FAIR MUNICIPAL FINANCE ACT, 1997 / LOI DE 1997 SUR LE FINANCEMENT ÉQUITABLE DES MUNICIPALITÉS
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
EASTERN ONTARIO BUSINESS IMPROVEMENT AREAS
REAL ESTATE BOARD OF OTTAWA-CARLETON OTTAWA REAL ESTATE ASSOCIATION
CONTENTS
Tuesday 15 April 1997
Fair Municipal Finance Act, 1997, Bill 106, Mr Eves /
Loi de 1997 sur le financement équitable des municipalités, Projet de loi 106, M. Eves
City of Ottawa
Ms Mona Monkman
Association of Municipal Clerks and Treasurers of Ontario
Mr Larry Simons
Mr Don Reid
Mr Ken Cousineau
Nepean Chamber of Commerce
Mr Robert Wilson
Mr Buck Arnold
Delta Engineering
Mr Jeffrey White
Town of Hawkesbury
Mr Raymond Bessette
Eastern Ontario business improvement areas
Ms Dawn Dannehl
Ms Christine Leadman
Mr Brian Mackey
Real Estate Board of Ottawa-Carleton; Ottawa Real Estate Association
Mrs Sylvia Milne
City of Gloucester
Ms Karen Tippett
Mr Phil Sweetnam; Mr Dennis Date
Conservation Ontario
Ms Wendy Stewart
Mr Allan Higdon
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Mr TedChudleigh (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Mr TimHudak (Niagara South / -Sud PC)
Ms IsabelBassett (St Andrew-St Patrick PC)
Mr JimBrown (Scarborough West / -Ouest PC)
Mr TedChudleigh (Halton North / -Nord PC)
Mr JosephCordiano (Lawrence L)
Mr Douglas B. Ford (Etobicoke-Humber PC)
Mr TimHudak (Niagara South / -Sud PC)
Mr MonteKwinter (Wilson Heights L)
Mr TonyMartin (Sault Ste Marie ND)
Mr GerryMartiniuk (Cambridge PC)
Mr GerryPhillips (Scarborough-Agincourt L)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr E.J. DouglasRollins (Quinte PC)
Mr JosephSpina (Brampton North / -Nord PC)
Mr WayneWettlaufer (Kitchener PC)
Substitutions/ Membres remplaçants:
Mr BernardGrandmaître (Ottawa East / -Est L)
Mr Jean-MarcLalonde (Prescott and Russell / Prescott et Russell L)
Mr RosarioMarchese (Fort York ND)
Mr RichardPatten (Ottawa Centre L)
Clerk / Greffier: Mr Franco Carrozza
Staff / Personnel: Ms Alison Drummond, research officer,
Legislative Research Service
The committee met at 0900 in the Delta Ottawa Hotel.
FAIR MUNICIPAL FINANCE ACT, 1997 / LOI DE 1997 SUR LE FINANCEMENT ÉQUITABLE DES MUNICIPALITÉS
Consideration of Bill 106, An Act respecting the financing of local government / Projet de loi 106, Loi concernant le financement des administrations locales.
CITY OF OTTAWA
The Chair (Mr Ted Chudleigh): I call the meeting to order. I thank the committee and the deputants for being prompt this morning. Our first witness is from the city of Toronto -- city of Ottawa. Pardon me.
Mr Gerry Phillips (Scarborough-Agincourt): We're off to a bad start, Chair.
The Chair: That was probably a bad way to start the day -- the city of Ottawa, Ms Monkman, city treasurer. We have 20 minutes together, if you'd like to start. We'll fill any remaining time with questions.
Ms Mona Monkman: Good morning. Thank you for this opportunity to appear before you. I'm the treasurer of the city of Ottawa. Council has asked me to bring forward comments on Bill 106 based on our understanding of the draft legislation, legislation that is starting to be known as the three Rs: rates, ratios and ranges.
First, council is generally supportive of the proposed legislation, as it provides for municipal control over tax policy.
On the issue of who sets tax policy, while council is generally supportive of the need to maintain equity in tax policy across the community of interest that is Ottawa-Carleton through the setting of tax policy at the upper tier, some specific concerns must be taken into account in designing the provincial parameters. Specifically, mechanisms must be in place to minimize the ability of certain municipalities within an upper-tier structure to unfairly shift the burden of taxation to prominent property tax classes in neighbouring communities. Local municipalities within a two-tier structure should have input into the tax policies developed by the upper tier.
On an issue that is not specifically addressed in Bill 106 but which flows from education reform and which can have a significant impact on tax policy at the local level, council deems it imperative that the retention of payments in lieu of taxes presently collected on the basis of the education mill rates continue to be an integral component of the financing of local government and that these funds must continue to be used to support local municipal purposes.
We've been told by Minister Eves, in a letter dated March 18, 1997, that he understands the current importance of payments in lieu of property taxes for education purposes as a source of revenue for the city of Ottawa and that the Minister of Finance will keep council's concerns in mind as they review payments in lieu of property taxes, how those payments are shared and related issues.
By way of background, I would like to indicate to you that this issue surfaces from the present situation whereby lower-tier municipalities retain the school portion of payments in lieu of property taxes. For the city of Ottawa, a very significant portion of our net budget is funded by this source -- over $50 million. Payments in lieu represent more than 25% of our net budget. With the announcement that the province will control the business component of education property taxes, the city of Ottawa is concerned that PIL revenues will be removed without providing the tax room for us to increase our tax base by a corresponding amount. Without this, it would require a 48% tax increase for the average resident to recoup those lost revenues.
Further, the province must recognize that municipalities in Ottawa-Carleton are unique in their reliance on payments in lieu of property taxes as a funding source, and that means municipalities must be consulted immediately as to the development of the criteria and methodology for the establishment of provincial ranges for tax ratios and in any revisions to the methods for assessing land as they pertain to exempt properties.
Turning to another issue, there is a need for the province to design a comprehensive communication package for municipal councils and taxpayers on the changes proposed under this legislation. This communication should be completed by the fall of 1997.
Regarding the business occupancy tax, the province must communicate more effectively why the business occupancy tax is being eliminated by publicizing that the tax is being eliminated to afford a more secure and rational basis of tax collection. In addition, the province should publicly announce its intentions with respect to the recovery of lost education funding revenues resulting from the elimination of the BOT so that businesses and municipalities may begin to plan. In Ottawa, approximately 50 cents of every business occupancy tax dollar goes to fund education.
On the vacant property issue, we need adequate provision so that the fair assessment of vacant property can be made in order to prevent the potential widespread shift of taxation burden to other vacant properties. You will likely hear of this issue from others.
Finally, council believes that it is imperative that reassessment data and impact studies be finalized and communicated with sufficient lead time for municipalities to make their tax policy choices and to prepare municipal budgets for 1998. Taxpayers must be informed in a timely basis of their tax bills for 1998. In the event this information is not available on a timely basis, and in a format easily understood by taxpayers, consideration should be given to postponing the implementation of the legislation until 1999.
The Chair: That leaves us about four minutes per caucus. We start with the official opposition.
Mr Phillips: You've raised a number of very good points. Our problem here is that we've got two more days after today of public hearings; we've got one day of what we call clause-by-clause and then the bill's done. If we don't pick up on these concerns of yours quickly the bill becomes law and away it goes.
My understanding of the bill right now is that vacant property will be assessed, if it's a commercial vacant property, at the commercial rate and will be taxed at that rate regardless of whether it's empty or not. I believe when the bill is passed that the assessors will have no choice but to do that. That's my understanding. I think the bureaucracy have heard the concerns and maybe they have some suggestions on it.
On the business occupancy tax, it is clear to us, at least us in the opposition, that when that's gone and that's part of the bill, virtually every municipality's plan is to recover the revenue, because they need the revenue, from the realty tax on commercial-industrial.
I'm generalizing now, but as you reallocate that on the realty tax, larger businesses, retail chains -- I keep using banks; banks get very offended with that -- banks and what not pay a lower tax and smaller businesses pay larger taxes. The government has said, "Don't worry about that because sometime down the road, we're going to bring in some more legislation that will set up two classes of commercial, large commercial and small commercial, and you can charge."
Has your council taken a view on whether that is a good idea, two classes of commercial, whether we should be trying to incorporate that in this bill to give you some idea for planning purposes? I notice you mention here you're sufficiently concerned that you're at least raising the question of delaying the implementation for a year if it can't be properly done. So my question is on BOT and whether your council has discussed the implication for small business, large business and whether your council would support in this bill establishing two classes of commercial.
Ms Monkman: We have discussed the issue, and I did indicate to council that there was some talk of assistance for small business. In terms of the understanding that I had of how that would be done, there had been some discussion of perhaps a first X square feet exempted of assessment.
Council is sufficiently concerned as to the impact on small business with this elimination and other changes that that would certainly be something that would be welcome.
On the elimination of the business occupancy tax and where it goes, the general understanding I believe of most municipalities is what you have said, that it will be passed on to the commercial-industrial property tax class and hence passed on through the lease agreements. That's our understanding, and I believe that with the upper-tier, lower-tier tax-policy-setting mechanism, that decision will ultimately be made by the upper tier in this region because it will be a decision affected by tax ranges and ratios, not specifically the mill rate. I may be wrong about that, but that's my general understanding of how this would work in this system.
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My main issue with the business occupancy tax has been the communication element around it. When the tax was eliminated, the communication from the province was essentially that there would be a cut for businesses and municipalities and politicians will be under some significant pressure by various business groups to effect that cut. In Ottawa-Carleton, that's $60 million worth of money that's being raised in the business occupancy tax: on our own budget, $11 million; the region's $19 million; and the education component is the half that I was speaking of.
I believe the province has probably already started to think about what they will do to recoup the $30 million in lost business occupancy tax on the education side. I don't believe that's a municipal decision, but I do believe -- that was one of the points I was trying to raise -- that has to be communicated. As soon as that decision is made, it must be communicated because businesses will be pressuring various politicians not to replace that BOT. Half of that decision is not a municipal decision. Half of it is a provincial decision.
Mr Phillips: That decision was made, by the way. You may not be aware of it, but it has been made.
Ms Monkman: It was my understanding that it had been made, although I haven't seen anything formally communicated to that effect.
Mr Gilles Pouliot (Lake Nipigon): In your comments, your council is generally supportive in number 1 and number 2, and then in the same breath, without pause, you mention the 48% impact. If I were a resident, an average person, a homeowner with equity in a house, I would be concerned, madame.
The bank towers, the large industrial sector get a break. The commercial sector is saddled with the education levy. They pick up the slack on the exchange. This is not revenue-neutral. Madame Monkman, Bill 106 does not take practice in isolation; it's meshed and webbed with other pieces of legislation.
Many people believe that they'll get a tax break. Some homeowners have listened to the Premier saying that by the year 2000, you, as the treasurer, should be able to pass on a 10% decrease at the property level. The small and medium-sized businesses believe that they too will get a tax break, and obviously the focus here is to give the industrial and larger sector a property tax decrease as well.
With your science and your knowledge, would you please explain to me where the money is going to come from? Unless you get a cheque from the government, after you have exercised your interim tax levy, going fully, I anticipate, 50% to what the statutes allow you, then in the spring of 1998, when the downloading comes through, and you will have been paying for this since January 1 of next year, how will you face the taxpayers?
Ms Monkman: Several questions: Yes, it is not a revenue-neutral impact, taking all of the pieces of legislation together. You mentioned the downloading and the changes on that front. We do see that in our own municipal budget there will be approximately $4 million that needs to be found, which is about 4% of our budget, and how will we do that? We will likely do that through further downsizing and review of municipal services.
Secondly, the 48% impact is also something that is not specifically in this legislation, Bill 106. It's an impact of potential further legislation around how grants in lieu of taxes are shared, payments in lieu of taxes, whether they have to be shared with the school boards and education financing. That is a big impact and I can't begin to have the answer of how we would accommodate that.
The third issue you mentioned was the impact and the fact that the banking institutions will be better off. Yes, there will be some if the business occupancy tax is added to the commercial-industrial rate. It would probably be done at a general rate, somewhere around 30% in our case, whereas, some institutions like the banks pay 75% right now. There will be winners and there will be losers.
Mr Pouliot: The 4% savings on the overall can be found within the shop. I thought you had already downsized and you were really, really lean and aggressive in your pursuit to reconcile the bottom line. Am I to take it that there is a floater here which represents a full 4% and that can be trimmed without losing services?
Ms Monkman: I don't suspect that it could be trimmed without losing services. We have downsized significantly.
Ms Isabel Bassett (St Andrew-St Patrick): I was interested first of all to see that your council generally is supportive of the proposed legislation as it provides for municipal control over the tax policies. So if you apply that to the BOT, I just want to point out before I ask you the question that although there will be probably some money that you'll have to spread around -- you'll have to make up the lost revenue -- there is going to be considerable savings, $200 million that we lose already in BOT taxes that we can't collect. Secondly, several people who have made presentations here have said that the BOT is an administrative nightmare and they figure that considerable administrative costs can be saved. So there will be some money. It's not as great as you think.
What I wanted to ask you about: You say that mechanisms must be in place to minimize the ability of certain municipalities within an upper-tier structure to unfairly shift the burden of taxation to prominent property tax classes in neighbouring communities. Could you explain what that means to you? Could you go over it again, the fact that the upper tier has the ability in some cases to --
Ms Monkman: Quickly on the BOT, yes, we do agree that it is an administrative nightmare and there is some benefit to changing that type of taxation.
On the shifting issue, our concern is that in a region where we have different municipalities with different types of assessment -- Ottawa has the largest commercial assessment base in relation to the other municipalities in the region; we don't have as much residential assessment -- when you're looking at tax policy, you will be looking at shifting the burden between classes. To the extent that we member municipalities of the upper tier have a different proportion of taxpayers in each one of those tax classes, there may be some room for shifting or some dispute as to where those burdens go. I believe that it will to some extent be constrained by the provincial ranges that are to be established. The problem is we don't know what the details are right now.
Ms Bassett: So there's a need for greater communication. Thank you.
The Chair: Thank you very much. We appreciate your coming in and making a presentation today. It's very valuable to have that kind of input.
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
The Chair: The next deputation is the Association of Municipal Clerks and Treasurers of Ontario, Mr Simons, president. Welcome to the standing committee on finance and economic affairs. We appreciate your taking the time to make your presentation. We have 20 minutes. If you'd like to make your presentation, we can fill any remaining time with questions. Would you please introduce your associates for the purposes of Hansard.
Mr Larry Simons: It would be my pleasure, thank you, Mr Chairman. My name is Larry Simons. I am the president of the Association of Municipal Clerks and Treasurers of Ontario, which you will hear me refer to by its acronym, AMCTO, from here on in because it's much too long to say repeatedly.
With me this morning is Don Reid, the CAO and treasurer for the township of Osgoode and a fellow AMCTO member. On my left is Ken Cousineau, the executive director of the AMCTO.
Last week, the AMCTO's past president made a presentation to this committee in Toronto. I am going to be building on that presentation, reinforcing our key concerns and again offering our assistance, the assistance which, for effective implementation of this legislation, frankly only AMCTO members can provide.
As Mr Shaw, our past president, indicated to you in Toronto, the AMCTO is the largest voluntary professional association for municipal government managers in Canada. Clerks, treasurers and CAOs are self-regulated professions and AMCTO is the professional certification body in Ontario. The association has been in existence since 1937 and our members are now represented in about 93% of the municipalities of Ontario.
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Our members -- clerks, treasurers and CAOs -- provide the professional, expert administrative support required for the efficient, continuous and professional delivery of municipal services. Everyone will be counting on us for the effective implementation of not just Bill 106 but just about every other piece of municipally related legislation that has been introduced recently.
We believe we should be heard before, not after, this legislation is advanced, since we are the implementers of Bill 106. We believe we have a duty to flag concerns and issues that could be problematic once Bill 106 is passed and applied across Ontario. What we'd like to do is provide you with some foresight into this particular element of restructuring of municipal financial affairs.
Of course I begin by expressing AMCTO's appreciation for the opportunity to appear before this committee and to put our views on Bill 106 before you and on the public record.
I have to start by saying that AMCTO has very grave concerns regarding the proposed implementation time frame of the new legislation. Not unlike the previous speaker, we are concerned about the lack of sharing of information. There must be more information sharing, particularly given the timetable for Bill 106. To perform the functions effectively, we need all the information they can get and we need it as soon as possible.
The AMCTO relayed this concern to both Minister Eves and Minister Leach in a letter dated February 24, 1997, and in a press release which was issued February 25, 1997. The message was clear: Any further delays in information sharing could compromise the January 1998 implementation deadline or, worse, create an administrative nightmare. To date, neither of those ministers has responded.
Our detailed concerns and recommendations regarding Bill 106 can be found in a separate submission which I handed to the clerk and I believe he has distributed to you this morning. The presentation today will focus your attention on some priority issues specifically relating to amendments in Bill 106 which relate to the Municipal Act.
In today's session, there are four key issues I would like to touch upon: interim billing; apportionment; ownership change during the phase-in period; and cancellations, reductions and refunds of taxes.
The first concern, relating to interim billing limits, relates to section 55 of the bill where it pertains to section 371 of the Municipal Act. It provides the minister with the authority to establish interim billing limits for any particular taxation year.
The crux of this matter is in the transition. Municipalities could be faced with a significant gap in their taxation revenues in 1998. We could be forced to borrow funds and the pay the price of doing that. That situation can be and should be avoided.
AMCTO recommends, therefore, that the minister prepare and file a regulation providing municipalities with the authority to raise up to 50% of their 1998 estimates from a taxation by way of an interim levy.
Our second issue relates to apportionment. AMCTO believes that apportionment of costs among municipalities should be based on weighted assessment values rather than assessed values. This is especially true with respect to county- and conservation-authority-related apportionments.
The need to follow the weighted assessment approach can be illustrated by considering a municipality that has a high percentage of farm assessment. Using weighted assessment, its apportionment would be calculated based on the taxes actually recoverable from conservation and farm properties.
Under the current proposals, if the assessed value is used, not a weighted assessment, the municipality could be apportioned costs based on values that would only attract 25% of the revenue that would come from properties with similar assessed value in a residential class. This would create a situation where the remaining property owners would be required to further subsidize farm and conservation properties with respect to apportioned costs.
We're seeking a solution to this problem that has fairness. We think taxpayers will be seeking one too, and we should anticipate that requirement. AMCTO therefore recommends that apportionment be based on the sum of the weighted assessment and that weighted assessment be based on tax ratios as applied to the different property classes.
A third issue revolves around the fact that the phase-in of property tax changes under the revisions proposed in Bill 106 are owner-based -- that is, the changes in the tax amount are based on the value of the property -- but the decision to phase in the changes are based on softening the financial impact on the owner by spreading it over a period of years.
Subsection 372(6) of the Municipal Act, which will be created by section 55 of Bill 106, provides that council may exclude a property from the phase-in or from the continuation of the phase-in provisions of a bylaw based on a change in the use or character of the land or its classification.
AMCTO recommends that the same option should be provided to council if there's a change in ownership. The new buyer ought to be aware of the true assessed value of the property and therefore the true applied tax rate. Consequently, a new buyer should be subject to the full extent of the applicable property tax. The application of this provision should be determined at the discretion of the municipal council.
In addition, the legislation should clearly state that this same provision can be applied to properties where a new structure is built or where, although there may not be a change in the use, an addition is made to the existing use to increase the size of the use or the value of the property. It is unclear at the moment whether the existing provision relative to the character of the land would cover those kinds of circumstances.
Finally, our fourth issue relates to section 442 of the Municipal Act. Section 442 has been around for a long time, and it provides municipal council with the authority to cancel, reduce or refund property taxes on specific properties for a number of specific reasons.
Clause 442(1)(e) provides that an application in this regard can be made by any person "who is unable to pay taxes because of sickness or extreme poverty." For years, municipalities have recognized that this legislation is unworkable. Issues related to sickness and extreme poverty should be dealt with outside of the property tax structure and could be dealt with by municipalities in ways much more responsive to individual needs, such as general welfare assistance, other social service programs or perhaps even section 113 of the Municipal Act, the municipalities' general ability to make grants.
AMCTO recommends the repeal of clause 442(1)(e) of the Municipal Act as part of Bill 106.
