.
The concerns of municipalities arise from the fact that where caps are introduced in some municipalities, neighbouring municipalities will come under significant pressure from owners of similar properties and/or ratepayer groups to have their taxes similarly capped, particularly where the cap also applies to general levy increases. This presents a problem where municipalities may not wish to implement caps on tax increases, preferring instead to mitigate tax increases via phase-ins or rebate programs.
The use of a tax cap requires that municipalities maintain a frozen assessment listing such that all properties eligible for the cap would have their assessment linked with the 1997 assessment and tax level. This continues the reliance on outdated and unrepresentative assessment values, complicates tax calculations and ultimately prevents the move to province-wide consistency in assessment and taxation. Further, responsibility for maintenance of the 1997 assessment information must be clearly defined as to whether this function rests with the municipality or with the OPAC as the successor to the Ministry of Finance property assessment division.
Second, Bill 16 makes mandatory a rebate of 40% of total property tax for eligible charities. AMO maintains its objection to mandatory tax policy initiatives, believing that these are unwarranted and threaten local autonomy and responsiveness to constituent needs. Proposed legislative provisions do, however, provide municipalities with the option to establish a bylaw to extend this rebate to other similar organizations.
Municipalities are concerned with the requirement that rebates for eligible charities for 1998 and the first instalment of 1999 are required to be paid by October 31. While it's understood that this provision was to ensure that charitable organizations would not encounter cash flow problems, this requirement places an unfair obligation on municipalities to pay rebates in advance of the actual due dates of taxes. A more appropriate provision would be one which allows rebate payments to be issued to eligible charities when actual tax payments are due. In addition, where an eligible charity is not required to pay taxes or is not affected by tax increases, it should not be mandatory that a rebate be provided to such organizations.
AMO recommends that some discretionary power or review authority on the part of the municipalities for the issuance and timing of rebate payments should be established within this legislation. This may be included in the definition of program requirements under subsection 442.1(3).
Third, AMO is pleased that legislative provisions governing similar organizations are flexible and permissive, recognizing the great diversity of charitable and non-profit associations province-wide. Municipalities are capable of identifying and classifying similar organizations such that bona fide and non-profit organizations that were not previously subject to BOT may continue to carry on operations without facing large tax increases. It's anticipated that the province will come under considerable pressure from lobby groups and non-profit associations to develop a definition for "similar" organizations. This must be resisted.
Bill 16 also provides the power for municipalities to prescribe by bylaw other rebates of property taxes to identified groups. These provisions are intended to allow municipalities to afford further protection against tax increases to small businesses or other commercial or industrial property types to address local circumstances.
The authority and discretion granted municipalities to provide rebates which recognize local circumstances is supported. Municipalities, for their part, recognize the value and role played by small business and their contribution towards local economies. The proposed legislative provisions of this section reinforce municipal autonomy and flexibility. We support provisions which provide for the sharing in the cost of rebates for the education portion of taxes on eligible properties by the province.
Fourth, the legislative authority for landlords to pass on BOT and business improvement area charges to tenants in gross lease situations is seen as necessary. We commend the government for incorporating AMO's previous recommendations in this area.
The legislative provisions are still unclear, however, as to the method of apportionment of both BOT and BIA amounts. It should be clearly established within the proposed legislation that the onus to apportion and collect these amounts lies with the property owner or landlord. While AMO supports the intent of this section, municipalities on the whole are concerned that such a legislative provision may be open to legal challenge. Assurance on the part of the government that these provisions have been thoroughly reviewed and are supported by legal principle would provide a measure of security and establish the intent of the government to stand behind potential legal challenges arising from these legislative provisions.
Finally, AMO is pleased that Bill 16 includes provisions for the payment to school boards of the education portion. These measures will provide significant relief for municipalities from cash flow shortages and increased financing costs because of the delay in the return of the roll.
Municipalities are seeking the following assurances with respect to interim financing:
(1) That all payments to school boards made on behalf of municipalities by the province are interest-free and that municipalities only be required to reimburse the province for actual amounts paid to school boards. We believe this is accomplished by the proposed legislation in subsection 34(14), but we would appreciate assurance.
(2) That municipalities not be required to demonstrate financial need. The delay in the return of the assessment roll and the inherent lost interest revenues should be sufficient to establish the need. This would also alleviate the administrative effort required to establish need.
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Many of the legislative provisions governing assessment and taxation are tied to regulations which establish the timing of municipal decisions, payment schedules and deadlines. This includes dates by which capping may be elected, dates by which tax rates must be established and payment to upper tiers, schools boards and charities.
The importance of well-informed and unhurried decision-making cannot be overstressed. Neither can the requirement for thorough review and analysis of final assessed values by municipal governments.
The Chair: Your Worship, I'm going to have to interrupt you there. You have about 30 seconds.
Ms Laking: Good. You probably can read the rest and you can ask me a quick question.
The Chair: I'm afraid we do not have time for questions. I thank you for your attendance and thank you for your presentation. We'll take your advice and put it under the pillow tonight.
Ms Laking: Sorry I didn't précis it a little more. Pleased to be here. Thank you for your attention. Remember, single tiers are great.
Mr Gerretsen: On a point of order, Mr Chair: In light of the discussion we had earlier, I've just been informed that the minister in question arrived at the west door of this building at 9:52. Perhaps we could ask him at 12 o'clock, after the presenters are through, to make the presentation that members of the committee may want to hear from him. I'm talking about the finance minister, of course.
The Chair: Thank you very much. I'll allow you to make the inquiry yourself, and if he's available, let the committee know.
Mr Baird: Mr Chair, if I could interject: The ministry office is not in this building and he's chairing cabinet this morning.
Mr Gerretsen: He arrived at the west door at 9:52, so I am informed.
Mr Baird: His ministry office isn't in the building.
The Chair: I hope you aren't keeping track of the rest of us in that manner, especially after 5 o'clock. This isn't Kingston, Mr Gerretsen.
Mr Gerretsen: It sure isn't. I would like to go on record as totally agreeing with you on that.
The Chair: Thank you very much.
BOARD OF TRADE OF METROPOLITAN TORONTO
The Chair: The next presentation is from the Toronto board of trade. Ms Verity, come forward. Welcome. Thank you for attending, and if you would, introduce the individuals with you.
Ms Louise Verity: Good morning. My name is Louise Verity, director of policy with the Toronto board of trade. With me is Bob Sniderman, a member of our board of directors and president of the Senator Restaurant; and John Bech-Hansen, staff economist.
We appreciate the opportunity to appear before the committee and apologize that our remarks were hatched together quite quickly last evening in response to the committee hearings recently being set.
The Toronto board of trade is representative of all sizes and types of businesses and, with over 10,000 members, is Canada's largest local chamber of commerce or board of trade.
Property tax reform has long been a top policy priority of the board. The Toronto business community has always paid a disproportionate share of the city's costs. Businesses contribute 55% of the total tax bill from an assessment base accounting for only 20% of the city's total property wealth.
We have consistently supported the province's efforts to introduce a modernized property assessment system in Ontario. Not one significant study of property taxation has recommended anything other than a value-based system for business property.
This is the first Ontario government since 1970, when the province assumed responsibility for property assessment, with the courage to act decisively in this critical area.
Over the past year, the board has made a number of submissions geared to ensuring that the transition to the new system is fair and manageable.
The passage of the capping component of Bill 16 is critical to Toronto's business community. We are also pleased -- and this is a point we cannot overemphasize -- that the capping option applies to both assessment-related tax changes in the commercial, industrial and multiresidential property classes and to budget-related tax changes.
Bob will now provide a small business perspective on the proposed legislation.
Mr Bob Sniderman: Thank you, Louise. Good morning.
As full or part owner of several small commercial properties and the Senator Restaurant in Toronto, I can assure you that the tax capping provisions in Bill 16 are absolutely essential to protecting over 17,000 Toronto business properties like mine from triple-digit tax increases under CVA.
The board advocated for a cap on tax increases following the release of preliminary tax rates in March by the city suggesting that some individual business property taxpayers would face five-fold, 10-fold and even higher increases as a result of the new assessment system.
We think it is highly appropriate that the capping provisions will apply to both assessment-related tax changes and to budget-related tax changes. This will prevent Toronto's continent-topping business property tax rates from increasing further over the next three years. This is essential to ensuring economic development and job creation in the city.
It also provides an important mechanism to address the historical imbalance between residential and business tax rates in Toronto in a fair and incremental way. That is because under the provisions of the cap, if the city requires any budgetary increase over the next three years, it will have to raise it only from property classes not subject to capping.
Some Toronto councillors are worried that this means taxes will be shifted from business to residential taxpayers. It is important to point out that no such shift will occur if there is no budgetary increase. We think this will instil a cost-conscious approach to providing services and give council a powerful incentive to keep city costs in check and the mayor a strong incentive to fulfil his zero-tax-increase campaign promises.
However, if the capping provisions are removed or substantially amended, councils will have to consider other, much more complex options in the proposed legislation and associated proposed regulations to mitigate the impact of assessment reform.
I will now turn it back to Louise.
Ms Verity: The proposed legislation and regulations provide for as many as four new non-residential property classes to be created, with corresponding transition ratios and sub-classes for vacant land, and the optional extension of graduated tax rates to both existing non-residential property classes. A tax rebate option is also offered in the proposed legislation.
We see numerous problems ahead should municipal governments adopt this approach.
(1) It would make the property tax system incredibly complicated and all but incomprehensible to the average business taxpayer.
(2) It would make property assessments virtually irrelevant as a determinant of municipal taxes, leaving taxes subject to the arbitrary value judgements of municipal councillors.
(3) It risks exchanging one set of unacceptable impacts with another, just as Toronto found when it modelled the impact of graduated tax rates.
(4) A constituency and political lobby is certain to emerge around each of the new property classes where none existed before.
(5) It doesn't provide for a class of property to where there is strongest justification: the small, street-related commercial buildings commonly associated with small business uses.
In reference to this last point, we specifically recommend the minister prescribe only one additional property class in the regulations. This would consist entirely of small street-related commercial property types typically used by small, mostly retail, businesses. This would ensure that these taxpayers continue to receive a substantial measure of protection in Toronto when the three-year cap is lifted.
This would ensure the continuing viability of many small Toronto businesses and recognize the important contribution strip retail areas make to neighbourhood viability, street vitality and overall quality of life in the city.
We recommend that the draft regulatory provisions for the creation of optional classes for office buildings, shopping centres, vacant land, parking lots and large industrial properties, and the legislative provisions for graduated tax rates, not be implemented.
We would also like to take this opportunity to commend the province for committing in the 1998 budget to bringing education property tax rates down in Toronto, and other municipalities to the province-wide average over the next eight years. This is an issue the Toronto board has advocated long and hard for, and we were delighted with the announcement in the provincial budget. A reduction of C and I education taxes of between 25% and 50% by the year 2005 will take much of the sting out of assessment reform for Toronto's business community.
In closing, we would again like to emphasize the importance of applying the cap to both assessment-related tax changes in the commercial, industrial and multiresidential property classes and to budget changes. You may hear some different information later on this morning.
We offer our continued assistance and expertise to both the province and city as we move forward.
Thank you. We would be pleased to take any questions.
The Chair: Thank you very much. We have about two minutes per caucus. I'll start with the Liberals.
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Mr Phillips: Thank you. Just to get your interpretation of the bill, and I'll go quickly because we have little time: On the cap, if the municipality implements it, the way I read it is that a municipality then would be allowed to raise the same amount of money off a business class as it did in 1997. So if it's $100 million, they still raise $100 million.
If some businesses pay 2.5% more than they did in 1997, an equal amount of money has to be deducted from other businesses. So the 2.5% cap is really a freeze on the amount of money raised off that property class and the movements within it can be 2.5% above, but an equal amount of money has to be cut from below. Have I interpreted it properly?
Mr John Bech-Hansen: That's pretty much our understanding of how it's intended to work, yes.
Mr Silipo: On this question of your position that the 2.5% cap that's being suggested now is the way it should be done, if you support the notion that there should be a limit to property tax increases, why not then provide the same kind of capping or protection of 2.5% on the residential side that you obviously would like to see on the business side?
Ms Verity: First of all, the business taxpayer right now is responsible for roughly 55% of the tax contribution despite being accountable for only 20% of the total property tax value. There is an incredible historical imbalance there which would not serve to be eliminated over time should this approach be taken on the residential side.
Mr Silipo: But isn't that imbalance in part going to be taken out over the time period that the education issue is going to be addressed? Wouldn't that be the better way to deal with that issue, because that has been the cause of it, as opposed to creating a situation in which municipal councils are going to now have to pit business on the one hand against residences on the other side?
Mr Bech-Hansen: Can I just supplement? There are some things here from the city's own calculations in Toronto, at least, of the impact of the change. In a Toronto context anyway, only 3% of Toronto homeowners face tax increases of 100% or more, but 57% of Toronto businesses face a tax increase of 100% or more, 17,000 properties.
When you look at what's clustered around the median, it's a nice even bell curve of tax increases and decreases facing the residential taxpayer. Fifty-seven per cent of Toronto homeowners are clustered around an average tax increase of plus or minus 15%, so you only have 13% of Toronto businesses facing tax increases of plus or minus 15%.
You have so many businesses facing colossal tax increases. There is not even the most elemental shape of a bell curve in the distribution of increases and decreases as there is in the residential property costs, so it's for those two reasons.
The Chair: I'm going to interrupt you there. Thank you. To the government.
Mr Steve Gilchrist (Scarborough East): Thank you for coming before us here this morning. I appreciate Mr Phillips's getting on the record that under all these changes there will be an equal number of winners and losers, at least in terms of the dollar value.
I'd like to explore further as well the idea of the cap applying to both, because we just heard, as you did, from AMO the suggestion that this is somehow an unfair burden on the city. I think, Mr Hansen, you were in the middle of a point, or expanding on the point, of why you see that there is already an inequity that has to be addressed.
I wonder if you'd also add your comments -- or whether you're inclined to make any comments -- whether or not that's precisely what municipalities should be doing, trying to level out the tax rates as they apply to all properties, or at least come up with a far better estimation of true demand.
Mr Bech-Hansen: Absolutely. For one thing, having the option of capping is not hamstringing the ability of municipal governments to raise revenue. I think what might be lost in some of the perspective you hear from municipal governments is that they're implying that this is an extremely severe constraint on their ability to do business.
I think what has to be remembered always is that this is a freeze. It's the same amount of money being raised over the next three years, if the cap is adopted, from the cap's classes. How onerous can that be in the context of -- you could take the example of the provincial government cutting income taxes by 30%, a very considerable change in potential revenue yields coming out of that. This is a freeze, and you still have several uncapped property classes where incremental revenue requirements can still be raised.
Mr Gilchrist: Would you hazard a guess as to how much the revenues will increase, based on growth?
The Chair: Mr Gilchrist, excuse me, we don't have time for a further question. I thank you.
Mr Gilchrist: I thought I had two minutes.
The Chair: When you take a minute and a half to ask the question, Mr Gilchrist, that sometimes limits the time for the answer. Do you understand?
Ms Verity, I thank you very much for your attendance and for your submission. We appreciate your time this morning.
CITIZENS FOR LOCAL DEMOCRAACY
The Chair: The next presenter is Citizens for Local Democracy, Mr Sewell. Welcome, sir. You have 15 minutes to use as you see fit. Please proceed.
Mr John Sewell: Thank you very much, Mr Chairman.
Citizens for Local Democracy was formed in opposition to the imposition of Bill 103 and the megacity on Toronto municipalities. C4LD has continued to meet regularly to discuss the constant attacks on democracy and local institutions unleashed by the Harris government. More than 40 C4LD members wrote to the clerk asking to make presentations on the bill -- I'm not sure if people are aware of that, but I have 40 of the letters I have received and I know others have received others -- but by adoption of the time allocation motion they have been prevented from speaking, which is very unfortunate.
This brief will address three issues: the unfairness of the principles behind this particular bill; the undemocratic manner in which this bill has been processed and in which this government is acting; and the fact that this unworkable bill is being rushed through the legislative process with the intention of destroying local finances.
