MINISTRY OF MUNICIPAL AFFAIRS
MINISTRY OF REVENUE
MUNICIPALITY OF METROPOLITAN TORONTO
ST ANDREW'S RATEPAYERS ASSOCIATION
BLOOR BATHURST-MADISON BUSINESS ASSOCIATION
CONTENTS
Monday 30 November 1992
Metro Toronto Reassessment Statute Law Amendment Act, 1992, Bill 94
Ministry of Municipal Affairs; Ministry of Housing; Ministry of Revenue
Gordon Mills, parliamentary assistant to the Minister of Municipal Affairs
Nancy Bardecki, director of municipal finance, Ministry of Municipal Affairs
David B. Braund, registrar, Ontario's rent registry, Ministry of Housing
Michael O'Dowd, director, assessment policies and priorities branch, Ministry of Revenue
Ron Skinner, manager, taxation policy, Ministry of Municipal Affairs
Municipality of Metropolitan Toronto
Alan Tonks, chair
City of Scarborough
Joyce Trimmer, mayor
Alan Wood
Tina Schickedanz
St Andrew's Ratepayers Association
Patrick Sue, president
Jim Essex, treasurer
Van Zybala, member
Bloor Bathurst-Madison Business Association
David Vallance, membership chairman
Annex Residents' Association
Mary Corbett, past chair
Diane Brook Brown, member of executive
STANDING COMMITTEE ON SOCIAL DEVELOPMENT
*Chair / Président: Beer, Charles (York North/-Nord L)
*Vice-Chair / Vice-Président: Daigeler, Hans (Nepean L)
Drainville, Dennis (Victoria-Haliburton ND)
Fawcett, Joan M. (Northumberland L)
Martin, Tony (Sault Ste Marie ND)
Mathyssen, Irene (Middlesex ND)
O'Neill, Yvonne (Ottawa-Rideau L)
*Owens, Stephen (Scarborough Centre ND)
White, Drummond (Durham Centre ND)
Wilson, Gary (Kingston and The Islands/Kingston et Les Îles ND)
Wilson, Jim (Simcoe West/-Ouest PC)
Witmer, Elizabeth (Waterloo North/-Nord PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Frankford, Robert (Scarborough East/-Est ND) for Mr Gary Wilson
Grandmaître, Bernard (Ottawa East/-Est L) for Mrs Fawcett
Mammoliti, George (Yorkview ND) for Mr Drainville
Mills, Gordon (Durham East/-Est ND) for Mr Martin
Poole, Dianne (Eglinton L) for Mrs O'Neill
Swarbrick, Anne (Scarborough West/-Ouest ND) for Mrs Mathyssen
Turnbull, David (York Mills PC) for Mrs Witmer
Wiseman, Jim (Durham West/-Ouest ND) for Mr White
Also taking part / Autres participants et participantes:
Carr, Gary (Oakville South/-Sud PC)
Cunningham, Dianne (London North/-Nord PC)
Clerk / Greffier: Arnott, Douglas
Staff / Personnel:
Drummond, Alison, research officer, Legislative Research Service
Richmond, Jerry, research officer, Legislative Research Service
The committee met at 1545 in room 151.
METROPOLITAN TORONTO REASSESSMENT STATUTE LAW AMENDMENT ACT, 1992 / LOI DE 1992 MODIFIANT DES LOIS EN CE QUI CONCERNE LES NOUVELLES ÉVALUATIONS DE LA COMMUNAUTÉ URBAINE DE TORONTO
Consideration of Bill 94, An Act to amend certain Acts to implement the interim reassessment plan of Metropolitan Toronto on a property class by property class basis and to permit all municipalities to provide for the pass through to tenants of tax decreases resulting from reassessment and to make incidental amendments related to financing in The Municipality of Metropolitan Toronto / Loi modifiant certaines lois afin de mettre en oeuvre le programme provisoire de nouvelles évaluations de la communauté urbaine de Toronto à partir de chaque catégorie de biens, de permettre à toutes les municipalités de prévoir que les locataires profitent des réductions d'impôt occasionnées par les nouvelles évaluations et d'apporter des modifications corrélatives reliées au financement dans la municipalité de la communauté urbaine de Toronto
The Chair (Mr Charles Beer): I'd like to call the meeting of the standing committee on social development to order. We are here to discuss Bill 94, with respect to the question of assessment, the Metropolitan Toronto Reassessment Statute Law Amendment Act, 1992. Just before I recognize Mr Owens, could I say to those people who are looking for chairs, or if others come in when chairs run out, we have more space in committee room 2, which is just down the hall to the right, and people can watch on the monitor. So if there is a need for people to watch these proceedings and there isn't any room left here, committee room 2 will be open for that purpose.
Mr Stephen Owens (Scarborough Centre): While it's appropriate at this time to look at adopting the subcommittee report, there appear to be a number of issues that have arisen, and what I would like to propose, and I have discussed it with you and my two colleagues opposite, in order to get the parliamentary assistant's statement under way and continue with our technical briefing, I would like to move that we defer the subcommittee report until 7 o'clock this evening.
The Chair: Is that agreeable? All right, we'll defer that until 7 o'clock. I call upon the parliamentary assistant to begin this afternoon's proceedings.
Mr Gordon Mills (Durham East): This bill will permit Metropolitan Toronto council to implement its interim reassessment plan which was approved by council on October 29. A duly elected council has reached a decision after considerable debate and compromise, and the province must respect the responsibility of that local council. However, there are certain aspects of the Metro plan that this government does not agree with. The legislation ensures that Metro will revisit certain issues that have caused some concern.
Let me begin with some of the background to the Metro bill. Properties in Metropolitan Toronto were last reassessed in 1953, when the municipality of Metropolitan Toronto came into being. Reassessment at that time was based on 1940 market values. In the last 50 years, property values have increased dramatically and have created large inconsistencies in property assessment, both within property classes and among the six municipalities comprising Metro Toronto.
Metro council has made various attempts to make some changes to an outdated property tax system. In 1988, Metro council developed an interim reassessment plan with a base year of 1984. The plan was approved by Metro council in 1989.
The former provincial government agreed to undertake the reassessment impact study for the interim plan but requested that the base year be 1988 instead of 1984 and that implementation be deferred until 1993.
In August of this year, the Ministry of Revenue prepared an impact study and delivered 1988 market value estimates for all properties in Metropolitan Toronto to Metro's staff. Using these values, studies of the Metro interim tax plan were prepared and published by Metro. Metro council held various public meetings to highlight the results of the impact study. Metro's management committee and Metro council heard 305 deputations and received 1,006 written submissions in response to invitations.
On October 16, the management committee of Metro council voted in favour of a revised interim reassessment plan for Metro. The plan was approved by Metro council on October 29 in a vote of 21 to 13.
All of us are familiar with the Metro plan, but I would like to highlight its key features for the committee.
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Metro's interim tax plan is not full market assessment. It updates the assessment on residential, commercial and industrial properties by changing the assessment base from 1940 real estate values to 1988 values, but the plan's primary feature is to limit the increases and decreases that would otherwise have resulted for the overwhelming majority of properties in Metro.
This is an interim plan only. Metro is to develop a new tax plan by January 1997 for consideration by the province. Let me emphasize that no intermediate major changes can occur during the next five years without provincial approval.
Metro has proposed a unique phase-in of reassessment, permitting limited tax increases and decreases over the next five years. The legislation provides for this phase-in through a system of cuts on increases and a clawback on decreases.
The regulations will specify the upper-limit rate of the caps. Metro will then pass a bylaw to implement them. Metro cannot exceed these limits over the next five years without asking for provincial approval.
For residential property, the regulations will provide for a maximum 5% increase in taxes in 1993 as a result of reassessment, plus a further 5% in 1994. Thus the package would limit increases to residential properties to 10% over two years. Just for example, if property taxes are now $2,000, the total increase due to reassessment would be $200, bringing the total to $2,200.
Property tax increases for commercial and industrial properties will be limited to 25% over the next three years. In other words, if a business now pays $10,000, the total increases over three years would be $2,500, bringing the total to $12,500 for property taxes only. It should be noted that businesses also pay business taxes to municipalities, and these are determined in proportion to the property taxes.
Owners of residential properties -- that is, single-family dwellings, duplexes and apartment buildings -- whose tax bill would decrease because of reassessment can expect 50% of that decrease over the next two years. For example, if the owner of a house is now paying $2,000 in property taxes and the 1988 assessment update decreases that tax by $500, under Metro's interim tax plan that home owner can expect a total tax reduction of $250 over the next two years.
In a moment I will talk about how these decreases will be passed along to tenants living in rental properties.
For commercial properties, owners can expect a total tax reduction of 25% over three years. For example, if a business is now paying $10,000 and the new assessment decreases taxes by $2,000, the owner can expect a total tax reduction of $500 over the next three years.
For industrial properties, the owners can expect a total tax reduction of 40% over the next three years. For example, if an owner is now paying $10,000 in taxes and the new assessment decreases the tax by $2,000, the owner can expect a total tax reduction of $800 over the next three years.
Once the 1993, 1994 and 1995 tax changes attributable to the reassessment have been implemented, no further tax adjustments are to be made in 1996 and in 1997; 1998 is the beginning of a new assessment cycle. Between now and 1998, Metro, with the help of the province, must develop a property tax plan that is fair and ensures the continuation of healthy urban centres.
That is, in brief, the Metro plan.
Let me now explain how the province is responding to Metro's proposal. As I said earlier, the bill will allow Metro to implement its interim plan. There are, however, provisions in the legislation that will affect that implementation.
This government has heard the concerns expressed by the city of Toronto and many of its citizens and small businesses about the future of their city and the future of their neighbourhoods. We share the concerns about sustainable development for the suburban areas. That is why we are committed to working on a fair tax plan for the future.
Between now and 1997 the province will work with Metro and other communities to examine the full impact of any future property tax reform. We will still work with Metro on a social and economic impact study of future property tax changes. The legislation ensures that at the end of five years Metro will not end up with full market value assessment by default. Nor can Metro move to market value assessment by itself. The interim plan will continue, past 1997 if necessary, until the provincial government has approved a new plan.
In addition, there are elements of the Metro plan which the province does not agree with. We are ensuring, through the legislation, that Metro will revisit these issues.
The legislation gives Metro permissive authority -- that is, it permits but does not require Metro -- to remove the limits on tax increases when a single family dwelling or duplex changes ownership. Metro will have to consider this and pass a bylaw specifically removing these caps from houses when the ownership changes. We are saying to Metro in this bill that we are not in favour of that part of the plan that requires a house to be taxed at full market assessment once it is sold. They will now have to revisit that part of their plan.
We also have concerns about the impact of Metro's plan on certain other properties such as vacant land, pipelines and railway rights of way, as well as those public properties such as federal and provincial government-owned land, crown agencies or municipal agencies like the parking authorities. Bill 94 will give Metro permissive authority to develop limits on increases and decreases for these property categories in a similar fashion to the limits prescribed for residential, commercial and industrial categories. In addition, the bill will allow Metro to define special categories, such as parking authorities, which could be subject to the same caps as taxable commercial properties, in other words, a 25% cap.
I'd like to touch briefly on how the bill will impact on tenants.
The bill amends the Rent Control Act, 1992, to allow decreases to be passed on to eligible tenants.
Landlords will have to continue to apply for rent increases beyond the annual guideline limit. However, the Rent Control Act limits increases for extraordinary costs to 3% above the provincial guideline.
A 5% increase in property tax is not equal to 5% of the rent a landlord collects. For example, property taxes for a typical building equal 20% of the rents a landlord collects. If a landlord receives a full 5% tax increase, the cost could be covered by a 1% increase in the tenants' rents.
This bill enables a duly elected council to implement a local decision. This government respects that local responsibility. Because of the special nature of the Municipality of Metropolitan Toronto Act, Metro does not have the legislated authority enjoyed by other counties and regions in Ontario to reassess its property tax system. Currently, 733 municipalities in the province have opted for a property tax reassessment on their own authority.
However, it is important to point out that Metro has unique social and economic realities. That is why, in permitting Metro to implement its interim reassessment plan, this government has made certain provisions in the bill to ensure that the social and economic viability of Metro and its member municipalities is maintained.
Thank you very much, Mr Chairman. Those are my opening remarks.
The Chair: Thank you for those opening remarks.
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Ms Dianne Poole (Eglinton): On a point of order, Mr Chair: In the five years I've been in this Legislature, I have never known an occasion when you have had a contentious subject like this and the minister has refused to appear. A number of us have questions specifically for the minister, because he has made very contradictory comments during the last few weeks, and I'm not sure his parliamentary assistant would be able to answer those questions. I'm wondering if we can request that the minister appear.
The Chair: Any other comments to this?
Mr Owens: Respectfully, I think the decision that was taken in the subcommittee was that this was an opportunity for the people of the city of Metropolitan Toronto to get in and get their points of view on the record. It was my recollection that all three parties agreed that this was an opportunity for that to occur and that the minister attending was not an issue there was any contention around.
The Chair: Mr Turnbull and then Ms Poole.
Mr David Turnbull (York Mills): I would like to support Ms Poole's suggestion. I would suggest to her that she should perhaps bring it as a motion to this committee, because it is quite unacceptable that the minister who has said absolutely contradictory messages at various times is allowed to wriggle out of this.
This is very important legislation which will affect Metropolitan Toronto substantially. The government is trying to have it both ways, because to different groups it's saying different things. We want to merely question him about the inconsistencies of the different statements he's made.
Mr Owens: This is not the opportunity, with respect --
The Chair: Excuse me, Mr Owens. I'll recognize Ms Poole, and then the parliamentary assistant wanted to say a few words.
Ms Poole: With respect to Mr Owens's comments, the purpose of these public hearings are obviously to hear from the public, but if Mr Owens consults his schedule, he will see that two and a half hours have been set aside for us to question the ministries of both Municipal Affairs and Revenue. There is no time during that period when the public has been invited to participate. We are not taking away from one citizen's time by having the minister here. I think it's totally outrageous that the minister would duck his responsibilities on this very contentious issue.
I am now going to put a motion on the floor that the committee request the appearance of the Minister of Municipal Affairs at these hearings so we can question him.
The Chair: Okay. The motion has been tabled by Ms Poole. I'll take comments on the motion.
Ms Anne Swarbrick (Scarborough West): I'll speak against the motion, based on the fact that the motion assumes the parliamentary assistant is not able to effectively answer the questions; I think that's an unfair assumption.
Mr Owens: First of all, in terms of Ms Poole's grandstanding, I think the request for the technical briefings came from all three parties. If she has a particular problem with the way her caucus member performed in the subcommittee, then she should deal with that problem outside of this committee.
Secondly, it's my understanding that the minister will be appearing this week; if we could request that the motion be stood down, we'll confirm the date and the time of that appearance.
Mr Mills: I'd just like to comment that I don't think the minister's trying to wriggle out of anything at all. He's in the House today. This is a unique situation. We're here starting these hearings, it's still being debated in the House, and you have an opportunity up to this evening to pose to the minister these questions that you may or may not have. This time, in my opinion, is set aside to listen to the technical presentations from ministry staff -- that's my understanding of it -- not to debate or to argue about why the minister is trying to wriggle out or not wriggle out. That takes place in the Legislature, and that's where he is.
The Chair: I recognize Ms Poole and Mr Turnbull, then I'll put the question.
Ms Poole: When the parliamentary assistant says that the reason Mr Cooke is not here today is because he's in the Legislature, where they're debating market value, he's just full of it. Quite frankly, we sat through five hours of debate on market value last week and, except when the minister was giving his speech for the first 20 minutes, he was not in the House for the duration of that five hours. So there's no excuse for him not to be here today. We have specific questions about comments he has made as Minister of Revenue, and I don't think it inappropriate for him to be here to answer why his comments are contradictory and why he is pursuing a certain direction.
Mr Turnbull: There is a fundamental question here. We have the media, who are representing a lot of people who are interested from both sides of the issue, and they would like to record why the minister has said different things to different people which are totally contradictory. The opportunity for the media to record this by having him attend at some later date is unacceptable.
I would request that we send a message to the minister now to come down here. They only have to send a message upstairs. Then we have specific questions with respect to what he has said -- not what the parliamentary assistant has said, but what the minister has said -- over the last few weeks. It's quite clear that the NDP is trying to have it both ways, to the extent that during the last election it said it was against market value reassessment. They simply have to answer why they've made this turnaround.
The Chair: There's been a request, Ms Poole, whether you would stand down the motion pending Mr Owens's suggestion that they see when the minister could be here, if you are prepared to accept that. Or I would proceed with the vote, because I think we want to get on. There is a schedule here of --
Mr Mills: We can tell you when he's going to be here, if that's any help.
Ms Poole: If Mr Cooke is going to be here within the next hour, I would accept that as an alternative. We have not been given any reason why he isn't here right now, and I would ask to proceed with the vote.
The Chair: Can I just hear from the parliamentary assistant?
Mr Mills: The minister will be present here between 7 and 10 pm tomorrow night, Tuesday, December 1; he will be here between 7 and 10 pm on Wednesday, December 2; he will be here on Monday, December 7 from 7 to 10; again on Tuesday, December 8, and, depending on some tentative arrangements about the weekend sittings, he intends to be here on Sunday, December 6. So there's ample opportunity, in my view, when the minister will be here, and ample opportunity for you to present those questions. Whether or not the press and the cameras are here is not up to us.
The Chair: Those are the times that are set out.
Ms Poole: I am only prepared to stand down my motion if we have a specific allocation of time on the agenda for the minister to answer our questions. As Mr Owens pointed out earlier, the purpose of the hearings after 6 o'clock today was to get input from the public, so I would be very reluctant to take away time from the public for this. I really cannot understand why the minister has refused to appear today.
The Chair: I'll put the question. All those in favour of Ms Poole's motion? All those opposed? It's defeated.
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MINISTRY OF MUNICIPAL
AFFAIRS
MINISTRY OF REVENUE
The Chair: We'll then move on, if I might invite the representatives from the Ministry of Municipal Affairs and the Ministry of Revenue to come forward to the table. If I could ask perhaps the person who is playing leader to be good enough to identify those who have come forward, I would then turn it over for you to take the committee through the briefing. Please identify yourself for Hansard.
Mrs Nancy Bardecki: I'm Nancy Bardecki, the director of municipal finance from the Ministry of Municipal Affairs. I will open the technical presentation. Also making presentations are my colleague David Braund, rent registrar from the Ministry of Housing, and Michael O'Dowd, the director of assessment policy from the Ministry of Revenue.
The Chair: Welcome to the committee. We'll turn the proceedings over to you, Ms Bardecki, to lead us through.
Mrs Bardecki: As Mr Mills has said, Bill 94 represents enabling legislation to facilitate Metro's interim reassessment plan. As he's also indicated, this plan is not full market value reassessment. The plan enabled by this bill is intended to apply for 1993 to 1997. By section 241.15 of the bill, Metro is required to prepare and submit to the province by January 1, 1997, a reassessment plan to operate for the period 1998 to 2002.
The Minister of Municipal Affairs has indicated that our ministry will work with Metro and other communities in Ontario to examine the impact of market value assessment on neighbourhoods and business viability and to develop a plan that's fair.
In the event that Metro does not submit a new plan by January 1, 1997, the plan for 1993-97 will continue until such time as the province approves a new plan.
While the bill enables Metro to carry out all aspects of its proposed plan, there are some areas which the minister believes Metro may wish to reconsider. The first of these is the proposal to move to full market value for residential properties upon resale. The second area which Metro may wish to reconsider is the decision to apply full market value assessment to vacant lands, railway lands, and property subject to payments in lieu.
The bill requires Metro to reconsider these issues and gives it the flexibility to apply caps to increases and decreases to these properties if it wishes. This is outlined in section 241.14 of the bill.
The timing of the bill is important to Metro. It would like to be able to have its reassessment plan in effect for January 1, 1993. If it if not possible to pass the bill before the Legislature adjourns, we'll have to consider our options. These options include implementation at a later date in 1993; implementation when the bill passes, retroactive back to January 1, 1993; or postponement till January 1, 1994. All these options hold considerable complexities, so it's important to Metro to have this bill passed before the House rises.
I'd like now to deal with some other specific features of the bill and why they are as they are.
To a large extent, Bill 94 mirrors the provisions in the Municipal Act and the Regional Municipalities Act which enable upper-tier-wide reassessments in other areas of Ontario. These are sections 241.1 to 241.11 and 241.13. Because of its unique structure and its unique economic and social needs, Metro requires additional features to those that are in the Municipal Act and the Regional Municipalities Act.
Incidentally, as in most other reassessments, Metro has been done on a basis of property class by property class. This means that no tax shifts occur among property classes except those caused by the caps that I will describe a little bit later.
Metro's phase-in provisions are enabled in sections 241.14 and 241.17 of the bill. Caps on increases in taxes which are occasioned by reassessment will be established in the regulation; they're not in the bill.
For residential properties, increases due to reassessment will be capped at 5% in 1993 and an additional 5% for a total of 10% in 1994.
For commercial and industrial properties, increases due to reassessment are capped at 10% in 1993; a further 10%, for a total of 20%, in 1994; and a further 5%, for a total of 25%, in 1995.
While Metro plans to limit decreases in order to finance the caps on increases, these decreases are not in the legislation or in the regulations. This is because it is not yet known if the full intended decreases will be able to be financed from the allowed increases. However, the intended decreases, for your information, are:
For residential properties they would be limited to 40% of the decrease due to reassessment in 1993 and another 10% in 1994, for a total of 50% of the tax decrease due to reassessment in 1994 and future years;
For industrial properties we'd be looking at 30% of the decrease in 1993, a cumulative total of 36% in 1994, and a further 4% for a cumulative total of 40% in 1995; and
For commercial properties we're looking at 12% of the decrease due to reassessment in 1993, a cumulative total of 21% in 1994, and a cumulative total of 25% in 1995.
As you may have perceived from these numbers, the bill permits cross-subsidization of the residential class by the commercial and industrial classes, as requested by Metro.
Metro Toronto is the only jurisdiction in Ontario that has a two-tier school board hierarchy, the Metropolitan Toronto School Board and the six boards of education having jurisdiction in each of the six area municipalities. This situation accounts for the various repeals of the existing apportionment-based system of raising school board requirements now contained in the Municipality of Metropolitan Toronto Act, at sections 2 to 7 of Bill 94, and the Education Act, sections 11 to 15 of Bill 94, and amendments to a uniform mill rate approach in raising school board requirements, section 241.4 of Bill 94.
Because of the complexity of protected features contemplated by Metro council and the magnitude of tax adjustments proposed to mitigate the tax increases, it became apparent that there is a need to provide a right to taxpayers to appeal their level of tax adjustment. This special provision is provided in section 241.20 of Bill 94.
As part of the interim plan, Metro council has also requested a discretionary authority to require tax reductions obtained by owners of multi-unit residential properties -- that is, properties in the rent registry -- to be passed on to tenants by reducing their monthly maximum rents.
I'm going to ask my colleague David Braund from the Ministry of Housing to explain this provision in more detail.
Mr David Braund: Part of the MVA plan for Metropolitan Toronto, as you've heard, is that the tax savings to landlords should be passed on to tenants. In other words, Metropolitan Toronto would like to ensure that rents are reduced to reflect the tax savings to landlords.
Mr Bernard Grandmaître (Ottawa East): Do we have a paper on this?
Mr Braund: No. I can provide you with one, if you would like.
Mr Grandmaître: I think it would be useful.
The Chair: The clerk will make copies. Please go ahead.
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Mr Braund: The province supports the principle of ensuring that tenants obtain the tax saving. The new Rent Control Act, which was passed just this year and was proclaimed in force in August, provides ways that maximum rents can be reduced.
In rent control, if there is a decrease of the landlord's municipal taxes through a reassessment, that means the maximum rents can be reduced. This can be done in two ways: through a tenant application or automatically. Before I explain those two methods, I'd like to deal for a moment with the concept of maximum rent.
Both the reductions done through orders and the automatic rent reductions will affect the maximum chargeable rent. This means that the rent actually charged that year is not necessarily reduced. The maximum rent is the rent legally charged in 1985, increased each year, but not all landlords have been able to increase the rent the full amount allowed by the guideline in every year, and especially in the last two years. Many tenants currently pay the maximum chargeable rent permitted by law. These tenants get an immediate benefit from rent reductions when the maximum rent is reduced.
However, there are many landlords currently charging less than the maximum permitted by law, primarily due to market forces. For those units, if the difference between the maximum rent and the rent the tenant is paying is greater than the tax savings, the tenant's actual payments will not change, but the maximum rent will be reduced so that in future the rent and the rent increases will be lower due to the tax savings, so there is a future benefit in terms of affordability.
The two methods I referred to are that, first of all, a tenant may apply for rent reduction and, by an order, a rent officer will reduce the maximum rent by the amount of the tax decrease. As well, the rent officer may join to the application all the other units in the building, which means that one tenant applying can result in rent reductions for the whole building.
There is a second method that was introduced in the Rent Control Act, in section 113, which is specifically related to market value reassessment, and that is the section which is proposed for amendment in the bill before you. It sets up a more automatic method of reducing maximum rents where landlords have tax savings from MVA, which does not require tenants to apply.
Reducing rents through automatic rent reductions has the advantage that tenants do not make an application. That means less time and expense for both the tenant and the rent control program. The Rent Control Act will provide that automatic rent reductions are only done where there is a general municipal reassessment, and they are only done where the reassessing municipality requests the automatic reductions.
The tax savings are calculated by the rent registry and automatically reduce the current rent recorded in the registry. Metro will then notify landlords and tenants of the rent reductions. The rent control program will then enforce the legislation so that tenants get the benefit of the full rent reductions.
There are also a number of buildings for which rent increases would apply because of the Metro MVA plan.
In rent control, there is only one way to have the maximum rent increased by more than the annual guideline: The landlord must apply for all of the units in the building. When a landlord brings an application, there is a scrutiny of whether the rents charged are lawful, and the tenants can raise issues regarding the maintenance of the building and the units and they can point out services that have been withdrawn in the past.
