AIRPORT MANAGEMENT CONFERENCE OF ONTARIO
ONTARIO HOME BUILDERS' ASSOCIATION
CANADIAN PROPERTY TAX ASSOCIATION
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
LAWRENCE PARK RATEPAYERS' ASSOCIATION
CONTENTS
Thursday 23 October 1997
Fair Municipal Finance Act, 1997 (No. 2), Bill 149, Mr Eves /
Loi de 1997 sur le financement équitable des municipalités (no 2)
Projet de loi 149, M. Eves
Retail Fair Tax Group
Mr Frank Zinner
Ms Sharen Cain
Mr Darryl Thompson
Mr Jack Walker
Mirvish Productions
Mr David Mirvish
Mr Mark Blidner
Chiefs of Ontario
Grand Chief Doug Maracle
Chief Darlene Ritchie
Mr Kim Fullerton
Chief Margaret Penasse
Canadian Transit Co
Mr Remo Mancini
Airport Management Conference of Ontario
Mr Dave Dayment
Toronto Arts Council
Ms Ann Bermonte
Ms Janis Barlow
Ontario Home Builders' Association
Mr Peter Goldthorpe
Ms Celia Teale
Town of Huntsville
Mr Christopher Williams
Mr Robert Small
Canadian Property Tax Association
Mr Brad Nixon
Mr Frank Zinner
London Development Institute
Mr Ben Lansink
Mr Bernie Zaifman
Association of Municipal Clerks and Treasurers of Ontario
Ms Cathie Best
Mr Bob Heil
Lawrence Park Ratepayers' Association
Mr George Teichman
Mr Arthur Lofsky
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président
Mr Terence H. Young (Halton Centre / -Centre PC)
Vice-Chair / Vice-Président
Mr Wayne Wettlaufer (Kitchener PC)
Mr Ted Arnott (Wellington PC)
Ms Isabel Bassett (St Andrew-St Patrick PC)
Mr Jim Brown (Scarborough West / -Ouest PC)
Mr Monte Kwinter (Wilson Heights L)
Mr Gerry Phillips (Scarborough-Agincourt L)
Mr Gilles Pouliot (Lake Nipigon / Lac-Nipigon ND)
Mr E.J. Douglas Rollins (Quinte PC)
Mr Wayne Wettlaufer (Kitchener PC)
Mr Terence H. Young (Halton Centre / -Centre PC)
Substitutions / Membres remplaçants
Mr Ted Chudleigh (Halton North / -Nord PC)
Mr Gary R. Stewart (Peterborough PC)
Clerk / Greffière
Ms Rosemarie Singh
Staff / Personnel
Mr Ray McLellan, research officer, Legislative Research Service
The committee met at 0904 in committee room 1.
FAIR MUNICIPAL FINANCE ACT, 1997 (NO. 2) / LOI DE 1997 SUR LE FINANCEMENT ÉQUITABLE DES MUNICIPALITÉS (NO 2)
Consideration of Bill 149, An Act to continue the reforms begun by the Fair Municipal Finance Act, 1997 and to make other amendments respecting the financing of local governments / Projet de loi 149, Loi continuant les réformes amorcées par la Loi de 1997 sur le financement équitable des municipalités et apportant d'autres modifications relativement au financement des administrations locales.
RETAIL FAIR TAX GROUP
The Vice-Chair (Mr Wayne Wettlaufer): Good morning. I'd like to welcome everyone to the standing committee on finance and economic affairs. I welcome the Retail Fair Tax Group, and I wonder if you could identify yourselves, please.
Mr Frank Zinner: My name is Frank Zinner; I'm with Hudson's Bay Co.
Ms Sharen Cain: Good morning. My name is Sharen Cain; I'm with Shoppers Drug Mart.
Mr Darryl Thompson: My name is Darryl Thompson; I'm a manager at Loblaws and a past chairman of the Canadian Property Tax Association.
Mr Jack Walker: My name is Jack Walker; I'm with Walker, Fox, Van Moorlehem and Attard, a law firm.
The Vice-Chair: You are free to make your presentation. You have half an hour, and any time that is left over after you make your presentation will be open for questions. You can begin.
Ms Cain: As I indicated, my name is Sharen Cain. I'm director of real estate at Shoppers Drug Mart. I am part of the Retail Fair Tax Group, and I'd just like to tell you a little bit about who this group is and what companies are involved.
Our group is comprised of 10 of Ontario's largest retailers, including the T. Eaton Co, Sears Canada Inc, K mart Canada Ltd, Woolworth Canada Inc, Winners Apparel Ltd, Hudson's Bay Co/Zellers Inc, Wal-Mart Canada Inc, Loblaws Properties Ltd, Shoppers Drug Mart and the TDL Group Ltd, which is the Tim Horton group. Combined, our group has over 1,500 locations in Ontario. We pay in excess of $260 million in property and business tax. We employ roughly 150,000 full- and part-time employees across the province.
You may recall that back in 1995 there was a lobby effort on behalf of some of the tenants, and some people referred to it as the mall wars. The composition of this group is different in that the anchor tenants and the CRU tenants, or the commercial retail units, are sitting here together. The reason for that is it's an issue that affects all tenants in all properties, commercial, industrial, because what we're concerned about is tenant rights under the proposed amendments to the legislation before us today.
Historically tenants have participated in the assessment and valuation process, and our goal is to continue to participate effectively in the assessment process by ensuring that the properties which we occupy are fairly and equitably assessed in relation to one another.
I'm going to start to talk about how a shopping mall is valued today in referring to the slides. Typically what would happen is the first anchor tenant would be valued. In our example, we have indicated that anchor A has a value of $30 million applied to it. The next step would be to value any other anchor tenants that happen to be in the mall. In our example, we have indicated that anchor B has a value of $25 million applied to it. The third step would be to value the individual CRU tenants, and the process there briefly would be simply to identify on a square foot basis the CRU tenants and apply a fair market value to those tenants. The end result is a total value for the CRUs, and our example is $20 million. The total market value in our example of this mall is $75 million.
Historically, the realty assessment would be sent to one owner of the property. Business assessments would then be sent to all the tenants, which would therefore form the basis for our understanding what the assessed value for our property was and give us the information we needed to determine our tax obligation. Under this system, any tenant could appeal its portion and focus on its portion of the overall assessment.
Under the proposed legislation, what's happening next year, the first step will be the same, a realty assessment will be sent to one owner, but what is happening under the new system is that -- you'll see on our slide there are no individual tenants identified -- it's all just one entity, so the concern is that with the business assessments being eliminated, all parties must appeal the overall value of the property, and at this time it's also unclear whether the tenants will be permitted to focus on their portion.
Mr Thompson: My name again is Darryl Thompson; I'm with Loblaws. I'm going to continue the presentation.
After the mall has been valued, the municipality then issues a tax bill, and that tax bill is sent to the owner of the shopping mall, shopping centre or multitenanted property. One thing we should remember here is that this legislation and what we're presenting here today deals with all tenanted, income-producing properties, not just shopping centres. We're just using it as an example.
Again, the municipality sends the tax bill to the owner, who acts as a tax collector. He gets the bill, and as the next slide will show, the owner then develops a process to bill the tenants their proportionate share of taxes based on the lease agreements they have with the owners. The tenants then remit back to the owner those taxes. He then remits it back to the municipality. So to the owner, it's just a flow-through process. He receives a bill, passes on the invoices to the tenants, the tenants remit back, and he acts as the collector and remits it back to the municipality.
Some of the changes under Bill 149 we would like to bring to your attention today. Historically, if you look at the chart in front of you, a tenant received a notice of assessment, a tenant had access to his information, he had the right to reconsider and be a part of a reconsideration process, and he was also allowed to focus on his own portion of his taxes and his assessment. Under the new Bill 149, the tenant loses all those rights, and it gives the owner or landlord absolute power over that part of the tax payments and tenant remittance to the owner.
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It might be a little tough to see, but this is a cross-section of a number of malls throughout Ontario. You can see from a tenant's perspective how important the tax liability is. In some cases it's as high as 70% of his rental costs. To require a tenant to remit taxes based on 70% of his rental costs with no right or access to information on how those costs are arrived at is detrimental to the leasing and tenanting of malls and detrimental to the small business itself, with the inherent costs of such high taxes.
I want to review some of the fundamental objectives of Bill 149. The first one is fairness. As you can see, what I have just gone over removes the longstanding rights of tenants. Tenants have always had certain rights to be negotiated. We've always had the opportunity be watchdogs on the assessment process. We're the taxpayers. We want to know what our portion is and we want to be able to fight that tax portion and have access to the information accordingly.
It also excludes the participation of knowledgeable parties. That goes along with the watchdog process. The tenants are normally the ones, and historically have been the ones, who have appealed assessments. Owners appeal assessments to a certain point, depending on the profitability or competitiveness in the market that they share. If there is no competitive market and the owners are fully tenanted, there is not the same motivation for an owner to appeal the assessment on a property as there is for a tenant who is the actual taxpayer.
The second basis is consistency. The current legislation will give all the rights to the owners, as I have previously stated, and only limited rights to tenants. Tenants will only have access to information based on small errors, clerical omissions, that kind of information. The actual basis and meat of the tax payment, the tenant doesn't have any reconsideration process available to him. The whole Bill 149 goes against the reality of commercial leasing practices in today's market. Some 95% of all leases are net leases, the tenant picking up all the costs associated with their premises, and I think this bill goes against that premise.
Accountability: Tenants are unable to seek an equity of assessment. It's very difficult for a small tenant to compete in a marketplace when some of his costs are unknown. He is also trying to compete in a marketplace with competitors that don't have the same kind of costs or who may have access to information and access to appeal that he does not because of his location in the mall. Currently the assessors' methodology impacts on existing leases. Everything that the assessor does, the methodology process, would certainly reflect on all the leases currently in the marketplace.
What are some of the amendments that we feel are required to this legislation? All stakeholders, owners and tenants, must have the opportunity to work together and work as that watchdog process. Tenants should be given the right to request reconsideration, a form so that they can look at their information and find out if they are being correctly assessed. In order to participate, information is crucial. As it stands now, the only time that a tenant will receive information is when he has to appeal the entire assessment. Up until then, neither the assessment office nor the landlord has to give the tenant any information whatsoever on the basis of their assessment.
Finally, it's unreasonable to require a tenant to argue the value of an entire property. If you're a 2,000-square-foot tenant in, for example, Yorkdale, currently legislation says you have to appeal the entire Yorkdale mall in order to be reconsidered and have access to information on your 2,000-square-foot portion. That becomes a business case decision now; it goes against equity and fairness of valuation. It comes to the point, "Can I afford to spent $30,000 to appeal a mall to save $3,000 in taxes?" the down point being if you lose the appeal on the entire mall, you have lost $30,000 plus the $3,000 in extra taxes that you appealed to begin with.
To conclude, we want to continue to participate effectively in the assessment process. To do that, the tenant should have the right to request a reconsideration, the tenant should have the access to information, and most important, the tenant should have the ability to focus on their own portion of the property, what directly relates to them. I think that's an important part to small business and the larger retailers as well, "What directly affects my business, and how can I be competitive in this marketplace?"
Mr Zinner: I'm going to conclude our presentation. My name is Frank Zinner, and I'm with Hudson's Bay Co. I'm also the current vice-chairman for the Ontario chapter of Canadian Property Tax Association. A bit of my employment background is I was a property assessor from 1974 through 1987 for the province of Ontario.
In its overall reform of legislation and regulations, the province has set goals of reducing red tape, cutting the size of government, streamlining processes and enhancing job creation and growth prospects of Ontario business. We believe that sound assessment policy can help the province accomplish these goals and that a full discussion of assessment process options and their implications will benefit government, business and municipalities.
We have asked AEC to undertake an analysis of four policy options against criteria which address the impact on the province, owners, tenants and municipalities. The four policy options are (1) maintaining the status quo; (2) Bill 149 as presented; (3) Bill 149, amended to allow reconsideration and appeal options to tenants, with the obligations on the owner or the province to provide individual notices to tenants; (4) Bill 149, amended to allow the tenant to request a reconsideration of the valuation of the specific tenancy if the tenant is responsible for the payment of taxes under its lease.
The four options range from maintaining the status quo through extensive amendments to Bill 149, to minimum amendments to Bill 149. While numerous other variations are possible, it is suggested that the four are adequate to begin discussion on the important issue of taxpayers' rights, access to information and rights of appeal.
We will present the committee with our brief after our presentation. The submission uses the relationship between property owners and their tenants to illustrate the issues. The problems that are identified are equally applicable to all owner-tenant relationships where the tenant is responsible for paying taxes. The analysis has led to the following conclusions and recommendations:
It appears that Bill 149 is only partially successful in achieving the government's stated municipal reform objectives. The one-tier appeal process is welcomed by all parties and may reduce the red tape to some extent. Expected cost savings that were to result from limiting assessment notice provisions will likely be more than offset by additional costs incurred by forcing unnecessary new appeals. This suggests upward pressure on administrative costs at the Assessment Review Board.
By limiting the parties who receive notice and thereby limiting those who may request reconsideration or partial appeals, Bill 149 undermines the integrity of the assessment process by significantly diminishing taxpayers' rights.
Based on the analysis undertaken by AEC, the Retail Fair Tax Group recommends the government consider the third and fourth policy options which amend Bill 149. Both these options will allow the government to meet its objectives while at the same time preserving the rights of tenants as taxpayers. These options amend Bill 149 in a manner which would offset the regressive aspects for Ontario businesses.
Policy options 3 and 4 provide alternative methods by which information on assessed values could be made available to the tenant. They also allow the tenant access to the reconsideration program, while preserving the government's objective of one level of formal appeal. We believe either of these options would further the government's stated objectives while addressing the concerns raised by the submission.
Policy option 4 preserves the tenant's right to access to information, maintains confidentiality and allows the tenant the right of reconsideration.
Bill 149, as drafted, dramatically changes the manner in which tenants are dealt with in the assessment process. No longer will the tenant receive individual notices of assessed value of the space he/she occupies in the total property. No longer will there be the opportunity to seek redress of concerns regarding the assessment through an appeal process of his or her own individual tenancy. The tenant in fact will not even have the right to participate in the admirable innovation of the request for reconsideration program.
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The result of these changes is that a group of taxpayers will have lost a substantial portion of their historic right to redress. In doing so, they will also be forced into costly new processes regarding requiring formal appeals of the assessment and entire properties in order to resolve minor assessment concerns.
These changes appear contradictory to other parts of the bill which continue to afford these rights to tenants in so far as supplementary assessments, correction of errors, omissions and other assessment changes that occur. The cumulative impact of the changes on tenants is to restrict their rights, add to their costs and create a new layer of red tape in their path of concerns. That concludes our presentation.
Mr Walker: I'd like to make one statement before you ask questions. The reality of what this bill does is that the tenant, as of January 1, 1998, will have only one right: the right to appeal. For a small tenant, that's not a right, because they can't afford it. He's not appealing his own; he has got to appeal the total, for instance, of Yorkdale Shopping Centre. Effectively, what they've done in this bill is remove the right of the small tenant to ask for a reconsideration, obtain information or discuss their assessment with the assessor. That right no longer exists. The large tenants that are here, that form the component parts of this group, will appeal everything, because the only access to information is to appeal everything. So what's going to happen is that every Sears, every Loblaws, every Shoppers Drug Mart in this province is going to be appealed, there's no question. Rather than limit the number of appeals, with this bill you've effectively increased the number of appeals, because there is no alternative available.
The submission here is supported by the Metropolitan Toronto Board of Trade, and it's also supported by the Canadian Property Tax Association. All we're really talking about here is tenant rights.
The Vice-Chair: We have about 12 minutes left. We can go by caucus, four minutes each caucus.
Mr Gerry Phillips (Scarborough-Agincourt): I have just one really quick question and then another. Does each of the tenants pay the same business occupancy tax rates right now?
Mr Walker: It depends. For instance, if I'm a department store, under the existing act I pay at 50%; if I'm a small tenant or franchisee like Shoppers Drug Mart, I would pay at 30%; if I'm a lawyer, I pay at 50%; if I'm a brewery tenant, I pay at 75%. The run the whole gamut.
Mr Phillips: I think you've got a good case, which is that each of the tenants is operating on the business proposition where, if assessment change takes place, they currently get notice, because they're paying business occupancy tax. You established a business relationship based on knowledge of a major part of your lease expenses, and this bill will substantively change that. As you point out there, it looks to me like in some cases well over half of your cost are property taxes; in Sudbury, it looks like 70% of them. So I think you have a legitimate case of the bill, perhaps inadvertently, catching you.
My question really is: Which specific option does your organization prefer? On page 16 in the blue brief, you propose an amendment. Is this your preferred option?
Mr Walker: Yes, Mr Phillips, it's the preferred option. The system is not based on lease rates. If you go back to the analogy where they valued the shopping centre, they don't use the actual leases. For instance, the Sears lease may be 20 years old. They use what they call "economic rents." If I don't have access to the assessor as an objective third party -- the assessor has always been looked on by the tenants as an objective third party. We may disagree with him, but he has always been looked on as being objective. He's not involved in the process between the landlord and the tenant. Now the tenant has no right to go to the assessor and ask, "What is the basis they use to value my tenancy?"
The amendment we're suggesting is that we have the right to go and say to the assessor, "Tell me the particulars of how you valued my tenancy" -- and only my tenancy; I'm not looking to look at the total plaza. If I want that information, if I'm dissatisfied enough and I can't get the assessor to agree to the reconsideration process, I will then go to the next step, appeal the whole thing, and disclosure will come in the court process.
The Vice-Chair: Mr Phillips, your time is up. I'm sorry.
Mr Gilles Pouliot (Lake Nipigon): If you're about to set up shops in most of the malls in urban centres or in the suburbs, beside the town clock you will have your meter, and I want to wish you well. Your future is unlimited indeed. I'm sure you could go public. I will be looking very closely for your first private placement.
This is all about money, there's no question about it. On the process side, it's fully acquiesced by every party that there will be upward of 500,000 appeals. So if we refer to the right to appeal, you grab a number indeed. It was unforeseen at the beginning, but this is the largest appeal endeavour ever undertaken in North America. You will have subclasses of appeal, in fact. You will have class appeals. Many players will be compelled to appeal.
The bottom line is that Bill 149 does not work in isolation. You have $1 billion being taken out vis-à-vis transfer payment. On your page 10 you cite that under Bill 149 taxes will increase, and you focus on the small tenants, not the main anchor but the subgroup, the other people who occupy the mall. When the assessment notice comes, the Association of Municipalities of Ontario is petitioning the government to allow more than 50% on the interim levy, based on the previous year's taxes, of course. The business occupancy tax will be a factor in the equation. There's $1 billion being taken out. So, mathematically, taxes will go up. There is no way out here. On top of it, you will have this kind of dilemma.
One of the options you propose is to put the brakes on, you say "a status quo." You realize things might be changed. Do you feel this bill needs more consideration, more dialogue, more options developed, or do you feel that under the veil of regulations we don't know where we're going two months before implementation?
Mr Zinner: Bill 149 addresses most issues. The two important issues it does not address are the reconsideration process for the tenants and the right to appeal their valuation within the total. All tenants, big, small, whether we're talking industrial or commercial, it really doesn't matter, any multitenanted properties -- this is not just going to affect the retail sector; this is going to involve multitenanted industrial malls, because they're all valued on an income approach. If we are not allowed to view the assessor's records as to how our particular values were arrived at, we're all going to appeal the property, every single tenant. So instead of having one appeal, if there are 300 tenants, you'll have 300 appeals, because if the assessor is not going to allow us access, we will have no reconsideration process, which is supposed to take place, incidentally, in the first 90 days. We are supposed to be allowed to sit down with the assessor, view the records and only after that can we file an appeal. If we don't have access, we have no recourse other than appeal. That's going to clog up the courts, and we're going to have one court level, the ARB or whatever it's going to be named, in the 1998 tax year.
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Mr Bill Grimmett (Muskoka-Georgian Bay): Good morning. Subsection 53(1) of the Assessment Act currently indicates that every person employed by the Ministry of Finance etc or who has access to actual income and expense information on individual properties "who wilfully discloses or permits to be disclosed any such information...is guilty of an offence and on conviction is liable to a fine."
You've indicated in your brief that policy option 4 that you've put out would maintain confidentiality. Can you explain to our committee how a tenant could go to an assessor and satisfy themselves that they're being dealt with fairly by their landlord while maintaining the confidentiality in the assessment process?
Mr Walker: Sure. It's simple, because he does it today. The little tenant, the big tenant, the medium-sized tenant, the commercial tenant, the industrial tenant, the Tim Hortons tenant goes to the assessor and says: "There has been a value put on my property. Can you tell me how you arrived at the value?" The assessor, today, says: "Yes. We arrived at an economic rent. We looked at the leases. We determined that your space should be leasing for $8 a square foot. We multiplied that by the number of square feet, we made some expense allowances and then we applied a capitalization rate. We came out to a figure." He says, "Thank you very much."
On January 1, 1998, he goes to the assessor, same person, and says: "Mr Assessor, I was here in January 1997, and you explained it to me. Now my property tax has gone up because the business tax has come on and has been included, not for any other reason. Could you explain to me how you valued my premises? That's my experience, and that's what I've done." "I'm sorry, I can't talk to you. You're not entitled to a reconsideration. You go to your landlord."
If I'm an 800-square-foot tenant in a 25,000-square-foot office building and I go to my landlord and say, "Could you explain this to me?" the guy is going to say: "Get lost. I've got too much to do and too many important things to do."
Under the amendment, what we're talking about is that we're only asking for the information and the reconsideration with respect to the tenant's portion. That's it. So I'm not going and asking for everybody else's portion; I'm asking for my portion. I'm asking for it because they value it on an economic rent as opposed to an actual rent.
Mr Thompson: Exactly. This bill does not change how the assessor will value that mall. He will value a mall the exact same way he did it before this bill. He'll take the individual tenants' rents and capitalize them. That information is still available to the tenant if the landlord wants him to have it. This act restricts it.
Mr Walker: He has always looked to the assessor as the objective third party, and quite frankly in the last -- I won't say in the last 15 years, but I'll say in the last five years the Ministry of Finance has gone out of its way to facilitate and help the tenants.
The point that was raised about the increase in appeals, I can with certainty tell you right now that if my business is going to go public, if you give the tenants the right to reconsideration, I'm private again, because suddenly you're going to reduce the assessment appeals from the tenant portion. Historically one million or two million tenants' appeals were issued in Ontario. You're going to reduce the tenants' appeals by 95% to 100%. Now the tenant can attain the degree of satisfaction he wants and he can talk to the assessor. Supposing the assessor makes a mathematical error; he can correct it, and I feel a part of the process. You've shut the door, and I'm frustrated, and we're going to end up with more Metro Mall situations.
Mr Zinner: I just want to comment on valuation. Historically, they've determined a fair market rent based on the income and expense analysis the landlord provides them. They'll put it on a fair-market-rent curve. So that information, albeit it's confidential to that shopping centre, is a fair-market-rent curve based on all of the individual tenant leases. There is not a release of individual tenant leases; there's a release of that fair-market-rent curve. That is what we're looking to have released, the components.
The Vice-Chair: Thank you for your presentation.
MIRVISH PRODUCTIONS
The Vice-Chair: We will move on now to Mirvish Productions, David Mirvish. Good morning. You can begin when you're ready. You have a half-hour. You can use all or any part of that half-hour in your presentation, and anything left over will be distributed proportionately among the caucuses for questions. Could you please identify yourselves.
Mr David Mirvish: I'm David Mirvish from Mirvish Productions through Alexandra-Princess of Wales Theatre. This is Mark Blidner, who is with me to give me some advice if we get into technical questions, because, as you can imagine, putting on shows is my specialty, not taxes. I'll try to answer questions accurately, but I thought I might need a little help.
First of all, I'd like to say that I'm in support of what is being done for the theatre by this bill. It seems to me there's a recognition of what used to historically be a relationship between not-for-profit theatres and theatres that were commercial, which had a very long history. It has begun to become out of whack for various reasons. We've had an exceptional situation in the last 10 years, where two new theatres have either been renovated or built, and that is not the norm in the world of theatre, funnily enough. Toronto has an impression of theatre that is not the norm for the rest of the world but which has been very fortunate for all of us.
Historically, since the 1930s most theatres outside of New York or London are either owned by not-for-profit organizations or by municipalities and governments and are usually subsidized and are used by people in those communities to present successful Broadway shows that tour. In 1961, when the O'Keefe was built, it was thought that the Royal Alexandra Theatre would be torn down and that it would take the place of everything that was necessary to serve this community. By a quirk of fate, that didn't happen, and it left a commercial theatre in the city.
At that time, and always, going back many years, live theatre was never taxed at the same rate that movie houses or other commercial properties were. For 30 or 40 years, it had its own established rate that it was taxed at. People came to my father and said: "Ed, it's unfair. You're paying taxes and the government doesn't, and you have to compete with a place that's twice as big. Why don't we apply to remove the taxes?" My father always answered that the taxes were in a relationship that he could live with, and he didn't have to live with committees. So he was glad, because he had his own business and he didn't have anyone telling him what he had to do with it; he'd rather pay taxes.
It was an interesting situation, and it went on that way for many years. I think in principle it was right. It was his badge, his way of saying, "I'm successful too," because everyone told him, "You can't make any money, Ed, in the theatre business," and when he bought it he promised to keep it as a theatre for five years, but if he didn't succeed, he'd be able to do what he wanted. All the other offers were to make it into parking lots at that time, because they knew something he didn't know: When you're closed, you know how much you lose every week; when you're open, there's no limit.
That was the history of the early days, and that's how theatre worked. It still works that way in many cities. If you were to go to Chicago and you had a great success in New York and you wanted a theatre and you were to rent the Auditorium Theatre, which is run by a not-for-profit organization, you wouldn't be paying taxes when you go to Chicago.
So there are two relationships one is looking at: the one that's between live theatre, both for-profit and not-for-profit, here in the city of Toronto, and then the relationship between Ontario and Toronto and its competitors outside, which I view as Boston, New York, Cleveland, Pittsburgh, to some extent Detroit, which I don't think is too much of a competitor, and Chicago. I'd just like to say a little bit about each, about these two different situations.
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When I built the Princess of Wales Theatre, I looked about me and I went on the experience of 30 years, that we'd been paying about $100,000 in taxes at the Royal Alexandra at that time, which was a 1,500-seat theatre. I then phoned the league of New York theatres and I said, "How much does the Colonial in Boston pay?" which is about 1,600 seats. They said, "It's hard to tell, because it's buried in an office building, but we believe the theatre component of it is about $60,000." The biggest theatres on Broadway are anywhere from $50,000 to $160,000. That's what they pay in New York. The rest of the road is mostly not-for-profit. I had a theatre in London, England, and at that time I was paying £27,000 for a 1,000-seat theatre, about $75,000 or $80,000.