First, the flawed principles behind Bill 16: Section 30 of this bill apparently permits municipalities to freeze property tax increases for commercial, industrial and multi-residential properties across the province at 2.5% a year for the next three years. This is the "protection" the title of the bill refers to. If a municipality does not freeze these taxes, then it must implement the extraordinarily punitive assessment and property tax changes imposed by the province. In Toronto, that change reduces taxes for large office buildings and substantially increases taxes for businesses on retail strips, as you've already heard from the board of trade. This bill proposes to protect these property owners from these monstrous changes that you indeed have inflicted.
If municipalities decide to exercise this option to cap taxes on these properties, then homeowners, condo owners and cooperatives will bear the brunt of any municipal expenditure increases in future years, and the full brunt of property tax change this year and in future years.
In short, this bill forces municipalities to choose between two stupid alternatives. It tells municipalities they must slash their own throats and then asks them which rusty razor they want to use. Who ever thought MPPs in Ontario would be so cruel, so compliant with such malign instructions? I say don't do it.
The impact of Bill 16 and other property tax reform legislation on homeowners in parts of Toronto is astounding, and that's even without any expenditure increases. Contrary to what Bob Sniderman was telling you, in fact the results of this and other property tax reform legislation is extraordinary. I have included a chart at the end of the brief, which I think you have a copy of, which outlines some of those changes. That is taken from a city of Toronto study entitled Property Assessment and Taxation System Preliminary Tax Impacts -- Summary.
In North York Centre ward, 89% of all homeowners will experience a property tax increase, and the average increase is 35%, which is about $2,000 a house. That's what you're imposing. In North Toronto ward, 92% of homeowners face a property tax increase, and the average increase will be about 48%, $2,500 a house. The attached charts list some of the extraordinary increases that will result to homeowners in Toronto from provincially imposed property tax reform. As a government you can talk all you want about giving people a tax break, but you are doing it for some at the expense of these homeowners. Shame on you.
One reasonable alternative is to extend the 2.5% cap to everyone and, again, allow municipalities to levy property taxes as they see fit. I think it's the only sensible thing to do and it's relatively easy to accomplish. I've suggested some wording changes to do that. I would ask you to please make those amendments.
The second point is with regard to the death of the democratic tradition in Ontario. The traditional legislative process followed in Ontario involves extensive public information and involvement. Government publishes and distributes a white or green paper and invites comments. A special committee is appointed to hold hearings around the province, usually followed by draft legislation distributed to those expressing interest.
The third step is the introduction of legislation. Substantial debate is permitted on second reading, and bills are without fail sent to committee for full hearings, usually throughout the province. There are opportunities for everyone to suggest amendments and to talk to political representatives in an attempt to make changes.
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The Harris government -- your government -- has thrown this traditional process out the window. The example of Bill 16 is typical of what the government has done to this traditional process. Bill 16 was introduced on May 7. It is 73 typewritten pages of very complex language, amending nine separate statutes and containing numerous very complicated formulas.
No white or green paper preceded this bill. No explanatory notes are available to make the bill intelligible to an informed public. No notice of the bill has been provided to anyone in the province, even though it is of province-wide application. The government has agreed to a mere three hours of public hearings, with nine speakers -- I thought it was 12 but it's nine -- telephoned only yesterday to be told to prepare, for something that affects every municipality in Ontario.
This is part of the government's shameful strategy to keep the public in the dark about what it is doing. This strategy bears no relationship to government of the people, by the people, for the people. This is rule by an autocrat who says his way of ruling can't be questioned.
Running government like a dictatorship between elections is wrong. Government doesn't know best. You guys don't know best. Mike Harris doesn't know best. Like the governors before responsible government was established in Upper Canada, Harris deliberately excludes the public from any say in how government works or what legislation is being changed. This is wrong.
Our remedy is simple: Restore democracy to Ontario. Explain what legislative amendments are all about. Hold reasonable hearings on Bill 16 and on all other legislation. Allow fair consideration and debate on Bill 16 and on all other legislation.
Third, the details of Bill 16 are probably wrong.
The bulk of the bill amends legislation the government passed just last year, often with a minimum of public hearings and consideration. The capping provisions only occupy about 20% of the bill; the other 80% of the bill is making changes to things you guys did last year and got wrong. In your rush to bludgeon the public and the opposition into silence in 1997, the government proceeded very quickly. It obviously made many mistakes which it now wishes to correct.
Haste makes waste -- and confusion. Since the government is unwilling to give the public or anyone else any reasonable opportunities to give fair consideration to this legislation, in all likelihood the government is again passing legislation riddled with mistakes.
The May 25 letter to the provincial Treasurer from the Association of Municipal Clerks and Treasurers of Ontario sets out the problems with this bill very simply and very strongly. As that letter notes, this bill is badly drafted -- some stupid errors in it -- and if passed, it will destroy the finances and the financial viability of municipalities.
I note that even the board of trade is very concerned with some of the proposals you've made. I know they pat you on the back a lot, but they also say: "Don't do what you're doing. We've got to have more discussion about the number of classes you're trying to create." You're rushing things through. People don't know what you're doing and when they do know what you're doing, they think it's usually wrong.
I can only assume the leaders of this government have gone slightly daft if they really want you to vote for the detail of Bill 16. Don't be so foolish.
The Chair: Thank you very much, sir. We have approximately two minutes per caucus and we'll start with you, Mr Silipo.
Mr Silipo: Thanks, Mr Sewell, for being here. Just to be clear, we had actually proposed some weeks ago to the government a way in which we could have limited debate in the House in order to allow the bill to come to committee, have more time spent in committee to hear from other people, and actually have the kind of examination of this legislation that we believe should be taking place, because, like you, we believe that no matter what amendments are made, and we still don't know what those are, there will likely be, as you say, major mistakes that will still have to be dealt with in future, probably through further legislation as has been the pattern so far.
I want to ask you particularly around this recommendation that you make in the first part of your presentation, that one of the reasonable alternatives to the 2.5% cap and the split that causes between residential on the one side and business assessment is to extend the same protection to the residential side. That's certainly something we would support.
Mr Sewell: I think that cap should happen only for assessment purposes.
Mr Silipo: Right. You were here earlier to hear, I guess, the reaction against that from the board of trade. I just wondered whether you had any comment to make on that.
Mr Sewell: Quite frankly, I don't understand their position. Their argument is a very strong one that says, "Look, the 2.5% cap on commercial still says you have to raise the same amount of money from commercial, so why not do it?" Putting the 2.5% cap on residential is exactly the same. It's not as through you're transferring anything on to commercial taxpayers by putting that 2.5% cap on residential properties. So if it applies to commercial, it should apply to residential.
The Chair: Thank you, sir. I must interrupt there and move to the government.
Mr Baird: Thanks very much for your presentation. I just make a comment on one point you raised. The commercial rates in Toronto are about 600% greater than those of residential rates. That's certainly one of the reasons the cap isn't extended to residences as well. There are some measures in existing legislation to phase it in over eight years and, as well, to provide for low-income seniors and low-income disabled.
Mr Sewell: That argument has nothing to do with --
Mr Baird: I did note in your presentation that you showed it in 10 wards, but in the city of Toronto is it not the case where 54% of households are actually getting a decrease, that have been paying too much tax, that are getting a tax cut? Wouldn't that be in the interest of fairness to say to those 54%, "You've been paying too much," because 54% would see tax decreases in this proposal?
Mr Sewell: It's a very interesting way to proceed, which is to say, "Let's impose an unthought-out reassessment of properties," and then say, "Let things fall as they may." It's interesting you won't do that in the commercial-industrial class. You will not say, "Let things fall where they may." Instead you're rushing in with the 2.5% because you realize it doesn't work.
I'm saying it doesn't work in the residential class as well. But maybe it's true, maybe you have something against people living in the North York centre ward. Maybe you do have something against people living in North Toronto ward where 92% of people are going to face a tax increase. I think that's stupid and you shouldn't do it.
I believe that if you went around the province, if you had the guts to go around the province, you would be inundated with people who would say, "Don't do it." Instead, you have three hours of hearings. You can make your fancy arguments, but go out to North Toronto ward and sell your argument. You won't get out of there alive.
Mr Phillips: Just on process, Mr Sewell -- I appreciate you being here -- the way they're doing it is deliberate, in my opinion.
Mr Sewell: I think you're right.
Mr Phillips: I'd like your opinion on it. First, the Legislature didn't come back until a month beyond when it should have come back. We wanted to come back in March; they came back at the end of April. They then introduced this bill. We said, "Let's have hearings right away." They refused to have hearings. They delayed it to the last minute and now, frankly, they're beyond the last minute. It's costing our municipalities $1 million a day in interest costs as a result of their delay. Now we've got a gun to our head. The municipalities are saying, "Get this bill passed," and the government has put that gun to our heads.
My question to you is, as you watch the Legislature, is this part of a pattern that you see around here, from the outside, because certainly I see it from the inside? Second, why isn't the public more upset about what I regard as a lack of debate on legitimate bills?
Mr Sewell: I believe it part of a pattern. I believe this government and these people here who vote for it, the Morley Kells and the Steve Gilchrists of the world, want to destroy local government as they've done in Toronto. They've literally introduced legislation to try and do that. They literally have taken our government away from us in Toronto. I think they want to do it. I've read the brief of the Association of Municipal Clerks and Treasurers. I believe it will wreck the financial viability of many municipalities in Ontario if they pass this legislation as it now stands. I think that's a deliberate attempt.
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In terms of whether the public is upset, I think the public is very upset. They don't believe that you can say anything to this government and it will listen. The way you can tell it's upset is, I don't believe any member of the cabinet is safe walking down any street in Ontario. They're going to be yelled at; people are going to throw things at them. The reason you can tell that is, it doesn't happen. Most politicians like glad-handing. But let me tell you --
Interjections.
The Chair: Order. I want to hear from the witness, please,
Mr Sewell: Go down those streets; you'll be pretty unhappy. Your leaders will find that people will be coming up and causing a lot of trouble to them.
Interjection.
Mr Sewell: Fortunately, they don't know you, Morley. I know you.
Interjections.
The Chair: Order. Thank you. Please.
Mr Sewell: The point is, as a citizen you come, you get yelled at, you get called a coward. What's the point?
The Chair: Please.
Mr Sewell: Mr Chairman, be clear about this. We're supposed to be living in a democracy. You're supposed to be consulting people about legislation. Having nine members of the public speaking is not good enough. Do your job. Represent people.
Interjections.
Mr Sewell: What's that?
Interjections.
The Chair: Please, Mr Kells, he's lecturing me now.
Mr Sewell: You've put out stupid alternatives. They should be called for what they are. They are not well-thought-out; they are badly thought out. Everybody has made that point. I don't think any of you people know much about them. You probably don't even know the amendments you're going to be presented with. This is no way to run a democracy; it's a dictatorship.
The Chair: Sir, I'm sorry, I'm on a tight time schedule. I do appreciate your coming.
Mr Sewell: I know it's a tight time -- that's the problem.
The Chair: Thank you very much for coming. Thank you for your comments. I apologize for the interruptions. You were a guest and poorly treated and I apologize.
TORONTO PROPERTY TAX FREEZE
The Chair: The next presentation will be from Toronto Property Tax Freeze. Mr Opara, please come forward. Welcome and thank you for coming.
Mr Michael Opara: I'd like introduce Councillor Michael Walker of the former city of Toronto and the new city of Toronto, and Councillor Norm Gardner, a former councillor of the city of North York, now councillor for the city of Toronto and the head of the police commission. I'll be very brief before I turn it over to these two gentlemen. We're also expecting someone else.
Our group has been holding rallies and has organized the businesses, the merchants. We've had the street demonstrations; we've picketed your fund-raisers, some of the fund-raisers that have been going on, as you probably know. We have more rallies planned.
You've really got yourselves into a serious political mess. It's not just in Toronto; it's throughout Ontario. It's in Whitby, Kingston, Belleville, Ottawa, Markham, Mississauga, Hamilton, just to name a few of the municipalities.
You're introducing this legislation. It's terribly flawed. The municipalities won't be able to get their tax bills out, probably, until the end of the year. You're heading into an election. What you've done is really unnecessary. It reminds me: It's like a mechanic. You've got a little problem with a spark plug, you take the spark plug up, you damage the engine and suddenly you've got the whole engine apart on the garage floor and you don't know how to put it back together again. It's a total disaster.
The problem is not just in the old city of Toronto or North York Centre South; it's in Etobicoke, Kingsway, Humber -- we're holding rallies there -- it's in the Scarborough Bluffs area; it's in East York and York. It's not confined just to the city of Toronto. People in Mr Gilchrist's riding: Believe it or not, some of those people are going to lose their homes. Tens of thousands of people across this province are going to lose their homes. You cannot go into an election -- if you want to, go ahead, but you're really doing something that you don't have to do.
We have a paper here; you can read it.
This bill will not survive a court challenge. We intend to have this challenged in court. It'll end up getting thrown out in six months because the assessments are so badly flawed. We've done a lot of research; about 80% of the assessments are way off. Now I turn it over to Michael Walker.
Mr Michael Walker: To be honest with you, these hearings are a bit of a mockery in terms of the exercise of democracy on a major bill that's affecting taxpayers across this province: to have a few minutes; rushed through. Finding out about it late last night is not the way to go, but that seems to be the pattern with the government, and you're its Chair today.
We've now got a fourth version of this legislation. Each version really is an admission that the earlier version has failed. This last version is just that. It's another joke. It's 73 pages long, trying to pick up the earlier three pieces of legislation. What you should understand is that the well is poisoned and you can't unpoison it with another piece of legislation.
The impact is not just in the city of Toronto, as some of you are sort of giggling away, this is going to affect everybody across the province. The people who get a tax increase will remember who gave it to them, and it wasn't their local council. It's time for you to drop it. If you go ahead with this legislation, plus the piles of other legislation on this issue, the disruption of people's lives will be spread across this province. In my opinion it is unconscionable that you're carrying forward with it.
With this final piece of legislation you don't have any more equity than you have today. That's the bottom line. If you did, 2.5% caps took it away. It's an admission. It's the next thing farthest from market value that you can get. I watched a movie the other night, Cat on a Hot Tin Roof. Burl Ives said that mendacity and hypocrisy were alive and well. This was back in 1958. But that's what this is. It's garbage on top of garbage.
You should go to the local option. Give it back. Give the problems for raising municipal taxes and designing the tax system to the municipalities where it belongs. That's called disentanglement. That's called delegating those responsibilities. Load them on where they should belong. Make those local governments responsible for designing and getting public acceptance of a tax system in their municipality.
Give them a menu of tax options, such as: It can be the British county tax system; it can be the tax system of unit assessments such as you have in Tel Aviv; it could be a Proposition 13, market value at point of sale; it could be that if people want to embrace and take your proposal to bed, let them. But why are you trying to impose on them one size fits all? The problem is, it isn't a good size.
Michael Opara said it all. You started out tinkering with this thing. You took the spark plug out. You now have taken the whole engine out and you can't get it back together and you're desperately trying to cobble something else together.
The municipal clerks and treasurers said it all, "We'll get chaos and ruin." That's from the experts out there. If Bill 16 doesn't go through, there are no caps: 300%-plus increases for businesses are back on the table. Drop it and come out in favour of local autonomy and a local option.
Mr Norm Gardner: This is not just a Toronto problem. The Association of Municipal Clerks and Treasurers of Ontario have given some comments in regard to CVA. In their general observations they've indicated: "There are over 25 specific controls and directions through regulation. This amount of administrative discretion is excessive. It leaves administrators and municipal councils without certainty. Many of the regulations" are going to "place the financial stability of municipal governments in jeopardy. There is, furthermore, little opportunity for municipal councils to comment and recommend changes to regulation.
"This bill is complicated, cumbersome, confusing and, too often, badly drafted. It serves to perpetuate the bad system that the government was so bent on eliminating. The end product is a political and administrative nightmare. Sophisticated systems and specialists will have to be developed to manage not only the complexities of Bill 106, 149 and 164, but now Bill 16 as well. Ontario municipalities will not be able to implement the complex taxation system without a substantial commitment of time, effort, resources and tax dollars."