The overall amount that the maximum rents can increase in any one year is only 3% above the guideline. That is all that can be allowed on an application. The increases to municipal taxes by the Metro MVA plan are, as Mr Mills pointed out, 5% of taxes and not 5% of rents. In fact, the average increase would be only about 1% of rents.
In other municipalities which have implemented market value assessment, our program has not noted a large increase in the application rate by landlords. We believe this is generally because such small increases, as are affected when you have caps like those proposed in the Metro plan, mean that landlords do not undergo the process of application. Our conclusion is that although many landlords of units may be able to justify small increases, they will probably not come to us unless they were going to come for some other purpose.
In summary, the Rent Control Act allows rents to be reduced where the landlord has tax savings either through applications from tenants or through an automatic process. The act needs several amendments to ensure that the automatic process can be used for Metropolitan Toronto. We'd be glad to answer your specific questions on the rent impacts of the MVA plan.
The Chair: To the committee, did you want to pose questions now? Are there other things you want to do by way of introduction before we get to questions, or should we do some questions now?
Mrs Bardecki: I would like to review some more portions of the bill that are housekeeping rather than policy in nature, and then call on my colleague from the Ministry of Revenue, but if there are questions that people have, I'd be happy to entertain them now.
The Chair: What is the committee's wish? Shall we hear the full presentation and then go back for questions?
Mr Jim Wiseman (Durham West): Let's hear the whole thing.
The Chair: Fine. Please continue.
Mrs Bardecki: I'm now going to outline some sections of the bill which are more housekeeping than policy in nature but are very necessary to see that this legislation enables the implementation of Metro's plan.
Section 241.1 of the bill provides authority for the Minister of Revenue to direct a return of the assessment roll, assigning new values to all one million assessable units.
Section 241.2 prescribes Metro council's estimates process. It's relatively unchanged.
Section 241.3 establishes a process for instituting uniform mill rates for Metro services.
Section 241.4 prescribes the estimate and mill rate process for all eight school boards: Metropolitan Toronto School Board, Metropolitan Separate School Board and six boards of education.
Section 241.5 provides the six area municipalities with the authority to levy their local mill rates on the revised assessment base.
Sections 241.6 and 241.7 provide the authority for interim levies by Metro council, school boards and area municipalities prior to the adoption of annual estimates.
Section 241.8 provides transitional powers in 1993 to the ministers of Education and Municipal Affairs.
Section 241.9 provides for the sharing of payments in lieu, amounts to Metro corporation and school boards. Presently, they're retained, by and large, by area municipalities.
Section 241.10 provides for the sharing of telephone and telegraph gross receipts taxes to Metro corporation and the school boards, just as they are now.
Section 241.11 establishes the instalment dates for payment in lieu and telephone and telegraph gross receipts taxes.
Section 241.12 is a transitional provision to clarify the status of 1992 surplus or deficit amounts of area municipalities.
Section 241.13 provides authority to modify the conservation authority cost-sharing formula in the event the reassessment distorts Metro corporation's share.
Bill 94 has been drafted on the basis of concentrating only on those changes to the Metro act that are required to implement the interim reassessment plan. No housekeeping changes are being entertained at this time. The legislative amendments may appear somewhat extensive, but property taxes raised from the metropolitan area in 1992 exceeded $4 billion, and accordingly it's essential that the provisions are clear and cover all important contingencies.
I'd like now to call on my colleague from the Ministry of Revenue, Michael O'Dowd.
Mr Michael O'Dowd: Mr Chairman, there is some material that I believe has been distributed to the members of the committee which outlines in general terms --
The Chair: Is that the material that's in the briefing book? Do you know which tab that might be? We have a number of things. There is one entitled Metro's Interim Reassessment Plan.
Mr O'Dowd: Property Assessment Program: Metropolitan Toronto Reassessment and Market Value is the title.
The Chair: Just one second while we make sure which document Mr O'Dowd is speaking to, just so everybody knows. We have a number of things in our book. I just want to make sure we're all singing, if I can put it that way, from the same hymn book.
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Mr Mills: Have we identified where it is?
Mr O'Dowd: It's the document I provided to Mr Richmond entitled Property Assessment Program: Metropolitan Toronto Reassessment and Market Value.
The Chair: This is the material, in the package that the researcher provided. If members would look in their kits, there is information that was provided by the research officer from the legislative research service, Mr Richmond, and that is what you're referring to.
Mr O'Dowd: With the committee's indulgence, I'd like to use that as the theme document for my presentation.
The Chair: Fine, okay. Everyone has a copy? Please go ahead.
Mr Mills: The fat one.
The Chair: The memorandum to me from Mr Richmond. Please go ahead.
Mr O'Dowd: The purpose of my presentation is to put in context the basis of the assessment base which has been created to provide for Metropolitan Toronto's reassessment plan. As the parliamentary assistant indicated in his introduction, the decision was made by Metropolitan council to proceed, or to ask the government to proceed, with the preparation of an assessment impact study, and the Minister of Revenue, the Honourable Shelley Wark-Martyn, by letter to Alan Tonks, the Metro chairman, in April 1991 undertook to produce that study.
The study was to prepare an estimate of 1988 market value for all properties within Metropolitan Toronto using an assessment by property class approach. If I can clarify for the purposes of the committee's understanding, there are three types of reassessment packages currently offered within Ontario: reassessment by property class for local municipalities, reassessment at full market value for local municipalities, and then reassessment of upper-tier jurisdictions, counties or regions, such as Metropolitan Toronto, using either one of the two bases, by class or at full market value. The foundation of the plan that Metropolitan Toronto council has undertaken and is seeking legislation to introduce is reassessment by property class for the entire metropolitan area.
The base year used for the reassessment was 1988. The point of establishing a base year is to allow for the transition from the existing assessment bases within the jurisdiction, in this particular case Metro Toronto, which is using the 1940-based values that were implemented when the Metro federation was created in 1953, to a more current basis for assessment. The base year being used is the base year which is on offer for all municipalities at this point in time by the ministry, and that is 1988 market. The use of 1988 was confirmed by Metropolitan Toronto in its resolution to the Minister of Revenue in 1991.
If I could clarify for the committee the definition of the "base year," what does it mean? It does not mean the actual sale of an individual property. I draw to the committee's attention the fact that we have approximately 550,000 or 560,000 properties within Metropolitan Toronto and there are approximately 1.1 million separate assessments of parcels occupied by individuals as residences or as business enterprises or as industrial enterprises.
To develop market value requires the analysis of market activity. All the values that have been used in the interim study presented to Metropolitan Toronto are based on an analysis of market activity that took place in 1988, and also in 1987 and in 1989. The need to review what I would term the shoulder years, 1987 and 1989, is critical to ensure that whatever value is determined as representative of 1988 is a reasonable measure of the trends of the market at that point in time.
I would remind the committee that not all properties sell in the base year of valuation. Therefore it is necessary to develop a process whereby the activity demonstrated in the market place when properties do sell can be applied with fairness to the properties that have not sold. The basis of that process is the establishment or the analysis of the market transactions that have taken place, the evaluation of the characteristics of the properties that are associated with those market values as evidenced in transactions between buyers and sellers, and then the exporting of those principles of value to the properties which have not sold, using the same characteristics that a property purchaser would use in the marketplace.
In the case of residential properties, if I can illustrate that, typically property purchasers look for amenities provided by the property in terms of size, the number of bedrooms perhaps, other facilities and the location. These are the characteristics which are then used by assessors in attempting to establish a 1988 market value based estimate of the value of those properties which have not sold. The analysis of the market transactions which take place then provides them with information on neighbourhood and area levels for different types of property that they can then use to establish a standard, typical estimated selling price for properties which have not actually been exposed to the market. That process is used for single-family homes.
In developing the values for properties which did not sell, the assessors used an estimate of replacement cost plus an estimate of the land value of the properties for all properties. These were applied universally. The analysis of sales took place and the properties that sold were, as I said, categorized and the results of that analysis were then applied against the properties which hadn't sold to determine if the estimate that had been developed was in fact reasonable. If it was not reasonable, then adjustments would take place to allow those estimates to more closely reflect the activity that's evidenced by transactions in the marketplace.
Members of the committee will recall that 1988 was a particularly active year in the real estate market, and there was a significant amount of evidence available to the assessors to use in the evaluation and the determination of their value estimates.
With respect to multiple residential properties, which are apartment buildings, conventionally, the market value for these properties is calculated, again, using market activity where it exists in terms of sales of apartment buildings and on the basis of the rental income of apartment buildings related to the value. If an apartment building sells in the base year or in the other two adjacent years, the shorter years, then the assessment will tend towards the value as indicated by the sale prices.
However, there has to be consistency that all properties are treated in the same manner, so therefore there is a need to evaluate the income generating potential of the apartment building expressed in terms of the rental income to the owner, and the value developed depending upon that relationship, to the extent that we are able to determine that there is a consistent relationship between the market as evidenced by sales and the income as evidenced by rental capacity. That, then, is used to establish consistent standards for the evaluation of similar apartment buildings. We are always attempting to bring things into line of a similarity of physical structure or a similarity of type of facility.
The replacement cost may be used in some areas to estimate market value of smaller multiple residential buildings. In the Metropolitan Toronto plan, "multiple residential" in a building is classified as three residential units and over. Traditionally, the smaller buildings, the three-, four-, five- and six-unit buildings, will have their preliminary estimate of market value calculated on sales and on replacement cost of the structure, plus land values, similarly to single family residences. Typically, this is because there is not sufficient or adequate information to allow for an analysis of income generated by these properties to be consistently applied to all properties within the class.
Commercial property can be conceptually classified into two groups. Office buildings and shopping centres are one group, and there are other commercial properties. I draw the distinction only in terms of the techniques that are used to develop market value estimates for these types of property. In the first group, office buildings and shopping centres, the estimated market value is calculated on the capitalized value of the net income of the property. An important point for the members of the committee to recognize is that we are not concerned here with the income of the individual businesses within the property; it's the value generated in terms of rental income to the landlord or the owner of the building.
There are some sales of properties in this particular class in the base year. These are used as checkpoints or standards for comparison so that there are consistent standards applied to other properties in that class which did not sell in the base year.
The balance of the commercial property class, stores on the major arteries, gas stations and places of that nature, are typically valued according to the replacement cost plus a land value component. The replacement cost is developed according to standards established for the ministry, which are universally applied across Ontario, and the land values will be drawn from transactions, sales of property which actually took place within within areas of Metro Toronto, which will then be analysed to determine their validity as standards to be used for the evaluation of the balance of the properties which did not sell, in much the same way as we value the residential property.
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Industrial properties, split into two generic categories: Again, the categorization is only to demonstrate the methodology that we use to develop market value estimates. Factories and plants, manufacturing facilities in the traditional sense, are valued on replacement costs. They do not sell very frequently, and when they do sell there are usually characteristics associated with the transfer of the property which are related to factors other than the real property itself. The approach is a common standard which is accepted by the appraisal industry. This is not just a feature that is used by the property assessors in the Ministry of Revenue.
The balance of the industrial class, industrial malls, are typically set up as income-generating facilities. They are developed to generate an income stream from the real property to the owner of the development and are valued based on capitalization of their net income where that information is available to us.
There are other classes of property, if I could briefly address them. They're not covered in the briefing material, and they deal with things which are either statutory in nature or which have specific statutory direction. I refer here to rights of way for railway properties and for utility rights of way for Ontario Hydro. I refer to public utilities. In this case, public utilities are defined as the properties used for traditional public utility services, sewer and water treatment plants and garbage transfer stations. They also include the facilities of the Toronto Transit Commission within Metropolitan Toronto.
The value of these properties by the various pieces of legislation that govern them -- the Power Corporation Act in respect of Hydro and the Assessment Act in respect of the railway rights of way and the Public Utilities Act -- requires that they be valued according to the value of abutting lands. What this means is that they do not get assigned to a class. They do not get called industrial, commercial or residential. Their value is a function of the land adjacent to their particular installation, so if you conceptualize a right of way that runs right across Metro Toronto, it will run through residential lands, commercial lands and industrial lands. To the extent that the adjacent lands to that right of way have a value which is industrial, residential or commercial, the amount of the right of way that runs through that particular area will attract a value which is the average value for commercial, residential or industrial lands in that area.
In summary, the value of these utility types of properties or these rights of way is an amalgam of the values that are generated by the land which is not used specifically for these utility purposes.
That covers the general thrust of the reassessment approach. In the event that the legislation passes and Metropolitan Toronto reassessment is to be implemented, the Ministry of Revenue assessment program will undertake a number of activities in support of the reassessment, the most important of which will be the notification to all owners and tenants of property within Metro of what the new assessed value is.
If I can just clarify and pick up on one point that Ms Bardecki mentioned earlier, the reassessment by property class assigns a level of value which reflects the current relationship between 1988 market value and the assessments of properties in that class, and that's called a class factor. The class factor is applied to all property within a class right across Metropolitan Toronto, and what it dictates in conventional terms is the level of market value that we're assessing at.
In the residential case, we're assessing at approximately 2.2% of the 1988 market value. All residential property in Metro will be assessed at 2.2% of its 1988 market value. By so doing, it ensures that the total assessment of residential properties before and after the reassessment will remain approximately the same, subject only to arithmetic process and rounding errors. That means that conventionally the burden that will be borne by that class will be the same before and after the reassessment. The same principles apply to both industrial and commercial classes -- the levels of value are somewhat different -- and the same principle would also apply to the multiple residential class. There are factors established for each of those classes.
If the ministry is called upon to develop or to deliver assessment notices to taxpayers with the new values in place, those notices will contain the 1988 market value estimate for the property. It will contain the class factor. It will contain the arithmetic result of the application of the class factor to the assessment. In other words, it will tell the individual what his or her actual assessment will be, based on the application of the 1988 market value in a reassessment by property class standard, the same process that is used in the other regions and counties across Ontario.
It will also contain information with respect to the appeal rights of the individuals, how they may challenge that appeal, and it will also contain information in an insert form about the opportunities taxpayers will have to discuss the details of their evaluation, the methodology that was used and the specifics of their own evaluation with representatives of the assessment program.
We intend to hold information sessions throughout Metropolitan Toronto if the legislation proceeds. We will hold them for an extended period of time. We are looking at approximately five weeks' worth of total hearing time, probably at a ward-by-ward basis for the Metropolitan area, but the final details have not yet been determined and obviously will depend upon staff availability, the time availability and the facilities we can claim access to.
Typically, the information sessions operate from 1 in the afternoon until 8 or 9 o'clock in the evening to allow people who are working during the day to attend, and of course information would be available through the telephone system and telephone inquiry to the regional assessment offices directly.
Upon roll return, if information has been brought to the attention of the assessor that indicates the preliminary estimate of value that has been placed on the assessment notice the taxpayer has received is incorrect in any way, and there is an agreement about what it should be, then obviously those corrections will be made before the assessment roll is returned to Metropolitan Toronto and amended notices will be issued, and the attendant appeal rights will still follow.
We will also advertise in the media the locations where information can be obtained about the information sessions that we publish. Then, if the taxpayer remains unsatisfied, having had the opportunity to discuss the evaluation with an assessor, he or she will of course have the right to appeal to the Assessment Review Board under the provisions of the Assessment Act.
The information process and the delivery of assessment notices and the custody of assessment information lies with the regional assessment officers. There are four of them within Metropolitan Toronto serving combinations of the area municipalities. Their telephone numbers are available in the telephone book and are on the materials the committee has been provided with.
The Chair: Thank you. Anything further?
Mrs Bardecki: Nothing further. We can answer questions now.
The Chair: All right. We'll turn to questions. The clerk is handing out one final document for us all. To begin with questions, I have Ms Poole, Mr Owens and Mr Turnbull.
Ms Poole: To begin my questioning, I'd like to ask some questions of the parliamentary assistant.
On November 4, 1992, in the Toronto Sun, Mr Cooke is quoted as saying that all other municipalities have the power to introduce MVA.
"Do we give Metro the same powers that everybody else has or do we say...we're going to intervene and do something quite differently?
"There's a fundamental question about whose responsibility this is. Certainly, my view is it's the responsibility of Metro council and that Metro should carry out that responsibility."
This was followed up by a statement in the House on, I believe, November 5, when Mr Cooke said, "It is clear that Metro council is responsible for its own deliberations and decisions. A duly elected council has reached a decision after considerable debate and compromise, and the province must respect that this is the responsibility of local councils."
He then goes to say -- in the same statement, mind you: "The legislation will not give Metro council the power to implement full market value...in 1998. It will, however," require "Metro to seek provincial approval" before any significant tax reforms are implemented.
Mr Parliamentary Assistant, can you please tell us, is property taxation and assessment a municipal responsibility or a provincial responsibility?
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Mr Mills: I think that in deference to my colleague Mr Cooke, who said all these things, the best place to get your answers is right in the Legislature this evening when he'll be there. I don't intend to answer for the minister. I am going to say again that this is a forum to listen to the technical arguments and, later on this evening, to listen to public presentations that we are here to listen to. If you want to debate what Mr Cooke said or did not say, my suggestion to you, with respect, is that you take those considerations and concerns into the Legislature this evening when he will be there. But I have no intention at all, whatsoever, of answering what Mr Cooke may or may not have said. That's not my responsibility and I don't intend to respond to the bait.
Ms Poole: Mr Chair, I find this totally outrageous. The purpose of the committee hearing this afternoon was to speak to the ministry and the minister about this assessment plan. The minister has said very contradictory things in the statements he has made. If the committee is to consider where to go on this legislation, we first of all must understand where the minister is coming from. The parliamentary assistant has the nerve to tell me to go up to the Legislature to ask him questions when he well knows that tonight there will be no time for me to ask questions of Mr Cooke in the Legislature. That is not how it works and he knows that. This is the very reason why I asked for the minister to be here.
Interjection.
Ms Poole: I can't believe this. This committee is sitting to decide on the direction of legislation and we have members of the peanut gallery over there saying that we shouldn't be entitled to ask questions of the minister, particularly when the minister has publicly said very different statements.
Mr Chair, does this mean that the parliamentary assistant is going to refuse to answer all of the questions I have here for the Minister of Municipal Affairs? Because this is a complete waste of time.
The Chair: Ms Poole, I can't determine how the parliamentary assistant will answer your questions, but you are certainly free to put them.
Ms Poole: It is totally inappropriate to ask a bureaucrat to respond to comments that the minister has said that are of a very political nature. So what you are saying is that there is nowhere in this forum that we can get answers.
Mr Mills: He's going to be here.
Ms Poole: He's not going to be here to answer questions.
Mr Wiseman: On a point of order, Mr Chair: If all we are going to deal with is haggling over what the minister said or didn't say, is it possible that we could allow these people to go, since they have come here to answer questions on the technical aspects of this bill? If that is not what we are going to do, then perhaps we should allow these fine people to go home.
The Chair: I have a list of those who wanted to put questions. I am going to follow that. I suspect that some of those questions may be directed at the officials from the ministry. Ms Poole, do you have any?
Ms Poole: Since I am not getting answers from the government, from the ministry or the minister's parliamentary assistant, and since the minister has no time allocated for us to ask these questions, then I am going to have to ask these of the bureaucrats, which I feel is quite inappropriate.
Would any of you like to comment on the fact that the statements made by the Minister of Municipal Affairs are totally contradictory? On the one hand he says that this is a local municipality's --
Mr Mills: On a point of order, Mr Chair: I think it is outrageous to put political questions --
Ms Poole: Well, you won't answer them.
Mr Mills: I am not the minister. If you want to ask the minister, you speak to the minister.
Ms Poole: The minister isn't here because you refuse to have him here.
Mr Mills: You know where to go.
The Chair: Order, please.
Mr Mills: You're not going to put words into my mouth.
Ms Poole: What a joke.
Interjections.
The Chair: Order, please. The Chair is recognizing Ms Poole to pose questions. The answers that are provided will be determined by the individuals who are making those answers. Would you put your question, Ms Poole.
Ms Poole: My question is, according to the minister, the Ministry of Municipal Affairs or the Ministry of Revenue, is assessment the responsibility of the municipality or is it up to the province to take on that responsibility?
Mrs Bardecki: I'm not quite sure I understand your question, but I will attempt to answer it. The Municipal Act and the Regional Municipalities Act give upper tiers like Metro Toronto the authority to implement or to ask for reassessments of the types Mr O'Dowd outlined. A lot of Bill 94 simply mirrors what is in the Municipal Act and the Regional Municipalities Act, specifically sections 241.1 to 241.11 and 241.13, very much like what is in the Municipal Act and the Regional Municipalities Act. But because of its unique structure and the unique phase-in requests of the municipality of Metro Toronto, it needs something more than what is in the Municipal Act and Regional Municipalities Act.
As I said, Metro Toronto wants to impose certain caps on increases and limit decreases to finance those caps on increases. That's something different that could not be done by all the other municipalities in Ontario. The need for that has been determined by Metro as a result of all the hearings it held and discussions it had on its potential reassessment plan.
Also, there are some other aspects. Metro Toronto has a unique structure as far as its school board system goes, and so there had to be some special features in Bill 94 that aren't in, say, the Municipal Act and Regional Municipalities Act, because Metro is the only jurisdiction that has a two-tier school board arrangement, with a metropolitan or upper-tier equivalent board and then boards of education representing the lower-tier municipal areas within. Different things had to be done in Bill 94 because of that unique feature.
Ms Poole: Perhaps it would help --
The Chair: Ms Poole, just before your next question, I see a fourth person at the table. I wonder if you would be good enough just to introduce --
Mrs Bardecki: I'm sorry, Mr Chairman. This is Ron Skinner from the municipal finance branch in the Ministry of Municipal Affairs.
The Chair: Thank you. That's just for Hansard.
Ms Poole: Perhaps it would be helpful if I phrased the question in a different way. In 1970 the province took over the assessment function for the purpose, the avowed purpose at the time, of bringing the entire province under the umbrella of market value assessment. At that time they devolved the power to the local municipality; ie, in this case the city of Toronto is the local municipality. Metro is the upper-tier or regional municipality. For many years it was done at the local level, until the mid-1980s, and that was the first time --
Mr Grandmaître: The mid-1970s.
Ms Poole: No, the mid-1980s; it was in the mid-1970s that they started doing it on a regional basis.
My question for you is, not even talking about the unique nature of this plan, can you tell me of an instance where an assessment plan has been imposed on the local municipality through the regional municipality's request when the local municipality is of the size of the city of Toronto or even approaching that?
Mrs Bardecki: I'm really not up on the populations of the cities of Ontario, but I don't believe there is another local jurisdiction the size of the city of Toronto. But it's been our practice in the past, and I believe the practice of the Ministry of Revenue, that where the upper tier has asked for a reassessment that reassessment has been implemented. Mr O'Dowd, would you like to --
Mr O'Dowd: That's correct. The reassessment has been implemented in a number of regional municipalities, none of which of course approaches the size of Metropolitan Toronto, but in the regional municipalities legislation the resolutions are those of regional councils; they're not those of area municipalities. Therefore, I think it's very difficult for us to evaluate whether or not there has been, as you categorized it, Ms Poole, a single municipality that has not gone along with the resolution.
If it were in a county jurisdiction, then we could probably answer the question, because there are votes by area municipalities and by the county jurisdiction; both have to take place before the resolution can be submitted to the Minister of Revenue to proceed with the reassessment. There have been instances where individual municipalities in county jurisdictions have decided that they did not want to proceed with reassessments, but the majority of the municipalities and the majority on the county council have decided that they do wish to proceed.
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Ms Poole: Sudbury was a bit of a different situation, and the city of Sudbury basically got bribed with $24 million to forgo its objections to market value. Other than that, you're talking about Haldimand-Norfolk, where obviously the local municipality was extremely small. Certainly, I would ask you if there are any other instances where a large local municipality that is opposed to the assessment plan has been overridden by the regional municipality with the provincial approval.
Mr O'Dowd: You're right. I can't answer the question because, as I say, the votes that I receive indicating that there's a desire on the part of regional council to proceed do not give me a breakdown by municipality. It's a regional council vote. The other areas that have considered and implemented are Ottawa, Waterloo, Sudbury you've pointed out and and Haldimand-Norfolk you've pointed out.
Ms Poole: And in Ottawa, I understand all municipalities voted in favour although some of the votes were quite narrow.
Mr O'Dowd: I don't know what the individual municipal breakdown was, but the result was a resolution of regional council to proceed.
The Chair: Ms Poole, I have a number of people. I wonder if we could go around, and then we'll come back.
Mr Owens: I'd like to thank the ministry people for their briefing this afternoon. I have a couple of specific questions for Mr O'Dowd. In terms of the difference between the assessment in your commercial property section on page 3, if you have a building, for instance, like the Scotia Plaza which has most recently come on stream with essentially a glut of office space in the downtown core, and they purposely price their rent at a level at which to entice tenants and then the assessment is done based on that income, is that ever reassessed at some point, or when is that reassessed?
Mr O'Dowd: Under the current assessment system the property would be assessed at the time it first comes on stream, at whatever point that was. I don't know the details of that specific property. The reassessment would then take place at the next opportunity for a municipal reassessment, which is where we're at today: We're considering municipal reassessment. Other than that, the only other opportunity for a reassessment would be in the event that there was an appeal against the assessment established by the assessor through the Assessment Review Board and the Ontario Municipal Board.
Mr Owens: That would have to be done by the property owner, or could that be done by a resident of the city of Toronto, for instance?
Mr O'Dowd: The current Assessment Act permits anybody with the appropriate notification requirements to appeal anybody else's assessment, but there are fairly stringent notification requirements for all third parties and all parties involved. But traditionally the appeals are lodged by building owners or their representatives or by tenants within the individual buildings and their representatives.
Mr Owens: So in terms of your last paragraph, what would be an example of a unique commercial property?
Mr O'Dowd: The CN tower. SkyDome is another one.
Mr Owens: I guess I'm just struggling to understand how this assessment process works in terms of establishing a fairness. Would a strip mall also be classed as a shopping centre, or is that a collection of stores?
Mr O'Dowd: It's a collection of stores, if you want to categorize it that way. They would primarily be valued according to replacement costs plus land values.
Mr Owens: As opposed to the shopping centre, which would be based on income.
Mr O'Dowd: It's valued on the income generated to the building owner.