Furthermore, with respect to clause 442(1)(g) and issues of seasonal business, AMCTO understands and agrees with the intent of this amendment, but we are concerned about the removal of the words "except where the business was intended to be or was capable of being carried on during a part of the year only." The concern relates to properties that are, by their nature, used on a seasonal basis.
AMCTO would recommend that the phrase "except where the property was intended to be or was capable of being used for part of the year only" be added after the word "property" in clause 442(1)(g). This would prevent seasonal use properties from claiming tax reductions or rebates based on purported renovations during what would normally be the non-use period of the year.
I want to reiterate that the recommendations we've made this morning and that I've included in this presentation are aimed at improving operational aspects of Bill 106.
In the interest of time this morning, we have only addressed selected concerns and recommendations regarding the proposed legislation. We have prepared quite a lengthy list of issues in detail. We have raised them with ministry officials and we have supplied them to you today.
AMCTO fully recognizes the need for municipal reform. We're not exempt from the paradigm shift that all governments and even the private sector are confronting. We wish to be actively involved in that reform process. We look forward to appearing before this committee again as the reform process continues to unfold. If you wish to hear our views on any aspect, we would be very glad to hear from you. Thank you very much for your attention.
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The Chair: Thank you very much. That leaves us about three minutes per caucus for questions.
Mr Pouliot: A renewed pleasure, gentlemen. Larry, it's always a pleasure. We've been doing battle for a number of years now.
Mr Simons: Nice to see you again, Gilles.
Mr Pouliot: The people you represent are front-line. You're better equipped than perhaps anyone, by virtue of tenure and also dedication, to see what's happening, to look at the flow of services and the funds necessary to provide them.
None of us at the committee are opposed to changes that simplify and bring forth a better degree of fairness and make it easier to collect. No one I meet is opposed to changes; consciously or subconsciously, people will readily acquiesce. But there's also some threshold, and I'm afraid that in a short period, you surpass the capacity of society to assimilate and digest all the changes. We can only take, as people, so many changes at any given time. It has to do its thing at the marketplace.
I want to go back to one small focus, the phase-in provision. You know in the real world that you must pay the banker. You started by saying, "Give us the ability to borrow." In the phase-in situation, the bankers will help you in your decision-making vis-à-vis the phase-in. For instance, if I've been paying too much in tax, you owe me and I will not wait a period of eight years; I've already been ripped off. If I'm to pay taxes, if I've been paying too little because it has been decreed, eight years is not enough. You have to reconcile this at the marketplace in the real world. If you owe me taxes, there will be no thanks to the government, I can assure you: "What took you so long and where's my interest?" If I have to pay more, it's "May your children walk backwards." You know: "A curse on your house."
I want to wish you well, but there are so many changes. If you're not getting a response from the government, Larry, do not despair. They don't have the answer yet, because they have to deal with Bill 103, amalgamation, Bill 104, education; the sewer and water act has to be revived. They're under a state of siege in a very short time. I want to wish you well.
If you get the answers, do you want to give them to Mr Phillips, Mr Grandmaître and myself? We wish to have them too.
Mr E.J. Douglas Rollins (Quinte): Thanks for your presentation. It's nice to see that you people have come forth with some good, thoughtful ideas, given that you're the people who implement this bill when it gets done with.
You have a concern that you're not going to be allowed to collect half your taxes prematurely until you realize -- you're under that condition at present. You put an interim tax bill out for two or three payments, roughly half the taxes. I can't see why that can't continue the same it has in the past. You're bringing it up here, but we as a government are trying to give the municipalities back that foresight. You people know you need that money in that part of the year and the taxpayers realize they have to pay their taxes, so surely to goodness you'll send out an interim tax bill even though you don't know the exact amount. You'll send one out so that they will be starting to pay part of their taxes.
Another area that many people have presented to us about is the BOT, particularly if there's big and non-collectible tax. A certain portion of that is non-collectible, and I think putting the onus on back the assessment and on to the owner will help out. By the way, do you feel you're not collecting a high percentage of your BOT?
Mr Simons: It's fair to say that the business occupancy tax attracts an inordinate share of your collection activities, no question, and that's simply because it's not guaranteed by property in the same way that property taxes are secured.
Mr Rollins: Does it also eat up quite a bit of your time as far as your office is concerned?
Mr Simons: I work in a very small office where people would be involved in a wide range of things. No, it doesn't occupy a great deal of time, but I am aware from our members that considerable portions of their collection efforts are directed towards the BOT. I have not heard of anyone suggesting that the elimination of this particular surtax is a negative move at all. How it fits into the overall package and how the timing of this is done is a very real concern, but that particular element is not.
Mr Joseph Spina (Brampton North): I gather that fundamentally there is an underlying support for the thrust of the bill. Did I read that correctly?
Mr Simons: We understand the need to reform municipalities and municipal finance in particular. If you could tell me in one sentence exactly what the thrust of the bill is, I could probably tell you whether we support it, but it has a number of different initiatives.
Mr Spina: A fair assessment system is the fundamental underlying purpose of the bill, the objective we're trying to achieve.
Mr Simons: Understood. We had a commission in Ontario that took about this much to define "fair" not too long ago. I'm not sure I'm in a position to improve on that.
Mr Spina: Maybe I can ask you to clarify, and I appreciate your conclusion. You said that your recommendations are really aimed at improving the operational aspects of Bill 106. That's why I perhaps was being presumptuous by saying you fundamentally supported the bill and the need for change, that you were just concerned with some of the these operational aspects which you brought to the forefront.
Particularly, you were looking for some information from the ministry to be able to implement the changes in a timely fashion. I'm looking for some help from your perspective about the time frame that would be best for you, knowing that this is tentatively to be implemented January 1, 1998. We're in the process now of trying to gather numbers on municipalities, but those numbers come from people like you. This is what we're in the process of trying to get. How can we play that one better?
Mr Simons: We have taken the position -- this was at the end of February -- that the time to have the information in the hands of municipalities so they could make the kinds of tax policy decisions they need to make and plan effectively for 1998 was getting extremely short, and that was the better part of two months ago.
I believe we are really bumping up against the limits of whether or not this can be effectively implemented by municipal treasurers in 1998, particularly given that we are not to have, apparently -- as of now, at least -- even an assessment roll in our hands before the end of April 1998.
A colleague of mine is fond of saying that our job is really quite simple, that you only have to know two things: What are you going to spend the money on, and how much assessment do you have to raise it on? As of this moment in time, we don't know either of those things in any comprehensive way for next year.
Mr Phillips: My background is business -- I used to have three companies and all that sort of stuff -- and I keep saying to my business friends that government is giving business a bad name. We're in the same boat you are: We can't get an impact study out of them. We've got to approve this bill. People come and say, "We are supportive of the bill," and then they go on with 10 major problems with the bill.
It isn't a question of whether we've got to change; it's whether this bill works. You must despair when you come in here and there's no problem with interim billing, according to the government members, when you've just told us there is a huge problem. We know what the problem is, and that is that you right now have to send out your interim bills for 1998 on the basis of previous background; you cannot guess and estimate.
What you're asking us is the authority to send out an interim bill based on your best estimate so you don't run into what right now is going to happen. Without any question of a doubt, your phone will be ringing off the hook from probably about May 15 to May 30, when you've got to send out your real bill next year, 1998. You're begging for an opportunity here and you're being told by the government: "Well, you don't understand the bill. You can already send your interim." You can't do that without a regulation change.
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Mr Spina: All the more reason to get it through.
Mr Phillips: Well, all the more reason to get it through, but you've got a gun to our head. You won't tell us what's there. Here you've got the experts telling us the changes that have to be in the bill. You're saying, "Get the bill through," but they're saying, "Make some changes, apportionment." You are going to penalize some municipalities and reward other municipalities unfairly.
I'm sorry to be angry, but this is a classic case, the government saying, "Get this bill through," and you, the experts, coming to us and saying -- like apportionment, and I think you make a great case here; interim billing, I think you make a great case here; the ownership, you probably have a good case here, I just have to understand it a little bit better; and the cancellations, reductions. But the problem we face is, "Get on with it, get on with it," when we should have had this bill six months ago so we could deal with it on a sensible, logical basis.
Anyway, my colleague has a question on something we're both quite interested in.
Mr Bernard Grandmaître (Ottawa East): You were concerned with section 12 of Bill 106, which repeals subsections 19(1), (2), (3), (4) and (5) and provides the option for the current value of land to be related to its current use. Can you be a little more precise and give me examples of your concern on section 12?
Mr Simons: These are the current use provisions as it relates to that?
Mr Grandmaître: Yes.
Mr Simons: To be honest, I've not reviewed that section personally in a great deal of detail. The report you are reading was prepared by an advisory group. Perhaps my colleague can help me in this area.
Mr Don Reid: No, I can't. I'm being honest here.
Mr Simons: I'm sorry, I do apologize for that. We will certainly give you a little more illustration of what that is, we'll follow that up, compared to what's in the brief.
Mr Ken Cousineau: Part of our concern in that area is that we're not sure what the current use is going to be based on. Is it the use of the property? Is it the zoning? What sort of criteria are going to be utilized to determine current use? That's a problem.
The other aspect of concern there is that the upper tier will have authority to apply the current use provision and upper-tier governments can delegate that authority down under the bill, and there's some concern about municipalities sort of whipsawing one another in terms of applying that principle or not, again based on the criteria that might be set up in regulation.
Mr Grandmaître: Do you believe that this concept will be revenue-neutral for our municipal governments?
Mr Simons: We've seen an awful lot of numbers from a lot of municipalities. Everyone seems to use a different set of assumptions in order to come up with some numbers. How to draw a picture province-wide, I honestly don't know, and that takes us right back to the main point, that without a comprehensive look at the information, it's very difficult to make these kinds of projections.
Having said that, no matter what assumptions are used, no matter what municipality they're using, I have yet to see one that suggests it's neutral or positive for the municipality.
The Chair: Thank you very much, and we appreciate the association of clerks and treasurers making a presentation today.
NEPEAN CHAMBER OF COMMERCE
The Chair: We now welcome the Nepean Chamber of Commerce, Mr Wilson. Welcome.
Mr Robert Wilson: Unlike the previous presenter, I'm not going to use the initials and acronym for the Nepean Chamber of Commerce. There are too many varying degrees of connotation to that in this area.
Members of the committee, the Nepean Chamber of Commerce, on behalf of business in the city of Nepean, thanks you for the opportunity to present our views to the standing committee on finance and economic affairs in regard to Bill 106, An Act respecting the financing of local government, or the Fair Municipal Finance Act.
Our presentation will deal with issues, in general terms, that the chamber has identified in discussions with its members and other interested parties in the business sector. Our suggestions will deal only with those issues the chamber identifies as directly affecting business.
The Nepean Chamber of Commerce supports the concept of a uniform property tax assessment system across the province based on a current value assessment. When Statistics Canada public sector finance data for Ontario indicates a 20.8% increase in property taxes for the period 1990-91 to 1994-95 as a source of revenue for provincial and local government revenue, it's time something was done to implement property tax reform, especially as it affects business.
Bringing the proposed changes closer to home, the city of Nepean, which has had a market value assessment system in place since 1993, complete with a phase-in adjustment, may have its competitive position vis-à-vis Renfrew county enhanced. That county's lower taxes are partly due to the fact that its base years for assessment are from an earlier period than Nepean's and reflect less than a current market value.
As well, the results of a 1995 Canadian Federation of Independent Business survey of 4,750 Ontario business owners "found that when measured as a percentage of estimated property value, commercial and industrial property owners across Ontario pay double the rate of tax, per $100,000 of property value, compared with residential properties." In terms of Ottawa-Carleton, the results were not significantly different.
Anything that has the potential to reduce this kind of adverse tax load on business, our only economic engine, is welcomed. We've benefitted from the first results of reduced taxation in Ontario: an increase in jobs, a positive influence on the economy, for government revenues and for the future job prospects of our youth, the entrepreneurs who will build Ontario's economic future.
Business must be encouraged to locate, or even stay, in Ontario. Allowing the current system of property tax on business to continue would be counterproductive to this concept. Business can no more afford high property taxes than any other group. When one considers that most of the jobs are generated by small business, the current burden is even more unfair. Small businesses can't achieve economies through downsizing as easily as large corporations, nor can they easily pass on increased costs to consumers in the highly competitive markets they face. All businesses, large and small, have already made all the sacrifices they can. Profits have been squeezed almost dry. Property taxes are fixed costs, and those costs can't be reduced, unless one goes out of business, or made fairer except through the legislation that is being proposed.
The apparent current upswing in business confidence and productivity can only be augmented by the proposed legislation in the act. If only the changes to the property tax system were coupled with legislation making Ontario a right-to-work province, Ontario would be well on the way to ensuring its economic future.
The repeal of the business occupancy tax is welcome. Business has long lobbied for the elimination of this discriminatory tax. The possible removal of business property tax inequities between or among municipalities is a positive move.
Under the proposed revisions of the act, municipalities will be able to recover their share of BOT revenues by setting different tax rates for different classes of property, as we read the act. The Nepean chamber is concerned that no data exist or have been prepared as to the potential effects of this change on business within municipalities.
Unless the replacement of tax revenues lost through the repeal of the BOT is carried out under very strict guidelines developed by the province, specific to municipal areas, there is a potential for trouble, and the government must not shirk its responsibilities in this area.
The Nepean Chamber of Commerce believes that specific, enforceable regulations must be developed by the province to ensure that revenue lost through the repeal of the BOT is not replaced by other taxes, real or hidden. Municipal governments must replace current BOT revenue through methods other than taxation.
We all know that taxes targeted against business are job killers, and all of us also know that municipalities generally, with a noticeable exception in the case of the city of Nepean in this region, have not been able to keep control of the current property tax system. The province must take control; to do otherwise abdicates responsibility.
The Nepean Chamber of Commerce supports the concept of the Assessment Review Board in determining the outcome of disputes over property assessment or classification. This process is far more equitable than the current OMB process.
Other issues are entangled within the provisions of the act that have an impact on property tax: downloading of social service costs to municipalities, uploading of education costs to the province, downloading of road systems maintenance. These are not issues that can be decided or enacted in isolation from the potential impacts of the act. Provisions must be developed and included in the act that deal with these entanglements.
In conclusion, business is and must continue to be the prime economic generator for this province, and the proposed legislation goes a long way to improving the current situation. The Nepean chamber supports the proposed act, but we have some concerns, which we've outlined. We anticipate these concerns will be addressed during committee deliberations and in any potential revisions to the proposed legislation.
The Nepean Chamber of Commerce will continue to exercise due diligence in regard to the progress of the proposed legislation, and we will continue to make our voice heard on behalf of business. Thank you for your time and attention to the presentation.
I'll just take a minute to introduce my colleague Buck Arnold, who is president of our chamber of commerce.
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The Acting Chair (Mr Joseph Spina): Thank you, Mr Wilson and Mr Arnold, for the presentation. We have about three minutes each, and we'll begin with the government side.
Mr Jim Brown (Scarborough West): On page 4 of your presentation, you say, "Municipal governments must replace current business occupancy tax revenue through methods other than taxation." Can you elaborate on that statement?
Mr Wilson: As Ms Monkman said, we don't want this to be a replacement of taxes. We've got to reduce tax on business, so therefore, get it through restructuring, redownsizing, this sort of thing. There's one excellent way to achieve it in this area, and that of course is to eliminate regional government and just create three municipalities, and then we don't have all those costs; it's a tremendous savings for current payments that way. But we have to wait and see what's going to happen there.
Ms Bassett: I'm glad you say the repeal of the BOT is welcomed. Business has long lobbied for the elimination of this discriminatory tax. Is it universally lobbied for, the elimination of the BOT, in this area?
Mr Wilson: I think I'm on safe ground there. I was talking with Catherine Swift from the Canadian Federation of Independent Business, and that is indeed her opinion, that it has long lobbied to get rid of this particular tax.
Ms Bassett: Have businesses said consistently that it was an unfair tax?
Mr Wilson: Yes. You can take a look at any business, any major business or any small business, and they will say it is unfair; the way it's applied too, in some cases.
Ms Bassett: The new system should reduce those inequities.
Mr Wilson: Well, it depends on how it's going to be recovered too, because I don't think we've ever seen municipalities lose tax revenues easily.
Mr Phillips: You're the NCC, are you?
Mr Wilson: No, we're the Nepean Chamber of Commerce.
Mr Phillips: I know. I'm just kidding.
Mr Buck Arnold: Yes, we are the NCC.
Mr Wilson: Don't we wish we were, in this area.
Mr Phillips: Everybody says the business occupancy tax is a bad tax and all those sorts of things. But here's the situation you face: Every single municipality we've talked to has said: "Frankly, we just can't give up the revenue, as much as we might like to. We are going to have to recover it." Every single one has said they will recover it. Nobody said they were going to put it on residential property taxes; it's all going on commercial and industrial.
When we pass the bill, and it will be passed, we have to deal with the implications. Business should not be surprised when the business occupancy tax is recovered 100% off commercial and industrial. It will shift by business, because if you're paying a high business occupancy tax now, you'll get a good break; if you're paying a low business occupancy tax, you'll probably get increased taxes.
CFIB, the Canadian Federation of Independent Business, expressed real concern about this. They said that ironically this will lead to increased tax on small business. We have to ask -- we don't have to, but we do in opposition at least -- "Where does this lead? Here's the result." The Nepean Chamber of Commerce is going to accept that. You may say, "Well, we don't want that to happen," but if we're told by everybody it is going to happen, we've got to at least be honest with you.
What will your members say when the business occupancy tax is put on to the realty tax and small business pays more and large business pays less? Will they be happy with the situation --
Mr Wilson: I rather doubt that.
Mr Phillips: -- or angry?
Mr Wilson: I've tried to outline here -- and it's as much in answer to your question as it is a point to be made -- that in fact it's time we don't replace these sorts of things. If there have to be services cut, then it's time they were done, period. If you have to replace it all, then there's something wrong somewhere. I think there are savings to be made still in terms of downsizing. If you could take this area and reduce it to 12 politicians, locally elected, in terms of running whatever it is, what a marvellous saving it would be, and they wouldn't have to replace all the lost revenues, because they wouldn't have so many expenditures.
Mr Phillips: You're making the point that the city of Ottawa made earlier this morning about the need for communication. I know what you'd like. We're told, though, that the municipalities are going to have to recover the revenue and it will be put back on business. If that is going to be the outcome of the bill, have you any suggestions how we might revise the bill to make you more comfortable?
Mr Wilson: Just give us some facts and figures first so we can make up our minds.
Mr Phillips: I'd like that too.
Mr Wilson: I think that's one of the points we've made, to get some information.
Mr Phillips: That would be good.
Mr Pouliot: Good morning, gentlemen. The subject matter, as an aside, as a side show of fewer politicians, be it at the school level, at the provincial level and the municipal level as well, has been reduced. A great deal of effort has been channelled that way, so I think this issue should be domiciled elsewhere for a while, with respect. I know there are still too many, Mr Wilson. They're a much-maligned profession. It's a vulgar trade that some of us exercise, but it has to be done. The alternative is not to be contemplated.
I will not go to the right to work or the right to a job in your presentation. I had written "Alabama," but that's for another time and another session and debate.
The people you represent, your membership, is comprised mostly of medium and some small business?
Mr Wilson: Yes.
Mr Pouliot: And some large, but they would be, naturally, in the minority?
Mr Wilson: Yes.
Mr Pouliot: When you converse with them, are they under the impression that they will get a property business tax decrease?
Mr Wilson: Some of them, yes. I think they're looking for a decrease in occupancy taxes, period.
Mr Pouliot: You heard Mr Simons, the previous speaker, speaking on behalf of all the clerk-treasurers and administrators of Ontario.
Mr Wilson: Yes.
Mr Pouliot: He said today, as they tabulate the numbers, there might be a little padding. You do that when you don't have all the answers. But he hasn't heard one municipality that says this is revenue-neutral. It's all going to cost money.
In the political world -- and I don't wish to impute motive here -- if you have small businesses and if you have housing -- politicians can count votes; in fact, they excel at it. If they could vote early and more often, it would only serve their trade. Who is going to win in this debate? Is it going to be the commercial or the residential?