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To put it in a basic clear system, the whole assessment situation is in a mess. They don't meet, as others have told you, the government's own standards in the legal test of the legislation. For the most part, CVA has pitted councillors against councillors, based on how many constituents benefit, without taking into regard the casualties there are going to be as a result of it. The most negatively affected are primarily seniors or people who are on fixed incomes.
In my own constituency, the average increase is just under 40%, but that means there are a lot of people -- I've had a widow tell me that her taxes went up 66%. She's not able to come up with those kinds of dollars based on her fixed income.
This has become a shock to a great many people who have had stability in their lives and now they've just been jolted by the instability of the CVA. What these people need is time to rearrange how they're going to live in the twilight of their careers. As I said, the increases are devastating to people in this kind of situation.
CVA is a location tax. You can have a property, maybe it's free and clear, so now you're asset rich and cash poor. This is another way of describing what's going on. In checking a lot of the complaints that have taken place by people who have complained about CVA, we found that people who paid $250,000 for a property were assessed at $350,000. When they complained about the $100,000 discrepancy, they were told, "You got a good deal." People just don't buy that. There have just been too many of those situations.
Prices of property in Toronto vary as the economy goes, so sometimes you have large fluctuations in the prices. This is going to put a real problem on the shoulders of many of the people who need some kind of stability as far as their incomes go.
CVA is tantamount to pushing an elephant through the eye of a needle. You can't do it without a lot of cutting up being done. At best, we need a freeze for a year so that you can go back and re-examine the pros and cons of this, because there are advantages to doing this but there are a lot of disadvantages and you've got to try to find a system that will take care of the negative aspects of this kind of legislation.
As I say, we need a freeze at best and at second best we need a cap so that we don't dislodge all these people and we don't pit municipal councillors against each other just on the basis of numbers of constituents who are going to benefit.
The Chair: Thank you very much. We have about one minute per caucus and we'll start with the government caucus.
Mr Gilchrist: In a minute it's tough to do much more than rebut a couple of the factual errors in your presentation, with the greatest respect. Mr Opara, 87% of the households in Scarborough East go down, so I don't think anybody's been losing their homes. In fact, it's just the opposite. Right now, Scarborough residents in aggregate pay $100 million more than they should under a fairer tax scheme and that's why I think it's quite important to point that out.
Also, you talk about a number of other communities. Let me tell you, in the case of every one you list, a majority of the homes go down. In Kingston, for example, 69% go down. More importantly, because they had up-to-date assessments, because they did have the courage to confront fairness over the years -- for example, Kingston brought in MVA in 1992 -- only 3% of their houses go up by more than 20%; in London, only 1%.
In Toronto, where they haven't done anything for 58 years, here and only here are you finding the need to rebalance as dramatic as it is, but that's precisely why: because the politicians haven't had the courage to get the fair tax from all the properties in the Toronto area. Instead, they stuck it to small business, they stuck it to renters and they stuck it to industry, driving it right out of the city.
Mr Opara: Is that a question?
Mr Gilchrist: That was a statement.
The Chair: I think it was a statement. Mr Phillips?
Mr Phillips: I'm here to get kind of get your advice rather than to attack you. Mr Gilchrist loves to hear himself talk. This is a public hearing to hear your views on it. The challenge for us is, what advice do you have when earlier AMO said -- they have a gun to their head -- it's costing the city of London, for example, $390,000 every month that this bill isn't passed, so they were saying, "Get on to pass it."
Your advice is to delay it for a year, but the municipalities are telling us to pass the bill. What advice do you have for us?
Mr Walker: I would suggest that you do delay it, because first of all, you're going to have to backdate all these increases. Mr Gilchrist can go around and pound his chest, but there are 17% who are getting increases. I understand Mr Gilchrist likes to look at himself in the mirror too, but all I say to you is you should defer --
Mr Gilchrist: I know what Lastman said about you too.
Mr Walker: I didn't interrupt you, Mr Gilchrist.
Mr Phillips: You're going to have to get Mr Gilchrist under control, Chair.
The Chair: Yes, I'll work on it. I'm also going to keep the clock under control. You've only got a couple of seconds left.
Mr Walker: Delay it and try to work something out that the clerks and treasurers can at least try to administer. Do you want to backdate and send out the bills back to January 1 for all these increases? Where are the people going to find that?
Mr Phillips, if there was any common sense, this thing would have been dropped long ago, but more particularly now because they're not going to be able to implement it until September or October.
Mr Silipo: If I can just follow up on that, I agree very much with your position and your point that we should try to stop everything and leave tax assessment as it is for at least a year and go back, but that's unlikely to happen, as you know. Given that, then I hear what you're saying about the 2.5% cap and that's something certainly I support. I have no idea what the government's going to do on that. But if the government persists essentially with this piece of legislation, what's going to happen out there come this fall?
Mr Walker: Rolling thunder across this province. People will get their pitchforks and start looking for the soft parts of certain MPPs.
Mr Gardner: Can I say something here?
The Chair: Very quickly.
Mr Gardner: In answer to your question, a lot of people aren't going to pay their taxes because they're not going to be able to pay their taxes. I've got constituents with 900- and 1,200-square-foot homes paying as much in the way of taxes as people in other parts of suburbia with 2,500- or 3,000-square-foot homes.
This is a big problem, what's going on in parts of the city of Toronto and parts of North York where we've had older neighbourhoods. It's a location tax, not one for service, not for what you're getting. When you think about what you're paying your taxes for, this is really how you should be raising your taxes, not based on just location as things change because something has become more valuable and a few homes in the neighbourhood have sold for higher rates because somebody wants to put a monster home where you've had a 900- to 1,00-square-foot bungalows. Those are the kinds of things that happen. The property gets more valuable because somebody can do something better with it than you are doing with your own because you've been living there for 40 years and you've been happy with the way you've been living.
We have over $100 million a year that never gets paid in taxes now, so what are you going to look for, $200 million, $300 million in unpaid tax?
The Chair: Thank you, sir. I'm going to have to interrupt you there. I thank you very much, gentlemen, for coming in. Thank you for your time and your presentation.
Mr Opara: We're going to have the biggest tax revolt in Canadian history.
The Chair: Thank you very much, Mr Opara. Your time is up.
TORONTO ASSOCIATION OF BUSINESS IMPROVEMENT AREAS
The Chair: The next presentation will be from the Toronto Association of Business Improvement Areas, Mr Ling. Welcome, sir. Thank you for attending. You have 15 minutes to use as you see fit.
Mr Alex Ling: Thank you. This is going to be a quiet time for a little while.
Mr Chairman and members of the committee, my name is Alex Ling. I'm president of the Toronto Association of Business Improvement Areas. I am also proud to be chairman of Bloor West Village, Canada's first business improvement area. It's been in existence since 1970, 28 years already.
As you know, BIAs operate under provincial legislation, section 220 of the Municipal Act, which allows us not only to volunteer our own time but also to bring money to make improvements in each and every marketplace. There are now 38 BIAs in the amalgamated new city of Toronto and last year the amount they contributed was around $3.5 million.
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Early this year when the city of Toronto floated this commercial rate of 7.49% for commercial and 1.24% for residential, of course with the new assessment it kind of scared all the small businesses because we just cannot afford it. Some of us increased up to 700% or 800%. We are very happy that instead of demonstrations and marches and everything, the Toronto association took the route of meeting with the government and Mel Lastman and his staff to show both sides our concerns and get things together. We are very happy that the Minister of Finance, Ernie Eves, made the announcement to have the 2.5% cap. We are very, very happy about that because we believe that if your assessment goes up because of your outdated assessment, you should be paying increased tax. However, we also realize that those who are in line for a large amount of decrease should be entitled to some relief. I think this 2.5% for the next three years will slow things down a little bit, allowing the government and us to have more input to get different classifications and everything going.
Getting back to the 7.49% tax rate, which really bothers us as small business people -- you know, hindsight is 20-20 -- if the city had realized at the time that floating that rate out would have a very devastating impact on small business, it probably would have got things straightened out with the provincial government before they made the announcement. But now that there is the 2.5% cap for three years, think ahead: What happens after the three years? If we don't do something about it, we're going to have the whole nightmare all over again. I'm suggesting that perhaps the government might think about classes, subclasses and everything else. They might think about pegging small businesses to the same rate as the residential, because the BIAs are made up of mainly small businesses, mom-and-pop shops a lot of them. This is typical of BIAs.
A number of you have visited some of the BIAs or have a BIA in your hometown and you know how they operate. They have become part of the communities. As I say, we not only volunteer our time but we also bring money to revitalize the marketplace. This not only benefits the businesses but also benefits the whole community. It makes the whole community vibrant, safe, a good place to live, to work, to shop, to raise a family. You should see the small businesses as part of the community. Pegging the tax rate to the residential rate will prevent some of the city councillors from raising taxes on these businesses. Often they realize that some of the business people may not necessarily live in their ward and therefore they sometimes perhaps have not as much concern about business as far as the municipal tax rate is concerned and they feel that business can pay for it. But they have to realize that the business strips are very important to their community. As goes the business strip, so goes the whole community. It's very, very important.
That's all I want to say right now. I just want to make it short and sweet so we'll all go for lunch.
The Chair: Well, not quite, sir, but I thank you for your presentation. We have approximately two to two and a half minutes per caucus. We'll start with Mr Phillips.
Mr Phillips: I appreciate you being here, Mr Ling. You're the president of the Toronto BIA. There was a question on the legality of the gross lease pass-through provisions for providing funds for the BIAs in a gross lease situation. The Association of Municipalities of Ontario this morning was concerned about whether it is legal or not. Has your organization looked at, in Bill 16, the gross lease provisions and are you satisfied that what is being proposed here will stand up legally?
Mr Ling: I'm not a lawyer. I was told it will stand up. I have not sought any legal counsel. I presume the government should have done their research.
Mr Phillips: Your members that have gross leases, have they commented on the provisions? I'm just curious whether we're likely to see a lot of appeals.
Mr Ling: They were told that they will be paying the BIA levies through the proposed legislation and they will continue to be full members of the BIAs. They are happy with that. They've been paying for years and they will continue to pay.
Mr Phillips: So from the legal point of view, you're not sure.
Mr Ling: I'm not a lawyer and I have not consulted legal opinion on this, but I presume that the government must have done their homework.
Mr Silipo: Thank you, Mr Ling. I agree very much with your approach in saying that the 2.5% cap is important for small businesses. As you know, that wasn't the position the government originally took, but we're happy that they've come to their senses, at least with respect to the need to protect small businesses.
I want to ask you to comment on the people who actually help you to stay in business, which are the people who shop in your store and others. You said yourself that in your particular neck of the woods, where you are, the vast majority, almost 70%, of residential taxpayers there will see big increases. They're not getting any protection under this legislation. Don't you think they should be getting the same kind of protection the government has seen fit to provide to the business sector?
Mr Ling: As I understand it, the amount of increase on the residential is not as great, compared with businesses. Also, I understand that a substantial number of residents in some of the areas are in line for a substantial decrease. I suppose this is something the government had to figure out, whether the residents who are in line for a large decrease, will they be happy with 2.5%? I guess they either go one way or the other. You cannot have a large decrease and a small increase, because it won't balance. Whatever the increase is going to be, it will, as I understand, balance with the decrease.
Mr Silipo: That's true. Looking just at the figures from the city of Toronto, in the High Park area some 69.5% of residences will see increases averaging 34%. That's going to mean that a majority of people who shop in your neighbourhood are going to have huge increases that they're going to have to deal with and consequently, at the very least, far less money to spend, let alone people who might actually be in danger of losing their homes. Does that concern you as a small business operator?
Mr Ling: I understand that these are phased in over eight years. Am I correct, sir?
Mr Silipo: Presumably, if the city does that, yes.
Mr Ling: They will go three years and then they will start over again. Am I correct? Because reassessment --
Mr Silipo: I don't know what's going to happen after three years. That's the big question that we all have, what's going to happen after the three years, even on the business side, in terms of the caps.
The Chair: Excuse me, I have to interrupt you there and move to the government side.
Mr Hardeman: Good morning, Mr Ling. Thank you for your presentation. It's nice to see you again.
There are two items I wanted to quickly discuss. You mentioned the fact that at the end of the three years there needs to be something put in place as to what we do or what happens to the taxation for small business. Your recommendation is that we look at putting something in place that would put it at the residential rate as opposed to a special class. In your interpretation of the legislation thus far, would that not be possible for municipalities to do, to in fact have some discussions and decide what the appropriate rate for small business is, and that rate could be set at that local tax rate?
Mr Ling: It's very difficult for the municipalities to make this decision because you have so many councillors and they will be voting with their voters looking over them. Some of them will vote to peg the rate and some of them will say, "No, no, no, we want to put more tax on the businesses," because a number of businesses may not necessarily live in the ward that the councillor is in. Therefore, sometimes it's tempting to increase the tax on the small businesses because the vote actually comes from the residential.
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Mr Hardeman: The other item, if I could quickly, the issue of the pass-through of the BIA levy in fixed leases, does that deal with the issue of tenants being able to be members of the BIA and being involved in the BIA that you previously expressed to me in other meetings we've had? Does this solve that problem somewhat to your satisfaction?
Mr Ling: That doesn't solve the problem because the legislation says that the people who actually pay the levies are the members of the BIAs. A lot of members were devastated when they found out earlier that they may not be a member because they don't actually physically pay the BIA levies. Now, this will solve the problem. I presume that it will be legal as was raised before. I hope it is.
The Chair: Thank you, sir. I'm going to have to interrupt you there. The time is up. I thank you for your time and for your attendance this morning.
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
The Chair: The next presentation is from the Association of Municipal Clerks and Treasurers of Ontario. Ms Best, welcome, and thank you for attending. If you'd introduce the people with you, you have 15 minutes to use as you see fit.
Ms Cathie Best: My name is Cathie Best and I'm president of the largest voluntary association of municipal professionals in Canada, the AMCTO, the Association of Municipal Clerks and Treasurers of Ontario. With me today are fellow executive members Ken Cousineau and Bob Heil. Ken is executive director of our association and Bob, in addition to being a valuable board member, is corporate manager for the town of Haldimand.
Clerks, treasurers and chief administrative officers provide the professional expertise required for the efficient, continuous and professional delivery of municipal services. We're the professional non-partisan public servants in municipal administration.
Over the past week, a few legislators and senior government officials have claimed that our concerns relating to Bill 16 result from a misunderstanding of the legislation. Clerks, treasurers and CAOs are the experts in interpreting legislation and we, not they, will be responsible for its implementation. If we have problems with this legislation, if we don't understand some of it, and we've done our best to interpret it, then all I can say to you is that we are all heading for serious trouble.
Again, we believe as AMCTO members we do understand this legislation and that's why we're here today to exercise our professional duty by flagging our significant concerns and issues that will be problematic if Bill 16 is passed in its current form and applied across Ontario. What we're offering is a dose of foresight. We are appreciative of this opportunity to appear before this committee and to present these views to you and propose amendments to correct at least some of the major problems.
The AMCTO recognizes that the provincial government is trying to provide municipalities with tools: tools for self-governance, increased flexibility and increased autonomy. We also acknowledge that there are severe time constraints in place that deny any of us, legislators included, the luxury of a complete overhaul or rewrite of this bill which, in the best of all possible worlds, we'd recommend to address its manifold problems.
In the absence of a complete rewrite, in order to mitigate the impact of this bill, we propose five priority amendments. However, we must caution that, even if all of these amendments are adopted, Bill 16 will continue to cause numerous problems. For those of you interested in a more detailed version of our concerns and proposed amendments, we have copies of the submission we made to the minister.
Our five critical amendments are as follows:
(1) Provide municipalities with the option of having the 2.5% cap apply to assessment-related increases only, or alternatively, to both the assessment and net levy-related increases.
(2) Extend the decision period on the 2.5% cap to a minimum of 30 days after the on-line property tax analysis system is up and running.
(3) Remove the eight-year maximum on phase-ins and leave the phase-in-related decisions to the municipal councils.
(4) Have the provincial government agree to fund the maintenance of the 1997 frozen assessment roll. The government has calculated the cost of this to be approximately $3.5 million spread over three years for the maintenance of the system. In the context of government expenditures this is nothing, but represents a substantial commitment for municipalities that opt for the 2.5% cap.
(5) Provide the option that charity rebates be offered as either tax credits or cash rebates and that these rebates be coincidental and in proportion to tax instalments.