I thought: "Okay, I'll build this theatre, and what is the maximum the government will tax me? If $160,000 is the biggest on the continent, they'll probably tax me $250,000." Then I got my tax bill, and my property and business tax came in at $1.275 million. I've spent the last five years dealing with this, and I'm about to come to the OMB. Who knows? Maybe we'll even solve it before we get there. They're no longer asking $1.275 million, and we are getting closer to the old historic relationships. But the government had no flexibility to deal with it, there was no separate category, and within the tax department they decided to do a mini-reassessment and change the mill rate. Is that what it's called, or the assessment rate?
Mr Mark Blidner: Reassessment.
Mr Mirvish: So what does it mean? Say we were to pay this larger tax. Well, there's been a big change in what has gone on. For one thing, there was a moment in the late 1980s when there were no shows to put into the theatres. The reason I ended up producing shows wasn't because I wanted to; it was because I had to. I couldn't get anything good enough to get the public to attend. We wanted to up the stakes on the quality; it also upped the stakes on my risk. I was now in a new business.
There is only a handful of really successful producers, but as they succeed, more and more people are being drawn in. It's rather wonderful, because there are also people being drawn in at every level, so Toronto is really a place where people can start and have new producers and new shows going on. In a funny way, the province has helped to facilitate it, not quite the way they expected, but by restoring the Elgin and the Winter Garden. It is a place that isn't controlled by me nor by Livent and where, because we have to plan far ahead and we are unsure of who would come to us and give us a run -- I'd love to have someone take a risk in my building, but I haven't had many people come forward and say they're willing to do it. But because I fill up my building, on those odd occasions when a young producer does come, there's no place for him to go, and the Elgin and Winter Garden are sitting there providing that function.
If that historic relationship of the absolute amounts of money, however it's arrived at, is maintained, then we can afford to pay the taxes and still be competitive with what's going on outside us. When I say competitive, the question is, can we attract Disney to decide to make -- if they have a success with Lion King, for example. When they were here with Beauty and the Beast, they were here for two years. If you had come by my theatre on a Wednesday or a Thursday afternoon, you would have seen between 10 and 15 buses parked there, people who had come from outside of Ontario, not just outside of Toronto. They brought hundreds of thousands of dollars and thousands of people into this city.
A study was done by the Ministry of Citizenship, Culture and Recreation when they were reconsidering an entertainment tax and its impact on commercial theatre back in November 1994. In a three-year period, they found that live theatre was paying roughly $1.674 billion in salaries and wages that were being taxed in this province, and that taxes at all levels of government, of about $681 million, were being generated. It sounds like we've got a great big industry here. I can tell you that it's a lot more fragile than these figures suggest.
But it is interesting that it is growing. In fact, there's a little company called Edge and Company out on Bronte Road, halfway between Hamilton and Toronto, that built seven sets for Broadway and all over the world this year, that never existed five years ago, and that built my Jane Eyre set. We have technical people who are absolutely superb, and we're developing more of them all the time. The sound boards today are very complicated to run a live theatre show. Every time we do a show, we get into the next generation of board and we train technicians who never could do it before. Suddenly, we're exporting technicians, we're exporting artists. Ma-Anne Dionisio, who was my lead in Miss Saigon, is now sitting in London playing four performances of Saigon and two performances a week of Martin Guerre; she walks across the street from one theatre to the other.
Tourism: Here's a figure of $69 million in tourism, but figures don't make sense to me, quite honestly. Figures can mean anything. What I know is that in order for me to put a musical on, I have to have 150 to 200 people go to work every night, and I know that a lot of cabs drive up in front of the building and there are a lot more restaurants in my neighbourhood than there were five years ago. I know that I'm affecting thousands of jobs in hotels and people who are making beds. That's what I know.
Some people get confused. They think that because we have seats in live theatres and there are seats in movie houses, they're the same thing and should be treated the same for tax purposes. This is a mistake, and I'd like to try to explain the difference. A movie gets made and it's put in the can and sent all over the country and all over the continent at almost the same time; nobody has to go to your city to see a movie.
I'm going to have Antonio Gades on my stage tonight -- if I'm lucky, because only half the set arrived yesterday from Madrid. But when he's here with his flamenco dance company and his 30 dancers, it means he's not in Madrid; it means this is the only place in the world that you can see Carmen in this way at this time, for the next three weeks.
When building a movie house, if you have this as your piece of land and you build the movie house, you put your screen here and you put your seats there and you have a few people working here. If you want to take the same piece of land -- because that's what a multiplex piece of land would be -- and put a live theatre in, you put a proscenium here and you have as many people working back here as you do here. You have 50 stagehands, if you're doing a musical, 26 musicians, a cast of 45, and now you've got 30 ushers here in the front, because you can't let people go down by themselves, and you have all sorts of merchandising services up here. You have 150 people working, and you have something for which people drive up to six hours, we've discovered. We can reach everyone within a six-hour drive range. To do that, we have to spend extraordinary amounts of money on advertising, and what we're really advertising is the province. Pittsburgh is exactly equidistant from Chicago, New York or Toronto, and we figure we can get them to make at least one trip here, and if they do, I think they're going to like it and come back.
What we're looking at is that we need a level playing field here between the not-for-profits and the for-profits. I think it's wonderful that this bill recognizes that for theatres under 1,000 seats, it's appropriate to protect those not-for-profit theatres because those are really training grounds for our actors.
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We also need a relationship that allows me to say to Disney: "If you come here, you're going to be treated as well as if you went to Chicago, and there are other reasons you should come here. We can do a job for you." What my deal with Disney was that I said, "I don't believe they're going to tax me $1.275 million. Every cent I get back, I'm going to give it back to you. If you want to gamble with me on Beauty and the Beast, come in and take the gamble." Basically, they took the gamble, and the government did reduce it to about $700,000 initially, so I paid on the basis of the $700,000, and it is coming down into a more appropriate range.
But I don't know that I'm going to get them back for Lion King. What it means is not that they won't bring Lion King here; that's not what will happen. They'll tour for eight weeks into O'Keefe Centre, with an all-American company that will take all the money out, and they'll go on to the next place, after they've sat for six months in Chicago in a theatre that isn't charging the same rents. Or they'll choose to come here, and make the people in Detroit and Cleveland and Chicago, for those first six months, bring their buses here. So the question is, which way do we want the buses to go? It's real simple.
I don't want to take up too much of your time. If there is time for questions, I'd certainly like to try to respond. As I say, I'm generally supportive of what -- I'm not looking for the not-for-profits or for the bigger theatres to pay taxes; I'd just like to maintain what we always used to have, which was a historic relationship. It's hard to get back to the original.
The Vice-Chair: Thank you, Mr Mirvish. We have about four minutes per caucus, beginning with Mr Pouliot.
Mr Pouliot: When reading, Mr Mirvish, about how you got here, "unique" certainly applies. You represent a success story unlike any other, and we've all benefited. However, given the present situation and the focus on Bill 149, you cease being unique, and the government will say, "Thank heavens."
You've mentioned the flow of buses. It used to be, 10 years ago, that every opportunity was good to get out of Cincinnati or Cleveland and certainly Pittsburgh, especially on a rainy Monday night, but Toronto 20 years ago might not have been the desired destination; New York was more attractive to some. You're not asking the government to provide incentives, in other words, to say, "We can better sell our theatre, create jobs, bring outside dollars in to be spent in Ontario, by incentives." You want a fair playing field. You don't wish to be penalized.
Mr Mirvish: Yes, that's exactly it. And it's a dilemma, I know, because North York, for example, which has the Ford Theatre and has no taxes and runs commercial shows like I do, in a way is an anomaly that's a bit of a problem. But on the other hand, I don't know their business, and maybe they're supporting the smaller 1,000-seat house with that profit. I don't have a problem with them not paying taxes, or Hummingbird not, or Roy Thomson or Massey Hall, if the difference between paying taxes and not paying taxes is what it used to historically be, if it stays within that $250,000 range, and it used to be $150,000. But it's once it gets out of that range that I can't be competitive any more.
Mr Pouliot: So not only do you compete with other jurisdictions and that makes it more difficult --
Mr Mirvish: I compete locally and I compete internationally. It's a funny problem, because I then turn to the Elgin and the Winter Garden, which don't pay taxes, and I'm happy that they don't either, in a funny way, because they don't go to the government for grants either to run the Historical Board, and if they do make something out of that theatre, that goes back into that area.
Again, if we're paying $120,000 to $125,000 in the Royal Alex and we're paying $250,000 in the Princess of Wales, I can live with that and their not paying anything, and I can still compete for shows with them and I can still have a fighting chance. But if I have to pay $600,000 and they pay nothing, then I've got a problem. And under the present setup, the government has no way of doing that, of stopping an assessment person coming in and saying that we should be paying $1.2 million. That's what I think this bill gives them; it gives them at least the chance to create a level playing field.
Mr Grimmett: Thank you, Mr Mirvish, for attending today. I certainly congratulate you on the tremendous contribution your family has made to the Toronto economy.
I was fascinated by some of your comments about your competing jurisdictions in the United States. How is it that they're able to keep their taxes at that rate, do you know?
Mr Mirvish: Each of them has slightly different situations -- it's fascinating -- but they all are glomming on to the idea that having a vibrant live theatre community is a way of distinguishing their city from others. Even if they all have live theatre, whatever is on in live theatre is unique to that location. There will not be another time when they do four or five Beauty and the Beast companies. Disney learned from the last experience to not ever have more than three across all of North America. Whereas baseball, say, exists in 26 cities, something like a Beauty and the Beast or a Lion King will only exist in three.
In all those other cities, really the government has come in and given them money to build those theatres. In Chicago, which has a slightly different situation, they're getting a new theatre out of Livent. There was an article about it in the newspaper. It's a $32-million theatre, but Livent is only expected to supply $16 million of it. The government, through grants and in other ways, is giving all the rest of the money.
Not only do they not charge taxes in their not-for-profit situations -- or where they do charge taxes, it's to recoup the $16 million they've given to subsidize the making of it -- but they're all hungry for this type of activity as a way of selling their city.
Mr Ted Chudleigh (Halton North): Again, Mr Mirvish, thank you very much for attending. I'm sure with your opening tonight, you have other things to do.
You've referred to the tax as being a significant cost to your operations. I was wondering, what portion of your fixed overheads would municipality taxes represent?
Mr Mirvish: I've never looked at it that way, but it costs us about $35,000 in the Royal Alex to break even, covering all the ushers and everybody else, without counting the stagehands or the musicians to run the show. So $2,000 of that is taxes, if you're $100,000; it's $6,000 if -- that's how we got to $35,000, because we're counting something like $6,000 at the moment from $100,000. In order to justify going up to $700,000, they took the Royal Alex from $100,000 up to $300,000, and then they said, "Now we're in proportion, so now we can ask the $700,000."
Mr Chudleigh: So it's very significant.
Mr Mirvish: It's pretty significant. It makes a difference. If my theatre is $6,000 more than the Elgin, guess where a show is going to go if there's a $6,000-a-week difference? If it's $2,000, they may not go anywhere else; there may be other mitigating services I can provide that would make my theatre more attractive. That's what the difference is that we're talking about. With Beauty and the Beast, it was $12,000 with $700,000. For $12,000 a week, Disney will think.
Mr Phillips: I thank you for being here too, and I just add my thanks to the family. You're Canadian icons. I really admire what your mother and father and you have done. There's no question that you have made a huge contribution to preserving and enhancing Metropolitan Toronto. We all owe you a debt of thanks.
Mr Mirvish: I have the feeling I'm in a room of theatre-goers.
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Mr Phillips: I was there last night, not your place, somewhere else, but we really do appreciate it.
I gather you're supportive of the provisions in the bill. I think you can rest assured that it's going through as it is. I'd just make the comment, just so you understand the political context, that what's happening here is that this is a government that has cut its support to the cultural community dramatically. What's happening here is that your taxes will be reduced, and that's very helpful and good for that community, but it will not cost the provincial government a cent; it's all coming from Metropolitan Toronto. I think it's obscene that we are adding 100% of social housing costs on to property taxes. It has nothing to do with you, Mr Mirvish. I'm just telling you the context here.
I can guarantee you that people in this city of Metropolitan Toronto are desperate for housing and now rely 100% on property taxes. The next economic downturn we are going to see anger like we've never seen before, because if you require help in those times, you're going to have to go to the council, and they'll be hard-pressed because of property taxes.
Many cultural groups have been thanking the government for doing what they're doing. I know there is only one taxpayer, but it's costing the province nothing. They have cut support for the cultural community dramatically, and now they're getting a pat on the back for cutting the revenue of Metropolitan Toronto at the very time when they are adding social assistance, child care and social housing on to the property taxpayers. You can rest comfortably that the bill will pass -- you shouldn't feel guilty about any of that -- but within that context.
I guess my only question would be this. We have had -- you call it the O'Keefe -- I think they call it the Hummingbird now, and the North York Centre, Roy Thomson and Massey. They, because of this bill, where they currently don't pay taxes, will now be paying taxes. Perhaps you don't even want to comment on that, because I think you're just here to speak for your organization, but have you any advice for us on that?
Mr Mirvish: No. I think it's a complicated dilemma. I'm not advocating necessarily that they pay taxes. That's the irony of it. I think that they do provide other services, and all I want to do is be kept in the game. What I really think I'm asking is not for privilege or special treatment. I'm asking that what has historically existed be maintained, and which has now been taken out of balance because I built a new building and because I then did an extraordinary renovation of the Pantages, and in doing so, got penalized in a way for making the building operational again.
In other cities, for example in my experience with London, taxes are more related to the number of seats than what it actually costs to create a theatre. You can't build a theatre and ever sell it for its real value or for the value of what you paid for it.
When I built the theatre, all the experts said two things. They said, "David, build a skyscraper on top of it to help pay for this." That's how the Colonial is done in Boston. But I don't believe a theatre works that way. I believe a theatre is a destination and has to stand alone if you want it to really be an exciting building. The other thing they said is, "Don't build two balconies, because you can't charge as much money in the second balcony." I believe you need places where there are cheap seats so that nobody is disfranchised. I also believe that you should be closer to the stage, and that's just how I believe theatre works. So I built an impractical theatre on some levels.
I don't think there's an answer to the social housing one except that if we have a vibrant theatre business -- I know that Charlie Cutts said there are 1,200 people who work in it, but according to this report of 1994, I think he's only referring to those four buildings he represents. There are between 4,000 and 5,000 people who work in live theatre in the Metro area, as I understand it, according to this other government study. I think we really generate money way beyond, even without government grants. I think grants are important for the opera, the ballet, some of the not-for-profits. We don't have higher education systems to train those people; this is our training ground. I think there is some relief in this bill and the government is being properly responded to. There's a recognition that there is some relief. That's really all that I can say about this.
The Vice-Chair: Thank you for your presentation, Mr Mirvish.
CHIEFS OF ONTARIO
The Vice-Chair: We will move now to the Chiefs of Ontario. Good morning. I'd like to welcome you to the standing committee. You have half an hour in which to make your presentation; if you do not use all of it, the remaining time will be split among the caucuses to ask questions. You can begin now. Could you identify yourselves, please?
Grand Chief Doug Maracle: I'll begin first by introducing myself. I'm Doug Maracle, grand chief of the Association of Iroquois and Allied Indians. I'll let my colleagues introduce themselves.
Chief Darlene Ritchie: I'm Darlene Ritchie, chief of Chippewas of Saugeen.
Mr Kim Fullerton: I'm Kim Fullerton; I represent Fort William First Nation, Michipicoten First Nation and Mississaugas of the New Credit.
Chief Margaret Penasse: My name is Chief Margaret Penasse from Nipissing First Nation.
Grand Chief Maracle: We're here to make the presentation on behalf of the Chiefs of Ontario.
First nations in Ontario are extremely concerned with a provision in Bill 149 that eliminates a longstanding tax exemption for certain off-reserve lands held by first nations in trust. The exemption under the current Assessment Act has been used by a few first nations for purposes such as economic development and the settlement of land claims. The potential revenue loss to the province and to municipalities is minimal. It is the position of first nations in Ontario that there is no reasonable policy justification for the elimination of the exemption.
(1) Chiefs of Ontario: Chiefs of Ontario is a non-profit corporation with a head office in the territory of the Mississaugas of New Credit and business offices in Toronto and London. The Chiefs of Ontario office provides coordination and facilitation services for the 134 first nations in Ontario. A complete list of the first nations is appended to the brief as appendix 1. All but eight of these first nations have band status under the federal Indian Act of 1985. Most of the bands also have a reserve land base under the Indian Act, in addition to their traditional treaty and aboriginal territories. The eight first nations without band status are involved in various negotiation processes designed to achieve such status.
The Chiefs of Ontario office acts pursuant to resolutions and declarations passed by chiefs' assemblies. There is an annual all-Ontario chiefs assembly in a first nation territory; as well, there are special assemblies during the year to deal with priorities as they arise. In between assemblies, the Chiefs of Ontario office is directed by an executive body known as the planning and priorities committee, PPC. The PPC is chaired by the Ontario regional chief and includes the following members: grand chief of the Nishnawbe-Aski Nation, grand chief of Treaty 3, grand chief of the Union of Ontario Indians and grand chief of the Association of Iroquois and Allied Indians, and a representative of the independent first nations.
The current Ontario regional chief is Tom Bressette from the first nation of Kettle and Stoney Point. He was elected at the all-Ontario chiefs conference of June 17 to 19 at Mattagami in Treaty 9. The regional chief sits on the executive of the Assembly of First Nations, the national representative body for first nations. The Chiefs of Ontario office provides secretariat services for the Ontario regional chief.
The most recent chiefs' assembly was a special assembly held in Thunder Bay just last week, from October 14 to 16. The relevant provisions from Bill 149 were discussed at the assembly. The chiefs were unanimous in expressing deep concern with these provisions.
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(2) General first nations position on taxation: In general, first nations take the position that they are immune from all forms of Canadian taxation, including federal, provincial and municipal levies. In Ontario, most first nations have signed treaties with the crown, some before Confederation and some after. Treaty 9, 1905-06 and 1929-30 and the Williams treaty of 1923 featured the participation of the province of Ontario. By the treaties, the first nations agreed to share the resource wealth of the province in exchange for some very meagre promises. Therefore, first nations have paid their taxes to Canada on an indefinite basis. If Canadian governments wish to impose taxes on first nations, then it will be necessary to reconsider the sharing of resources agreed to in the treaties.
It is clear that the first nations position on comprehensive tax immunity has not been fully accepted by Canadian governments. However, there has been partial acceptance. The broadest tax exemption is contained in section 87 of the Indian Act. On the provincial side, there is an exemption from sales tax in certain situations contained in subsection 7(l) of the Retail Sales Tax Act of 1990, regulation 31, and of course, there is the exemption for Indian trust lands contained in section 3 of the current Assessment Act. The proposal in Bill 149 to eliminate the modest exemption contained in the Assessment Act is alarming to first nations because it is a step backward from comprehensive tax immunity in Canada.
(3) Current Assessment Act: Paragraph 2 of section 3 of the current Assessment Act provides as follows:
"All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:
"2. Property held in trust for a band or body of Indians."
The marginal note in the statute describes paragraph 2 as relating to Indian lands. It is noteworthy that section 3 of the act lists 23 separate categories of exemption, only one of which is directly beneficial to first nations, ie, paragraph 2. The categories of exemption include crown lands, churches, Boy Scout and Girl Guide properties, battle sites, and amusement rides.
The limited tax exemption contained in the Assessment Act is separate and distinct from the tax exemption which applies to reserve lands by virtue of section 87 of the federal Indian Act. In particular, clause 87(l)(a) exempts the interest of an Indian or a band in reserve lands or surrendered lands. While the federal provision exempts lands held by individuals, the Assessment Act exemption is restricted to holdings by a band or body of Indians. Thus there are two important and related qualifications to the provincial exemption: The land must be held in trust and it must be held by a first nation entity with a governmental nature. The exemption is designed to benefit first nations communities, as opposed to first nations individuals and private businesses.
(4) Utilization of the tax exemption: Even though the exemption for Indian lands has been in place for a long time and is well known in first nation circles, the utilization has been modest. Approximately 15 of the 134 first nations have actually acquired off-reserve trust properties that qualify for exemption under paragraph 2 of section 3 of the Assessment Act. In addition, approximately four organizations or entities controlled by first nations have also accessed the exemption. Based on data from the Ministry of Finance, it appears that there are at least five situations in Ontario where a first nation or first nation entity is eligible for the exemption but has not applied, appendix 2.
The exemption has been used for two principal purposes. First, trust lands have been acquired in furtherance of land claim settlements, often involving Ontario as well as Canada. Trust lands acquired in this way are usually earmarked for reserve designation under the Indian Act, in the fullness of time. Unfortunately, it often takes many years to achieve reserve designation after the final settlement of a land claim. The tax exemption for such properties helps to ensure that they will still be owned by a first nation when the Indian Act designation finally occurs.
The second principal purpose relates to community economic development. The Indian Act imposes many legal restrictions on first nations, some of which make it difficult to establish successful ventures on reserve. For example, the protection from some forms of credit security in section 89 of the Indian Act makes it difficult to obtain traditional forms of financing. Therefore, in some special situations, it may be prudent to acquire off-reserve property in trust in order to site a community economic development project. Section 3 of the Assessment Act provides a modest tax incentive for this kind of community enterprise. The enterprise may benefit not only the first nation, but also nearby non-aboriginal communities. As noted, the exemption is not open to individual entrepreneurs in order to give them a commercial advantage over competitors.
In practice, first nations pay taxes in lieu or levies to municipalities in spite of the tax exemption. This occurs in particular where the land held in trust is actually serviced by a municipality; for example, water and sewer hookup, garbage pickup and the like. Essentially, these services are paid for on a fee-for-service basis. In the case of on-reserve children attending off-reserve schools, provincial boards are fully compensated on a per student basis through tuition agreements. So, generally speaking, there is only a tax loss in relation to unserviced land.
According to officials from the Ministry of Municipal Affairs, who have met with Chiefs of Ontario representatives on this issue, the net tax loss attributable to the Indian lands exemption is approximately $125,000 per year. This is a very modest tax expenditure for worthy public policy objectives, ie, first nations economic development and the implementation of historic land claim settlements. To put this into perspective, the total value of the exemption for all 134 first nations, with a registered Indian population in the range of 175,000, is not even equivalent to the amount of potential tax that a single wealthy individual may avoid or defer through planning.
There is no evidence that the modest pattern of utilization by first nations is changing, and there is no evidence of abuse or fraud.
(5) Proposed change in Bill 149: Subsection 3(l) of Bill 149 eliminates several paragraphs from section 3 of the Assessment Act, including paragraph 2, "Property held in trust for a band or body of Indians." The replacement list of exemptions contained in subsection 3(l) of the bill does not include a revised version of the Indian trust land exemption. Therefore, it is eliminated, effective January 1, 1998, assuming the bill is passed according to the government schedule.
It is noteworthy that section 3 of the Assessment Act, as revised by Bill 149, will continue with a lengthy list of exemptions. These continuing exemptions are as follows: (1) crown lands, (2) cemeteries, (3) churches, (4) public educational institutions, (5) philanthropic organizations, (6) public hospitals, (7) highways, (8) Boy Scouts and Girl Guides, (9) municipal property -- the list goes on -- houses of refuge, charitable institutions, children's aid societies, scientific or literary institution, battle sites, exhibition buildings of companies, machinery, machinery for producing electric power, forestry purposes, mineral land and minerals, certain properties of telephone and telegraph companies, improvements for seniors and handicapped people, amusement rides, land of designated airport authorities, conservation land as defined in the regulations.
Subsection 3(2) of Bill 149 in fact adds the following category of exemption: "26. Eligible small theatres as defined in the regulations." Paragraphs 24 and 25 were added earlier this year pursuant to section 4 of An Act respecting the financing of local government, 1997, chapter 5. It is the position of first nations that there is no rational justification for the retention of this multitude of tax incentives and the exclusion of the lone incentive for Indian trust lands.
Section 71 of Bill 149 contains a grandparenting mechanism to partially protect exempt properties affected by the amendments and deletions to section 3 of the Assessment Act. This applies to Indian trust lands. Lands exempt for the entire 1997 tax year will continue to be protected so long as there is no change in use or ownership. This will be of assistance to first nations that held exempt properties on or about January 1, 1997. However, the first nations position, as expressed in this brief, is that the exemption contained in the current section 3 of the Assessment Act should simply be continued.
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(6) Lack of adequate consultation: In the Sparrow case, the Supreme Court of Canada confirmed that the crown owes to first nations a fiduciary duty of care, in particular in relation to land issues. This duty of care is constitutional in nature, as it is inherent in section 35 of the Constitution Act, 1982. Section 35 recognizes aboriginal and treaty rights. Again in Sparrow, the Supreme Court decided that a logical implication of the fiduciary duty is a legally binding obligation on the part of the crown to reasonably consult first nations in the instance of a proposed measure likely to affect significant first nations interest. Very recently, the highest court in Ontario, ie, the Ontario Court of Appeal, unanimously held that the fiduciary duty as laid out in Sparrow applies to the government of Ontario, and that was in the Perry case.
It is the position of first nations that the constitutional fiduciary duty of the province is activated by the relevant provision of Bill 149. The proposal is to eliminate a longstanding exemption in relation to Indian trust lands. This is a significant proposed infringement on Indian land rights. An implication, based on Sparrow and Perry, is that the province is under a legal obligation to consult in a reasonable way. It is submitted by first nations that there has not been a reasonable consultation.
Officials of the Ministry of Municipal Affairs contacted some first nations in February 1997 about the possibility of a change to paragraph 2 of section 3 of the Assessment Act. For various logistical reasons, a follow-up meeting did not take place. Officials from the same ministry sent a form letter to a restricted list of first nations on or about June 12, 1997. The list was restricted to some, but not all, of the first nations benefiting from the current exemption. The form letter proposed a meeting on June 19. However, this was an impractical suggestion, since the all-Ontario chiefs conference was being held in northern Ontario from June 17 to 19. On June 26 there was a general meeting between the first nations leadership and some Ontario cabinet ministers. The first nations leadership was led to believe that there was nothing imminent on the trust land exemption, and that in any event all options were open. On that very same day, June 26, Bill 149 was tabled, in the afternoon.
It is the position of first nations that this record of consultation would not pass constitutional scrutiny. Therefore, even if Bill 149 is passed in its current form, there is a significant risk that the elimination of the trust land exemption will be suspended by court order, assuming there is a court challenge.
(7) Provincial aboriginal economic development policy: The Ontario Native Affairs Secretariat, ONAS, published in early 1996 a document entitled the Aboriginal Policy Framework. While skeletal in nature and largely unimplemented 18 months later, the framework did promise the development of progressive policy in the sector of aboriginal economic development. The approach was consistent with the northern tour document published by the Conservative Party before the last provincial election. On June 26, 1997, at a meeting between ministers and first nations leaders, the ONAS minister, the Honourable Charles Harnick, tabled a draft version of a document entitled Aboriginal Economic Development in Ontario: Consultation and Feedback Report, appendix 5. It is anticipated that a reasonable facsimile of this document will become the official policy of the government later in 1997.