The Chair: Mr Turnbull.
Mr Turnbull: First of all, while I stepped out, I want to say I'm very disappointed to hear that the parliamentary assistant refused to answer anything which he considers to be a political question.
Mr Mills: That's not true.
Mr Turnbull: Whether you like it or not, this process is to examine what the government is doing and we're examining legislation, and it seems reasonable that we should get answers to the questions. The government is trying to have it every which way. For example, in the 1984 policy convention of your party, you voted to be against MVA for any further expansion of MVA in the province, and it has always been trumpeted by your party that policy decisions in your policy conventions were binding on the party. Furthermore, several ministers and other members of your party who are elected today campaigned very clearly as being against MVA. What happened to them in this interim period, and why are they being gagged and told they have to vote with this --
Mr George Mammoliti (Yorkview): Mr Chair, point of order: What's the party got to do with governing the province? I mean, these are questions for the party --
Ms Poole: Look, George, if you don't know --
Mr Mammoliti: If he has something to take up with the party, perhaps he could write the secretary a letter, send them a memo --
The Chair: Each member has a right to pose his or her questions. Mr Turnbull is simply posing his questions and the parliamentary assistant may answer as he sees fit, but it is Mr Turnbull who has the floor.
Mr Turnbull: My question is, given the fact that these ministers campaigned on a platform that they were going to be against MVA, what has happened to change this situation? Of course, look at the notes you're given from somebody else.
Mr Mills: Excuse me. I have a right to consult with my assistant. I have that right, I hope. This is not an MVA plan.
Mr Turnbull: Yes, it is.
Ms Poole: You'll get some disagreement on that one.
Mr Turnbull: What is it, then?
Ms Poole: It's not unit assessment.
Mr Mills: Property tax assessment is a local municipal and/or a provincial responsibility. It's both.
Mr Turnbull: Okay, but this is MVA.
Mr Mills: The province sets the framework and the rules, and the local council has the right to determine the key issues within that framework. That's what it is about.
Mr Turnbull: That isn't answering my question. You said this is not MVA. This is MVA.
Mr Mills: I don't intend to get into a political argument with you here, Mr Turnbull. I don't think this is the place.
Mr Turnbull: It's not a political argument. I'm asking what it is.
Mr Mills: You're asking me about people, that the ministers campaigned on this and campaigned on that. I believe, in all fairness, that you were in the House and you asked these questions to those people then, and I don't see really the point in repeating all that in this forum. I'm certainly not going to answer for any person who campaigned for or against market value assessment in the last election. I don't think it's fair to ask me that. You should have asked them, or you did ask them. I'm not going to fall for this bait.
Mr Turnbull: Then let me ask you this: You're saying its not MVA. What is this?
Mr Mills: To be quite fair, it is a series of interim measures that we are addressing here; it is not market value assessment as such.
Mr Turnbull: What about the excluded class? What is that for them?
Interjection.
Mr Turnbull: Excuse me, I'm asking a serious question to the parliamentary assistant: What is this to the excluded class? You made the statement, "This is not MVA," so I'm asking the question, what is it to the excluded class?
Mr Mills: Well, it's an interim measure until down the road, five years down the road, we look at it again. That's what it is.
Mr Turnbull: It's full MVA for the excluded class. I don't know if you've read your briefing notes.
Mr Mills: I know what you mean.
Mr Turnbull: It is full MVA.
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Mr Mammoliti: Point of order, Mr Chair: I don't mean to cut off Mr Turnbull, but if I can get an indication of how long his questioning is going to be, I can get an indication of when I'm going to be put on to ask the panel a question.
The Chair: You're on the list. We have until 6 o'clock, and I am trying to allow each person approximately 10 minutes to put their questions.
Mr Turnbull: Mr Chair, since we're getting no answers from Mr Mills, I want to turn to Mr O'Dowd. I want to talk to you about the methodology you've used. Let's, for example, talk about the methodology within shopping centres; let's take the example of Yorkdale, where the small tenants are getting substantial tax increases and the large tenants, the anchor tenants, who already enjoy lower rents, are getting decreases. Can you tell me what methodology you used in that case?
Mr O'Dowd: The Assessment Act requires that the interests of tenants in a property be apportioned among them according to the fair market rent of the space they occupy in relationship to the fair market rent of the entire property. That's the principle that's been used for the apportionment of the values in that particular shopping centre, I believe, and all others of that type.
Mr Turnbull: And that accounts for the fact that they're going to pay substantially more on a 1988 assessment and there's going to be huge reductions for the anchor tenants in a 1988 assessment as compared with the 1984 assessment?
Mr O'Dowd: If I could clarify, there is no such thing as a 1984 assessment. We have a 1940-based assessment in place now. The shifts that take place are between 1940 --
Mr Turnbull: You know there was a study done for 1984.
Mr O'Dowd: Yes, sir. There was a study done, and the study indicated our best estimate of the conditions at that time. It did not represent a full, in-depth analysis of the marketplace.
Mr Turnbull: Well, we're being told that this is not a full, in-depth assessment and that we don't have the final numbers yet.
Mr O'Dowd: That is probably true, that the final numbers are in the process of review and finalization and fine-tuning. That is a common practice, that the impact study that is presented is the best information we have available at the time it's produced, and that there is a process of fine-tuning in which values that are out of line as a result of things such as calculation errors are corrected, and information that is brought to our attention from taxpayers directly -- and there's been a fairly significant amount of that since Metropolitan Toronto released the information at the beginning of September -- may also result in fine-tuning of the product. There will be further fine-tuning taking place, as I indicated in my presentation, during the period that precedes the return of the assessment roll. The final numbers, I guess, will not be set until the assessment roll itself is actually returned to the municipalities, whenever that happens.
Mr Turnbull: In the case of large office buildings, what vacancy rates did you use? Did you use 1988 vacancy rates or were you using later vacancy rates?
Mr O'Dowd: As I indicated in my presentation, the information that was used to establish the market value estimates for the 1988 conditions was an analysis of 1988, plus 1987 and 1989. They were time-adjusted to bring them to a 1988 figure. This is a 1988 estimate of market value.
Mr Turnbull: But my question was specifically about the vacancy rate that was used.
Mr O'Dowd: I'm talking about all components of the capitalization of income, and that includes expense statements, the rentals and the vacancy rates and management factors associated with evaluation.
Mr Turnbull: Do you think those cap rates that prevailed in 1988 were sustainable?
Mr O'Dowd: Could you perhaps clarify your question for me, please?
Mr Turnbull: If there had been more product on the market, could you have sustained those capitalization rates?
Mr O'Dowd: I can't answer that question. I do not possess the detailed technical knowledge of the individual valuations that were there.
Mr Turnbull: Let us turn to residential houses. I have a particular problem in the area that I represent in that a lot of small bungalows were knocked down in 1988 and sold, and they were sold purely for their land value. The income of the people who still live in those houses adjoining them has not gone up to help them to pay -- and their consumption of services is fairly low -- and yet they are being taxed on the basis of this unusually high 1988 value, which was based on what a developer would pay.
My question to you is, if more product had been available, in other words, if more of the people who had these houses at that time had been prepared to sell, would those prices have been sustainable and what would have been the impact on market values?
Mr O'Dowd: I cannot really answer your question, because it requires me to guess the effects of the marketplace, and I'm afraid I can't attest to that. We had a significant number of sales of properties in all areas in 1988, and those were the base positions or the basic information we used to establish the analysis. What may or may not have happened, I don't really think, with all due respect, sir, I can respond to.
Mr Turnbull: But you keep ongoing statistics of values of houses. What happened in 1988 relative to earlier and later?
Mr O'Dowd: If I can interpret your question, was 1988 the peak of market value?
Mr Turnbull: Yes.
Mr O'Dowd: No, the peak occurred in 1989.
The Chair: Mr Turnbull, if I could just ask you to bring this round of questioning to a close.
Mr Turnbull: In these 1988 values, do you think there was an even increase up to 1988 right across Metro for values, or were certain areas going up more than others? And if you agree that some went up higher than others, have those that went up come down more than the others that didn't increase as much?
Mr O'Dowd: If I can answer the first question, yes, certain areas in Metropolitan Toronto, as is always the case, will appreciate or depreciate at rates different from other areas within Metropolitan Toronto. In respect of their relativity to 1992 circumstances, I cannot give you a clear indication. There is some suggestion that there has been a disproportionate change, but I'm not sure if that disproportionate change is in fact a reciprocal of the change that took place leading up to that peak in 1989. I cannot give that information. I do not have that information.
The Chair: I'm going to turn to Ms Swarbrick, who is next on the list. As can be heard in the background, we're being called to a vote in approximately 13 minutes, so I think we'll go for 10 more minutes and then we'll have to break for the vote in the House. We'll continue as soon as that vote is concluded.
Ms Swarbrick: Mr O'Dowd, do you know the rationale for the value of land used for hydro or railway utility purposes having been assessed as being the same as the surrounding areas? Why is there not a separate classification for the utility lands?
Mr O'Dowd: I would mislead you if I said I knew the exact reason. I can guess, because it's been around for a lot longer than I have. I believe it was done that way to allow for balancing, given that the rights of way are a unique type of property. They're a strip of whatever width, whether it's a railway right of way or a hydro right of way, which arguably has no market of its own but has value in use to the owner. You have to develop some way of estimating what that value might be.
The logic is presumably that, given that people are indulging in market transactions for properties which are adjacent to those rights of way, that gives you some sense, if those were available for those uses, of what that value might be. Given that it passes from one use to another use to another use as it traverses the municipality, there's a sense that if you bring them together and weight the values of the lands which are adjacent to that right of way, you have some notion or estimate of what the value in use to the owner of that property might be. It is not a perfect approach, but I believe it fairly represents the standard used on most utility right of way valuations for tax purposes across North America.
Ms Swarbrick: Since land is usually zoned based on its use, and if that land is being used not for commercial and not for industrial and not for residential purposes, but rather for utility purposes, would it not make sense to have a separate zoning classification for utility lands?
Mr O'Dowd: I can't address the zoning issue. That's an area that lies outside of my expertise and responsibility. In terms of classifications for assessment purposes, yes, you could establish a separate class if you so desired. The current legislation, we believe, does not permit that. There is litigation under way at the moment with respect to the assignment of railway rights of way to classes, where there is litigation around the city of Mississauga and our use of classes in the reassessment for the city of Mississauga for the railway rights of way.
It's questionable, though, whether, in the absence of a market and transactions for the purchase or the sale of right of way properties, there is no evidence of what that value is to the owner. To establish some value according to which the owner will pay tax or contribute to the municipal tax base, you have to use some standard, and I guess the standard always has the risk of appearing to be arbitrary, but you need some basis upon which to calculate the contribution of that particular taxpayer. The basis we use is one of the more common bases for this type of property across the country.
Ms Swarbrick: Thank you. Mr Braund, a quick question to you. You say in your presentation that the rent officer may join one tenant's application to that from the other units in the building in order to allow for the passing through of reductions to all of the tenants. Is that really a "may," or would they in effect do it just as a "shall" or a "will"?
Mr Braund: The intention would be to add the other tenants in the building so that all of the issues may be dealt with together. In this particular case it's a fairly straightforward calculation, so it would be most beneficial to all parties to deal with it all at once.
Ms Swarbrick: So in effect that's a "will," is it, that they will do that?
Mr Braund: In the circumstances of an extraordinary operating cost decrease, all other units would be added. The "may" is because there are other things that can be considered in the same kind of application where it might be more discretionary.
Ms Swarbrick: But could tenants generally rest assured that if one of the tenants in the building leads by filing that application, then the rest of them are okay and it will automatically take effect for them?
Mr Braund: That is our intention.
Ms Swarbrick: Thank you. A question for both Mr O'Dowd and Ms Bardecki: How long have each of you worked for the provincial government in your present or similar jobs?
Mrs Bardecki: I've been with the Ministry of Municipal Affairs for four years now.
Mr O'Dowd: I've been with assessment for 22 years.
Ms Swarbrick: Based on your employment with the provincial government, do you have any way of knowing whether or not the Liberal government before us was looking favourably upon developing enabling legislation to permit Metro council's reassessment of property taxes in consideration of more current market values?
Mr O'Dowd: The Minister of Revenue, in 1990, wrote to Chairman Alan Tonks indicating the willingness of the government to proceed with the preparation of an assessment impact study for Metro's consideration. If memory serves me correctly, the date of the letter was some time in January of that year.
Ms Swarbrick: January 1990, so that was a Liberal Minister of Revenue requesting that.
Mrs Bardecki: Mr O'Dowd's response covers my memory of the situation as well.
Ms Swarbrick: So it's fair to conclude that the Liberal government before us was heading towards doing a similar thing. Is that correct?
Mr O'Dowd: To the extent that Mr Mancini's letter to Chairman Tonks indicated an undertaking to proceed with the preparation of an impact study, I guess the answer to your question is yes.
The Chair: It is six minutes to the vote. Rather than starting on another round of questions, this might be the appropriate time to adjourn. I apologize, but if I could ask our witnesses to remain, once the vote is over we will be back and continue till 6 o'clock. So until the Chair and the other members return, we stand adjourned.
The committee recessed at 1723 and resumed at 1738.
The Chair: We could reconvene the committee, the vote having been held. I want to thank everyone for still being here at our return. I have next on the list Mr Mammoliti.
Mr Mammoliti: My question was for Mr Braund. I'm wondering whether he --
Mrs Bardecki: He'll be back in a second.
Mr Mammoliti: I wanted to make a comment anyway, in that Mr Turnbull had earlier asked a question in terms of difference between what the government's saying and MVA. I'd like to say for the record that I've always been an advocate for meaningful change in the property tax scheme and I will continue to be an advocate of that. The current system, in my eyes, isn't working. This, to me, isn't perfect, but it's fairer than what we have at this particular point. I thought I'd say that for the record.
On that note, I see Mr Braund is back. First of all, I'd like to find out how many tenants we have in Metro currently.
Mr Braund: There are about 350,000, I believe.
Mr Mammoliti: I'm familiar with the home owners. I understand that most of the home owners in Metro will benefit, will get a reduction in their property taxes with this plan. Can you give me an indication of how many of the 350,000 tenants in Metro will benefit from a reduction in rent, either through application or the automatic form you were telling us about earlier?
Mr Braund: We believe that figure will approach 200,000. That's in terms of units, not in terms of tenants, obviously.
Mr Mammoliti: Well, I think it speaks for itself. The majority of tenants will also benefit with the current plan, am I correct?
Mr Braund: Absolutely.
Mr Mammoliti: In my particular area, the majority of people will benefit from this, including the business sector; $17,000, $18,000 reductions in my particular area. They're still not happy. In your eyes and in your experience, is this a fair compromise? I'm asking the panel this.
Mrs Bardecki: I think this is a judgement call. The government is relying on the elected government in Metro, which had a number of hearings and heard a number of deputations and reached a compromise that it felt was fair. That was what was presented to the government, and on that basis the province is putting forward enabling legislation.
Mr Mammoliti: Let's go back to the tenants for a second. For the record, I'd like to ask again: Can you clarify for us how the automatic reduction plan, rent control, works? How many of the tenants will get an automatic reduction, or increase, for that matter?
Mr Braund: There are no automatic increases. Landlords must apply in order to have their maximum rents increased. We believe about 175,000 units could have the automatic rent reduction of the 200,000 I spoke of. Basically we're looking at a division by the size of the building. What Metro has asked us to do is to look at the buildings that have three or more units, which are the property classes 1 and 2, as Mr O'Dowd explained them.
What we've not had in the past is rent registration for the three- to six-unit buildings, and we intend to do as much in the area of rent registration as possible early in 1993 so that we have those rents available as well.
So from three units and up, to the very largest complexes in Metro, the way it would work is that we would get the information from Mr O'Dowd's ministry by way of computer tapes. We would compare that with the computer records in the rent registry. We would calculate the tax savings using the mill rates for the appropriate municipality in which a building was located, on the old and new assessments. We would then take that calculated tax saving and divide it by 12 to reflect the monthly rent adjustment that should be made. That would then reduce the maximum rent in the rent registry.
We'd pass the information, at the end of all of that, to Metropolitan Toronto, which is required by our legislation to advise the landlords and tenants of the amount of the maximum rent reductions.
Then we have an enforcement problem. Some landlords will probably not follow the legislation when they're told to do so or will not immediately do so, so we will have to follow up with those landlords and ensure that they do obey the law.
Mr Mammoliti: Okay. Let me just wrap all of this up for a second. The majority of home owners in Metro will benefit in terms of reduction with this plan; the majority of the tenants in Metro will benefit through the form of an automatic reduction in their rent. Wrapping it all up, the majority of the people in Metro benefit from this plan. Am I correct?
Mr Braund: In terms of random impacts, which is all I can speak to, the advantage is to the tenants to some degree.
The Chair: Mr Grandmaître, and then I have Dr Frankford. There's a little bit of time. I'll try to squeeze in two others.
Mr Grandmaître: As a follow-up, landlords who will qualify for a tax decrease hopefully will pass those on to the tenants and they will rely on the rent registry, right?
Mr Braund: Landlords who want the increase must apply to the --
Mr Grandmaître: No, no, I'm talking about a decrease.
Mr Braund: In terms of the decrease, the automatic ones are done by the rent registry. The ones that are done by application are done by our local offices in the various areas of Metro.
Mr Grandmaître: Tell me about the land registry in Metro. Is it up to date?
Mr Braund: The land registry or the rent registry?
Mr Grandmaître: Rent, I'm sorry. The rent registry, not the land. Is it up to date?
Mr Braund: Yes. It has over 700,000 rental units for the province and we have records right up to the end of the Residential Rent Regulation Act, which is only three months ago. We've been scrambling to try to bring into place the changes that have been required by that legislation, but basically there hasn't been a lot of activity yet under the Rent Control Act because people have been making their applications and we're proceeding through the time lines to orders and so on.
Mr Grandmaître: But the rent registry has been in place for a couple of years now, more than two years?
Mr Braund: Yes, and it's only within the last year that it has come up to date, if that's the point of your question.
Mr Grandmaître: If this plan is implemented, what guideline will landlords and, for instance, Metro use to figure the decrease?
Mr Braund: Our intention was not to use an across-the-board guideline as we do for permitted increases each year. It's to figure out specifically for each property, and even within it for each unit, how much the tax saving is and turn that into a rent decrease. We're not just taking an across-the-board 1% decrease in rents or something like that.
Mr Robert Frankford (Scarborough East): Can you explain to me about the valuation of vacant or derelict land?
Mr O'Dowd: Vacant or derelict land. I'm not quite sure what derelict land is. Is there a specific category of land --
Mr Frankford: Land awaiting development.
Mr O'Dowd: Parking lots. Vacant land is assigned to a class of property depending upon its zoning, primarily. If it's zoned commercial land, then it would be looked at as commercial land. To the extent that there are sales of commercial parcels in and around a specific area, those will provide the primary basis for establishing the value.
In the event that there is no commercial activity, which is extremely rare in terms of vacant land particularly -- there is recent history -- then you move further afield from that specific site until you can find some evidence that may give you a trend and then look to other relative levels of commercial property between those two areas to determine whether where you eventually find sales activity is representative of the area you are studying.
Another method may be used, less so with commercial properties than with residential, to evaluate the land component of improved properties and develop estimates of land value by taking building values away from sales. If a property sells for $1 million and the building can be estimated to be worth $250,000, then there's imputed land value of $750,000. That type of approach would be undertaken. The results of a fairly significant amount of analysis would have to take place to then create a basis of valuation of the vacant land or the unimproved land.
Mr Frankford: You didn't want to make any judgements on the relative ups and downs from year to year, but it would seem to me reasonable that in a speculative market undeveloped land goes up faster and in a depressed market it would go down more.
Mr O'Dowd: That's probably a reasonable assumption.
1750
The Chair: Two final questions. Ms Poole and Mr Turnbull.
Ms Poole: Since I don't think the parliamentary assistant would either be willing or able to answer this, I'm going to go to Mr O'Dowd from the Ministry of Revenue. We can agree this is not full market value assessment, but is this a market value assessment plan?
Mr O'Dowd: Ms Poole, if I could distinguish between the assessment and the tax plan, because they are two different things in my mind, the assessment base that we have provided to Metropolitan Toronto and which will be used to support Metro's tax plan is a market value-based assessment system in the same manner as all other market value-based assessment systems that have been implemented in Ontario over the last 10 years in the other 700-odd municipalities.
The point of argument, I suppose, comes then in terms of what effects the Metropolitan Toronto interim tax plan will have on that basic assessment system that may create something different from that which would be expected as a result of proceeding with a reassessment in a traditional sense anywhere else in Ontario. In that sense, I really couldn't give you an answer as to whether it is or is not. It is different from that which would normally be expected to happen as a result of implementing a reassessment based on market value under the Assessment Act anywhere else in Ontario.
Ms Poole: I think the short answer is: Yes, it is a market value-based assessment plan. Correct?
Mr O'Dowd: The assessment component of it is.
Ms Poole: Following on that point, okay, so we don't have full market value assessment, and yet within the next five years we're going to have houses on the point of sale that will go to full market value; we will have vacant lands at full market value, including railway rights of way, GO Transit, Hydro and municipal parking. They'll all be at full market value. Expansions and additions to businesses are not covered under this particular plan. New construction will all be under full market value without a cap.
The final thing, and one that is very important and has not been raised right now, is that I have been talking to people within the Ministry of Revenue, and the questions I asked were about new businesses. We're not talking about a scenario where one business is sold to another business and there's a transfer; that clearly would be capped. We're talking about a business closing down, moving off of a property, that building being vacant and then a new business moving in. According to the information I have from sources within the Ministry of Revenue, the business tax for that new business would not be capped but would be on full market value.
So you would have houses on the point of sale, new construction, vacant land, expansions and additions, new businesses -- and in fact businesses that move would again have their business taxed under full market value. What are the estimates of the Ministry of Revenue as to what proportion of Metro will be valued under full market value at the end of five years?
Mr O'Dowd: There are no estimates in the Ministry of Revenue. If I could maybe put one point of clarification, you use the term "full market value." In my presentation I drew a distinction between full market value as a basis for taxation and assessment by property class. In fact, what we have is assessment by property class, not conceptually full market value.
Ms Poole: Full section 63, then.
Mr O'Dowd: I'm reluctant to use sections that don't exist, because that always creates a problem in trying to track which one we refer to; if we can refer to it as reassessment by property class.
Ms Poole: Pure market value in its purest form wouldn't have the four different classifications.
Mr O'Dowd: That's correct.
Ms Poole: But I am talking about what the common understanding is of full market value, which means a section 63 under market value and at the estimated rate of what their market value would be, which I am referring to as at full market value. So the Ministry of Revenue has not done any analysis of what proportion would be valued over the five-year period?
Mr O'Dowd: No.
Ms Poole: Do you have any estimates based on houses that have been sold, say, over the last five-year period? What proportion of houses were sold within Metro?
Mr O'Dowd: We have figures that give us the transaction rate of all properties selling over the last five to 10 years, if we like. The problem we have is in establishing a solid basis upon which to project those numbers forward, given the fact that the current economic climate is somewhat different than it was during the period leading up to 1990, which means that we don't have an awful lot of history to base any prediction on. And I don't think we have an adequate crystal ball to predict how quickly the economy will turn around that might have an impact on the amount of sales activity that takes place.
Ms Poole: If no --
The Chair: Ms Poole, could this be your last question, because Mr Turnbull has one and there's a brief one from Mr Wiseman.
Ms Poole: I have to choose?
Mr O'Dowd: Ms Poole, could I just comment on one point? You're suggesting that there would be a transition to a full assessment, an uncapped assessment for certain changes in business occupancy?
Ms Poole: That's right.
Mr O'Dowd: It's not my understanding that this is the case, but the details, I think, are covered off in the legislation or have been part of the discussion, if I could ask my colleague from Municipal Affairs to comment on that.
Mr Ron Skinner: Metropolitan Toronto has not worked out the details of its implementation plan in terms of how it would handle properties that are expanded, where a new business would go into premises, or many of those things that you mentioned might happen. The details have not been ironed out yet. The legislation provides them with the scope to provide for protection in virtually all circumstances save and except, probably, a new structure on vacant land.
Ms Poole: Let me just put it this way. I still haven't asked my question, but I'll just finish off with this one comment: When I've talked to senior people in the Ministry of Revenue about this very thing, they say this plan does not make allowance for it.
Mr Skinner: That may be the way they respond. I think they would have to respond only to the method of assessing. They will assess them as they would any other property. The implementation of --
Ms Poole: But they've got no 1992 base year to base it upon for the business tax. That's the problem. I would actually ask for a response in writing on this particular issue, on the one we've just covered.
My last question is, there have been allegations and accusations that the assessment was not carried out properly. I was going to say that the assessment was cooked, but under the circumstances there's probably no place for levity here. I would like to ask Mr O'Dowd, why do assessments for all major office buildings throughout Metro go down during this reassessment when using 1984 values? It was estimated that office buildings would go up to a 50% increase level. Using 1988 values instead, all major office buildings are going to go down. In other words, the movers and shakers are going to get decreases under this plan, while in using 1984 values the movers and shakers were going to get hammered. What happened, Mr O'Dowd?
Mr O'Dowd: If I could first put a caveat, I don't know that all office buildings go down. I believe that certainly a majority of the office buildings will remain roughly the same or decrease. The reason for it is one of two things. Firstly, during the period from 1983 through 1989-90 there has been a significant amount of construction of commercial space within Metropolitan Toronto. When new construction is put on to the assessment roll, the level of assessment relative to market value at which it is placed on the roll is a function of the level of assessment which exists within the immediate vicinity.
A lot of the construction took place in the downtown core. As you are probably aware, there was a significant amount of litigation under way with respect to assessments of properties within that downtown core, a number of which were settled around that same point in time. This means that there's a coalescence of the level of assessment, the relationship between assessment of those types of properties to the market value of those types of properties, which means that when you move to a system where you establish a common level of assessment for all commercial properties across Metropolitan Toronto, the proportion of the tax base for commercial properties that's represented by these large buildings is so significant that it moves the total level of assessment towards the average level of those buildings. And since most of them are either new and have been assessed at a level close to 4.5% or 4.3% of market or have been settled through the appeal process at a similar level, the arithmetic dictates that there has to be a coalescence around that particular level of value.