Mr Wilson: I don't think we should look at a win-lose situation. I don't believe in that kind of philosophy and never have. But to borrow a phrase you used, to not proceed with this legislation, I would hate to think of the alternative.
Mr Pouliot: Okay, that's fair. Thank you.
The Acting Chair: Thank you, gentlemen. We appreciate your time.
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DELTA ENGINEERING
The Acting Chair: Our next presenter has just arrived, and that is Delta Engineering, Mr White. Thank you for joining us.
Mr Jeffrey White: I'm sure you are all more used to sitting in front of these poky little high-tech things; I'm not. I'm used to making myself heard, as a small business man. This morning, if I may stand, I'd appreciate that.
The Acting Chair: We would ask that you stand near the mike so it can pick you up.
Mr White: First of all, let me say thank you for the opportunity. I am a small business man. I'm the CEO of Delta Engineering. We are a systems research and development company here in Ottawa. We've been around for 35 years, or at least I have been. I will make a verbal presentation to you this morning and submit within 48 hours a written summary of my comments. The reason I do that is because if there are any questions, they should be included in what my responses are, accordingly.
As a small business person, let me start by saying there is a pervasive attitude in the public sector, and the private sector somewhat, that companies and businesses are awash with cash. All you have to do is answer the phone for all the charities that call me every week.
Secondly, I believe that governments feel the same way, that we are awash with cash. Upon the announcement of the elimination of the business occupancy tax recently by the government of Ontario, the assistant finance commissioner of the city of Ottawa stood up in public with the maximum of arrogance that could ever be mustered by a civil servant and said, "Well, we'll just have to get it from business some other way."
If you check with the Bank of Montreal, they will tell you that 5% of the companies they handle in bank accounts do not have what they call active lines of credit because they have a surplus of cash; another 5% are not capable of mustering lines of credit; and 90% of us function on debt, basically, lines of credit. Need we exemplify the strength of the banks and their growth over the past few years? That is one of the factors: We borrow money to stay in business. I don't like borrowing money to pay taxes, and I don't like to subject myself to this type of arrogance as expressed by the assistant finance commissioner of the city of Ottawa.
I am speaking in favour of the elimination of the business occupancy tax. The direction of the government, as outlined by the provincial Treasurer in the Legislature, is absolutely correct. The reasons given by the Treasurer for the elimination of this outrageous, indiscriminate, unfair, excessive and unconstitutional tax are absolutely correct, so I won't go into that aspect of what he has said.
It is a small merchant, storefront concept of taxation, charging the most tax to the occupant of property that appears to have, apparently, the most advantageous position. If you read the act and if you read the business occupancy tax aspects of the assessment of various types of business referred to by the Treasurer, you will see that it is from the early 1900s and it's the storefront concept. The second-storey chap pays less and the first-storey chap pays more because they were all basically guild merchants of a type, and the tax reflects that. It is completely out of date today.
Look at the company I run. I run a company that spends about 25% to 30% of its revenue, and that revenue is for research and development. That's extremely high, and that is our business: solving unique environmental problems for clients who have specific problems and building systems that have never been built before. I point to the sewage treatment plant in the town of Westport, Ontario, as a prime example of that. We just recently finished that.
I have personal experience in this matter in a running gun battle with the business occupancy tax, the system, the assessor's office and, God help us, the city of Ottawa finance department. As you are aware, another tenant could occupy my premises, do 10 times the business, employ twice as many people and pay half the tax that I am paying. A business colleague who has a business not 500 metres away from me owns three acres of land, has 12,000 square feet. He is a fabricator and a manufacturer and should pay 60% of the assessed value; I'm assessed at 50%. His annual BOT is $3,300 a year and mine is nearly $8,000, and damn it, am I annoyed at that. That's not the only one. There are many others that I have checked. I'm quite prepared to actually provide the details except that my colleague probably wouldn't appreciate it. He obviously has a better deal than I have. But that is the inequity addressed by the Treasurer. I occupy less than 5,000 square feet, own no land. I'm assessed as an engineer and I pay $8,000 per year while my business colleague pays $3,300. This is a truthful indication that the government is moving in the right direction to solve this problem.
To those members of this committee who represent former governments, you had an opportunity to fix this, because I've been complaining since the last two governments were in power and I have been bloody well ignored, and I thank you for this opportunity. However, I did know John Robarts, I used to sail with him, but in those days the tax was so minor, we didn't care. In the city of Sarasota, Florida, they have a maximum business tax of $300, referred to from the turn of the century, maximized at $300, as a conspicuous assets tax. Every business pays it, and gladly.
We have concisely and clearly articulated this injustice for years, as I've said. However, this committee and the government must ensure that they do not fall short on this matter with respect to the pillars of these injustices: the assessor's office and the municipal financial officials.
The Treasurer's remarks refer to working out any assessment anomalies or disagreements with the assessment office. Often this is an impossibility. In my case, the assessor's office is 60 metres away from the window of my office. I personally have measured it. My experience is that they are the laziest, most incompetent group I have ever observed. We have a little sign on the inside of our office that's a joke, "Do not step outside this door without looking to your left," because they don't go home at 4 o'clock, they evacuate between five to 4 and 4 o'clock. I wish they could see my people go home at 7 and 8 and 9 o'clock at night and so on, which is the indication of a modern small business.
Together with a bureaucratic arrogance that now permeates the Ontario civil -- what happened to the civil service in this province?
Mr Richard Patten (Ottawa Centre): It's disappearing.
Mr White: That's maybe part of the problem, but there's a different attitude than there used to be. I think we have to restore that and that means meeting them halfway, possibly. That sounds funny maybe, coming from a business person, but that would be my advice.
Together with a bureaucratic arrogance that now permeates the Ontario civil service that they are all-powerful and untouchable and a completely uncooperative group, the assessor's office, that has little or no intention of tolerating public interaction or confrontation -- it took the assessor's office, 60 metres away from my office, three years, when we moved in in 1987, to get the square footage right so the assessment basis could be looked at.
Secondly, as we are a research and development company, we clearly qualified for "other" under the act and the lowest level of taxation, which would have taken us down to the 25% or 30% level. The assessor's office refused, after several applications to them directly, to come to our office and see that we were not a manufacturer. They heard or they read in one of our brochures that we did software. Software represents less than 1.5% of the total revenue of our business. In fact, anybody in the high-tech field today has software of some type involved, because if you don't, you're not in a high-tech business, and we're in the high-tech environmental business. Because of that, we estimated 1.5% of our revenue is software, which is a small part of what we actually do, which is primarily unique environmental circumstances, they classed us at the time with Cognos and Corel and classed us a manufacturer. If anybody would like to see, I have a letter here from the assessor, and that arrogant SOB -- and I referred to the status --
Mr Pouliot: Mr White.
Mr White: You'll have to excuse me, sir, but this is a matter of passion with me now because I should be in my office actually making money instead of talking to you, because you are on the right track. But the simple fact of the matter is that the man classed us as a manufacturer.
It was then that we perceived that there was an attitude in the assessor's office, and this is what I am saying. It's not just the legislation, but it's to go further than the legislation to make sure that this attitude is eliminated. The simple fact of the matter is this: Their attitude was to assess you at the highest possible level, throw you into the appeals process, which costs tens of thousands of dollars, and leave you to float on your own and then their backs are covered.
Was that an instruction from their political masters to assess at the highest possible level or is there an instruction from their political masters to clearly be reasonable? When I was assessed as a manufacturer -- you have to see my office. It is not a place of manufacture at all. Out of 30 people, I only have two who work on software, and they're part-time.
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To that, the local financial officials of the city were most unhelpful and unsympathetic, pointing to the assessor's office as the cause of my problems. Then they played this game of wait and penalize, while we had a lawsuit going for the last nine years. Wait and penalize. I should have paid less than $20,000 over the last nine years for the space I occupy, in fairness, in balance to my colleague. Instead, I am now in the middle of paying $100,000.
Ladies and gentlemen, do you know what I can do with $100,000? I can create seven jobs. On a one-time start basis, that cash would create seven more jobs. Instead, I'm paying it to the tax people of the city of Ottawa, who point to the assessor's office, which over the past several years has clearly acted in bad faith. I appeal to you: Incorporate into the legislation, which is moving in the right direction, the elements that are required -- it's going to take some finesse -- to ensure that this act and these acts of bad faith are not permeated on business after business after business.
The word "incorporation" is to provide a corporate body or a corporate entity to the intrinsic circumstance of a corporation. It is, according to the law, supposed to have the same rights, yet we pay 14% plus on the assessed value of real estate; we pay only 9.76% on the basis of domestic -- your home -- and private real estate. I don't think we have been justly treated. The elimination of the act is essential. The finesse must be in the legislation to ensure as well that the local municipalities, after any appeal to future legislation, should move quickly.
My recommendations are as follows, if I can just terminate this thing, because I'm only going to get more excited:
Proceed with the bill. You're on the right track, so I speak in support of it.
Reorganize the assessment office from the top down. Give them some leadership. It's numbing to watch these people, and I have personal experience of watching them every day. I went through the OPSEU strike as well, which was a hell of an experience, having to fight to get on to my own property.
Establish local appeal tribunals in the regions at arm's length from the assessment office and make sure they deal with these things quickly and promptly.
This is a touchy one: Insert bad-faith legislation to remove legal protection from government employees who misuse their power and positions and authority and are proven to have acted in bad faith. If nothing else, that will put an incentive right where it belongs.
Insert legislation to force the other pillar of discrimination, the local municipal finance officials, to act on any disputes within 90 days of the decision of any appeal. The city of Ottawa, I now realize, deliberately strung us out for years. When you add all the penalties, in spite of the fact we had a lawsuit going -- I would suggest that if a lawsuit is in effect, any appeals and everything be stopped until the damn lawsuit is settled, because that is your basic right as an individual. That, of course, is another problem.
My concern is with the continuing permanence of high-handedness and bad faith that we've experienced. While the BOT may be eliminated, assessments, collection of taxes and expenditure of tax dollars by these same people continues ad nauseam. Commercial real estate values have plummeted. B and C class real estate chokes the market. It is a good time to buy and expand and create more jobs, but municipalities are again balking at readjusting the taxation levels established in more buoyant times. This is not fair. You can't have it both ways. If you're going to take market value, then market value clearly, as the Treasurer has said, is what the damn property sells for. That is essential.
We have to fight again and again and again to obtain fairness. The new legislation, ladies and gentlemen, must reflect these realities. Thank you.
The Chair: Thank you very much for a very spirited presentation. We have about two minutes per caucus. Would you start us off, for the Liberal caucus, Mr Phillips?
Mr Phillips: I appreciate the presentation. My colleagues tell me your business is very successful and you do a great job at it.
Based on your comments, I gather you're quite pleased that the assessment department will be turned over to the municipalities as part of this procedure. Is that something that you think is a substantial improvement, that the city of Ottawa now will handle assessment?
Mr White: Yes, absolutely. I think that generally the trend of legislation -- if you run a business with your head down, it's sort of like the way the Russians used to play hockey. We used to love to play hockey against them because, man, did they take a hit when they skated fast with their heads down. The opportunity to deal with this on a local level is absolutely the best route we can go. I commend the government for doing this. This is essential, because it means we can get at them.
Mr Phillips: It sounds like you've got a good relationship with them.
Mr White: Yes, sir. Absolutely.
Mr Phillips: The BOT: You're cheering them on with that and I understand that. I know you won't like to hear this, and I don't want to get you excited, but every municipality has told us -- and the dreaded assistant deputy here said the same thing, because that may be reality -- the business occupancy tax is going to have to be recovered. That's not something you want to hear, but most municipalities have told us they're going to have to, and they're going to put it on to commercial-industrial.
Mr White: It's already --
Mr Phillips: I know you don't want to hear it. I'm reporting the news. I'm the messenger. That's what they tell us. What it means is that your friend at 60% is going to come down and maybe some of your friends at the lower end may go up, but there'll be a reshifting. I know you don't want to hear that, but that's what's going to happen. Do you think we should be doing anything at all in the bill to try and manage that? Everybody says you've got to get rid of the BOT, we're all with you on that, but just to manage the transition?
Mr White: I did allude to this and I said there is a fundamental inequity between commercial real estate and residential real estate. All right? It's in the best interests of the community that the businesses function. We create the jobs and we are creating the jobs. Yet this pervasive attitude of -- why hit the business? It's an attitude from city hall, from the provincial and federal governments, that we're awash with cash. We are not awash with cash.
When you have a new business like ours, in the sense that we have gone into new technologies of recent date -- we have borrowed. We've spent all the profit and we have borrowed to go into this. We can't tolerate these additional taxes. So if you take it away with one hand and hit us back with another, that will equalize it somewhat, but it's not acceptable. What I'm saying too is it should be spread right across the board because everybody in the community benefits, in any sense, and it is more equitable, and quite frankly constitutionally more equitable, if there is any value to the rights of a corporation vis-à-vis the rights of an individual.
Mr Pouliot: Thank you, Mr White. I cannot picture a worse nightmare than being an assessor entering Delta Engineering with you on the property, sir. That must be some fate for the poor person who would venture there. It would demand a lot of courage.
Mr White: Only when they take my parking place, sir.
Mr Pouliot: That's fair. Under the proposed legislation, Mr White, council would have access to a class tax. Simply put, do you fear that what you would gain by the elimination of the BOT, you could end up losing by the ability of council to petition, to make application to establish, to get you under a different tax? So when all is said and done, you would have scored what is referred to -- in our party we call it a moral victory, but when you look in your pocket, Mr White, you will perhaps not be richer nor poorer.
Mr White: That's like paying an unfair parking ticket or something like that, I suppose, and saying it's cheaper to pay and walk. I'm not in business for that reason. If I was in business for that reason -- hell, I've got to tell you something, sir. The province of Ontario is a hard place to do business because of the bureaucracy and because of the rules and the regulations. There's an army of civil servants out there trying to save us from ourselves and they're not doing a very good job of it.
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The province of Quebec very often looks more attractive to us from a business point of view because they're at least on a little bit of a leading edge. But when you look 45 minutes south of here, across the US border, where 80% of our business is carried out, it looks even more attractive. So I'm here for a reason. God, I'm from Vancouver Island and I live in Ottawa. That's the anomaly of the century. But I'm saying to you I love this community, I love this province and I love this country and I'm going to stand and fight one battle at a time, sir.
You're absolutely wrong about the assessor. We eventually got him into our office, because his associate, his assistant, phoned one of my clients in the United States and identified himself to my client and demanded to know what kind of business I did in the United States with this client, because it was in one of our brochures. Think of the arrogance of that, but also think of this: In having done business with that client for 12 years, every year up to that point, I have no longer done any business with that client. Put yourself in that client's position, receiving a call from the tax collector -- "What the hell is wrong with Jeff White's business?" That kind of arrogance -- and Mr Falkena, his supervisor, came into my office and he justified it and then he looked me and my lawyer and my financial advisers right in the face and said, "I don't make mistakes." Well, he made a big one. I haven't slashed his tires yet, but that's always a final resort. But you understand what I'm saying? He wasn't afraid and he shouldn't be intimidated. I am a reasonable man but I only have a few moments here to express the passion of 10 years of fighting this thing. I am damned annoyed and I'm not going to take it any more. You are on the right track.
Mr Jim Brown: Mr White, what a great presentation.
Mr White: That's my business.
Mr Jim Brown: I had a small manufacturing company and sold it when I got into office. You have said what so many of my colleagues in business have said. You said it so well. I only wish there were more small business people who took the time and effort to come and make presentations as you did, because then maybe the bureaucrats would get the message. They're not getting the message and I agree with you completely. Eighty-five per cent of all new jobs are created by small business and I agree that $10,000 worth of capital in your hands will create one new job.
Mr White: Once, yes.
Mr Jim Brown: It'll take Chrysler $200,000 to create one new job.
Mr White: Bombardier too.
Mr Jim Brown: Yes. You are the job creators. For the government and the municipality to treat you shabbily, as they have, that is self-defeating because we will not be generating jobs.
Mr White: What I'm concerned about is that you're on the right track, but the finesse of the legislation must go beyond the words of the Treasurer in dealing with what I feel is the assessment.
Mr Jim Brown: I have about the same view of bureaucracy as you do, and I'm closer to it, so I have bigger problems than even you do. The minister said: "This spring we plan to introduce legislation to enable municipalities to set lower tax rates on lower-valued commercial properties. Municipalities will be able to choose to tax properties, such as small retail stores and neighbourhood shopping centres, at a lower rate than office buildings and large commercial developments."
What he's saying is basically that small and medium-sized enterprises would get more favourable treatment, as they do under the business occupancy tax. However, part of the problem is that that's going to be left to the municipality to decide.
Mr White: That's good.
Mr Jim Brown: You think that's good?
Mr White: Yes, sir, I do.
Mr Jim Brown: The guy who said to just tax you?
Mr White: It's a step, but I think you'd better finesse the legislation.
Mr Jim Brown: Would it be better if the province set that category?
Mr White: Once and for all? Possibly, but it's got to be with the resolve of upgrading it on a regular basis, as the Treasurer has stated clearly. I don't think there would be any disagreement on any side of the political fence in this that the act does not reflect the reality of what business is all about: the high-tech sector, the predominance of export, to be the success of any business at this particular juncture.
That's why a British Columbian like me is here, although things have changed in British Columbia, because of the Pacific Rim activity now and so on over the years. I came to Ottawa and I came east because this is where the centre, the heart of this country is and business in the United States as well. That's why I'm here. But I have to say to you that if you put it on a local level, that's a good move. At least we can get at them.
I want to correct one thing you've said. I don't have a wide view of the bureaucracy that way. I have very good relationships with many elements of the bureaucracy, particularly in the environment ministry, who have worked and helped us develop this technology with great enthusiasm over the past 17 years that we've been working on this one technology. But when it seems to come to taxation, it somehow brings out the best in all of us, so we show it. Consequently maybe we are a little more aggressive, maybe we've got to tone it down, but we must perceive fairness and we must have access. I don't want to sit in front of the mayor of Ottawa and get a rationalization of the damned good job he or she has been doing. What I want to do is deal with the facts. We're too damned busy. We're working Saturdays and Sundays and late hours.
Mr Jim Brown: I know it.
The Chair: Mr White, thank you very much for a very spirited presentation. We certainly appreciate you taking the time.
Mr White: Within 48 hours I will submit this to the committee in Toronto. I thank you again for the opportunity.
The Chair: Is the Ottawa Business Improvement Area present? No.
TOWN OF HAWKESBURY
The Chair: Perhaps we could ask the town of Hawkesbury, Mr Bessette, to go out of turn and give his presentation at this time. Thank you very much, sir.
Mr Raymond Bessette: Good morning, ladies and gentlemen. This will be a fairly short presentation. I just want to talk briefly about the impact of Bill 106 on business tax revenue.
As you all know, Bill 106 will result in some changes in the Assessment Act. One of the significant changes will be repealing the current section 7, which currently provides for business assessment to be computed by reference to the assessed value of the land occupied for business purposes. It will be replaced by a new section 7 which prescribes classes of real property, and these new classes are: residential/farm, multiresidential, commercial, industrial, pipeline, farmlands and managed forest. Nowhere in there are there any business taxes.
This definitely has some impact on Hawkesbury and I would think any other town or city. First on the positive side, this means the problems associated with collecting business tax revenues will be a thing of the past. As you all know, due to the difficult economic conditions there is a significant amount of tax arrears -- we see this in Hawkesbury and I'm sure this is the same situation just about everywhere -- both real property and tax. In the case of real property, these uncollected revenues are considered hard revenues, and that's because the Municipal Act allows us to register a tax certificate against the title of the property once the arrears have reached three years. If within one year of issuance of the certificate the cancellation price, that is the cost of all your taxes and interest, hasn't been paid, then the town may sell the property and recover the taxes.
But we don't have that option on the business side. On the business side we consider them soft revenues. We must manage them fairly closely to ensure that we do in fact collect them. A measure we have to take, for example, is the use of bailiff services to distrain goods and hopefully to collect and recover taxes. In the case of bankruptcies quite often we have to write off those taxes, and this can add up to a significant amount of money. From that point of view, the fact that there are no business taxes, all taxes will be real property and therefore will be hard revenues for us and make it that much easier to collect them.