Unfortunately, time is working against all of us. However, we cannot afford to have haste dictate such a fundamental change agenda.
The cumulative effect of Bills 106, 149, 160, 164 and now Bill 16 is sure to create confusion and administrative chaos. The AMCTO has met with the minister's staff, the public servants in charge of the municipal legislation, and has presented detailed, thoughtful and rational proposals and insight.
Today we ask you in the name of sound administration to accept nothing less than the five critical amendments we have outlined to address Bill 16. Our purpose is not to create problems for this or any other administration but to prevent problems which are destined to manifest themselves if Bill 16 is not amended.
Thank you for your time, attention and hopefully your action in this matter.
The Chair: Are there other comments you wish to make or are you prepared to --
Ms Best: We're prepared to answer questions.
The Chair: We have about four minutes per caucus.
Mr Silipo: Thank you for being here. First of all, I just want to say, as I think I've said in the House, that I believe it was your intervention over the last week to two weeks that has resulted in us at least being here in this very limited fashion. Had you not put forward your concerns as the administrators, as the people who are actually have to implement this thing, the government would simply have rammed the bill through the House without any amendments whatsoever and you would have had to deal with the fallout of that later on. So I appreciate very much not just your being here but what you've done.
I just want to ask you whether in terms of the five -- and again, I appreciate the way you've come forward and said, "Look, there are a bunch of other problems." There are many things, if I've heard you correctly, both today and in the things you have written, that essentially, if we could do it, the best thing would be to do a complete rewrite of this. But if we can't do that, if the government isn't prepared to do that, then here are five basic bottom lines that have to be met.
Do you have any sense from your discussion with the minister or the ministry officials that the government is prepared to move on any or all of those five areas? We don't know, as we sit here, what the government is going to do and we probably won't find out until this afternoon. I don't know if you know any more than that.
Ms Best: We have had some indication from the ministry staff that there may be some leeway on the 30-day proposal in terms of evaluating the system, to extend that, but have not got confirmation on that as yet.
Mr Silipo: The first of the points you make on the 2.5% cap and applying that to assessment-related increases only, how crucial is it from your perspective that that be done?
Mr Bob Heil: The issue is that if the 2.5% cap in the current Bill 16 remains, the effect is that that will seriously impair the municipal ability in the future to raise taxes over the next three years, if for no other reason than its own tax policy. I should qualify that. If a municipal council elects to raise taxes with this 2.5% optimum, the shift or the increase above the 2.5% for commercial-industrial will have to go to the other classes, residential and farm. The council is not hand-tied. It can raise the taxes but it will shift it all to other classes.
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Mr Hardeman: Thank you very much for the presentation. First of all, I want to agree with the member opposite that we are appreciative of the fact that you came forward with your concerns on the bill and put forward your suggestions for changes. I'm sure, after the public participation this morning, when the amendments come forward, your concerns will have been considered. Whether they would have been addressed or not, I have no way of knowing, but they will be considered. I'm sure we can be assured of that.
I have just a couple of questions on your five proposals. The first one is as it relates to the taxation or the allowed increases above the 2.5% cap, that the cap would only relate to the assessment changes, but you also say, alternatively, that it applies to the net levy-related increases. I'm not sure I totally understand the "net levy increases" as opposed to the other, what it presently would be. If you allow the levy to increase only to 2.5%, how would that alleviate the concern you expressed?
Mr Heil: Currently Bill 16 says a 2.5% cap, and that's on everything. That's net levy. We're asking the government to provide the councils, very responsible people in their own communities, with the tools to decide whether they're going to freeze their own levies at 2.5% or simply manage the assessment-related increases and make their own decisions with respect to their own tax policies above the 2.5%. We're asking the government if it will amend the legislation to provide both of those options for responsible councils.
Mr Hardeman: The second question is on item 5, and it relates to your tax credits as opposed to rebates to charities. Does your organization have any suggestions of how you would impose that pass-through, that in fact if it was a tax credit on a rental property, how one would guarantee that the charity actually got the tax credit as opposed to the landlord?
Ms Best: Under the current legislation the landlord is required to pass that along to the tenant. We're supposing that under this legislation that would again take effect, that a tax credit would be passed on to the tenant.
Mr Hardeman: So your interpretation of the legislation is that the tax rebate would go to the landlord to be passed through to the tenant?
Ms Best: The total property would get the rebate and those rebates would have to be effectively reflected in the rent on the property to the tenant.
Mr Phillips: I smiled to myself at the comments before because I appreciate that your association has been, I think, the one voice that's been trying to get the government to listen strongest, and it was, as you know, at the very last moment that the government finally agreed that you maybe have some legitimate -- like, literally. They were ready to call a motion in the House calling for complete closure on the bill with no amendments and withdrew it minutes before that, right after your press conference.
My first question is, you're going to be responsible for implementing all of these bills, 106, 149, 164, 160, 16, all the property tax bills. Even with the anticipated amendments, can you give us some sense of what's likely going to happen on the property tax issue over the next two to three months? Is it smooth sailing? Should we here in the Legislature expect a few phone calls, or is this now all patched up and we can move on to other issues?
Ms Best: I imagine it will not be smooth sailing. There will be problems ongoing, and we've addressed that in the presentation. Even the amendments we proposed will not address all of the problems that are going to be encountered in this legislation. There is a lot of confusion out there right now. There are a lot of misunderstandings and those will have to be addressed. I'm assuming that there will be phone calls both to your offices and to the municipal offices, to the municipal councils and mayors and to staff in the municipal offices, to try and sort out the details of the legislation and what exactly is going on.
Mr Phillips: When would you expect the final tax bills to be going out, on average?
Mr Heil: We'll be optimistic and say late August. That's, I believe, very optimistic. I can expect September. We're scheduling September in my own municipality.
Mr Phillips: How are you going to handle the cash-flow issue then?
Mr Heil: We have to borrow. That's all we're going to have to do, unless the government can provide some amendments in here to help us with our cash flows, further advance of our grants, again deferral of payments to the upper tier, the continuation of the commitment of the payment of the school levies, so that we can get back on our feet. I don't believe our cash flows are going to be in very good shape probably until the middle of next year, would be my guess, because of the bills that we're going to be sending out with due dates somewhere around Christmas. I know where my priorities are as a taxpayer.
Mr Phillips: I did a calculation: I figure that you've got about $7 billion left to bill, about half of the $14 billion. The interest on $7 billion a year, let's say at 7%, is about $490 million, so it's $40 million a month. Every month it's delayed, it's $40 million. That's why I get a $1-million-a-day cost to the Ontario taxpayers. Is that ballpark correct?
Ms Best: We haven't done a calculation on that. We'll rely on your figures if you like, but we haven't done a calculation ourselves.
The Chair: I have to interrupt there. I thank you, Ms Best, for your attendance. Mr Heil and Mr Cousineau, thank you very much.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair: The next presentation is from the Canadian Federation of Independent Business, Ms Andrew. Good morning and welcome. Thank you for coming. Please introduce your confrère. You have 15 minutes.
Ms Judith Andrew: Good morning, Mr Chairman and members of the committee. I'm Judith Andrew, executive director of provincial policy with the Canadian Federation of Independent Business, and I'm joined by my colleague Ted Mallett, who is CFIB's director of research and the author of a number of our studies and briefs on property tax and very knowledgeable in the area. You will find in the kits you have before you a couple of those studies as well as some things we've presented in the past, but this time in living colour, some useful charts that we'll refer to as we proceed.
We appreciate the opportunity on behalf of CFIB's 40,000 small and medium-sized business members to appear before the committee and present our views today on Bill 16, the Small Business and Charities Protection Act. As the committee will know, CFIB has been very active on local property tax issues and we've tried to be a constructive but very vocal voice in working towards a fair and meaningful reform of Ontario's property tax system.
As always, CFIB's views are based on the opinions and experiences and results from surveys of thousands of small and medium-sized business owners who do business in all segments of the economy and from all parts of the province. Our interest is not in searching out other groups or regions on to which property taxes can be loaded, but rather we would like to recommend solutions that will strengthen communities, strengthen the economic fabric of cities, towns and villages throughout Ontario, as well as improve the political accountability of local government with respect to taxation policy.
As a system, property taxes in Ontario impose very real problems on small business owners in the community. Property taxes are insensitive to profits and this means that tax burdens are applied unevenly across the economy. Committee members will be aware that Ontario is the property tax capital of the world, and in this regard I would commend to your attention to figure 3 from the coloured charts, which shows that Ontario extracts over 5% of GDP in property and wealth taxes. It's the leading jurisdiction, before Canada and all of the other OECD countries compared there.
High tax levels in Ontario means that businesses are paying more for services than they actually consume, and the variability of the assessments means that the property owners don't have the ability to plan for their tax expenditures even in the short term. In this regard, we are very sensitive to the previous presenter's points on the complexity of the reforms, the time pressures that are facing all of us, and we find it very disturbing on behalf of our members that tax bills will be delayed until August or even September.
Our recommendations in this whole area have, throughout the piece, been consistent, clear-cut and transparent. First, we need to set a fair system of assessment; second, we need to set a destination goal on how the tax loads should be distributed by class; and third, we need to set into place the series of steps necessary to reach that destination.
My colleague Ted Mallett will now describe where the reforms have fallen short, but why at this juncture this particular bill and its legislation, with improvements, is needed.
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Mr Ted Mallett: We have been meeting with the province and municipalities for years. We've been getting information from our members about the problems with the property tax system. We've been working hard to develop a constructive approach to tax reform in Ontario, as well as through the process of the legislation, especially over the past year.
We are being asked to support, really, a second-best. This is a patch for a number of problems associated with previous legislation. We had hoped that our solutions would have been taken earlier on. We favour strong provincial leadership on this issue. We're not enamoured with the idea that municipalities should have wide-open powers to set rates and tax distributions because of the experience our members have told us of with regard to the small business community and with the experiences we've seen so far to date with the tax reform.
In our view, municipalities are really unable to handle many of these responsibilities because their political structure favours short-term residential voting interests as opposed to long-term business and economic needs of the community. Our views have been reinforced by the universal approach in Ontario that we've seen so far: almost to 100%, every municipality appears to want to retain the distortions from the old tax system.
If you look at chart 1, you can see an example of a number of cities across Ontario: Toronto, London and Ottawa. In Toronto commercial businesses pay 4.2 times the residential tax load, in Ottawa it's two times, in London it's 1.9 times. We haven't seen any movement or interest from municipalities about starting to lower that gap.
In Toronto, political decisions in the lead-up over the winter would have caused some absurdly unfair levels of taxation imposed on the small business community in that area, so Bill 16 is very necessary to ensure that those kinds of problems do not crop up. Therefore, we strongly endorse the plus-or-minus 2.5% cap on business. In fact, it resembles some of our key recommendations of the past, that everybody should have these very small increments or changes in their tax load to assist in the gradual phasing in of a new system.
We also strongly agree that the 2.5% cap should include all tax changes and not just those related to reassessments, because it does impose a financial rigor and accountability to the system. We also support the way the caps were applied to the business tenants in shopping centres and office buildings. The pass-through methodology is something we recommended and we're glad to see that the province is taking that approach.
CFIB is empathetic to the plight of charities as a result of tax distribution, but notwithstanding, charities face the same problems of the small business sector. Charities do see a mandatory 40% tax rebate structure, but we don't see any kind of mandatory measures towards protecting the small business sector in Ontario. In addition, if past behaviour serves as an indication for the future, the people who will be paying for that 40% tax rebate will be the remainder of the business sector, solely the business sector itself. There doesn't appear to be any kind of requirement for this money to be shared within the entire tax base.
Because of the road the province has taken, the decision to let municipalities define new tax classes appears unavoidable. Again, it's second-best. Trying to define tax rates according to the kind of business or the location is really problematic. Our favourite approach would have been to develop mandatory tax tiering based on the value of the property: that relatively low-valued properties that are similar in value to residential properties should be taxed at more or less the residential rates, and that as a transition measure the higher rates would apply to the much more valuable properties, but over time we would hope that the gap between business and residential would be reduced.
One of the other problems with the legislation is that we don't see any long-term goal. Giving power to municipalities may help their political interests, but we don't see any help towards the small business sector in defining their long-term expenditures, especially after the next reassessment.
One recommendation that we'd like to put forward strongly is an additional restriction not only on the tax ratios -- the province has required that the tax gap cannot get any wider -- but we would like to also recommend that the province impose a restriction that the tax share, business or residential, cannot widen as a result of reassessment. This is a relatively small measure, but it would be highly demonstrative to the small business sector that the province and municipalities would actually be interested in solving the high tax burden on the small business community and the large business community in Ontario. We would hope that this kind of measure of trust in the business sector would therefore create long-term interest in developing properties, expanding job creation and reinvesting in this province.
Ms Andrew: The small and medium-sized business sector is of course an indispensable part of the community fabric in Ontario. I've listened to previous presenters this morning and almost all of them have mentioned that. Therefore, we are calling on the committee to strengthen this legislation and make some of the tools available to protect small business more of a mandatory nature. We don't think municipalities need more flexibility in this area. In fact, we would strongly encourage the committee to recommend less flexibility for municipalities.
Small businesses appreciate the efforts by the Ontario government to minimize the worst impacts of property tax reform, but they certainly know that more is necessary and it has to happen quickly before the property tax system can be considered fair.
I thank the committee.
The Chair: Thank you very much, Ms Andrew. We have less than two minutes per caucus. We'll start with the government caucus.
Mr Ted Arnott (Wellington): Thank you for your presentation, especially on short notice. We certainly appreciate your advice and your considered opinions.
As you know, this bill was brought forward to correct a couple of the problems that were not apparent to the government when we brought forward Bills 106 and 149. That's pretty obvious and pretty clear. But you've obviously given us more work to do on the issue of property tax. Your figure 3, which shows Ontario as the property tax king of the world, demonstrates that there's considerable work to do for the province in trying to get property taxes down in an overall sense, especially as they affect small business.
For a time, you were proposing that there should be a special small business rate consistent with the residential rate. I assume you still support that as a recommendation for the government. How do you see that working if we were to adopt that proposal?
Ms Andrew: That particular recommendation is actually the very last sentence on the bottom of the second page of our statement. Essentially, we would recommend a tiered approach based on property value such that the first X thousand dollars of a property would be anchored at a rate closer to the residential rate. This would also allow small businesses that start initially, as they often do, in the basement or the garage, to move on to Main Street without taking a huge property tax wallop. It makes good sense from a policy point of view and it's pretty straightforward from an implementation point of view, and we would very much like to see that one made mandatory.
Mr Phillips: Just help me a little bit on that. There are small businesses on Main Street and then there are identical small businesses in a shopping mall. Have you any recommendations for us on how the bill may ensure that both get fair treatment? I think we've got a lot of support for small Main Street businesses, but how could we ensure that in a shopping mall an identical business might get fair treatment?
Ms Andrew: You're talking about the issue of passing through the first X thousand relief to a small business in a shopping mall.
Mr Phillips: A principle, I think, is that identical businesses should presumably be taxed identically.
Ms Andrew: I would note that there aren't a lot of independent businesses in shopping malls because the lease arrangements in shopping malls work against them. In fact, they're treated badly vis-à-vis the anchor stores in shopping malls, so you tend to see far more small businesses on Main Street than you do in shopping malls, which is where the major chains tend to be.
Mr Mallett: Our primary recommendation is that no property owner should see large increases or large decreases in their tax load from year to year. The 2.5% rule is strongly recommended. We had recommended something very similar. If it takes 40 years for the tax system to become rebalanced, then it should take 40 years. Nobody should see huge tax changes. That's one way to ensure that businesses within the shopping malls and office buildings would not see huge increases or changes, though they would start to see decreases, and bring the tax rates closer to where the Main Street businesses are located.
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But it's also important to know, what is the tax goal? Is the goal to tax businesses at four times the residential rate? So far, we're seeing that the goal is that. The municipalities seem to say that is their long-term goal for taxation and that's where all businesses should be. Well, we say that's wrong. First of all, there has to be protection for the transition issues, but also these kinds of shifts or these kinds of distortions have to gradually be eliminated over time and therefore we will get to a point where all similar businesses are taxed at similar rates.