The Chair: I have to move on to Mr Turnbull and then to Mr Wiseman, briefly.
Mr Turnbull: To Ms Bardecki and perhaps to Mr Braund: With respect to the request by Metropolitan Toronto to find some help for tenants, I have not particularly seen any effort by the government to help the tenants in apartment buildings, given the fact that they are paying taxes based upon an 8% factor of market value as compared with 2.2% for the single-family residential. Could you comment on any discussions you had along those lines?
Mrs Bardecki: First of all, the help that Metro asked the province to give it in respect of giving assistance to tenants was to give it the legislative flexibility to ask for automatic decreases in maximum rent, and the province has provided that help via Bill 94. If you want to comment on further discussions, Mr Braund, that have taken place in order to effect that help --
Mr Braund: Metropolitan Toronto has not asked the Ministry of Housing to become involved in the debate of what weight property classes should have within total municipal taxation. That is generally a matter which my colleagues in treasury and Revenue deal with, and perhaps I should turn it over to Mr O'Dowd.
Mr Turnbull: Are you comfortable with those levels, 8% for a multifamily residential and 2.2% for a single family?
Mr O'Dowd: I think my comfort is irrelevant, given that the process we're working with here is one which defines a class of property and then maintains the tax burden for that class of property through the process of reassessment. It's my understanding that the Fair Tax Commission working group that's looking at property taxes will come forward with a recommendation that there should be an amendment to assessment structures such that the burden of taxes on multiple residential, on apartment buildings, should be much more in line with single-family homes.
Mr Turnbull: Based upon that, would you not think it would be more reasonable for us to have waited with this legislation until the Fair Tax Commission property tax panel reports?
Mr O'Dowd: I don't think that's an appropriate question for me to respond to, is it?
The Chair: Mr Wiseman, last question.
Mr Wiseman: If a house is put in a numbered company and shares are transferred from one person to the next, since it would not appear on the assessment rolls as a transfer of ownership, would it then be reassessed?
Mr Skinner: I suppose legally it would not appear as a change of ownership. Metro has the authority, under this legislation, to define change of ownership, and I guess it'll have to grapple with those thoughts.
Mrs Bardecki: There are techniques used presently for the land transfer tax which take into account and capture changes of ownership of that nature that take place, and Metro could avail itself of the same techniques if it wished to.
Mr Wiseman: Is that built into this legislation, or is that just something they can do anyway?
Mr Skinner: No, the legislation enables Metro to define change of ownership for the purposes of this act.
The Chair: With that, our afternoon has come to a close and we have to begin again at 7 o'clock, so I would like to thank all of you for coming this afternoon and participating in the briefing. As one who has not been introduced to too many of the joys of market value, I can certainly see why it is a deep and overwhelming study, and I'm sure we will learn far more about it over the course of the next week than we thought was possible.
The committee will now stand adjourned until 7 o'clock.
Ms Poole: Mr Chair, on a point of order: Just before the --
The Chair: I'm sorry. I've adjourned the hearing till 7 o'clock.
The committee recessed at 1804.
EVENING SITTING
The committee resumed at 1902.
The Chair: Good evening, members of the committee, ladies and gentlemen. This is the standing committee on social development, which is meeting to discuss Bill 94, the Metropolitan Toronto Reassessment Statute Law Amendment Act.
We began our hearings this afternoon with briefings by ministry officials. Tonight we move on to witnesses who will appear before us. As we decided this afternoon, we put off dealing with the subcommittee's report on our order of business, and I would now like to call that report. Members have a copy of the report of the subcommittee before them. Is there any discussion on that report?
Mr Owens: I'd like to move an amendment to item 7.
I would like to move that item 7 of the report be amended by adding "scheduled up until 6 pm on Tuesday, December 1, 1992," after the word "presentations" in the first line, and further that the following words be added after "invited" in the fourth line:
"The time for oral presentations be allocated on the following basis:
"Ten minutes for individuals, 20 minutes for groups, to be scheduled after 6 pm, Tuesday, December 1, 1992."
The Chair: Any discussion on the amendment? Just for the sake of clarity, what you are raising is that those sessions that have been organized for today and tomorrow, for which the committee has the permission of the House, would remain as set out in the subcommittee report, which is 15 minutes for individuals, 30 minutes for groups, but on the assumption that later tonight the House directs us to sit after 6 o'clock tomorrow and for whatever time, it would be 10 minutes for individuals and 20 minutes for groups.
Mr Owens: That's right.
The Chair: Did you want to explain why you've made that suggestion?
Mr Owens: The reason for the motion is twofold: First, we have an extremely large number of groups and individuals who have requested time to bring forward their testimony. The clerk can clarify the exact numbers; I'll turn it over to Doug. It's my understanding that we had 80 groups and 80 individuals as of today, as well as the folks who had already been scheduled. It's our opinion that we want to get as many people forward as possible in the limited time we have. We've already taken a look at scheduling Saturday and Sunday, which is a highly unusual event around this place, and it's our concern that if we kept the original time limits we would further preclude a number of citizens and groups who have an opinion on this issue.
The Chair: Comments, Mr Grandmaître and Mr Turnbull.
Mr Grandmaître: I am somewhat disappointed at cutting back. Of course we want to listen to as many individuals or groups as possible, but the government should realize that we are talking about not only new enabling legislation but a new model of assessment or reassessment in Metro. I think it's very, very important that people be given a chance to talk about this new model, this new proposal. I realize that people were given an opportunity at Metro to speak out for or against market value, but they weren't given an opportunity to talk about the model before us, and I think it's very important that they be given the 15 and the 30 minutes originally proposed.
Mr Turnbull: Clearly, it has always been the position of the Conservative Party that we wanted to have very full hearings into this scheme and we want to make sure that as many witnesses are heard as is possible; in fact, we believe that everybody who wishes to be heard should be heard.
However, I must say that cutting back the time allocation for these people isn't really fair. I've sat on committees where there has been too short a time allocation for witnesses and it ends up with the parties not having adequate time to develop a line of questioning, which almost destroys the whole reason for the people coming here to present their cases.
The Chair: Any further discussion? I'll put the question: All those in favour of the amendment to the committee report put forward by Mr Owens? All those opposed? The amendment carries.
I now have to put the question: Will the subcommittee's report, as amended, carry? The report carries.
Just to be clear, for those who are here and those watching, the procedure tonight and tomorrow afternoon that had already been set up is for 30 minutes and 15 minutes. On the assumption that the House directs us to sit beyond 6 o'clock tomorrow, it will be 10 minutes for individuals and 20 minutes for groups and organizations.
MUNICIPALITY OF METROPOLITAN TORONTO
The Chair: I would now like to call our first witness this evening, Mr Alan Tonks, the chair of Metropolitan Toronto.
Welcome, Chairman Tonks. I know you're not a stranger to these rooms. I just indicate that although we're at about 10 after 7 and we have scheduled half an hour for your presentation, I hope we'll have some opportunity for questions in there as well.
Mr Alan Tonks: Thank you very much, Mr Chairman, and thank you to the committee for the opportunity to be here. Let me just preface my remarks by saying that I don't think that any level of government these days, within the context of these times, gains any comfort from having to deal with issues related to assessment reform, shifts in the burden of taxation, even if the cause is as just as it may appear; that is, to alleviate the injustices that have been created over a period of four decades. I think it should be self-evident that it's a difficult time in which to make these kinds of decisions.
The second thing I'd like to say is that I think it will be apparent that if Metropolitan Toronto had the same legislative authority as that vested in the other regional municipalities across this province, I wouldn't be here asking you for your approval with respect to this scheme. Even though the approach to the implementation of a market-based system of reassessment may appear to be different, it still in principle is very similar to using market-based assessment as that portion of rateable assessment upon which to assess the costs of the regional services which the taxpayer receives the benefit of.
I think it would be an understatement for me to say, at the very least, that while death and taxes may be inevitable, the former should be postponed as long as possible and the latter should be as fair as is absolutely possible. It's to strive towards as fair a system as we can, within the context of very pressing times, that Metropolitan Toronto has proceeded very carefully to inch towards the implementation of a market-based system similar to the other hundreds of municipalities that have legislative authority to do that.
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I'd like first to give you a little bit of an overview, if I may. Mr Chairman, may I doublecheck on how much time I have available to me? I just broke my watch, so time is flying; at least it's falling away. Do I have 15 minutes or 10 minutes?
The Chair: You have half an hour. What we hope is that there'll be some time for questions.
Mr Tonks: I'll try to keep that down so that the question period will be as much as possible.
Metropolitan Toronto's approval of the interim assessment plan on October 29, 1992, represents the first step towards reforming the current inequities in the property tax system. In Metropolitan Toronto, properties have not been uniformly assessed since 1953, at which time assessments were based on 1940 values. Over time, owners of older properties generally have been paying lower taxes than owners of newer properties. The failure to update assessments has created much inequity, which will now be resolved through this reassessment program.
The need for reassessment has been acknowledged across Metropolitan Toronto. I have never had anybody come into my office, regardless of the impact, who has said that the present system and the status quo are sufficient and acceptable. The failure to update assessed values since the last Metropolitan-wide reassessment in 1953 has allowed many long-standing inequities to become greater. As a result, a Metropolitan-wide uniform basis of assessment no longer exists.
Property owners have lost confidence in the assessment system, which is being weakened through appeals in the courts, yet 86% of all municipalities across the province are on some form of market-based system; in fact, most major Canadian cities are on a market-based system.
Metro council's been involved in assessment reform since I became a member of Metro council in 1976. Because approximately 80% of property taxes collected are for metropolitan school board costs, which are apportioned across the six area municipalities, it's absolutely abundantly clear that we have to have a fair apples-and-apples system that exists across the metropolitan area.
It is necessary to ensure that the assessment base upon which tax is levied for Metro-wide services is up to date. The property tax is the major source of revenue for local government in Metropolitan Toronto. It only stands to reason that the base upon which property taxes are raised be rational and fair.
Metropolitan council has reviewed and debated reassessment on several occasions and has been very cautious during its consideration of this matter. Council undertook numerous reassessment-related studies to support its decisions. Here are just a few of them.
In 1986, council approved in principle a Metro-wide reassessment and requested an updated study based on 1984 market value.
In 1988, council received an implementation plan based on 1984 market value. And I needn't say that these dates correspond to changes in government, so they reflect two governments through those changes; in fact, Metro reflects the three governments in terms of using market value as a base.
In 1989, council approved an interim reassessment plan based on 1984 market value.
And in 1992, on October 29, council approved the previous interim reassessment plan, with modifications to reflect public concerns. The studies indicate that delay results in greater tax discrepancies and that the majority of taxpayers continue to pay more than their fair share.
Let me briefly review the process Metro Toronto went through in developing the interim reassessment plan in 1989.
In 1989, council's task force on reassessment in Metropolitan Toronto reviewed a number of reassessment and taxation methods, including market value and the unit-value system that was put forward as an alternative by the city of Toronto council. The task force concluded that market value was superior to the other alternatives discussed. Starting from the general market value assessment model used throughout Ontario, the task force developed a plan specific to the unique needs of taxpayers in Metropolitan Toronto. Due to Metropolitan Toronto's size and complexity, the reassessment plan approved by council in September 1989 contained measures of assistance designed to lessen the impact of reassessments after 40 years of failing to update property assessments.
The main conditions of that plan included full decreases for residences and industries, no increases for residences and limited increases for industries to 25%. Capped tax increases would be funded from withholding part of the commercial decreases. The Ontario government approved that plan, but requested that Metropolitan council base its plan on 1988 market values instead of 1984 and that the year of the plan implementation be changed from 1991 to 1993. Council complied with these requests and gave final approval in February 1990.
In 1991, the Ontario government reconfirmed its intention to undertake the reassessment study in Metropolitan Toronto based on 1988 market values. The 1988 market values were submitted to Metropolitan staff in August 1992.
The estimated tax impacts of the plan were computed and released publicly in early September. The results of the estimated tax impact study confirmed details identified in previous analyses. The study showed that the majority of taxpayers across Metropolitan Toronto continue to pay more than their fair share; 56% of taxpayers would receive decreases; 44% would experience increases, compared to 63% and 37%, respectively, based on the 1984 market values. Furthermore, the tax inequities become greater the longer reassessment is delayed, thereby resulting in larger tax shifts between area municipalities for Metropolitan Toronto-wide services.
Upon analysis of the results of the estimated tax impacts, it became evident that the plan earlier approved by council would need to be modified in order to reflect and adjust to public concerns. Throughout September and October, council sought public input and further analysed possible implementation options. The main points of constructive input gained through the public consultation process include the following suggestions: Capped tax increases should be funded with decreases from within the same property class; enhanced protection measures for commercial properties should be provided; and tax increases and decreases should be phased in. The plan was modified to reflect these kinds of concerns.
The main features of the approved interim reassessment now include: property assessments based on 1988 market values; implementation period, January 1, 1993, to December 31, 1997; reassessment by property class to prevent tax shifts between property classes; tax decreases and increases are phased in and funded with minimal cross-class subsidization; a mechanism has been established to ensure decreases to tenants and that they are reflected in lower rents; and that taxation reform is to continue during the implementation period.
This plan moves towards correcting inequities within the system while still providing assistance and protecting home owners and businesses experiencing tax increases. Under the plan, vacant lands, railway rights of way and pipelines experience full increases and decreases. The protection measures available to homes and businesses do not apply to these properties, nor do these properties subsidize the protection measures to other properties. They stand or fall on their own merits. Properties making grants in lieu of taxes also receive full decreases and increases under the plan. The plan is based on each property class funding its own protection measures from within that class. The valuation methodology applied to some of these properties, such as hydro and railway rights of way and some public utilities, results in increases which cannot be offset by available decreases.
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The interim reassessment plan is intended to serve as a temporary plan. Prior to the next reassessment, before 1998, Metropolitan council will encourage the Ontario government to undertake further reforms to the property taxation system. Council has repeatedly heard public concerns regarding the funding of social services and the education system: They should be taken from the property tax.
In addition, council requested the Fair Tax Commission to review the basis upon which apartments are assessed. The assessment process clearly needs improvement as it affects the public's confidence. We look forward to working with the province on this matter.
We are encouraged by the Minister of Municipal Affairs' recent statement regarding the province's willingness to work with Metropolitan Toronto towards examining future property tax reform and we acknowledge and await the developments arising from the disentanglement process, the Fair Tax Commission and the review of educational finance.
Mr Chairman, I'd be pleased to answer any questions.
The Chair: Thank you very much, Chairman Tonks. We'll begin the questioning with Mr Turnbull.
Mr Turnbull: Chairman Tonks, you identified during your discussion here two key aspects. One is reassessment by property class to prevent tax shifts between property classes, and also tax decreases and increases are phased in and funded with minimal cross-subsidization.
Mr Tonks: Yes.
Mr Turnbull: I think that the committee members will be familiar with the idea of reassessment within classes. Indeed, it has been done by many municipalities across the province.
I have a report here which is dated October 23, 1992, produced by the chief administrative officer of Metro: Impact of Interim Reassessment Plan Adopted by Management Committee on October 16, 1992. It very, very clearly shows that the residential tax bill will be down by $57 million in a year, compared with what those properties pay today. Commercial breaks even, approximately, and industrial is to fall by about $20 million.
You have two other classes called "other" which are mostly vacant land and pipelines and rights of way. These two classes have tax increases totalling about $87 million. That's approximately enough to finance the net decreases for residential and industrial, so I'm hard pressed to accept your opening statements when confronted with numbers from Metropolitan Toronto which somewhat refute that.
Mr Tonks: As I indicated, the protection measures available to homes and businesses do not apply to these properties, railway rights of way and so on, nor do these properties subsidize the caps that we have placed within the classes. In fact, the report that you're referring to and the $87 million initially was the full impact of the cross-subsidization; that has come down. I said that we have not totally achieved obviating the cross-subsidization but we have brought that down to some $15 million.
The time-of-sale provisions will hopefully, over the period of time between now and 1997, remove the requirement to do any cross-subsidization whatsoever, inasmuch as the time-of-sale will provide the revenue that will help to reduce the requirement for subsidizing the residential class in its entirety, hopefully by 1997.
The valuation methodology applied to railway rights of way and so on is that the abutting lands must reflect --
Mr Turnbull: Chairman --
Mr Tonks: Sorry.
Mr Turnbull: Very clearly, if you take away the increases to the "other" and the rights-of-way classes, then quite frankly you don't have any money to give the reductions for residential.
Mr Tonks: Which is precisely why we have not been able to afford, in this plan, to include those for the same decreases that are --
Mr Turnbull: Okay, so the opening statement that there be no shift between classes is absolutely incorrect.
Mr Tonks: No. I think the matter of how these others are assessed is a matter of provincial policy. It is not an option of ours, Metropolitan Toronto, either under the requirement of this legislation or the present legislation under the municipal Assessment Act --
Mr Turnbull: Chairman Tonks, the point --
Mr Tonks: -- that allows the municipality to assess those on anything other than how they're assessed according to the abutting rights of way, and that is the same right across the province.
Mr Turnbull: But the point I'm making --
Mr Tonks: The point I'm making is that if you choose to factor that into this plan, then the province has to make changes in the Assessment Act to do so.
Mr Turnbull: Okay, but to suggest there's no cross-subsidization is absolutely incorrect. When you look at the numbers as to how much the net reduction for residential and industrial is and you look at the increases to the "other" category, they about balance each other.
Mr Tonks: I think we're going to have to agree to disagree on that, because my --
Mr Turnbull: I'm looking at your numbers from Metropolitan Toronto.
Mr Tonks: Mr Turnbull, you can look at the numbers and I accept with great respect the conclusion you're drawing from that. I'm telling you that, within the classes and according to the criteria Metropolitan Toronto is obligated under the Assessment Act to apply, the cross-subsidization is about $15 million and those properties you have chosen to bring out of the context of how properties are assessed according to provincial law should be and are on the outside, on the sidebar, of this program and we don't have the right to change that. I take it, sir --
Mr Turnbull: It's cross-subsidization.
Mr Tonks: With great respect, I take it, Mr Chairman that my answer is quite upfront in that I identified those right at the beginning -- granted, within the issue of cross-subsidization -- but my answer, sir, is that Metropolitan Toronto has absolutely no other authority but to assess those according to what the abutting properties are within Metropolitan Toronto.
The Chair: We move to Ms Poole. I wonder if I could just ask those with cameras if you would mind not putting the light on. It distorts the television coverage and I'm informed that there should be sufficient light here to take a picture, so if you would help us with that.
Mr Tonks: If it's any satisfaction, I have no problems with those lights, Mr Chairman. I look the same close up. They can't do anything for my face.
Ms Poole: I think the point Mr Turnbull was starting on and attempting to reach was that Metro played games with this plan.
The vacant land was first factored into the categories: the residential category, the commercial category and the industrial category. If that had been brought in with the vacant lands being part of that and capped, because it was part of those three schemes, then your plan wasn't viable.
The political way out was to remove the vacant lands from where they had been put by the ministry, and Metro concocted it so that these vacant lands would stand on their own, no cap, $48 million more on those vacant lands than should have been, because they're taken out of their classes. Perhaps, Mr Chairman, you would like to respond to those comments.
Mr Tonks: In fact, the use of words like "concocting" is playing games with words. I have given the answer. I have attempted to demonstrate that during the period of public discussion there were clarifications that were given and the plan was modified in relation to the public input and professional input we received.
Quite the contrary of suggesting that games were being played, we refined the program according to the information we had. There were no games being played; it was just an honest attempt to deal with a system that is four decades old and to appropriate shifts where in an upfront way they were most appropriate. As I have said, we did that according to the Assessment Act and the manner in which we were obligated to apply assessments as they are worked out by the province, according to its legislation.
I don't think it's appropriate to characterize that as playing games. You may disagree with it; you may disagree with the final outcome, but it was an honest attempt to come to grips with a very, very difficult and complex issue.
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Ms Poole: I'd like to shift tack just for a moment and go to an issue which was brought up this afternoon. The parliamentary assistant, the government and the minister keep saying: "This is not full market value assessment. This is not a market value plan." We can agree that at this particular stage it is not full market value, but after the five years there will be a significant portion of Metro that will be on full market value. Would you please tell me, do you think this is a market value plan?
Mr Tonks: This is a market value based plan. If we were to implement, as Mississauga and other municipalities did, full market value within the context of our plan -- and recognizing that, you know, even some of the regional municipalities had a leg up on Metro because at least some of them had gone to section 63 in assessment updates. In fact, most of the municipalities in Ottawa-Carleton had gone to that. Most of the municipalities in Niagara region had gone to that, but no municipality in Metropolitan Toronto had come anywhere near to an assessment update even close to what our regional neighbours had done.
For me to characterize it, as I have in the past, as inching towards a market value system, I think is as close as I can come. I think that as the time of sale factors click in, we will gradually come to the same market based system as the province is presently on.
If, in the meantime, the province, through it's Fair Tax Commission, comes up with another system, I say all power to the province in that respect. We are taking the first steps towards removing over a period of time, gradually, the inequities in the present system.
Ms Poole: One of the problems we're having is that we're getting extremely mixed messages from the Minister of Municipal Affairs on this matter. For instance, he has made statements saying this is a municipal responsibility and he trusts the municipality to carry out this responsibility, yet on the other hand he says there are parts of your plan he doesn't like, so he's going to require a bylaw regarding the homes at point of sale.
When this was announced, in the paper it was reported: "Metro officials say the provincial announcement is a crafted political ploy to throw the market value assessment hot potato back in Metro's lap. `But it won't destroy the deal approved,' they say." Then it quotes you, Chairman Tonks, as saying: "They want to look like it's us that's doing the foul deed. Even now they're trying to cover their political rears by putting a different spin on the issue." I guess I'm asking, did you say those words?
Mr Tonks: Oh, absolutely, absolutely. I would even like to take credit for being one of those crafty Metro officials. I would hardly want them to get a leg up on me in that respect.
I responded, I think, as most of us can respond. Where it is a jurisdiction that is in fact responsible for making certain political judgements and where that jurisdiction is close to the people and goes through the full process of having hearings and taking the kinds of very difficult decisions Metropolitan Toronto has, I think it behooves us to understand that the other level of government -- in this case the province, regardless of what party it is. I think I can identify with that, as many others perhaps can't. I think one would like to distance oneself from the fallout which may come from the tough choice that has to be made.
I say it without impugning either the political process or the individuals, and in this case, impugning the Minister of Municipal Affairs.
Ms Poole: You're kinder than we are.
Mr Tonks: I just took it, madam and Mr Chairman, that this is a political decision now and it can always be excused for us to find the easiest way to pass that decision through. I say that without any malice whatsoever, as a practitioner of the art of the possible, I think; sometimes not a very good one.
The Chair: We must pass on then.
Mr Owens: In terms of some of the other questions that came across from the member for York Mills -- and since I can't ask him directly -- in terms of the figures that were presented, is it possible that the figures being quoted were not part of the plan that was agreed to on October 29 and that's why the confusion is there?
Mr Tonks: I'm really not following that, Mr Owens.
Mr Owens: In terms of some of the assumptions that went into the figures that would be included in whatever plan was agreed to, is it possible that the figures Mr Turnbull is quoting were in fact based not on the assumptions included in the October 29 plan but based on assumptions that were floated --
Mr Tonks: It may be possible. We were dealing with over a million assessments that had been worked through the provincial system since the 1984 data were provided for. The assessment officers appeared before the committee. They explained how those assessments were done. They explained how vicinity and districts were worked out, over 300 in Metropolitan Toronto. They explained how the averaging took place. They explained how many thousands were done according to actual affidavits of sale and how those were reflected in the market.
What we did, Mr Owens, was we had a computer model that was put together to massage those data and interpret them as a result of the province, the city of Scarborough and Metropolitan officials sitting down and actually constructing the model. The city of Toronto had a different model. They used different assumptions and they came out with different conclusions. It could be that in the reporting out, some mix and match was attached to interpretations of those figures. I think we've always been consistent in the data we have used and the conclusions we have come to.
Mr Owens: In my personal view, your first comments and your concluding comments in terms of the injustices that have taken place in the tax system over the past four decades, and I would argue over the previous two governments -- but we may be at variance on that -- and in terms of some of the things that are taking place in terms of the Fair Tax Commission and the education financing project, I don't think we can sit here and kid each other that this situation, whether it's the enabling legislation or the Metro plan, is going to take care of any of the inequities currently in place. In terms of the technical briefing and even the basis on which assessments are done between the person who has the pizza store at the corner of Yonge and Wellesley versus the person who has the pizza store in Sherway Gardens mall or Yorkdale, there's this bizarre --
Mr Tonks: Difference.
Mr Owens: -- difference in how the assessments are done.
Mr Tonks: Those are the kinds of inequities we're attempting to adjust. But Mr Owens, I certainly hope I haven't given the impression that this interim reassessment plan is the grand panacea for the problems we have with property assessment generally as the chief source of financing services. This is an attempt to at least work towards distributing that load, if you will, that burden, more equitably in Metropolitan Toronto.
In fact, even with the interim assessment in 1997, after it has matured somewhat, there will still be inequities. As a result of the caps, you will still have a pizza shop in the city of Toronto paying less because of the caps being applied than that corresponding property in North York or one of the suburbs. You could find that as a fairly true barometer of other assessed properties.
However, what it does do is say to the people out there, "Look, here's a level of government that's attempting to come to grips with the issue." It's my hope that property revolts, tax revolts and so on, at least will be allayed somewhat when they see a government at least working towards some concept and policy and fairness.
Mr Owens: I don't see any hands going up in back of you there.
Mr Tonks: Certainly, what you have seen is an agonizing process of a level of government attempting to come to grips with injustices that have existed for four decades. Nobody's going to be happy with the end result, and in particular people who have benefited by the inequities that have been created. But that's part of the political process, balancing out those who at least will feel some justness and justice is being striven for, as opposed to past experiences with governments that have said, "Well, let's not rock the boat on this one, because this one is" -- we know what's going to happen, we just have to deal with it; that's all.