Sections 2.2 and 2.2.1 on pages 4 and 5 of Aboriginal Economic Development in Ontario deal with the closely related topics of aboriginal economic development and the resolution of land claims. There is an admission in subsection 2.2 that the aboriginal people are among the province's poorest. The report concedes that in the past first nations have not benefited in a measurable way from economic expansions in Ontario. Therefore, there is a need for a strategic approach to first nations economic development. The budget speech of May 6, 1997, by Finance Minister Ernie Eves announced a lengthy and expensive list of tax incentives for business; however, there was not a single concrete measure directed at first nations.
Section 2.2.1 of Aboriginal Economic Development in Ontario notes that unresolved land claims lead to economic uncertainty, a negative for aboriginal and non-aboriginal people alike. Therefore, Ontario remains committed to the settlement of significant land claims. In particular, the government is committed to ensuring the settlement of claims is structured to result in increased economic development opportunities. It is pointed out that land base settlements will also stimulate economic development opportunities and benefits, promote partnerships and attract additional debt financing from commercial banks.
It is the submission of first nations that the Bill 149 elimination of the trust land exemption contradicts government policy as stated in the Aboriginal Economic Development in Ontario report. The elimination of the tax exemption will be a disincentive for the placement of economic development ventures off-reserve. Also, Bill 149 will make it more difficult to structure lasting land claim settlements. There is the scandalous prospect of claim settlement lands being put into trust and subsequently being lost because of unpaid property taxes. This is not a fanciful prospect. In Saskatchewan, areas set aside pursuant to treaty land entitlement settlements have been jeopardized by property tax liens.
Finally, again on the policy front, first nations would like to remind the committee that the government of Ontario has not withdrawn the Statement of Political Relationship, SPR, of 1991, and it's appendix 2. The SPR was recently referred to by the Ontario Court of Appeal in two cases: Perry and Lovelace. The SPR commits Ontario to a government-to-government relationship with first nations. There is also an acknowledgement of the inherent right of self-government protected by section 35 of the Constitution Act, 1982, subject to the appropriate role of the federal government. It is submitted by first nations that the unilateral elimination of the very modest tax exemption contained in the Assessment Act is not consistent with the values set out in the SPR.
(8) The relationship between first nations and Ontario: Over approximately a decade -- up until 1995 -- first nations and Ontario had gradually built up a respectful and businesslike relationship. There were many issues between the two levels of government, but a baseline of trust had been established. This relationship has been severely strained over the last couple of years by a change in approach within the government of Ontario. First nations have not changed. They continue to aspire to a respectful government-to-government relationship. A continued deterioration of the relationship will inevitably have negative effects for first nations, the province, and the non-aboriginal residents of Ontario.
The province has taken many provocative steps, for example: cancellation of the Williams treaty harvesting agreements, August 1995; killing of Dudley George at lpperwash, September 1995; cancellation of the interim enforcement policy, January 1995; Ministry of Natural Resources creation of conservation committee, with a budget of $45 million, under amended Game and Fish Act, without aboriginal representation; confiscation of 20% of the gross revenues from Casino Rama, contrary to prior agreement; purported imposition of fishing licences on first nations in the Bruce Peninsula, contrary to prior agreement; imposition of new trapping regime controlled by non-aboriginal trappers; punitive cutbacks in the Ministry of Natural Resources and the Ontario Native Affairs Secretariat.
Needless to say, the issues on this list are complicated and beyond the scope of this committee. It is notable that many of the issues are now being litigated, at great expense and inconvenience to first nations. Issues that used to be negotiated are now being litigated. That in itself is symptomatic of the strained relationship.
The elimination of the trust land exemption proposed by Bill 149 is about to become another issue for the list. Unless there is a change of heart, the Bill 149 provision will further strain the relationship between Ontario and first nations, perhaps to the breaking point. It is the position of first nations that this is a nonsensical move by Ontario, given that the province and municipalities have so little to gain by the removal of the exemption. As noted above, the tax exemption represents a net loss of approximately $125,000. When a loophole is being added for eligible small theatres, why is the province stooping to remove a modest tax incentive for people who are "among the province's poorest"? That's taken from the Aboriginal Economic Development in Ontario document.
(9) Implementation problems: If the elimination of the trust land exemption is allowed to stand, it is likely that the financial gain anticipated by the province of approximately $125,000 will be overwhelmed by implementation costs. A lengthy court challenge is likely. Probable grounds for such a challenge would be the consultation test under Sparrow and the prohibition of discrimination under section 15 of the Charter of Rights and Freedoms.
Given the surviving list of 25 exemptions or loopholes, it might prove difficult for the province to justify the elimination of the lone aboriginal exemption as a matter of tax equity. The recent decision of the Ontario Court in the employment equity case indicates that the courts are willing to invalidate provincial actions that are discriminatory. A finding of racial discrimination would be an embarrassing development for the province.
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Quite apart from a major challenge to the Bill 149 amendment, there would be significant implementation problems at the local level. First nations with new trust lands might claim exemption under provisions of the Indian Act and challenge local assessments. First nations affected by the grandparenting provision in section 71 will undoubtedly challenge any future move to assess, on whatever grounds. When all these major and minor challenges are put together, it is obvious that the perceived windfall from the elimination of paragraph 2 of section 3 of the Assessment Act will be a bust.
(10) Positive first nation alternative: For all the reasons stated in this brief, it is the position of first nations that section 3 of Bill 149 should be amended in order to restore the existing trust land exemption of the Assessment Act. This approach is equitable, given the large number of exemptions that will be continued under the Assessment Act. It is also consistent with the published policy of the Ontario Native Affairs Secretariat in relation to aboriginal economic development and the settlement of land claims. Confirmation of the modest exemption for trust lands will be a sign from the province that it is interested in reconstructing the relationship with first nations.
If the exemption is continued, the stage may be set for a broader dialogue between first nations and Ontario on fiscal matters. The federal government, through the Department of Indian Affairs, is interested in establishing a fiscal relations table with first nations in Ontario. If the province is perceived to be acting in a positive way, there may some interest in inviting them to the table.
Thank you very much for the opportunity, committee. If we have time for questions, I'm sure we'll provide some answers.
The Vice-Chair: Thank you very much. We have about a minute per caucus.
Mr Grimmett: Given that we have only a minute, I wanted to perhaps clarify the position our government has on this issue. I want to thank the people for coming in today to provide their comments on the bill.
The Fair Municipal Finance Act (No. 2), Bill 149, intends to bring Ontario into line with all the provinces of Canada, which, as you're probably aware, have closed the loophole that exempted native-owned off-reserve lands for property taxes. This act creates tax equity between native-owned properties and other properties, in some cases businesses that might be competing with the properties in question. I note from your brief, on page 5, that a developing current practice between first nations and municipalities is that they pay taxes in lieu or levies to municipalities in spite of the tax exemption. So we see it as a codification of a developing relationship between the properties and the municipalities.
Mr Phillips: The only conclusion you can draw from the brief is that it's part of a systematic attack on the first nations. That's strong language, but to meet with the cabinet and be told that nothing was imminent, and then, the ultimate insult, that very day a bill is tabled in the House that is another attack on the first nations -- you've outlined eight areas, and this is a ninth. It just seems to me that the government is using every opportunity to disadvantage the first nations. I have no idea why they would want to be provocative in a bill like this, to use a tax bill and hide something like this in it, when it seems to be one of the fundamental issues for the first nations that should be discussed and debated and negotiated with the first nations. I think you've done us a service of pulling together in one place a whole bunch of issues that I don't think the public is aware of, and this is the ninth provocative step the province has taken. I would hope the government would see that there's merit in setting this aside and having some meaningful dialogue on it before it's rammed through in another few weeks.
Mr Pouliot: Most distinguished chiefs and participants, this government is not a friend of first nations. Make no mistake about it. This is systematic and deliberate. You have become, in the negative, a target group. With this agenda, there is no human dimension. You've asked the question, "Why is it, since we are among the poorest in the province, that someone would remove the exemption for a mere $125,000?" It's meagre dollars, in the overall scheme. Well, you've answered your own question. It is because you are among the poorest. There's only one train leaving the station, and unless you have money, thugs and bullies will privilege the most fortunate.
The Vice-Chair: Mr Pouliot, your time is up.
Mr Pouliot: Keep fighting. This is a well-prepared document. There is no social justice. They only represent those who line their pockets. I'm convinced of that, and I've been here 13 years. Half of them are straight out of the Reform-a-Tories, and people like you --
The Vice-Chair: Mr Pouliot, your time is up. Thank you to the chiefs. Your input is --
Grand Chief Maracle: If I could have the opportunity of making two responses --
The Vice-Chair: Yes.
Grand Chief Maracle: First, in the context of trying to bring everybody in line, one of the severe differences, as we've referenced in here, is the issue of education. We are, it appears at this point, going to be compelled to pay tax on reserve lands held in trust outside reserve boundaries, and at the very same time we're not brought in line with education costs, when we have to pay $7,000 a head in addition to that and the general population, by the Education Act, is looking at $740 a year.
The Vice-Chair: Thank you very much.
CANADIAN TRANSIT CO
The Vice-Chair: The next delegation is the Ambassador Bridge, if Mr Mancini will come forward. You can begin when ready, Mr Mancini.
Mr Remo Mancini: Good morning, ladies and gentlemen. My name is Remo Mancini. I am here representing the Canadian Transit Co. I am pleased to have this opportunity to address members of the finance committee on Bill 149, dealing with the Fair Municipal Finance Act (No. 2). For the information of members attending this morning, the Canadian Transit Co would like you to know that we strongly endorse and support Bill 149.
Let me begin my presentation by telling you who we are. The Ambassador Bridge is North America's number one international border crossing and has a long and storied history. Approval for the Ambassador Bridge was granted by acts of both the Congress of the United States and Canada's Parliament. At the time of its completion in November 1929, the Ambassador Bridge was the longest suspension bridge in the world, exceeding by 100 feet the Philadelphia Camden Bridge, completed in 1926.
The Ambassador Bridge was named by Joseph Bower, the person credited with making the bridge a reality, who thought the name Detroit-Windsor International Bridge was too long and lacked emotional appeal. Bower wanted to "symbolize the visible expression of friendship of two peoples with like ideas and ideals."
The Ambassador Bridge is a privately owned, taxpaying facility.
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In 1992, the Ambassador Bridge surpassed the Peace Bridge, which connects Fort Erie, Ontario, and Buffalo, New York, as the busiest international commercial border crossing in North America. In 1996, more than 10 million vehicles traversed the Ambassador Bridge, of which nearly 2.5 million were commercial vehicles. It is not uncommon for 10,000 commercial vehicles per day to traverse the bridge. For your information, in 1996 total US-Canada commercial trade exceeded C$400 billion, of which 26% traversed the Ambassador Bridge.
We are very active in our community, and I'd like to tell you some of the things we do and that we're involved in. The Canadian Transit Co is a proud Canadian company. We are proud of our achievements, we are proud of our employees and we are proud of our community. We are a good corporate citizen and participate in a number of innovative activities.
In 1996 we initiated a "Colour the Bridge to your Future" essay contest in order to commemorate the repainting of the Ambassador Bridge structure, but more important, we wanted to use this opportunity to provide scholarships for education beyond high school. Our first prize winner was awarded $4,000, second prize $2,500, and third prize $ 1,000. We also donated $3,000 to the school of the first prize winner for computer equipment. This community activity was a phenomenal success. More than 1,800 essays from 64 Windsor-Essex county schools were written.
Over the last number of years, we have embraced the Windsor Symphony and have become a major corporate sponsor of the symphony. We consider the Windsor Symphony a community treasure.
We are also business partners with our neighbour, the University of Windsor, through a unique and innovative joint initiative at the Ambassador duty-free store. This opportunity provides the University of Windsor with cash payments, more than 500 badly needed parking spaces, and jobs for University of Windsor students. The university has no investment and no liability. On April 2, 1997, we announced a $100,000 pledge to the University of Windsor in support of the provincial government's Ontario student opportunity trust fund. As you know, members, the province of Ontario contributes $3 for every $1 pledged.
On July 31, 1997, the Ambassador duty-free store, in association with the North American Black Historical Museum, announced two annual scholarships for first-year University of Windsor students. These scholarships are to be called the Ronald W. Ianni academic achievement scholarship and will be presented at the annual North American Black Historical Museum gala dinner.
The above very briefly outlines our commitment to and involvement in our community.
I'd like to talk to you about the current situation. As a good corporate citizen, all we ask from our government is to be treated fairly. I would like to say to members of this committee that the current property tax regime in Ontario, as it relates to international border crossings, is the most unfair, ill-conceived property tax regime anywhere.
There are 13 bridges and one tunnel that connect Ontario to New York, Minnesota and Michigan. Let me take a moment of your time to explain how some of these bridges and the tunnel are currently assessed and taxed. I should let the committee know that I obtained the following information from a 1994 survey done by the Ogdensburg Bridge and Port Authority.
The Blue Water Bridge in Sarnia is governed by International Bridges Act passed in 1981, with the consent of all three parties, I might add, and in 1994 they made a payment in lieu of approximately $42,000.
The three bridges in Niagara Falls are also governed by the International Bridges Act passed in 1981, and in 1994 they made a payment of approximately $414,000.
Ogdensburg Bridge in Edwardsville refuses to pay, and the town cannot enforce. So that's an interesting law unto itself.
The International Bridge in Sault Ste Marie is currently exempt.
The Thousand Islands Bridge Authority makes voluntary payments, and in 1994 they paid approximately $54,000.
The Windsor-Detroit Tunnel is owned by the city of Windsor, so they pay $0 in property taxes.
The Peace Bridge in Fort Erie has a system whereby the bridge operators, the town of Fort Erie and the local assessment commissioner get together and agree on what should be paid, and in 1994 I'm told they paid $258,000.
In 1996, the Ambassador Bridge paid approximately $2.4 million in property and business taxes.
If you can believe it, we discovered, during a long, expensive and protracted appeal process, that no basic fundamental principles guide the current valuation process. In July 1995, we received a memo from one of our solicitors stating that they had been told "that responsible regional assessment offices value international crossings on an ad hoc basis without regard to a standardized methodology." This information was provided to our solicitor by Mr Frederick Jones of the Ministry of Finance in response to our freedom of information request.
You should know that we have been working with the ministry and exchanging information. We thank the departmental officials for the courtesy they have extended to the Canadian Transit Co. However, departmental officials need proper tools. They need good and fair legislation to implement. They need Bill 149.
In 1995, we approached the previous government. I was able to meet with the then parliamentary assistant to the Minister of Transportation, Mr George Dadamo. I would like to read into the record a letter written by Mr Dadamo as a result of our meeting. The letter is dated January 19, 1995, and is addressed to Mr Wayne Wood, property analyst in the Ministry of Finance. It states:
"Dear Mr Wood:
"I understand there are a number of international border crossings with facilities in the province of Ontario. I further understand there are several property tax regimes used for assessment and the collection of taxes payable.
"For example, the Windsor-Detroit tunnel pays zero in property taxes, as it is owned by the local municipality. The Blue Water Bridge in Sarnia and the three bridges at Niagara Palls are all covered by Bill 171, An Act Respecting Certain International Bridges, passed in 1981, that make property taxes payable negligible. The Peace Bridge in Fort Erie has a special arrangement with the local municipality that has absolutely nothing to do with their true assessment. This makes their property taxes negligible.
"On the other hand, the Ambassador Bridge in Windsor, which faces stiff competition from the border crossings mentioned in the above paragraph, is paying in excess of $25 million per year. This is on top of federal corporate tax and provincial corporate tax, which none of the other border crossings are required to pay.
"It does not take very long to realize that this whole system of property taxes is unfair and places the Ambassador Bridge at a distinct disadvantage. The Ambassador Bridge is very important to the Windsor-Detroit region and serves as the natural and historic gateway for trade, commerce, and tourism between the United States and Canada. with the passage of the free trade agreement and the North American free trade agreement, the Windsor-Detroit gateway has risen in importance; not only to our region, but to our national economy.
"I understand that you are undertaking a review of the property tax regimes as they are applied to international border crossings. I am encouraged by this and would sincerely hope that the end result of your work would be a proposal to bring the property taxes paid by the Ambassador Bridge in line with all the other border crossings in our province. A perfect vehicle to do this would be the inclusion of the Ambassador Bridge and other border crossings under Bill 171, An Act Respecting Certain International Bridges.
"Sincerely,
"George Dadamo,
"MPP, Windsor-Sandwich, and parliamentary assistant to Minister of Transportation."
Mr Dadamo got a reply to his letter. Ms Elizabeth Patterson, assistant deputy minister, responded to Mr Dadamo. As our presentation time is limited this morning, I will only quote the following statement, with respect to the appraisal services branch, and I'm quoting Ms Patterson: "[I]ts main concern is to ensure that market value assessment principles are uniformly and consistently applied to all international bridges."
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Members of the committee, the reality is that international crossings are not uniformly and consistently taxed; the opposite is true. I have already pointed out to you the array of special arrangements which exist, the results of which have created an indefensible property tax regime, without question a system imposing an unfair burden on the Canadian Transit Co.
On June 13, 1997, the Ministry of Municipal Affairs held a stakeholders workshop. I have, for your convenience, attached the final minutes of the workshop and the list of attendees, which is substantial. I would like to quote from page 8 of the minutes.
Question 4 states -- and this question was put to the stakeholders -- "Should bridges owned and operated by commercial enterprises and bridges owned and those operated by public authorities be assessed and taxed in the same way?"
"Mr Bennett stated that all should be treated the same.
"Mr Gandell stated that he wouldn't see it any differently.
"There appeared to be agreement that all bridges owned and operated by commercial enterprises and bridges owned and operated by public authorities be assessed and taxed in the same way. Therefore, the participants moved on to question 5."
I'd like to talk to you about competition at the border. Members of the committee, I believe it has become very clear to officials both in the Ministry of Finance and the Ministry of Municipal Affairs that competition in our industry does exist, and in some cases at a ferocious level. It goes without saying that the Peace Bridge in Fort Erie and the bridges in Niagara Falls compete head-to-head for both commercial and passenger traffic. Both of these authorities should be commended for their aggressive infrastructure improvements.
In southwestern Ontario, the Canadian Transit Co, the Windsor-Detroit Tunnel and the Blue Water Bridge are in serious competition. There are only four basic forms of traffic: commercial, passenger, local and long-distance.
The Canadian Transit Co has invested considerable sums in recent years to ensure that the international flow of long-distance and commercial traffic is processed in the most expedient manner possible. Competition for this long-distance and commercial traffic is constant. Our principal competitor for long-distance and commercial traffic, the Blue Water Bridge, has greatly expanded their capacity. They recently opened a second span. They have modernized both their Canadian and US plazas. They are working diligently to ensure that Interstate 69 and Highway 402 form part of the NAFTA superhighway. They should be congratulated for their efforts. However, they should not be given an unearned advantage.
In the city of Windsor, the Canadian Transit Co and the Windsor-Detroit tunnel compete for auto traffic and short-haul commercial traffic. I can tell you that the city of Windsor is pretty serious about this, as they are the owners of the Canadian half of the tunnel. They have spent many millions of dollars completely rebuilding their Canadian plaza. They have and continue to employ an aggressive billboard advertising campaign, among many other initiatives.
We at the Canadian Transit Co find ourselves in the absurd situation of actually contributing funds to our competitor which they can then use to draw traffic away from our crossing. I wish to thank the Blue Water Bridge Authority for recently passing a resolution supporting the principle of equal and fair treatment of all border crossings with respect to property taxes.
In conclusion, the current property tax regime as it applies to international border crossings is clearly unacceptable, has no sound basis in policy, has created an uneven playing field, is without any pretence of fairness, has distorted fundamental economic principles, disregards private sector discipline, rewards the inefficient, punishes the efficient and gives an unearned advantage to some. Through Bill 149, the present government wishes to correct this grievous situation. I have read Bill 149 and am convinced that a system of fair property taxation can evolve from this legislation. I therefore, without equivocation, urge all of you to support and pass Bill 149 into law.
The Vice-Chair: Thank you, Mr Mancini. We have about three minutes per caucus, beginning with the Liberals.
Mr Phillips: I think what you probably mean is to pass the portions of Bill 149 that apply to you. We have some significant reservations about other parts of Bill 149. Can you give us some indication of what it means in practical terms if the bill passes? On page 4, just in gross terms, what is likely to happen in terms of what the Ambassador Bridge might pay?
Mr Mancini: I'm not sure what the gross numbers would be, because I do not believe there has been 100% consensus on how international border crossings are in fact to be assessed. It's a very complicated procedure. I know that the departmental officials are looking at it very seriously. What we would like in the end, no matter what the number is, is to have more of a balance. With the Ambassador Bridge, obviously, because we pay corporate taxes, we couldn't really judge whether or not there would be a savings or how big it would be, because of that factor. What we're looking for is a balance. We're looking for fairness, and we're looking for a system that would treat international border crossings in a very similar, if not equal, fashion.
Mr Phillips: What I'm trying to get at is that this is an unusual bill in that all of the financial impact is with municipalities. We've got some cultural groups coming in and getting some substantial reduction in taxes, but none of it, if you will, comes from provincial revenues. I'm just trying to anticipate what the impact on the city of Windsor and others will be. Is it a wash? Would you expect that the tunnel's taxes would go up and yours would go down, yours would stay the same and theirs would go up to your level or what?
Mr Mancini: I would expect that if there is equal treatment, what we pay and what the tunnel pays would be closer than zero and $2.4 million or $2.5 million; there would be a greater degree of balance. It could be a wash.
Mr Phillips: But you said you read it carefully. I'm just trying to get an idea of what the Ambassador Bridge would anticipate; that the $2.4 million would go down?
Mr Mancini: We haven't really done any calculations, and we can't until we understand very clearly the methodology used for assessment. But we want a system that applies equally to the international crossings. That really is our goal. That is the goal for fairness and the goal for equity and being treated equally. I don't think the current situation can stand. I don't think we can continue to be put in a situation where we pay our competitor all this money and they pay zip.
Mr Phillips: I appreciate that.
Mr Pouliot: Mr Mancini, it's a renewed pleasure every time you have the opportunity, from our standpoint, to renew a friendship with a former colleague, a former Minister of Revenue with a full 15 years in the Legislative Assembly of Ontario.
Mr Mancini: That was 18 years.
Mr Pouliot: It was 18 years? My apologies. Time just flies. You're well placed under a constitutional monarchy. I will vote, as a member of the third party, the very same way on Bill 149 as you voted for 18 years. I will be consistent there.
Thank you for bringing out, no doubt, some variances. There was some discrepancy between one facility and another. I support more consistency, if you wish. I don't think we have much quarrel with that part of the bill. I know you have been a loyal soldier for a long, long time. In fact, you went beyond the call of duty in your former life, and you're to be commended. You reaped a just reward.
No matter what scenario, whether it's a wash or not, when we talk about changes, the taxes at the Ambassador Bridge cannot go any higher; they will go down. When they roll the dice in Windsor, no matter what comes out, your taxes are going down, right?
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Mr Mancini: I would hope for equity and fair treatment. If the taxes go down, it means we've been overpaying. That's not fair. We should not be charged more than what is fair. We should not be subjected to a system that is not equally applied to all.
Mr Pouliot: We're all fair people here, but sometimes it's a fast-moving world and it takes on some twist of fate; it does that. That's why they open the Exchange every morning; whether it's fair or not, you speculate. We can only go by past performance. There's a need to rectify what I think is a wrong, when someone refuses to pay and there doesn't seem to be a legal recourse, when someone has a nudge-nudge, wink-wink private arrangement with others, when the discrepancy between the high and the low is extraordinary, when no one can come up with criteria on volume of business being generated, when there is no factor, no substance to arrive at a philosophy. In fact, there is no philosophy; it's an arrangement that has been made over the years. It's not a very proud history in terms of administration and so on. I know you agonized over this when you were the Minister of Revenue and had to collect or not collect. You were front row centre.
The Vice-Chair: Mr Pouliot, your time is up. We will move to the government caucus now.
Mr Grimmett: Mr Mancini, thank you for coming in today with your presentation. Just to clarify some issues as to how the Bill 149 suggestions would differ from the current model, rather than having the actual bridge structure taxed, we're going to take control at the provincial government level. The Ministry of Municipal Affairs will have a payment prescribed for all bridges, regardless of whether they're publicly or privately owned, for the bridge structure itself, and the land and buildings that accompany that bridge structure would pay municipal property tax but not education tax. We're also going to have a test whereby we look at the American side and compare the cost so that we have equity that way as well.
We've had some other presenters in on this issue, some who had what I would call quasi-public ownership, and they have indicated that they feel their bridges are in some way unique. Before I had this experience in government, I had no idea that the bridges were owned in a different way in Ontario. For the life of me, I have difficulty understanding how any bridge can be unique. Surely all bridge operations would have to have some form of long-term financing.
Mr Mancini: That is correct. We are in the middle of infrastructure improvement. We believe it's absolutely necessary. We have to go to the private sector to prove that what we're doing is reasonable and that we'll be able to pay it back on time. We have to work with the local community to make sure that our infrastructure improvement is in sync with local improvements. All of us find ourselves in absolutely the same situation.
The Vice-Chair: Thank you very much, Mr Mancini. That concludes your presentation.
AIRPORT MANAGEMENT CONFERENCE OF ONTARIO
The Vice-Chair: We will now move to the Airport Management Conference of Ontario, Ms McAfee and Mr Dayment. You have 30 minutes in which to make your presentation. You can use all or part of it. If there's anything left over, we will distribute the remainder among the three caucuses for questions.
Mr Dave Dayment: Thank you for your time. Unfortunately, Ann McAfee couldn't join us this morning. She's stuck in Barrie in snow. She had a copy of the handout that I am going to read from, and we're going to fax one down today that she was going to present with us.
On behalf of the Airport Management Conference of Ontario, we bring you greetings from its member airports from around the province. The Airport Management Conference of Ontario was incorporated on January 14, 1986, and represents the interests of owners and operators of airports in Ontario.
We acknowledge your intent to hear briefs based on the content of Bill 149 and believe it is important for you to view this bill within the context of the government's commitment to the airport sector of Ontario's transportation system. To facilitate this, we offer this background information. I've mentioned what AMCO is. We're in the business of development and operation of airports not under the direct control of federal or provincial governments and strive to promote the safe and efficient operation of these airports. I know some members here may be familiar with us. I know some colleagues over here know AMCO very well.