Mr Silipo: Thanks very much for being here. A couple of questions, if we have time. One is on the point about the 2.5% cap. You say in your brief that in your view, municipalities should be required to set these caps on all properties. I'm assuming you're talking there about residential.
Ms Andrew: No, not residential.
Mr Silipo: You're just talking about businesses?
Ms Andrew: Yes. Our eventual goal is to have a property be a property, whether it's residential, commercial-industrial. If you have a fair assessment system, it should attract tax based on that property value, not at some incredible multiple of that.
Mr Silipo: That's why I was just trying to clarify whether you are supporting the notion that if there's going to be a 2.5% cap, that should also be there on the residential side as well as on the business side, or are you not?
Ms Andrew: No, we're not. We understand that homeowners who are facing increases do need transition and there are phase-ins for those, but to actually cap it when at the root of the problem of the high tax burden in municipalities is the fact that the people who are enjoying the services are not paying for them, you're not going to get any accountability unless you eventually move to a system where the residents who are enjoying the services are actually footing the bill for them.
The Chair: Thank you very much, Ms Andrews and Mr Mallett, for your time and for your presentation this morning.
Ms Andrew: We appreciate the opportunity.
CITY OF TORONTO
The Chair: The next presentation is from the corporation of the city of Toronto. Mr Adams, good morning.
Mr John Adams: Good morning. I'm John Adams, a councillor with the city of Toronto and chairman of our task force on assessment and tax policy. With me today is Wanda Liczyk, who's the treasurer and chief financial officer of the city of Toronto. I'm here representing the city council, not just speaking for myself today, and we're delighted that there is an opportunity for these public hearings. I believe the clerk is distributing to you some background material which is the record of the motions on these matters that city council has adopted. I just want to highlight a few things.
Way back in the beginning of March, city council asked the minister, Mr Eves, for disclosure of the particulars of the methodology used to assess properties -- commercial, residential, the lot -- across the city of Toronto. We're still looking forward to receiving that information from the minister's staff.
We also would ask that this committee give consideration in this legislation that the next time we do a reassessment, the preliminary tax study information provided by the assessment people to the municipalities be a public record within the meaning of the Municipal Freedom of Information and Protection and Privacy Act. That was a problem for us over the last few months.
In addition to that, council is on record as saying that it would want to make sure that the legislation and the regulations provide municipalities with the authority to create a separate class for their retail-restaurant, retail-with-residential-above and retail-with-office categories which already exist on the assessment roll. These are the best available proxies for the strip-retail category, which has been subject to so much volatility with the rollout of current value assessment.
We'd also ask that the legislation and regulations provide for internal apportionments to deliver caps on tax increases due to reassessment in the commercial and industrial categories, with particular emphasis on the shopping centre categories. I believe you had a deputation and representations already today at this committee on the sensitivity of that issue.
Last but not least, we're also asking that the legislation and regulations make provision for a separate class for heritage lands and buildings so we can do a better job of protecting our important heritage stock in the city and across this province.
The other thing I want to say is that I know the city would be keenly interested in continuing to work with the government and the Legislature on real property tax reform so that the costs of education and the costs of social services no longer are an incredible burden to business and residential property taxpayers.
Thank you very much. I'll turn it over to our treasurer.
Ms Wanda Liczyk: Good morning. I think the handout labelled "Small Business and Charities Protection Act" has been distributed. I'd like to go through each of the items in this particular brief. Some of these are from an administrative perspective, so it's very near and dear to my heart in terms of implementing Bill 16, and others are reflective of some of the council's decisions and direction with respect to assessment in its totality, and not particularly limited to Bill 16.
With respect to Bill 16 specifically, the aspect that we would call the limitation of budgetary increases to uncapped classes, it is our observation that this was not originally contemplated during the announcement of the capping of commercial-industrial and multiresidential property classes. The limitation of the phase-in to 2.5% of 1997-level taxes is effectively handcuffing municipalities by requiring budgetary increases to be funded by uncapped classes.
From a financial perspective, and speaking on behalf of the municipality, this is restrictive. I'm most concerned with unforeseen circumstances that may arise to us financially in the year 2000. While I am trying very much to put the books and records of the city in good order, I think there's a sensitivity to the fact that trying today to guess today where we're going to be in the year 2000 is very difficult.
Also, concurrent with the limitation and the restriction on the 2.5% capping, a common theme in many pieces of legislation that have been put by this government, which we quite endorse, is the enhancing of municipal decision-making and autonomy. But not providing municipalities with the ability to determine how budgetary tax increases can be funded is pre-empting municipal autonomy in this matter.
If the restriction is still desirable on the part of the province with respect to capping, it is suggested that the budgetary increases be shared by all classes, based on the proportion of CVA for that class. This is not dissimilar to one of the two options that the board of trade had presented to our task force meeting with respect to changing the tax burdens that exist between different classes of property.
On the issue of the delayed return of the assessment roll, these hearings are causing a delay, which is financially hurting the municipality. We have estimated that it is costing us $5 million per month for every delay in our due dates. I should point out that some of the former municipalities in the now new city of Toronto had due dates that were June 2 and June 3. Prior to Bill 16, we had been working towards due dates of July 29. Depending on when the roll is actually released, we would have to be looking at August 29 as being the first due date for property tax bills, so we would have a cumulative impact of $10 million in lost revenue from the delay of passing this bill.
We would like to seek assurance -- we have been given the assurance by the government -- that there will be funding to offset the loss of interest revenue and/or the cost of our borrowing if we run out of cash over the next couple of months.
Councillor Adams has mentioned a council direction which speaks to the optional classes in section 1 of the bill. We would like to propose very strongly that the bill be amended to include the optional class of small/strip retail. We've done some preliminary work on that particular optional class and see that it has promise for the city of Toronto in terms of alleviating some of the issues for us. As you may be well aware, within the commercial class the valuation of office buildings has been quite problematic and we have been looking at what it would do to take office towers out as a separate class. But we've also been doing analysis on small/strip retail, and at this moment it appears to be the most promising longer-term solution for the city of Toronto with respect to phasing in CVA on a much more balanced basis.
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The bill speaks as well to the issue of charities and similar organizations. While we commend the fact that with the capping option, the charitable and similar organizations are being taken care of, it still leaves very much an administrative nightmare for how we would administer a program for charitable and similar organizations if a municipality does not choose the capping option. We are proposing that a new approach be looked at. We would want to work with the province in terms of coming up with a longer-term solution on how charitable and similar organizations are defined, as well as how we could implement this as administratively efficiently as we can.
An alternative we would suggest is that a subclass for charities or similar organizations be defined and that we be given the flexibility to attach a separate tax rate that would reflect a fixing for the charitable and similar organizations. This is not dissimilar to what exists in the legislation for vacant commercial. It would be of the same nature for charitable and similar organizations.
With respect to the administration aspect of Bill 16 with respect to assessment, it is causing us some concern with respect to how we are going to be taking care of the old 1997 assessment roll. We have been given an understanding that we as municipalities will have to be the ones who update the 1997 assessment roll. It would be our suggestion that if municipalities opt for the capping provision, we should not be expected to take on the responsibility for role maintenance and updating, because we don't have that expertise; we have not been in the assessment business as municipalities. We would recommend that the province continue to maintain and update assessment records pertaining to the identification of tenants in commercial and industrial properties so that it would ease the administration of the capping option for commercial and industrial.
There is another section of the bill that requires municipalities to provide the owner of a property with the listing showing business taxes levied. We would request that the bill be amended so that it be on an optional basis that this listing is provided, again just in the interests of administrative efficiency.
With respect to charitable organizations, the payment of the rebates is a bit problematic with respect to cash flow for the municipality. We would request that the rebates should be paid to charities in the month following the last instalment date for each tax bill, both the interim and the final bill, and that municipalities should not have to fund the rebates prior to receiving the tax payments on the rebates. Particularly for 1999, we would have to advance to charitable organizations before we've even gotten the funds from the previous BOT.
With respect to other related concerns that we'd like to bring to the attention of the committee, Councillor Adams has mentioned --
The Chair: Ms Liczyk, you have about three and a half minutes to go.
Ms Liczyk: Shall I talk slower or faster?
Mr Gerretsen: You'd better talk slower.
Ms Liczyk: With respect to the Ontario Property Assessment Corp, there has been much concern from our council about the quality and accuracy of the assessments. We would strongly request that there should be some independent quality review of the 1996 values and methodology as part of the mandate of the new assessment corporation. Particularly, we as the city of Toronto will be paying about $25 million for the operation and function of OPAC and we do not have a direct representation on the board. We would strongly suggest that the city have some presence on the board.
With respect to commercial properties, we would also like to put before the committee the issue of a longer averaging process for commercial and industrial properties. A three-year averaging, which is where we will ultimately get to in the next eight years, we do not feel represents the business cycle that exists within the city of Toronto. We would request that a longer averaging period be implemented to smooth the impacts of CVA for our commercial and industrial properties.
A piece of legislation that also touches the assessment family is the Tenant Protection Act. We will be forwarding to the province some recommendations from the task force, which council will be debating today, with respect to the notification of tenants of reductions to property taxes resulting from the implementation of CVA.
With respect to heads-and-beds legislation or taxation of public hospitals, universities and colleges, the city of Toronto council has requested the province to change the legislation so that those institutions pay their fair share of property tax dollars to the municipality.
Finally, council has been very concerned about the seniors and disabled property taxpayers across Toronto. We are looking at recommending and requesting the province to provide a tax deferral program that is broader than assessment-related tax increases and would respectfully request that the Ontario administer such a program as the province of British Columbia does.
The Chair: Thank you very much. You've exhausted the time we've allotted, but I thank you for your presentation and I thank you for your attendance this morning.
ONTARIO SPECIALTY TENANT TAX COALITION
The Chair: The next presentation is from the Ontario Specialty Tenant Tax Coalition.
Mr Michael Sherman: My name is Michael Sherman and I'm representing the Ontario Specialty Tenant Tax Coalition. I'm here to introduce our issue. Phil Gillin will then talk about some of the realities of retail. John Barnoski, from Woolworth, will talk about specific details of the impact of a particular section of the bill, subsection 447.24(4). Finally, Larry Derocher, also from Woolworth, will conclude.
We've distributed a handout to you. Briefly, the OSTTC represents 41 major tenants in malls, representing about 3,400 stores in Ontario. These are specialty stores, small retailers or CRUs. We employ over 30,000 people in total. We support the passage of Bill 16. In particular, I want to talk about one issue, which is that subsection 447.24(4), which protects small retailers.
To give you a little background on the issue, this issue came about in terms of the allocation of property tax among different tenants in a mall. Under the old Assessment Act, it was done on the basis of a mix of cost and per-square-footage. You'd decide how those were allocated, but the act did use the term that it should be allocated under "fair market rent."
The government put that aside -- successive governments did -- because it wouldn't be fair. Why? Because typically the rents of large anchor stores, such as the Bay, Eaton's, Wal-Mart, are about 10 times lower than specialty stores because there are so few of those anchor stores and because they take up much more square footage they might pay between $3 and $4 a square foot. We typically pay, in large malls, between $30 and $40 a square foot. So you had an anomaly where these small businesses were paying much higher rents per square foot and, on top of that, much higher property taxes per square foot.
That Assessment Act was challenged by one of the large anchor stores and because the "fair market rent" was in there, the last government, the NDP government, had to then send out tax bills to each of the retailers and we found that our tax bills were, in some cases, going up 600%, 700%.
All hell broke loose with retailers. We found that all our profit was eliminated, what little was there, and we also found that we were working for nothing, so we protested. To the credit of the previous government, I think the last law that was passed by that government was a Band-Aid solution, which was put into place to help small retailers. It was supported by the Liberal Party -- I think the former critic is sitting here, who helped small business, and we appreciate that support -- and also the Conservative Party supported that, and it was passed.
But there was one catch to that: under that law, when there was a reassessment or a new act was brought in, it would disappear. That Band-Aid solution has been ripped off and we're exposed. Small businesses want to put across the position that that particular section should be kept in. If that section does not remain in this bill in its present form, our taxes will go sky-high.
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Just to summarize, if there's one thing we want to communicate to you, it is that that section, which looks through leases -- although leases have been entered into by the anchor stores to protect their position, those leases push all the property tax on to the small retailers. Although we believe in the sanctity of contracts as much as anyone, not since the contract with Shylock which said he was entitled to a pound of flesh has there been a contract that so badly needs eliminating.
I'm going to pass now to my associate, Phil Gillin, who will tell you a little bit more about why this is so important.
Mr Phil Gillin: You've heard a lot from the various people who have been in front of you this morning about retail and the impacts of these tax changes on retail. We can't stress too much just how competitive retailing is these days. Our margins are being squeezed. There is no inflation on retail pricing anywhere at all. Last year, the true inflation on women's soft goods was less than 1%. Everybody is on sale all the time so margins are being squeezed, and it's a very, very difficult environment in which to eke out a living.
I think there's an illusion out there that the shopping centre environment is wildly profitable for the people in those shopping centres. That may have been the case many years ago, but it is no longer the case. The costs of being in a shopping centre are very significant. The small retailers, not the major tenants, pay the costs of the common areas. They carry the taxes on the common areas, on the fountains, the Santa Clauses, the petting zoos and all the stuff that goes on in a mall, and that's very expensive. It is very difficult to make a lot of money in a mall environment these days.
When the current market value assessment first came out, at Yorkdale, for example, the realty taxes were going to go up by almost 300%. For a 4,000-foot store, that meant the taxes were going up by $150,000. That was why the Ontario Specialty Tenant Tax Coalition was formed, to communicate to government that we cannot withstand increases of that magnitude and still run our businesses.
The consequences of tax increases of that magnitude will be store closures, store closures from small tenants as well as large tenants like Dylex, the company I work for. We take a very clear-cut view of store analysis. If a store makes money we run it; if it loses money it closes. When the store closes, jobs are lost and that's the fact of retailing today. We can no longer carry and subsidize stores that don't make money for us.
We come to you today to just explain to you that we cannot withstand tax increases of the order of magnitudes that were suggested. We must have the protections inherent in Bill 16. Any threat to the 2.5%-cap element of that bill is a fundamental threat to the viability of retailing in Ontario. We look to you to continue to protect us and give us the benefit of that aspect of the legislation because it's key to us moving forward.
Mr John Barnoski: Good morning -- close to afternoon. My name is John Barnoski and I'm a member of this coalition as well.
Our main concern when the original 2.5% solution was put forward, which we thought was a very good idea as an option to municipalities, was the fact that internal shifts within a shopping centre and within a strip plaza were still going to occur, and the same type of situation as the so-called mall wars in Toronto -- the previous NDP government introduced some legislation related to that to protect us -- was going to happen.
If you look at page 3 of our submission, the Scarborough Town Centre model, you can see a model of tax shifts even if the 2.5% solution as originally structured is to go in place, with no protection for the individual tenants. I can tell you, all the members, that it is not the big owners and the pension funds and the big landlords of the world who pay these taxes; it is their tenants, and the tenants were not protected from the internal shifts. We approached this government on this issue. They understood that this was not only an issue for shopping centres and strip plazas, but an issue for any multi-tenanted property situations, where you previously would have a bank at a higher business rate of 75% and a smaller business at a lower business rate. You would need to give the ability to protect these internal shifts.
Specifically in the Scarborough Town model, you can see that even if there was a 2.5% cap on the total increase to that shopping centre, within that shopping centre the CRUs, the retailers in the middle between these anchor tenants, would still see increases ranging from 38% to 110%.
The government has responded to this significant issue. The government has said that the 2.5% proposed solution, which is an option to municipalities, will be applicable to the actual taxpayers and that there will be no shenanigans along those lines. That is why this legislation is key for us. We commend the government for introducing such well-thought-through legislation.
I'll turn it over now to Larry Derocher, another member of our coalition.
Mr Larry Derocher: Thanks for letting us make our case here today. My job is to just quickly sum up for you what my colleagues have said.
We want to start off by saying that our coalition basically supports the legislation and its objective of creating a uniform, equitable, predictable tax system, but our problem is that without the section of the legislation that provides the option of the 2.5% cap on a tenant-by-tenant basis, we seriously believe that the viability of shopping centre retailing in total is threatened.