The Chair: I'm afraid we've run out of time. I know there were a couple of other members who wanted to ask questions and I'll try to incorporate you into the next one, but if we are to keep to our schedule --
Mr Tonks: Mayor Trimmer is more than capable of dealing with those, believe me, and I know you'll have other members of council who'll also be appearing before the board.
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CITY OF SCARBOROUGH
The Chair: I now call upon the mayor of Scarborough, Mayor Trimmer. While Mayor Trimmer is coming forward, I'd just like to ask the indulgence of members of the committee -- Mr Stockwell, who is joining the committee -- if we could accord him the privilege of asking a question. His slip, by inadvertence, arrived late. I think it is a courtesy to allow him to ask questions, but we need the consent of the committee to do that. If as Chair I might direct that decision, I trust we would follow protocol and allow him --
Mr Mammoliti: Who's going to ask the question?
The Chair: Well, we'll find out. Thank you for that.
Mayor Trimmer, we welcome you to the committee and know that you also have been in these rooms before. You have half an hour for your presentation. If you would like to introduce the person with you as well, for Hansard, we'd appreciate it.
Mrs Joyce Trimmer: It's a pleasure to be given this opportunity to address a topic that is so dear to the hearts of so many people in the city of Scarborough, and in the event that your questions become just too technical for me to answer, I've brought the treasurer of the city of Scarborough, Mr David Creech, along.
Having listened to some of the exchange during the last presentation by Chairman Tonks, it becomes clear -- an issue that, of course, has been clear to many of us for a long time -- that this is an exceedingly complex issue, very complex. Unfortunately, over the period of time from the first review of the assessment in 1984 and then the new figures in 1988, plus the many permutations and variations of formulae, at least in the last short while at Metro, the figures that have been going out that have been in the newspapers have not only been exceedingly mixed, but some of them have been downright inaccurate, so it's exceedingly difficult. If people in your position and my position are unable to grasp the full intent of some of those variations, then certainly the general public are having great concerns in understanding, really, what this is going to mean to them.
However, some things are very clear indeed, and let me go through some of the points I have here. There is no question that Metro-wide reassessment is long overdue and, as you heard from the chairman, the last uniform reassessment in Metro was in 1953.
Since then, properties of similar values are assessed differently, and the result, of course, is that properties of comparable market value do not pay the same amount of Metro and school board taxes. There are many, many people who consider this is most unfair and who also recognize that the longer the delay in dealing with this, the greater the discrepancies grow.
Reassessment, as you heard again, is nothing new. Most major Canadian cities are on market value. Across Metro, 86% of the municipalities are assessed on updated market value and 15% of municipalities are reassessed under regional, country-wide section 63.
Scarborough council has been aware of the inequities for a very long time and as early as 1982 we improved implementation of local market value reassessment. Their concerns have been established for 20 years, but in fact they also go back into the early 1970s. Since then there has been no workable alternative offered up. There simply has not been another one, to my knowledge, and we have to see something done in the next little while.
The city of Scarborough has been actively promoting market value reassessment, and of course we and our staff have been working very closely with the treasurers right across Metropolitan Toronto to try to come up with a system that was reasonably equitable. That, of course, is very difficult when people have been paying more than their fair share for such a long time.
It's very important to note, by the way, that when the release of the assessment information Metro-wide was given to all taxpayers, they could go into their municipalities to look and find out for the first time on a large scale just exactly what they have been paying and what they would pay under market value assessment. But those figures did not indicate what they would pay under the formula, so of course there were a lot of very angry people, those who saw their taxes rising considerably and then, on the other hand, those who saw they had been paying far in excess of other areas for many years, up to 40 years.
There is a major problem with assessment appeals. It is the opinion generally, I think, and I certainly hope, that reassessment towards market value reassessment will reduce the number of assessment appeals and therefore the tax burden on the existing taxpayers who have to make up that difference.
We are concerned about the tax break for tenants of apartment buildings. There has been a commitment by Metro that that will be passed through to the tenants, but the method of doing that again has to be finally resolved.
The majority of Metro taxpayers will benefit from this proposal. Over 56% of all properties across Metro will benefit from a tax decrease; 56% of all the properties. There is a cushion provided for properties facing tax increase, and that again, I believe, is a very fair proposal, taking into account the current economic climate. All residential, commercial and industrial properties are protected from the full tax increase.
Overall, 77% of all Scarborough properties would receive a tax reduction and 84% of the Scarborough residential home owners receive a tax reduction. These taxpayers benefit the most, as they pay property taxes out of their after-tax income. Close to 70% of rental apartment buildings in Scarborough would receive a tax reduction, which would be passed on to the tenants.
The overall picture, then, of Scarborough under the proposal at present is that Scarborough taxpayers would pay $4 million less to Metro and the school boards, but in fact Scarborough taxpayers have been subsidizing other municipalities to the tune of $37 million annually. Although they have been subsidizing to the tune of $37 million they will under this proposal simply pay $4 million less than that.
The tax burden should be shifted, to some degree, from those taxpayers who have been overpaying their taxes to those who have been underpaying. It seems to me that that is only fair and reasonable.
In looking at some of the concerns about the impact of these increases, "The Metro plan, frankly, will not wreak destruction upon the business community." That is a quote from Stephens Lowden, vice-president of the Board of Trade of Metropolitan Toronto.
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The concerns that have been expressed from the city of Toronto seem to imply that since Scarborough businesses and residences have been paying more than they should for so long, they can in fact afford it. That is not true. There are as many hardship cases right across Metropolitan Toronto as there are anywhere else.
Fifty-two per cent of all commercial properties in Metro will pay less tax. Large buildings in the Toronto financial district will pay less tax. There was a lot of false information pumped out indicating that Toronto was going to collapse under the burden of these incredibly high increases. Well, the ones that were first identified as not being able to cope with that are in fact those large buildings that will pay less. Forty-nine per cent of the commercial properties in Toronto have tax reductions and no taxpayer will have to pay the full tax increase within those groups. The maximum tax increase is 25% of the 1992 taxes phased in over three years.
Again, discussing the issue of the businesses in Scarborough, we've had businesses going under and to some degree that is because of the very heavy load of taxes they have been paying for so long.
The real estate boom in 1988 does not result in high assessment and high taxes. The 1988 market value is the only relative measure of the value of the property. All properties are based on the same basis. All the values increased or decreased to some degree in 1988 -- they increased and decreased in the same manner -- and the share of the total assessment is the same as before. Obviously, there are going to be some variations as certain areas move up more quickly than others or others drop, but that would happen in any year, to some degree. If it is your belief -- or anyone's belief -- that 1988 is the wrong year, you can say that about any year at all, because for those people who are going to get an increase there is never a good year at any time, ever.
The cap removal on residential homes upon sale: I hope that cap is removed, because it means that over the years, the removal of the cap and the benefits from that upon point of sale will further go to alleviate the pain of those people who have been paying more than their fair share for many years. Under the proposal, there will just be two years in which those people will be able to receive reductions, and over those two years it will take them to 50% of that which is due to them. Without the point of sale, that 50% is going to stay set until the next review. With point of sale, it will allow a further implementation of the decreases to occur for those who would be due for that.
We have a few concerns, and I would like to run those by you.
The responsibility: In Bill 94, I believe you are suggesting that the responsibility for setting the mill rates perhaps should be with Metro and the school boards. Area municipalities are responsible for billing and collecting taxes and I believe they should be. It doesn't make sense to split it up; you have the concurrent growth of bureaucracies if you're going to do that. It makes sense, therefore, if the area municipalities are responsible for billing and collecting taxes, that they should also be responsible for setting the mill rates.
We have a concern with regard to the due dates for school board levies. I don't know if this has been part of your discussion. At the moment there is a 10-day provision for the municipalities to pay to Metro, and then Metro pays to the school boards. If the area municipalities are required to pay directly to the school boards without any 10-day provision, we could run into a precarious situation whereby we would have to pay the school boards, for example, on the first day or the second day and we would not have received all of the taxes due; in fact, we don't, even after 10 days, but if it were to be one or two, it would be even more precarious for us, and it would obligate us to have to go out and borrow money in order to pay that, and that of course compounds the situation. So I would ask you to review that and, if you are going to require us to pay the school boards directly, consider putting in a 10-day provision similar to that which is in force at Metro.
Tax appeals: That is not an area municipality's responsibility, and I'm not sure it's really appropriate that it should be done through the area municipalities.
The tenant pass-through mechanism: I think I've indicated that that still needs to be addressed.
The Metro market value assessment plan is a compromise, and compromises of course are never popular. You never please everybody with a compromise. I can tell you that there are a lot of very, very angry people in the city of Scarborough, who now have discovered for how long they have been paying excessively. Many of them are talking very loudly about tax revolt. I have no doubt there will be a major move towards that if something is not implemented. There may well be some tax revolt if this is implemented, but certainly it goes a long way to alleviate the pain of a lot of people. Now that the assessments are out for everyone to see, I am genuinely seriously concerned that the whole system will dissolve into chaos if some commitment is not made to move towards market value.
I think it's also essential to include an ongoing review, because when you consider the compounding interest of not going to the full market value, the compounding effect over the years is going to put the people who have been paying too much at an even greater disadvantage, because they will still be behind all the time, unless you factor in some means of moving on with the system and completing it and accomplishing it over a set period of time.
Finally, I will give you an example of some of the figures; our residents know them full well. Metro did some excellent analyses of a number of situations, but this is one that is dear to the heart of many Scarborough people: On a $300,000 assessed property in Scarborough, the taxes presently are $3,200. In Toronto they are $1,200. These are similar properties --
[Interruption]
The Chair: Order, please. I must ask people in the audience to refrain from comment during the presentation by any and all witnesses.
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Mrs Trimmer: The point I'm making, Mr Chairman, is that all the figures are there; they're there for anyone to peruse. That is taking into consideration the capping. Across Metro the average in differentiation on a $300,000 residence, the average difference across Metro from the city of Toronto, is $2,000. The rest of Metro is paying $2,000 more. In Scarborough, that difference is $3,000.
Scarborough's residents, of course, are very largely young families. They are families, many of them on one income, if they can manage to afford to maintain a home on one income these days.
You can compare houses in Scarborough on very small lots and you will find that they are paying, many of them, in excess of $5,000 per annum. I'm not sure how many houses we have in Scarborough that are paying less than $1,000, but I assure you there are a number in the city of Toronto who pay less than $1,000.
The inequities are very serious. They have existed for an incredibly long time. The cat is now out of the bag. Everybody now has access to those numbers and they wish to see some fairness introduced into the system.
During the Metro debate, I will tell you that I did not like the first proposal and I too, like others, compromised because I wanted to see something. I wanted to see some movement and I wanted to see something occurring. I would prefer to see complete market value in one fell swoop, but that's my personal opinion. Obviously, that's going to be exceedingly painful.
Ladies and gentlemen, I hope you have a number of people come down from the city of Scarborough. They do feel strongly about it, but I will tell you that they also felt exceedingly threatened and harassed and bullied and outshouted when they went to Metro council to express their concern. They will not, I think, easily agree or too willingly agree to come down if there is any indication that they will be threatened and intimidated to the same degree that they were previously. Thank you very much for your consideration.
The Chair: Thank you, Mayor Trimmer. I have a number of people who want to ask questions and a limited amount of time, so I'm going to have to be fairly strict in terms of how we go about this. We'll begin with Mr Owens with one question, please, so we can try to get everybody in who would like to ask a question.
Mr Owens: Before you start counting, in terms of the decorum and in terms of Mayor Trimmer's comments, I think that not only the people in Scarborough but any citizen in the province of Ontario should feel comfortable about coming down to Queen's Park and participating in a committee without fear of any kind of intimidation or harassment, if you would like to make that clear to the television audience as well as the other members who are here.
The Chair: Absolutely. I think Mayor Trimmer --
Mrs Trimmer: I'll be pleased to, and I hope the news media take that opportunity as well.
The Chair: Just to reiterate, this room and indeed this building belong to all the people in the province, who are entitled to come before any and all committees and express their views and expect those views to be listened to with respect. I think everybody on this committee and indeed all 130 elected members in this Legislature would want to make that a very firm commitment to you, to everyone in this room and to anyone who might be thinking of coming and speaking before this committee or any other, and we would want to make that very clear.
Mrs Trimmer: That is much appreciated, Mr Chairman. Thank you very much.
Mr Owens: My one question: In terms of your presentation, Mayor Trimmer, I thank you, and as a home owner in Scarborough who's actually on the end of receiving a decrease, I have some level of interest in these proceedings.
However, in terms of Scarborough council showing leadership and demonstrating an understanding of what's happening out there in the greater world, whether it's residential or commercial property taxes, are you thinking of not recommending a tax increase to Scarborough council at this point, as we work our way through this process?
Mrs Trimmer: That's a wonderful proposal and suggestion. We are indeed trying to accomplish that, but I can't make any commitment before we go through the process. However, I will tell you that Scarborough has managed to accomplish that in over two years. We had the lowest increase of any last year. The year before, it was a zero increase. But I can't help adding this little caveat: It's not the Scarborough increase I'm concerned about; it is the school board increase. As a member of Metro council, I have to say I'm very concerned about the Metro increase as well.
I don't need to tell you that 52% of our taxes go to the school board and we have no control over that, but we do take the flak for those increases. So we are doing the best we can and we're going to keep it down, we hope, below the level of inflation, which is pretty low.
The Chair: I'm going to give the list of who we're going to try to get in: Ms Poole, Mr Turnbull, Ms Swarbrick and Mr Wiseman. I'm cutting the list and those are the ones we'll work in. One question each, please.
Ms Poole: Mayor Trimmer, you said in your opening remarks that Scarborough taxpayers have been subsidizing other municipalities to the tune of $37 million per year and that you want municipalities to pay their fair share.
I guess it depends on a perspective of where you come from, because in the city of Toronto, we feel that we're Metro's cash cow. Of the $4.4 billion in taxes produced in all of Metro, $1.8 billion comes from the taxpayers of the city of Toronto: businesses, home owners and tenants. That means we have 29% of the population and yet we, Toronto, paid 42% of every tax dollar spent by Metro.
With education alone, the city of Toronto paid out $316 million more last year than we used for our own schools. So in fact the position of the city of Toronto is that the city of Toronto is subsidizing the suburbs. I wonder if you'd like to comment on those figures.
Mrs Trimmer: I most certainly would like to comment on those figures. Let me deal with the board of education, first of all. Let me remind you that it was the province of Ontario, many, many years ago, whose policy it was that the city of Toronto should contribute towards the education and the improvement in education of the other area municipalities.
I think that was an excellent goal because the city of Toronto had then and still does have most of the ability to generate tax income. They have most of the office buildings; they have most of the wealth; they have everything down there. Along with that, of course, has gone the best transit system and all kinds of other very nice things that the city of Toronto has enjoyed. But the question of education, frankly, is a red herring because the province dictated, and rightly so, that those who could afford it should contribute to evening the educational system across Metro, and that of course is what has happened.
Mr Turnbull: Mayor Trimmer, you talk about the impact on business and you seem to take quite a cavalier attitude to what's happening. There are going to be 41,000 businesses across Metro which are going to get increases of up to the maximum amount -- I'm not talking about an increase; I'm talking about the maximum allowed under this scheme -- 41,000 businesses, of which 6,500 are in Scarborough. How can you justify a system that merely says that because of the building they happened to be in in 1988, which was the all-time high water mark for property values, they happened to be in a building which had a very high market value at that time and has probably come tumbling down -- how can you say that they should be paying more taxes based upon that value?
Mrs Trimmer: That value is applied right across. It doesn't just apply to businesses; it applies to the homes as well. Unless you are to look at the complete numbers -- I don't know if you've had an opportunity to look at actual numbers. When you start dealing in percentages it sounds tremendous. You have to go further than that. You've got to go and look at the actual numbers and you've got to see what that percentage increase really translates into in dollars. In some instances, it may well be substantial, and in others it may be very, very minimal. But you're talking about --
Mr Turnbull: Excuse me. You must have misunderstood what I said. I'm saying that 41,000 people are getting the maximum, which is 25% in the case of commercial. So I'm not talking about the "other"; I'm talking about 41,000 businesses getting a maximum increase under this. So let's not start talking about maybe a small amount. We're talking about the people getting the maximum.
Mrs Trimmer: Twenty-five per cent. Again, 25% --
Mr Turnbull: No, it's not 25%.
Mrs Trimmer: You said getting the maximum, which is 25%.
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Mr Turnbull: In Scarborough you've got 28.9%; we've got in North York 28.1%, in Etobicoke 30.3%, in East York 40.3% and in the city of Toronto 41% getting the maximum increase. These are businesses.
Mrs Trimmer: Which is 25%. The maximum business increase is 25%; it's capped at 25%.
Mr Turnbull: Twenty-five per cent maximum, yes.
Mrs Trimmer: That's a lot of businesses, but it depends what that 25% represents in dollars. For example, let me give you the example of -- there were some that were quoted and they were set out in the newspaper, I believe. When those numbers were reviewed by Metro staff, they found that some of the increases were just a few hundred dollars. If you're paying tax on, for example -- this was one, it was less than $500, but let's be generous and say it was $500, so 25% of that isn't one heck of a lot. That's why I say --
Mr Turnbull: That must have been a newspaper stand.
Mrs Trimmer: This is why I'm saying that throwing around percentages is meaningless unless you can tie the actual dollar numbers to those. You know, 100% of $5 is $10, so big deal.
Mr Turnbull: That's absolutely correct, but there are very, very large increases to an awful lot of these people.
The Chair: Mr Turnbull, I'm sorry, we've got to move on because we have limited time and I still have Mr Wiseman and Ms Swarbrick.
Mr Wiseman: You're going to have to help me out on this a little bit and I'm going to play devil's advocate with this question, but help me if you can.
In downtown Toronto you have a house that sits on a 16.5-foot lot that's appraised at $300,000, and in Scarborough you have a house that sits on a 60-foot lot that's appraised at $300,000. It seems to me that it's going to cost you a lot more for transport in terms of transit costs to move those people around, that it's going to cost you more for sewer maintenance on a per-linear-foot frontage, that it's going to cost you more for schools as you sprawl out into the urban areas in order to build new schools and staff them, while other spaces in the older areas go empty.
Why shouldn't the residents of Scarborough pay more for that kind of an excess of lifestyle in terms of using up land, and why should people in downtown Toronto, who happen to live in a 16.5-foot or 20-foot-wide house subsidize the fact that other people can live on a 60-foot lot? You're going to have to explain that to me.
Mrs Trimmer: There seems to be an assumption that the people who live on those 60-foot lots are there totally by choice. But again, let me get back to the statement that I made earlier about the fact that these are young families with young children, which of course is why they moved out into the suburbs. They moved out and they needed the schools. That's why you had to have the contribution for the schools.
But quite frankly, and I'll use my own experience here, the only reason I moved out to the suburbs was because I could afford the house. I couldn't afford to live in the city of Toronto because I couldn't afford the whole financing package of having to pay so much down on a house. If you can put less down on a house in the suburbs with the financing that is available, it may well be too large a house, as it was in my case. I didn't want a house that size. It was all we could afford at the time. I didn't want to have to drive downtown. We have no transit to the extent that you have in the city. We have no subway and the services --
Mr Wiseman: With all due respect, you haven't answered my question. The reason you don't have a transit system that works in the suburbs is because there's a sprawl.
The Chair: Mr Wiseman, excuse me. Order, please.
Mrs Trimmer: The system you are referring to is one on which this whole provincial tax system is based. If you can come up with something better, do it, but we've been experiencing this one for 20 years. The province established it. If you can do something else that isn't going to require us to wait another 20 or 40 years, be my guest. Get on with it.
Ms Swarbrick: I would guess that my colleague here beside me will end up, as I will, supporting a compromise move for the short term. I am interested in pursuing a question, however, Mayor Trimmer, with regard to your view for the long term.
Is your sense that in terms of the long term there really is a need for a major overhaul of how we finance education, for instance; that rather than having that lion's share of property tax, funded through property tax, it should be looked at again in terms of whether it should be covered through the income tax system in a situation that would consider more people's ability to pay?
Mrs Trimmer: I couldn't agree more. The educational tax portion of it is a real killer, and I believe some serious consideration has to be given to a new system. I believe there are a number of improvements that could be made, many of them, and I'm sure there are lots of suggestions that can be made. But, as I indicated before, the frustration is that politicians like you and I do an awful lot of talking, and in the meantime there are a lot of people who are suffering and have been for many years, and it simply isn't fair. Something needs to be done in the short term, as long as there is a commitment -- and there must be a commitment -- to some end result over a certain period of time. Even with this plan, as far as residences are concerned, it's just two years and that's it, and that's not good enough.
Ms Swarbrick: In terms of the long term, you agree that we need to look further at that.
Mrs Trimmer: Absolutely.
Ms Swarbrick: I have one remaining question for you. In terms of the issue of the assessment rates on public lands, such as the utility lands, the rail rights of way and the hydro corridors, would you agree that these do need to have a cap put on them now and that we need to be looking at a separate assessment class for utility lands, rather than assessing rail lands and hydro lands as if they were being used for the commercial or residential or industrial purposes of the lands they may side along?
Mrs Trimmer: I would agree that it needs to be looked at, but in looking at it, it's like the scales of justice, if you will: it's got to balance. If you are going to remove any of the increases, wherever -- and I don't want to get into the cross-class business -- you are going to have to balance that off with lesser decreases. It is a balancing act that's exceedingly difficult. As you compromise and assist one, then you've got to stick it to somebody else, for want of a better term. That is a predicament that Metro has faced. After all the consideration it's been given, I think Metro has come up, after a painful process, with a very good proposal. I'd like more for my residents, obviously, as we all would, but the chances of getting it I think are slim. I'll take this and I'll run with it if I get the chance.
The Chair: Thank you very much, Mayor Trimmer, for coming before the committee tonight.
Mrs Trimmer: Thank you very much, Mr Chairman.
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ALAN WOOD
The Chair: I would now call Mr Alan Wood. Mr Wood, welcome to the committee; you have 15 minutes for your presentation.
Mr Alan Wood: Does that include leaving time for questions?
The Chair: Yes, it does.
Mr Wood: I'll try to make it in 10 minutes.
The Chair: We have passed out the submission. The clerk has given everyone a copy.
Mr Wood: Good. I'm going to read it, if that's all right.
Mr Chair, members of the Legislative Assembly, my name is Alan Wood. I'm 77. I was born in Toronto and I have lived here all my life. When I married, we bought our present house in 1951 at 29 Lowther Avenue in the Annex -- pictures attached -- two blocks above Bloor and half a block west of Avenue Road. Our deed says "formerly in the village of Yorkville." It was built with its two adjoining houses somewhere around 1860 -- the city has us down as 1850 -- by the first reeve of the village of Yorkville, who at the time lived next door on the west. That's in the little house in that picture.
Our lot is 23.79 feet wide. It joins a house on either side. To allow for a mutual drive that goes through the structure, the house is just under 20 feet wide in the front, 13 at the back. It is two-storey, three up and three down, frame with stucco on lath, one-and-a-half bathrooms, an unfinished three-quarter basement. Its floors slope, although all is now firmly supported. It has been well maintained, rewired, new plumbing, new shingles, some windows and doors etc. However, it is essentially what we bought: no gutting and rebuilding.
The assessor says it was worth $878,000 in 1988. Our tax increase would be $5,606. Our total tax, plus any mill-rate increases, would be $8,179. I consider this a flawed assessment.
We asked Wakefield Realty Corp, realtors, to value our house on a market value basis as of 1992 and 1988. Three knowledgeable realtors went over the whole house and grounds together on November 29, 1992. They said that if we were to sell now, we should put it on the market for $400,000 and could expect to receive a maximum of $375,000. Their estimate for 1988 was $500,000.
Today, November 30, 1992, a top salesman for Johnston and Daniel Ltd, realtor, went over our house and estimated -- see attached letter -- a 1992 asking price at $395,000, with an expected sale at $350,000 to $375,000. The 1988 estimate was $500,000.
Excuse me, sir; I'd better take my hearing aid out because I speak too quietly when I hear my own voice. Was I speaking loud enough?
Interjection: It's better now.
Mr Wood: I'll put it in for questions.
A similarly constructed house with roughly the same floor area, stucco on frame, but freestanding, at 9 Lowther Avenue, eight houses away, is valued for 1988 by the assessors at $879,000, $1,000 more than ours; 9 Lowther Avenue was sold in 1986 for $250,000 and sold again in the summer of 1992 for $370,000, a far cry from $879,000, even if the latter were reduced for today's values.
A further comparison is 45 Lowther, a two-storey semi-detached with full driveway, the same type of construction and size but with a very small basement. It is on the market for $399,000, but it is believed that a reduction in this asking price has been announced. The 1988 MVA assessment on 45 Lowther is, incredibly, $955,000. I have a picture of it here, but I haven't time, I suppose, to show it to you.
A similar-sized but three-storey brick house next door at 47 Lowther, pictures attached, is asking $389,000. I have not been inside this, but have seen the others. The 1988 MVA for 47 Lowther is $877,000.
Under full MVA, if implemented, we would be paying taxes on a great deal over what our 1988 value should be. I'm quite aware we'll be capped at 5%, but I'm aiming at the assessment. While full market value has not been implemented on residences yet, it is still considered the yardstick and is available for future use. It should be set aside as being flawed. If such a small sample is, apparently, so grossly overstated, even for 1988, the widespread intention to appeal the assessments may become a flood that will greatly congest the system.
Incidentally, I must apologize for the typing; I did it myself.
I feel that with the adjustments or caps, the existing assessment will serve for the present period, during which further research by the Fair Tax Commission and others will develop alternatives. It would remove the feeling, or certainty, of impending doom. The use of the MVA assessment should be only to sort out those who will now be taxed higher, at 5% and 5% additional on the present resident assessment or 10%, 10% and 5% commercial. The present approach to MVA on railway lands, hydro rights of way, parking lots and any other uses now not capped should be capped at similar lower percentages of their present taxes, ie, 5% or 10%.