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The less positive side, however, is that we're now facing a loss of business tax revenues in the order of 15% for Hawkesbury. For us it's $772,000. I don't know if 15% is an average rate everywhere, but for us 15% is a very steep price. Given all the pressures we're facing right now, the major cuts in subsides, it's clear that we can't absorb this kind of shortfall. What it is going to mean is that an equivalent amount will have to be generated from real property taxes. The question then becomes, how will the burden be distributed?
Assuming that the range pertaining to industrial and commercial properties prescribed in the regulations allows it, the tax levy for these classes should be increased by an amount equivalent to the business taxes previously levied.
For the business owner who also owns the real property, there is basically no change in the amount of taxes levied. It simply means he's going to get one bill, which will be his commercial taxes, as opposed to his commercial taxes and his business tax. In theory there will be no change in the amount.
In the case of a tenant business it's assumed then that the real property tax increase would be passed on to the business owner by the property owner simply by increasing the rent or lease by an amount equivalent to the taxes that will be increased.
Our point here is that it's extremely important that the rate prescribed for industrial and commercial properties be such that it will permit recovery of business taxes, otherwise our only option will be to increase the rate of all classes of property. In our minds that would mean it would be a subsidy, basically, from the residential property owner to the commercial property owners. Again, for us it's important that the restructuring be such as to allow full recovery of those taxes.
Another related issue is the fact that the rate on commercial and industrial has to be uniform within the county. We think it could be detrimental to a town like Hawkesbury, for example, when the county is mostly rural and we are fairly industrialized by their standards. So we think that perhaps towns should be allowed to set their own rates.
I thank you very much. Are there any questions?
M. Pouliot : M. Bessette, bonjour. Je vous remercie. Je me souviens de quelques visites au fil des ans chez vous à Hawkesbury. C'est un beau pays, n'est-ce pas ?
M. Bessette : Effectivement.
M. Pouliot : Donc la vie est belle à Hawkesbury, malgré tout ?
M. Bessette : La vie est merveilleuse à Hawkesbury.
M. Pouliot : Je vous remercie, M. Bessette. The last paragraph on the first page of your presentation to me indeed tells a tale. It focuses the presentation on the fact that business assessment, and I quote from your presentation, "generates approximately $772,000," simply put, "15% of tax revenues." You operate a fairly small shop, and I see by the ratio, by the proportion of taxes, that 15% takes on extraordinary proportions. It is indeed a large sum. You deal on a daily basis with streamlining, with downsizing. You've done this over the years, I take it?
Mr Bessette: In fact, based on the major subsidy cuts, that's what we've had to do. We've had a very small tax increase in the order of 2% this year and everything else has been absorbed through cuts, and we are very close to the limit with the cuts we can impose.
Mr Pouliot: Would it be fair to say that through recent years every department has come under very close scrutiny? If there was an opportunity to encourage someone to retire, bridging arrangements were made, so you're really lean now, aren't you?
Mr Bessette: Yes, we are lean. We still have an ongoing early retirement incentive program but we are, again, getting very close to the line where we're either going to have to cut services drastically or increase taxes.
Mr Pouliot: So you would be hard-pressed to make up 15% through a normal rate of attrition, through downsizing or through better efficiencies?
Mr Bessette: It would be nearly impossible, sir.
Mr Pouliot: I see your mayor is behind you and he's watching you and listening very intently to what you have to say, and you can make this a short drive back home or a very long drive back home: "Oh, there's only both of us here. Why don't we do this candidly? Where are you going to take the money from? Are you going to find a way to go to another class tax?" What the business people will gain on the one hand they'll have to give back to the office with the other hand, because surely there's an election. Are you running again next November? It's either that or you pass the buck, or the bill, I should say, to the property taxpayers, and since there are more votes -- I mean there are more property taxpayers than there are businesses, and since you represent everybody in Hawkesbury, where are you going to take the money from?
Mr Bessette: What we're hoping will happen, as I said in my brief, is that the rate structure will be such that we will be able to recover the business tax from the people who are basically paying it now. If the commercial and industrial rates allow us to do this, that's exactly what we're planning on doing, so there should be very little impact. I guess our point here is to ensure that the rates are such that we will be able to do this.
Mr Pouliot: So using the mill rate when you blend both the residential and the commercial, the bottom line shouldn't change?
Mr Bessette: That's what we're hoping for.
Ms Bassett: Thanks for your presentation. I just want to make sure it's clear that you understand the municipalities are going to have the option to decide whether or not you want to recover the revenue from the lost BOT and you will be able to spread it over the classes you want. But maybe different municipalities will have different focuses. Some will want to make sure business taxes stay low, so they may not put as much on as they want.
Also, the minister is giving the option for municipalities to create a two-tier structure, so you will be able to take and protect smaller businesses with a lower rate, where banks etc will be able to be taxed at a higher rate. Do you think that municipalities will not understand and take that to heart and realize they've got to put in a tax system that works for everybody?
Mr Bessette: Obviously that's exactly what we're hoping to achieve, but our understanding is that the county in many cases will have to make those decisions because the rates must be uniform within the county. In a county like Prescott-Russell, for example, there was a great disparity between towns like Hawkesbury that are fairly industrialized and the rest of the county that with some exceptions is mostly rural. Perhaps the rate set by the counties would not be the rates that we would set here.
Mr Rollins: One of the things you've alluded to is that assessment being distributed around. There is going to be a fund to assist those municipalities that haven't got that commercial base to fall back on to be able to soften that over a period of time. Do you feel that your BOT should be stretched out across everybody, the residential as well as the commercial, or do you feel it should just go on the commercial?
Mr Bessette: We feel it should be commercial. In other words, we should recover it from the people who are currently paying the business taxes, whether through directly property taxes or indirectly by increased leases or rents from property owners.
Mr Rollins: We've heard some presenters, and I think you probably were in the room when the last presenter was here -- he felt it should be put over everybody because he is the individual or the commercial person who's creating that new job and that they would be at a better advantage to be able to spend some of those tax dollars in creating more work. Thank you very much for your presentation.
Ms Bassett: Other presenters have made the point that perhaps municipalities will be able to cut their spending to some degree too. In addition, with the lost revenues on BOT of $200 million that we can't collect, there's going to be a pool of money there. Do you feel it's possible for your municipality to cut back its spending?
Mr Bessette: We are very aggressive in cutting back on spending right now, but we have to absorb not only the business tax but also the major loss of subsidies from the province, which for us is a significant loss.
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Mr Patten: Mr Bessette, we're talking about redistributing taxes here. In your opinion, who is really going to benefit and who is going to be faced with an increased burden?
Mr Bessette: We're hoping that the restructure will allow us to not change the balance right now of who's paying what. We don't want to see residential taxes increase simply because of business taxes. What we would like to see is that the people who now pay the business taxes pay the new tax. In other words, at this point we don't wish to redistribute the tax burden.
Mr Patten: There are some businesses hoping they're going to get a tax break. Which are the businesses that are going to get a tax break on this?
Mr Bessette: At this point we don't know. Probably the small businesses that are operated from homes are the people who are going to fall through the net and get a tax break. But our intention is to leave the tax mix as it is.
Mr Patten: Would not businesses that are renting premises be faced with increased costs?
Mr Bessette: Yes, they would be. What we're hoping is going to happen is that the person who owns a real property will pass the tax increase to the tenant in the form of increased lease or rent, and at the end they should be paying no more than they pay now for business taxes.
Mr Phillips: You've raised an issue that's extremely important, and we've not really discussed it at the committee; that is, that the tax ratios are set at the upper tier and you can't deviate from those tax ratios at the lower tier. You're alerting us to a real concern; that is, if you have to live with the county ratios in Hawkesbury, you are going to have to move taxes off business on to residential to recover your revenue. That is how I read the legislation so I think you've got a legitimate concern. I don't have the solution for you, but your concern is extremely important because this is going to happen right across the province where the lower tiers have to live with upper tiers' ratios. I'm just making an observation. That's my observation of the legislation. Is that how you read the legislation?
Mr Bessette: That's the concern we have -- not to say that the county will set a rate we can't live, and not to say that the county will not ask for our input on this. But it is a concern.
Mr Phillips: It isn't that they will set the rate; it's that the upper-limit rate will be established on the basis of the total assessment within the county. Under this law, the lower tier cannot go above that upper-tier ratio. The average tax ratio on commercial for the county will be substantially lower than it is for Hawkesbury, but you're going to have to live with the county ratio, not your own ratio.
Mr Bessette: That's our concern.
Mr Phillips: In my opinion, that's highly important, fairly technical, but none the less a huge problem for Hawkesbury if the legislation goes through as it is, I believe.
Mr Bessette: Yes, sir. That would be a big problem for us.
Mr Phillips: Mr Chair, I guess it will be at our meeting on May 1, but I think we should look at that when that comes forward.
There's a second thing I'd ask. I heard something today that I wasn't aware of, that part of this legislation includes a fund for helping cushion the blow. Mr Rollins mentioned it. I'd like to get the details of that fund that's being made available, because I wasn't aware of that.
The Chair: Surely you were aware of the $1-billion fund that was -- sorry, I shouldn't --
Mr Phillips: Is that for assessment? I didn't realize that. That would be very helpful to --
The Chair: We could ask for confirmation. I believe that would be from the ministry staff that we could have some confirmation of that.
Mr Pouliot: Mr Chairman, by way of supplementary: Are we talking about a fund vis-à-vis specifically dedicated to 106, or are we talking for the other fund vis-à-vis the downloading?
Mr Phillips: It's 106.
Mr Pouliot: That's what I heard too.
The Chair: We'll get some confirmation on that.
Does that conclude your questions, Mr Phillips? You have about a minute left.
Mr Phillips: I think he's raised an exceptional point. The business occupancy tax: We've heard of where it likely will be recovered from, but you no doubt have conversations with your colleagues and other municipalities and what not. What is the expectation of where the business occupancy tax will be recovered? Is the expectation that it will be almost always from the commercial-industrial sector, or are there some communities saying, "We're going to move it on to residential"?
Mr Bessette: I can only speak for myself. From some discussions I've had with my colleagues, we are hoping not to disturb the tax balance that exists right now. In other words, we would like to recover from the commercial.
The Chair: Thank you very much, Mr Bessette, for coming in and making your presentation today. It's very valuable to have that kind of input.
EASTERN ONTARIO BUSINESS IMPROVEMENT AREAS
The Chair: We now welcome the Ottawa business improvement area. Ms Dannehl, welcome to the standing committee on finance and economic affairs.
Ms Dawn Dannehl: My name is Dawn Dannehl. I'm the executive director from the ByWard Market business improvement area. My colleague Christine Leadman is the executive director of the Westboro BIA. We're actually making a presentation on behalf of the eastern Ontario BIAs.
Ms Christine Leadman: Good morning. As Dawn indicated, we are here representing the eastern Ontario BIAs. BIAs are merchant- or business-driven organizations established by a majority of the businesses in a commercial area. Their purpose is to provide an equitable sharing in the costs of the beautification and promotions of its business core. They also provides a mechanism for organizing and financing programs in cooperation with municipal governments that would not be available to independent businesses by any other means.
At this point, we question, why were BIAs required? Basically, it's the lack of participation or financial will of the municipalities because of financial restraint, but also the lack of concern or initiative from landlords. This was the origin of BIAs. The BIA businesses took it in their own hands to ensure or protect their investment in their business and to ensure that the commercial area stayed viable through beautification and promotions.
Over the years, the BIAs have evolved beyond this role. We've become more of an advocacy group to protect the interests of our membership and the ongoing viability of some of Ontario's most historic retail sites. These efforts are really more far-reaching than they appear. They impact tourism, they strengthen the small business employment base, and they also protect the property values of the surrounding communities, because a viable commercial area is very important to those residential bases.
Though some aspects of Bill 106 appear to strengthen BIAs, the legislation precipitates some grey areas in terms of the board of management eligibility, the membership list and the collection of levies. These are the matters we would like to address today.
Ms Dannehl: In keeping with the spirit of a BIA as being a merchant-driven organization, we would like to ensure that the levy is actually passed down to the tenants via some mechanism in the legislation. This is currently not included in the legislation and it is necessary, because a lack of a clear definition of who actually pays the levy creates an administrative grey area for BIAs. When a new BIA is created, clarification will be achieved by the list the landlord must submit to the municipalities; however, for existing BIAs, this list will not be supplied and the information will be extremely difficult for us to obtain.
It should also be noted that such a mechanism will assist with vacancy rates, as landlords will be encouraged to ensure that their properties are filled, to have tenants to allow them to pass the levy on to somebody.
However, let it be known that the involvement and participation of landlords is beneficial. Many BIAs have independently undertaken initiatives to involve landlords, and they must continue to encourage their involvement.
We therefore suggest that the board of management have representation designated to landlords. For example, 70% of your board of management could be allocated towards the actual business owners' tenants, to ensure that it's still a merchant-driven organization, and the remaining 30% could be allocated towards landlords or municipal electives. The very fact that the landlord has the responsibility to collect and administer the levy we feel gives him or her the right to sit on the board.
Other issues that we feel need to be addressed are that for landlords who have properties with multiple tenants, we are concerned with how it's going to be ensured that the levy is equitably distributed among those tenants if it's not based on some sort of assessment as it currently is. It is also important for us to ensure that the levy is a separate line item on the tax bill, to assure tenants that they are only paying the levy or the equitable portion and nothing else.
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Also, one important thing for us in particular: It is assumed that as a result of the elimination of the BOT and subsequent transfer of lost revenue to landlords, municipalities are no longer going to collect or compile tenant lists. Those are what currently serves as the basis for public notification, and what we fear is that it's going to be reduced from all your members to landlords only, though a lot of these issues, whether it be zoning, change in use, whatever, affect the tenants. We'd like to have some mechanism that makes BIAs submit our membership lists to the municipality so we can continue with a proper notification process.
In the event that it is deemed inappropriate to ensure that the levy is passed on by tenants by this committee, at a minimum a mechanism must be in place to ensure that the landlord submits on an annual basis, presumably with taxes, a list of who the tenants are and what taxes are paid -- so not just once, when BIAs are established, but on an annual basis.
That being said, should the recommendation not meet approval, it's got to be noted that landlords are going to have very little incentive to support BIAs. Currently, the tenant is directly assessed the BIA levy. It doesn't impact the rent. With the change, the levy will now be a form of tax passed down through the landlord, and although in reality the actual tenant is paying the same amount -- they still have to pay the levy, they still have to pay the rent -- there will be a perception that the rent has increased. A landlord might say, "I can locate outside this BIA and have a lower rent and attract people to my building." What motivation is there to say, "I can locate within a BIA and have higher taxes"? The perceived rent increase will not be market-driven. It will be the result of a taxation shift.
Ms Leadman: At this point, we would also request some clarification that existing BIAs are grandfathered, from subsections 220(2) and (2.1,) and do not have to be dissolved and re-established under this new legislation. We found this area not addressed in the proposed changes, and we'd just like to ensure that there is some grandfathering for existing BIAs.
That's all. Thank you very much.
The Chair: Thank you very much. That leaves about three minutes per caucus for questions, and we'll start with the government side.
Ms Bassett: Thank you very much for your presentation. I just want to clarify. We all agree that organizations such as the BIAs are very important to communities, and we would hope this legislation will do nothing to impede your success that you've already established. We could follow up and talk about it a bit, but we feel that Bill 106 will not discourage business improvement areas but rather that it will encourage managers and property owners and tenants to have a say in your association because everybody will be paying. Do you not feel this is a positive step? Anybody who's paying a tax is going to want to have some say in how well an organization is run.
Ms Leadman: I agree. As Dawn indicated, we've always tried to encourage landlord participation. This has not been the case, though. We find that landlords are reluctant to participate, generally because they're absent from the area. We've tried to have them participate in programs that have been offered through the municipality, such as façade improvement programs to continue a viable area, and that has almost been nil. Most of the façade improvements that have been done have been done by the retailer on buildings they do not even own.
Ms Bassett: Do you not feel, though, that in the past the tenants were paying the BOT, but now they will be paying?
Ms Leadman: The problem is that the BIA is a merchant association and they feel it is something they have established for the protection of their own business. The lack of landlord participation has been prevalent throughout BIAs for their existence. Merchants do not feel that the landlord works in cooperation with their goals, what they want to achieve through their businesses, but that they usually work at odds.
Yes, it would be great if we could encourage that kind of cooperation for those landlords who do not own a business in the area. Fortunately, in my own BIA the chairman is a landlord; he also owns a business and recognizes that need. But those absentee landlords don't. They're not there and they don't really care. They want to rent the building, and if they don't it's a tax write-off, so for them there really is no incentive.
Our concern is that by putting the onus -- the proposed legislation indicates that the person responsible for paying the levy is the landlord. What we are saying is, make the responsible person the merchant, not the landlord. The landlord is the mechanism through which the tax will be collected, but we would like to see the landlord be required to pass the levy down to the merchant. As the merchants feel they will lose their organization, that it will become a landlord organization, it is therefore not in the interests of the landlord to continue with the BIA and they will dissolve it.
Mr Grandmaître: At present, I believe the BIA levy is considered a special tax. With the new system that's before us, Bill 106, has your Ontario association had a chance to go over Bill 106 to find out how it affects existing BIAs?
Ms Leadman: We do not have an Ontario association.
Mr Grandmaître: It's not set up yet, eh?
Ms Leadman: It was, but it did not survive.
Mr Grandmaître: So you really don't know how BIAs from other municipalities, let's say Toronto or Metro, will be affected by Bill 106.
Ms Leadman: We are here representing 10 of the eastern Ontario BIAs, as listed, as many of the BIAs we could get together with on such short notice. Unfortunately, some of the BIAs within the city itself were unable to get their responses back to us in time, so we did not feel we had the right to put their names there, but they were with us at our initial meetings.
Mr Grandmaître: What about the composition of existing BIAs? You say, if I'm not mistaken, that "70% of the board be comprised of merchants and the remaining positions would be allocated to municipal officials and landlords." What is the percentage of landlords being members of these boards of management?
Ms Dannehl: That honestly varies for every BIA. You can't say there's a flat rate.
Mr Grandmaître: What's the average, though? Is it 10%, 15%? You'd like to see more.
Ms Dannehl: Yes. If you're lucky, there's 10% right now, which on a board of 10 members is one. So within Ottawa, when we went to the two-tier level, we have a regional councillor and a municipal councillor on our board, the balance to be made up from the membership. Now, the membership is the merchant. Should the merchant be a landlord as well and should they wish to participate on the board, that's fine, or should a merchant give authority for someone to act in his stead and should it be the landlord, then they can participate as well. But at the present time, it is strictly a membership-based board of management with municipal and regional representation.
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Ms Dannehl: And you have to keep in mind when you do have a person who is the property owner and a tenant that they are coming to the table with both hats. I don't know how many people come to the table strictly as a landlord right now.
Mr Grandmaître: And you think that's the reason why landlords are not too interested in joining your association or being part of your membership?
Ms Dannehl: You mean because they're not part of the board currently?
Mr Grandmaître: Yes.
Ms Dannehl: No, because quite frankly we'd welcome them being on the board. I think you have different objectives between your merchants and your landlords.
Mr Grandmaître: Well, why are they reluctant?
Ms Leadman: Basically, as I indicated before, a majority of the businesses are usually held by four or five major landowners, and they have quite a few holdings, so their interest in one particular area is just not there. You're looking at a portfolio -- that's the way they view things -- and so what happens in one specific area is really not a major concern to them, and what's happening in the day-to-day activities of a business area. For them it's insignificant in the overall portfolio of properties they hold.
For those smaller landlords who do own property in the area, do take the care and are involved with the BIA -- as I indicated, my chairman is a landlord and we've been fortunate that many of the members in our area, or some of the members in our area, are landlords and have put the investment in their properties because they are retailers or have their business in the area.
Mr Pouliot: Thank you very much, mesdames. It sounds more like a definition of a mutual fund as opposed to intrinsic value of a particular stock, and I like your grouping.
With the elimination of the BOT, the BIA would be hard-pressed to get funding, right?
Ms Dannehl: No. The funding is a special levy that each merchant pays based on the BOT. So the structure on which the levy is formulated is being eliminated, and therefore it creates a problem in that regard.
Mr Pouliot: So unless you're grandparented, you could find yourself in a position where your future is behind you.