There are a couple of factors here. One is the increase in taxes in total to the shopping centre as an entity, and the second is the allocation within the shopping centres based on whether you're an anchor or a CRU tenant. Without the 2.5% cap, individual retailers in the CRU area are going to face increases of 100%, 150%, 200% and more. The message that's gone out and has been heard by independent businesses in shopping centres is that that 2.5% cap is going to apply to them on an individual basis. That's what they've heard. If that doesn't happen, we're predicting that you're going to face a revolt from shopping centre tenants. That revolt is going to be followed very closely by the closing of businesses and job layoffs, and I don't think any of us want that to happen.
Our goal is to provide input to you to help you draft legislation that will keep our sector viable and allow it to continue to contribute to the economy. We have two basic recommendations.
First, we are recommending that Bill 16 be passed, and for municipalities where current value assessment will result in significant tax increases to shopping centres, allow us an adequate transition period. We're prepared to work with you. We want to work with you over a period of time to help you modify the legislation further so that it eventually ends up being as close to perfect as it can be.
The second recommendation is that the clause in Bill 16 that imposes the 2.5% cap on a tenant-by-tenant basis is literally critical to our survival in the future.
With that, we will close and we'll open it up to questions for you.
Mr Barnoski: Let me just add one last point. Some of the municipal associations and municipalities today have made a point that sending out these frozen assessment rolls, if they were to adopt this option, might be somewhat onerous. Well, if this didn't go through and didn't happen, we would see uncontrollable increases. This is the type of thing that protects the tenants within these shopping centres, by saying, "Here's what the previous assessment roll was and here's what the previous tax bill was." While we certainly do not want to see a big problem for municipalities, this is literally critical to our existence. This part of the legislation wasn't just thrown in there; there is a reason behind it. It's critical and we need that to be in place.
The Chair: We have approximately one minute per caucus.
Mr Silipo: Thanks very much for being here. I want to be very clear about something. The one comment I have trouble accepting is that this is well-thought-out legislation, given what everybody else has told us, but from there on in, I want to say to you very clearly that we certainly support the notion that the 2.5% cap should apply on a tenant-by-tenant basis, to use your phrase. Our point all along has been that this protection could also and should also apply more broadly than that, and also, that this legislation could have passed and been done by now if that's what the government had wanted to do, with the proper process, which would have made the legislation much stronger and much better than it actually is.
It's unfortunate that we're here at this late time, causing all the problems there are, but I just wanted to be clear. I almost took from what you were saying that you were under the impression that some were hesitating about whether that 2.5% cap should be there. Certainly we support that. We just think it should also apply to others.
Mr E.J. Douglas Rollins (Quinte): Thanks for your presentation today. Do you people feel that there are many municipalities that won't opt for the opportunity to cap at 2.5%?
Mr Gillin: Based on some conversations with one of the municipal associations, the name of which escapes me at the moment, the information they gave me is that the only municipality that was planning to adopt the cap at this point was Toronto, that all the other municipalities in the province weren't touching it with a barge pole.
Mr Sherman: We have not yet had an opportunity to speak personally with many of those different municipalities, but because this is so important to our survival, one of the things that specialty stores should do is speak to some of those municipalities and communicate to them how important it is for us. Specialty stores are independent by nature. We have our businesses to run, but there are certain things that are so important to us that we have to dedicate the time it takes.
Mr Phillips: I smiled at "well-thought-out legislation." This is called the Danforth legislation; it was sort of made up on a trip out to the Danforth by the minister.
My question is a follow-up on a previous one. On the assumption that many municipalities will not implement the 2.5%, does the bill provide, in your mind, adequate protection for your tenants and jurisdictions where that doesn't happen?
Mr Derocher: Without that clause, no.
Mr Phillips: Without which clause?
Mr Derocher: Without the option to cap at 2.5% on a tenant-by-tenant basis, we have severe problems. We have to get over the first hurdle, then we will start with the municipalities on an individual basis, but without that initial step we're dead in the water.
Mr Phillips: This is absurd for us to be trying to deal with something this important for you in this time, but I'm telling you -- at least my belief is that many municipalities, if not most, will not have the 2.5% cap. That's a reality you'll deal with in most communities. That won't happen. Is there protection for you in here?
Interjection.
Mr Phillips: So that doesn't exist. If the bill passes as is, you've got big problems in communities where the 2.5% cap isn't adopted.
Mr Barnoski: I guess the protection we have is the ability as constituents, as taxpayers, to inform the municipality that these are the critical issues to us, and I guess others will say, "These are the critical issues to us," and the option that's taken will be whatever the municipality deems appropriate. But yes, it's obviously very critical to us. There will be substantial increases to us if this is not taken. We must have confidence in the municipalities to understand the issue and make an informed decision.
Mr Gillin: We'd like you to introduce an amendment about the 2.5% cap.
Mr Phillips: Well, I've got two hours.
The Chair: Thank you very much, gentlemen. Our time has elapsed. We appreciate your attendance, and thank you for your submission.
Mr Silipo: On a point of order, Chair: Could I seek some clarification from you and/or the clerk? Given the 2 o'clock deadline for the filing of amendments, is the clerk going to be able to circulate those amendments to our offices prior to the committee resuming?
The Chair: That was the agreement when we took the time of 2 o'clock. That was very harsh treatment of the staff, but we were in consultation with the staff when we selected the time. Can you still live with that?
Clerk of the Committee (Ms Tonia Grannum): Yes.
The Chair: Excellent. Thank you. We'll recess until 3:30.
The committee recessed from 1204 to 1531.
The Chair: Can we get started? Pursuant to the direction of the Legislature, we are to commence at 3:30 with the clause-by-clause analysis of the bill until 4:30, at which time we'll proceed to call the other matters that have not been dealt with.
We have a government amendment to section 1.
Mr Baird: I move that clause 2(3.2)(a) of the Assessment Act, as set out in section 1 of the bill, be struck out and the following substituted:
"(a) for 1998, the day that is 30 days after the assessment roll is returned or such later deadline as the minister may order for the municipality either before or after the earlier deadline has passed; or."
Mr Phillips: Could we get an explanation or reason for this?
Mr Baird: I'll just give a brief one and then if there's anything further that the legal team from the Ministry of Finance has to add, I'll let them do so. This extends the power by ministerial order to give the municipalities an additional 30 days when they're phasing in the four new categories of shopping centres, parking lot and vacant land, office towers and large industrial, so it just gives them 30 more days. I don't know if you have anything extra.
Mr Gerald Sholtack: That's covered in the next motion, the details of what that order can encompass.
Mr Baird: If they want to choose optional classes, this just gives them an extra 30 days to make that decision.
Mr Silipo: Could I just ask the parliamentary assistant why, given that they're making some movement on this, which I think is better than none, they wouldn't have gone for the suggestion that I believe AMO has made -- I think it was AMO -- which was to make the 30 days, if they want to stick to the 30 days, start clicking after the time at which the full impact of the new assessment is known?
Mr Baird: I think on this issue it's with respect to allowing them to choose the four categories, not when the tax bill is sent out. This would obviously precede that.
Mr Sholtack: The 30 days starts when the roll is returned. When we have the information on the impacts of the classes, they'll have that with the roll return.
Mr Silipo: That's not what we were hearing this morning, though. They were telling us that in fact they won't know the impact.
Mr Sholtack: I think they may have been referring to the Ministry of Municipal Affairs' computer program that provides for calculations.
Mr Scott Gray: It's our understanding now that that program is going to be available at the time the roll is returned. There was a concern earlier that that program wouldn't be available till after the roll was returned. At this point in time, it would appear that that program will be ready when it's returned.
Mr Sholtack: So they will have that tool in order to analyse it, but just to be safe, after the 30-day period, a municipality can ask for a further 30 days, if they feel they need a little more time.
Mr Silipo: That's what's covered in the next amendment?
Mr Sholtack: That's right. That gives the details of what that order can encompass.
Mr Phillips: The clerks and treasurers did propose that it be 30 days after the OPTA, which is the online property tax analysis, is available. Knowing the problems we've had with computers around here, I wonder why you wouldn't have put that in. If the computer's operational, fine, it's 30 days after. If they get it right then, why would we not have accommodated the clerks and treasurers?
Mr Sholtack: I think from a drafting point of view it's difficult to tag your time limit to a computer program. We do have a 30-day period, and I think the Ministry of Municipal Affairs is fairly confident that it will be ready so that 30 days after roll return would be sufficient time, and if that isn't sufficient time, then another 30 days can be provided. This is more definite.
Mr Gray: Certainly defining when the program is ready -- I mean, you can work on a program forever. People would argue about what is ready, and we need some kind of certainty. In terms of operationalizing this program, my understanding is that essentially it will be ready to go in a very few days, certainly by the time the roll is returned.
Mr Phillips: Help me with my confidence then. Were the assessment rolls ready to go out last Thursday and they were held up just because the bill wasn't passed?
Mr Sholtack: Yes. The rolls couldn't be returned until the legislation received royal assent.
Mr Phillips: Why was that? Again, the reason I ask is to provide some comfort that these things are ready to go. What part of the bill said that the assessment rolls couldn't be --
Mr Sholtack: One provision in the bill allows for optional classes created out of commercial and industrial, and those would be noted on the assessment roll so that the legislation that authorizes the creation of subclasses, which will be set out in regulations under the Assessment Act which will be filed after royal assent, would authorize matters that are contained in the assessment rolls and, therefore, the full authority to return those rolls needed to await royal assent of Bill 16, plus the filing of regulations under the Assessment Act.
Mr Hardeman: Just for clarification: As the questions come forward, I get somewhat confused. In fact, this amendment creates the ability of the minister to extend the time; this does not set a time line. Is that correct?
Mr Sholtack: This allows a municipality to request a further 30 days to consider whether to adopt --
Mr Hardeman: As was presented this morning by the clerks and treasurers, there may be some difficulty in meeting the time line in the legislation, and this amendment will allow the extension of that time line to meet the needs of the municipalities.
Mr Sholtack: That's right.
Mr Monte Kwinter (Wilson Heights): On a drafting point, could you just clarify for me? There seems to be a contradiction. The amendment to the amendment says, "for 1998, the day that is 30 days after the assessment roll is returned or such later deadline as the minister may order for the municipality either before or after the earlier deadline has passed." How can it be earlier if it says 30 days and the earlier one was 30 days? I can see it being after, but I can't see how you can do it earlier.
Mr Sholtack: The order could be made before the 30 days expires or it could be made after the 30 days expires. The earlier deadline refers to the 30 days because there could be a later deadline which is 30 days after the 30 days.
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Mr Gray: If they don't select their optional class within 30 days, and on the 35th day they come to the minister, the minister has authority to extend that for another 30 days even though the original 30 days has already expired. In the absence of that provision there's certainly a reasonable argument that 30 days having expired you're not extending the 30 days any more, because the authority is to extend it has already expired. There's no authority to extend for any further period of time. This is just to be sure. If people said, "Oh my God, we waited until the 32nd day," they can apply to the minister and the minister can extend, essentially, retroactively to the end of the original 30-day period.
Mr Kwinter: I have no problem with that. I still don't quite understand when you talk about the earlier date. It says it should be 30 days. You're saying it can go earlier than the 30 days.
Mr Sholtack: The later deadline is 60 days. That's the later deadline, and the earlier deadline is 30 days. You've got to make a distinction between two deadlines in the provision. When the legislation refers to the earlier deadline, it means the day that is 30 days after the assessment roll is returned. When they refer to such later deadline, it would be covered in the second amendment, a day that is 60 days after the assessment roll is returned.
The Chair: Any other questions? Are you ready for the question? Clause 2(3.2)(a), the amendment, all those in favour? Contrary, if any? Carried.
The next amendment, to subsection 2(3.3) of the Assessment Act, is a government amendment.
Mr Baird: I move that section 1 of the bill be amended by adding the following as a subsection of section 2 of the Assessment Act:
"Orders extending deadline
"(3.3) The following apply with respect to an order referred to in clause (3.2)(a):
"1. The order may be made only upon the request of the municipality to which the order relates.
"2. The order may not provide for a deadline that is later than the day that is 60 days after the assessment roll is returned.
"3. The Regulations Act does not apply with respect to the order."
Mr Phillips: Can we have an explanation of what this is attempting to fix?
Mr Baird: This is complementary to the first amendment that we just presented. It gives the details on how a municipality would go about getting the extension, that you have to request it. It just sets that out how one would seek the minister's authority to give a 30-day extension, the process on how a municipality implements the first amendment that was just carried.
Mr Silipo: Would I be correct in saying that if you didn't have this amendment, then on the basis of the amendment that we've just passed the minister would be able to order, upon a request by the municipality, a further deadline and that deadline would not be prescribed other than by whatever the minister in his wisdom decided? In other words, the 60 days could even be longer, couldn't it?
Mr Sholtack: It could be, yes.
Mr Silipo: If we put in the second amendment, it limits the flexibility to 60 days.
Mr Sholtack: That's correct.
Mr Silipo: I would just ask the parliamentary assistant why he wouldn't leave it open-ended in case you have a situation there that requires you to deal with a period of time longer than 60 days. You bind yourself into the 60-day period.
Mr Baird: If you want to use the optional new four classes, that means you've got to make a decision in terms of picking out your own assessment and financial information. You've got to make a decision soon. There is a degree of flexibility to allow municipalities to deal with that, but you do have to make a decision.
Mr Sholtack: They can't send their tax bills out until they decide whether they're going to adopt an optional class. Then there has to be a transition ratio prescribed for that optional class so that they can calculate their taxes.
Mr Baird: This would be a backdoor way. If they've already sent their tax bills out, they could raise more money.
Mr Gray: There is a statutory deadline for them concerning the tax ratios. These optional classes have to be selected before the tax ratios.
Mr Hardeman: Does this amendment mean that when the application came in after the 30 days, the minister could no longer grant the 30-day extension?
Mr Sholtack: No --
Mr Hardeman: He would grant the length of extension: 30 days minus the days that they were over the first 30?
Mr Sholtack: If the request was made 35 days after the assessment roll was returned, the minister would have the authority in the first amendment to extend it to 60 days. It would be another 25 days that the municipality had to make their decision.
Mr Hardeman: It limits it to a 60-day extension.
Mr Sholtack: Sixty days in total. That's right.
The Chair: Any other? Ready for the question? All those in favour? Contrary, if any? Carried.
The next amendment also concerns subsection 2(3.3) of the Assessment Act, an NDP motion.
Mr Silipo: I move that section 1 of the bill be amended by adding the following as a subsection of section 2 of the Assessment Act:
"Certain classes required as municipal option classes
"(3.3) The minister shall prescribe the following as classes of real property that apply only if a municipality opts to have them apply as allowed under subsection (3.1):
"1. The retail strip small business property class.
"2. The heritage building property class."
If I may speak to it briefly, this would add a couple of classes that we know have been requested certainly by the municipality of Toronto, but perhaps by others as well, in terms of suggesting that in the classes that should be set up when the municipality makes the decision whether to opt into this thing or not, there should be a separate class dealing with retail strip small business property class and, as well, the heritage building property class, which I know is a particular concern in the city of Toronto. It may not be in other places, but it is here.
Having the ability to create these classes would allow the city to single these classes out for special protection, particularly with respect to the heritage building class and the retail strip classes we heard a lot about this morning. We're not quite sure why, particularly on the retail strip, that wasn't included as a list of optional classes. But our sense is that it may not even be set out as a separate class in the regs that will follow this, unless the parliamentary assistant has information to the contrary. We think it should be right in the legislation.
Mr Baird: I assume this is one of the issues that arose from the presentation by Councillor Adams from the city of Toronto. Looking at it and considering it, I don't know if I'd have a serious objection. At the same time, I do have a concern with respect to including it in now, wondering whether there's enough time to make such changes and get the assessment rolls out. The heritage and the small strip retail are difficult to identify on the rolls. It potentially could take months to be able to identify them with a significant degree of accuracy, which would delay the tax bills going out.
There is a concern that has been expressed by AMO and by members of the committee with respect to the loss of revenues for municipalities if it were to be delayed further. It's not something which I would say I personally was against, but I would want to consider it. I do have that concern with respect to making the change at this time, because it would just further delay the rolls, because it is very difficult to identify in the rolls.