A further consideration for people such as ourselves who live in small houses and do not drive cars -- I gave it up nine years ago because of age, deafness and the fact that we are so central to stores, transportation and services that we do not need one often; I might add, they're also money -- is exemplified by the fact that my top-notch butcher-grocer on Avenue Road near Davenport, who delivers free of charge for large orders, is speaking of leaving Toronto for the Caledon area if MVA impinges more heavily. Similarly, a good friend who supplies us with butter, eggs and cheese, also delivered free of charge, has a store on the Danforth that will be seriously affected, along with a great many in that area. If stores close, where do we shop? A nearby supermarket will also be seriously affected.
On November 26, 1992, Henry Hess, in a report in the Globe and Mail, wrote in part about the proposals coming from the property tax working group, appointed by the Honourable Floyd Laughren in 1991 under the umbrella of Ontario's Fair Tax Commission, as recommending as follows: "Shifting the full cost of social services such as welfare and more -- though not all -- of the cost of education from property taxes to other types of taxes that better reflect ability to pay."
Another of the working group's recommendations reported by Mr Hess is: "Studying alternatives to market value as a basis for assessment, followed by a province-wide reassessment based on a `fair and consistent method of valuation.'"
The city of Toronto is an example renowned in North America of a city to live in. Its downtown has large areas of homes that are kept up and improved, with nearby churches, good stores, libraries, hospitals, theatres and generally all services. Its centre does not die at night, its streets are clean and, in the words of that famous urbanologist, Jane Jacobs, it has "eyes on the street." It has well-used parks and ferries to the island, with even a nature study school at Hanlan's Point. Portland, Oregon, is almost the only North American city approaching it.
Our beloved city will be harmed, possibly irrevocably, if further steps are taken down the road of what Jane Jacobs calls a "nutty" market value assessment.
Finally, Colin Vaughan, who can encapsulate a difficult subject so ably, wrote on October 12, 1992, in the Globe and Mail: "If the shortcut to tax reform is taken, the result will not be pretty. Higher taxes will make the inner city a less attractive place to live and work. Families will move out. Stores will close. Businesses will relocate. The downtown tax base will shrink and the inner city will begin to decay."
The suburbs will feel the brunt of a dying heart in the central city. No one will benefit. Mrs Labatte said in Metro council, in response to a remark from a Metro councillor insisting on the need for haste, that "nevertheless, it should be done right." I agree.
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The Chair: Thank you very much for your presentation and for the attachments.
Ms Poole: Mr Wood, I'd really like to thank you for your excellent presentation today. I think you've encapsulated many of the arguments and points that people in the city are feeling about this.
First, you talked about the size of your house. We're not talking about a huge monster home in one of the affluent parts of Metro. It's a modest house, yet it was valued at $878,000. The other point you made that I think is very important is that a lot of people in Toronto bought their houses many, many years ago, decades ago.
Mr Wood: Might I add that I paid $14,780 for it.
Ms Poole: Absolutely, and that's the major problem. We have a large proportion of seniors in the city of Toronto who could afford to buy those houses at that time and pay the taxes based on the value of the house at that time, and now to consider what you would have to pay at $878,000 --
Mr Wood: It's $8,179, I think.
Ms Poole: I think you make the point so well. The final point that I think was very good was when you talked about the impact on businesses in your neighbourhood and really how it will destroy a neighbourhood.
I just wanted to thank you very much for your excellent presentation and what you brought to our committee today.
Mr Turnbull: Mr Wood, I too would like to thank you for an excellent presentation. During these committee hearings, I'm sure we're going to have a lot of people coming forward with technical papers; indeed, this morning we had them. But here you have studied very well the impact on your neighbourhood, and you've pointed out so correctly that the cost of servicing a small lot in the inner city is in fact a lot less than it is in a suburban location, and that is not reflected in market value. The fact is that in a hot real estate market, whether you like it or not, you're taken along, you're swept along with all of the other values around you, and even if somebody else has the ability to pay a very high amount for the house adjacent to you, the only choice you have is to sell your house and leave, which you don't want to do. Your ability to pay has not been enhanced, and I think you've said it very well.
There have been discussions about a unit assessment system, which would be a stable assessment system. Have you considered that and do you have any words for us on this issue?
Mr Wood: I'm not an expert in the field, but I have thought deeply about a variety of things. Certainly the Globe and Mail has come out with some very interesting suggestions, including Mr Arthur Eggleton's suggestions. I don't use, for instance, any more water -- well, of course, for water you pay for what you use; it doesn't much matter -- but I don't give out much garbage or anything else than a bigger or smaller house. The fact that I'm downtown is sort of a location penalty, you might say. The way the system is aimed to work is not to me logical. I think also that the assessment is -- well, I don't want to be too drastic, but it's rather irresponsibly done.
Mr Turnbull: Unfortunately, Mayor Trimmer has left. I'm sorry she isn't here for your presentation, because here you're able to explain the --
Interjection.
Mr Turnbull: I'm talking about Mayor Trimmer. Unfortunately, she isn't here to hear what you're saying. The value of your house, supposedly, in 1988 has absolutely no relationship to your ability to pay. Indeed, compared with houses in Scarborough, your house has a much higher value, yet when you bought it, there wasn't a big discrepancy between the cost of your home and something out in Scarborough, if someone had moved out to Scarborough in those days.
The Chair: Excuse me, Mr Turnbull; I'm sorry. I must turn to Ms Swarbrick for a final question. I'm afraid we're running out of time.
Ms Swarbrick: Mr Wood, I also want to say a very big thank you to you for coming before the committee. I think you've done an excellent job of showing why the Metro level of government had to come to some kind of compromise on this issue. I think you've also done a good job of showing why this government is not going to allow an automatic move to market value assessment for 1998; rather, why it's very important that we sit down and work with Metro to try to arrive at a fair system of taxation for 1998. So thank you very much.
Mr Wood: Thank you. If you could stop them putting the tax on sales --
Ms Swarbrick: On the resale homes? In fact, that's why we're trying to put that special attention on recommending that it go back to Metro for it to reconsider. Certainly I myself, in speaking in the House earlier -- and I would urge everybody to encourage Metro to put those same caps on resale houses.
Mr Wood: It will make two different kinds of citizen in Toronto: the ones possibly paying much too much -- I don't know what the other people's assessments are, whether they're as wrong as ours are, but I feel that every $5,000 you tack on to a tax based on assessment can be said to reduce the sale value of the house by 20 times; $5,000 additional on my house would technically reduce what I might have got by $100,000. It sounds silly, but that's what my experts tell me. I'm not going to sell; I'm going to go out feet first, so it doesn't bother me too much, but if we could make it so that the underlying horror of market value assessment is put on the sidelines and is not the law of the land, that it can be turned on like a tap, it would be much fairer and Metro would go on just as well.
I feel that the Metro assessment now is really only of use to sort out the sheep from the goats, the ones who are going to get a slight increase and the ones who are going to get a slight decrease. But if you have it latched on to people who are buying their houses -- I'm not thinking necessarily of the people selling, but the people buying are going to be charged the full thing. In other words, you can say that the Metro MVA is a sleeping giant that will wake up and nip every 10th person.
The Chair: Mr Wood, I want to thank you on behalf of the committee for coming here this evening. I'm sorry we've run out of time.
While we wait for the next presenter to come forward, I just say that in the next 20 minutes or so we expect a bell to start ringing; I put members on notice that we may have to go to the House for a vote. But whoever is speaking before the committee, we will continue with the full program tonight; you'll just have to allow us the five minutes or whatever it is to vote.
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TINA SCHICKEDANZ
The Chair: We have Ms Tina Schickedanz. Welcome to the committee; you have 15 minutes for your presentation.
Miss Tina Schickedanz: My name is Tina Schickedanz; I'm a landlord in North York. I've come here this evening to explain the impact that Metro Toronto's reassessment plan will have on tenants and landlords.
As I trust you are all aware, Metropolitan Toronto's proposed reassessment is not a market value assessment but assessment based on market value. This means the proposed assessment for a single family home, duplex, condo and co-op would be calculated at 2.2% of their 1988 market value. The assessments on small apartment buildings, three to six units, would be calculated at 2.7% of their market value. Commercial properties, that's office buildings, street shops and shopping malls, would be assessed at 4.3% of their market value, and industrial property at 6% of its market value.
We then have apartment complexes with seven or more units. Under this proposed reassessment scheme, they will be assessed at 8% of their market value. That's 33% higher than industrial property, 86% higher than commercial property and that's 263% higher than single family homes, and that's not fair.
We had hoped that market value assessment would mean an end to the inequities that had developed as a result of Metro's outdated assessment base, but instead of equalizing residential assessments, this system makes Metro's tenants second-class citizens by creating a separate class of assessment to guarantee that tenants continue to pay three and a half times their fair share of taxes. How can any government condone three classes of residential property taxpayers?
Metro's proposed reassessment scheme has only one class of industrial property. There's only one class of commercial property; there is no distinction between an office tower and a coffee shop. In the commercial and industrial assessment classes, there is no distinction between those who own their premises and those who rent them. Why is it okay to make these class distinctions when it comes to residential property taxpayers? Is it because someone still believes that tenants don't pay taxes? We all know they do. Property taxes are the largest single component of a tenant's rent. Almost 25 cents out of every rent dollar go towards paying property taxes.
If you take a typical Metro apartment with monthly rent of $700, currently about $165 of that rent goes towards paying property taxes. The Metro proposal will perpetuate this disproportionate tax burden. However, if the province were to allow only one residential class of property, where all residents were assessed at the same level of market value regardless of whether they owned or rented their homes, this inequity would vanish. The property taxes on that typical apartment would drop to approximately $60 per month and, as you all know, by virtue of the Rent Control Act this property tax reduction of $105 a month would flow through directly to the rent, reducing it from $700 to $595 a month.
Metro council did not pass its MVA motion in isolation. At the same time, council unanimously approved a resolution that "the provincial government be requested to redress the current assessment that perpetuates inequities between home owners and tenants." This has not been done.
If this committee and this government are truly concerned about the affordability of rental housing and are truly opposed to regressive taxation which places a disproportionate burden on lower-income taxpayers, it is inconceivable that you could support this enabling legislation for Metro's reassessment scheme without a companion bill that would eliminate the arbitrary and inequitable distinctions between different residential taxpayers.
The Chair: Thank you very much. Questions? Mr Mammoliti.
Mr Mammoliti: I'm first, am I? Let me just get something straight first. You're here on behalf of, I guess, the landlords and the tenants?
Miss Schickedanz: I'm here on behalf of myself. However, this is an inequity which impacts on me as a landlord and every tenant I know of.
Mr Mammoliti: Yes, I'm going to agree with you. I think that in terms of the tax the tenants pay at this particular time, I'd like to just agree on the fact that they're paying a little bit too much. They're paying at this point, I believe, three times more than a home owner for every square foot, if I'm not mistaken, on the square footage.
Miss Schickedanz: Based on their value, they are paying three and a half times more than home owners.
Mr Mammoliti: Right. Let me assure you that this government is certainly looking into the change that's required so that the tenants will be properly addressed.
Let me just touch on one area in terms of rent control as well. Do you think that tenants will suffer immensely, even though rent control is in place, with this proposed market value assessment in front of us?
Miss Schickedanz: Tenants will continue to pay three and a half times their fair share of taxes. I would suggest that is grievous suffering to them, yes.
Mr Mammoliti: There's a 3% limit for landlords to increase rent to tenants with the rent control policy.
Miss Schickedanz: Regardless of whether rents are increased or decreased, tenants are paying three and one half times more than single-family homes.
Mr Mammoliti: Right, and what I'm saying to you is that this government is hoping to change that. In terms of the immediate --
The Chair: Mr Mammoliti, I'm sorry, in terms of time, I have several others so --
Mr Mammoliti: In terms of the immediate concern, how is MVA going to hurt those tenants?
Miss Schickedanz: Those tenants are paying three and one half times the amount of single-family homes.
The Chair: I think we've got the answer to that question. I'll turn now to Ms Poole.
Ms Poole: Thank you very much for your presentation today. It was really excellent in that it highlights the inequity that tenants are paying right now, as you've mentioned on at least four occasions, three and a half times what home owners are paying.
The city of Toronto has estimated that under this MVA plan that 117,000 tenants would be subject to rent increases. They also estimated that if the taxes were equalized, as you have suggested in your brief, only 1,200 units would have tax increases due to market value. That means 99% of the tax increases for tenants due to market value would disappear if indeed the taxes were equalized, but we've had no indication from this government that it is going to do this. It says, "Well, the Fair Tax Commission...," but it's not even waiting for the Fair Tax Commission report.
In your opinion, do you believe that most tenants are aware that 25% to 30% of their rents go to taxes, or do you think this is a basic problem, that tenants haven't risen up because it hasn't been publicized enough?
Miss Schickedanz: I agree with you. Tenants do not for the most part understand what component of their rent goes towards taxes. As a matter of fact, I have spoken to tenants about the issue and have been told, "We don't pay property taxes; we pay rent."
Ms Poole: And I think that's --
The Chair: Sorry, Ms Poole. I'm afraid we are quite a bit over our time. We're going to have to move on.
Thank you very much for coming before the committee.
Mr Turnbull: I don't get a chance?
The Chair: I'm awfully sorry. We're running behind.
Mr Turnbull: In future could you please divide the time before you --
The Chair: I'm trying to do that, but I need the cooperation of all members.
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ST ANDREW'S RATEPAYERS ASSOCIATION
The Chair: I would now like to call the St Andrew's Ratepayers Association, and I would just want to say to the members of the association that we're informed we may be called to the House, I suspect, somewhere in the middle of your presentation. That has nothing to do with the quality of your presentation. We will return and you'll have the full time.
I wonder if I might ask, just for the purposes of Hansard, if whoever is chairing the group would mind introducing everyone. Could you leave for Hansard everyone's name, and if there is a title in the association, that would be appreciated.
Mr Patrick Sue: Thank you, Mr Chairman and members of the committee. My name is Patrick Sue and I'm the president of the St Andrew's Ratepayers Association. With me are Jim Essex, treasurer, Annmarie Charness, vice-president, and Mr Van Zybala, a member of the association.
The St Andrew's association represents 1,400 homes in the North York area, and the presentation tonight is going to be given by Mr Essex.
Mr Jim Essex: Thank you for giving us the opportunity to speak tonight. Last week in the debate in the House on this issue, Mr Cooke, the Minister of Municipal Affairs, prefaced his remarks with a comment that "It's fair to say that the current tax system in Metro Toronto is unfair" and that "We need to work with the regional government to develop a fairer tax plan for this community." At no time was it defined as to what "fair" meant, nor was it outlined how "we" proposed to work with the regional government. Rather, it seems that the government is prepared to accept what Metro Toronto is suggesting as a short-term solution, and we in St Andrew's are fearful that once the present proposal is in place, it will carry on unchanged until full market assessment is in place.
We would suggest to the committee that a full and complete study of the issue should be conducted now, before the ball has been set in motion. Any review should start with a definition of what is fair.
We're of the view that the present is unfair in that two homes of equal size in the same community can pay dramatically different property taxes. What is fair is that two homes that are, say, both 1,800 square feet in size on a lot that's, say, 40 feet by 100 feet, whether it's in Scarborough, Toronto or North York, should pay the same amount of property taxes. Our principle behind this is that property taxes are meant to be a usage tax and that the municipality provides a bundle of services, whether it's education, roads, sewage, whatever, and that each property of similar size should be paying the same price because it's using the same amount of services.
By looking at the system of assessment based on property values, the legislators appear to be trying to satisfy residents in outlying areas, who have been squawking for years about paying too much in the form of taxes. We think the other is the case, that, rather, the city of Toronto has been subsidizing the outlying areas for years and years. This is being done in a number of ways, but one of which is to pay for the infrastructure of the city while the suburbs are being developed.
The present proposal seems to be giving the outlying residents a small reward, phasing in the increase for those residents who will be suffering increases and dumping the largest burden on small businesses, the backbone of the Canadian economy. We read this every day in the newspapers: Small businesses are what makes Canada strong.
We are particularly concerned about the effect on those businesses. In St Andrew's, we are at the top of Hogg's Hollow, which is right at the edge of Toronto, and every day you drive down Yonge Street you see in front of every small store and building "No Market Value Assessment." Many of those small businesses close to us will be forced out of business because of market value assessment.
While we don't in our area have a large number of such small businesses, we do see these small businesses close, near at hand, and many of us are familiar with what's happened to cities like Detroit and New York when their small businesses in town have been forced out of business and the downtown area has become a ghost town.
A further contribution to the demise of the downtown is the possibility that cultural institutions would be taxed at the full market value amount. This would force many of these groups out of business, or at least force prices for cultural events beyond the realm of the ordinary citizen who wants to go to see a production of some kind. The net effect would again be to decrease the livability of Toronto's downtown.
A third concern for us is the effect on seniors facing large increases in property taxes, both from market value assessment and from an anticipated large hit from municipal school taxes. The average increases in our neighbourhood from market value assessment, if fully implemented in 1993, would amount to approximately 20% on the existing 1992 taxes on older homes. Even with the proposed cap of 10% on 1992 rates, when you couple that with the proposed increase in school taxes in North York of 6% to 8%, these older residents, and in fact all people in older homes, would be looking at increases of approximately 16% at a time when inflation is running at only 2%.
At the same time, many of those older residents are looking at decreases in their incomes, based on the fact that interest rates have come down. These people are on fixed incomes, and they might be forced out of their homes because of property taxes and the lower income. We don't think this is fair, because there's a large number of people in our community who are older citizens. They've lived in these homes for 35 years or more, and we don't think it's fair that they should be forced out of their homes because of taxes.
The fourth concern which is related to that is the move to put full market value assessment on sales of existing properties. Under this scheme, those same seniors who would suffer because of the taxes, who might have to sell their homes, would now get a lower price for their properties because of the higher taxes on the properties. So they get a double whammy because of market value assessment. In addition, the people who might buy those houses would suffer a distortion because they would move in and have to pay full market value assessment, and their neighbour next door is still under an older system and paying less tax. So that new individual in the neighbourhood suffers disproportionately.
We understand Mr Cooke stated that the government is opposed to this measure and would not allow it to pass. In reply, we understand that Mr Tonks, chairman of Metropolitan Toronto, has merely said that the Metro government would pass a bylaw to make it happen.
We have heard several members of the government suggest that market value assessment is a municipal issue and that you should just wash your hands of the whole matter. While this may be a politically correct stance to take, it is not fair to the residents of Toronto. Since Metro council is composed of several diverse boroughs or cities, the members of council vote and are expected to vote in a manner which best serves their constituents, as opposed to what is best for Toronto as a whole. Thus, if a representative wishes to be seen to be doing something which benefits the residents of his constituency, such as lowering taxes, then that is the policy which he will support, despite what might be best for the city of Toronto. It is therefore up to the provincial government to fill the gap created by individual municipal interests and examine policies which affect all of Metro Toronto.
In the Globe and Mail this morning there was an article written by a gentleman who lives in Schomberg, and he was complaining about the fact that so many people move from Toronto to Schomberg to get a better quality of life. But in actual fact he points out that there are many small communities within Metro Toronto where the quality of life is just as nice as it is in some small villages in the outlying areas.
We'd like to see Toronto stay that way. Toronto, as the previous gentleman said, is one of the nicest cities to live in in all of North America. I myself have lived in Metro Toronto for more years than I'd like to say, my whole life, and I like it the way it is. I don't like to see it change. I don't like to see Toronto become another Detroit.
Thank you very much. I understand Mr Zybala would like to speak.
Mr Van Zybala: Yes. I represent a senior retired professional person who is living in the St Andrew's area in a small bungalow, 1,500 square feet, built 43 years ago. I hope that this home will be my home for the rest of my life.
I had a rude awakening when I found out what my property assessment is. It has been assessed at over $500,000, and my taxes will go accordingly. It will almost double. How could I possibly be in a position to pay for the increased taxes, living on pension? I am faced with a dilemma. What do I do? Do I sell the house? At what price? I would have to sell not at $500,000 -- it's impossible. I would be glad to receive that amount of money from the government. I would sell to the government for $300,000, but there are no offers of such sort.
Secondly, if I would sell, I can only sell it for a very small portion of what I probably would sell for if I had the time to wait. So that's my position, and this represents what Jim mentioned in his submissions.
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The Chair: Thank you for your presentation. We'll turn first to Mr Turnbull.
Mr Turnbull: Thank you very much for your presentation. Obviously I know a lot about your area, since you're within my riding. I would like to just draw out from you the fact of what has been happening in your area. A lot of older houses have been knocked down to build monster homes. In fact, that had the effect of driving up artificially high the value of lots in your area, only to see it crashing down again. Would it be a fair assessment to say that values rose faster than in other areas of Metro and have crashed down substantially since 1988?
Mr Essex: I can give you one example. The way our neighbourhood was built up was that a number of builders built houses but not all in a row. One builder would get six lots in a number of different locations. There was a house exactly the same as mine a couple of blocks away that in 1988 was listed for $1.08 million. I know for a fact that if I were to sell my house today I would not get $500,000 for it. That gives you a sample of where the prices went. In fact, eight years ago I bought my house for $230,000. It went zooming way up and has come back down at least 50 per cent from 1988.
Mr Turnbull: I would say it would be a reasonable statement to make that the ability of the people in our neighbourhood did not rise in lock step with the 1988 values.
Mr Essex: I believe that's correct, especially in the case of older residents such as Mr Zybala.
Mr Zybala: If I could add to it, there are several houses in my street. There are two houses right opposite and they are backing on Highway 401. The sizes are 3,500 square feet to 4,500 square feet. The asking price when the houses were built was about $750,000. Two years ago they had to sell it at $450,000. Here you have houses which are 4,500 square feet. My house is 1,500 square feet and is assessed at the value of $500,000, which is ridiculous.
Mr Turnbull: This indeed is the problem. What I hope you can bring out for the members, particularly the people on the other side, is the fact that the people in areas like ours are not just a bunch of fat cats whom you can continue to suck more and more taxes out of. I would like you to give them a message as to the kind of level of taxation that you're paying now. For example, maybe Mr Sue could give us an indication of the kind of taxation that he's paying on his house.
Mr Sue: My house is 2,000 square feet, which I think would be modest by Scarborough standards. Yet I'm paying close to $5,000 in taxes a year and I'm being asked to pay $900 more under market value assessment. When I bought my house it was under $200,000 and I made a personal sacrifice to purchase this house so I could live closer to downtown, where I work. Now, I never expected that all these property values would go up drastically because of these monster homes. I'm being faced with having to pay taxes that I think are frankly unfair. I'm one of those young people Mrs Trimmer mentioned whose family is living on one income. There are people outside of Scarborough in that situation as well. I'm one of them.
The Chair: Ms Swarbrick. I might add, just so people don't get excited, that there is no vote.
Ms Swarbrick: Oh, there isn't?
The Chair: No, we can all relax. If there is to be a vote, I will be informed.
Ms Swarbrick: Are you sure those bells don't mean a vote?
The Chair: I think the bells have stopped and we're back to business. Pardon us, it's just that this is a time of votes and so on, so we have to run upstairs, but we don't have to now.
Ms Swarbrick: Just before getting to my question, I'd like to clarify that I don't think it is fair to say that the provincial government is washing our hands of the entire matter. I think it is more that we should be saying that we believe that for the short term there is a reasonable compromise that has been worked out that won't mean going to automatic full market value assessment for taxes, because in fact we don't agree with going to full market value assessment.
For that reason, between now and the next assessment period of 1998 we will be very clearly sitting down to examine with Metro what the social and economic impact of the property tax system is or would be and looking at ideas like whether we should be removing the education component from property taxes and putting it instead into income tax where it would be based more on an ability to pay. I think there are all those things that we hope you'll join us in in terms of looking at what the system should be come 1998. Of course, we want to do that for a number of the very good reasons you have presented to us today as being some of the areas of concern.
In terms of your concern, which I share, with regard to cultural facilities, I just wanted to ask, are you aware that most cultural facilities will not have any impact from what you've said? They are tax-exempt. For instance, any cultural facilities that are operated by municipal bodies of any type, such as the O'Keefe Centre, the Metropolitan Toronto Zoo, Roy Thomson Hall etc, are tax-exempt and therefore will not suffer increases. The same is the case with the provincially owned properties like the Art Gallery of Ontario, the Royal Ontario Museum, the Ontario Science Centre and also with the ethnocultural facilities of any type. I just wanted to make sure of that. Are you aware that all those types of cultural bodies, other than the clearly privately owned, profit-making cultural facilities, are tax-exempt and will be protected?
Mr Sue: I understand that the Jewish Home for the Aged is in that category of "other" and would be subject to full market value.
Ms Swarbrick: But then they're not municipally or provincially operated and run or non-profit.
Mr Sue: But not everything is run by the government.
Mr Turnbull: Not yet.
Ms Swarbrick: No, I'm not saying that there are no areas of concern. I just want to find out if you are aware of how many are exempt. The others of course would be protected by the same kind of caps that were worked out within the compromise.
Mr Sue: Another aspect of the proposal is that your government says that you are not in favour of having the caps removed on point of sale, yet tonight I heard Chairman Tonks saying very clearly that's what he intends to do. Is your government going to introduce legislation to disallow them from removing the caps at point of sale?
Ms Swarbrick: No, I think it's the opposite from what I understand you are saying. What we have done is that in the enabling legislation we're requiring Metro to pass a bylaw if it won't keep the same caps on resale properties. We are saying that we don't agree with what they're looking at doing in terms of resale homes and we want them to rethink it. The same is the case with regard to the publicly owned lands like the railway lands, the hydro corridors and others like that. We want them to rethink it. We're saying that if they want to allow those properties to go to full MVA, they have to pass a special bylaw after this enabling legislation, because we want them to give it sober second thought and change that.
Mr Sue: Are you saying --
The Chair: I'm sorry; we have to move on. There are two more people who want to ask questions: Mr Grandmaître and Mr Mammoliti.
Mr Grandmaître: I can guarantee you that if the government were serious it would introduce legislation to prevent Metro from doing what it's doing now. They're asking Metro to revisit the issue. They may pass a bylaw. But they voted against it three times, so I don't imagine Metro will change its mind. They won't pass a special bylaw.