It is the view of many that the federal government is responsible for airports. It certainly is true that the federal government's initiative laid the groundwork for Trans-Canada Airlines in the late 1920s and that the airports were required to adhere to federal legislation, but that is only part of the story. Overlooked is the fact that the government's development of Trans-Canada Airlines changed the way the government did business with municipalities and led to a long-term financial commitment by Ontario. Previously, the federal government had treated aerodromes as something the municipality was welcome to develop as long as the community could pay for it. The vision of an airport sector within Canada's transportation system changed that.
The government knew that municipalities could not afford the kind of system it envisioned. Its first assistance came from a 1929 order in council that provided grants to assist with the cost of lighting equipment and to provide, free of charge, one flashing beacon to each airport that made such a request.
When the 1930s brought the Depression, it became difficult for airports to keep up with the standards being set for them. The government assisted financially and sometimes assumed responsibility for special services.
In 1937 the Department of Transport agreed to split the costs of developing terminal airports equally with the provinces and municipalities. By the end of the Second World War, 149 new aerodromes had been built and 73 existing facilities had been expanded. The new aerodrome sites were chosen so that future commercial needs in the area would be served. This sent a strong signal that airports were considered a vital link in the economic development of communities.
As time went by and rising costs made the government's financial commitment to the airport sector increasingly difficult to meet, some of the provinces, Ontario being one, allocated funds for airport development operation and maintenance.
In 1968, Ontario entrenched financial support in the Airports Act, which clearly states the intent of the provincial government to have in place the legislation required for the long-term establishment, extension, improvement or maintenance of any airport in respect of which an agreement has been entered into under the act. The Airports Act is unequivocal evidence of Ontario's responsibility and commitment to the financial wellbeing of her airports.
In spite of the entrenchment of the government's commitment within the Airports Act, policy and legislation do not adequately reflect the value of the airport sector. The Municipal Act places airports under "Transportation, Other," along with municipal parking and street lighting.
AMCO believes that airports are entitled to the same status held by other main transportation categories, namely roads and transit, and will continue to work towards this change in legislation.
The Ministry of Transportation of Ontario's definition of "purpose" on page 5 of the minister's message of May 1996 omitted airports. The Ministry of Transportation "ensures that Ontario has a transportation system that allows people and goods to move about safely and efficiently. This means that our roads, bridges, buses and ferries must serve the needs of the people of Ontario." AMCO believes this definition must be amended to include airports.
Further in his message, the minister stated, "Above all, the budget in our business plan" -- that being the Ontario government's -- "demonstrates that the minister remains accountable to Ontarians for preserving the transportation system as an economic asset." AMCO believes that the government must remain accountable to Ontarians for preserving a transportation system that includes the airport sector as an economic asset.
Early on, Canada established a policy of giving a hand up. Somewhere along the line, the term "subsidy," with its negative connotation of "handout," was born. But from the time the vision of Trans-Canada Airlines was born, the federal and provincial governments knew they would have to assist municipalities. Now that the airport sector is in place, these governments must continue to pay their fair share.
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We understand and support the government's efforts to balance the budget, but we are concerned about the information on which the government bases its decisions. For instance, when the Who Does What committee released its report earlier this year, it stated: "So far, affected municipalities have responded well to the funding reductions and in fact many are now operating their airports more efficiently and effectively than they had previously with a provincial subsidy by raising additional revenues, reducing their costs and having more say in how the facility is run."
When the committee was asked to provide the research data that led to this conclusion, AMCO was told that a subjective comment made by a representative of the Ministry of Transportation was the basis of the report.
It is demeaning to the airport industry and to MTO staff to think that the removal of operating subsidies will make deficits go away, as if the men and women involved were lax in fulfilling their responsibilities. If consulted, AMCO would have provided the picture of an industry struggling for a place, lost revenue and an operation already operating in a deficit. MTO can provide you with a list of airports which still operate with a deficit, and it is almost the same as existed prior to the end of the subsidies. Why? Because federal regulations mean fixed costs are high, and few airports have revenue streams great enough to match them.
In an effort to reduce costs, services are being cut. Sometimes there are fewer hours of operation, other times there are fewer hours of snow removal available. Sometimes there is one less runway open. More serious, however, is while the airports cannot cut costs beyond their safety threshold, some municipalities are doing it without realizing it. Safety is being jeopardized by the elimination of knowledgeable, experienced upper-management staff in exchange for the work of lesser-paid employees in the same management position. A budget cut for sure is a safety hazard without a doubt.
A recent example is a report we received concerning an airport with an inexperienced manager who allowed bird feeders to be positioned on an airport and grass to grow through the apron days before the Canadian Forces Snowbirds were due to land.
Airport managers require specialized training, so much so that the international association of airport executives of Canada has been formed to promote standardized training for every airport manager in Canada. Airports need your help. The first thing you can do is give us time. We need time to examine the implications of Bill 149. We need time to give you detailed feedback so critical to relevant legislation. We need to know that this consultation process means as much to you as it does to us.
We would like you to know that some of your legislation runs contrary to the requirements of the federal guidelines for the safe operation of airports. For instance, Bill 106 encourages the agricultural use of airport lands as a means of reducing new property taxes for airports when in fact federal manual TP11-500 discourages farming the land on airports because of the wildlife problems it encourages.
In addition, taxing all airport land as recent legislation dictates increases the tax burden and the deficit of Ontario's airports. The Ministry of Finance legal department spent the better part of three months analysing the management contracts of two of our member airports to determine how Bill 106 would affect them. They're still trying to understand the ramifications of Bill 106 on our industry, and now suddenly it seems here is Bill 149.
We have to delay the third reading of Bill 149 until March 1998, as this will grant us time to make a more formal presentation in a detailed manner. During this time, we ask you to examine the Airports Act and the municipal airports subsidy agreements with us. It has just come to our attention that week that these subsidy agreements signed some 25 years ago were meant to be binding on not just the parties who signed them but on the respective successors and assignees. We need to make certain that the airports that signed these agreements and the legislators who rescinded them are not in violation of Ontario law. The end result of this examination and discussions should be the basis of a provincial airports policy. It's long overdue.
We ask you to acknowledge that the men and women of the airport sector of Ontario's transportation system are dedicated to attaining and maintaining balanced budgets, and this government has a responsibility to educate itself concerning the industry-specific budgetary challenges that face us. We ask you to understand, to protect and preserve the vital link that airports provide to the life and livelihood of the people in this province in terms of both financial contributions and economic development. We ask that you ensure the principles of the Common Sense Revolution make sense within a $1-billion transportation industry that is not acknowledged by this government's definition of the transportation system nor in the municipal financial reporting system.
We ask you to take the high moral road and return a portion of what is taken from the industry back to the communities which generated it. A portion of the aviation fuel tax collected in this province would provide the necessary funds for the airport sector to maintain its level of service and its value as an economic asset to the people of this province.
The Airport Management Conference of Ontario grew from the vision of a group of men and women who believed the interests of the owners and operators of Ontario's airports not under the direct control of the federal or provincial government must be represented in the forums where change occurs. AMCO recognizes government's willingness to tackle the difficult issues that form the basis of renewal and further, the courage it takes to topple structures and redefine boundaries to reflect the life and times of the 20th century.
Times have changed and the vision must keep up with it. We need leadership that sees the big picture and develops the partnerships to get the job done. Where there is a vision, there is a viable financial solution. AMCO is part of that solution. We eagerly await your reply to the requests that we have made, and I thank you for your time and consideration.
The Vice-Chair: We have six minutes per caucus, beginning with the government party.
Mr Grimmett: Thank you for attending this morning. Is the snow really heavy up north?
Mr Dayment: I'm from the city here myself, but Ann McAfee was going to join me. She called and said she wished to attend today but thought she'd better not. There was about four or five inches, and ice. You're from Parry Sound?
Mr Grimmett: A little south of there, Muskoka.
Mr Dayment: My boat is still floating up there. I'm hoping to get it out one of these days.
Mr Grimmett: Don't take it out yet, because we may still get some warm weather.
Mr Dayment: I hope so.
Mr Phillips: I'd take it out.
Mr Grimmett: You have to live up there and ride it around in November. That's the best time to go boating.
I listened carefully to your comments. I'm sure many of your concerns are valid and I have noted them. Is there an assessment-related issue here?
Mr Dayment: There is the potential for different assessments at different sites.
Mr Grimmett: Some airports in Ontario would be municipally owned, and they would not be subject to municipal taxation.
Mr Dayment: We have a letter from the province that says the current situation may not change, but each airport will be taken on a site-by-site basis and that situation may change if the ownership or the operator of the airport changes.
Mr Grimmett: Some are privately owned. They would pay taxation based on assessment presumably for industrial or commercial.
Mr Dayment: And do now.
Mr Grimmett: Right, and some would be unique, such as the Pearson airport, where they have a unique relationship.
Mr Dayment: Yes.
Mr Grimmett: Probably payments in lieu paid by the new authority to the municipality.
Mr Dayment: Yes. Our membership, again, is made up of airports that are not provincially or federally owned, and our membership airports are from Dryden, Red Lake, down through Geraldton, to Pembroke, to Kingston and back through southern Ontario to Goderich.
Mr Grimmett: Some of them are municipally owned?
Mr Dayment: Some of them are.
Mr Grimmett: You made some comments about the remarks by I think it was someone from the municipal affairs ministry. I can't really help you with those comments except to say that in the area that I represent, the Muskoka airport has recently been taken over by the district government, and they did it for the very reasons that were stated, to get more control. They were quite prepared to deal with the overhead costs, and they felt that they could promote more economic development when they were in control. There was an existing subsidy from the federal government, which the district feels they can reduce and which they're quite prepared to take on as a district subsidy, if you will, until they are able to reduce it.
I wonder if perhaps in the context of Bill 149 you could focus on the assessment issues and comment on how these smaller airports that you represent might remain competitive given the different patchwork of assessment that exists.
Mr Dayment: I know Muskoka is now a member of our association. Before it was not, because it was a Ministry of Transport airport. You're obviously closer to that situation than I, but if the federal government could seem to operate it, I don't know if the municipality would have taken it over or set up an airport commission.
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Some of our concerns from member airports are the changes in -- certain areas are taxed already, commercial areas on an airport, business tax, which is changing, but now they're saying the entire facility with dual zoning or dual taxation some places. For instance, if you grow corn in one area of an airport, you can reduce the tax to 25% of what it might be somewhere else instead of a commercial taxation. We're afraid the municipality is going to look at that and have to pay it and say: "Here's how we can reduce that. Let's put this in here, reduce this down to 25% of what it would be if it was zoned differently." By doing that alone, we may be jeopardizing the safety and operation of the airport by looking for deer to come in, birds and that sort of thing. I think the increased tax burden, if it changes, and I'm not certain -- we have talked to Bob Caines in the ministry about assessment and how it may change. Some of the airports are owned by municipalities but operated by private companies under contract. That may change how the airport is looked at as a commercial entity and not an airport or transportation link.
I guess what we're hoping to get is a uniform thing for airports across the system. I hear comments about it. What we're trying to do also is get it linked into airports as part of the transportation definition.
Mr Grimmett: You're going to provide us with a written brief on this?
Mr Dayment: Yes. I apologize. Ann was going to bring them down. She has them, so I'm going to fax a copy down this afternoon.
Mr Grimmett: I look forward to receiving it and passing it on to the appropriate parties.
Mr Dayment: I appreciate your time.
Mr Phillips: Your suggestion to delay the bill is probably not practical. What we have said in the Liberal caucus is we have significant problems with the bill, but the bill has to get passed to allow the system to -- this thing kicks in on January 1, 1998. We're less than three months away, about 10 weeks away from this thing starting. What you do is point out what I think is going to be the reality of the bill. I don't even think it has been well thought through. I think there are some enormous unforeseen problems, and yours will be simply one of them. I'm sympathetic, but the fact is that whatever changes are going to be made to this bill have got to be in by October 28 at 5 o'clock, so that's when the doors close and the train leaves.
Mr Dayment: The plane.
Mr Phillips: The plane leaves, that's right. Actually liftoff will be a little later, but all passengers must be on board at 5 o'clock on October 28. I feel bad about that, because I think you have raised some legitimate worries, unforeseen consequences of the bill. I appreciate your comments. Recognizing that that's the reality, as they say, that whatever changes you can propose we have to see by 5 o'clock -- not only that, more than that, there has to be an amendment proposed by the government or the opposition by 5 o'clock next October 28 -- if there was something that might at least buy you some breathing time until these issues get resolved, we'd certainly welcome any suggestions you've got.
I guess my comment is it's 1159 and 30 seconds. It will not be enough even to have your comments to us by next Tuesday; any amendments that are going to be proposed have to be tabled by 5 o'clock next Tuesday. Tragically, I think you, we, are running out of time on it, but I appreciate your pointing out some of the real practical problems. As you point out, growing corn a few feet from the runway is probably going to attract a few vultures to eat the corn and the vultures can get in the --
Mr Dayment: We have an ongoing concern with the deer population on airports as we speak. That's just something that goes to feed the problem.
Mr Phillips: Literally.
Mr Dayment: We're working with the Ministry of Natural Resources on that. I'm the vice-president of AMCO this year, and I'm getting input from some of our members. Some of the operations are different. Some are under the works department, some are going to be under economic development, some are private, but some of the feedback seems to stem from the same thing, that airports seem to have been left over there as someone else's problem for a long time. They blame Ottawa, I guess, for a lot of it.
Mr Pouliot: A renewed pleasure indeed. I'm sorry to hear that precipitation, a snowstorm, has hit Barrie. It's in the snow belt. I can relate to having to cancel meetings sometimes at the last minute by virtue of weather.
Vultures do not stop at cornfields, I can assure you. In fact, in a political sense, they won't hesitate to pick the carcass clean. I can attest to that, I can assure you.
Your lot, your situation, your presentation, varies a great deal from, in its extreme, Pearson International. Then you have the regional airport, then you have some municipal airports, and then you have the privately owned. A good case can be made for every one of them. Your dilemma is that the government has decreed that the amendments must be in shortly, by October 28.
Mr Dayment: Yes.
Mr Pouliot: Then they will do their clause-by-clause, but -- there's only you and I here; we're not going to share this with other people -- this is a fait accompli. They might change one or two things, because we believe that there has been a penetration of their philosophy on farm assessment. It is so blatant, so obvious that errors of omission abound, and we sense that there is a commitment to look at this, and you would prefer the status quo. You want more time to come up with your proposal.
My question is, do you have the facility? Are you able to come up with amendments that we could channel? It's highly unlikely that they will wish to pay too much attention to them, but we can -- with the Liberals, on many, many subjects, we're not that far apart on many subject matters. In fact, I'll share another secret with you: We're looking forward to the next election, and they know they must get a majority -- but that's political -- otherwise, it will be done very, very quickly, I can assure you.
If you cannot give us the amendment, we hope that the government will listen. You're not that big an entity in the overall scheme, but for yourself, that's all that matters, and what you have presented is most commonsensical, but sometimes it comes out in the wash and you get away from here and say: "Have I made my point clear? Are they really listening? All I saw was a lot of papers all over." Your point is well taken. Your situation is not like the others, and it seemed that in the drafting, the intent and spirit, they forgot about you. You're coming out as a bagatelle, as the tombola that's about to leave town, a circus for the less fortunate, the small time. We'll make sure that your voice is heard. I thank you very kindly for taking the time to be with us.
The Vice-Chair: That concludes the time. Thank you for appearing, Mr Dayment.
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TORONTO ARTS COUNCIL
The Vice-Chair: We will now move on to the Toronto Arts Council presentation, Ann Bermonte. I wonder if the two of you could identify yourselves, please. You have 30 minutes in which to make your presentation. You can use all or part of it. If there is any time left over after you make the presentation, we will go into a rotation of questions among the three party caucuses.
Ms Ann Bermonte: Thank you. I'm Ann Bermonte. I'm the associate director of the Toronto Arts Council. I'm pleased to be addressing you today. I am joined by Janis Barlow, an independent theatre consultant, who will be speaking to you specifically about the act and its impact on live theatres.
Bill 149, the Fair Municipal Finance Act (No. 2), has come a long way in addressing a number of concerns I raised with your committee earlier this year regarding Bill 106. You are to be congratulated on the provisions in the act affecting the live theatre sector. As I'm sure you've heard from my colleagues in the theatre community who addressed the committee earlier this week, we recognize this as a significant step forward and are very pleased that the considerable economic and cultural impact of live theatres will be encouraged in the future.
Today I am not going to itemize the reams of economic statistics that I'm sure you've heard many times before, but if you haven't, I'd be pleased to. However, I am pleased to provide you with a brochure entitled Culture is the Business of Cities, produced by the Toronto Arts Council and sponsored by Toronto Life and Random House, which creatively captures and communicates the excitement and economic impact of our arts and culture sector. I am also providing you with a copy of Spreading the Word, a report summarizing the findings of a symposium on Culture and the Civic Society cosponsored by Toronto Arts Council and Metro Parks and Culture this September, which involved representatives from other cultural centres such as London, England, Sydney, Australia, Montreal, New York and Paris and looked at ways the new city of Toronto can continue to realize the arts and culture community's potential and role as an economic driver, a contributor to our high quality of life and a leading-edge employer. I believe Rosemarie distributed copies of those to you. If you would like additional copies, you could always contact me at the Toronto Arts Council. We'd be pleased to make them available to you.
Instead, I'm here today because I wish to use this opportunity to point out an anomaly that is still contained in the act and contradicts the spirit, if not the intent, of the amendments to Bill 106. Unfortunately, the vision which informs the act's provisions for live theatres is not extended to the rest of the non-profit arts community. Non-profit art galleries, rehearsal studios, production facilities and arts offices in which hundreds of theatre, visual arts, dance, music, film and special events are produced are also key to the economic development of cities and to the success of our arts and culture sector as a local, provincial and national economic driver.
Nevertheless, the Fair Municipal Finance Act (No. 2) offers no commitments to these organizations, which remain extremely vulnerable to large tax increases, tax increases which most of them will not be able to survive. Since most of these groups over the past two years have had to absorb cuts in their grants from the Ontario Arts Council and the Ministry of Citizenship, Culture and Recreation ranging from 30% to 100%, their inability to pay increased property taxes is exacerbated.
In order to redress this anomaly and to provide comfort to a vulnerable, yet vital, sector of our arts and culture community I recommend that you expand the regulations defining "residential property class," which currently includes golf courses, ski hills and land owned and occupied by non-profit service organizations, non-profit private clubs or non-profit recreational sports clubs, to include non-profit arts organizations.
This amendment is straightforward to implement and is easily justifiable, given the fact that it maintains the status quo, as currently all non-profit arts organizations are exempt from paying the business occupancy tax and, if they pay property taxes, are taxed at the residential mill rate.
In addition, this amendment would remove the uncertainty requiring charities to seek discretion from municipalities for rebates for the purposes of giving them tax relief from taxes on property they occupy as defined in section 442.1 of the Municipal Act. Under the residential property class, non-profit arts organizations would be exempt from this requirement. Addressing this issue by expanding the definition of residential property class saves time, money, confusion and provides non-profit organizations, whether or not they also have charitable status, with a clear definition of how the new act applies to them.
Although the above recommendation represents a minor modification to the act, in my opinion it will have a tremendous impact on ensuring and encouraging the viability of the arts in Ontario.
Once again, on behalf of the Toronto Arts Council, I thank you for listening to me and hope that you will once again see value in the advice I have offered today.
Ms Janis Barlow: Mr Chairman, members of the committee, thank you for giving me the opportunity to speak to you today. My name is Janis Barlow. I am an independent arts management consultant who specializes in theatre. Toronto has been my home base since 1978.
In 1979, while on the board of the Toronto Theatre Alliance, I was one of three people who invented the phrase, "Toronto is the third-largest producer of live theatre in the English-speaking world," and then did the research in 1981 to prove it. It's a phrase that seems to have caught on.
I was the project manager on the Elgin and Winter Garden Theatre restoration in the 1980s and I have consulted extensively throughout Ontario and in the United States. Most recently, I have done management reviews for Toronto's Factory Theatre and the city of Toronto's 12 Alexander Street project. I currently do not represent any theatre clients in Ontario.
I am here to offer congratulations and gratitude for Bill 149 and its impact on the smaller live theatres in Ontario. The news of the initiative to exempt theatres under 1,000 seats from property taxes has been met with relief and appreciation from across the sector. The theatre sector is, on the whole, highly motivated and resilient, but it is very much in need of some good news, news which represents jobs and opportunities in a labour-intensive industry.
While the smaller theatres of the province are a training ground for larger commercial cultural industries, they are also vital places of non-denominational public assembly. Theatres, together with libraries, museums and galleries, complete the cultural infrastructure which characterize communities across this province. Like parks and community sporting facilities, they are public services which are non-commercial in nature.
In Toronto, the theatre industry is a unique attraction and socioeconomic driver for the city. It has always seemed odd to me that not-for-profit performing arts facilities were taxed in Ontario and property-tax-exempt in Alberta, Quebec and throughout the United States. Also surprising is the fact that Canada provides, through all levels of government, less direct and indirect support to the cultural sector than the United States, France, or Great Britain. The theatre industry offers tremendous value and return on the investment. Why make it harder to do business in Ontario?
In the past, the application of property taxes has made for an inequitable and unfair tax system even among the not-for-profit facilities, where tax assessments have ranged between $41 per seat capacity per year at Theatre Passe Muraille to $129 per seat per year at Young People's Theatre Centre. Then there are the facilities where taxes are forgiven, like Massey Hall and Roy Thomson Hall, where the assessments range from $17 per seat per year to $405 per seat.
The not-for-profit and commercial sectors of the theatre industry are part of an ecosystem. They share resources and pursue different goals. The goals of the not-for-profit organization have to do with freedom of artistic expression and development, and public access to the arts; the goal of the commercial producer, of course, is to give a work of art or entertainment a long and hopefully profitable life. The commercial theatre sector in Toronto is relatively small and new, but it is a labour-intensive, renewable resource with tremendous growth and export potential. It is already a multi-billion dollar business.
The commercial theatre of Toronto is a high-risk sector that has never asked for, or received, direct government subsidy. The entire theatre industry in Ontario recognizes the potential of this sector and has always endorsed property tax relief across the boards for the theatres of Toronto.
The potential pitfall of Bill 149 stems from its good intentions to level the playing field for the commercial theatre in Toronto and offer some relief for a small handful of overtaxed commercial facility owners. Unfortunately, the bill threatens the operations of several publicly owned facilities. It may be complicated to administer and in the end risk being penny wise and pound foolish.
At the risk of being accused of gaining an inch and asking for a mile, may I suggest that you consider extending the property tax exemption to all Toronto theatres with seating capacities under 3,200 seats? It is the same simple formula, which is consistent with the entertainment sales tax exemption and applied for the same reasons. The blanket exemption:
Captures the few theatres which are overtaxed now.
Maintains the status quo for Toronto's large not-for-profit facilities.
Represents an investment toward industry growth, but it's not a subsidy.
It allows our theatres to be competitive with the vast majority of competing American theatres, which are property-tax-exempt, like Shea's Buffalo, Playhouse Square in Cleveland, CAPA in Columbus, which are directly competitive with this market, not to mention the historic theatres which are owned by commercial operators.
It helps to equal the field and stabilize the industry in Toronto.
It provides an incentive for the development of sorely needed small and mid-sized commercial facilities, to create a better balance of facilities in this city.
It increases jobs, productions, ticket sales and tax revenue from other sources.
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The exemption would permit the commercial operators to bid more competitively for foreign productions, invest more in research and development of their own productions, develop product for export and offer productions at competitive ticket prices for the theatre-goers of Ontario and visitors to the city, at least 40% of whom cite theatre as one of the reasons they come to Toronto.
It is a simple solution which will result in a relatively modest loss of property tax revenue in the immediate future but enormous long-term gains in economic impact.
More theatre activity in this city has only positive consequences for the economy and quality of life of the city and the province. A review mechanism in, say, five years' time would undoubtedly demonstrate favourable results.
Once again, I thank you for the opportunity to offer thanks and a few thoughts on Bill 149.
The Vice-Chair: Thank you. We have six minutes per caucus remaining for questions, beginning with Mr Phillips.
Mr Phillips: Thank you for the presentation. We've heard from quite a few different groups and we appreciate the comments. This is an interesting issue for us, because the provincial government has decided to dramatically cut its support for the cultural community over the last two years. We heard from a group of theatres that their support had been cut by $2.5 million. When the province is committing its own money, it's slashing. What we're talking about here is the province ordering municipalities to take in less money. I realize it's all one taxpayer, but the province has spoken with its money by slashing it and now says, "Municipalities, we're ordering you to cut taxes on the cultural community." That's interesting and it's relatively painless, but municipalities will now get less taxes, so they're faced with two choices: cut policing or fire or social services, or increase taxes on the rest of the properties.
The reason I point that out is because many groups have been in here patting the provincial government on the back, saying, "Thank you, thank you, thank you." I just remind us that you should be going and thanking the city of Toronto council, because they're going to have to cope with that much less revenue.
That may be really good public policy. I'm very supportive of the cultural community. Not only does it do a fabulous job in developing culture, but I think it is also a terrific economic engine. There are lots of bonuses. But when you are the new city of Toronto council next year, all social housing is now on property taxes. I was at a fund-raising event last night for the Fred Victor Mission. actually at the theatre, Second City. The shelter for women that they just opened is 100% filled right now, every single night. We're just on the tip of some significant problems in social housing.
Now, you're here to speak on behalf of your group, and I don't want to equate one with the other. I'm just saying that as we approve these bills, the consequence is less revenue for municipal governments at the same time as 100% of social housing is being added on them, against, I might add, all the advice. Any government likes people to come in and pat them on the back, as you're doing. I just think it's important that we clarify what is really happening here.
In my opinion, you make a good point, that there is some unforeseen fallout of this as well, which is that some of our community theatres, Hummingbird, Massey, Roy Thomson and North York Performing Arts, are suddenly going to be hit, I gather, with some property taxes, just at a time when at least two of those organizations have worked their way through some challenges over the last decade and have emerged quite strong.
I guess that's more a comment than anything else. I appreciate your advice on it. I think there's a lot of concern around what I call the unforeseen circumstances, and you provide some good advice. I wanted to at least get my view on the record with you. As you're high-fiving Mike Harris for doing this, recognize that the bill is going somewhere else. That's my comment. I don't know whether you can provide any response to that.
Ms Bermonte: Very quickly, I'd like to point out that one of the shocking pieces of information that we learned at the symposium in September is that the city of Montreal spends $72 million on arts culture and heritage. The city of Toronto spends $24 million. The city of Sydney spends $107 million, the city of New York spends $128 million, and the city of London spends $495 million. I think we all agree that the city of Toronto does have some equity to build up there.
We're also working in a vacuum of information. We need to look at, what is AVA going to mean for the city of Toronto? Is it going to balance off, or will it mean a little more money into the city's coffers that would allow them to absorb this? We're estimating it would be somewhere between $1 million and $2 million -- it's not significant -- if indeed you were to look at and consider the proposal that Janis Barlow has recommended around making the exemption based on 3,200 seats rather than 1,000. We're not talking about a whole lot of money.