Ms Leadman: Yes. I'm just, as I say, going on the proposed legislation that was mailed to us on which to formulate our opinions. All it does is address the formulation of a new BIA; it does not address the position of existing BIAs. And because you're theoretically restructuring the corporation or changing the whole basis on which the BIAs work, is there protection for the BIAs that currently exist? Do they have to be dissolved in order to be implemented into the new formula, or are they being grandfathered? This is what our concern is.
Mr Pouliot: By way of supplementary -- and I must apologize I don't give your presentation the attention that it deserves. I'm trying to locate and situate, and it's the first time I have had the opportunity and the pleasure indeed to be immersed in a group such as yours, so I'm just trying to define the functions in accordance with the bill. And when you speak, with respect, of nuance, you sound like my broker, who was trying to explain to me the intricacies associated with Bre-X mining. So it's not very easy. It's quite difficult.
I sympathize with your presentation. I don't have the answer, but I'm sure the government is listening intently, and if there is a way that accommodation can be made to make sure your mandate is secure, I'm sure it will be done. Thank you.
The Chair: Thank you very much. We appreciate the business improvement association coming in and presenting to us today.
Ms Leadman: Thank you for your time.
The Chair: Our next presenter has not yet arrived, and I don't believe any of the others are in the room at this time. We'll take a 15-minute break and reconvene at 20 after 11. The committee stands in recess.
The committee recessed from 1106 to 1122.
BRIAN MACKEY
The Chair: I call the meeting back to order. Mr Brian Mackey, a councillor from Ottawa-Carleton, is here to join us. Welcome to the standing committee on finance and economic affairs, sir.
Mr Brian Mackey: Thank you for the opportunity for me to appear here today regarding the changes to the property tax system. I'm delighted to be before you, but also to see an old friend, Jean-Marc Lalonde, who I've known for many years and worked with eons ago, I guess.
Mr Jean-Marc Lalonde (Prescott and Russell): I'm not that old.
Mr Mackey: Well, not that many years ago.
By way of introduction, as has been stated, I'm a city councillor from Ottawa, but I'm not here representing the city of Ottawa; neither am I an expert in municipal finance or tax assessment. Nevertheless, as someone in the business with a direct interest in municipal finance, I consider it important to make some points regarding the proposals, albeit in a general way.
My contention is that these proposed changes to the property tax system in Ontario are necessary to move towards a fairer system for both residential and industrial-commercial taxpayers throughout Ontario.
You've heard earlier today from the city of Ottawa's treasurer, Mrs Mona Monkman, that city council is generally supportive of the proposed legislation, as it provides for municipal control over tax policy. This municipal control over tax policy is a critical step for municipalities in exercising local control and accountability, and I stress the accountability aspect. You've also heard from her that we're concerned over the retention of payments in lieu of taxes that are presently collected on the basis of the education mill rates. It is our position that these payments in lieu continue to be a component of the financing of local government for local municipal purposes.
In supporting the changes to the property tax system, I also support the government's position of not allowing municipalities to use the changes as an excuse to raise overall taxes.
I would like to speak in favour of keeping assessed property values up to date, as proposed in the legislation. The annual update recommendation from the Who Does What panel, along with the three-year rolling averages to moderate year-to-year changes, will provide current and consistent property assessment across the province.
Repealing the business occupancy tax established in the early years of the century makes sense to me. How to recover that tax will then become a ratio issue for each municipality and present an opportunity for tax reduction in certain areas. Again, it will put the responsibility in the hands of the local government, where it belongs, in my mind.
Exempting eligible conservation lands from property taxation is, I believe, a progressive step. This incentive may result in less public money being used to buy environmentally sensitive land. As a politician who has seen many property owners treated unfairly by local governments, I support being able to use a carrot in the form of tax incentives to protect land. This may take the stick out of other politicians' hands, who sometimes use zoning to unfairly restrict property owners' legitimate rights.
In the spirit of greater municipal control, the authority to establish a tax deferral system for seniors and persons with disabilities where hardships could apply is also welcomed. I also favour the new dispute settlement process whereby someone in an assessment dispute or classification dispute can apply to the assessment commissioner for a review prior to going to the Assessment Review Board. This will help to simplify appeals.
That's my position. Thank you for the opportunity to bring it to you today.
The Chair: Thank you for coming and making a presentation. We appreciate this kind of expertise. We have about five minutes per caucus.
Mr Grandmaître: I know the city of Ottawa or the regional government have taken an interest in this bill, but how about the cost of setting up the assessment system? You're taking over from the provincial government. Have you looked at the cost involved?
Mr Mackey: I'm sorry that Peter Hume, the regional councillor who was supposed to speak before me, was not here; I would have liked to hear what he had to say and to get that perspective. You heard from Mona Monkman, our treasurer, earlier in the day.
Mr Grandmaître: Yes, and I'm sorry I didn't ask her.
Mr Mackey: That's all right. I wasn't here to hear what she had to say. Council only recently gave the direction for her to come here with the message she had, and as I said, council has said they're generally in support of the proposed legislation. But the answer to your question is, we have not looked, to the best of my knowledge, unless she said something different earlier in the day -- I don't think she's had time to do it, so I don't believe that has happened yet.
I would imagine that whenever you're involved in any type of change, naturally, whether it's downloading or any type of situation where some other level of government is being asked to take something on, it would be important to take a look at those costs to see the impact of that and understand what they are. In the long run, they may well be worth the extra control and accountability that the organization gets from the move. I'm sorry I can't give you a figure or be more direct on that.
Mr Grandmaître: That's okay. I realize that whatever the outcome of the year 2000 and the new Ottawa-Carleton map, whatever it is -- three municipalities, four, or maybe a single-tier government -- it could be a regional responsibility. But I'm concerned that maybe 50% of our municipalities in Ontario won't be able to afford that additional cost, and if there are additional costs, they'll have to look elsewhere for more revenues to pay for that service. That's very, very important.
I realize that AMO has raised that concern, but again they don't have a figure or individual municipalities haven't looked at this. So I'm all for changes, but I don't think too many of our municipalities can afford to take on this downloading.
Mr Mackey: The only comment I could make to that -- obviously I can't speak on behalf of AMO, and I'm not speaking on behalf of the council for the city of Ottawa. But municipalities, in my mind, from what I've seen, differ in their ability to take on additional costs. I just heard in the car on the way over here that Ottawa-Carleton has now surpassed the million mark, the number of residents in the area, making it clearly the fourth-largest area within the entire country. We are, for all of our other faults, a relatively well-to-do area. I think we differ a bit from rural areas, for instance.
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Mr Patten: Good morning, Mr Mackey. A quick question, and that's simply the interplay between the different municipalities in our area. For example, what is this going to mean? Is this going to mean more competition? Is this going to mean differentials, some places more attractive than others in terms of locating across one municipal line to another?
Mr Mackey: It's a bit difficult, Mr Patten, for me to answer that question in any substantive way. In my talks with our treasurer, we obviously raised some of these types of issues as to where they are.
I guess I would contend that the situation, as it is now -- in other areas, there are all kinds of forms of competition, at any rate. I think the real question is where should Ottawa-Carleton go rather than whether this will form another type of change in ratios and rates and mill rates and other sorts of things that alter the competition. It really begs the other question: What's the future for this area? I'm reminded all the time by many people who travel around the world that once you get outside of this area, you don't really say you're from Gloucester or Nepean or Kanata or Cumberland; you say you're from Ottawa. So in my mind I tend to look at it from that point of view and would suggest that I would prefer to see us working together and not having that kind of competition which tends to divide.
Mr Grandmaître: Don't let Ben Franklin hear you say this.
Mr Mackey: Mr Franklin has already heard me say that.
Mr Pouliot: Good morning, Mr Mackey. My name is Gilles and I'm from Manitouwadge -- not Manitoulin, Manitouwadge -- in northwestern Ontario.
Mr Grandmaître, my colleague, has mentioned -- it will become contentious -- the real issue of assessment is that in some cases it's so dated, it's exactly that; it's reassessment if you're more current.
Treasury: The province has allocated fully $62 million to bring the assessment current, to update. One out of one million at the regional level, out of $11 million, would result, if you were to partake in this exercise at present, in $5.8 million to $5.9 million. That's what you would have to fork over to pay the assessor. It's also anticipated that an additional 600,000 appeals will join the ranks of those who have already filed -- it's in excess of 330,000, grosso modo -- bringing the total of appeals to about 900,000. So it's a challenge indeed; it's a problem big time.
Everyone is for change. When it comes to assessment: Not in my backyard unless I can benefit. That almost borders on normal reaction. When all is said and done here, under the premise that it will be more fair, the bigger you are, usually, the more you stand to benefit. That's the formula on which the BOT is based. So when all is said and done at the end of the day, the banks, if they occupy large areas, the large hotels, the large or maybe not so large apartment buildings, the large industrial sector -- I'll give you a real example: In Oakville, which is among the most prominent cities in all of Canada, because of the BOT and because of the very structure of Oakville, car plants will see $18 million shift because it is said that those car plants have been overassessed; they've paid a disproportionate share of the tax burden. So aside from the philosophy, all the niceties and the fairness associated with it, at the end of the day, the large ones will benefit and it comes then at the expense of both the commercial and the residential.
So when we have a parade of presenters, all well-intentioned small business people through their associations, expecting a decrease of the three sectors, they are the ones, Mr Mackey, who stand to lose the most. They don't have the tradeoff of the residential levy. They don't have the voting power nor the lobby of the residents. They don't have the built-in benefits of the industrial. They are the ones we should focus on as a committee, in my humble opinion.
What is your impression when you shake the can and it all comes out? You don't know now. You, as a councillor, will be asked to go on the interim tax levy based on this year. Your fiscal year will start January 1, the province's fiscal year will start on April 1, 1998, and the rules, the new game, not only reassessment -- this is a bagatelle. It pales in comparison to all the new services which you don't have any cost on. You don't know what the cost is.
I'll ask you one question, for instance. If someone is on general assistance and has muscular dystrophy, you will pick up 50% of the cost of prescribed drugs. Are you aware, have you been exposed to the formulary of the Ontario drug program? Do you know about the Trillium drug program? Those are all questions. That's only a small example. You'll be asked to go to the interim tax levy and then, when you final levy comes in, it will be appalling and shocking to cost all those programs. I want to wish you well. My job is a lot better than the one that awaits you. I'd like your comments, briefly.
Mr Mackey: It's a shame that I'm not more knowledgeable of the subject because you've spent so much time discussing different aspects of it that it's very difficult for me. I'm tempted just to say, "Je ne sais pas."
In fairness, on the whole thing, all I can really say to you today is that, as an individual, as a resident of this community, as a resident of the province, as a city councillor looking at and trying to come up to speed in a number of these things and many of these other changes that are under way, my sense is that this is in the right direction. Change is always difficult and I think that obviously a committee looking at things is going through that process of trying to establish how to make those types of changes. I think it's important to continue to move forward and to make the right kind of changes.
I do believe in the aspect of fairness and people argue philosophically over how that gets to be applied. You're right, there can be potential winners and losers. Again, that's a bit of the role of the committee in listening to people and taking those things into account and hopefully exercising good judgement on the whole thing. But I'm afraid that your question went into so many different areas that I'm not an expert in and it's very difficult for me to -- I wish you as much luck on your side.
Mr Pouliot: I've done 12 years or 10 years of your job; that's okay, they're taking the riding away. But, Mr Mackey, Ms Jones, who is 74 years old, lives in your trailer court and she's the one who will be calling you, and I want to wish you well, because those people will do her in with the transfers.
Mr Spina: Thank you, Mr Mackey, for the presentation. I appreciate your inability to answer M. Pouliot's bagatelle of questions. The opposition talked about the cost of assessment. I ask you this question perhaps more as a councillor who could be faced with a voting decision, so please bear with me in that it's hypothetical.
The mindset is that if the province eventually divests itself of assessors, because now the responsibility will become the role of the municipality, suddenly the city is going to have to hire this group of assessors and create an assessment department and have 10 employees or 80 employees running around doing assessments. But the reality is that part of this bill gives the municipality the option. All we're saying in this bill, if I understand it correctly, is that the municipality is bound to do a regular update on the assessment in order to prevent the ignorant situation that took place in Toronto, where they ignored updating assessments for 40 years or more. What we're saying is the municipality has to get into assessment on a regular basis.
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We're also giving the municipality the option of whether it wants to create a bureaucracy of assessors or whether it wants to contract that out. My question to you is if assessment is only required to be done, with the exception of particular cases, every four years, would you be in favour of creating a bureaucracy or would you be comfortable in voting to contract this out on an as-needed basis?
Mr Mackey: We have two things going on in this area almost simultaneously. One is in many of our jurisdictions, municipalities -- and we have 11 municipalities in the region, but certainly the city of Ottawa -- we have been attempting to find ways and means to contract things out. That side of things has been growing with us at the city even to the point of looking at our recreational centres and those kinds of things. The idea of contracting something out is not something that's foreign to us and it's something that I would imagine we would have no problem with. I certainly don't have a problem with it because there are times when it's applicable and times when it's less applicable.
At the same time in this area we are going through, as I was discussing earlier in a small fashion, changes which may lead to a new configuration of governance in the Ottawa-Carleton area. I tend to be the kind of person who looks at the glass being half full rather than half empty. I think there's opportunity that's there for us to make changes that will be fairer and to the betterment of everyone in the Ottawa-Carleton area through potential changes.
I would, as both a local and a regional taxpayer in this area, want my government to look at different ways and means of delivering the services. I expect that. We're doing that; we're looking at that. I hear that all the time from people. The long and the short of it is I don't personally have any problem with that and I think we're so far down the road of doing it already in different areas that it's just au naturel to us here.
Mr Douglas B. Ford (Etobicoke-Humber): Mr Mackey, we had Barbara Hall before the committee a while ago. She's the mayor of Toronto, as you know. We were asking her about the 1942 assessments in various areas. There are some 180,000 items on the books, laws, bylaws and everything else. As we were talking to her, she said there's a patchwork in this type of thing on assessment. Since 1902, there are other things on the books, and 1942. Now we're talking about the BOT, the business occupancy tax. I'd like to get an opinion from you of the shortfall of the BOT and where we do a pickup on that. A dollar is a dollar is a dollar. That's what I'm just trying to tell you and you know that; I don't have to tell you that.
Mr Pouliot: You want 1997 prices.
Mr Ford: That's right, we want 1997 prices. We seem to have a conflict of interest when we're talking to these various people who are in charge of the assessment areas. We've got horse-and-buggy assessments but we need them up to 1997. That's all I'm saying. I'd like to know your opinion on it.
Mr Mackey: I think, and I spoke to it in a general fashion, they should be up to date. I realize that the rolling averages were an aspect of trying to take into account how that may affect people, and also you've got a fairly long phase-in time that takes us into the next century. I don't have a great problem with that.
In our area, we're fairly up to date on assessment. As a former Torontonian and someone who grew up in Riverdale, in the downtown area, I have -- I guess when you go about these kinds of changes, you obviously have some compassion for people who have assessments going back to the 1940s, because that must be quite bizarre. Someone said to me the other day when they were looking at this, looking at the last time the Ottawa assessment was done a few years ago, probably housing values were up, so if they were reassessed now we'd probably be in a much better situation because most of the values are down. Some of it's got to do with timing.
Once again, I take the position of not being necessarily an expert in this, but I do think that as an issue of consistency, and in my mind, of fairness, you should have assessments that are up to date and that should be consistent. I think people need to know that.
Mr Ford: How many years would you say? Every time there's a reassessment, how long do you think it should be between reassessments?
Mr Grandmaître: It's supposed to be five years.
Mr Ford: I'm not trying to put you on the spot. I just want an opinion because we're getting opinions from everybody right across the board here in Ontario.
Mr Grandmaître: The government is saying five years.
Mr Mackey: A gentleman over here raised the issue of what was the cost at one time of different sorts of things that happened, so obviously you want to know these things. I've heard the figure here, the length here of five years. I would like things to be up to date and I suppose that a three-year period may be a reasonable time frame to work in.
Mr Ford: We have many people across the board who say they can't afford the assessments and different things like that. But we've had a discussion on that and wealth comes in many forms. When I say that, it's either in real estate, in pictures or jewellery or whatever it is --
Mr Pouliot: Cars.
Mr Ford: -- cars, automobiles, whatever it is. We were saying that the people who weren't assessed for years upon years, their property values have increased from $2,000, $3,000 or $5,000 for a home way back when till they're $200,000 or $300,000 today, but they still want to pay those old-fashioned taxes and they don't want to have any commitment on the upper values now of 1997. The BOT, again we didn't get an answer on that, but I would just like an answer on that BOT that I asked about.
Mr Mackey: Yes, I'm sorry, on the BOT, I had mentioned in here at some point -- because we don't know that entirely. We have these concerns about grants in lieu and such on that area, but the thinking is that eliminating the BOT may just mean that it affects the commercial side. There's always the residential side of things, but each municipality will have to look at that in different ways. I know that in reading some of the literature the minister has mentioned the possibility of even tax reductions and that may need to come about if in fact it's possible through expenditure reductions. I can't be definitive on that. I'm sorry.
Mr Ford: I understand where you're coming from.
The Chair: Our time has expired. We do appreciate, Mr Mackey, your coming in and making a presentation to us today.
Mr Phillips: We've got you down strongly in favour.
The Chair: Thank you, Mr Phillips, for the scorecard. I believe that completes our morning. We haven't been able to locate Mr Peter Hume. Last call for Mr Peter Hume. The committee will stand in recess until 1:40 this afternoon.
The committee recessed from 1148 to 1340.
REAL ESTATE BOARD OF OTTAWA-CARLETON OTTAWA REAL ESTATE ASSOCIATION
The Chair: We have the pleasure of welcoming the Real Estate Board of Ottawa-Carleton; Mrs Milne.
Mrs Sylvia Milne: Thank you, Mr Chairman, committee. This submission is presented by the Real Estate Board of Ottawa-Carleton in conjunction with the Ontario Real Estate Association, with respect to Bill 106, the Fair Municipal Finance Act, 1997.
The Real Estate Board of Ottawa-Carleton is a non-profit trade organization that represents a membership of 1,370 real estate brokers and sales representatives across the Ottawa-Carleton region. Because of our locale in the capital city, we communicate frequently with politicians and civil servants on a wide variety of issues affecting realtors and real estate generally.
The Real Estate Board of Ottawa-Carleton's comments on Bill 106 reflect our long-held view that Ontario's property tax system should incorporate the following four principles:
(1) There should be one province-wide system that is applied consistently across Ontario.
(2) The system must be transparent, simple and equitable, so that all property owners can understand how their property taxes are calculated, what they pay for, how they compare to similar properties and how to appeal inequities.
(3) Property tax reform should be revenue-neutral from both a provincial and a municipal perspective.
(4) Education should not be funded by property taxes.
Bill 106, in its current form, appears to satisfy these principles, as well as address a number of other concerns. We therefore support the thrust of the bill.
We share the government's view that Ontario's current assessment system is unfair, inconsistent and difficult to comprehend. It's value-based, but in many parts of the province assessments are far out of date. Some are based on values established as far back as the 1940s. In municipalities with out-of-date assessment bases, recently developed properties tend to pay higher property taxes than older properties with similar market values. As a result, property owners in the same municipality often pay vastly different taxes, depending on the age of the neighbourhood in which they live. This problem has been brewing for more than 25 years. In 1970, in recognition that the system needed reform, the province took over assessment from municipalities. The intention was to update all property assessments to current market values, as recommended by the Ontario Committee on Taxation in 1967. That didn't happen.
In 1978, municipalities were given a choice of whether to update their assessment base. Since then about 91% of municipalities and taxing school boards have been reassessed at least once; 70 Ontario municipalities and taxing school boards, including nine cities, have not been reassessed since 1970. By basing all tax assessments on current values and ensuring that the assessed value of properties is regularly updated, the government is redressing the serious inequities that years of neglect have created. REBOC supports the government's commitment to value all properties in the same year and to use three-year rolling averages to moderate changes from year to year. This should ensure that over a reasonable time period similarly valued homes will pay similar property taxes. Ottawa-Carleton generally is assessed at 1988 market values, and so the impact would appear to be minimal in most cases.
