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HomeMy WebLinkAboutFND-004-03 ,. .-.. . j ClYlilJgton REPORT FINANCE DEPARTMENT Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE E~' -'I .-'1 ,',' , . - I .- . ,/j ,.-,.( _(I ') Resolution #(. j! / 1'0 . -' MONDAY, FEBRUARY 3,2003 ,:~ /) ./ , r--. ( " File#: By-law #: Date: Report #: FND-004-03 Subject: BEAUBIEN - PROPERTY ASSESSMENT AND CLASSIFICATION REVIEW Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report FND-004-03 be received for information; and 2. THAT a copy of this report be forwarded to The Honourable Janet Ecker, Minister of Finance. Submitted by: Reviewed by:Q ~__ri.st..... ranklin Wu, Chief Administrative Officer. NT/LG/hjl 1301 . '- REPORT NO.: FND-004-03 PAGE 2 Background: On December 9, 2002, Council requested staff in the Finance Department to provide a summary report on Marcel Beaubien's Property Assessment and Classification Review. On November 29, 2002, the Ministry of Finance released Marcel Beaubien's second and final report on Property Assessment and Classification Review. Mr. Marcel Beaubien's, MPP for Lambton-Kent-Middlesex, first report, released April 2, 2001, dealt primarily with the governance and structure of the Ontario Property Assessment Corporation which is now known as the Municipal Property Assessment Corporation. Mr. Beaubien's mandate for his final report was to review the following issues: The number, scope and definition of the property classes and sub-classes; The assessment methodology applied to unique properties; and The linkages between assessment classifications and related public policy objectives of the Government of Ontario. The following is a summary list of Mr. Beaubien's final report recommendations that are of particular interest. Recommendations: 1. That the Appeal powers not be conferred upon upper-tier municipalities. Comments: The upper tier municipalities requested to have the right to appeal property assessments. Presently, lower tier and single tier municipalities only have the right to initiate property assessment appeals and generally the lower tier municipalities are satisfied with the status quo as giving appeal rights to the upper-tier municipalities may introduce unnecessary duplication. The downside is that upper-tier municipalities are less likely to share in the costs of significant appeals. 2. Features of a property which are designed for environmental protection or pol/ution control not be subject to additional assessment. Comments: In this recommendation, structures used to protect the environment or for pollution control are being recommended not to be assessed. In many cases, pollution control equipment is already exempt, it is alterations to the landscape that are of issue. 13Q2 REPORT NO.: FND-004-03 PAGE 3 3. That the Province not take action to require MPAC to assess all occupants of exempt properties. Comments: The Province is putting the onus on the municipalities to identify taxable tenants in exempt properties within their boundaries and for the municipalities to notify MPAC. The intention is also that for owners such as a municipality, that a management agreement would not convey the degree of control over the premises that is required for the law to view someone as an assessable occupant. Staff is supportive. 4. That changes are not to be made to the classification of gravel extraction sites. Comments: Currently, the area under active excavation (working face) is included in the industrial property class and the unused areas beyond the working face are included in the residential property class. There were some proposals to bring all of the licensed sites into the industrial class, but this was not supported, the Beaubien review. Staff would recommend that a proportionate scale be introduced to recognize areas in the immediate vicinity of the working face as well as lands that are prepared for extraction (ie. cleared, etc.). 5. Recommended changes to the definition of the Industrial Class in respect to the Research and Development, Zoning clauses and the meaning of Manufacturing. Comments: The recommendation is for the Research and Development facilities to be removed from the industrial property class to the commercial property class. This should be further refined to reflect "pure" research and development rather than further refinements of existing products. The definition would be crucial in this instance. The recommendation for Zoning is that businesses located in commercially- zoned areas are not to be included in the industrial property class. This would be very detrimental to municipalities province-wide as the definitions of commercial and industrial are different for zoning purposes than assessment purposes. The recommendation to delete the phrase "in connection with" and "producing or processing anything" from the definition of industrial class would be extensive and far reaching. The intent was to assist print shops, software developers, and other types of businesses who were inadvertently caught in the definition of industrial. The solution presented, however, would significantly reduce the portions of properties held by large scale industrial companies currently in the industrial class. Staff are recommending that these provisions not be pursued further. 