But I do understand your point and I do agree with it, and I did make a point of identifying that indeed what the government is giving with one hand they are taking away with another.
Mr Pouliot: My contribution, with respect, Ms Barlow is very humble. I'm one of the millions of people who provided you with the inspiration to invent the phrase. It has indeed been a success story, and there's a need to encourage.
Arts and culture need not come to any committee, be it federal, provincial or municipal, with cap in hand and say, "Don't forget me," or "Me too." The contribution in terms of hard, cold dollars -- you did mention some 40% by survey, but even if it were a smaller percentage, we all know the multiplier. We all know that we benefit greatly as individuals and we all know of some others who benefit financially because of the spinoffs. It's not only so many seats occupied by so many people and the success of a production -- the anxiety of many others, unfortunately -- but when you put it all together. The film festival, for instance: Try to get a seat or a stool at Bistro 990. They have to hire, and that money goes round and round and round.
What you're saying is: "Give us recognition, be it through a small incentive. Give us a chance to stay alive." You're right. You have to measure, on a different scale perhaps, as it won't happen overnight.
My colleague is right. I don't believe it was totally by design, but it is true that with a program of restraint, the government of the day has made some choices. Please don't feel targeted; many ministries were cut. I don't believe for one minute that culture was targeted, but they were cut. That's the reality of the day. Then they went one step further, and that's where I depart, that's when I started to say, "Gee, no wonder 82 politicians in the Legislative Assembly give the rest of us a bad reputation."
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Then they dictate to the municipalities, cut you off substantially. It doesn't cost them a bloody penny, but they stop the municipality from levying taxes. At the same time, this is what they shove down the municipalities: land ambulance, policing -- the list is almost endless. They call it devolution, transfer of responsibilities. They wrap it up and it looks nice, but it's like Bre-X: When you open the package, there's not much gold; there's nothing in it. In fact, this package is all rotten inside. It's as simple as that.
January 1, it might be a free-for-all. But please be one of the early birds. Grab a number. Ask that you be granted the pleasure of an audience with the city council, because it's your last grab at it. This is as far as they will go. Also, take a moment of your time to send a note to Isabel Bassett, even for the recognition of the most democratic form of theatre: street theatre, the most accessible theatre. They're getting a break. I don't like the interference with the municipality, but I can appreciate the forcefulness, and Isabel Bassett is now the Minister of Culture. Sincerely, I think it was a great choice. She was instrumental and she's sincere and she really believes in it. Take a moment of your time, take a moment of her time, and ask that you be represented, that they go one step further.
I have no question, but I too wished to be a part of the record. I share in your presentation. I want to wish you well, but come back tomorrow. Life gets better, and the future can last a long, long time. It usually does.
Mr Grimmett: Thank you both for coming today, for a very entertaining and informative presentation. I just wanted to talk for a few minutes about some of the comments that were made in Ms Barlow's paper respecting the public theatres. I just wanted to let you know that earlier today we had David Mirvish here. Were you able to see his presentation?
Ms Bermonte: No.
Mr Grimmett: He gave us a presentation this morning, and I thought it was quite entertaining, in that he talked about being a private operator in a sector that is dominated by publicly owned and to some extent publicly subsidized operations, and how interesting it has been for his family to try and survive in that marketplace.
I thought it was interesting when he made the comment that when his father was in the business in the early years, some of his handlers and maybe his advisers said, "You're operating a private theatre in a market where all the public theatres you're competing with don't pay the kind of property tax you pay." He mentioned some figures; he said it was around $150,000 a year he paid, while the public facilities he was competing with didn't pay. His comment, and I think everyone would believe David Mirvish was quoting his father accurately, was: "I don't care. They have to deal with committees, and I don't." He saw that as a major advantage. He could go about his operation and use some of the entrepreneurial flair that his family has demonstrated for a long time. David Mirvish made the point that he didn't wish for public facilities to pay taxes; he just wanted to make sure that his operations could continue in the game. I think that's very much the way we have approached this legislation.
I will admit that the theatres under 1,000 are clearly getting a break and it is at the expense of the municipalities and the municipalities are going to have to deal with that, but that is also in recognition that there is an important contribution made by the smaller theatres, not only to the economic development of many municipalities -- and let's not forget that this bill is not entirely about Toronto. The under-1,000 theatre exemption applies to all those theatres that exist in all the smaller community around Ontario, and I'm sure you know them well. They certainly are in most of our ridings, if not all our ridings. There is a significant benefit there to the arts community in those parts of Ontario where they exist.
But even those people who have come representing those public facilities, it seems to me, have indicated that they too feel that it is only fair, from a taxation perspective, that when the private facilities and the public facilities have commercial operations going on, they should be treated the same way, and that really is what Bill 149 is all about. It treats public facilities, when they have a commercial-type operation going on, the same way as it does private. I think that would be seen by the public as fair. Do you have any comment on that?
Ms Barlow: Simply that it's complicated to administer in terms of, where do you divide it up? What is it, 182 days in productions? You know, when you hit 183, you start paying taxes. It just seems complicated to administer, and that the incentive would be worthwhile to maintain at the status quo. As you say, David Mirvish doesn't object to the status quo as far as the large publicly owned facilities are concerned.
Also, I'm concerned that we do compete in a global marketplace. More specifically, our neighbours to the south don't have these kinds of property taxes. Many of the commercial theatres, because they're designated historic, have property tax relief as a result of that, or they're a not-for-profit facility management -- they're a 501-3C -- so they're exempt from property tax. It's a question of a level playing field with some of the other provinces as well as our American neighbours.
Ms Bermonte: If I could add to what Janis was saying, I've seen the formula and it's very complicated. On the one hand, the proposal that she's offering simplifies it very clearly for everyone concerned. Also, Mr Mirvish and Mr Drabinsky and Mr Latimer have a history of investing in what they call R&D, the non-profit sector. By relieving them of property taxes, it gives them a bigger incentive to invest in the non-profit sector and to develop shows so we can be an exporter of theatre goods. We are already, but it will just strengthen our hold, our role as an exporter of theatre products, not only in North America but also around the world.
So there is an incentive there, it just makes everything simpler from an administrative and bureaucratic point of view, and I think it's simpler for everyone to understand the legislation and how it applies to them.
The Vice-Chair: Thank you, Ms Bermonte and Ms Barlow, for appearing before the committee.
With that, the morning is finished, and we'll recess until 1 o'clock.
The committee recessed from 1159 to 1305.
ONTARIO HOME BUILDERS' ASSOCIATION
The Chair (Mr Terence H. Young): We will start. We're continuing the public hearings of the standing committee on finance and economic affairs reviewing Bill 149. I wonder if you could please identify yourselves for the record. I understand you're from the Ontario Home Builders' Association. You have half an hour to use as you wish. If you leave any time after your initial presentation, I will divide it evenly among the three parties. Please introduce yourselves and go ahead.
Mr Peter Goldthorpe: Good afternoon. My name is Peter Goldthorpe. I'm director of public affairs for the Ontario Home Builders' Association. With me is Celia Teale. Celia is vice-president of OHBA. She is also involved in land development for Dalron Corp in Sudbury and is a past president of the Sudbury Home Builders' Association, one of OHBA's locals.
OHBA is a volunteer organization representing the home building industry. We have approximately 3,200 member companies in 34 locals across the province. I will begin by making some general comments about Bill 149, the second part of the Fair Municipal Finance Act. This will set the context for the more specific technical comments that Celia will be making. As you mentioned, we have 30 minutes. We're going to be brief so there will be time for questions afterwards.
To begin at the beginning, the home building industry fully supports the government' efforts in the area of property tax reform. If there is anything that can be said without fear of controversy, it is probably that Ontario's property tax system is broken and needs to be fixed. Deficiencies in the current system show up all over the place, and especially so in housing, where a lot of new units come on to the market each year.
In general, there has been a fairly steady year-over-year increase in the value of housing in Ontario. But in most cases, only the newest housing is assessed at current market values. The balance is assessed at older, generally lower, values, and this results in obvious inequities. So we are glad to see the taxation field being levelled. We do, however, have some concerns about the incidence of redistributed tax burdens. Any attempt to level a very large field is bound to result in occasionally, and unintentionally, shifting too much burden on to some specific area. Celia is going to explain how this might be happening in the area of land development. But before she goes into the technical details, I want to briefly remind you of a couple of general points that will place her comments in context.
The first point concerns provincial policy with respect to ensuring a supply of affordable housing. One of the goals of this policy is to avoid upward pressure that occurs when the demand for housing outstrips the ability of the industry to supply that need. To this end, the province wisely advises municipalities to ensure that there is a 10-year supply of land designated for residential development and at least a three-year supply of land that is draft approved.
The second point concerns the economics of our industry. The land development and home building industry is one of the few in Canada that is unable to deduct carrying costs of inventory from its income. As a result, companies that are profitable in the eyes of Revenue Canada must sometimes borrow money to pay their taxes. The sort of financing that this entails obviously increases the cost of housing; it does so directly, because all these costs must be capitalized. It also does it indirectly, because the financing requirements are a barrier to small companies that do not have deep pockets. One of the effects of the policy proposed in Bill 149, therefore, is to increase concentration and decrease competition in the home building industry. When you do this, you run the risk that prices will go up.
With these two points as background, I will now turn things over to Celia to talk about one of the impacts that Bill 149 may have on housing in Ontario.
Ms Celia Teale: Thank you, Peter. The issue that is causing us concern in the proposed assessment system is the treatment of farm land undergoing development. The current tax treatment is all over the map, and that is yet more proof that reform is long overdue. But the typical practice in most municipalities has been to stay with the farm land assessment until the use actually becomes residential. In farmer-to-farmer transactions, farm land in most of southern Ontario typically costs $2,500 to $3,000 per acre. The assessed value is usually 10% of this. So farm land is generally in the range of several hundred dollars per acre.
Bill 149 proposes to reassess farm land that is undergoing development beginning at the draft-approval stage. Two further reassessments are proposed, at registration and building-permit issuance. For low-rise residential development, registration and building-permit issuance typically occur fairly close together at the end of the process. As a result, the tax treatment at these two stages will have less impact on the cost of housing.
It is the proposed treatment at the draft-approval stage that gives rise to the most concern. There are two points about draft approval that are relevant in this discussion. First, by itself, draft approval does not offer any assurance that the land will actually be developed. Second, for a lot of reasons, draft approval can occur long before a serviced subdivision comes on stream and the construction of houses is under way. Draft approval is, however, a recognizable stage in the planning process, so I am not suggesting it is a purely arbitrary choice for reassessment. But I want to emphasize that the increase in assessed value at this point will likely be very large. This fact must be combined with the uncertainty of draft approval. As well, a large increase could directly jeopardize the province's intent to maintain a supply of draft-approved land in order to protect housing affordability. When viewed in this light, I think it is prudent to take a very cautious approach to reassessment at this stage of development. This is the nature of our concern.
Now I would like to apply some numbers to this so you can have a sense for what might happen. I said earlier that the assessed value of farm land is typically in the range of several hundred dollars an acre. In Sudbury, where I have just been involved in a review of property tax assessments, bulk acreage rates average $40,000 per acre on sites up to 15 acres. If servicing is not available, the rate is cut by 50% to $20,000 per acre. In developing areas in southern Ontario, the rates are substantially higher than this.
Under the draft regulation that has been circulated with the proposed legislation, this value would be discounted by 50% to 75%. The larger discount is the default, so I will use this as the comparison. The shift in assessed value for farm land undergoing development will be substantial. It will rise from several hundred dollars to thousands of dollars, and this is probably conservative. How this translates into effective tax rates, of course, is another matter, and that is uncertain at this point in time. We do not know, in precise terms, what is going to happen to the assessments of other classes of property, so we do not know exactly how the tax base for land undergoing development will change relative to other types of land, nor do we know the net impact of the downloading and restructuring that is taking place. But even without this information, it is safe to assume that land undergoing development will contribute a larger share of property tax revenues under this proposed legislation. The only question is: How much larger?
Land development is the first stage in most economic growth and development. If businesses cannot locate, they cannot get started. If potential employees cannot finding housing, businesses cannot be staffed. If land costs are not kept as low as possible, businesses will have a tough time remaining competitive. The cost of land affects commercial rents; it also affects salaries and must reflect the cost of housing. If these do not remain competitive, companies will be hard-pressed to remain in business, let alone expand.
I understand that property taxes are based on the value of land. So the straightforward approach is to say that the taxes should go up as the value of the land increases. But let me suggest that inflexible adherence to this principle is shortsighted and dangerous. Other equally important provincial policies and interests, such as economic development and affordable housing, are at stake in this matter.
From a purely practical perspective, it can be argued that development charges are financing, or can be used to finance, costs incurred during development. It can also be argued that development charges act like a property tax surcharge.
With this in mind, OHBA has proposed delaying reassessment of land undergoing development to a later stage. I refer you to the attached resolution 022 from our annual general meeting, in which we propose registration of the plan of subdivision as the trigger for reassessment.
In closing, let me remind you that responsible tax policy involves a blending of complementary tax instruments. It also requires that we be sensitive to the consequences that any specific tax policy may have on a wide range of policies and interests. In the proposed tax treatment of land undergoing development, I believe we have forgotten about the role of development charges. I believe we have lost sight of important interests in economic development and affordable housing. Thank you for your attention. We will be happy to answer any questions you may have.
The Chair: Thank you very much. We have approximately 21 minutes left. I'll go first to the NDP for questions.
Mr Pouliot: Thank you both for taking the time and presenting us with a straightforward opinion by way of your time today. What the Ontario Home Builders are saying echoes the sentiment that has emerged throughout the week of public hearings. There are two main themes, and the presenters will attest to that: on the one hand, the arts, theatre groups, members of both Odeon and Players, major and some not-so-major players in the film industry, anywhere from the opera house to the most humble of democratic theatre, if you wish; and on the other hand, the other theme that has emerged is yours, that of what's about to happen unless the government takes heed, that of the definition and classification of land which is presently being farmed or in some cases is vacant.
The staging of assessment before the last stage does not encourage someone to develop; it proves to be a deterrent. That's what you're saying. You're also advising that when you look at the bigger picture and when you blend that with the mandate and philosophy of the present government -- creating jobs, Mike Harris the Taxfighter, Ontario is open for business, we will cut the red tape, we will provide economic stimulus, create the climate etc -- when one looks at the proposal, the draft of Bill 149, it is beyond the ironic; it is contradictory. This is the mantra, this is the spin, this is what they say. They say, "We will do what we said we would; people will like that," and then they come up with this.
Sometimes I suspect two things: One municipality with a lot of clout, shouting and jumping up and down, got to them and/or because they're downloading so much on the municipalities, because this is not revenue-neutral, because they're hurting the municipalities so much, they extended an olive branch to them and said, "Well, we'll give you this opportunity, but you're going to be the bad guy, the bad people."
But you go, in your direct relationship with the developers, and you tell them they can't develop, because you can't get the land, it's too onerous. I'm with you, but when all is said and done, I remain confident that if anything changes in Bill 149 by way of amendment, this is it. I think the government has listened and hears you loud and clear that some accommodation must be made, because the presentations repeatedly tell us the obvious. It's just nuts and bolts, straightforward. I do appreciate your presentation and certainly will urge the government to listen to the presentation you've made and to act accordingly when it comes time to produce the amendments, before we go clause-by-clause.
Mr Goldthorpe: I'm not sure if there was a question in that.
Mr Pouliot: No, it was just by way of comment.
Mr Goldthorpe: I appreciate your support. Certainly the message we've received from the Minister of Municipal Affairs and Housing every time he has come to our conference to speak to us in the last three years was that the housing industry in Ontario was overtaxed and overregulated and that the government needs to be doing things to lighten the tax burden, not increase the tax burden, on the industry. As I said, we appreciate your support for these proposed amendments.
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Mr Wayne Wettlaufer (Kitchener): Thank you very much for appearing before the committee. I have some questions, and I hope we can do this very briefly. I had a developer come to me last week in my riding. He indicated that he was presently paying $45,000 a year in taxes on a plot of land for which the draft plan has been submitted. He estimated that the taxes under this bill would go up to $400,000 a year. Do you see that as being possible?
Mr Goldthorpe: As Celia mentioned, one of the problems we're grappling with in commenting on this legislation is that no one knows what the final numbers are going to be. The effective tax rate ends up being a function not just of the assessment but also of the mill rate, and that mill rate is going to be determined by the assessment base across the entire municipality, and how that ends up being changed as a result of actual value assessment and the relative share of this class in that assessment base is also going to be a function of the expenses the municipalities have to finance. There are still some open questions about what those expenses are going to be in the next couple of years.
Certainly when you look at an assessment which is changing from 10% of farm land to 25% of bulk land rates, that increase in assessment is, in a lot of cases, going to be greater than a factor of 10. You're talking about a tax hit of a factor of 10. So it's not outside of the realm of possibility. Whether it will actually happen, at this point in time we don't have the numbers to answer that question.
Mr Wettlaufer: I believe that the average rule of thumb is that it could take as much as four to seven or eight years from the time the draft plan has been submitted to the time the contractor starts building homes on that land. Is that correct?
Ms Teale: That's quite reasonable. I think we all have to remember too that draft approval doesn't necessarily mean registered lots that will become developed, because although you've taken the risk to go through the planning process and acquire draft approval, unless there's servicing capacity at the time of registration, they won't let you proceed. Years ago, draft approval might have carried a little bit more weight than it does today, because there are so many other constraints that are tied to that draft approval now.
Mr Wettlaufer: Until homes are actually sold, no remuneration comes the developer's or the contractor's way.
One of the arguments that has been made to reinforce passage of this bill is that presently under the legislation that exists if a contractor or a developer puts in services but chooses not to build homes, this land is still assessed at agricultural taxation rates, even though the services are in. Do you have a comment on that?
Mr Goldthorpe: It depends how it's being used. If the use of the land, even though the services are in, is agricultural and it's just sitting there not being developed any further, that's a different situation than if you're actively working on developing the land and bringing it on stream.
Just to reiterate the point that Celia made, you shouldn't be looking at individual tax instruments in isolation. Certainly we've heard a concern from some municipalities that land that's undergoing development is not paying its share of expenses. I think you have to keep in mind that there are development charges being paid. The current legislation, as well as Bill 98, provides for early payment of development charges at draft approval, so that when the services are being put into a subdivision, municipalities can be collecting very large sums of money from the development industry that are paying for services that are being required for that land at that time. So the property tax payment is not the only tax revenue coming off that land at that point in time.
Mr Wettlaufer: If the services are in, ie, curb and gutter, hydro, sewer, how would it be possible for that land to be used as agricultural land?
Mr Goldthorpe: I think if you're talking about curb and gutter, obviously you're not going to be talking about an agricultural use any more. That would be a different situation.
Mr Wettlaufer: I'm looking for some input. You're opposed to the bill as written in so far as how the assessment will be made. What would be a better period over which to pay? I'm not looking at your resolution here; I'm looking at something maybe in between, ie, from the time the draft plan is approved to somewhere through the period until registration or until construction or until sales are made. Would there be a better time? I understand that the UDI is not necessarily opposed to this bill, that they have proposed something else.
Mr Goldthorpe: Our proposal is registration. I think at registration you'd be capturing the sort of development you're describing, curbs and gutters in place, individual lots created and that sort of thing. The proposal we've made is 20% of current value at the time of registration, and then you'd be looking at a relatively short period of time when they're finishing off the development process and then reassessing again when the occupancy permit is issued, I would think.
Mr Wettlaufer: But could there be something else in between your resolution here and the bill, a compromise?
Mr Goldthorpe: The problem with having a recognizable trigger is that you're really left with draft approval or registration; there's not too much in between in terms of recognizable triggers. So if we weren't looking at registration, then I think we'd be looking at very substantial discounts from current value at draft approval; a 75% discount is probably not sufficient.
Mr Phillips: This is an area where I think there's probably broad-scale agreement that there's something wrong with the bill as it's proposed. We've heard from a lot of municipalities, actually, that are concerned about the bill, which is only mildly surprising, because they would stand, theoretically, to benefit from increased revenue. We heard yesterday from the mayor of Brampton, who indicated some significant concerns about what it will do for the availability of reasonably priced land for both commercial/industrial and residential. So it looks like there may be a mistake in the bill.
Certainly you've put forward a good case, that all of us are looking for some reasonably priced housing in the province, and this appears to drive up the cost of available land quite significantly, as a matter of fact, potentially disastrously, particularly if, as we always do, we run into some kind of an economic downturn; just when the builders assume they're going to be able to plow ahead, they get very close to building and then they've got to pause for a couple of years but the tax tap is running full out.
I hope the government is looking at an amendment in this area. It will be, to some extent, up to them, obviously. The only thing I would say is that the amendments have to be in by 5 o'clock on Tuesday, so the clock is also running quite quickly here for them to develop those amendments. I can only assume, as my colleague Mr Pouliot said, that they've been listening carefully, because you're probably about the sixth well-regarded organization that has raised the concern. I don't really have a question. You've covered the same ground that has been covered by many. I think you have a legitimate concern here, and I hope the government has its technical people working on a solution for us.
The Chair: Thank you very much for your presentation today, and thank you for coming.
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TOWN OF HUNTSVILLE
The Chair: Could the representatives for the corporation of the town of Huntsville please come forward. You'll have half an hour. After an initial presentation, if you leave time, I'll divide it equally among the three parties for questions, but you can use the time as you wish. Would you please identify yourself formally for the record, and then please go ahead.
Mr Christopher Williams: My name is Christopher Williams. I'm a solicitor with the law firm of Aird and Berlis. We represent the corporation of the town of Huntsville. To my right is Mr Robert Small. He's the town manager and clerk for the town of Huntsville. He will be available to assist me and to answer any questions the members of the committee may have regarding my presentation.
By way of background, the town of Huntsville is an area municipality within the district municipality of Muskoka. By virtue of the provisions of the District Municipality of Muskoka Act, the district functions as a regional municipality or a regional government, notwithstanding its nomenclature as a district municipality, and the town of Huntsville is, for all intents and purposes, as are the other local municipalities, an area municipality. Notwithstanding the fact that it's called a district municipality, what we're dealing with is a regional government system.
The town is the most populous of the six area municipalities which make up the district of Muskoka. It has a full-time population of 18,000 and obviously many more during the summer months as a result of resort and recreational use. This constitutes approximately 35% of the district's total population.
From a land area perspective, Huntsville covers almost 69,000 hectares and is the second-largest of the six area municipalities in the district. By way of some comparison, the town of Huntsville is about the same size as some regional municipalities in southern Ontario and certainly much larger than Metropolitan Toronto. Obviously the district of Muskoka covers a very large area, and it's due in part to these facts.
It's important to note for the purposes of this submission that the district also has significant geographic and demographic differences. Mr Small may be able to attest to some climatic differences that he noticed driving down here this morning as well. It is different from regional municipalities within the greater Toronto area, which are much more homogeneous in their current land use, expected future land uses and population distribution. By way of example, the next closest lower-tier municipalities, urban areas, to the town of Huntsville are between 40 and 50 kilometres from the downtown, urban part of the town of Huntsville. That stretch, it's important to note, is never going to be developed, as a result of the existence of the Canadian Shield, and it will likely remain as a forested wilderness area.
The important point here is that services do not, for the most part, overlap between the area municipalities, and there is not the ability to create a homogeneous development pattern or servicing structure, which exists in regional municipalities in southern Ontario such as York, Peel, Halton, Durham and the like. The separation and distinctions between the communities in the district of Muskoka will inevitably continue, and they will tend to function quite separately, as opposed to what we see happening to regional municipalities in the greater Toronto area.
As a result of these circumstances, the delivery of services across existing municipal boundaries is often impractical, if not impossible. Given the physical separations which exist between the more heavily populated pockets and having regard for the thrust of the proposed legislation, Bill 149, to create local-level decision-making in the areas of municipal assessment and taxation, we submit that it is important to define what a locality is, and it's obviously going to be our submission that a locality, or the municipal level which should have the bulk of the decision-making authority, is the local or area municipality, at least in the district of Muskoka.
Finally, by way of background, we note that based upon the 1996 assessment for the 1997 taxation year, Huntsville has the second largest total assessment base and by far the largest commercial/industrial assessment base of the six area municipalities. For example, the commercial/industrial percentage in the district of Muskoka as a whole is 8.1% and that in the town of Huntsville is 18%. Examples of some important industries in the town of Huntsville are Kimberly-Clark, Algonquin Industries and Tembec. They're large industries. They are poised to expand. They employ over 1,000 people, and they are very sensitive to changes by way of increases in their tax rates.
The town of Huntsville has expended considerable energy trying to encourage these industries to locate and expand. It's in that way that perhaps the vision of the town of Huntsville vis-à-vis its economic and tax policy may diverge to some extent from the majority of municipalities in the district of Muskoka, in that Huntsville is more actively courting and encouraging commercial and industrial use as opposed to simply being reliant upon seasonal-residential, which is the norm throughout much of the rest of the district.
It's as a result of these different visions of its economic future that we believe the current bill will create some difficulty for the town of Huntsville and should be changed. But I would hasten to add that our general observation of Bill 149, as it is really a continuation of the Fair Municipal Finance Act, 1997 (No. 1), being Bill 106, is that we generally support the thrust and intent of both those pieces of legislation.
The town concurs that there's a need for change with regard to property assessment and taxation, as the system currently in place in the province is outdated in many respects. The creation of a single, consistent approach across the province with respect to property assessment is long overdue and is greatly welcomed. The principle of providing local municipal governments with more decision-making powers vis-à-vis assessment and taxation is logical, appropriate, fair and just. Allowing municipal governments, which have the most direct links with taxpayers, to address the concerns and priorities of their constituents through the municipal taxation system, and being able to determine what the appropriate distribution of tax liability will be, is a positive step and one in the right direction.
However, notwithstanding our support in a general sense of this thrust and intent of Bill 149 and Bill 106 of facilitating local decision-making, there are aspects of Bill 149 which the town respectfully suggests should be modified in order to better implement the principle of local decision-making and to improve the legislation. I'd also add that the town is disappointed that the concerns which it raised, largely along these lines, regarding the Fair Municipal Finance Act, 1997 (No. 1) were not addressed in that bill. We have attached for your information a copy of our submission in April regarding the first municipal finance act.
The town's concern fundamentally with both pieces of legislation is with respect to the distinction made between upper-tier municipalities and lower-tier municipalities. In a nutshell, it appears that upper-tier municipalities are being empowered both through delegation of what had been performed by the provincial government and by taking away some hitherto powers of the lower-tier municipality and giving them to the upper tier without a logical or reasonable policy basis for doing so, particularly in a municipality such as the district municipality of Muskoka, which has a number of very diverse and separately operating area municipalities.