In view of the uncertainty created by Bill 101 for some property owners, REBOC supports this legislation's phase-in provisions. Municipalities will have up to eight years to complete the transition to Ontario's new assessment and property tax system. This gives property owners ample time to adjust to higher property taxes if that is the result. As well, we support the flexibility municipalities will be given to mitigate the impact of these changes on seniors and disabled citizens.
Realtors support the removal of education funding from property tax rolls. We believe that education is a provincial responsibility and that it should therefore be paid for out of provincial government funds. We believe that property taxes should be used for services directly related to property ownership, such as fire, police, local road maintenance and such. Our support for this provision of the legislation presumes that the provincial government will maintain education funding at its current levels.
The business occupancy tax is the responsibility of a business occupant rather than the owner of a property. While the business occupancy tax is separate from the realty tax, it is part of a total property tax pool that funds local government services. It generates about 11% or $1.6 billion of total property taxes.
Whatever the rationale for the establishment of the business occupancy tax when it was first introduced, it is extremely difficult to justify its existence today. It's confusing, it's inconsistent and it's incomprehensible. In addition, because the tax is payable by the person operating the business rather than the property owner, municipalities experience significant collection problems. Business tax arrears at the end of 1995 were over $200 million -- an administrative nightmare. We therefore support the elimination of the business occupancy tax. We also support the option to be given municipalities to decide whether to recover the revenue forgone by the elimination of the business occupancy tax.
Multiresidential rental properties have been the victims of unfair property tax assessment for years. We are pleased to see the government putting in place mechanisms that will allow municipalities to redress this inequity. For example, municipalities will be able to request a separate tax class for new rental apartment buildings with seven or more units, enabling them to tax these new units at a level comparable to single-family homes.
While we support the thrust of this reform initiative, we note that it will not in and of itself increase the supply of new rental accommodation, a badly needed commodity. In order to achieve that goal, additional measures must be taken including reform of the rent control regime in Ontario and additional tax reform at both the provincial and federal levels.
One more cautionary note: We remain concerned that when the new funding arrangements between the province and local governments are finally in place, municipalities may not have any incentive to offer tax reductions to tenants.
The current assessment and property tax system is complex and difficult for homeowners to understand, and navigating the appeal process is equally daunting. Many appeals occur as a word-of-mouth advisory from neighbours. We are therefore encouraged by the simplified process for assessment appeals in Bill 106. Average citizens must be able to understand the property taxes they pay, the services they fund and the remedies available to appeal inequities.
REBOC also believes that Bill 106 should not be utilized by either the Ontario government or municipalities as an opportunity to raise additional revenue. Property owners are already paying their fair share. The system needs reform; we don't think it needs more money.
Discussions as to which level of government will pay for which service are ongoing and a detailed analysis of the cost implications for individual municipalities and the province is of concern to us and to our local and regional representatives.
The provincial government has stated that property tax reform will be revenue-neutral, and our support for Bill 106 is based on adherence to that principle. Realtors across Ottawa-Carleton and Ontario support Bill 106 and the new assessment system it will bring, because it meets the principles of fairness, simplicity and revenue-neutrality.
We appreciate the opportunity to present our views and wish the committee well in its deliberations.
The Chair: Thank you very much. That leaves us about three minutes per caucus for questions.
Mr Pouliot: Thank you very kindly. We're joined by our distinguished colleague Rosario Marchese.
Thank you for your presentation, kindly indeed. "Transparent," "simple," "equitable" are words that everyone, I would imagine, would readily spontaneously support. You support the brief: "It's about time. The present government, the government du jour, has had the courage to do it where others have failed, and amen."
You support it, but you hope that it is revenue-neutral. With respect, let's make no mistake; there is no such thing as revenue-neutral here. This bill does not work in isolation. It is meshed and webbed with the downloading, pure and simple.
Education: You're kind and generous and it should remain the same. It will not. They're just about to activate the mechanism to deal one on one with the teachers and their pension plan and they shall shoot to kill, no question about that. There's between $800 million and $1 billion there and they're going for the big grab. No question there.
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In terms of the phase-in, if only we lived in a world where we could have the flexibility, the latitude, the friendly or not-so-friendly banker, because local governments will have to find the money to pay for services. They'll do the phase-in for them, so those who owe the system will not be able to run faster than the local government. Those who have a tax break coming will want it tomorrow; those who have to pay will want to wait more than eight years.
I wish you well. The bigger you are, the more you benefit. There's no question about it. If you are large industrial, if you are large commercial, you benefit. The money has to come from someplace, and I'm afraid that this hasn't been addressed. And if you're commercial, you're still stuck with the education portion.
Mr Rosario Marchese (Fort York): Mr Chair, is there more time?
The Chair: Yes, one minute.
Mr Marchese: I had many questions for you actually. Is it somehow your sense that municipalities could find more ways to tax some group of people out there who haven't been taxed? You said this should not be an opportunity for municipal governments to tax more. Do you believe there's room somewhere that we haven't found that we could do this?
Mrs Milne: I don't think there is. I think, though, what we are voicing is a concern that the constituents, the property owners, have. As with any change, people are always concerned about the negative impact. I think everybody recognizes that yes, we must pay taxes, but with the historic inequities, people are looking for those people who have been assessed at those lesser values.
Mr Marchese: I understand. You said education should not be funded by --
The Chair: Thank you very much, Mr Marchese. We'll move to the government side.
Ms Bassett: Thank you so much for your presentation and the good things you had to say about the direction we're going. I just want to pick up on what you said about the lack of supply of apartments. Certainly removal of rent control is one way, but as you said, not enough, and I want to point out that we believe that by the changes in the future to the Development Charges Act and the building code, along with changes in the Planning Act and reform in general to Ontario's property tax, this will help and work together to make rental housing. People want to build anyway. Let's hope.
Mrs Milne: That will be very welcome.
Mr Rollins: Thanks for your presentation. I don't think there is any question that most people who have stood at that table where you have through the time of our hearing have all agreed that we do need some reform as far as the fairness. You feel that in the Ottawa area or in this area your assessment was done in what -- you said in 1988?
Mrs Milne: In 1988.
Mr Rollins: So there will be virtually little change in the value of property?
Mrs Milne: It seems to be the impression. The people I've spoken to from the different municipalities feel that it won't be a large impact for the most part.
Mr Rollins: The other thing is that there is also a rent control bill that will likely be coming forthwith in the very near future that may address the concerns that you have with not enough of those places being built. Maybe we can start to dig a few more holes and build more.
Mrs Milne: We'll look forward to that.
Mr Spina: Mrs Milne, I apologize. I got tied up trying to check out, so I missed most of your presentation, but I was interested in hearing what your perspective was on small business and the opportunity for small business with regard to this bill.
Mrs Milne: In terms of the business taxes?
Mr Spina: Yes, the real estate portion, or perspective of small businesses, renting or leasing space, the taxes they pay, the impact on your sales in that sort of context.
Mrs Milne: I'm not going to make a lot of comment on that, because I am a residential specialist. Our commercial people do have fairly strong views. I think, though, the business tax has been a problem item on both sides of the fence as far as the businesses are concerned -- there is a fairly large chunk -- but also from a collection point of view. We run into it only when the business goes up for sale, of course, and become aware that collection has not been a particularly successful issue. Where does the money come from as far as the municipality is concerned? The property owner, of course, is left with monies not being contributed to the system.
Mr Spina: Have you had any feedback from your ICI members?
Mrs Milne: No, we have not, I'm sorry. The ICI representative was out of town and unavailable in the short time that we had to prepare.
Mr Lalonde: Thank you for your presentation. A few points that you brought to our attention really struck me. First of all, you said that people should understand the tax system. I remember when I was the mayor of a town, I used to give sessions to the real estate people, and I really believe at this time all real estate people should get around to the ministry and have them explain what's going to happen with this Bill 106. You said that the bottom line is the revenue should be neutral, but I don't think the people understand the system at the present time. I don't think the people have taken the time to do an in-depth study.
In my district alone, the tax increase for the surplus, what we call the dumping -- I hate to call it dumping -- that generated during mega-week is going to cost our taxpayers in Prescott and Russell over $1,200 per family. Why is that? There are two main points that we have to look after. The business occupancy tax, how are you going to recover this? I got the answer from the PA last week. He said all you have to do is put back that tax on the landlord. Someone will have to pay for that. The bottom line has to remain the same unless the services are reduced or cut. Secondly, in the rural area, agriculture, 75% -- $171 million -- has been cut. I just want to tell you that I think there's no way at the present time, the way this bill has been introduced, that you are going to get away from a tax increase.
The city of Ottawa, I remember the day following the announcement, I met the mayor, Jackie Holzman. She said: "It's a good thing. We have a hard time to collect the business occupancy tax." Do you know how much the loss is going to be? At the present time, we're saying that landlords have a hard time, when they come up to build a building, to have it rented, because if the landlord has to pay that extra tax, he has to increase the rent. But there's one thing that we have to remember. Some of those landlords have a 10-year lease. Can you adjust the rent because of that additional tax that you have to pay?
I'm serious when I say that. I used to have, on a yearly basis, a meeting with all the real estate people to explain what effect a bill or a bylaw would have on real estate. I really believe you people are going to have a lot of business because people won't be able to afford to pay their taxes. That's my point. I think Gerry had a question.
Mr Phillips: Yes, just to follow up. I think you outlined the four principles that the real estate association had. One was to get education off the property tax. How does your association feel about now having nursing homes, ambulances, child care, social assistance for children -- clothing, housing, food. I know you wanted to get education off, but does your association have a view on adding those things on to the residential property tax with, according to most estimates by municipal politicians, adding back a lot more on to the property tax than came off? If you didn't like education, do your members like ambulances and nursing homes on the residential property tax?
Mrs Milne: I don't think it's been addressed in any great detail at this point, but I do believe that the association feels that there is an upcoming need for those services that I think many of us are not even aware of. Certainly demographics indicate that those needs are there and somebody's going to have to --
Mr Phillips: So the residential property taxpayer should pick that up as the need grows?
Mrs Milne: I think as the need grows, it's certainly going to have to be addressed, yes.
Mr Phillips: It's just unusual your association would feel that the property tax in that growing area would be where you want it to be. I intuitively thought your association might have taken the opposite view.
Mrs Milne: I don't think it has been addressed fully at this point, and I really would like not to comment on that as representing the association.
The Chair: We thank you, Mrs Milne, for coming in and spending the time to make a presentation to the committee today.
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CITY OF GLOUCESTER
The Chair: We now welcome the city of Gloucester. Ms Tippett, welcome to the committee.
Ms Karen Tippett: My name is Karen Tippett. I'm the treasurer of the city of Gloucester. With me is Jo-Anne Poirier. She's the deputy city manager of corporate services for the city.
Thank you for the opportunity to have input into the review of Bill 106 and to present the comments of the city of Gloucester. Just for your information, I'd like to provide a little bit of background information on the city. We have 107,000 residents and we're located to the east and south of the city of Ottawa. Our commercial and business tax base is about 24% of our total assessment. Our total operating budget for 1997 is $50 million, and of this, almost $10 million, or 20%, comes from payments in lieu of taxes; 80% of these payments in lieu of taxes are from federal government properties such as the airport, CSIS and the Uplands base. Our total 1997 tax revenues are about $20 million.
I've left a package with you that is the report and resolution that our council approved. I'm just going to touch on some of the highlights of some of our comments on the legislation and some related issues.
Gloucester is generally in favour of the draft legislation, while acknowledging that the impacts are not yet fully determinable. The revised assessment methodology should be easier for taxpayers to understand. The increased frequency of assessment updates will be appreciated in reducing complaints. We are currently receiving a high level of complaints because our assessment values are based on 1988, which was near the peak of the market values, and they have dropped since. So a number of people do not understand that a drop in their market value may not impact on their taxes. Everyone believes they're being overtaxed.
We believe at the city of Gloucester the tax policy should be determined at the local municipal level, not at the upper tier. Each municipality has a different mix of residential, farm, commercial and multiresidential properties. Ottawa-Carleton is a good example of the mix of municipal types between rural, suburban, and of course, the fully urban city of Ottawa.
Tax policies that will meet the needs of one municipality may not meet the needs of others. "One size fits all" over the entire upper-tier municipality will in the end penalize one or more classes of taxpayers. We expect strong pressure to shift the tax burden away from the commercial and multiresidential sectors to the residential and farm classes. The urban balance of power at the upper-tier level may result in this in fact happening. This would penalize the suburban and rural sectors of the region. The local level is most able to tailor for the needs of its taxpayers and therefore should be responsible for tax policy such as setting the tax ratios.
The elimination of business assessment is supported, as the business occupancy tax, as you just heard, is difficult to defend, administer and collect. Our preliminary position is that the tax revenues eliminated as a result should be transferred, to the extent possible, to the commercial, industrial and pipeline property classes so that there's no shift in the tax burden to the residential and farm classes.
The move of the farm tax rebate program to the municipal level by fixing the farm land tax ratio at 25% will result in a tax shift to other property classes. If this remains in the legislation, the province must live up to its promise that these changes will not result in increased property taxes.
Payments in lieu of taxes are a significant portion of the revenues of municipalities in the Ottawa-Carleton region. The proposed elimination of residential education taxes will impact these revenues. For Gloucester, this represents about $1 million or a potential 5% tax increase. The uncertainty of the commercial portion of the education tax is a larger concern. For Gloucester, the loss of this revenue, which we currently retain, represents an additional $6 million or a potential 30% tax increase. There has been no indication as to how these taxes are to be determined or allocated, that is, the commercial education taxes. We believe that Ottawa-Carleton municipalities should be consulted immediately to ensure that there's no negative impact to our taxpayers. We believe that this is part of the revenue-neutrality promised by the province.
The intentions with respect to residential and commercial education property taxes need to be announced as soon as possible to reduce the current uncertainties with respect to future tax levels, particularly on the commercial sector. With the mega-week announcement, it is hard to comprehend how the taxes on that sector will not skyrocket. This will not be acceptable. The struggle for business to survive is already tough enough.
During mega-week, in the newspaper there was a cartoon of a municipal treasurer being carried out in a straitjacket, screaming. If those of us who are experienced in municipal finance and assessment are feeling that there is an overwhelming amount of change, can you imagine what the average taxpayers will feel like when they get their tax bill in 1998? The province must develop and put into action a communication plan for the changes that are going to happen. The plan must be comprehensive, clear and delivered early enough for the message to be well understood by all. The plan should be tailored to educate both municipal representatives and the public.
My final point is with respect to timing. The first development of tax ratios by municipalities will be a huge and complex task. It appears that adequate information may not be available until into 1998, which will compromise the ability of councils to do a proper job. Although a delay of reassessment is not optimal, as we are already one year late on our promised four-year reassessment cycle, we strongly believe the setting of tax policy has to be done right the first time. Therefore, if the tax impact studies and other required financial information are not available with sufficient lead time, there should be a one-year delay considered in implementation.
Thank you for your time. I'd be pleased to answer any questions.
The Chair: Thank you very much. That leaves us about four minutes per caucus for questions. Would you like to start for the government side, Ms Bassett?
Ms Bassett: Thank you very much for your presentation. Just to sum up in an overview, past governments have failed to take up the challenge of property tax reform, and because they didn't, of course, thousands of businesses and homeowners are paying inequitable amounts. We think that's not fair. Do you think the current system is unfair?
Ms Tippett: As was noted previously, we did have a reassessment, effective 1993, based on 1988 market values, and at that time we felt it was more or less made more equitable in Ottawa-Carleton.
Mr Spina: I wanted to touch on a couple of things in here. They seemed to be contradictory to what you had said, and I wonder if you could just clarify it for me. I'd appreciate it.
Under the section titled "Business Occupancy Tax," the last paragraph, you say that the 1997 tax revenue is $1.3 million, roughly. "If these taxes are recovered in 1998 from the commercial-industrial sector, there should be no change for the average business." Then you say: "If instead the lost revenue is recovered over the whole property assessment base, the...commercial taxes would decrease by 21% and the local...taxes would increase by 7.5%." You made a comment during your presentation that said something about commercial-industrial taxes going up 30%. I was trying to reconcile these two.
Ms Tippett: That comment related to the payments in lieu of taxes that we currently receive from government properties. A component of that is the commercial education tax that the local municipality retains. That is a portion of our revenue base. If we lost that, our taxes would have to go up by something like 30%.
Mr Spina: Currently you don't collect the commercial education tax anyway.
Ms Tippett: We collect the commercial education taxes and remit them to the school boards, but on payments in lieu of taxes, we retain that portion at the local level. It's part of our revenues, not the school board revenues.
Mr Spina: It's my understanding that I don't think that changes.
Ms Tippett: There is nothing that has told us that.
Mr Spina: There's nothing in the bill regarding those. From what we understand in the bill, payments in lieu of taxes remain static. That's to the best of my knowledge. Also, the education portion of the commercial tax will continue to be collected and remitted as you do now. I don't think there's any change being proposed with respect to those particular areas.
You made another comment. In your current value assessment statement 2.1, you indicated that: "The impact of the change in methodology on individual taxpayers...is not possible to estimate...." We understand that. "It appears that current value assessment will be easier for the public to understand due to the direct relationship.... Use of more recent values and more frequent updates should provide a more user-friendly system."
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I thank you for that statement, because what that tells me is that this bill is really being created for the taxpayers and not, perhaps to the chagrin of some municipal governments, to specifically try and gouge the treasury of the municipal governments at whatever level. Is that a fair statement?
Ms Tippett: I think we all have the best interests of the taxpayers at heart.
Mr Phillips: I have a lot of confidence in the municipal level people and I don't think you're out to gouge anybody. I dissociate myself from the comment.
We heard two things from the member, and I'm speaking to them or to the staff, because that's the first time we've heard what he just said, that is, that the payments in lieu will not change. That's good news. We'll just get clarification for you on that. Second, he said that the method of collecting the education portion of business tax will not change. We have never heard that before. We've been trying to get clarification. We've now got those two things, and as a result of your presentation, the parliamentary assistant for small business has clarified those two things for us. We'll get that in writing for you: that the payments in lieu will not change, and essentially what we're told is that the education portion that your businesses currently pay, the same level will be collected and paid, that it won't be a uniform mill rate right across the province or anything like that. Your presentation has been very helpful in that respect.
Did your council pass this resolution, the one that you've provided to us here?
Ms Tippett: Yes, they did, last week.
Mr Phillips: I gather they've made the decision, as virtually every other municipality has, that the business occupancy tax will be put back on to the commercial-industrial pipeline sector?
Ms Tippett: That is their preliminary position. Of course, they have to look at it more closely when we actually get the information in 1998.
Mr Phillips: That's helpful.
You've raised an issue that I don't think is well understood on this bill, and that is the impact of the upper tier on the lower tier on tax ratios and the profound impact that can have, because you've got to use the same tax ratio in the lower tier as the upper tier, on shifting the burden from one class of property to the other. If you happen to be a lower-tier municipality with a very high commercial-to-residential assessment and you're above the upper-tier level, you're going to be forced to lower your levels to the upper-tier level, and that's going to have quite an impact. I realize you don't have the numbers, that you've got to wait for the assessment, but has your municipality done any number-tumbling on what impact that might have on your municipality?
Ms Tippett: Actually, again as the result of the reassessment we did effective for 1993 -- it was a region-wide reassessment -- in this region at this time, we all have the same assessment factors and the same mill rate differentials. So in Ottawa-Carleton, if we went with the status quo, there would be no impact.
Mr Phillips: You're assuming the reassessment will essentially keep the status quo in assessment?
Ms Tippett: The impact now is the determination of tax ratios, which is under municipal control. If somebody wants to change that by shifting the tax burden to different classes, that has been given to the upper-tier level to determine, not the local level.
Mr Lalonde: In the business occupancy tax, you only have $1,394,000. Are you sure? Just a shopping centre is about that much.
Ms Tippett: That is our local share of the business taxes in Gloucester. We're 15% of the tax bill, so multiply that by six; that's $8 million we collect in business taxes.
Mr Phillips: That helps. My colleague knows this stuff better than I do.
Mr Pouliot: You're truly the front-liner. You understand the mentality and you understand the capacity of industrial, commercial and residential abilities to meet the current expenses in Gloucester. There's a lot of expectation there.