Mr Phillips: Although I think the way the motion's worded is that this decision is left to the municipality if it believes it can accommodate that. This is enabling legislation.
Mr Sholtack: The regulation would have to identify the content on the assessment roll so that the municipality could see the impact, just like we will identify the content of the office building, the shopping centre, the other optional classes that are going to be made. We found, over the last little while, trying to identify what constitutes a retail strip small business is very difficult from a drafting point of view. You have a whole myriad of different kinds of properties that might be included. The option to use the tiering was the recommended approach to deal with small properties. By tiering commercial assessments you can target tax relief to smaller properties which tend to be the strip retail properties. In our view, using tiering is the best way to provide tax relief to small retail properties.
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Mr Phillips: I have heard a lot of support for the small retail strip from many government members. It seems to me that if we don't provide this option now, it's gone. If we do, municipalities can weigh the complexities of it and make their own decisions. They'll understand if it does delay some things. I just wonder why we wouldn't make this part of the bill.
Mr Silipo: Without belabouring the point, this has been, as Mr Phillips has just said, one of the things that the minister and others have said they wanted, to make sure that small businesses were protected. Yet, ironically, nowhere in the classes that they have set out have they provided for a particular small retail strip class to be there among the categories.
The other thing is that there are also the small businesses in the malls which aren't picked up anywhere as far as I can tell. Even though, as we heard this morning, many of them may be chains, there are also a number of individual ones that are not covered anywhere. This at least would provide some ability with which to cover them as well.
Mr Hardeman: A question to the ministry: If those two classes were added as optional classes, would it require a change in the assessment roll if municipalities decided to pick up on the option and implement it? Then they would have to go back through the assessment process and create those classes in the assessment before they could avail themselves of it.
Mr Sholtack: That's right. The assessment roll has to identify all classes of real property, so just as in the other optional classes, they would have to be reassessed and assessment notices sent would have to be out.
Mr Hardeman: The other question is to the mover of the amendment. I have a concern as to how you would identify the heritage building class, whether that would be a building with any heritage attributes regardless of what is in it, or is it a strictly designated historical building of historical significance?
Mr Silipo: Chair, I don't profess to be an expert in this, but I think there are municipalities, certainly the city of Toronto, but beyond, that have a lot of experience in this. So my sense is that while I don't claim it would be easy, I don't think it's a particularly onerous process to determine, on the basis of provincial legislation and practice that's been used municipality by municipality, what the criteria should be in terms of what would fit into that category.
Mr Hardeman: On the same one: In the opinion of the mover of the amendment, is there a difference between a small business property class and a retail strip small business property class? Is it significant that they're in a strip as opposed to being a small business class?
Mr Silipo: Not per se, except that the point has been made that many of the small businesses are found in the retail strips and that warrants a particular kind of protection because of the nature of the business they have and the nature of the community that builds up around that business.
Mr Baird: Would that cover -- you mentioned shopping centres.
Mr Silipo: No, I stand corrected on that. It probably would not pick up those if it's seen that way.
The Chair: Any other questions? No? Ready for the question?
Amendment 3: All those in favour? Contrary, if any? That's lost.
Shall section 1, as amended, carry? All those in favour? Contrary? Carried.
Section 2: No amendments to section 2. Shall section 2 carry? All those in favour? Carried.
Section 3: Shall section 3 carry? All those in favour? Carried.
Section 4, amendment number 4, subsection 23(9) of the Assessment Act; Mr Baird.
Mr Baird: I move that subsection 23(9) of the Assessment Act, as set out in section 4 of the bill, be struck out and the following substituted:
"Update of old fixed assessment
"(9) A fixed assessment is changed each year after the year with respect to which it first applies in accordance with the following:
"Fixed assessment (current year) equals previous year's taxes over current year's tax rate times tax change (class);
"Where,
"'Previous year's taxes' means the taxes levied for municipal and school purposes in the previous year on the land to which the fixed assessment relates;
"'Current year's tax rate' means the total tax rate, for municipal and school purposes for the current year, for property in the residential/farm property class in the local municipality;
"'Tax change (class)' means an amount determined in accordance with the following:
"1. Determine the total taxes levied for municipal and school purposes in the previous year on the property described in paragraph 4.
"2. Determine the total taxes levied for municipal and school purposes in the current year on the property described in paragraph 4.
"3. The tax change (class) is the amount determined under paragraph 2 divided by the amount determined under paragraph 1.
"4. The property referred to in paragraphs 1 and 2 is the property in the local municipality that, for both the previous year and the current year, is in the residential/farm property class. For 1998, the property referred to in paragraphs 1 and 2 is the property in the local municipality that, for 1998, is in the residential/farm property class."
Mr Kwinter: I'd like to get a clarification from the parliamentary assistant. In the original drafting of this bill, the whole equation is based on assessments. It says: "Fixed assessment...equals assessment (current year) over assessment (previous year) times fixed assessment...." You've now changed the whole concept to previous taxes. So what happens is that if I pay my taxes and in the interim I get reassessed, there's no provision in that formula dealing with assessments. It all has to do with taxes. What you're saying is that it depends on what taxes you paid before and we will have this formula to determine what taxes you're going to pay now, as opposed to assessment, which was the original drafting of the bill. I just would like to know the rationale behind that.
Mr Baird: It deals with tax change. Maybe the official could shed some light on the specific nature of your question.
Mr Sholtack: The concept of the fixed assessment is contained in section 23 of the Assessment Act. It allows a municipality and a golf course to enter in an agreement that would fix the assessment for as long as the golf course wishes to have it fixed. Once it's fixed, it cannot change under the legislation, so the tax rate is applied to the fixed assessment and the taxes are paid by the golf course. The intent of the original provision had been that where the assessments are updated so that they're increased significantly, the result is that the tax rate goes down. So if there's no alteration to the fixed assessment, the golf course ends up paying very little tax, so there's a significant drop in the total tax paid by the golf course unless the fixed assessment is modified to reflect the new assessments that are being returned in 1998.
The intent had always been that the golf course should not pay any less tax in 1998 than they paid in 1997, and that required a change to the fixed assessment. The formula that was used based on assessment wouldn't work in the circumstances. It wouldn't truly reflect the guarantee that the taxes wouldn't change, so we've now corrected that and are proposing that they be based on the actual taxes. There's a provision that if the overall level of taxes goes up or down, that would modify the taxes paid by the golf course. These are only those golf courses that have fixed assessments, that have an agreement with the municipality to fix their assessments.
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Mr Baird: In layman's language, that just maintains the existing contractual relationships between the municipality and the particular operator. The municipality has entered into these agreements and basically maintains the status quo. That was the intent of the first and second reading draft and that just seeks to clarify it. If a municipality has signed a particular agreement, then this just maintains that status quo.
Mr Kwinter: I have a problem with the concept that the taxes must keep going up. An assessment is an assessment. The whole idea behind current value, actual value assessment is, what is it worth? What happens if the golf course for whatever reason isn't worth what its fixed assessment is, then what do you do?
Mr Baird: The operator went into a contractual relationship with the municipality. Obviously it's not in their interest to do that and they wouldn't -- I'd be hard-pressed to think of a situation where that would --
Mr Sholtack: The fixed assessment is not intended to reflect the actual assessment of the golf course. It's designed to preserve green space in the municipality. So the amount of the actual taxes is being calculated under the provisions of section 23, and when the golf course is sold or when they go out of the agreement, they'll have to repay all the taxes they've been deferring for the duration of the fixed assessment.
Mr Phillips: This is fascinating: We got these amendments an hour and a half ago and this is the golf course amendment, I gather, hidden under the term "fixed assessment." Just one more question: Are there any other things besides golf courses on fixed assessments?
Mr Sholtack: No.
Mr Phillips: So it's the golf course amendment. Is the impact of this that golf courses will pay more taxes than the previous one or less taxes? I don't think we had any presentations in our little public hearings this morning on the golf courses, but what is the intent, that they're going to pay more or less taxes here than under the part you're amending?
Mr Sholtack: They'll pay the same taxes. The intent is that they pay the same taxes in 1998 as they paid in 1997. This formula will modify the fixed assessment to reflect the fact that all assessments in the municipality have gone up and the older the base, the more significant the change is. In order to get the same amount of money that they got, the municipality would reduce its tax rate to get the taxes. That's why I said that the fixed assessment has to be modified to reflect the increase in the general level of assessment in the municipality.
Mr Phillips: I'm not sure you answered my question, which was, will they pay more tax or less tax under this amendment than under the original proposal in the bill, not versus 1997?
Mr Sholtack: The result will be that they will pay exactly what they paid last year.
Mr Phillips: I understand that.
Mr Sholtack: The result may be more or it may be less. We found that it varied depending on the circumstances. The assessment carried on the roll in 1997 versus the current value return for 1998 resulted in a great variation in tax consequences for these golf courses and a number of examples resulted in significant tax increases applying this formula, and that was not the intent of the amendment.
Mr Phillips: I'm just trying to get an idea of the story tomorrow in the Star and the Globe. Is it, "Committee Gives Rosedale Golf Course Last-Minute Break" or not? I just don't know.
The Chair: Read it whatever way you want.
Mr Phillips: But surely we're owed some explanation before you want us to vote.
Mr Baird: What anyone will say is that there are no changes, that 1998 will be the same as 1997.
Mr Phillips: That's not the issue.
Mr Baird: That's not your issue.
Mr Phillips: No, that's not the issue. The issue is that we are amending the previous proposal and I just want to know why we're amending the previous one. Did it have consequences that we didn't like, what were those consequences and what exactly is the impact of this?
Mr Baird: The intent was that 1998 would be the same as 1997, that it wouldn't be changed. This seeks to live up to that intent.
Mr Phillips: I never knew that was the intent of the original bill.
Mr Kwinter: Mr Chairman, I have a basic problem with the concept we're dealing with. Basically, the province has the duty to provide a uniform assessment. That is the duty of the province and that's the reason we're into this whole situation with current value, actual value, market value. The municipality under guidelines set out in this legislation has the authority to set the tax rate, and that tax rate is done by the municipality based on their particular requirements.
We now have an act that is going to be amended that is taking the concept of the provincial legislation providing the ability to assess, and we're now saying we're also going to determine the tax by saying we are removing, as it was in the original bill, all reference to assessments other than fixed assessment, and we're now talking about dealing with previous taxes and making sure that taxes remain constant.
I just find that there's a conflict in what we have been doing in every other tax classification. I understand the requirement that this is green space and that there have got to be some concessions. I just find that we are setting what I think is a very strange precedent. We are suddenly legislating what the taxes are going to be as opposed to what the assessment is going to be.
Mr Baird: But the fixed assessment is not new by this legislation. It has pre-existed for some time.
Mr Kwinter: I'm not talking about assessment. I'm talking about taxes.
Mr Baird: I'll give you an example in my constituency of one operator, whom I think you and your colleagues would know quite well. There was some discussion of expanding that and purchasing -- there's some MTO residual land that'll go up for sale at some point in the next five or 10 years and the community there, for example, wants the green space maintained. This is not new with Bill 16. In the past there was a tax recognition of that, because obviously if a municipality or the province has a park, if there's not a separate tax rate for parkland because generally speaking it was in the public sector, I guess over the years this has developed. It's not something that's new or being introduced or changed. It's simply holding what was done in 1997 through to 1998, so it maintains it at the same rate.
Mr Silipo: I find that the more complex these things get, the easier it is to try and come back to basic principles. I'm going to ask the parliamentary assistant this I hope simple, straightforward question: Tell me what you think I should say to one of my constituents staying at the corner of Dufferin and St Clair, who's either a shopkeeper in that situation or a shopper, for whom they're going to see either this 2.5% cap, depending if you get the regs right and protect them, or they may see an increase or a decrease, depending if they're residential. What's going to happen to them? How do I explain to them that in the same piece of legislation you're putting in a provision that ensures that golf courses will not have an increase in taxes?
Mr Baird: I'd say to them a number of things. One is that the operators are going to pay the same in 1998 as they paid in 1997. I'd say to them that this piece of legislation puts a 2.5% cap on. Finally, I'd say that this government is moving to equalize the education taxes for commercial-industrial, and there'll be a $400-million tax cut to the city of Toronto, that was overpaying for years and was driving businesses out of this province. I would say to them that this government is finally taking some action to ensure some fairness and equity and to ensure that businesses in Toronto aren't whacked to such an extent. I'd say to them one example that Mr Ruprecht made in the House: "Why are all the restaurants on one side of the road on" -- I believe it was Steeles Avenue -- "and not on the other side?" That's because of the inequitable tax system. We're beginning to clean it up and we're beginning to move to a more fair and equitable tax system.
Mr Silipo: You're welcome to come and try any and all of that, Mr Baird. I was trying to get at why, if I've understood this, you're treating golf courses differently than you're treating other sectors, including -- you said a couple of things in your answer that maybe helps in the situation or maybe not. Are you saying by virtue of this amendment that golf courses will have their taxes frozen at last year's rate? Or are you saying that they will be subject to the potential increases but then be subject to the 2.5% cap? Which of the two is it?
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Mr Baird: I think we're saying that the local municipality that entered into a contractual relationship with an operator, that agreement will stand and they'll pay this year the same taxes they paid last year. That contractual relationship entered into by that local storekeeper's councillor and mayor is going to be respected and maintained. That shopkeeper elected the local council, elected a mayor, and that mayor and council has entered into a contractual arrangement with an operator. We're going to simply maintain that the way it was; we're not going to interfere in that respect.
Mr Silipo: You'd argue that this is a case where you are allowing some semblance of local autonomy for municipalities to make those decisions.
Mr Baird: Yes.
The Chair: Any other comments or questions? Are you ready for the question? All those in favour? Contrary? Carried.
Shall section 4, as amended, carry? All those in favour? Contrary? Carried.
Shall section 5 carry? All in favour? Contrary? Carried.
Section 6, subsection 31(7); a Liberal amendment.
Mr Phillips: The following five amendments all deal with the same issue and you have to deal with them as a package. I'll just explain what it is and then read the amendments. This responds to the concern of the clerks and treasurers --
Mr Hardeman: On a point of order, Chair: I'm reading it and I'm quite prepared to hear the member across read it, but if this is the one that deals with how I should vote, I would suggest that that may be out of order.
The Chair: You might be right; it might be out of order; therefore, you'd want to deal with debate on the item itself. What difference does it make? It's probably out of order, but I'd like to hear the argument.
Mr Baird: He hasn't moved it yet.
The Chair: If it had been after 4:30, it would've been ruled out of order.
Mr Phillips: Of course; everything will be.
Mr Silipo: But since we have a whole hour to debate, why not?
Mr Phillips: Listen, the clerks and treasurers have told you this bill is a mess. I'm trying to be helpful in correcting the damn thing.
The Chair: I know how you feel. I often do the same for the Speaker in the House.
Mr Hardeman: Just tell me how to vote; don't make a resolution to tell me how to vote.
Mr Phillips: You vote however you want to vote. I'm just telling you that if you want to accommodate the clerks and treasurers, you'll have to join with us and vote against section 6, subsection 31(7) of the Assessment Act. If you don't want to support the clerks and treasurers, do whatever you want.
They point out in their concerns that with the change of "shall" to "may" in subsection 8(1), the delegation of authority is transferred to the assessor. In their opinion, and I think they're probably right, this should only be decided by the Ontario Property Assessment Corp through policies, not left to the assessor to make these decisions. These five recommendations return to the Ontario Property Assessment Corp, with the board made up of AMO, the authority to make these decisions.
I would say that if the committee is supportive of the clerks and treasurers, you would vote against section 6 of the bill. I'll read the motion on subsection 8(1) if you want, Mr Chair. But if you want to deal with them sequentially, you can.
The Chair: I think we'd better deal with them sequentially.
Mr Phillips: Okay. I will repeat what I said, that the bill now puts in the hands of the assessor authority that should, in the minds of the clerks and treasurers and in my mind, be left as a matter of policy to the Ontario Property Assessment Corp.