Like all lower-tier municipalities in the province, for years the town has set mill rates based upon the forecasted needs and expectations of the town. Obviously those needs and expectations are going to change dramatically as a result of the changes occasioned by the Who Does What series of legislative and policy decisions, and therefore the town is very shortly going to have a very substantial realignment of the nature and type of services it provides.
The town obviously had regard for the requirement of the 15% differential between the residential and commercial/industrial rates of tax. While the difference which must now exist between residential and commercial/industrial is presently statutorily mandated, the proposed legislation, both in Bill 106 and Bill 149, would provide a great degree of flexibility with respect to the actual number of tax rates created and the differences or variations which can exist between them, and that's a very significant change and a very important change, because what we're getting into then is the split between residential and commercial/industrial, and through Bill 149 we're getting into the concept of bands of commercial/industrial assessment where the liability will be changed depending upon what band the property fits into.
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This is, if I may say so, a significant empowerment for municipalities, but unfortunately Bill 149 provides a new section to be added to the Municipal Act, section 368.2, which would, subject to the appropriate regulations being promulgated by the minister, permit upper-tier or single-tier but not lower-tier municipalities to, by bylaw, establish bands of assessment for the purposes of facilitating graduated tax rates for commercial and industrial.
As I've noted to the committee, commercial/industrial is of great importance to the town of Huntsville, and I would submit it is of greater importance to the town of Huntsville than other area municipalities and the district of Muskoka in general, given the current existence of a high percentage of industrial-commercial assessment and the town of Huntsville's vision of encouraging that.
The tax for a particular property would then be determined by applying the tax rate for each band or the proportion of the assessment of the property within the band. The regulation-making authority allowed the minister under this legislation is extraordinarily broad, and it is arguable, although not clear, that the minister may have the authority under the section I've just mentioned to promulgate a regulation which would empower a local municipality to establish the bands as opposed to the upper tier. However, the legislation on its face reserves that authority for an upper-tier or single-tier municipality, and the regulation-making authority, while extraordinarily broad -- and that's perhaps another point for another day -- is not entirely clear.
The concern here is quite similar to those we expressed to the committee last April regarding the Fair Municipal Finance Act, 1997 (No. 1). That regarded the empowerment of upper-tier municipalities to establish tax ratios and phase-ins. Our concern is that lower-tier municipalities, although capable of creating their own tax rates, would have those tax rates effectively determined by the upper-tier municipality by establishing the tax ratios and the bands of assessment. Consequently, it would be the councils of upper-tier municipalities which would, for each lower-tier municipality, determine how the tax liability is to be apportioned among the various classes of property and, importantly for the town of Huntsville, through the bands within the commercial/industrial set.
This, we submit, does not achieve one of the desired principles or goals, as we understand them, of this legislation or Bill 106 in that it lessens the accountability of lower-tier municipal politicians and councils to the taxpayer and delegates that to an upper-tier which is more remote, more diffuse and may, in this case, have a very different vision of where it wants to go from an economic-development and tax perspective. While there would be elected representatives from Huntsville on district council, those members currently make up only four of the 23 members on district council. Thus, the tax liability between classes of property in Huntsville and the resulting tax rates imposed by the lower-tier municipalities would not be created by elected officials from Huntsville, and in fact Huntsville representatives could be unequivocally opposed to, and have voted against, assessment bands or ratios approved by district council but, because of the composition of district council, be defeated. This is particularly disturbing given the proportionately high level of commercial/industrial assessment in the town of Huntsville to which the bands of assessment will apply. So what we may get is the district having a somewhat different vision, perhaps wishing to further encourage seasonal-resort or resort/recreational uses and the town of Huntsville trying to encourage industrial/commercial development. The way the act is currently set up, it's obvious the town of Huntsville will not prevail.
As well, it's important to recognize that the assessment bases of various municipalities within a tiered structure -- that's any regional government structure, not just the district of Muskoka -- can be quite different in terms of the splits between, and amount of assessment base attributable to, the various property classes. That's obviously the situation in the district of Muskoka, where the resort or seasonal-recreational class is much higher in the other municipalities. We would suggest that it would be more appropriate for lower-tier municipalities to determine how tax liability is to be distributed among the property classes within their own jurisdictions.
It's our respectful submission that if one objective of the proposed legislation is to provide local governments with certain decision-making powers which they will need in order to respond to the changes occasioned by the Who Does What series of amendments, then serious consideration should be given to having the lower-tier municipalities be the recipients of those powers, including the ability to determine assessment bands and, we would submit, tax ratios as well, particularly so within the district municipality of Muskoka, having regard to the physical geography described earlier. We believe it is open to the government to differentiate between different regional government systems, and the district of Muskoka is substantially differentiated from other systems of regional government within the province, given its vast geographical area, given the impossibility of urban areas merging or forming together and given the fact that this will not permit much in the way of shared services.
It's our suggestion that legislative amendments be introduced to the proposed new section of the Municipal Act, section 368.2, which would allow lower-tier municipalities, perhaps specifically within the district of Muskoka, to determine their own commercial assessment bands if they so desire. It's our submission that a change of that nature is not at all contrary to the general thrust and intent of not only Bill 106 and Bill 149 but the general thrust and intent of the province towards local empowerment.
If the province does not agree with this request, we ask that provisions be added to that section to permit a lower-tier municipality, at least in the district of Muskoka, to appeal decisions of the upper-tier municipality regarding the determination of tax ratios, phase-ins and commercial assessment bands to an independent third party, such as the Ontario Municipal Board or, at the very least, to the Minister of Revenue.
I understand that in legislation which was introduced in August, the Services Improvement Act, that when dealing with apportionment of moneys needed for health boards in the amendments to the health services act, the ability to appeal decisions to the Minister of Revenue, if the municipalities were not able to agree on something, was available. So we would ask that if the legislation does not specifically empower the town of Huntsville to set the tax ratios, phase-ins and commercial assessment bands, there be some ability to take that decision-making beyond the district, as there is a great deal of concern that the district may not share the vision of the town of Huntsville vis-à-vis encouragement of commercial/industrial uses and there could be decisions which the town of Huntsville is powerless to stop but which could act greatly to its detriment.
At the time Bill 106 was introduced last January, the minister stated that the province would return the delivery of tax assessments to the local level by January of this coming year, thereby providing municipalities with a much greater degree of control over the determination of their assessment. We understand that there have been a number of proposals considered, and we have been provided with a copy of draft legislation known as the Ontario Property Assessment Corporation Act, 1997. We also recognize that no final decision has been made and that legislation has not been introduced in that regard as yet.
The option suggested in the draft legislation is to maintain a centralized body which is similar in many respects to a regional assessment office, although obviously funded by municipalities, and there is some greater control by municipalities. Another option which is permitted by regulation under that draft legislation would be to empower municipalities to perform the assessment function. It's our desire that it would be made clear that it would also include lower-tier municipalities, not simply upper-tier municipalities.
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With respect to timing, both fair municipal finance tax acts require the enactment of extensive regulations to make them operative, and indeed in some cases comprehensible. To date, we are aware of only one regulation that has been released in draft form. Without a complete set of regulations, at least in draft form, it's very difficult for any municipality to plan for the substantive changes these two amendments will effect on municipal finances and process. We therefore suggest that the government consider deferring the implementation date of both the fair municipal finance acts until the 1999 municipal taxation year.
Finally -- and I'll just wrap this up in about 15 seconds -- as Bill 149 is supplemental to the Fair Municipal Finance Act, 1997 (No. 1), we request that the concerns we raised in our April 1997 submission on Bill 106 be considered in the context of Bill 149. I repeat that we remain particularly concerned about the assignment of the determination of tax ratios and phase-ins to the upper-tier municipality as opposed to the local municipality.
We've attached for your information a copy of our April 1997 submission, and it goes over those concerns in somewhat greater detail. I think you understand where we're coming from: that it's important for the town of Huntsville to have the ability to determine tax ratios, tax phase-ins and the establishment of commercial bands at the local level as opposed to having it performed at the district level.
That's my submission. I'm not sure if Mr Small has anything to add; if not, then we're both happy to answer any questions you may have.
The Chair: Thank you very much, Mr Williams. There are approximately three minutes per caucus. I'll begin with the government caucus.
Mr Grimmett: Welcome, Chris and Bob, to the committee hearings, and thank you for the rather ominous weather report. It sounds like there's a lot of snow between here and home tonight.
I of course am quite aware of the wonderful political discussions that take place in Muskoka in the six different municipalities and the challenges of having district government. I was struck by your comment at the beginning of your brief that you congratulate the government on bringing in one assessment system that would be uniform throughout the province. Then you went on in your brief to suggest that you would like to have a less-than-uniform approach within the district of Muskoka.
I want to make it clear that I don't think the committee should think that Huntsville is the only municipality in Muskoka that has an industrial base. There are two other municipalities, Bracebridge and Gravenhurst, that have quite aggressively pursued commercial and industrial investment, perhaps not as successfully as Huntsville. Those three municipalities have a cross-section of commercial/industrial and residential, and the other three municipalities are largely supported by cottage and seasonal-type assessment.
What is your particular concern with respect to the upper tier making decisions on the commercial/industrial? Do you suspect that there will be perhaps a tendency to slough off some of the tax responsibility or the assessment responsibility on to the industrial-commercial sector?
Mr Williams: That's precisely our concern, Mr Grimmett, yes.
Mr Grimmett: Do you have a reason to believe that? Has that been the discussion at the district table?
Mr Williams: That's a concern the town has. As well, we believe that the determination of the tax ratios and the establishment of bases for industrial-commercial assessment are better dealt with at a local level, where perhaps the interests or the situation of the town of Huntsville is somewhat different from elsewhere. We believe, perhaps in a philosophical sense, that's better done at a local level.
While I believe your comment is well put, that we don't want to have an overly diverse system across the province, the basic thrust and intent towards fair market value and so forth is going to be uniform across the province. The basic rules are established. It will be a much more comprehensible system. But some of the fine-tuning to respond to local needs, and particularly the local needs that are going to result from the downloading through Who Does What, is going to have to be done at the local level. It's the local level that has charge of the planning function. That ties in with encouraging economic development. I'm not sure if Mr Small has something he wishes to add here as well.
Mr Robert Small: I'd just like to add one comment. Certainly it's true that Gravenhurst and Bracebridge do go after industry. I've spoken to both the treasurer of Bracebridge and the treasurer of Gravenhurst, and they both have the same concern that I do. They would certainly like to see it amended so that they would have the same power as Huntsville. They are especially concerned about the industrial/commercial tax base and how the ratios are set. They have the concern as I do and would support an amendment.
Mr Grimmett: The three of you, though, the three municipalities together, carry the majority of the voting at the district table.
The Chair: Thank you, Mr Grimmett. We're going to go to Mr Phillips now. If you want to finish that thought during Mr Phillips's time --
Mr Phillips: On delaying it a year, I think realistically that's probably a non-starter. The engine is revved up and this thing is going to leave the station on January 1, 1998. You can lie down in front of it, but I don't think you're going to slow it down.
This thing has been, in our opinion, badly thought out in many respects. There are going to be an enormous number of problems out there, including probably 500,000 appeals on assessment, which probably won't be the least of the problems. But it's going ahead. That decision is made. Don't confuse them with any problems. It's going ahead, so I think we should try and deal with that reality and just say, how do we accommodate?
You made a suggestion on the assessment function. Frankly it's not really before us, as you can appreciate, but I appreciate your advice because some day we will be dealing with the corporate, I guess, but once again, it's being handed over January 1. I come from a business background, and I'd never be opening a brand-new business on January 1 with as little planning as this has got, but I'm not running this. I can comment on it.
Your concern on the potential in a two-tiered system for the upper tier to perhaps deal unfairly with a lower-tier municipality is probably well founded, and it's going to get more complicated, because this bill will, in addition, permit bands by property class so that the upper tier will be setting and saying, "We're going to set three bands by commercial property size or assessment," so that -- I'm sorry, it won't be this bill, it's Bill 160, but it is all this tax bill -- the upper tier will have a lot of tools at its disposal if it wants to direct tax revenue to certain municipalities, so I think you're right to be concerned.
Having said all that, once again the problem is this thing is set to have the upper municipalities deal with it. I think you're the first lower-tier municipality that has appeared before us with concerns, apart maybe from Mayor McCallion.
Mr Pouliot: Welcome gentlemen. I want to wish you well on your return journey home. I too, I can assure you, can directly relate to it. We live in Canada and it's winter.
Timing: This is one train that will leave on time, January 1. The devil might be in the regulations. We don't know. We know that the fiscal year is different. We know that both Bill 106 and the offspring Bill 149 challenge more than they answer, and yet you are generally supportive. It's a good omen. It's very positive. Why, we don't know, because you're asking that the implementation of the bill be delayed until after the taxation year 1999.
They could perhaps delay it, but it has responsibilities attached to it. Bill 149 carries a lot of luggage, a lot of sideshows. It's meshed, blended. It doesn't work in isolation, not in the least, because at the same time you're getting downloading, who pays for what and when and how much. You're getting massive reassessment resulting in over 500,000 appeals, 18 months to be heard, 3.8 million units to be assessed and reassessed across Ontario -- it has never been done before in North America -- fewer school boards. You read the paper. It's not all that pretty, and it's all meshed together. You're supportive.
I live under your jurisdiction. We're a mere two months before you look at the interim tax levy, inclusive of the business occupancy tax of this year. I too would wish to be supportive, but I believe that my taxes might go up, sir. It's an educated guess. If they don't go up at the residential level, they'll go up at the commercial and industrial level, if not all three, because first of all this is not revenue-neutral. If it's a wash, it doesn't mean that your municipality will not be impacted.
My question is, you believe that things need to change, but yet your support is tacit, it's tentative, but before a full commitment, you would like to know a lot more from the regulations. Are you comfortable that if you get some regulations and if there is a time frame made available that you could come back quickly and maybe reconcile what's missing here?
Mr Williams: I would, sir, yes. The act does provide for a lot of implementation through regulation, in fact some policy decisions through regulation, so we would be more comfortable if we had those regulations. It's also an issue for municipal corporations to properly plan for the changes to their finances and revenues which are going to come about through this legislation and the regulation, so it's really twofold. One is to understand the legislation, and we support its general thrust and intent, and secondly, to be able to plan for the changes it is going to put in place, and we don't know what those changes are going to be until the regs are in.
The Chair: Your time is complete. Thank you for an interesting presentation. Thank you for coming all this distance today as well.
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CANADIAN PROPERTY TAX ASSOCIATION
The Chair: Would the delegation from Canadian Property Tax Association, Ontario chapter, please come forward. You'll have 30 minutes to use as you wish. It's your time. If you leave time for questions, I'll divide it evenly among the three parties. Please identify yourselves for the record and then go ahead.
Mr Brad Nixon: My name is Brad Nixon; I'm a lawyer with the firm of Poole Milligan, and Mr Zinner and I represent the Canadian Property Tax Association.
Mr Frank Zinner: My name is Frank Zinner. I was here before you earlier wearing my Hudson's Bay hat. I'm the vice-chairman of the Canadian Property Tax Association, Ontario chapter. Our chairman couldn't make it. He's tied up in Victoria at our annual conference.
Mr Nixon: I'd first like to outline to you who the Canadian Property Tax Association represents, who we are and the nature of the organization. It's a national non-profit organization which was incorporated in 1967, and its membership includes the owners and occupants of commercial, industrial, pipeline and multiresidential properties. In addition, there are members who actively represent property taxpayers before the courts and tribunals, all of whom have over the years had an active interest in property tax reform.
Part of our non-profit corporate mandate is to provide a forum and information exchange for discussion on property tax and municipal assessment issues, to advocate for change and review proposed changes. As you may be aware, we have been actively involved with a number of commissions and committees in the last few years as Ontario has embarked upon major reform in municipal assessment and property tax.
The CPTA has consistently urged reform of what has become an antiquated assessment and property tax regime in the province. The present patchwork quilt, if you will, has proved to be grossly unfair to most, if not all, taxpayers, as we find varying tax burdens between property classes and between municipalities throughout Ontario.
As you can see from our presentation, there are a number of principles to which the CPTA subscribes, which we believe should form the fundamental basis of property tax reform, and you'll find them on pages 4 and 5 of our presentation. I'm not going to lead you through them. I'm sure you have heard many of them in some iteration or another.
The fundamental commitment of the Canadian Property Tax Association is to assessment based upon market value, and we commend the government for moving forward with a review of the valuation system in the province which has formed the basis for property tax for almost the last century. However, it has become outdated, has become divided between municipalities. It was intended to be revised and made coherent and consistent throughout the province in 1970 when the province took unto itself the responsibility for assessment of all property in the province. Unfortunately, those reforms were stalled halfway and the goal of a true market value system with consistent application throughout the province was not achieved.
I'd like to make some specific comments relating to concerns we have, and these are comments that are not coming from Mr Zinner and I as individuals but are comments coming from the entire organization, which as I say, is the only spokesgroup I'm aware of that speaks for property taxpayers in the commercial, industrial, pipeline and multiresidential categories as an entirety.
The first is that you've got to understand that like virtually all jurisdictions in the world where there is a property tax regime, this province has utilized a market value system, and the premise of a market value system is that all properties should be valued at their market value or assessed at their market value, and the burden of taxation paid in respect of each and every property should be the same. That argues for one class of property, ie, all properties should be assessed at market value and taxed at the same rate.
The fundamental deviation from a market value system which you find in the legislation before you is the creation of seven property classes, with the potential for the creation of many more and possibly subclasses, so at the outset there has been a decision that the burden of taxation as between classes will not be the same. In that regard, you will see the proof when the government announces its tax ratios. The tax ratios will identify the differing burdens of taxation which exist for each property class.
We expect that the full burden that exists now will remain, if not entirely, substantially on the commercial, industrial, pipeline and multiresidential classes. As you know, the benchmark is the residential class, and all tax ratios are set to that class. In that regard, the province is undertaking significant reform of the education tax burden, and only one half -- we're not sure of exactly how the half will be calculated -- of the burden will be imposed upon the residential class, whereas the full burden will be imposed upon the commercial/industrial classes,
We're not aware yet -- the government has not announced -- what the actual tax rate for commercial/industrial education tax will be. One of the concerns that we have as we go forward is the inability of our membership to anticipate their tax burden because significant information is not yet available, information as to the tax ratios, information as to the education tax rate which will be imposed on the non-residential property class.
The Canadian Property Tax Association supports the proposals in Bill 149 to establish subclasses of commercial and industrial properties for vacant land, vacant units and excess land. This recognizes the economic reality of property which is not productive and excess to the needs and uses of the taxpayer. On the other hand, we are concerned about the subclass proposals which propose to create subclasses of commercial property, and the subclasses will be distinguished on the basis of assessment. The nature of those distinctions has yet to be defined, but we know that they will relate to properties, not businesses, and let me give you an example of what that means.
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Speaking personally, I believe this proposal came out of the Crombie commission, which recommended a small street retail subclass to be treated favourably, and that has a whole history behind it which I won't go into. However, that proposal is not recognized in Bill 149. There is a proposal for three subclasses based on assessment only, so a shopping centre, which is one property under this bill, may be in the highest-taxed subclass whereas a street retailer who owns his own property and might have 2,000 or 3,000 square feet will be in a single parcel property and in the lowest tax class. The question that's difficult to answer from a tax policy point of view is why the street retailer or the shop with 1,000 square feet has a different taxation burden than a shopping centre retailer located elsewhere in a larger property or a producer in a larger property. It's difficult to understand, and we are concerned about it.
We have concerns about the provisions regarding farm land pending development or farm land awaiting development. As it stands now, the existing legislation prescribes that farm land awaiting development is assessed and taxed according to its current use, and that has been the historical practice in Ontario for 30-odd years, but for one court decision quite recently. The government's response has been to establish new classes of farm land awaiting development which shall be assessed and taxed not as farm land but as industrial, commercial or multiresidential properties, and the trigger point being proposed to move out of the farm land class into those other classes is the approval of a draft plan of subdivision, which often occurs in the GTA 20 or 30 years in advance of actual utilization of the land. We believe this would have the effect, because there is no longer the benefit of the farm land assessment, of effectively disfranchising farmers who have been farming those lands for 20 or 30 years from use of them; in other words, the land owner will have no need to farm the lands.
In the past, the courts and tribunals have recognized that there are two policy prongs behind the existing legislation, and that is to encourage the maintenance of farm lands in productive use as long as possible, regardless of who they are owned by. As lands move through the development process, there is an attempt to increase the level of assessment and the burden of taxation such that the farm lands will no longer be farmed, and there will be a withholding of lands from the development process as long as possible, which will have a negative impact on the municipalities.
Interest on tax refunds: Many municipalities do not pay interest on tax refunds and sometimes hold on to the money for a lengthy period of time; others have municipal bylaws which prescribe the payment of minimal tax refunds. We recommend that the government draft a model bylaw in that regard or give a proposal. Certainly the taxpayer is obliged to pay interest on overdue taxes; certainly the municipality, in paying refunds, should be paying interest.
We acknowledge that the government's intention is to abolish separate assessments for tenants, but we have very strong concerns -- I'm sure you've heard about this -- about the ability of tenants to determine how their assessment was derived, because as you now know, the tenants in a building are required in many cases to pay property taxes, but how those property taxes are determined and apportioned between tenants will become a subject of arbitration and a lengthy court battle perhaps as we move forward, given the absence of a separate assessment which the tenant could rely upon and say, "That's what I pay in taxes." We urge the government to ensure, either in legislation or regulation, that adequate and sufficient information is brought forward so that the tenants can identify how the taxes they are required to pay are derived.
Phase-in bylaws: Again we recommend a model bylaw because of the possibility of what we call asymmetric phase-in bylaws; in other words, the municipality can decide to phase in tax increases for one class and not for another or phase in tax decreases for one class and not for another, and it provides the municipalities an opportunity to discriminate between classes, which we think is inappropriate.
A significant oversight, we believe, is that there is a reassessment occurring again in 2001, and we do not know how that assessment and assessment-related tax increases or tax decreases from the 2001 reassessment will be incorporated into the 1998 phase-in bylaw, if it all.
With respect to the education portion of realty taxes, you have before you a proposal in Bill 160 -- which I recognize is not before this committee -- to re-create a separate assessment for tenants for education tax purposes, and that seems to be in contradistinction to the elimination of the separate assessment for property tax purposes. We're just not sure where the government is going with that. We believe it's important, at the very least, that the government immediately make clear its intention that there will be a uniform rate across the province for all commercial and industrial properties for education tax.
Finally, with respect to the new assessing authority, there has been circulated, as you may know, a draft Ontario Assessment Corporation Act which would create a municipal -- not a crown -- corporation run by the municipalities to the exclusion of taxpayer representation on the corporation's board of directors. I realize it's not before you, but I think it's important to anticipate that we're going into a reassessment in the 1998 year with a new crown corporation which will be established by the municipalities, dominated by the municipalities, which will be the tax recipients, not the taxpayers, and we have strong concerns that there be a fairness and balance between taxpayers and tax receivers.
Those are my comments. Mr Zinner may have something to add.
Mr Zinner: Not at this point. Mr Nixon has covered them all.
The Chair: We have approximately 15 minutes left, and I will start with Mr Phillips in the Liberal caucus.
Mr Phillips: Thank you for a thoughtful presentation. The government made quite a big deal about protecting small business from tax increases in the bill, because right from the start on their property tax reform, they said that they would implement provisions to help small business. In fact, I was just looking over -- many of the Conservative members bragged about that when they had it in the House.
You point out here that it won't be protecting small businesses; it will be protecting owners of small properties, which is quite a different thing. We heard today from one of the major malls that the business occupancy tax is 50% on department stores and 30% on a smaller store, so smaller stores will go up and larger ones will go down. Do you think I have it right, that is, that what is proposed here will simply be a tax benefit to owners of smaller-assessed properties, not the owners of smaller businesses?
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Mr Nixon: That's right. The tax is imposed on property owners; the tax is not imposed on businesses. The proposal is to create three subclasses of commercial property at the municipal discretion, and the trigger points or dividing lines between the subclasses will be based upon assessment. To be strictly accurate, I suppose the distinction will be between properties with smaller assessments and larger assessments, but in reality, that generally translates into more valuable properties generally tending to be larger properties and less valuable properties tending to be smaller properties, so yes.
Mr Zinner: Where the problem is going to emanate is when you're looking at a small retailer on a commercial strip and if you're looking at a same ma-and-pa retailer in a shopping centre, the individual in the shopping centre is going to pay considerably more than the individual tenant on the neighbourhood strip.
Mr Phillips: I appreciate that, but I think this will be a bonanza for the legal community. As I said earlier, First Canadian Place will become Condominium Place. They'll divvy up the whole place and sell it off, just because your taxes will be based on the assessment of the property and so you're far better to divide it up and sell it. That's what I speculate will happen, because lawyers are pretty good at figuring out ways around these things.
Mr Pouliot: What about politicians?
Mr Phillips: Lawyers are even better than politicians.
The education portion -- you are advocating a uniform mill rate on commercial/industrial. We have no idea what they're going to do, because it's all going to be done by regulation. We'll never get a chance to even debate the legislation, Bill 160, and it gives the minister of the day, whomever he or she is, almost unfettered rights of setting the mill rate within municipalities on different classes of properties at different rates. Unfortunately, the way we are being required to pass legislation, we have no idea of how they're going to do it, but they have maximum flexibility.
If they did impose a uniform mill rate province-wide, commercial/industrial assessment, have you any idea of what that would mean in terms of major swings by municipalities?
Mr Nixon: Mr Phillips, I can only speculate. It will obviously vary according to the existing tax burdens in various municipalities. As you know, in Metropolitan Toronto, the full education tax burden is assumed within Metro Toronto, whereas in, for instance, northern Ontario and much of rural Ontario, a lot of the education tax burden is provincially assumed, so I think there would be a shift into rural and northern Ontario, for instance.
Counterbalanced against that, you're dealing with tax shifts in a temporal sense. We believe that the principle of uniformity is much more important and that there should be tax equity, tax neutrality and that decisions as to where you locate your property and undertake your business should not be guided by local tax benefits or local tax preferences which would be otherwise encouraged by regional tax rates.
Mr Pouliot: It's a renewed pleasure. We miss you, so welcome back to Queen's Park. We haven't missed you too much, for you were here yesterday with the gentlemen adventurers, May 2, 1670, but you have kept well through Hudson's Bay.