I live in a very small mining community, about 900 and some-odd miles from here. We extend to Hudson Bay. Two weeks ago I heard the Premier say on the radio -- I have a lot of respect for the Premier and the office of Premier -- that people in our village should expect a 10% decrease in their property taxes by the year 2000. This is presently, as you know, a makeup of general purpose and a portion for education.
As your new responsibilities are to take place on January 1, you will have some money in your hand based on your interim tax levy of 1997, but the rules will be severely altered and the clock will tick as of January 1. But your final levy, the big one, will not hit until later on in the spring, and then you will have the adjustments of assessment by 1998. I see you shaking your head. Does that mean, as per your tax, that you wish to have a delay? You're going to be in a bit of a mess. Do you feel, from what you know now, that taxes will remain the same, go down or up, and by what percentage?
Ms Tippett: I can't answer that question. I don't have enough information to make any kind of estimate of where taxes will go. I know our council is committed to not taxing our taxpayers any more than they currently are.
Mr Marchese: Recommendation 6 speaks to the fact that implementation of the changes should be delayed until you've seen the impact studies. You may be aware that both opposition parties have asked for those impact studies, which we believe they have in their hands; they're not releasing them. Clearly you're worried about it; otherwise, you wouldn't make such a recommendation. Do you have a sense of what some of your worries might be in relation to this?
Ms Tippett: My worry is that we won't have enough time to do a proper job of doing the calculations. If we had them in September, that might be adequate, but January might be too late.
Mr Marchese: In relation to the business occupancy tax, the government member talked about your last paragraph: "If instead the lost revenue is recovered over the whole property assessment base, the local commercial taxes would decrease...and the local residential taxes would increase by 7.5%." Could you envision a residential property tax increase of that kind? Could your municipality see that?
Mr Pouliot: Can you count votes?
Mr Marchese: That would be suicidal, it would seem to me.
Ms Tippett: Again I can't commit to what council would decide. However, I know their general tendency is not to have a tax increase.
The Chair: Thank you very much. We appreciate the city of Gloucester coming in and making the presentation.
Mr Marchese: Just out of curiosity, how much time did we have?
The Chair: You had four minutes, the same as all the other caucuses had. You're new, Mr Marchese, so I'll let you get away with that one.
Thank you very much for your presentation. We appreciated it.
Mr Pouliot: It seems to go a lot faster for the third party.
The Chair: I might point out that this watch was given to me by my three children.
Mr Marchese: Oh, it must be accurate, then.
The Chair: It's extremely accurate. I wouldn't want anyone to question it. They wouldn't win the argument.
Mr Pouliot: It always goes the same amount of time; it only seems faster.
The Chair: When you're having fun, you do enjoy yourself. I realize that.
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PHIL SWEETNAM DENNIS DATE
The Chair: We now welcome Mr Sweetnam and Mr Date. Welcome to the committee. We have 20 minutes together, and we look forward to your presentation. Will it be a joint presentation?
Mr Phil Sweetnam: Each of us will make about a five-minute presentation. My name is Phil Sweetnam. With me is Dennis Date, the former treasurer of the city of Kanata. Mr Date will go first.
Mr Dennis Date: Generally speaking, the thrust and content of the proposed legislation is to be commended. The province-wide application of the principles espoused in this bill will lead to better accountability at the municipal level, and it will create the potential for better understanding by the taxpayer.
I'm going to speak quickly, because I know you can't read fast. I want to stress four areas of concern or, shall we say, reminder notes.
Updating of assessment values: Confidence in the new system will depend very much upon the regular updating of assessment. I've been here listening to some of the other presentations, and it concerns me. The bill does provide for a transitional period before the updates are on, hopefully, a yearly basis. The British Columbia Assessment Authority has already moved from an annual update to one every two years, while in England the central government has deferred updating their values. I feel that maintaining current values will lie at the heart of securing ongoing public support for any new system. It might have been simpler for updating if they'd had some banding of residential properties instead of the individual assessments that are being pursued so vociferously.
Differential mill rates: The authority to set differential mill rates for at least six classes could set the stage for some abuse. The current restrictions on the bonusing of industries could become a particular issue of concern. It is good that assessment values will be clean and won't be factored and hiding the mischarging that goes on through the assessment system. On the other hand, any intermunicipal competition -- although competition is not bad in itself -- for commercial-industrial assessment could result in inequitable treatment for taxpayers in other classes of property.
The bill does provide for tax ratio limitations, but they can complicate the taxation process and could set up antagonism between classes of property taxpayers.
Third, and very important -- they're getting more important as I move rapidly through them -- is public education. I understand that notices won't go out until 1998. I think this is completely too late for the public to begin to get an understanding of this system. The potential for a tax revolt is very real if taxpayers are left to appraise the impacts of the new system until they receive their final tax bills -- probably in late May or June because, as we heard from another treasurer, they may have considerable difficulty in actually sending out those tax bills.
As a minimum, the education thrust -- and I note from the regional assessment office that a planned program of education is under way, or will be -- should explain how the current value will impact on the mill rates of the different classes. Also, the complaint process which replaces the appeal process should be explained.
Unfortunately, this priority for education for the taxpayer is not being acknowledged at this time because of the more pressing and high-profile restructuring, changed cost-sharing responsibilities and health care issues. Personally, however, I feel that the assessment system, this piece of the legislation, could have the greatest impact of any of the legislation introduced, and it should not be allowed to develop the status of a ticking time bomb between now and May of next year.
Finally, and this is my only real concern where I feel it's a retrograde step, is the assessment function being transferred to the municipal sector. It is highly desirable to separate the function of creating an assessment base and employing it as a taxing authority. Even if the costs of some $120 million are still to be assigned to the municipal sector -- and I don't wish to discuss that -- they should be collected as a service charge whereby they pay for that service to a commission or an agency or to the province. The present assumption of responsibility for accurate, independent and appropriate assessments has been the policy stand of successive provincial governments since 1971, and I would strongly urge that that function be retained outside of the municipal sector.
In conclusion, there is no rationale for not sharing payments in lieu of taxes with school boards, and the ministry's own documentation shows that the non-sharing situation is an anomaly.
Mr Sweetnam: My name is Phil Sweetnam. My family owns a small business in the township of Goulbourn, and we have approximately 30 employees. I am very supportive of the direction the government is taking in implementing market value assessment across the province.
As vice-chairman of the West Carleton Airport Authority in Carp, I believe the policy on airports in dealing with the federal transfer to non-profit corporations is appropriate.
As a past chair of the Mississippi Valley Conservation Authority, I believe the policy of not taxing conservation lands is an appropriate way of assisting in the preservation of provincially significant wetlands.
For my brief five-minute presentation, I would like to elaborate on two points: First is the assessment appeal process, and second is the range of flexibility offered to local municipalities.
In my 25 years of dealing with the assessor and assessment process, I have generally been able to mediate the disputed assessments. On those few occasions when I've had to have appeals at the local assessment review officer, I have not been impressed with the quality of appointments at that level. There is a perception that there is too close a relationship between the assessor and the chair of the committee.
In one particularly fractious appeal over the issue of whether or not land was being used in an agricultural capacity, an appeal chairman was bemoaning with his clerk the loss of a by-election the previous day. I then knew his politics and I knew what to stay away from on that day.
Over the years, in discussing this with a local lawyer who specializes in these appeals, his comments have been that he wonders where the Tories, the Liberals or the NDP, whatever government of the day, drag these party hacks out from.
Later, when I've done an appeal to the Ontario Municipal Board, the chairman, who came from Toronto, really understood the issue of agricultural land and clearly set out for the assessor what the rules were in determining whether a property was used in an agricultural capacity. We felt there was an informed independent comment at the time.
In conclusion, if we leave the appeal process to the local level, all parties must give due consideration to the appointment process to ensure that only informed people who really understand the taxation system are capable of doing an independent appraisal and understanding.
Taxation: Businesses should pay their fair share of taxes, but no more. The removal of the business tax is a step in the right direction in making municipalities more accountable for the amount of taxes they assess to the business process. I believe it would be fair, if the businesses represent 24% of the assessment in an area, that they would pay 24% of the taxes in that area. The province should provide a limited range of factor that would allow a shifting of taxes to the local business community. In British Columbia, a major industry in a one-industry town appealed its taxes and had the assessment reduced by 50%. The response of the municipality was to double the factor. Ladies and gentlemen, it's your responsibility to make sure that that flexibility is not available to the local municipalities.
I concur with the previous speaker. In talking to our township treasurer, Helen Bissonnette, she said that collecting these local business taxes is a real pain in the -- she said in the foot. She's quite a lady.
Even though I know some people on this side of the room may say that corporations pay less tax as a percentage of the total tax revenue, I assure you we're paying our fair share. Businesses find we're paying -- for such things as land severances, there are increased fees. Someone asked earlier. The land transfer tax has gone up recently. Fuel taxes are up. I've recently been part of the conservation authority; we've increased by $5,000 what we charge a plan of subdivision for the review process. Those are the new taxes that are coming to us, and in addition -- on the health care tax we got a little break, but in other things, the Canada pension plan is going to go from 2.8% to 5%, for instance. In other words, I think we're already trying to pay our fair share in the community, and I trust the standing committee will look at that when you're assessing what's a fair range.
I'd be comfortable if I knew what that range of latitude was, but I trust that when you're looking at the regulations, which is where I understand you're going to have those, you will have some input and limit that range. If the system is perceived as being fair, everyone will be able to buy into the market value assessment process.
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The Chair: That leaves us with about three minutes per caucus. We'll start with the Liberals.
Mr Phillips: Thank you both very much. You've raised some good points. On the public education one, let me just tell you, I used to have 300 employees, three businesses, so I'm very sympathetic to the business community.
If I were ever to try and make a business decision on the basis of the information I've got, my bank would have told me to go back to the office and put together some real numbers. We've got no impact studies. I hate to bring bad news to you, but we will never see the regulations. We'll see them some Saturday when they're published in what's called the Gazette, and they will be done. None of those will be referred to us.
You raise a very good point about the tax revolt, but wouldn't you think as business people that before we're asked to put this stuff into law, we should really take a look at what the impact's going to be? Wouldn't that be good business planning before we're asked to approve? Once this is in law, the flexibility's gone. If you were in our shoes, would you be saying, "Maybe we should have an impact study," or should we just let 'er go and then let the tax revolt happen?
Mr Sweetnam: I guess the answer is that it depends on how much of a hurry you're in. I would certainly like to see all those regulations first. With the previous government I had some experience with the rent control process, and so much of that was defined in regulation; we really never saw that until it was actually in regulation. That's perhaps a tough way of doing business.
Mr Date: I agree, but I think there's a partnership role here. Having been in the bureaucracy of the city of London and the city of Kanata, the bureaucracies can and do put forth some of their own evaluations, even without the other side's answers. I'm pleading that they get out there and engage the public. The public will just be lost if they wait until March. I think it's a joint effort, a required commitment. They do have information and they can do some evaluation, even with the gaps. It would then put more pressure on the government to respond, not in a confrontational way of putting information forward. They can, but they're not doing that at the moment.
Mr Phillips: Frankly, it's an embarrassment to have to approve legislation without an idea. I believe it's done deliberately, because if they did put out the impact studies the people who are going to be hurt would be angry. So be it. In a democracy, where you elect people to serve you, if they're going to do something to you they owe it to you to tell you what it is. But this is a deliberate plan, in my opinion, to hide the facts from the public. I predict this: They'll try and hide it long enough that they then will say, "Don't blame me; blame your local municipality." When the tax bill comes out a year from now -- it will probably be May 1998 before people wake up: "Holy God, I thought this was supposed to help me. Look at this." Then they'll attempt to blame the local municipality.
I'm just sharing with you our frustration. As to your recommendation on public education, I think it should start before we pass the bill so the public can have an informed view of the bill. I don't know whether you agree with me.
Mr Marchese: I'm going to ask you three quick questions and then you answer however you want. This way I get the questions out.
You made some good points that I support. One of them is a reference to British Columbia. I should point out -- I'm not sure how knowledgeable you are, but you may be -- that in British Columbia it took three years to do a proper appraisal of all the properties there, commercial, industrial and residential, and it's a small province. Here, we're going to do this in one year or less with fewer resources. You need over 1,000 property appraisers, if not more; we don't have them. I'm not sure how the province is dealing with that. Do you have a comment on that or are you worried about that?
Second, on public education, which the other members referred to, we're not likely to ever get any public education. Because the government is moving so quickly on so many bills, it has no time to educate anybody, really. It means we're going to have a serious problem in terms of people understanding the full implications of this bill on everybody.
The third one is the assessment function, which you made a reference to, Mr Date. I'm very worried about that. You both commented on it. The further point I would add is that it leads to the possible politicization of the property appraisers at the municipal level, and I'm not sure we want that. I think we want a distance, which is what we have with the province doing it. If you get property appraisers to do it at the municipal level, there's a dangerous potential for politicization, in addition to the point you made about making sure they know how to do proper appraisals -- but that's a separate matter.
Any comments on anything I've raised?
Mr Date: I'll answer the last one first. I think that's a relatively easy one. The province can certainly transfer the costs of the function and make the municipalities pay it. I really believe, beyond any party affiliations, that that function should be independent. The staff is in place and has grown for the last 10 years to a degree of independence. I believe that is the answer. You can charge the $120 million. I'm not discussing transfer downloading. I'm agreeing with your third point.
On your first points, I will say I'm very impressed with British Columbia's information pamphlets, of which I've had lots sent to me. They have a 1-800 number and they certainly seem to have put a lot of effort into the pre-educational effort. Again, I would like to hope that that will come on stream as early as the next month or so. I have confidence that the assessment offices are well advanced in preparing something along those lines.
Mr Sweetnam: My comment is that I would be probably more comfortable if the assessment were at a provincial level. On the issue of public education, if they're not stopping to do public education, you hold them accountable in another three years. You'll see what their package is. I'm not sure we can comment on each specific piece of legislation, but in three years they're accountable to the people.
Mr Spina: I'm astounded at both the parties in the opposition talking out of both sides of their mouths. Mr Phillips -- I'm sorry he's not here to hear this -- was a cabinet minister when they jammed the employer health tax down the throats of all the small businesses in this province.
Mr Pouliot: On a point of order, Mr Chair: In deference to our guests, and on behalf of Mr Phillips, he wouldn't mind me stating that this kind of uncalled-for accusation of members of the opposition when we have distinguished guests who are paying us the compliment of their presentation --
The Chair: I don't believe that's a point of order, Mr Pouliot. Thank you very much.
Mr Spina: They accuse us of not having sufficient hearings. Here is a party that rammed through the social contract and had fewer sitting days in the Legislature than we did in the past 18 months that we've been in power.
I thank you both for your in-depth analysis, your comments and your input. It is greatly appreciated. You've put a lot of thought into this.
The point I wanted to ask, Mr Date, is this: You said that it is highly desirable to separate the function of determining assessment values from that of setting the mill rates, and you got into that bit of discussion with Mr Marchese. You said it didn't matter if the assessment process was elsewhere, preferably on the part of the province, as long as it was separated from the municipal authority. Is that correct?
Mr Date: That's correct.
Mr Spina: If the guidelines for assessment were in place but a private sector assessor could do the work, would that be acceptable?
Mr Date: The municipalities should be able to buy the service in whichever way is most suitable, but I wouldn't comment on whether that is appropriate.
Mr Spina: The province wouldn't necessarily have to supply the service, as long as it was available for the municipality to access?
Mr Date: That is true, but discontinuity at this time is not a feature I would welcome. The function is in place, it's been in place and has grown, and I think it has earned some respect over the last 15 years during which it's been independent. Even the provincial governments have moved it away from municipal affairs to revenue and now I think it's gone to the final ultimate, finance, which shows that it's trying to keep it away from anybody who may even internally to the government bring a municipal affairs touch to it.
Ms Bassett: Mr Sweetnam, I want to pick up in your brief where you talk about the taxation part and the municipal response in BC where the town appealed its taxes and then reduced them by 50%: "The municipal response was to double their tax factor. That range of power should not be available to local municipalities."
I want to point out that this will not be possible under the Ontario system because the provincial ranges will constrain this type of spread. Municipalities won't be able to add to inequities between classes; they can only go closer to them. The province, by regulation in the fall, will be setting those. You hit a very good point, one we are aware of and are working to regulate.
The Chair: Thank you for taking the time to come and make a presentation to the committee. It's always interesting to hear the viewpoints of diverse groups. We appreciate your coming in today.
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CONSERVATION ONTARIO
The Chair: We now welcome the Association of Conservation Authorities of Ontario, Ms Stewart, chair, and Mr Anderson, general manager. Welcome to the committee.
Ms Wendy Stewart: Thank you for the opportunity to address this committee. My name is Wendy Stewart. As mentioned, I am chair of Conservation Ontario, formally known as the Association of Conservation Authorities of Ontario. The general manager of the association, Jim Anderson, has accompanied me.
My remarks today will reflect the collective opinion of Ontario's conservation authorities on the provincial legislative proposal to adjust land taxation in the province. In particular, I will outline the impact of these policies on our programs.
I think it's important to set the stage for my remarks first by providing a little background on Ontario's conservation authorities, their land holdings and their present treatment as far as land taxation is concerned.
As you may know, there are 38 authorities in Ontario, stretching from Thunder Bay in the northwest to Windsor in the southwest to here in Ottawa in the southeast. Collectively, they have assembled approximately 315,000 acres of land holdings in this province. Conservation authorities are community-based watershed conservation organizations, controlled by boards of directors appointed by local governments within the watersheds.
Ontario's conservation authorities presently pay taxes on all their land holdings. The vast majority of these lands are assessed within the residential class, so authorities pay educational as well as the general services components of land taxes.
Over the past number of years, we have qualified for and received a variety of provincial subsidies on these lands. At present, we receive grants in the order of 100% for lands judged to be conservation lands, which are described as provincially significant wetlands, areas of natural and scientific interest, and threatened or rare species habitat. In 1997 our managed forest properties will, we believe, receive a grant subsidy of approximately 40%. The province pays a maximum grant of $2 million annually to conservation authorities for both of these categories. In turn, conservation authorities pay approximately $5.8 million in land taxes each year to our member municipalities.
And it's important to remember that our land holdings are still increasing. While there are no longer provincial grants available for the acquisition of land and there are few municipal dollars remaining for this purpose, other funding has been identified. There has been a remarkable increase in the availability of private donations, and with new federal tax policies which now allow for the donation not only of money but also of land as an income tax reduction measure, conservation authorities anticipate that additional lands will be added to our exceptional legacy.
The policies contained in the bill under discussion are of considerable importance to us, because as community-based conservation agencies we believe that healthy, vibrant communities require a reserve of open space and natural areas to maintain and enhance their vitality. Quite simply, a mix of open space and natural areas close to built-up neighbourhoods make these communities nice places to live. We are told that the park at the end of the street or the ravine or valley land nearby are important ingredients to residents' quality of life.
In order to ensure the continued preservation of natural areas as Ontario urbanizes, we must ensure that there is the ability to protect this land in its natural state. We also need to ensure that there is a long-term business framework associated with preserving these lands.
Our member conservation authorities must now examine the long-term financial and business aspects of land ownership prior to making a decision to acquire or receive lands. It is our goal to ensure that lands under our ownership remain in public ownership and continue to be available for communities for future generations.
On the basis of the business-like approach to land ownership, I want to congratulate the government on the policies contained within this bill. I believe these polices are a significant improvement for those organizations and private land owners who have conservation and forest land holdings.
I believe the fairness sought in some of the past studies and commissions for these types of properties is finally becoming a reality. I believe that with these policies, our municipalities will be able to establish a reasonable framework for the ownership of natural areas and that communities can look forward to their conservation authorities adding to their network of natural areas.
While this bill sets forth important policies related to land taxation, we do have some comments about things that, in our opinion, will strengthen and improve this bill.
We continue to be sensitive to the impact of this bill on our municipal partners. This is not surprising, since all conservation authority boards of directors are made up of municipally appointed members, the majority of whom are elected individuals.
For example, I am the chair of the Rideau Valley Conservation Authority, an appointee of the regional municipality of Ottawa-Carleton and an elected official within that municipality. My colleagues and I cannot separate the benefits to my conservation authority from the impact on its member municipalities.