Every one of you has enumerated a number of flaws in the system. Why do you think the government is determined to go through with this scheme?
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Mr Essex: If I may answer, the Toronto Star, a number of weeks ago, published a comparison of which members are experiencing decreases in their property taxes and how they voted and naturally enough -- I am showing a prejudice here, but I shouldn't -- virtually everyone who is voting for market value assessment is getting a decrease in his personal taxes.
Ms Swarbrick: You should know that mine are going up 25% if we go to MVA.
Mr Essex: I was generalizing; I'm sorry. But really what they are doing is they are voting for their constituencies, because if their constituents are all going to get a decrease then they are doing the right political thing to vote for their constituents who are going to get a modest decrease, as opposed to looking at the benefit for all of Metro Toronto.
Mr Grandmaître: So you think they have a conflict of interest, really?
Mr Essex: Yes. I don't think it's personal necessarily, but rather it's politically expedient.
Mr Grandmaître: Do you think that the government should wait until the property tax commission and also the education tax commission are through with their studies before implementing any scheme or any reassessment program?
Mr Essex: I believe they should, and I believe that it should be the responsibility of the provincial government to step into this matter because then they wouldn't have a vested interest in this particular case.
Mr Grandmaître: Thank you.
The Chair: Mr Mammoliti.
Mr Mammoliti: Mr Chair, it's ironic that a Liberal would tell these people or hint that the government has an ulterior motive in this particular case, especially when the Liberals initiated all of this and were about to implement this prior to the election.
Ms Poole: Learn your history, George.
Mr Mammoliti: You learn your history, and read some of the letters that your minister wrote as well.
The Chair: Order. Mr Mammoliti, you have the floor.
Mr Mammoliti: Mr Chair, I would like to ask the group --
Mr Grandmaître: Who introduced the bill, George?
Mr Mammoliti: Remo Mancini introduced a letter --
Mr Grandmaître: No, who introduced the bill, George? Whose bill is it?
The Chair: Order, please.
Mr Mammoliti: I'm very sympathetic, especially to you, sir, who are paying $5,000 for a 2,000-square-foot home. I think that's ridiculous. I've got to tell you that I think it is very unfair if that is the case.
In my community, it is very similar. Most of our ratepayers, most of our home owners, will experience a decrease in our community, to the degree of $2,000 in some areas, $1,500, even with the amended package.
Of course, I am going to represent my community. That is what I was elected to do. At the same time, I am learning a little bit more about what's happened in terms of the history and in terms of how the people feel who come out here.
But what are we supposed to tell the people who have been waiting for this decrease for years as well? What are we supposed to tell them if we decide to just scrap it and change it completely? They've been waiting on the decrease for years. What are we supposed to say -- "You have to wait another 10, 15 years before you experience the decrease"? We'll have them in front of us telling us the same thing.
So I guess the question is, what would you tell them if you were in our shoes and if you wanted to change it?
Mr Essex: When I bought my house, I think I was in a similar situation as most other people: I looked at the price of the house, the cost of the property taxes, what the mortgage payments were going to be, and then I decided what I could afford and I moved in on that basis.
Now, the same thing was the case for someone who moved into a house in Scarborough. They looked at exactly the same factors and they moved in on that basis.
So why do the rules have to be changed now? I'm sure that the people didn't move in expecting that they were going to get a $2,000 decrease somewhere down the road; they moved in based on what they could afford that day. Now you are asking the people who have been there for a long time to take a large increase.
Mr Mammoliti: So your response would be, continue paying the $6,000 or $7,000 taxes that you are currently paying, even though it is unfair.
Mr Essex: My response would be, you knew what the facts were when you moved in; live with it.
Mr Mammoliti: Well, I disagree.
The Chair: Thank you very much for your presentation. I regret that time has run out, but we appreciate your taking the time to come down before the committee.
Mr Essex: Thank you very much.
BLOOR BATHURST-MADISON BUSINESS ASSOCIATION
The Chair: I now call on the Bloor Bathurst-Madison Business Association, if you would be good enough to come forward. If you would be good enough to introduce the members of your group for Hansard. We're passing out a copy of your presentation to the members of the committee, so please go ahead.
Mr David Vallance: I'll start by thanking the committee for giving us the opportunity to speak. About a year ago, when I started to organize the people on Bloor Street where I live, I was concerned about the situation with regard to the closing of businesses and the general economic climate. I didn't like the derelict buildings and the vandalism and panhandlers that were pestering the people on the street, particularly the women. Since then, there's been some improvement. However, I would have to say that the devastation at that time is really nothing compared to what's going to happen to this city and this area if this market value is allowed to proceed in any form.
I'd like to introduce Stella Kokoros, chairman of the organization, and Kathy Goodman, who is a member of the executive committee, both of whom own businesses on the street and both of whom will be affected rather dramatically by the overall impact of market value.
The Chair: Could I ask you to introduce yourself?
Mr Vallance: Sorry. I'm David Vallance. I'm a resident. I have a business from my home. I don't operate from the street; however, I've developed a lot of contacts on the street and I've been working on this with them.
I'd like to talk about the flaws in the assessment, first of all. Fair market value is generally defined as the highest price available on an open and unrestricted market between a willing buyer and a willing seller dealing at arm's length, both of whom are fully informed as to the qualities of the property concerned and neither of whom is under any compulsion or haste to transact business. By market value, that compulsion and haste changes dramatically. However, even with that definition, the value of a piece of property or a business is highly subjective, and no true value can be set until a sale actually takes place.
At the public hearings that Metro council held, even allowing for the subjectivity of making a valuation, it was shown that there are many gross anomalies which indicate that this definition was not used in the market value assessment -- MVA, as I'll refer to it from here on -- that was submitted for approval by the assessors.
Four of these anomalies appear in just a two-block area of the six blocks of the association. A single-storey Dominion store and two small three-storey buildings are on a combined lot of approximately 37,000 square feet. I refer to the Dominion lot. Directly across the street is a lot of about 34,000 square feet, which is 92 per cent of the Dominion lot. The 34,000 square foot lot has a 19-storey apartment building containing three floors of commercial, retail and professional offices. The Dominion lot and the two smaller buildings combined are assessed for the same amount as the 19-storey building. This means, in essence, that the assessors have given no value to the 16 storeys of apartments above the retail complex, or they have assumed that the Dominion lot would be replaced immediately with a 19-storey building.
A business in a six-storey office complex is going to have its taxes reduced to a total of $7,000. In the next block, two businesses, which together occupy the same space in total as the first business, would have their total taxes increased to $28,000. That doesn't seem to make any sense.
A one-storey corner grocery store already pays in property and business taxes the equivalent of the first six-and-a-third houses on the street behind it. Its lot is equal to about one-and-two-thirds of the house lots, and its taxes would triple.
The owners of another store in the area have a similar business in Scarborough. At present, the taxes on both stores are directly proportionate to each other relative to their area. With MVA, that ratio would change so that the store in Toronto would pay more than twice as much per square foot as the one in Scarborough, even though the one in Scarborough does proportionately 20 per cent more in business. Mr Tonks calls that apples for apples.
The building containing the store in Toronto has two apartments that would have their taxes increased by $200 per month per apartment. The store in Scarborough, need I say, is in a one-storey plaza. The assessors seem to be setting housing policy for the city of Toronto.
These examples do not appear fair, because they do not represent market value even in 1988. The result is that people are confused and angry because there appears to be no standard method to the assessment calculations. We suspect that the assessment has been based on the assumption that business in this area is so profitable that it really doesn't matter how high the tax is; but we don't really know, because the assessment office will not publicly talk about how the figures for the assessments were calculated.
Now, I understand from talking to somebody tonight that they're going to hold public hearings after the fact, as this hearing is tonight.
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It happens to be one of the safest and one of the nicest areas in the city and attracts a lot of tourists and visitors from all over the city, but many owners say that most of their business comes from neighbourhood residents. Many of the owners of the businesses live in the area or close to it. They're located here because this is the area they knew and where they wanted to do business, not necessarily because it was the most profitable place to be.
I'll paraphrase the next paragraph, in view of time. These people are going to see their businesses devalued. Many of them are new Canadians or first-generation Canadians who've opened their business. It's going to destroy a large part of what they've worked for and their pensions.
Downtown businesses cannot pass on the cost of the increased taxes even in good times, because the cross-border shopping syndrome becomes cross-city shopping as businesses with significant tax advantages offer lower prices at the edge of the city. Many types of retail businesses, the kind that make the city a decent place to live, will disappear from the downtown because the cost of doing business will be too high. I'm thinking of tailors and barbers and hairdressers and that type of thing.
There's another side-effect, and this is something I haven't seen any comment on. I was at a meeting not long ago where there was a discussion about the wealth tax the province has been looking into. This is where the thing cropped up, as far as I'm concerned. The side-effect is that the tax on capital gains is becoming a factor in senior government revenues. The transfer of values from business assets to personal and home assets means a loss of tax revenue to senior levels of government, because you're not taxed on your home when you sell it. Is a major tax change of this type a proper function for a municipality?
Professor David Nowlan, who happens to live in our area and whom I've known for a few years, of the department of economics, University of Toronto, states, and I think this is terribly important:
"As the burden of local government becomes heavier, especially in metropolitan areas, and as the role of this level of government becomes more complex" -- and it sure is -- "we need to think more creatively about the use of local taxation as an instrument of local policy.... However, outside the technical literature on local public finance, interest in local taxation is focused not on these policy effects but rather on issues of administration and distributive fairness."
That's what we've been talking about here tonight and what was discussed at Metro Hall last month.
"These issues are important, of course, but their importance should not cause us to ignore the potential that exists to use taxation as an instrument to link the costs of public services with their benefits or to correct distortions in the market price of urban resources or amenities; nor should it cloud an awareness of undesirable resource use and land development effects that may unwittingly result from existing tax practices. To emphasize redistributive effects rather than allocative or incentive effects is to adopt a perspective more suited to a national tax structure than a structure of local taxes."
When I showed this paper to somebody outside, they said, "That's heavy going." Well, it is heavy going, but this is a very difficult and heavy subject. What this is suggesting is that property tax should be a user-pay tax and that concern with ability to pay more properly belongs to a senior level of government.
Colin Vaughan, in his column in the Globe and Mail on Monday, November 23, says that 18% of the gross provincial product is generated in downtown Toronto. If this is true, and we suspect that it is, then the approximately 8% of Ontario's population in the city of Toronto pays for the services that generate a substantial portion of the revenues for the whole province. This can be seen in the capital payments and transfers to municipalities all over the province, which receive roughly 50% of their financing from the provincial grants; that has been decreasing, of course, but it's a substantial portion. It is also an indication of the efficiency of the city that has been able to finance these transfers for so long.
Mayor Trimmer said that Scarborough was subsidizing Toronto to the tune of $37 million. When Ms Poole suggested that Toronto had been transferring $360 million or so to the suburbs, she said that many years ago the province legislated that Toronto should subsidize the new suburbs. We think that after 25 years the suburbs should be able to support themselves.
Perhaps the one good thing that has come out of MVA is the fact that Torontonians are starting now to look at what is actually happening to them. Our suspicion is that once it starts to hit home, they're no longer going to want to take it. Some of us will stay and fight. Others will just get up and leave the province and/or the country. Still others will just leave the city. In any event, the cash cow Colin Vaughan talked about in his article will become very dry, and no milk will be available.
Jane Jacobs has become world famous for her studies of the decay of cities, and she says: "The very concept of MVA, with its idea that somehow there is an unearned value in the city that must be gotten at, is wrong. It attacks the core of the value and the potentiality of the city." As Colin Vaughan said, "It's the goose that lays the golden egg, and somebody wants to kill it."
There is a way out, I think, in the long term. It is in the form of three provincial commissions that are operating right now, all of which seem to be saying that the urban sprawl that has been encouraged for the last 40 years is creating enormous problems that must be dealt with.
The Fair Tax Commission has been mentioned frequently; frankly, I think it's the wrong one as far as property taxes are concerned.
If you look at the report from the Office for the Greater Toronto Area, it says:
"Although not explicitly discussed in the working group papers, municipal taxation is an important lever at the disposal of municipalities. At the very least, municipal taxation must be made consistent with compact urban form, if not proactively in support of it."
"At present, industrial and commercial property taxes in inner areas are high compared to peripheral areas," just the opposite of what we've been hearing. "This has been an important force in peripheralization and the growth of low-density, land-consumptive development."
It goes on to say, "Taxation policy must be supportive of compact urban form. Greater understanding of the implications of municipal taxation and grant policies in the context of new growth initiatives in the GTA is required."
New Planning for Ontario, the report of the Sewell commission, was published in April of this year, and I will just pick out some key phrases: "It should make efficient use of new and existing infrastructures and common services...first using existing infrastructure." What they are saying here is, develop what has already been provided in terms of sewers and water and roads and so on rather than expansion.
Down to Goal G: "Create opportunities for energy-efficient, low-polluting travel, and reduce the need for private automobile use in daily life." That is a goal. One of their policies: "New urban areas and transportation systems will be designed on the basis of the following order of transportation priorities.... As opportunities arise, these priorities will be reflected in existing urban areas." Again they say concentrate on existing urban areas with intensification.
Although the new planning commission doesn't say so in so many words, it is obvious that MVA is actually penalizing the area that most closely meets these goals, that is, the city of Toronto.
Properties in downtown Toronto are more valuable, not because they are more expensive to service but because they are more efficient. There are penalties to doing business or living downtown, such as lack of parking, poor access for deliveries, tow-away zones, panhandlers, crowded streets, aging services that often break down and a perception of higher crime. Despite these things, the market has judged that property is more valuable downtown.
Ms Jacobs, as reported in the Globe and Mail, Thursday, November 19, "said property values are higher than elsewhere because these urban areas are `efficient ways of doing everything. That's why people start businesses in the cities, or go to cities.'"
In the last week there has been a lot of news about the difficult position of the provincial treasury because of a shortfall of revenue. The recession gets a lot of the blame, but we believe there are many ways that the province can work on the expenditure side. If you combine the above reports, and also Toronto's efficiency, it would indicate that there is a potential for greater efficiency and enormous savings if some of the recommendations of these bodies were implemented. This would make the suburbs more efficient, not to mention all the towns and villages across the province that receive grants that encourage high-cost sprawl.
Property tax assessment should not be a crap game, where everyone waits for the roll of the dice -- as Mr Mulroney phrases it -- every few years to see what the assessors have come up with. What will happen in five years when they do the reassessment is that the whole thing will turn turtle, because the properties in downtown will have a value so low they won't even be able to come up with a number that small.
From published reports, the Municipal Affairs minister has said he wants a better method of assessment before Metro is due for a new assessment in five years. It should be possible to devise a system for assessment that is not arbitrary but is based on a set of rules that will allow anyone to calculate the assessment and hence the tax on property.
One hangup here, and I've heard it tonight, is that property tax is not fair in terms of income, that it doesn't relate to income. I'm not sure that's really a concern of property tax, because if you went out to buy a fridge or a stove, both of which are necessities in our world, you don't go into the showroom and talk to the salesman and say: "Here's my income tax return. How does it compare with the guy down the street? Shouldn't I get a lower price, or shouldn't he pay a higher price, or something like that?" That doesn't make any sense to me.
If there were a set of rules that wasn't arbitrary, this would avoid the need for regular reassessments and would also avoid the situation that Toronto is now in, where properties have been assessed using different criteria or different base years for assessment. Any new system should penalize people who let their property deteriorate and reward those who maintain their property, because the taxes on both properties would be based not on some arbitrary value, but on some combination of building size, lot size and a component for fixed service costs.
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The inequities across the city are well known and everybody said that they should be dealt with and they should be corrected. The reason those inequities come into being is because, every few years, somebody in his wisdom says, "Let's change the base year for taxes." So what happens is the same as when you sell your house under the current rules, the proposed rules at least, and the full market value assessment comes in; you're going to have a different tax base than your neighbour. That's where the inequities occur. The assessment should be based on a strict set of rules that continues for ever, if you will, or if it's changed, it should all be changed at once.
The method of valuation should be straightforward and each class of property should be assessed using the same criteria. We had a lady here just a few minutes ago talking about apartment buildings. They should be in a different class. Should they be higher or lower? I don't know. Is that a provincial or a municipal responsibility? Different classes of property may be taxed at different rates to reflect the use of local services or because the municipality wants to encourage or discourage certain types of use. Again, is that a provincial or a municipal responsibility?
We feel that we should pay a fair price for the services received, but we shouldn't have to subsidize our neighbours in the suburbs for those same services, which will drive us out of business. I refer to example 4 on page 1. To date there has been no evidence that MVA is fair in that respect, and in fact there has been no study of any kind about what MVA will do to an area as diverse and complex as Metro Toronto. The areas of study should include social, economic and physical effects on both the people and the physical stock.
What's the provincial responsibility?
The minister has obviously recognized the folly of what has been proposed. Now is the time to devise and implement an alternative method of assessment. Professor Nowlan has this to say:
"If the burdens and benefits of a property or other jurisdiction-wide tax are distributed similarly among the residents, the tax is a `benefit' tax, resident by resident. Within the context of the efficiency model of local government, benefit taxes are desirable because they encourage processes by which optimal amounts of local services are provided and they can help produce efficient patterns of land use" -- ie, the city of Toronto, if you ask me.
If the costs of services provided by the municipality are provided efficiently and distributed similarly, then the municipality is treating its residents fairly. School taxes complicate the problem, but is the municipality the right place to deal with that?
We respectfully request that you study the reports and information of your commissions referred to above -- and I've got a copy of some for you here -- along with the paper by Professor Nowlan, which I also have copies of, and those are some of his references.
In closing, we quote from Professor Nowlan:
"The local tax structure that is necessary to help a municipality respond efficiently to local preferences and achieve efficient uses of land and other resources is likely to be more complicated the larger and the more heterogeneous the taxing jurisdiction. For smaller, more homogeneous municipalities, there may be little practical difference between, say, a residential tax based on property value and one based on household income" -- and some others -- "but for urban areas having the characteristics of regional economies and for governing structures that are metropolitan in scope, these one-tax alternatives are no longer appropriate. If metropolitan areas have federated local government structures, like those of southern Ontario, with relatively high intraregional mobility but lower interregional mobility, then simpler tax structures at the local levels of government may be adequate, but the regional municipalities will need more sophisticated tax structures."
Again, heavy going, but it's a difficult subject.
Final comment -- I wrote this and I didn't really realize that when I was sitting here reading this, the legislation would be going to second reading upstairs at the same time -- the technology is now available to put these more sophisticated tax structures in place and the provincial government has an opportunity that may not ever happen again. Once this mangled plan gets into place, inertia will set in and much of the work of the expensive commissions mentioned earlier will have been wasted. Taxes have already been raised to the limit and spending has been cut. It is only by introducing efficiency at every opportunity that you can generate the extra funds that are required to get the provincial budget under control and keep it there.
My last picture shows my impression of market value assessment.
The Chair: Right. I was actually going to add that there's also a drawing here which has its own message. We'll turn to questions then.
Ms Poole: First of all, thank you for your presentation today. It was extremely comprehensive and I think will be very helpful to us.
On page 6 you state, "From published reports, the Municipal Affairs minister has said he wants a better method of assessment before Metro is due for a new assessment in five years." I can understand how you'd get that impression, because on the one hand the Minister of Municipal Affairs has said that, and on the other, he said that he's giving Metro the authority to go ahead with this plan. He says things that were reiterated by the member from Scarborough tonight, such as, "It's an interim plan," "It's short-term," "It's a compromise," and, "We don't believe in full market value assessment."
But I have a question for you. If, as under this plan, houses go to full market value at point of sale and if all new construction will be done under full market value assessment, if all vacant lands, including railway rights of way, hydro, GO transit, municipal parking lots, are all on full market value, if expansions and additions to businesses are done under full market value and if newly created businesses have their business tax assessed at full market value, then do you believe, after five years, we are going to have a significant portion of Metro and particularly the city of Toronto on full market value?
Mr Vallance: That's something I'm really not qualified as an expert to answer. But my opinion would be that there will be a few houses sold -- certainly, the value of those properties will drop dramatically, as I said earlier -- and then with the next go-round, on the assessment, then the reverse will be totally true, and assessments will drop in Toronto by probably 20% to 30%, maybe even more than that if some of the other effects that we feel are going to happen take place in terms of the businesses.
I didn't mention this during the talk, but there's an item in the Globe on Friday, November 27, that talks about a furniture company moving out of Cornwall because it couldn't get any tax breaks. So taxes are a big factor in a business decision of where to locate and how to operate. I don't think we should get into the buying-businesses syndrome -- it's a mug's game, as far as I'm concerned -- but that is a very good indication of how seriously the taxes will be viewed by business people.
My own view, as I've said, with my involvement in the business association, is that even a 10% additional tax increase on top of what's going to happen because of school taxes, which Mayor Trimmer talked about, is going to be enough to tip some of the businesses into saying, "I don't need it any more; I've had it; I'm not making enough money per hour to work this way," and they'll close up, move to another area or go on welfare possibly, maybe live on their assets if they can get anything out of them, because a lot of these people have worked hard and saved and do have some assets. There's no question about that.
I don't know. Should we penalize them for that? That's what it is, because as I said on the example on Bloor Street and the business in Scarborough, the ratio right now is -- I did the numbers with a calculator -- exactly, within one percentage point, one to the other, right now.
The change is going to more than double the ratio. The tax in Toronto will be twice per square foot as the one in Scarborough, and the one in Scarborough's doing more business because it's a shopping plaza where there's lots of parking, there are no tickets, they've got no rush hours where the parking's restricted completely. There are a whole lot of things going for the suburbs. It just doesn't make sense. The value's just not there. It's an imaginary thing.
Ms Poole: I think you're absolutely right: It's a matter of trading one set of inequities for another set of inequities, and a set of inequities that's going to be very devastating to our business.
You made the point on page 3 that many types of retail businesses, the kind that make the city a decent place to live in, will disappear from the downtown because the cost of doing business will be too high, and I think that's a crucial point that you make. Mayor Trimmer seemed to make light of the fact that 42,000 businesses across Metro will receive the full 25% increase, which will well be the straw that breaks the camel's back.
Mr Vallance: Yes, and Mayor Trimmer's answer to that was, "You've got to look at the numbers." The numbers are irrelevant. It's what you're making from the business that counts. A $2,000 increase to one business is nothing. A $2,000 increase to another business is enough to say, "Why do I do it?" It really is.
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Ms Poole: Many of those businesses are on the edge right now.
Mr Vallance: The numbers are relevant, the percentages are relevant, because that's what they started the business with and that's what they've been working with. To throw a massive increase -- 10% is a massive increase today -- on to a business is really a devastating thing.
As the people during the previous presentation said, the people who started these businesses and bought these homes bought them knowing what the taxes were. Now, I don't think they should continue to pay more than is necessary, but really, I think the problem with the suburbs is that they've got to increase their revenues from their property.
During the hearings at Metro hall, an Etobicoke councillor talked about his taxes going up by $200, from $2,700 to $2,900. He said he was being subsidized by everybody else and that he wasn't paying enough. Big deal. But when he was asked what his house and lot were all about, he had a 265-foot by 65-foot lot. That's half a city block. There are probably $25,000 in taxes coming from that area in the city. That's what you have to do.
It's in the GTA report, it's in the Sewell report and I think the Fair Tax Commission is saying something the same thing, although I haven't seen its report. It's your commissions. You started these things. The GTA was started by the Liberals, but the Sewell commission certainly was started by you. If you read their letter, that's what they're saying.
Ms Poole: Please don't look at me when you say "you." They're the government and we're the opposition.
Mr Vallance: During this term of government then, how's that?
Ms Poole: Much better.
The Chair: On that note, perhaps I can turn to Dr Frankford.
Mr Frankford: Do you regard Metro Toronto as one economic unit? You almost seem to think that downtown business and suburban residences --
Mr Vallance: I think Mayor Rowlands had it right when she was talking on the phone-in she did on City TV not long ago, and she also said it at city council when I was there listening to her, that we all have our problems but they're different.
Yes, we're an economic unit, but the city of Toronto is different from Scarborough and Etobicoke and North York. They're very closely related because the age of their infrastructure is similar and the ages of their properties are similar. The cost of owning a house in downtown Toronto, on its 25-foot lot, is much higher because it's an 80- or 70- or 90- or 110-year-old house that needs new plumbing, new piping, the plaster needs repairing and it's a constant battle to keep up with it downtown. If you do it and spend the money, then you increase the value and you get hit with higher taxes. It's a bind, and this is really what the problem is with market value assessment. It defeats the purpose of the whole thing of owning a piece of property.
To answer your question, yes, they are an economic unit but they're different in many respects in terms of property.
Mr Frankford: I would suggest that there is general agreement that there is an inequity that Scarborough home owners and other suburban home owners are paying relatively more and are being penalized --
Mr Vallance: Oh, no. I'd say --
Mr Frankford: Let me suggest that if one is concerned about economic development, that lack of revenue, or revenue which is taken in taxes, must have some impact on the local economies of Scarborough East and other suburban areas.
Mr Vallance: Look at your reports from the Sewell commission and look at the reports from the office of the Greater Toronto Area which say you have to intensify because the cost of servicing the properties out there is much higher, and they should pay more taxes because it costs more to service them.
At the same time, when I was at city hall somebody phoned in to the radio and said they were going to get a $900 tax decrease, from $4,200 to $3,300. Their lot was 60 by 200 -- I forget the numbers now -- 60 by 150. I figured it out in terms of square footage. You could but three and a third times my house on that lot, which would generate over $12,000 of taxes. That is what you've got to do as far as revenue is concerned.
I'm sorry; your first point was about subsidizing each other. If you want to talk about the inequities of Toronto, let's confine them to Toronto. Let's do a reassessment for the city of Toronto and adjust them within the city itself, but don't ask us to subsidize the suburbs any more. We've just about done as much as we can possibly do. The figure of $380 million or $360 million that was mentioned earlier is a year, not in total; this is a year. That's a fact; it's not a --
Mr Frankford: I'd like to continue but I'll defer to the committee.
The Chair: I have Ms Swarbrick, Ms Cunningham and finally, Mr Wiseman.