1303 , '- REPORT NO.: FND-004-03 PAGE 4 6. That the multi-residential property class be combined with the residential property class. Comments: It is part of the Province's long term goal of having multi-residential and residential properties taxed at consistent rates and to encourage the development of more rental housing units. However, current tax policy is gradually reducing the burden on multi-residential property owners and they are protected by the capping program. This recommendation could significantly increase the residential tax rate. This goal will be achieved over time and therefore, staff do not feel this recommendation should proceed. 7. That the retirement homes be included in the residential property class. Comments: This recommendation is for the retirement homes to be removed from the multi- residential property class to the residential property class. This pertains to whether the lack of in-suite kitchens indicate that they are not self-contained units and therefore don't qualify as multi-residential units. 8. That upper-tier and lower-tier municipalities be given the option of increasing the number of units (above seven) that trigger eligibility for inclusion in the multi-residential property class within their boundaries. Comments: Presently, properties that have more than six self-contained residential units are included in the multi-residential property class. It is felt that small buildings with two or three stories should not be taxed at the same tax rate as large high-rise buildings. The municipal sector has made a proposal to increase the threshold from six to twenty units for the multi-residential class. Increasing the unit threshold would shift a controlled number of properties from the multi-residential class to the residential class and represents a way for municipalities to facilitate a gradual transition of eliminating the multi-residential class. It is felt that the municipalities should set the unit threshold because the municipalities are in the best position to know the level of attrition from the multi-residential class that is manageable and appropriate for their local circumstances. 9. That there be only one 25,000 square foot threshold applied to each parcel of land on which there are one or more buildings that are eligible for inclusion in the office building or shopping centre classes. Comments: The intention of the 25,000 square foot threshold was to maintain smaller properties within the commercial tax class and was assumed that municipalities would set higher tax rates for the office building and shopping centre classes than the commercial class. 13D4 '- REPORT NO.: FND-004-03 PAGE 5 Applying multiple 25,000 square foot thresholds to a single property would defeat the intention of the thresholds which was to maintain the smaller properties within the commercial class, not to augment the portion of larger properties that would be included in the commercial class. Staff is therefore supportive of this recommendation. 10. That the Province will not intervene in the methodology of assessing race tracks and golf courses at this time. That the owners of race tracks and golf courses continue with the process of reaching a consensus on the assessment methodology issues with MPAC. Comments: MPAC applied a new income strategy for assessing the land component of golf courses in the 2001 reassessment year. This new income strategy resulted in significantly higher assessments for many golf courses. This new income strategy divides the golf course assessments into three (3) components: a prime time greens fee, an estimated number of rounds played during the year, and a "greens fee multiplier" which is based on golf course property sales. The golf course owners are dissatisfied with this new income strategy because they feel it does not accurately or fairly reflects the value of their respective courses. The greens fees and number of rounds played were based on model courses instead of their actual golf courses. 11. That the graduated tax rate mechanism, currently optional, be made mandatory for the commercial property class. This mechanism would require municipalities to apply lower tax rates to smaller and lower-valued properties. Comments: Under section 368.2 of the Municipal Act, there is a graduated tax rate mechanism that may be applied to commercial or industrial property classes which allows upper-tier and single-tier municipalities to establish up to three bands of assessment and to set different tax ratios for each band. The municipalities would determine the thresholds of assessed value for each band and the tax ratios for each band. It is thought that the graduated tax rate mechanism is the most efficient means of delivering property tax relief to small businesses. This mechanism avoids the need to define eligible properties because all properties in the class are eligible and treats all properties fairly and equally as every property in the class would benefit from the reduced tax rate on the same portion of its assessment. It is recommended that the Province prescribe criteria for a minimum threshold and a maximum tax rate for the first band of assessment to ensure the intent of the program is not defeated by the creation of an artificially low assessment or high tax rate on the first band. 1305 REPORT NO.: FND-004-03 PAGE 6 12. That the tax treatment of for-profit private schools not be changed at this time. Comments: Currently, for-profit schools are assessed at commercial property tax rates, the same as other for-profit businesses. The owners of these schools are seeking tax relief that their counterparts - public and non-profit schools receive and to provide tax fairness to the parents of their students. It is anticipated that the new education tax credit will move towards addressing inequities. Staff would support this recommendation. 