I have perhaps some questions but certainly some reservations with respect to your recommendation. Starting with number 9, "Any new assessing authority should be created in consultation with, and operated by, representatives of all the stakeholders" -- we're talking about an assessment authority -- "including taxpayers," and then the rationale for the previous two lines, and not just a captive, imputing of the tax collector. I'm wrong so often, but be it in a worst-case scenario, I can imagine a tug of war. I don't wish the assessment authority to be quasi-judicial, but I certainly would wish that they be at arm's length with no ability to jeopardize in the least their integrity, and just as importantly, their ability to operate freely. I think we all wish that. So my nuance, if you wish, is it's more than a technical call, a feel, a flair to try it. Maybe it can be accommodated, but we would have to condition to say, "Hey, this is my territory and this is mine," not to become lobbyists extraordinaires, because stakeholders tend to preach for their parish, and why not, but to lure them into an element where you have a taxation or an assessment authority is very tricky. Maybe that's why you put it as number 9, because I would put that one on the back burner for some time.
Mr Nixon: Let me respond to that if I may. One of the things I have certainly grown to appreciate, and I think all of us at the Canadian Property Tax Association have, is that the decisions that you legislators make, although they seem principled, and they are principled, in their implementation, in their details, have huge impacts. What we are doing here is moving from an assessment authority which was operated and run by the province for the benefit of all stakeholders, municipalities and taxpayers, to a system where you have the municipal corporation responsible for the assessing authority, and when the taxpayer goes to appeal their assessment, the responding party will be the municipality and the municipally controlled corporation.
Mr Pouliot: I have no quarrel with long-awaited and certainly overdue reform of municipal assessment and taxation. I have no time for the nuance and the tricks, the dance and the games of what is current, what is market or what is actual. When all is said and done, the local broker told me it was pretty well the same price, so unless it's motivated by ulterior motives, I see no difference. Let's go on with a modern assessment. I support you.
I sense when I listen to your presentation that you have a fear of emerging subclasses, and please correct me, that if at any time power is given to an assessing authority, ie, the municipalities, regional, upper tier, lower tier, whatever, the minute it leaves Queen's Park, if they have the ability to petition the government to establish some subclasses with the intent of recouping lost revenues and the choice is given between the residential and the people you represent, both commercial and industrial, that in the real world of levy you lose.
Mr Nixon: That's correct.
Mr Pouliot: If you dare, you use that, and you advocate -- you did the same thing yesterday, and that's okay -- a one-rate system with no creation of subclasses?
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Mr Zinner: If I can comment on the subclasses for a moment, if we continue to create more subclasses, we maintain the inequities that exist in the system today. If we're going to maintain the inequities that we have today, why bother going through a market value reassessment? We're going to maintain the same inequities, and it's a total waste of money at that point, so we have to be very careful when we're creating subclasses.
Mr Nixon: Let me give you, Mr Pouliot, a specific example of the problem that will arise. The legislation moves to a system of seven or more property classes. The legislation prescribes the establishment of tax ratios within the bands of fairness prescribed by the province. However, and this is something that we do mention in our brief, the province also allows the local municipality to keep the status quo by establishing a tax ratio outside the provincial band of fairness for as long as it wants. There's the municipal option to do that, which may have a very significant impact on those taxpayers who anticipated moving to the band of fairness. We recommend that we force, in the long term, municipalities to move to the range of fairness.
Mr Wettlaufer: I have a question relating to your submission on page 8, regarding the two- and three-tier tax structure. I see in my riding, and certainly in many ridings throughout this province, that there is a lack of similarity between "small businesses." You say that one small business is located on a small property and another is located on a large property. The large properties that I am referring to would be the plazas, the malls, the Cadillac Fairviews, of which Zellers and Hudson's Bay would be anchors or subanchors. The values of those properties are very high. I don't see too many genuinely small businesses locating in those malls. I see chain stores locating in those malls in the same product perhaps as a genuinely small business which is located in a downtown area in a smaller building. Perhaps the premises are similar. Would you not agree that some of the genuinely small businesses are entitled to a lower tax rate, ie, because the value of the property is lower, than perhaps a chain store?
Mr Zinner: If we look at the value of property as a small property -- we can take any strip; we can take let's say Bloor Street or Yonge Street -- the values of those particular individual stores are not low values. They are commercial downtown values.
If we want to make a comparison to shopping centres, and I agree with you that with the regional shopping centres there are very few small operators, but if we get into the smaller centres, if we get into the Bellevilles, the Chathams, Barries etc, and we get into their community centres, a lot of the commercial retail units are small tenants. If we're just referring to the regionals, the Yorkdales, the Sherway Gardens etc, yes I would, but in the smaller areas, no. If we go to Sudbury or North Bay, into the smaller shopping centres, you will find small tenants. You'll also find the chain stores, of course.
Mr Grimmett: I have another question relating to farm lands pending development. I don't know if you were here when the Ontario Home Builders' Association made its presentation earlier this afternoon. They have proposed that assessment be limited to 20% of final value pending the registration of the plan. Given that it can take many, many years for a plan to come to fruition, to be registered, given that much of this land, while it is considered "farm land," is not actually used -- much of that land is lying fallow or in some cases part of the land is farmed, but of course all of it is assessed at the farm rate -- given that scenario, how would you account for the municipalities needing a greater amount of revenue on that land, being as nothing is happening with it?
Mr Nixon: The existing assessment practice, if I can clarify it, is that only that land which is actually farmed is assessed as farm land. If it is not farmed, then it is not assessed and valued as farm land, it is assessed and valued according to its zoning, and the municipality does get its tax revenues. That is the practice of the Ministry of Finance.
Mr Wettlaufer: Agreed, but it may all be zoned as agricultural use, it's just not being farmed.
Mr Nixon: If it's not being farmed and not put to a productive use, I think that's a matter for the policy of the Ministry of Finance. But I'm not aware that this situation arises that frequently. The concerns of the home builders and others have to do with lands which are being farmed and used for farm purposes and would not be assessed as farm lands during that interregnum when you've got draft plan approval but there's no market and no immediate plans to register a plan of subdivision or develop the lands.
The Chair: Thank you very much. Actually, we're a little bit over time. We're very interested in what you're saying, but we have to keep moving. Thank you very much for coming today. We appreciate your interesting presentation.
LONDON DEVELOPMENT INSTITUTE
The Chair: Could the representatives for the London Development Institute please come forward. You have half an hour to use as you wish. If you wish to leave time for questions, I'll divide it evenly among the three parties, but the time is yours. If you'd like to identify yourselves for the record, you can begin when you're ready.
Mr Ben Lansink: My name is Ben Lansink. I'm from London, Ontario. The gentleman on my left is Bernie Zaifman of Z Group. He is also from London. We are both members of the London Development Institute. We would like to address you pertaining to the issue of farm lands awaiting development. I'm going to speak first, and then Mr Zaifman is going to speak as well.
Sometimes it's necessary to take a look at where you've been if you know where you're going to go, so I'd like to talk a little bit about history. Prior to Bill 106, which was an act that amended the Assessment Act, it was not possible for a property to be assessed based on its fair market value if the regional assessment commissioner decided the assessment value should be other than market value. An example of this unfairness can be found in a precedent Ontario Municipal Board case called Olympic versus Regional Assessment Commissioner No. 3, OMB file A9400179.
In that particular case, the property owner argued that the fair market value of his property was $670,000. He supported his argument by an appraisal done by a professional appraiser in AACI. The Ontario Municipal Board totally agreed that the value in fact was $670,000. However, the OMB could not alter the regional assessment commissioner's assessed value of $1,245,000, which is a little more than 100% more, because the owner could not give evidence that the assessed value of $1,245,000 was not "fair and equitable" in relation to properties similarly assessed by the regional assessment commissioner.
Prior to Bill 106, section 60 of the Assessment Act allowed a regional assessment commissioner to value similar real property in a certain vicinity at virtually any value, provided the value was consistent and resulted in "fair and equitable" assessment for that particular type of property. Notwithstanding that there was no question the market value was $670,000 and the OMB accepted that the market value was $670,000, the OMB could not alter the assessed value as returned of $1,245,000, because of section 60. Section 60 of the Assessment Act prevented the OMB from altering the assessment notwithstanding section 18 of the Assessment Act, which stated that real property must be assessed at its fair market value.
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So to us, Bill 106 was a breath of fresh air. Common sense and fairness had finally returned to the Assessment Act. Bill 106 deleted section 60 and the incredible unfairness of the "fair and equitable" section in its entirety. Finally true fairness could now be accomplished, with the result that each of Ontario's 3.5 million real properties would be assessed for realty tax based on an individual property's current value and not on an artificial regional assessor's "fair and equitable," convoluted, unfair value.
Bill 106, which amended the Assessment Act, received royal assent only in May 1997. It adopted farm or existing-use value. We understand Bill 149 -- and unfortunately we're from London, we're not from Toronto, and we've heard a lot of conflicting reports about Bill 149. But to the best of our knowledge, we understand that it's going to allow municipalities to tax land on the basis of draft-plan value versus farm or existing-use value. We understand the effect of Bill 149 to be that if land has draft-plan-approval status, then the tax can be 25% to 50% of the draft plan's current value, and the land use could be anything; it could be residential, industrial, commercial and so on. If the land has registered status, then it would increase from 25% to 75%; and if a building permit has been issued, it would increase from 25% to 100%. The 50%, 75% and 100% is at the discretion of the municipality.
We understand that a 100-acre industrial property now farmed but with draft-plan approval in place is currently taxed at about $40 per acre. With the adoption of Bill 149, the taxes would rise 27.5 times to $1,100 per acre if the municipality uses 25% as opposed to the 50%, 75% or 100% which it would be allowed to use. There is no common sense in this regressive legislation. A land owner will not subdivide until the last possible moment, and therefore no land will be available for immediate development. That's going to send a strong signal to industry that Ontario is certainly not open for business.
I'd like to give you just a little case study of a parcel of land that I own with my family, Marigold Developments (London) Ltd. It's a private company that my wife and I own. We have a small, nine-acre parcel that we received draft-plan approval for in the spring of this year. The draft-plan approval was for 69 lots. The vacant and unimproved land is agriculture in use, and the land is situated in the hamlet of Dorchester. The local government is the township of North Dorchester.
Bill 106 protected Marigold's current value as farm lands. Marigold's sole asset is the 69-lot subdivision, which we would very much like to develop. However, the hamlet of Dorchester does not yet have sanitary collection and treatment infrastructure in place. This means development cannot occur for some time. It might be next year we'll be able to develop this land, and it might be 20 years from now when we're able to develop this land.
The way we read Bill 149, it means that the realty taxes on what is pasture land may increase 27.5 times, from $2,235 per year to a whopping $61,485 per year. The Lansink family will not be able to continue to own Marigold and this piece of land, which we struggled to purchase in 1990. We fought very hard to obtain land use and draft-plan status, which was an arduous, expensive, seven-year task. It took us seven years to get to this point.
Our MPP -- and a good MPP for us -- Dianne Cunningham, recently wrote to all small businesses, including Marigold, suggesting that her government's top priority has been job creation. Bill 149 will kill thousands of jobs. If we assume the average price for the 69 homes that could be built on Marigold's land to be $175,000, then Ontario just lost a $12,075,000 investment and all the associated jobs in aggregates, manufacturing, trucking, forest, retail, construction and, of course, government.
The government's Small Business -- Big Results brochure that Dianne just mailed out says jobs are up and housing starts are up. This will stop with Bill 149. Housing starts may continue to go up in the short term, because we have land that's draft plan approved and serviced and so on, but they will drop dramatically in the long term if small business cannot afford to develop land.
The government is on record as stating, "What government can do is remove barriers that get in the way of job creation." Bill 149 installs a major anti-job-creation barrier.
As an active participant in the land development business in London, Ontario, we are very concerned about Bill 149. We ask that you not support this punitive bill. We are already overtaxed.
I thank you very much for listening to my concerns and again would like to, for the members who just came in, introduce you to Bernie Zaifman, who is also representing LDI.
Mr Bernie Zaifman: I don't have a written proposal to hand out to you, because I just got involved in this at the last minute. Just to give you an idea of where I'm coming from, I've got some grave concerns regarding this proposal for the subclasses for farm land awaiting development. I'm a developer, home builder and landlord in London, Ontario. We have various holdings of land.
In 1973, we acquired a chunk of land that now entails almost 900 acres. We proceeded through the development phases of getting the approvals put into place. Part of the development of those lands entailed about a $15-million infrastructure. We had to build a servicing tunnel to service all the lands. It was a one-shot deal, all upfront costs. To finance that deal, we were given indications from the lenders that the only way they would finance it was to have certainty of development of the lands. So we went out and acquired approvals for all the lands. We have a draft-plan approval on 630 acres. That 630 acres of land will probably last us about 20 years in London, Ontario. We've gone ahead and put the infrastructure in and the financing is in place. But, as I said, it will probably take us 20 years to use up all the land. So we now have a draft-plan approval on 630 acres. We have used 94 acres; that is, registered as a subdivision and built or partially built on right now.
The proposal to come up with these subclasses to tax these vacant farm lands with draft approval, which are farmed, would be a heavy burden upon these kinds of lands. We anticipate that we will probably be there for 20 years by the time we develop the last phases of the development. So this is of great concern to us and to other people in my industry.
My next point -- and don't take this in a negative way -- is that many times people outside of Metro feel that a lot of legislation is based out of Metro. We seemed to get that feeling when it came to the rent review legislation, and in some respects I get that feeling in this piece of legislation, that this has been driven by concerns out of the Metro Toronto area, not necessarily out of concerns from the municipalities surrounding Toronto or outside of Metro. I think there has to be more concern paid to the citizens outside the Metro area. We have a voice, and I think it needs to be heard. I think our municipal politicians have not been demanding and yelling and screaming that there is a substantial inequity in these provisions.
My next point is about draft approvals in general. A draft approval does not give a developer certainty that he can develop his lands. A draft approval is a document that lays out a number of conditions for development of lands. Those lands may never get developed. There are conditions that may or may not ever be met. There's no commitment on the side of the municipality to give the developer or provide the developer with any services. So the draft approval is part of the approval process, it's a very important part of the process, but does not give certainty to development. I think there may have been the understanding by some that it does, but it does not.
In London, Ontario, registered plans of subdivision are problematic also, because we have a servicing problem in our municipality. There is a lack of capacity in a number of our sewage treatment plants. We can get a registered plan of subdivision and not have the ability to hook our subdivision up. There is a lack of capacity, and the city of London is approving plans of subdivision with special clauses in them that restrict development. So you may have a registered plan of subdivision, but you may in fact not be able to develop the lands.
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My next point refers to affordable housing. I know the provincial government has made it a priority or mandated it that everything be done to try to provide affordable housing. In my mind, these provisions would only increase the cost of a serviced lot, which would throw up the cost and increase the cost of affordable housing and make the housing market available to fewer and fewer people.
There are a couple of other things in the planning process that I think may end up being the result of this process. I think developers may start looking at planning by property tax, where they'll look at their approvals and decide, based on the determination of property tax payments, whether they'll proceed with a certain level of planning. I think this could cause a shrinkage of approved lands and could really throw a bottleneck in the system when demand starts to increase.
Large corporate concentration on holdings: The ability of small to medium-sized developers to finance the tax costs is doubtful. There are a lot of developers who are very small and would not be able to afford to carry the tax costs. They are non-deductible. They'd be capitalized on the cost of your land. The result could lead to land development becoming dominated by large corporations, public companies with the resources needed to finance these costs and the ability to increase generally across the market the price of land to the end users.
Reverse approvals: The prospect of losing someone's land could lead them to try to reverse the approvals they have in place. If the tax payments may lead to the loss of their land, I wouldn't doubt that you would see some developers try to reverse some of their approvals or let the draft-plan approvals or other approvals they have lapse. It may sound like a ridiculous thing, but if you're going to lose your land and that makes the difference, I think it could happen. That wraps up my comments.
The Chair: Thank you very much. There are approximately 14 minutes left. I will go to the NDP caucus.
Mr Pouliot: This is getting to be the proverbial last straw, on and on, and maybe one third of this week's presentations deal with the very same issue. People have voiced their concerns in terms of, "Where is Mike the Taxfighter? Job creation? Job protection?" In some cases, a chance to dream is being shattered. You've worked seven years.
The province doesn't collect stumpage fees until the tree is harvested. If you play the Exchange, equities, you will not be assessed a capital gains tax until you sell. The market fluctuates. I'm very much aware of that through my colleague. That's why they opened the Exchange. You're asking for an assessment on the basis of what you are, am I right?
Mr Lansink: That's correct.
Mr Pouliot: No more, no less than that.
Mr Lansink: We would like to pay our fair share of taxes. We have no problem paying our fair share of taxes. If a lot is ready to go, then it should be assessed on the basis that it is ready to go. But I have a piece of land in Dorchester, and Mr Zaifman is in the same position. We don't know if we can develop that land or not. We don't know if we'll be able to flush. Pardon me for putting it to the point, but that's the point: If we can't flush, that land is not worth anything more than agricultural land; that's all we can use it for.
Mr Pouliot: Governments should be consistent and reasonable and govern for all. There's a lot of uncertainty. You don't know. Services might never reach you, the neighbour could have more trees, the population could change, all kinds of things. You could hit a severe, long-term depression or an acute recession. Those are all factors. Interest rates could go up. They're all factors you don't know.
Hypothetically, if you are assumed to be industrial when you are not, because someone has decreed it, should you never develop, do you expect to be reimbursed for your taxes? Of course not. You'll never get a penny back from the state. You can't fight those people.
It's becoming so blatant. What they're asking is: "Why don't you assess me on the basis of what I am, like you do A, B, C, D, E, F?" I'm the last person at this table, philosophically, who should say, "I'm going to help developers." Maybe I strike from a slightly different venue, not only for the weak but in view of if it balances, if there's an equilibrium here. There isn't. This is the world upside down. I should be the government, advocating what they're saying.
I agree with you. Enjoy the weekend. We have until the 28th to prepare amendments. If there is one that I could come forward with and have them listen to -- and I can only say this once. It's what you said in your presentation.
Mr Wettlaufer: Mr Lansink and Mr Zaifman, thank you very much for coming today. Mr Lansink, I am familiar with the situation in Dorchester. I have a very good friend in Dorchester. You probably know him. Rob Martin.
Mr Lansink: Yes, I've heard of him.
Mr Wettlaufer: The economy in Dorchester isn't exactly what you would call booming. It's not like Toronto. There is not an overwhelming demand for housing lots.
Mr Lansink: There's a slow, steady demand. We were prepared to take that risk in 1990 when we purchased this land.
Mr Wettlaufer: If I read into this properly, I think you have a suspicion as to whether or not the municipality will exercise proper discretion in its assessment once the land has draft-plan approval and once the land has registered status. Is that correct?
Mr Lansink: It's my belief that if you give the municipality the authority, they're going to exercise that authority. I have no trust of the municipality whatsoever. If you give them the right to tax, they're going to tax. That's my position, yes.
Mr Wettlaufer: Would you feel more comfortable if the legislation said, "Assess 25% of the current value when the land has draft-plan approval and a further 25% when the land has registered status"?
Mr Lansink: I would feel more comfortable if I were taxed on the basis of the use of the land, which is what Bill 106 does, and I were taxed on the basis of agricultural land. If in fact I can go ahead and get a building permit, we now have reality. If we're now dealing with something real, then I am quite prepared to pay taxes based on the value at that time. But, as Mr Zaifman and I both said, in our neck of the woods at any rate, we have a lot of land, and we don't know if we can ever build or not.
The municipality of Dorchester has no money to build a treatment plant. They have completed an environmental assessment. They have everything in place to build a treatment plant, but it must be paid for by the development community. They have no money. It's the same in the city of London, they have no money, which means that Mr Zaifman has a lot of land, which on the surface would appear to be very valuable, but it's only worth $5,000 an acre because all it's producing is corn. That's what it's worth, and he should pay taxes on that basis, in my opinion. What we're talking about is fairness, strictly fairness. We don't see any fairness in Bill 149, never mind the jobs and all the other damage it's going to do. It's just not fair.
Mr Wettlaufer: Presently the farm land pending development is assessed at 25% of value. Would you not say that once the land has draft-plan approval 25% of current value would be acceptable?
Mr Lansink: If the status quo didn't change, yes. If my land is worth $25,000 an acre, that's the current value as defined in Bill 106, and I'm taxed accordingly, sure, I'm willing to accept that. But what I can't accept is that my taxes would go from $2,000 to $60,000 a year. My family is going to lose it.
Mr Grimmett: We've heard from a lot of groups that have had similar concerns, and a lot of them are in the development field. I wanted to let you know that when the ministry was drafting the bill and trying to deal with the issue of fairness on the staging of how values go up through the development process, the ministry looked at other jurisdictions in Canada. I don't know if you're aware of this, but I just wanted to let you know that there is a real variety across Canada.
In British Columbia, upon the registration of the plan of subdivision, full market value assessment kicks in.
In Alberta, the assessment is based on zoning it full market value as soon as servicing of land takes place. They apply it to a three-acre portion of the land and leave the balance of the land at farm rates. Then when the subdivision plan is registered, all of the land is assessed at full market value.
In Manitoba, they use the test that once servicing of any kind commences, the land is reassessed to reflect the value added. So they go through a stage process as well.
In the most aggressive jurisdiction, in Quebec, as soon as the farm land is rezoned, its assessed value is increased to reflect the market value, and there is no provision for any property tax relief at all.
In this legislation, we've tried to provide a balanced approach, given what they do in other jurisdictions.
Mr Lansink: I have just a quick response to that. What comes to my mind right away is, how many houses are built per capita in British Columbia compared to Ontario? Ontario is booming right now because we have reasonable assessment and taxation rules in place. In Quebec, I'm not sure, I'm not an economist, but I don't think I'd be far off in saying that the housing industry in Quebec is suffering right now very simply because of that type of legislation.
Mr Phillips: I appreciate your presentation. Your industry has been very articulate. We've heard from the Ontario Home Builders' Association, the Greater Toronto Home Builders' Association and the Urban Development Institute, plus several municipal politicians, who have expressed similar concerns.
I think you've got your finger on a mistake in the bill. They've made a mistake in the bill. That happens, in my opinion, when you've got an organization, the Ontario government, taking on so many things all at once. The organization just can't handle this degree of change. I know you know from your own experience that if any organization tries to do too many major things at once, it has a potential to screw them up. I just don't think any organization can do the downloading on municipalities, closing of hospitals, taking on the education system and this. This is the most fundamental major change in property tax in the history of the province, but it's on a fast track.
You've got your finger on one problem. There are a lot of other problems in it, actually, that will come to light probably in about April. But it seems to me the government has to fix this one. You've got all of the people who are involved in attempting to keep housing and industrial-commercial development at a reasonable cost saying that this is going to drive it out of sight, and you've got the majority of municipalities saying, "We don't want it, because even though it may theoretically give us some short-term revenue, we think it's going to do more long-term harm to our revenue; in other words, companies won't locate in our jurisdictions because they won't be able to afford to."
I hope the government is listening to you, because, as I say, we need an amendment from the government, because they're going to have to develop the amendment, by next Tuesday at 5 o'clock. If it isn't in by next Tuesday at 5 o'clock, the bill goes as it is. So I hope they're listening, and I hope we see an amendment that fixes it by next Tuesday. Otherwise, we've just seen dozens of examples where the cost of land is going to be driven totally out of sight. As my colleague said, that's in good times. In an economic downturn, where developers have registered the property and got building permits but simply say, "I'm not going to proceed right now, because there isn't a market; we'll have to wait," there are still going to be property taxes going out of sight on them.
The Chair: Can you wrap up, please, Mr Phillips?
Mr Phillips: I just say that you've added your strong voice to a number of other strong voices. I hope the government has heard.
The Chair: Thank you very much for travelling here today and for your interesting presentation.
Mr Lansink: We hope common sense will prevail.
The Chair: This committee is recessed until 3:30.
The committee recessed from 1505 to 1516.
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
The Chair: We'll go ahead. We have people seated at the table. Please identify yourselves for the record, and then you'll have 30 minutes to use as you deem appropriate. If you leave time for questions, I'll divide it equally among the three parties.
Ms Cathie Best: My name is Cathie Best, and I'm the president of the Association of Municipal Clerks and Treasurers, the AMCTO. With me are Ken Cousineau, the executive director of the association; Steve Robinson, also a member and the treasurer of the town of Cobourg; and Bob Heil, the corporate manager for Haldimand, as well as a member of the AMCTO.
As you may be aware, the AMCTO is the largest voluntary professional association for municipal government managers in Canada. Clerks, treasurers and CAOs are self-regulated professionals for whom the AMCTO is the certification body in Ontario. The association has been in existence since 1937, and today our members are represented in approximately 93% of the municipalities in Ontario.
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 both Bill 106 and Bill 149, not to mention other legislation and provincial initiatives relating to downloading and municipal restructuring.
Therefore, as indicated to you in our Bill 106 presentation and submission, we believe we have a duty to flag concerns and issues that could be problematic if Bill 149 is passed in its current form and applied across Ontario. We'd like to provide some foresight into issues likely to arise through this aspect of the restructuring of municipal responsibilities.
Before detailing our views, I'd like to express our appreciation for the opportunity to appear before the committee and to put these views on Bill 149 before you and on public record.
To begin, I must state that the AMCTO, after reviewing Bill 149 and having previously reviewed Bill 106, recognizes that the provincial government is trying to be sensitive to a number of stakeholders and their needs and to provide a system that is fair in the greatest number of situations. In addition, the AMCTO acknowledges the government's intention that the bills will stabilize and purify the assessment system when fully implemented.
However, at the same time, the tax system will be immensely complicated by the institution of some 84 classes and subclasses of property and up to 156 tax rates by the addition of bands and the possibility for rebates and phase-ins. Appeals will result from assessed property values as well as from disputes concerning the class or subclass in which a property has been placed. The combination of these factors will undoubtedly increase the complexity of the property tax system rather than streamline it.
To date, the ministry has been unwavering in its opposition to proposals from the AMCTO and others concerning any postponement in the implementation of the fair value assessment system and the related approach to taxation. In the AMCTO's view, such a postponement would go a long way to ensuring the stability of the system on which municipalities depend for billions of dollars in revenue. Implementation on January 1, 1998, is a high-risk situation for the stability and financial health of the municipal sector. There are some municipalities in Ontario that simply will not be able to cope with this situation.
Once again, we suggest that there has to be more information sharing, particularly given the timetable for review and implementation of Bills 106 and 149. To perform functions effectively, clerks, treasurers and CAOs need all the information they can get as soon as possible.
To summarize this particular point, we who are responsible for the implementation do not think that there is either enough time or information to expect or even hope for smooth implementation as planned.
Our detailed concerns and recommendations regarding Bill 106 can be found in our written submission provided separately to the clerk. Our presentation today will focus on our priority issues specifically relating to amendments that are presented in Bill 149.
For today's purposes, there are three key issues we will raise. They are:
(1) The scope of administrative discretion given to the minister, and therefore the potential for instability and uncertainty.
(2) Vacant commercial and industrial land compensation.
(3) Interim billing.