Conservation authorities are watershed organizations, and their core responsibilities relate to water and its management. Our land acquisition focus relates to the acquisition of valley lands, headwater areas, wetlands and Great Lakes shore lands. Our land assembly priorities reflect watershed interests, not municipal administrative boundaries, and our land ownership often is concentrated, in select municipalities, within a watershed.
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None the less, policies can have a major impact on our municipal partners. For instance, there is one example where a local conservation authority owns approximately 18% of the lands within a single rural township. We recognize that the province has developed stabilization funding provisions to aid those municipalities unduly impacted by these policies.
This bill establishes the ability of the province to define those lands that are deemed conservation land by regulation. To date, our information from the province indicates that conservation lands are provincially significant wetlands; provincially significant areas of natural and scientific interest; areas designated as Niagara Escarpment natural areas within the Niagara Escarpment plan; habitats of endangered and threatened species; and other conservation lands owned by non-profit, charitable organizations that, through their management, contribute to provincial conservation and natural heritage program objectives and do not fit into one of the above categories.
It is the last category that we wish to draw to the attention of this committee. From our preliminary analysis, we have concluded that a little less than 60% of our properties may be eligible for inclusion under this policy umbrella. However, there remain approximately 120,000 acres of conservation authority land holdings that we are uncertain about because determining their inclusion must await the appropriate regulation and, in particular the determination of "other conservation lands."
The province, through the Planning Act, has declared a provincial interest in such natural heritage features as woodlots, wetlands, sensitive habitats, significant valley lands and ANSIs. The province has also declared a provincial interest in natural hazard features, such as floodplains, unstable soils and slopes and erosion-prone sites. Many of the natural heritage features are closely interrelated with natural hazards. Examples include significant valley lands, floodplains and unstable slopes.
The provincial interest as expressed in the Planning Act has, for the most part, carried forward into this bill. However, we note that valley lands, flood-prone lands and unstable slopes are areas where this provincial interest has not yet been reflected in taxation policies. We believe that this provincial interest should remain consistent, and we would ask that this committee recognize that valley lands, unstable slopes and floodplains be considered within the definition of conservation lands eligible for consideration under this policy.
The final improvement that I would offer to the committee again relates to the implementation of this policy. It is our informal understanding that lands judged to be conservation lands, because they are exempt from taxation, will remain in a residential assessment class. Perhaps this is due to the considerable workload of those who will left to implement this policy. In the short run, this will not impact on the land owner. However, in the long run, if these lands were placed in the appropriate class, based on current use as directed by the legislation, future policy considerations could be given to balancing the municipal services which our lands require with the benefits they provide. Clearly, lands held by us are not lands that will ever become development lands. They are lands held in the public trust, and their assessment classification should reflect this.
In summary, Ontario's conservation authorities believe the land taxation policies contained within this bill are a significant step forward for landowners of conservation and forest properties. We believe this will provide the business framework for lands to remain in these uses, and we laud you for these changes. We still believe, however, that within this new land taxation policy context, relatively minor improvements could be made, and we have offered these for your consideration.
The Chair: That leaves us with about two minutes per caucus. We move to the NDP first.
Mr Pouliot: Madam Stewart, your courage is great. You see the need to commend the government, yet we sense that you're very much aware of the state of siege, that your cousins -- the Ministry of Natural Resources has been cut by more than half; the related Ministry of Environment and Energy has been gutted. I, for one, placing myself in your shoes, would ask, am I next in line?
I'm very much aware that you also have survived and done so very well, to the best of your abilities in the face of severe, acute cutbacks, and some of them have been devastating. They went to the very heart of what you are trying to do and were of a deliberate, systematic nature, yet you're still around protecting what we feel is more important, part of our heritage. When that begins to slip, there's not much left.
You've talked about regulations. We won't be there at the regulation level. We don't have access to the regulation process, and we need your help. Would you please indicate to us if you have in your possession any regulations to be tabled or if you have any idea of what those regulations will be? We're going blind. There is no consultation process when it comes to regulations.
Ms Stewart: If I could deal with your first point first, sir, the NDP government in the five years preceding this government cut conservation authorities by 70%.
Mr Pouliot: I know, but they're the government now.
Ms Stewart: There was little left to do when this government took power.
Mr Pouliot: They're the government now.
The Chair: Mr Pouliot, would you let the witness answer the question, please.
Mr Pouliot: Any time. We both have immunity. Keep going, Wendy.
Ms Stewart: We are working, whenever possible, with this government on draft regulations and making our best people, our solicitors, available to ensure that when the regulations are drafted we have whatever input is possible.
Mr Pouliot: Will you send us a copy?
Ms Stewart: I'd be happy to.
Mr Rollins: Thanks, Ms Stewart and Jim, for coming in. It's nice to hear that, yes, we've done some things that haven't 100% suited you, but you people have also done a fantastic job of amalgamation in this area, I take it. Where I come from in the Quinte area, we've amalgamated three or four conservation groups together. How many have you put together?
Ms Stewart: We haven't jeopardized the watershed context of our authorities here. We've instead explored staff-sharing and creating the efficiencies that are possible while still respecting the natural watershed boundaries.
I think it's fair to say that authorities will continue to do whatever is necessary to deliver the very essential programs they are delivering, and we are very grateful to this government for endorsing continued watershed management as a core mandate of the authority.
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Mr Rollins: I think that's where the mandate of the authority originally started, back X number of years ago when it started. Maybe it was a little bit off the track, according to some people, but it was cut back to force that amalgamation. Also, we put in that individuals can apply to be assessed under the woodlands act and also under wetlands. Even though we have asked you to amalgamate, keep up the good work in looking after what we can't pass on to our next generation if you people don't have it.
Ms Stewart: That's right. There is one concern. It has come to my attention that under Bill 119, there's a move to remove the conservation authorities' ability to grant development in the floodplain. If this fair finances act goes ahead as is currently proposed and in effect results in the total sterilization of the floodplain without any compensation, the combination of those two may create a very difficult situation, where nobody has the authority to grant any development or any renovations.
In one of our municipalities here in the Rideau, Vanier, which is behind a berm which will be totally sterilized, people will not be able to put additions on their homes, even though there is little risk, in today's society, of flooding.
I think we'd better be very careful that with all this legislation on the floor right now, you examine some of those sorts of issues that are going to become more apparent.
Mr Lalonde: I'd like to welcome Jim back to the Ottawa area; it's nice to see him back.
You have done your homework on this bill. You've studied it and have covered the areas we believe in. There are two areas in this bill that apply to the conservation authorities: the fact that we have cancelled the taxes, because I do believe very much in conservation authorities; the other part is the fair assessment tax, and it depends on how it is going to be handled.
The part we really question -- you people have faced major cutbacks going back a year or a year and a half ago, and we would like to see the government compensate the municipalities. As you say, one of the municipalities -- I hope it is not one of my municipalities -- has 18% of its land under the conservation authority. But we should go even further, to cover the sloping areas, which are not covered at the present time. This is causing a lot of problems along the South Nation River. There is definitely going to be a shortfall to the municipality. Municipalities are faced with 75% reduction in revenues from farm taxes; this time, there are more revenues, from conservation tax, that we are going to lose.
We just hope the government will recognize this. You have done your homework and have brought it to the attention of the people, and it's right there in your brief. Once again, thank you very much for coming down, and congratulations again.
Ms Stewart: Merci, Jean-Marc. It is difficult for conservation authorities to pay their municipal taxes. Currently in the Rideau Valley we have Friends of the Rideau springing up, small volunteer groups who are holding special events to try and raise tax revenues. I don't think that's practical annually. If these lands are held for future generations of Ontarians, they ought to be recognized as exempt from taxation so we are able to continue to hold them in the public trust.
The Chair: We appreciate your presentation to the committee today.
ALLAN HIGDON
The Chair: We now welcome Councillor Higdon from the city of Ottawa. Welcome.
Mr Allan Higdon: I was thinking of you this morning as I was looking out at that beautiful blue sky, spring in the air, thinking of you in your meeting room, hoping the presentations were making up for your deprivation.
The Chair: Were you referring to the two hot-air balloons that were rising?
Mr Higdon: I don't know from where.
I just wanted to make a few brief comments personally. I know you've had the official presentation from the city of Ottawa this morning from our treasurer, Mrs Mona Monkman, so this is by way of some of my personal observations on the legislation. I'd like to thank you for this opportunity to present my comments on a piece of legislation which I believe is timely and overdue.
As you may know, the regional municipality of Ottawa-Carleton updated its assessment throughout the region in 1992 based upon a 1988 assessment. Older business and residential areas suffered quite a shock in the form of a dramatic tax hike. Our downtown business core was particularly hard-hit by market value assessment; it has led to very tough times for the merchants involved, coming as it did right along with the recession, as taxes bumped up and the recession hit them. It was devastating.
I realize, however, that this is what happens when assessments get outdated and reality eventually intervenes. I can just imagine the wailing and gnashing of teeth which we will hear from Toronto when their 1940 tax assessment is finally updated. I imagine it will be deafening.
I strongly support the Who Does What recommendation that a reformed property tax system must be province-wide, value-based and kept up-to-date. This will help to avoid the parochial political pressures that prevent municipal politicians from making necessary choices -- not that any of us would duck our responsibilities, of course, but some others tend to do that.
The legislation you are considering requires an update to be done based on a June 30, 1996, assessment, with annual updates after 2004. The three-year rolling average provision to smooth out property valuation fluctuations is an excellent innovation which should be well received by those affected by increased assessment, not that any taxation system is exactly warmly received.
The updated assessment provision will prevent the continuation of the current hodge
podge of property tax assessment systems throughout the province, an unrealistic situation created through deliberately outdated assessment systems.
The repeal of the business occupancy tax has been welcomed by the business community. I would think this is a positive move, and I support it. The tax reduction program for managed forests and conservation lands is also very welcome, as is the complete exemption of conservation lands from property taxation. I think these are excellent environmental initiatives. They've been lauded by the previous speaker, Councillor Stewart, who is very involved with the Rideau Valley Conservation Authority.
My concerns about Bill 106 are focused on a few areas.
First of all, very likely a tax shift will take place among the three existing property classes, and that will be hard to gauge until an impact analysis is complete. Just what will the implications of this be?
Second, an annual assessment may well lead to a greater likelihood of assessment loss through appeals, a potential loss we certainly can't afford.
Third, the issue of tax equity between property classes will be left to municipalities, which have never had to consider this before. We can only hope they get it right.
Fourth, the setting of tax ratios at the upper tier could lead to an unfair shifting of burdens between municipalities and across certain property tax classes throughout the region.
Of critical importance to the city of Ottawa, and I know that Mrs Monkman spoke to you about this this morning, is the payments in lieu of taxes from the federal and provincial governments. This issue is not addressed in Bill 106, and it involves over $80 million for the city annually. I would certainly like the status of the PIL revenue to be clarified. We'd be devastated if something happened to it or a significant portion of it was shifted.
Already our 1998 budget exercise promises to be a nightmare, given the impact of the mega-week announcements and this legislation. It will be difficult to have any clear idea of either the revenue or expense implications for the coming year. We're just going to have to muddle through.
In general, the city of Ottawa is supportive of the proposed legislation, as it provides for municipal control over tax policy. It will be vital that the province maintains open communication with the municipalities and demonstrates flexibility so we can resolve to our mutual benefit some of the problems we face in absorbing and implementing the many changes taking place in the administration of local government, virtually all of them simultaneously. It's going to be a very interesting year next year, and this promises to add to the mix.
Those are just my brief comments and some of the concerns I see from a city that's hard-pressed right now.
The Chair: Thank you very much. That leaves us about three minutes per caucus. We'll start with the government caucus.
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Mr Ford: I don't know that much about Ottawa, but my son went to Carleton University. I would just like to know if the tax assessment in Ottawa and vicinity is up to date. As you're very well aware, in the Toronto area there's a lot of conflict because the tax is not up to date. This creates a real vacuum in people's thinking. When I say "vacuum," they've got a tremendous amount of real estate assets but they want to pay that old, old tax. We believe it's unfair for certain individuals in other areas that are right up to date. I'd like your opinion on that.
Mr Higdon: We went through this. It was very acrimonious -- not as acrimonious as Toronto, but you tend to do things on a bigger scale there, I realize. But in 1992 we implemented market value assessment based on 1988.
The classic debate was about the little old lady in the old house and now her taxes have quadrupled. But I think the point that won out was, "We have all these expenses and there's this one big total tax bill." What you're saying to our proverbial little old lady is: "You've had pretty well a free ride for 40 or 50 years. Somebody else, a young couple who bought a new home, has been paying the freight on your house. Let's balance up the fairness here. Somebody has been paying the bill. You haven't; somebody else has been doing it."
When you look at what condos have to pay in terms of property taxes, it's enormous. Anything built recently pays these incredibly high taxes, and these older homes get by with half of nothing. Why should the people in Rosedale be getting off scot-free while the younger couple who's trying to get started in certain areas are paying higher taxes? It doesn't make sense. It's not fair.
Mr Ford: We've had the mayor, Barbara Hall, at one of our meetings. She danced around the subject for a while and said it was a patchwork of areas where they have not renewed the assessments or anything else for a number of years, back in 1902 or something; there was another one there. We've been getting a backlash from certain individuals and groups saying this government is being unfair in their approach to these things.
As I mentioned before, a dollar is a dollar is a dollar. Some people have their assets in property, other people have them in airplanes or jewellery or whatever they have it in, and you have to get a fair-share assessment on the items.
Mr Higdon: Just because you've had a benefit for decades doesn't mean to say that you're entitled to it. The point I made previously is that somebody's paying the freight, and if you're not paying your fair share, somebody else is picking it up for you.
Mr Ford: Everybody gets the connotation that senior citizens and everybody are poor.
Mr Phillips: I look forward to the government explaining the reverse mortgages to the seniors.
As to the payment in lieu, I can put your mind at ease there; the government has told us that nothing's going to change there, so I think you can rest comfortably with that. We've heard that today. It was a concern particularly in this area but in other areas as well.
Mr Higdon: We'll get confirmation in writing, I assume.
Mr Phillips: We've asked for that. We expect to get that, because the government members have told us that the payment in lieu will not change.
I have several questions. Everywhere we go everybody says: "We need change. I admire the government for the courage." All we say is, "We'd like to know a bit more about what this really means." My colleague said that everybody admired the First Brigade's courage too, but they all ended up dead. If somebody had been able to say earlier, "Maybe you shouldn't do that," they may have been courageous and alive.
In any event, we can't get any impact studies out of the government. We're being asked to do something your council would never do; you would never pass a bill with as little information as we got.
You raised several good points: the business occupancy tax but also the upper-tier tax ratios. Our concern in the opposition is that what you want, which is tax policy determined locally, will be determined at the upper tier. As we read the legislation, once those tax ratios are set at the upper tier, you have to use the same ratios as the lower tier. Furthermore, there's a further complication that if your ratio is above the upper tier, you've got to bring your ratio down to the upper tier's ratio. Is that a matter of significant concern to Ottawa or is it a minor concern?
Mr Higdon: It's part of all the rest of the things that are coming down through mega-week. We're talking about amalgamation of municipal governments. I want amalgamation to be planned so we have the impact studies and we know what we're getting into. I don't want amalgamation through default.
If this gives the upper tier a device to destabilize the local municipalities, it's another instrument to achieve one-tier government through default. I want to make sure it's a transparent process and the citizens get to decide the structure of local government; not to have, as our treasurer would say, all our revenue sources cherry-picked by the upper tier until eventually the local municipalities simply become unviable.
Mr Phillips: You mentioned the challenge the reassessment caused for some downtown businesses when they were all put on market value. There will be another dislocation as a result of this bill, which is taking the business occupancy tax away. Everybody agrees that's a tax that has to go, but it will be put back, according to all the municipal leaders we've talked to, on the commercial realty tax, essentially in a fixed rate. Has your council had any opportunity to look at the ones that will go up and the ones that will go down and whether that's going to cause any dislocation for your business sector?
Mr Higdon: We had a presentation by Mrs Monkman, who I understand spoke to you, and we didn't go into that aspect of it. It might be too soon to get into that kind of detailed analysis, or maybe we don't have the resources to look at that. But like the TV ads used to say, "You can pay me now or you can pay me later." Somebody's going to pay the bills. If you want to take that off the business tax, it's going to get stuck on somewhere else. Who will prosper from this change and who will not, I don't know.
Mr Marchese: Councillor Higdon, you make a case for saying that finally people are going to have fairness. Some people have been having a free ride. It's the same argument the government makes in this regard. One of the things we take pride in in downtown Toronto -- that's where my riding is -- is the fact that we have a livable city, a residential component which some of the major cities don't have. Our reference is usually to the American cities, where the residential component has disappeared, making the city core not a very livable or nice place, by and large. I think most people agree with that.
The feeling we have is that as you achieve this fairness, there are some dangers you've got to worry about. One I worry about is the seniors, and there are lots of seniors in my riding. My mother's one of them. She owns her own home -- she's going to be 86 this month -- and she wants to stay in her own home. She pays about $2,000 in taxes, and the increase in her taxes is probably going to be very high. You might argue that she's getting a free ride. She thinks she's paying a lot. When she all of a sudden has to face a big tax hike, she's going to have to worry about that. She and many other seniors are going to have to worry about that.
Businesses are worried about the tax burden. Some of them are worried about the tax burden in terms of their ability to stay. Downtown Toronto's been very worried about losing business to the outskirts, to the GTA. Doesn't that worry you a little bit?
Mr Higdon: Sure it's worrisome. The money has to be paid, but at least if you have tax policy in control of the local municipalities, these kinds of values you're talking about can be incorporated locally and reflected locally. I think people would much rather have that than have the policy decided at Queen's Park and it's just a general, generic tax policy for everybody. If your community values those kinds of residents and that integrity of the neighbourhoods, surely your municipal representatives will incorporate that in your local tax policy. That gives you the benefit of local control that reflects local values.
Mr Pouliot: Mr Higdon, you have mentioned in the course of your presentation that you don't see Bill 106 as working in isolation; that it was meshed, webbed, connected with the mega-week and it has to be factored in, incorporated. I could sense some hesitation on your part, and I thought it was on account of not knowing what the cost will be as you are compressed into a rather short timetable.
I, for one, do not possess the means to buy things without knowing the price. I think it's a fair question. Are you satisfied? We're not. I'm not blaming the government here. These things take time to detail and there's a lot of unknown. Before we make any decision regarding the people we represent, at whatever level, surely everything has to be costed. We have to know how many dollars we are talking about, because there are thresholds there. There is a philosophy, a human dimension, an apportionment -- there's only so much -- and there's also an ability for society to digest and assimilate only so many changes or we risk a counter-revolution perhaps, using their jargon, or we have mistrust and dislocation in some cases. Do you have some fear that it's getting a little late and we need the figures as soon as possible? I'm talking about the mega-week.
Mr Higdon: Sure. I think everybody's worried about that at the municipal level. We're in uncharted territory here, so who knows the impact of it? The government doesn't know, I'm quite sure. We're all hopeful. What the net benefit to this region will be of the mega-week changes, the regional chair has said the region might be out $100 million, $120 million -- who knows? -- or it could be a lot less. I don't think we will know, the financial figures won't shake out, for about a year. I'm sure you'd be looking at that.
I've worked in the bureaucracy, and you can bet the bureaucrats don't really know the implications either. They've taken educated guesstimates, but we're going to have to live with the consequences. That's why at the very end I stressed that I hope this still remains a flexible process. When you're going through this number of changes, there are going to be, you can bet, several major screw-ups or underestimates throughout the process, and the government had better be prepared or have the flexibility to adjust to make sure this evens out and the objectives they have set are achieved.
I know the federal government is downloading on to the provincial government, so the suspicion is of course the provincial government downloading on to the regional, which downloads on to the local. Unfortunately for us at the local level, there's nobody else to download on. We're at the bottom of the heap. There's a suspicion that you're incorporating the federal cutbacks as part of mega-week down to the local level.
The Chair: Thank you very much, Councillor Higdon. We appreciate your presentation to us.
That concludes our business in Ottawa today. The committee will stand adjourned until 9 am tomorrow morning in Chatham. See you all there bright and early.
The committee adjourned at 1524.