13. That all residential units located in trailer parks, campgrounds, and land lease communities will be assessed and taxed at the residential property class rate if they meet the permanency criteria test. Comments: Under the moratorium policy imposed over a decade ago, the residences in mobile home parks that are zoned for year-round use have been assessed, but residential units that are zoned as being seasonal usage have not been assessed just the land has been assessed. As a result, many trailers have not been assessed which has leaded to recent court challenges about the assessability of all residential trailer units. MPAC proposes the following criteria test to see if all residential units located in trailer parks, campgrounds, and land lease communities are assessed and taxed at the residential property tax rate if they exhibit the characteristics of permanency. . Unit not licensed for road travel or for towing behind a passenger vehicle; . Unit can only be moved to another site with a special vehicle and an oversize permit; . Permanent connections are in place for water, electricity, and waste disposal. This proposal would ensure consistency in the treatment of residential units. 14. That MPAC will not be required to issue omitted assessments for residential units in trailer parks, campgrounds, and land lease communities that have not been assessed prior to 2003 due to the moratorium policy that was previously in effect. Therefore, it is recommended that the Assessment Act be amended to create a limited exception to the omitted assessment rules to address this particular situation. Comments: The residential units in the trailer parks, campgrounds and land lease communities may be assessed retroactively because under the Assessment Act, MPAC must add properties to the assessment roll for the current year and two previous years when it is determined that the properties were erroneously omitted from the assessment roll. 1306 . '- REPORT NO.: FND-004-D3 PAGE 7 15. That mandatory capping of assessment related tax increases to be reviewed. Comments: The Province imposed mandatory capping on property tax increases for commercial, industrial, and multi-residential properties to mitigate the impacts of the 1998 property tax reform. The municipalities support the implementation of CVA and the municipalities would like to see the mandatory caps terminate by a fixed date in the future so that CVA can be fully implemented. It is recommended that the Province conduct a quantitative analysis to study the impact that taxpayers would experience if there were no mandatory caps in place. It is also recommended that the Province review the progress that has been made in each municipality towards achieving full CVA since 1998. 16. That zones be created in which property tax incentives could be provided to businesses that construct new buildings or expand existing facilities. Comments: This was announced in both the speech from the Throne and the Ontario Budget speech. 17. That a requirement to submit applications for inclusion in the farm property class be maintained. However, it is recommended that the deadline be changed to December 31st of the taxation year in question. Comments: This will assist farmers who purchase land after the deadline or those who may miss the current deadline (April 30th to June 30th). 18. That MPAC develop a test to isolate farm lands within urban shadows to ensure that their assessed values are not higher than the assessment rate per acre for similar lands outside the urban shadow area. Comments: This will assist in maintaining farm operations in areas under growth pressures. 19. a) That activities characterized as "primary agricultural production" on farm property be included in the farm property class. b) That activities characterized as "value-retention activities" on the farm property be included in the residential property class, off the farm property be included in the commercial class. c) That activities characterized as "value-added activities" carried out on or off the farm property be assessed at commercial or industrial classes. 1307 .. '".- REPORT NO.: FND-004-03 PAGE 8 d) Grain elevators off farm property to be commercial class. e) Storage facilities off farm property, owned by farmers for produce storage, to be in residential class. Comments: The intention is to bring clarity, consistency and equity to the tax treatment of farm operations. Summary: Staff respectively recommends that a copy of this report be forwarded to the Minister of Finance therefore illustrating to the Government of Ontario that the Municipality of Clarington is an active participant in legislative issues affecting the residents within its boundaries. Copies to be forwarded to: The Honourable Janet Ecker Minister of Finance yth Floor, Frost Building South 7 Queen's Park Crescent Toronto, Ontario M7A 1Y7 CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L 1C 3A6 T (905)623-3379 F (905)623-0608 1 3'J 8