HomeMy WebLinkAboutFND-028-08ti.
~~`~O.I~
Energizing Ontario
REPORT
FINANCE DEPARTMENT
Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE
Date: Monday November 17, 2008
Resolution #:` ~~o
Report #: FND-028-08 File #: By-law #:
Subject: PROVINCIAL EDUCATION TAX RATES
Recommendations:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report FND-028-08 be received for information.
Submitted by: ~ Reviewed
Nancy Ta o , .A., C.A.,
Director of Finance(freasurer
NT/LG/hjl
y
Franklin Wu,
Chief Administrative Officer.
REPORT NO.: FND-028-08
PAGE 2
BACKGROUND:
1.0 2007 Year:
1.1 In the 2007 Ontario Budget, the Province announced a new plan to reduce
Business Education Taxes (BET) across the province to a maximum rate of 1.60
percent by the year 2014.
1.2 This new plan is expected to reduce the Business Education Taxes by
approximately $540 million over the seven year phase in period and significantly
reduce the wide variation in BET rates across the Ontario municipalities. These
BET reductions will improve the competitive position of Ontario businesses,
create new jobs and strengthen the provincial economy.
1.3 The business property classes with education tax rates below the Provincial
maximum rate of 1.60 percent will remain at the 2007 education tax rates and will
not increase under this new plan.
1.4 The residential education tax rates will remain unchanged at the 0.264 percent
for the property classes: residential/farm and multi-residential. The farmland and
managed forest property classes education tax rates are still 25 percent of the
residential education tax rate.
1.5 In the 2007 Ontario Budget, it was also announced that all eligible new
construction initiated after the March 22, 2007 will immediately be subject to the
maximum BET rate of 1.60 percent.
1.6 These new construction properties are for the education tax portion only. These
properties are evaluated by MPAC and must reflect the existing definitions for
commercial and industrial property classes including the optional classes and fit
the eligibility requirements for new construction.
1.7 The new construction BET rate will establish a more level playing field for
businesses facing decisions about where to build new manufacturing facilities or
other business complexes.
2.0 2008 Year:
2.1 In the 2008 Ontario Budget, the Province announced an accelerated plan for
BET in the northern Ontario municipalities.
2.2 The northern municipalities with the accelerated BET reductions will reach
maximum BET by 2010, a full four years earlier than originally planned.
REPORT NO.: FND-028!-08
PAGE 3
2.3 The northern businesses will benefit from the total BET savings of more than $70
million over the next three years.
2.4 The 2008 Budget also allows that in future years, consideration may be given to
accelerating BET reductions in other parts of Ontario should the fiscal plan allow.
2.5 Beginning in the 2008, the Province set the education tax rates to implement the
BET reductions for both the broad and optional property classes.
2.6 The business property classes with education tax rates above the Provincial
maximum rate of 1.60 percent and below the Provincial year's ceiling rate are to
be reduced each year by two percent of the amount exceeding the 1.60 percent.
3.0 Commercial Education Tax Rates in Clarington:
3.1 Commercial properties have different education tax rates within each upper/lower
tier municipality across Ontario.
3.2 The Commercial property education tax rate for 2007 was 1.487553 percent
which is below the Province's mandated maximum target of 1.60 percent.
Therefore, for the 2008 year, the Commercial property education tax rate
remained at the 2007 rate of 1.487553 percent as it was below the Provincial
maximum BET of 1.60 percent.
4.0 Industrial Education Tax Rates in Clarington:
4.1 Industrial properties have different education tax rates within each upper/lower
tier municipality across Ontario.
4.2 The Industrial property education tax rate for 2007 was 1.968878 percent which
is above the Province's mandated maximum target of 1.60 percent. Therefore
for the 2008 year, the Industrial property classes participated in the new
Provincial BET reduction program to be phased in over the next seven years
based on the Province's formula.
4.3 The Industrial property education tax rate for 2008 was 1.961500 percent which
is a decrease of 0.37 percent from the 2007 tax rate for education.
5.0 Education Retained:
5.1 The Province allows Tower tier municipalities to keep for their own purposes the
education taxes on commercial and industrial payment-in-lieu properties. This is
generally referred to as education retained revenue. With the industrial property
classes education tax rates being reduced, the Municipality of Clarington will
receive less education retained revenue.
REPORT NO.: FND-028-08
PAGE 4
6.0 2009 Year:
6.1 The 2009 year for property taxation is a reassessment year with properties based
on current value assessments effective January 1, 2008. Properties with
increases are to be phased in over the next four years. While property
decreases are effective immediately.
6.2 Following each reassessment, municipalities and the Province have to reset tax
rates to offset average assessment increases. As a result, the maximum BET
target of 1.60 percent may need to be re-calculated for 2009 and future years to
adjust for the impact of the reassessment-related changes.
6.3 The Province will not be announcing the 2009 BET reduction rates until the
Ontario Budget at the end of March 2009 which is long past Council's final
budget date of January 26, 2009. As a result, any adjustment to the education
rates that result in a reduction in education retained revenue will be treated as a
tax policy change when the tax rate by-law is forwarded to Council in April/May
2009. This will likely result in a tax rate increase beyond the budget increase
approved by Council and is one of the reasons why the tax rate by-law does not
get forwarded to Council for approval until the spring. The Regional tax policy
changes must also be approved before final tax rates are approved in the by-law.
While our local budget can be approved in January, the actual tax rates follow
when external information is available.
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
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