Mr Hardeman: I'm not sure which amendment is before the committee at the present time, but if it's the one that suggests how we should vote, I would have great difficulty in dealing with that one now and dealing with the items that the member has discussed which would be subsequent to that. If I agreed with him in the first amendment then in fact I couldn't support the other amendments because we'd already voted them down. In process, he has a bit of a problem here with what's before us.
Mr Phillips: Actually, I have no problem at all, because if you vote for subsection 31(7) of the Assessment Act, you can't deal with the rest. You're going to have to make up your mind.
The Chair: Would you mind running that by me again?
Mr Phillips: If you approve section 6 of the bill, subsection 31(7) of the Assessment Act, you cannot accommodate the concern of the clerks and treasurers about turning the authority over to the assessor instead of the assessment corporation.
Mr Baird: I just would speak very briefly to the point. Section 6 of the bill also has a package of stuff that deals with supplementary estimates done in-year and year-end and requires things like a notice to be sent out if a supplementary estimate has been done. So to vote against it would open up a whole host of problems.
Mr Sholtack: If I might add, the amendments that were made in a schedule to Bill 164 that establish the Ontario Property Assessment Corp had complementary amendments that would define "assessor" to mean an employee of the corporation, once the corporation took over the delivery of assessment services. Once that happens, all assessors work for the corporation. The corporation will establish the policies and they will follow them. I just don't understand the concern.
Mr Phillips: Did you discuss this with the clerks and treasurers and are they satisfied?
Mr Sholtack: I don't think we actually discussed that aspect. If that's their concern, it really shouldn't be a concern.
Mr Phillips: Did you ever get a copy of their letter?
Mr Sholtack: We did.
Mr Phillips: Did you look at their concern?
Mr Sholtack: We did.
Mr Phillips: You didn't discuss it with them?
Mr Sholtack: We had a meeting with them, but there were many issues we discussed.
Mr Phillips: You didn't have time to discuss it with them?
Mr Sholtack: That's right. The intention of these provisions is to reflect current practice. Where supplementary assessments may not be made during the year, they may be made at the end of the year. They're very technical amendments to accommodate that; that's all they are.
Mr Phillips: The clerks and treasurers have some conflict.
The Chair: I'll rule the amendment in order and we'll call the question on the amendment.
Interjection.
The Chair: You have trouble with that?
Mr Arnott: It's out of order.
Interjections.
The Chair: It isn't an amendment. I agree. If we rule it out of order, we'll call the vote on section 6, which amounts to the same thing. The question then is, shall section 6 carry? All in favour? Contrary? Section 6 carries.
Shall section 7 carry? All in favour? Carried.
Section 8: subsection 34(1), several amendments.
Mr Phillips: Subsection 8(1) of the bill, subsection 34(1) of the Assessment Act: I move that subsection 8(1) of the bill be struck out, as part of that "shall" issue.
The Chair: Any other further comments? Ready for the question on amendment 6, subsection 34(1)? All those in favour? Contrary? Lost.
Amendment 7, subsection 34(2): Any additional comments?
Mr Phillips: I move that subsection 34(2) of the Assessment Act, as set out in subsection 8(2) of the bill, be amended by striking out "may" in the sixth line and substituting "shall."
Mr Baird: I know from the clerks and treasurers, from their letters and in discussions, that they want supplementary assessments to be done in-year. I guess there's a flexibility desire to do them in-year or end-year. Many municipalities already do end-year and this would take away that flexibility -- and obviously with notice that there was a supplementary assessment.
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The Chair: Any further comments? Ready for the question? Subsection 34(2): All those in favour? Contrary? Lost.
Amendment 8. Would you like to read it?
Mr Phillips: I move that subsection 34(2.1) of the Assessment Act, as set out in subsection 8(2) of the bill, be amended by striking out paragraph 2 and by amending paragraph 3 by striking out "Paragraphs 1 and 2" in the first line and substituting "Paragraph 1."
I think we're still on the shall/may issue. I'm sorry, that's not true. My apologies. This is a different issue that the clerks and treasurers raised and it has to do with what is called a change event. I believe that the way the bill is currently written, if there are in-year changes it permits the moving to a higher tax ratio class but not to a lower tax ratio class.
The concerns of the clerks and treasurers, which I share, is, as they say, "a 'change event' stipulated in subsection 8(2) will only have an impact on class changes driving a higher tax rate. If a change event moves a class to a lower rate, there is no option for the assessment corporation to reassess. This will prevent a negative tax bill." But for property taxpayers who should have moved to a lower tax rate, in the opinion of the clerks and treasurers it is going to lead to contentious dealings where it looks like their government is prepared to move them to a higher tax rate but, if justified, is not prepared to move to a lower tax rate.
Mr Baird: On this, under the Municipal Act there's already the ability to make application to go to a lower property class. If you had a building and tore it down and built a parking lot or built something that would significantly change the class, there is the ability to go into city hall -- it's called a section 442 application -- and to do that already. I think under the Municipal Act there's already the ability to do that. I don't take exception with what you said, that this bill doesn't say it, but under the Municipal Act already, under 442, they can.
Mr Phillips: The clerks and treasurers -- actually I'm quoting directly from them: "However, the property tax owner would expect a change and this will ultimately lead to contentious dealings with property owners." This prevents a negative tax bill. Why would they say that and you have a different opinion? Did you discuss that with the clerks and treasurers?
Mr Sholtack: I believe we did go through their submission and we undertook to get them our comments. The comment on that point would be that there is the process, it's been in place for many decades, it has not led to contentious dealings. People can get tax reductions. They do it all the time.
As the parliamentary assistant said, where buildings are torn down, where there are other changes that result in tax refunds, people will apply under 442 and those refunds will be processed. In the same way where property moves from a higher tax class to a lower tax class, it will generate the right to apply for a refund for taxes for the part of the year. That is a routine process that's been in place. I guess we can't understand why that would particularly be contentious in this case.
It's generally not the practice of the assessment department to reduce people's taxes. Their job is to assess in supplementary cases where there's increased revenues. For example, where properties are improved or where a building is erected, supplementary assessments are issued and, as was stated, when buildings are torn down the process is under 442 to get your taxes back. So that scheme continues with respect to these particular provisions.
Mr Phillips: I didn't quite understand what you're saying, that the role of who is to normally only deal with tax increases and not --
Mr Sholtack: In supplementary assessments they deal with increased liability. Where you improve property, as an example, where property is improved during the year, where a house is erected on a lot, or an apartment building or an office building, the supplementary assessment process results in an added assessment to the property and that generates a tax bill that's sent out by the treasurer of the municipality.
This continues that process. Where there's a classification change that again results in an increased tax liability, the collector will then send out a tax bill. It's not intended to deal with, as you say, negative tax bills. It's intended to deal with situations that do generate increased tax liability.
Mr Baird: A basic analogy is that if someone owes less tax, they're always going to be there to go and collect it. There's no doubt about that.
Mr Phillips: They're on their own.
Mr Baird: It's sort of like a tax refund. Those taxpayers who are owed an income tax refund generally apply significantly earlier to get it. There was a case, for example, that was very celebrated in Ottawa where one landlord actually ripped out all of the windows inside of an apartment building which sat empty in downtown Ottawa for a period of about two years just so that he could get his property tax reassessed. He just simply went down to city hall and just filled out a section 442 application under the Municipal Act and it was immediately reduced. When people have a reduction in property, they generally are pretty quick about seeking that reduction because people are taxed pretty heavily.
Mr Phillips: I'm just going by what the clerks and treasurers say and they were trying to be helpful to people who are owed a tax decrease, but I gather the government doesn't want to do that. They're going to have to find their own way around it, I guess.
The Chair: Any further comment? Ready for the question, amendment 8, 34(2.1)? All in favour? Contrary? Lost.
Subsection 34(4), amendment 9.
Mr Phillips: I move that subsection 34(4) of the Assessment Act, as set out in subsection 8(3) of the bill, be amended by striking out "the appropriate changes shall be made" in the third and fourth lines and substituting "the assessor shall make the appropriate changes."
Again, this is the clerks and treasurers. I do wish we had more time for them to provide some of their own comments on these things as well, but what they are recommending is clarification that it is the assessor who changes the assessment roll. Right now, it's unclear who makes those changes and in their mind it will create what they call "instant adverse relationships between the council and those taxpayers expecting a reduction."
Mr Baird: I think this is the same issue that we just dealt with two amendments ago with respect to whether it's the corporation or the assessor. I think it's a pretty narrow differentiation. It's clear, I think. Bill 164 set up the corporation, but I appreciate your issue. I don't agree with it, but I appreciate it.
Mr Phillips: Okay.
The Chair: Were you finished, Mr Phillips?
Mr Phillips: Yes.
The Chair: Any other comments with regard to amendment 9, 34(4)? Ready for the question? All those in favour? Contrary, if any? Lost.
Shall section 8 carry? Carried.
Shall section 9 carry? Carried.
By my watch it is now 4:30.
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Mr Phillips: Just when we get to the most crucial amendment.
Mr Gilchrist: You should have paced yourself.
The Chair: Section 10, amendment 10, subsection 40(17): On the amendment, all those in favour? Contrary? Defeated.
Interjection.
The Chair: There's no need to read them.
All those in favour of amendment 10, subsection 40(17)? Contrary? Defeated.
Shall section 10 carry? Carried.
Shall section 11 carry? Carried.
Shall section 12 carry? Carried.
Shall section 13 carry? Carried.
Shall section 14 carry? Carried.
Shall section 15 carry? Carried.
Shall section 16 carry? Carried.
Shall section 17 carry? Carried.
Shall section 18 carry? Carried.
Shall section 19 carry? Carried.
Shall section 20 carry? Carried.
Section 21, a Liberal amendment, number 11, reference to subsection 372(1.1). All those in favour? Contrary? Defeated.
Amendment number 12, subsection 21(2.1) of the bill, subsection 372(5). All those in favour? Contrary? Defeated.
Shall section 21 carry? Carried.
Section 22, amendment number 13, reference to subsection 372.1(4).
Mr Phillips: I gather, Chair, that we can't even get an explanation of what these do.
Mr Baird: There was a briefing offered at 8 am this morning.
Mr Silipo: Don't go there again.
The Chair: Excuse me, I think he was directing it to me.
Mr Baird: I'm just trying to be helpful.
The Chair: I know. I now appreciate the Speaker.
Mr Phillips: You wouldn't even present these publicly until 2 o'clock.
The Chair: My answer to your question is, as per the Legislature's direction, no.
Mr Phillips: Does anybody know what we're voting on here?
The Chair: We're voting on amendment 13, section 22 of the bill, subsection 372.1(4) of the act. All those in favour? Contrary? Carried.
Amendment 14, subsection 372.1(5): All those in favour? Contrary? Carried.
Amendment 15, subsection 372.1(6): All those in favour? Contrary? Carried.
Number 16, subsection 372.1(7): All those in favour? Carried.
Amendment 17, subsection 372.1(7.1): All those in favour? Contrary? Defeated.
Amendment 18, reference subsection 372.1(8.1): All those in favour? Contrary? Defeated.
Amendment 19, reference subsection 372.1(9), paragraph 1: All those in favour? Carried.
Number 20, subsection 372.1(9), paragraph 1.1: All those in favour? Contrary? Carried.
Number 21, subsection 372.1(9), paragraphs 6 and 7: All those in favour? Contrary? Carried.
Shall section 22, as amended, carry? Carried.
Shall section 23 carry? Carried.
Shall section 24 carry? Carried.
Shall section 25 carry? Carried.
Shall section 26 carry? Carried.
Section 27, amendment 22, reference to subsection 442.1(3), paragraphs 3 to 6: All those in favour? Contrary? Lost.
Amendment 23, reference to subsection 442.1(4), paragraph 2.1: All those in favour? Contrary? Carried.
Amendment 24, reference to subsection 442.1(4), paragraphs 5 and 6: All those in favour? Contrary? Carried.
Amendment 25, reference to subsection 442.1(4), paragraphs 5 and 6: All those in favour? Contrary? Lost.
Shall section 27, as amended, carry? Carried.
Shall section 28 carry? Carried.
Shall section 29 carry? Carried.
Section 30, amendment 26, reference 447.1, 447.2 and 447.3: All those in favour? Contrary? Defeated.
Amendment number 27, reference 447.1, 447.2 and 447.3. All those in favour? Contrary? Lost.
Number 27A is with reference to subsection 447.3(5). All in favour? Contrary? That's lost.
Number 28 is with reference to subsection 447.3(5). All those in favour? Contrary? Lost.
Amendment 29, subsections 447.3(5) and (6): All those in favour? Contrary? Carried.
Number 30, reference to 447.3.1: All those in favour? Contrary? Lost.
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Number 31 is the Liberal motion with regard to section 447.4.1 directing the expenditure of public funds. It's being suggested to me that it's out of order in that it's a direction to expend public funds.
Mr Phillips: It's sort of death by hanging or the electric chair.
The Chair: Take your pick. It's out of order.
Mr Rollins: If the power's off, you're in luck.
Mr Phillips: You'll get us one way or the other, I know.
The Chair: The next amendment, number 32, is also out of order for the same reason.
Number 33: This is also out of order for the same reason.
Number 34, with reference to subsection 447.5(1), a Liberal motion: All those in favour? Contrary? Lost.
Number 35, reference to subsection 447.15, an NDP motion: All in favour? Contrary? Lost.
Number 36, number 447.26: All in favour? Contrary? Lost.
Number 37, reference to subsection 447.34: All those in favour? Contrary? Lost.
Shall section 30, as amended, carry? Carried.
Shall section 31 carry? Carried.
Shall section 32 carry? Carried.
Shall section 33 carry? Carried.
Section 34, amendment 38, reference to subsection 257.2.1: All in favour? Contrary? Carried.
Amendment 39, reference to subsection 257.12.1: All in favour? Contrary? Lost.
Amendment 40, reference to subsection 257.12.1: All in favour? Contrary? Lost.
Amendment 41, reference to subsection 257.12.1: All in favour? Contrary? Carried.
Shall section 34, as amended, carry? Carried.
Shall section 35 carry? Carried.
Shall section 36 carry? Carried.
Shall section 37 carry? Carried.
Section 38, amendment 42, reference to subsection 52(15) of the Power Corporation Act: All in favour? Contrary? Carried.
Shall section 38, as amended, carry? Carried.
Shall section 39 carry? Carried.
Shall section 40 carry? Carried.
Mr Silipo: On a point of order, Mr Chair: I was just glancing at this to make sure I had this right. Can I raise a point back on amendment 42, more by way of clarification?
This, as you noted, refers to changes to the Power Corporation Act. As far as I can tell, we have not been provided a copy of that act. Is it in order for a bill to be amended without that having happened?
Mr Baird: It is amending the original bill. It amends the Power Corporation Act.
Mr Silipo: I didn't know if it had or not. That's why I was asking clarification from the Chair.
The Chair: I ruled the amendment in order. Is the entire act in the bill?
Clerk of the Committee: No.
The Chair: But the appropriate section is. The appropriate section of the Power Corporation Act is provided, not the entire act. I don't know how I'd rule if there was room for debate.
Mr Silipo: Whether or not there's room for debate, there presumably still is room for whether something is in order.
The Chair: I know. What I am saying is that I don't know how I'd rule if I heard the debate, but I'm not going to hear any debate on it. In light of the fact that the appropriate section is in it, I've ruled it in order and I think it is in order. I think it's satisfactory. But it would be an interesting point to hear submissions on.
Mr Baird: We already voted on it, in any event, so I don't know how you could go back.
Mr Silipo: But we were going through it at a pretty fast pace. Are you saying you wouldn't hear arguments on this, Chair?
The Chair: I don't know how I'd rule if I did hear, but in light of the fact that I found it in order and that the appropriate section is provided, I think on the face of it, that's sufficient. It would make an interesting argument.
Mr Phillips: If we could make it.
The Chair: If you could make it, that's what I said.
Have we dealt with section 40? Section 40 is carried.
Shall section 41 carry? Carried.
Shall section 42 carry? Carried.
Shall the long title carry? Carried.
Shall Bill 16, as amended, carry? Carried.
Shall Bill 16, as amended, be reported to the House?
That concludes the matters outlined in the directions from the Legislature. I would entertain a motion to adjourn.
Mr Rollins: So moved.
The Chair: We are adjourned.
The committee adjourned at 1648.