Ms Swarbrick: Mr Vallance, although we had senior staff from the Ministry of Revenue and the Ministry of Municipal Affairs today confirm that in fact the Liberal government before us was planning on implementing enabling legislation to allow Metro to also go towards a system based on market value assessment, I'd like to thank you for your very reasoned approach to pointing out the kinds of recommendations that have been made in some reports before us already, and assure you that in fact this government, over the next assessment period, will be giving extremely careful consideration to the contents of those reports and also to the other reports coming in with regard to education financing, the social and economic impact of the property tax system and the others.
I just want to say thank you very much. I think the kinds of things you and your business association have presented to us are very much the kinds of things we have to be considering in looking at moving towards a more fair, all-round system of taxation in 1998.
Mr Vallance: Thank you. I would like to just say that I understand the Liberal government did that. At that time I wrote letters, and it was partially in response to those letters that I voted for somebody else in the next election. I did not like it then; I do not like it now.
The Chair: Ms Cunningham.
Mrs Dianne Cunningham (London North): Well, Mr Chairman, I don't consider this a partisan issue. I represent London and I'm shocked to see this happen here, because I know that most municipalities the size of ours and smaller are fighting like crazy to keep their core alive. I think that's the bottom line here.
It's interesting to see three small business people here before us this evening. We've gone through many meetings in London. I would say that we at least had the opportunity to do an impact study in our city when we did re-evaluate our tax base, and we certainly understood what formula was used with regard to the method of the assessment of calculations for our regional assessment office. This was some five years ago.
I guess right now the question for everybody here this evening should be, why are these things not happening? I'm talking about the assessment calculations and I'm talking about the --
Mr Vallance: Are they not happening?
Mrs Cunningham: Yes. How could one proceed without these studies?
Mr Vallance: It's a puzzle to me that you've got a study that involves -- did Mr Tonks say a million properties? That was made available to the public in September, and here it is the end of November, two and a half months later, and you're rushing like crazy to get the legislation passed so that it can take place in the new year. I've never heard of anything that has such a big impact go through so quickly in my life. I really don't know what's wrong with the people who are running this.
Mrs Cunningham: But you have made an effort to get at least the assessment numbers and the formula that one would have used.
Mr Vallance: My contacts with the assessment office have not been very pleasant, I'm afraid. They're not very cooperative. In fact, they lie outright when you ask them what the impact is. They presumed this bill that you're passing upstairs tonight had already been passed.
Mrs Cunningham: Actually, we stopped the vote on the bill tonight.
Mr Vallance: Okay. That's good to hear.
I guess my numbers on the first page -- we don't understand, and I was told outside the building today by somebody who's with one of the ministries here that the assessment office is going to hold hearings. Again, it's after the fact, really. The deed is done, almost, at this point.
Mrs Cunningham: I think the government members should be listening very seriously. If in fact we are already paying for three commissions to do this kind of work, we should be looking at what we're paying for, and that's the end results.
That's my comment. I thank you very much, to see three small business people. I think many people are happy to visit this city, and depend on it for the economy of not just Metropolitan Toronto but sometimes the rest of the province. So thank you for appearing tonight.
Mr Vallance: For a city that thinks we love to be hated, then I appreciate your comments.
The Chair: The last question, Mr Wiseman.
Mr Wiseman: It's a question but also a way of comment. I don't live in Toronto -- I used to live in Scarborough -- but your assessment here is dead on in terms of some of the nonsense that is being communicated to people in terms of the building of a myth around urban sprawl.
I live in a community where over the last three or four years we've seen 2,000 houses built and our taxes practically double. Your assessment, in terms of cost per linear foot of frontage of a building, I think is right on and has been confirmed in a number of different places. But everything that you've said clearly indicates that we must move to a different system of taxation. We must base it on different parameters.
Unfortunately, the documents that I have seen coming out of the municipalities do not seem to indicate that they want to move in that direction. For example, one document I have says that we must find new ways of taxation, so what we'll do is, we'll put a tax on every cable television hookup. But they don't want to go to a system where it may be a combination of property tax assessment but, in addition to that, some formula for income tax in order to make sure that the assessment is fairly distributed.
I raised with the mayor of Scarborough the cost of transportation. To go out into the suburbs, it's more costly per-unit ride than it is if you've got the compact urban formula that you're talking about.
So my question is this, and it's going to be the political battle of the decade. If you think market value assessment is going to be the major civil war, I think trying to put in place a new system of taxation that meets these needs is going to be a bigger battle. My question is this: How do you see yourself getting involved and becoming part of the solution to making some equity and some reasonable changes to the way taxes are raised municipally, provincially and federally?
Mr Vallance: I guess I'm involved tonight. I've been involved for the last two and a half months since this hit the streets. Our local councillor, Ila Bossons, has been very involved in the process and has been very cooperative in getting the information out, because that's where it belongs, in the public. So I've become involved and a number of other people have been involved. As you know, if you were here, from the motion earlier tonight, because of the number of delegations, the time has been cut for future ones after tomorrow night. So the people are involved.
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As far as I'm personally concerned, I'm not sure, because I can't afford to give 25% of my time, or 50% of my time, if you count the hours at night spent typing and revising and faxing and phoning people and so on. I'm not sure how much further I can go in this. I don't intend to stop, but I don't know how much time I'm going to be able to put into it in the future, personally.
When I started to delve into it, there was a wealth of information out there. How many people have read the reports from the Office for the Greater Toronto Area? They came out in the middle of September. They're a terrific document. They're not put together by the city of Toronto or Metropolitan Toronto; it's the whole region. They're talking about Milton and Richmond Hill and Pickering and even further out than that, I think, in Oakville. There are people from all those communities involved in that process. The weight is there. What I hear from my neighbours and the other people I've talked to on the street is, "We don't mind paying our taxes, but we've got to be able to understand why they're the way they are and they've got to be fair."
I come back to the example of the store downtown, with the satellite in Scarborough. It's fair now, but it doesn't make any sense the way the change is proposed. The system, whatever it is, has to be like that. How can I help you do that? I don't know. I suspect people like David Nowlan at the University of Toronto and others who make this a professional thing are more valuable as far as you're concerned. But don't wait till the thing's done before you get the information to us.
Mr Wiseman: I'll tell you what the big problem is. I'll wrap up very quickly, Mr Chair, because I know time is of the essence. The problem is that the myth has been perpetuated for such a long time that there is such a great body of people out there who believe that urban sprawl, big lots and new houses are assessment, assessment, assessment, and don't recognize what you've said in terms of the costs for the infrastructure on the basis of linear foot in front of their house. The houses that are 22 wide in Toronto are more cost-effective in every way than the 40- and 60-foot lots -- they're calling them conservation lots now -- outside of Toronto. Somehow, an education process has to take place.
The Chair: Thank you, Mr Vallance, for your submission and that of your organization. I regret that our half-hour has come to an end.
Mr Vallance: It's been a good half-hour. I have copies of Mr Sewell's planning for Ontario commission. Also, there's one copy of the greater Toronto area reports, which I think somebody should read, at least.
ANNEX RESIDENTS' ASSOCIATION
The Chair: Could I now call the Annex Residents' Association, please.
Please have some water and get settled. We want, first of all, to welcome you to the committee. While you are the last witnesses tonight, by no means is that any indication of what you're about to share with us. We certainly will ensure that we have the full period of time with you, if whomever is going to be chairing your group would please introduce herself and introduce the other members of the delegation.
Ms Mary Corbett: My name's Mary Corbett. I'm the past chair of the Annex Residents' Association. The people who have joined me in this delegation are all members of the executive of the association. They are Rhoda Lipton, Diane Brook Brown and Peter Levitt. I will be making the initial presentation, and the members of the group will variously answer the questions as the spirit moves them.
First of all, I'd like to thank you very much for offering us this chance to explain our views on the subject of market value assessment to this committee. It's an enormous difference from the experience we had when we visited Metro council and were given five minutes by Chairman Tonks to explain our reservations about market value assessment to the council. We knew exactly how interested the members of Metro council were in our comments when they refused to permit the various members of the council to question us at all on any of our views. It was a Star Chamber sort of proceedings. This is a huge improvement.
First of all, the Annex. It's a part of Toronto that's bounded by Avenue Road, Bloor, Bathurst and the tracks on the north, just so that people can orient themselves. It's a very mixed community. It consists of old Edwardian houses; large 1960s, mostly high-rise apartment buildings; rooming houses; student quarters. The population is incredibly mixed. There is a large student body there still. As well, there are people who have moved into the area, professional people who are self-employed, often who work out of their homes. It's a very mixed area.
We're bounded on all sides of the area by small businesses. You've just heard the Bloor Bathurst-Madison Business Association, and that association really represents the businesses on our southern boundary. So you have some idea from them as to the nature of the problems that we're here to speak to you about this evening.
First of all, I'd like to make it quite clear that our association is firmly in support of the concept of tax reform. We know that there are inequities in the tax system in the city of Toronto. We know that reform is needed. We just don't happen to think that the present market value assessment approach is the way in which taxes ought to be reformed in this city.
One point I'd like to make -- and I will make an appeal to the government members in this committee because this just doesn't seem to be getting across -- has to do with the question of limits, and whether or not market value should be imposed at point of sale. If full market value assessment is imposed at point of sale immediately, what we will have by 1998, if anything like the current patterns hold, are tens of thousands of properties, private residences -- I'm only speaking of private residences, apartments or whatever form they take -- which will be on full market value assessment. I think at that point, market value assessment will essentially be a fait accompli for Toronto. I think your statements to the effect that you really want to find some alternative and so forth become empty if in fact the bulk of the properties of the city are on market value assessment.
So I appeal to you, if you are genuine in your statements about wanting to reform the tax system, to please reconsider that point very seriously.
Another point I'd like to make in connection with that has to do with the question of accountability. The question arises as to whether this Legislature ought to block MVA. Is this unjustifiable meddling? The points I'm making are randomly through here, but there have been points raised earlier in the evening and I felt I should depart from the sequence of my argument for purposes of this. Should the province block MVA? Is this unjustified meddling in the efforts of a municipality? Is this the kind of thing that should be permitted?
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I think the idea of having municipalities, regional governments, be responsible for their actions is commendable, but the fact remains that the province is the senior level of government and the province is accountable. You can delegate all you want. You can delegate responsibility for acting all you want, but ultimately this Legislature will be accountable for the results of market value assessment. You cannot delegate accountability. I spent 20 years in the civil service and heard that over and over and over again, unless things have changed in the last year or so.
I'd just like to make that point, and to make the point that what we have in Metro Toronto is a little bit like what we have in Canada. Politicians turn themselves inside out trying to figure out how to deal, how to balance off the Senate, to accommodate the needs of Quebec and the Maritimes and the west variously. Toronto's in something like the same position. When everybody gangs up on us, how do we deal with it? So we look to you as our ombudspersons.
I think one of the major concerns we have with respect to market value assessment has to do with the loss of jobs which we see occurring in our community. For every $8,000 of assessment increase when we have full MVA, you're looking at the loss of a part-time job. For every $20,000 you see increased in the property taxes of small business, you're looking at the loss of a full-time job. We've estimated that at least 100 jobs will be lost in the few blocks just immediately south of our residential area, and yet at this very time, if what I read in the papers and what I experience myself is true, we have an unemployment problem in this city.
Any laws should stimulate. They should have a purpose. Laws should support government policies.
Does market value assessment support the policies of the present government or of any reasonable government you might hope to have in place? We submit it does not. We submit that it ruins the prospect of job creations. It counters and will make much harder the results of the work of the Fair Tax Commission and of the Sewell commission -- those have been covered more than adequately by previous speakers -- and we would submit that the whole concept of market value assessment, by destroying jobs, by making it harder to reform property tax, by making it harder to create incentives to urban intensification, is not only something that's going to be awkward but it will be a positive disincentive to reform in the greater Toronto area.
We also object to market value assessment in principle. Market value assessment is a form of wealth tax, but it's unrelated to the individual taxpayer's ability to pay the tax. When you hear of people getting tax increases, facing tax increases from $3,000 to $10,000, how many of you could deal with that easily? How many of you can rustle up $7,000 just out of your pockets? You of course are on salary. I'm not. I'm privately employed, a small business person. I make money when I find contracts and so on. The income is fairly steady, but I certainly don't budget for that kind of increase, and I don't think most other people do either.
Basically, what you're talking about in this putative wealth tax, which has to do with these phantom increases which materialized and then disappeared faster than a speeding bullet -- it's fairy gold, that money. That wealth is fairy gold. It's not real. But the taxes will be real.
Another point I would like to make -- and this is something that hasn't come up before and I think is absolutely shocking and perhaps the most profoundly distressing aspect of this entire market value assessment exercise -- is that market value assessment will actively encourage the destruction of our neighbourhoods and it will encourage and promote almost exponential development.
I'm not sure if you realize this, but one of the things we have found out about the way in which market value assessment is working in the city of Toronto is that it isn't really just some value real estate might have attached to a property. No.
I'd like to use the example of what's happening to the Pollution Probe building. Pollution Probe -- I think you've all heard of it -- is located at 12 Madison Avenue in an old Edwardian building. The building was valued by valuators in 1988 at $660,000. That $660,000 is the price that was then paid when Pollution Probe bought the property.
The assessment on that property is $2.309 million. Why is there this difference? There is this difference because there is a vacant lot attached next to part of the Pollution Probe property. This property is generally zoned commercial, and if you ripped down the Edwardian building that's adjacent to it and you put up an office building, it could be worth $2.3 million.
So basically what we've got in terms of market value assessment in the city is assessment at the highest maximum value that can be attached if the property were fully developed.
There's a similar case a block from me. On one corner at Bloor and Walmer Road there's a high-rise apartment building: some offices, businesses on the ground floor, a drugstore and so on. Across the street, a single-storey --
Mr Mammoliti: Doughnut shop.
Ms Corbett: No, not the doughnut shop. A supermarket, and a couple of buildings. If you add the assessments for an acre of land under the high-rise and the acre of land across the street which is occupied by a single-storey, both those property assessments come out to roughly $26 million. Why? Because the location occupied by the supermarket could be developed and they could put a high-rise there too. So it's the maximum value that could be attached to that property that has been assigned, at least to those properties, and we've seen many other examples of that across the city. We're quite appalled by it.
Various people have said, and I think one of the members said, that there was not a tremendous problem with the non-profits in the city. Most of the non-profits in the city -- and I know because I managed a shelter for battered women for some time -- are in fact heavily subsidized by public money but they are privately run and those will be hit with market value assessment. They are in the same position that Pollution Probe is in. If there is no relief in Pollution Probe's situation, it will of course have to close its doors.
So what we see, and we'd be prepared to talk about this but we realize it's late and there have been a lot of suggestions that have been made -- but we do believe that what is needed in Toronto is a fair tax system, a tax system that reflects and respects the differences from one municipality to the other within the city and a system that is based on the population, the services that are received and needed in the different parts of the city, rather than in some phantom fairy gold called market value. It's got to be service-based. The demand for services has got to be a component in assessing the property values in the city.
It's been made pretty clear that everything I've said is probably a waste of time because market value assessment will go ahead. So if that's the case, then I would appeal to the government party to at least insist on some reformation, on some reform in the way in which it's being conducted.
First of all, we want a full disclosure to all taxpayers, whether they are renting the property or owning it, as to what their rates will be. We haven't had that. We've gotten it bootlegged and what not from our various councillors and we've been sharing it as best we can, but everybody should, as a matter of right, be told about this.
We should have a right, if need be, to straighten out the values. That is to say, if we need to appeal the values, we shouldn't be confronted with the absolute insolence and arrogance that was displayed by a civil servant who made some comment to the effect that, "Oh yeah, well, if there's any situation where we've added an extra zero, we'll fix it, but the appeals won't take long." That was arrogance of the first order and absolutely intolerable. I can't remember who it was who said that; I just heard it and started yelling at the radio.
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I would ask too that you reconsider the use of 1988 as the base year in the system, because 1988 was a year in which property values went absolutely nuts. The house I'm in, which is a three-bedroom town house, went from $180,000 in about 1986 to -- some of them were selling for $540,000 at the peak. They promptly plummeted to $320,000 or something. I mean, it's just nuts. We didn't have the same kind of patterns of increase and decrease evenly across Metro. There were greater increases and more fluctuation in the downtown area, and for that reason the use of that year is a particularly difficult one for us.
There are a number of other points I've made. They're here. It's late, and I'm sure that some of the members may have some questions and some of my colleagues may have some comments they wish to add.
The Chair: We'll commence then with Ms Poole.
Ms Poole: Mary, I'd like to thank you for an outstanding presentation. This is an evening when we've had several excellent ones, but yours has really, I think, outdone them all.
I guess I share your disillusionment about the process of stopping this legislation, simply because the government has the majority. They have the mandate, and if this is what they want, this is what they'll get.
But there is one thing I wanted to bring up with you. You talked about the protective cap being removed at the point of sale and that you would like the government to rethink its position on this. The Minister of Municipal Affairs has said that he doesn't like it. However, in the legislation he puts in a section which requires -- not forbids, but requires -- Metro to pass a bylaw to do it. It's been before Metro council now three times, and three times Metro has said it wants it. They want, on the point of sale, for homes to go to full market value.
Ms Corbett: Of course. They voted for market value; they'll vote for that.
Ms Poole: Exactly. So when I gave my speech in the Legislature last week, I put the government on notice that I will be introducing an amendment to the legislation to ensure that the protective cap will not be removed at the point of sale. I hope all of the members of the committee, particularly on the government side, will take note of that, in case they weren't in the Legislature at the time. When we go to clause-by-clause, you're going to have to vote on that, and if you at least want to purport to represent the interests of the city of Toronto and to save our city, then you will have to support that amendment.
Ms Corbett: Yes.
Ms Poole: I can't guarantee it will go through, but I will guarantee it will be placed.
Ms Corbett: We thank you, and we appeal to all members of all parties to consider this very carefully. We all agree that there are flaws in market value assessment. What we are asking for is simply some protection until such time as we can develop a better system, a more equitable system for assessing properties across Metro.
Mr Owens: I want to tell you, after the first day of hearings on this subject, I'm about to pull out what little hair I have left and say, "This stuff is just wacko." I mean, I sit and I listen to people from the suburbs, of which I represent a riding in Scarborough, and I have people kicking down my door saying they want full MVA, they want their decreases --
Ms Corbett: I used to live there; I know.
Mr Owens: -- and I have people now from the city of Toronto saying they're going to have $8,000 and $25,000 increases on their taxes. Now, I'm not Solomon, and I'm trying to figure it out. Somewhere in between there's a reality to be explored. I think we all agree that the assessment system is crazy.
Ms Corbett: It doesn't work.
Mr Owens: It's absolutely insane.
Ms Corbett: That's right, and the proposals which the city of Toronto has made, which take into account the services required by property, the size of the property, various other aspects of assessment -- and as well, I believe, it has a small market value component in it. Those proposals which were made in the earlier debates on market value I think have a great deal of merit and I think could solve the problem. It's just that people have got hung up on the idea of market value.
Mr Owens: I like your presentation, because in going through it -- one of the things that disturbs me is this argument about who's been subsidizing whom. In my view, that's a total red herring and it doesn't matter, because whether I live in Scarborough, I work in the city of Toronto, and people who live in the city of Toronto come to Scarborough to work. In my view, we all live in the same city, so let's sit down and figure out some kind of a reasonable answer to this proposal.
You raised an issue around non-profit institutions. My question is to the parliamentary assistant or to the ministry. I'd like to get a clarification of how non-profits will be treated. The example that was used was shelters for battered women. What is the view of the ministry on how these shelters will be treated with respect to taxation?
Mr Mills: Just a point of clarification: Where there's been an exemption -- and there are some -- that will be in effect, but the others will be treated like private property.
Mr Gary Carr (Oakville South): On page 3, you talk about some of the impact on jobs. If this goes through, what do you see happening? You mentioned a couple of examples of the bookstore and the cleaning establishment. If this goes through six months, a year from now, whatever, what do you see happening to the businesses in the area you're involved with?
Ms Corbett: What we see happening is something very like what's happened in the South Bronx. I don't know how many of you have gone to have a look at the South Bronx. I did, and our association is actually prepared to fund a sightseeing trip by bus -- this will be a very proletarian sightseeing trip -- for members of the Legislature, any of you who would like to go and see exactly what we think will happen to our area.
We think we'll be faced with boarded-up buildings. We already have a lot of derelicts on the street. I use that term with the greatest sympathy, because these are people who are absolutely raddled and ruined with drugs and alcohol, very young people, people probably under 20, many of them. We're working with community groups. Churches, the community residents' association and the business association have formed a trio to try and attack these problems and we've put a lot of time and effort into them, but we can only make a dent in them.
But the more that jobs are destroyed, the more that businesses close, the more that stores become shells, the more our community will become like some American cities. We're asking this body --
Mr Owens: That's what free trade's all about.
Ms Corbett: Well, it doesn't help, either. But we're asking this body to help us save the city. Don't destroy it.
Mr Carr: It's ironic that in the United States, Governor Clinton was elected and he's basically going to set up tax-free zones to get people to come back into the cities. Essentially, what we do is we destroy them, level them, move all the people out, and then we have tax incentives to get them to move back in. If what we're doing weren't so tremendous in terms of cost to humans, if it weren't so tragic, it would be comical, and we're doing the same thing here.
Specifically, regarding some of the home owners -- and I'm thinking particularly of some of the seniors -- how many people do you think will be forced out of their homes as a direct result of this?
Ms Corbett: I don't know. I know that one thing seems to be being overlooked about people's ability to pay taxes; that is, that people, whether they're seniors or civil servants or employed by other organizations, their wage increases are going up right now in the neighbourhood of from zero to 2% or 3% a year -- that's from the bottom to the top; others, of course, are taking decreases -- yet costs on every front are going up.
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What I think is going to happen is that there will be a major inability of people to meet these very large increases, even with the caps and so forth, because the rising costs of social services are going up exponentially in the city of Toronto and in Metro, and to meet those we're looking at 15% increases overall in mill rates and that sort of thing in addition to the market value increase. I'm just not sure where people are going to find these extra thousands of dollars. I think Diane would like to speak to this, too.
Ms Diane Brook Brown: I'd like to speak to the issue of affordable housing in our community. The Annex is a community in which many homes have second apartments. A couple of houses down from me there's a rather extraordinary example of what market value assessment would do to affordable housing.
A semi, the south side of the semi, is a single-family home. It's been assessed at $380,000. The north half of the semi, which is absolutely identical -- same paint job, same contractor, same level of renovations -- differs in only one respect, that it has a basement unit. The basement unit rents for $500 a month. The north half of the semi has been assessed at $780,000. The rent on that unit, if full MVA went into effect, would have to go up by $400 a month in order to absorb the increased tax. The owner of that building has said there's no way that he's going to be able to get $900 for the basement unit. It has a little two-burner stove and a small washroom. Since the owner doesn't need the income that badly, we will lose an affordable unit.
That situation I think is going to occur throughout the Annex and throughout many of the older neighbourhoods in our city, precisely at a time when we are trying to encourage that kind of housing intensification.
Mr Carr: Looking at some of the people who are involved, one of the problems we have with this issue is the fact that so many people don't know what's happening until they actually get their bill, notwithstanding the fact that it's been on television almost every night. Looking at your area, what percentage of the people do you think realize what is going to happen to them? Do you have any idea, ballpark?
Ms Corbett: We've made every effort to circulate to every single residence a means of having information. We've put out a number of flyers with telephone numbers and that sort of thing; means of information about this. We've had public meetings and we've handed out the information. We've done a great deal in the community. We've published newsletters twice that have a distribution of 5,000 that tell you how to get the information and give people examples of what's going on. So we've certainly made every effort. One large area of the Annex has been covered with individual notes to individual households listing exactly what the assessment changes will be. We haven't managed to cover absolutely everything, but we've certainly tried.
Mr Carr: I'm sure you've done a good job of getting it out. What I was getting at is that I don't think we're hearing from the vast majority of the people, because I think the vast majority of the people don't know --
Ms Corbett: Excuse me. I think the vast majority of people believe that this Legislature is going to stop it, that this insanity will never happen. They don't believe it's really going to happen, and it is. I think that's why they're not paying attention yet.
Ms Swarbrick: You've indicated that you used to live in Scarborough, where I am now. Although I would face under MVA a 25% increase, as I mentioned before, I used to live in the Annex as well, so it's an interesting turnabout here.
Even with of the timing we're under and the large feeling of a need to put through a compromise that hopefully will be reasonably livable for everybody for the next few years, for the immediate future, I'm hoping that after the wonderful and powerful representation you've made before us here that you won't end up feeling that what you've had to say and all the work you've done will be a waste of time. Because what you've put before us, you've put before a group of people who care very much -- certainly from the government side, as well as from the opposition side, I know -- about this system and about trying to make sure that we do work towards a very fair system.
I want you to know that I don't think that what you're doing is a waste of time, even if you don't get right now what you want. I think it's very useful, what you've done.
You talk about the feeling of the need to work towards a fair tax system. You propose that being based on population and services received and needed. I'm wondering if you've given thought yet to things like: Do you feel, then, that the education component should be taken out of property tax and paid for by income tax on an ability-to-pay basis? What kind of comments do you have about those other aspects besides the service cost in the property tax?
Ms Corbett: I think we'd have to comment separately, because our association hasn't addressed that. It is my personal view that the education tax ought to be entirely separate. I think the whole system of having separate local boards of education does nothing but create a charade for some rather self-important people to become elected and guide the destinies of the children, spending more money than pretty well any other country in the civilized world -- such as it is; God knows what civilization is -- and managing at the same time to achieve pretty well the lowest standards. So obviously, some proactive stance on the part of government to take over this mess and reform it is absolutely essential.
I'm sure my colleagues may have some other comments. Does that answer your question? If it's taken over by the province, then obviously the funding should be through the income tax system.
The Chair: Thank you very much for coming before us and ending our evening on, I think, a good note and a good discussion. We appreciate that for some it means coming at such a late hour, after what I'm sure has been a long day for all of you. Thank you very much.
To the committee, we stand adjourned until 3:30 tomorrow in this same room.
The committee adjourned at 2227.