On the first point, the scope of administrative discretion given to the minister, our first concern, and an overarching one, relates to ministerial approval. The AMCTO finds overwhelming the amount of regulations to be set by the minister and the extent of the minister's involvement in a process that is supposed to be municipally driven. For example, subsection 8(3), which relates to the minister prescribing subclasses of classes of real property, stipulates that nothing in subsection (1) or (2) restricts the discretion of the minister to define what is included in a subclass.
This is but one example of ministerial regulatory powers within the Assessment Act amendment section of Bill 149. There are many others. The government maintains that the new system will provide municipal flexibility and the autonomy necessary to respond to service delivery transfers and funding changes.
Notwithstanding, there are too many parts of the legislation that provide the minister with regulatory powers, when exclusive municipal authority would be more appropriate. Either municipalities are responsible or they aren't. You can't have it both ways. The bill as written obscures responsibility -- and thus accountability -- between the minister and the municipalities. If you want municipalities to be responsible, then, to paraphrase Winston Churchill, give us the tools and we will do the job.
Another example relates to subsection 32(2) of Bill 149, which adds a number of subsections to section 363 of the Municipal Act Specifically, subsection(16) provides that the minister may make regulations prescribing transition ratios for a restructured municipality. This is more appropriately the purview of the municipality and an area where the minister should only be involved under unusual circumstances. For this reason and in this regard, the AMCTO recommends that the minister's authority be limited to situations where the municipality requests the minister's intervention or where the municipality fails to establish the ratios within 60 days after the return of the final assessment roll.
Another example of unnecessary regulatory authority is in section 35 of Bill 149, which enacts sections 368.2 of the Municipal Act, subsections (3), (4) and (5). The provision provides the minister with the authority to establish graduated tax rates for each of the bands established for commercial properties. The overall effect is that although a council may establish the bands, the minister has the authority to establish the tax rates. AMCTO believes that the establishment of tax rates should be within the authority of the local council. The AMCTO is concerned that matters vital to municipal operation are dependent on ministerial approval or direction.
Our second issue deals with compensation for vacant commercial or industrial land. It is the AMCTO's understanding that the proposed tax rate reductions are intended to compensate for the fact that under the current system, vacant commercial and industrial properties are taxed at the residential mill rate and are not subject to business occupancy tax, or business occupancy tax, as it's being referred to. By having a fixed rate reduction, the province has presumed that the lost revenue from the BOT will be recovered only from the commercial and industrial classes. If a municipality chooses to recover this lost revenue across all classes -- and by the very nature of the new transition ratios, the BOT is shared across all classes -- or a select group of classes, then the vacant commercial and industrial properties would be receiving an extra tax concession. We're pretty sure that's not what the province or the minister had in mind, and obviously it will hit municipal revenues hard.
The AMCTO suggests that if the province wishes to provide some form of relief, it should offer a range for the tax reductions, as it has done with the other reduction categories. This would allow municipalities the flexibility to implement a rate reduction which more accurately reflects the classes' proportionate share of the recovered BOT revenue.
Interim billing is the third and final issue we wish to raise today. Interim billing continues to be a significant concern for municipalities. The effect of the current provisions in Bill 149 pertaining to interim billing are to limit municipalities to billing 50%, or a prescribed percentage, of the taxes levied in 1997 on a property-by-property basis. Let me assure you that this would be virtually impossible for municipalities to implement, because municipal taxes are established on a class basis, not on a property-by-property basis.
To alleviate this problem, AMCTO recommends that Bill 149 be amended to permit municipalities the option of interim billing either on the basis of 50% of the total property tax revenues levied in 1997 for all purposes, or on the basis of 50% of the 1997 mill rate. If 50% of the 1997 mill rate is used, then the expected November 1997 tax tape must be used for the purposes of interim billing. This would permit municipalities to use either the new assessment system in the case of the former approach, or the 1997 assessment values for the latter option. The choice would be at the discretion of the municipality.
This approach would go a long way to eliminating concerns related to interim billing and cash flow, thereby protecting the financial integrity of municipal governments in Ontario.
In addition, section 38(l) reads as follows:
"The rate on a property class must be set so that the total amount raised, when the tax rate is levied on the applicable assessment rateable for local municipality purposes, does not exceed 50% of the total amount raised for all purposes in the previous year by the levying of tax rates on all the properties that, in the current year, are in the property class."
The AMCTO suggests that the word "total" be defined. We cannot possibly know what 50% of the previous year's amount will be until all supplementaries and appeals are processed. Some appeals may not be final for several years. In addition, we're not sure whether supplementary levies are to be annualized for inclusion in the total.
What we have addressed today, in the interests of time, are only selected concerns and recommendations regarding the proposed legislation. We have prepared a list of issues of detail already raised with ministry officials, which is supplied to you today in our written submission.
The AMCTO understands and accepts that municipalities are not exempt from the paradigm shift that all governments, the private and public sectors are confronting. The AMCTO is looking forward to continuing to be actively involved in the reform process and offers to bring to the table foresight.
The AMCTO appreciates the opportunity to go on public record and comment on Bill 149. As indicated earlier, the AMCTO is generally supportive of the changes proposed in Bill 149. Our comments are geared to improving and strengthening the government's goals and objectives. An Assessment Act and a Municipal Act that work are good for us all.
We look forward to appearing before this committee again as the process continues to unfold. If you wish to hear our views on any aspect of the reform process, we hope you'll contact us. We are the experts in this field and we are the ones who would like to be able to answer the questions. We thank you for your attention, and we would be pleased to entertain any questions you might have at this time.
The Chair: Thank you very much. We have a little over five minutes per caucus, and we'll begin with the government caucus.
Mr Grimmett: Thank you for your presentation. I want to congratulate you for being very clear in the advice you're giving. The second and third items are similar in nature to those brought forward by a delegation from the treasury office of the city of Toronto, and we certainly will be looking at those.
With respect to the second item, the vacant industrial or commercial land compensation, the reductions in the legislation are meant to replicate the situation as it was for those properties that were not affected by the business occupancy tax. That is the theory involved in the legislation, but we certainly respect your expertise and we're going to take a look at that.
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I should let you know that with respect to the first item, the question of ministerial discretion or fiat, we have had a large number of groups come in and say that the municipalities are being given too much discretion and that they would like the minister to simply impose the rates. I think what we're trying for in the legislation is a balance, where we are giving the municipalities some indication of how we'd like to deal with the possibility of shifts between classes or between groups within classes, but we're also giving the municipalities a fair bit of leverage in terms of designing the structure. There is a balance here that we're trying for, but we appreciate your comments, and we'll be taking a close look at them.
Mr Phillips: I'm pleased you're here. We do all the talking around here, and you have to actually make it work. We value your advice, because you may be the only people who have worked through what this is going to mean come April. I'm anticipating that in April, Ontario will suddenly wake up and say, "What in the world happened here?" Small business is going to be hammered. The municipalities will be trying these tiered commercial taxes that are supposed to help small business, but they don't help small business. There are going to be half a million appeals around the province, and there'll be a lot of people who'll wish they'd appealed but didn't realize they could. In my opinion, this is going to be chaotic, and I think only you people worked it through and said: "What do we have to do here? When will the bills go out? What swings might we see in it?" Nobody else has done it. We haven't been given one single impact study, which I think is totally irresponsible. I don't think any government should be approving legislation without knowing the impact on the people who send us here to do it.
Having said all of that, your organization says, "Implementation on January 1, 1998, is a high-risk situation for the stability and the financial health of the municipal sector." Can you paint that out a little bit? What risk are we taking here, and what are the possible implications?
Mr Bob Heil: The risk the municipalities face: Currently, we're preparing the training manuals for the municipal staff in Ontario. The Association of Municipal Clerks and Treasurers is the leading training agency for all professional staff. We're facing the possibility of in excess of 150 tax rates that will be applied. Right now, we have basically eight, residential and commercial for each of the sections, and we're going to have in excess of 150 rates. We have a tremendous amount of staff in the province, from the city of Toronto down to the smallest municipality in Ontario. We don't believe there's enough time to be able to train everyone.
We've been talking to some of the software companies; they're really going to have a hard time grasping the broad issues and the complexities of the various pieces of legislation to write billing programs, so a lot of it's going to have to be done by hand.
The return of the rolls is going to be so late -- I know the Ministry of Finance is working very hard to try to get them to us, but because it's going to be so late, we're going to be under tremendous pressure. We are of the opinion that the interim billing really isn't going to take place properly and legally until late spring, maybe even early summer, in May or June, after the return of the roll in April, which will at that point create some tremendous financial difficulties for municipalities in being able to fund their operations from January through to April.
Mr Phillips: What I was assured of was that the final tax bill would go out in April. I don't think anybody will know what this means. They're going to get their assessment in January. Nobody will know what that means. They'll just get a piece of paper and they won't be able to figure out what it means. When they get their final tax bill is when it hits the fan. But they only have until June 29 to appeal. If there is any danger that the final tax bill does not go out until the end of June, I think the government is going to be dealing with the taxpayers in a fraudulent way, because they will not be able to appeal their assessment until after they get their final tax bill. Is there any danger at all that we could see in some municipalities the final tax bill going out not at the end of April but in June sometime?
Mr Heil: The final assessment roll will not be delivered to us until the end of April, and it's at that point that we have to try to calculate the final rates. Most municipalities won't be billing until after that time.
Mr Phillips: That's unacceptable to people, in my opinion. That has nothing to do with you, but I've been led to believe that people would have three months to appeal their taxes after they got their tax bill. I can now see what the plan is, and that is that you won't get your tax bill until your time to appeal has gone, so people will simply not have been able to appeal it. This is really getting bizarre.
Ms Best: The association has continuously said we needed more time to implement this, to implement it right. That's been a grave concern of ours through both Bills 106 and 149.
Mr Phillips: That single thing is the most important development I've heard in the last four days, actually. I at least had some comfort that people could appeal after they got their final tax bill, but now, if this is -- anyway, that's extremely concerning.
What other risks are we running in the financial health of the municipal sector? You mentioned the training time. Is there is a risk of your assessment base being at risk in any way?
Ms Best: There are so many variables right now and there are so many questions about the delivery of the information, anything is in question right now until we have some assurances and see what actually comes through from the Ministry of Revenue. There is a number of questions still outstanding.
Mr Pouliot: Thank you very much. I take your support to be a gesture of goodwill, a belief, hoping that things will go well, a kind of tacit support; you are generally supportive. I tend to be supportive when I know the facts.
Two months before a document of unprecedented consequence is about to hit, I turn to you. You are the people who make it happen. You're the first brigade. I never wish to talk well about you, because we know what the fate is of members of the first brigade in a revolution, so I would encourage you to reserve some judgement. You're so factual, and we don't expect anything less from the standard you have set, but it brings questions.
I just came back from the great riding of Lake Nipigon, which I have the honour of representing, also where I reside. Ask people about the drug formulary, they've never heard of it, and it's two months before. They've heard of general assistance. I've asked them about the cost of land ambulance. They don't know; they might get the bill from someplace. I've asked them about the cost of policing. That they know, but about process. Do they need fewer officers, do they need more? This is two months before.
I've asked them if they were aware that when they set the interim tax levy, they would include the BOT of the previous year in the equation. Some said yes; some, I sensed, were a little tentative. I asked them if they had the ability to exceed the 50%. They said, "No, we don't." I asked them if they knew that Mike the Taxfighter had said that they should be able to pass along a saving of 5% to 10% in the next two years in terms of property tax. Oh, that they knew. They doubted they could. And it goes on and on.
What fascinates me is that the ministry says they fully expect to have upwards of half a million appeals. There are 3.8 million units being reassessed, the largest in North America. You must conduct business in a new fashion starting January 1. I'm appalled, given the importance, and also given that this bill does not work in isolation -- it is meshed and webbed with other bills -- that we have so little information. Do you have an impact study you can share with me? I don't have one.
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All I wish to have, as a representative of our party and the great people of Lake Nipigon, is some information. The tapes, the assessment figures, will come in April. You're already four years into your fiscal year. Do you know what source of funding you will be able to tap for the shortcoming, for the dislocation?
Ms Best: No.
Mr Pouliot: But you're supportive.
Ms Best: The association is on record as supporting government change and supporting processes that will streamline efficiencies. What our job is, as we see it, is to assist in making sure that that legislation, or the improvements, are administratively doable and are able to assist our members. That's where our support is and that's where our concerns lie.
Mr Pouliot: You're very professional, and I admire your ethics, your decorum and your good manners, all of you. When the rubber hits the road -- and I'm not a merchant of fear. It gets better. When all is dark, sometimes I can see the stars too, but this is taxing the digestive and assimilating process like never before. Everything is being done under the cover of darkness by regulation. It's not the most democratic and open form of consultation and government, but when you are in a hurry -- you see, this agenda is about having the trains run on time. Nothing else matters. If I look at my watch, and the Conservative revolution train leaves at 3 o'clock and my watch says it's 3:32, they're telling me, "Get your watch fixed."
I'm afraid for municipalities. I'm afraid because the degree of uncertainty is unwarranted. I asked them, and I was hoping you would too: "Why don't you stagger it? Why don't you do policing this year, general assistance the next year? Give us time to adjust. Do not overestimate our capacity." I plead with you -- I know it's difficult to talk with people like you. Poor people like the ones I represent generally, with you say little. They don't say much. You're the second-last presenters we've had. If Frank Stronach pays us the compliment of a visit, they will listen, but the rest of us --
I want to wish you well. I'm going back to Manitouwadge to talk to my clerk-administrator, and I'm going to say, "This is what your association is doing." He's going to say, "We're going to try our best, but we don't know where we're going, two months before." It's a terrible mess.
Ms Best: We would be happy to comment on any of those other issues, but we were only prepared to comment on Bill 149 today. But we would definitely welcome an invite back, and we'll speak to the other issues as well.
The Chair: Unfortunately, we have run out of time, but I do want to thank you for travelling here today and for your interesting presentation.
LAWRENCE PARK RATEPAYERS' ASSOCIATION
The Chair: Would George Teichman please come forward, director and past president of Lawrence Park Ratepayers' Association. Thank you for coming, and welcome. You'll have half an hour to use as you wish. If after your initial presentation there's time remaining, I'll divide it equally among the three parties for questions. I notice here it says past president of the Lawrence Park Ratepayers' Association. Are you representing the association or yourself today?
Mr George Teichman: I'm representing the association. I might add that I have Mr Arthur Lofsky with me, who is an associate, not from Lawrence Park, who has been working with me on some of these elements, and he would like to spend a little time talking about the tax bill as well. But I am the person representing Lawrence Park Ratepayers.
Thank you, Chair, members. I am a director and past president of Lawrence Park Ratepayers' Association. I also come to you with some experience in the area of assessment, since I have worked in urban planning and development and real estate management for the last 30 years. I am the principal shareholder of Upper Yonge Properties Ltd and Glencairn Properties, which in turn own small strip plazas, industrial malls and residential properties inside and outside of Metro Toronto. The community I call home is North Toronto, which is part of that Toronto which Fortune magazine last November rated as the best city in the world in which to live and work; in other words, the way it is right now.
The concern of Lawrence Park Ratepayers' Association is that current value assessment, the method proposed in Bill 106 for taxing real property, will endanger the economic health of our city. First, however, it is necessary for us to establish that current value assessment is essentially the same as market value assessment. We like to use the term, MVA, so let's not get confused. CVA, which is in Bill 103, is exactly the same thing. The definition of the new term, current value assessment, is essentially the same as section 19(2) of the existing Assessment Act, except that it underscores that valuation should be based on the "fee simple." This is quite ridiculous, because all appraisals address if a property happens to be encumbered. Let's talk about CVA and MVA interchangeably, therefore.
Second, we in Lawrence Park want to make it clear that we also would like improvements to the existing method of assessing property, but to move to a market-value-based method would be unfair and does not make sense. We believe that the Conservative Party understood this when north and central Toronto voted the Conservatives in during the last provincial election. We were interested in two things that were talked about: reducing the deficit, and killing any introduction of MVA, as the NDP government did, and notice what we did to the NDP. We were assured by promises and letters, such as the one from Al Leach which is attached to my submission. You have it in front of you. He writes to Moore Park and Rosedale homeowners: "My party and I will never support the imposition of MVA in Metro Toronto," period, and we asked him that a number of times in public hearings during the megacity debates. Also attached is Isabel Bassett's election flyer. In it she writes: "The policy of the PC Party has always been that we will never impose market value assessment on Toronto. We remain firm in that position." When I asked Al Leach about this during a packed meeting in February, he tried to duck it by saying that actual value assessment is just terminology, and it's different from market value assessment. Well, we know that current value assessment is equal to actual value assessment is equal to MVA. Don't try to duck it that way.
Third, we want to say why MVA is not fair for the core of a large urban area like the GTA. This notion, which taxes the unrealized potential of residential properties, is not nearly as harmful for the core of smaller cities such as Kitchener, where I used to live, or London. I quite understand why properties don't go up in value in the central areas of places like Kitchener. The selling prices in the cores of these smaller cities are generally no higher than the outlying areas for comparable properties because of the travel distance. The travel distances and times are shorter and therefore do not put economic pressure on these areas. A much fairer method for taxing properties in Metro Toronto would be unit assessment, and you've heard of that many times. Perhaps we could put some weighting factors on for certain locations, certain neighbourhoods. If you want to put a heavier weighting factor on Lawrence Park, fine. We've discussed it; we don't mind.
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Attached to my submission is an article from the Globe and Mail on the views of Jane Jacobs, and I'm sure you've heard of her. Last week, there was a great conference held for one week in Toronto. Eminent economists came from Harvard, from Yale, from all over the world to hear Jane Jacobs. She chose to live in Toronto. She came here in the 1960s after writing the book The Death and Life of Great American Cities. I think we've all heard of her and we all respect this lady. I will read some excerpts from her comments in the Globe and Mail from November 19, 1992.
Jane Jacobs is opposed to market value assessment and calls the scheme "nutty."
"'The reassessment proposal would increase taxes for many businesses and residents in the city of Toronto while lowering them for many in Metro's suburban areas. The tax measure will leave Toronto with only two large population groups, the rich and the poor, because of the high levies it will impose on middle-class tenants and homeowners. This tax will have the effect of making the city an impractical place, but not for the richest part of the population or for the most assisted part of the population.
"'This is a very bad situation for the city to get into. This is a kind of rot. Property values in cities are higher than elsewhere because these urban areas are efficient ways of doing everything. This is why people start businesses in cities or go to cities.
"'The very concept of market value assessment, with its idea that somehow there is an unearned value in the city that must be gotten at, is wrong. It attacks the core of the value and the potentiality of that city. Market value assessment will undermine small businesses and the jobs they provide,' Mrs. Jacobs said. She has seen the dying away of small businesses in American cities, often because of exorbitant taxes."
And let us remember that she wrote that book, The Death and Life of Great American Cities, and she is being venerated by economists around the world.
A market-value-based system of assessing property is inconsistent, it's unfair and makes no sense. In no other case are personal assets taxed on the basis of their value. For instance, our stocks and bonds, cars, jewellery and furniture, are not appraised each year. Are you aware of your stocks, your cars, being appraised each year as to their value? To do so would be taxing unrealized wealth, not yearly income, which is associated with a person's share in the GNP and therefore the ability and obligation to pay taxes. Clearly, it is inconsistent and unfair to tax one's total assets of, say, $300,000 which is basically in a residence a person owns, but not to tax another's total assets of $300,000 which is basically in stocks, bonds and nice furniture. It's inconsistent.
But wait: MVA doesn't just tax personal assets in real property, in other words, your equity. MVA, in assessing the value of the property, levies taxes on one's equity plus the mortgage. In other words, you own a house that's worth $400,000 on the market and you have a $300,000 mortgage. You're paying a wealth tax on the $100,000 equity, and you're paying a wealth tax on the $300,000 mortgage, the loan. Can you imagine if you had to do this with your stocks and bonds? What would the Ontario Securities Commission say about that, if you borrow $300,000 to buy stocks and they tax you on the wealth of your stocks based on the loan? It's totally crazy.
In no other case I can think of are people obligated to pay taxes for services received based on the value of their personal assets. This is another aspect of how this thing just doesn't wash. For instance, a driver's license, your vehicle registration, the provincial taxes you pay for each litre of gasoline for your car, have nothing to do with the value of your car, whether it's new or used, and everything to do with the use of your car, in other words, the consumption of the gasoline.
Even in the case of a residence, some of the services delivered to your residence are based entirely on the amount used, such as your heat, your hydro and your water. It's not based on the value of your residence. Sure, it is more difficult to metre the use of services to a residence in the form of garbage, sewers and fire protection. But surely the delivery of these services has more to do with the size of the building than it does with location, and hence the value of the land on which the building sits. Besides, land closer to the city core is cheaper to service anyway. Those houses that are out in the suburbs really are more expensive to service and they should be treated that way; they should be paying higher taxes, if you want to be accurate about the thing.
Unit assessment is based on the size of the building and the land and is readily available in the existing databanks of municipalities. Any physical change to a building which requires a building permit is automatically fed into the databank for a quick, inexpensive and stable assessment base, without the need for $60 million a year in salaries, plus $40 million overhead, to hire tax collectors who prefer to call themselves assessors. What kind of Common Sense Revolution is this? When you ask a professional assessor what he thinks of MVA, they're trying to protect their jobs; let's face it. It's like asking a fox to lock the door of a chicken coop. Would you ask the fox to lock the door? Obviously, these assessors are trying to protect their jobs, so don't ask them whether they think this makes sense.
Finally, I want to demonstrate the unfairness of MVA by way of photographs which you will find on the last three pages of my submission. In each case, there is a modest house on a small property in North Toronto, and this is compared with a much larger house with garages and family room etc in very attractive areas in the rest of Metro. Property taxes are shown as levied in 1992 and as would have been levied in 1992 if the Ministry of Finance 1988 market value impact study had been implemented. If you recall, we had an impact study done. Based on that experience, I guess, this government does not want to give us impact studies. We have never seen an impact study, but we know the impact is going to be very similar to the study that was done in 1992, based on 1988 figures.
Take a look at them. Take a look, on the first page, at 416 Davisville Avenue, and compare it to the house on the right-hand side, at 16 Elkwood. The house on the left is semi-detached, on an 18-foot-wide lot, three small bedrooms, one bathroom, a mutual driveway that you can't get a car down, unfinished basement. Taxes for 1992, based on 1988 assessment, because that's the last time we had an impact study -- you people wouldn't give us one -- were $2,478. The property on the right, inside Metro, in a beautiful neighbourhood, at 16 Elkwood, a two-storey detached on a 50-foot lot, not 18, five bedrooms, three bathrooms, double driveway and a garage -- the one on the left you can't even drive a car down -- had taxes of $2,291. That's less.
The next two pages are similar. On the second page, on the left there's a little two-bedroom bungalow. That bungalow would pay higher taxes than the house on the right. I would like to take you to this neighbourhood on the right. It is truly beautiful. It's down in the Rouge area in Scarborough, down by the lake. It is truly a beautiful neighbourhood, but that house on the right-hand side was valued less than the house on the left because of land value. The house on the left would pay higher taxes.
On page 3, it's a similar situation. A little two-bedroom bungalow that backs on to apartment buildings in a busy area of Yonge and St Clair paid more taxes than the house on the right-hand side.
Is this fair? Does this make sense, this thing called MVA or CVA? Is it consistent with the payment of services for all other personal assets, or is this Harris government going to surprise us with even more legislation which will levy a yearly tax on the current value of our cars? Do they want to tax us in terms of the wealth of our furniture and perhaps even the luggage we're going to have to pack to leave this province if we have this implemented?
The Chair: Thank you very much for your presentation. We have a little under five minutes per caucus for questions.
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Mr Arthur Lofsky: I just have something briefly.
The Chair: Take as much time as you want. It's your time.
Mr Lofsky: It's more just on general principles. Bill 149, like almost every other bill introduced by this government, has not been well thought out and is highly antidemocratic. It's antidemocratic because usually governments of the past, when they introduced such sweeping, revolutionary legislation or any sort of legislation, float things about, but this government does not want to do that. It appears that they're trying to hide everything. So I, a card-carrying Conservative, have decided to do everything in my power to fight this government and make sure they're not elected next time around -- unless they change their ways.
I was a part of a group earlier this year called Citizens for Local Democracy, and I'd just like to call your attention -- I passed it out and made some photocopies -- to a program that's on tonight at 7 pm on CBC Man Alive. It's called C for LD Battle for Toronto. There you can watch the behind-the-scenes machinations of our steering committee, with John Sewell and the gang, and you can watch how we, with no resources and the spectre of the huge Queen's Park against us, did a good job of winning the referendum. You'll also see how brute force, brute power, will crush a citizens' movement and ignore 400,000 people. That's my only comment. I think you should direct your questions to my friend George Teichman.
Mr Teichman: Are there any questions?
The Chair: I'm sure there will be. Approximately four minutes per caucus, and we'll begin with the Liberal caucus.
Mr Phillips: Just a side comment on the last speaker: I remember before the election, Mike Harris had his Metro task force, and it was chaired actually by Joyce Trimmer, but Al Leach was a co-chair of it, and I remember very clearly that the conclusion from that was that we will eliminate the Metro level of government and keep the city of Toronto, the city of Scarborough, the city of North York, the city of Etobicoke --
Mr Lofsky: I remember that.
Mr Phillips: The reason I remember it is that it was used locally to reassure people in Scarborough. Al Leach would be still the ex-general manager of TTC, or maybe he'd be working somewhere else, but he certainly wouldn't have gotten elected if he had not said, "We're going to keep the city of Toronto." The other thing he did, which you point out here, is he said to home owners, "My party and I will never support the imposition of market value assessment." As you quite correctly point out, Mr Teichman, in your presentation, they call it current value assessment now, but it is word for word the definition of market value assessment.
Mr Teichman: It's precisely the same thing.
Mr Phillips: It's exactly the same wording, so it's the worst of all worlds. I guess the most charitable thing you can say is that Mr Leach and Mr Harris changed their minds, that they said they would never support the imposition of market value, and they have changed their minds. That I think the public can accept or at least understand -- but to say, "We're not imposing market value assessment," when in fact, word for word, current value assessment is the same as market value assessment.
As I say, I look forward to the documentary tonight. I remember clearly. It was called actually Mike Harris's task force on Metropolitan Toronto, and it was that Mike Harris would eliminate the Metro level of government and stay with the six area ones. I always find that unusual when people say to me, "At least Mike does what he says he's going to do." I say, "Whoa."
Mr Teichman: Yes, and you are quite right. It was chaired by Joyce Trimmer, the past mayor of Scarborough, very much loved in Scarborough, and I happen to know that she was asked personally by Mike Harris to run and encouraged to run in the last election, but she decided not to. She was going to devote her efforts to things like this task force. Al Leach was a member of her task force, and he signed the task force findings in agreement with bringing more services and more powers to the local governments at the expense of the Metro level of government.
Mr Phillips: I found it really bizarre and unusual, and frankly, mildly disturbing that suddenly Mike Harris decided to get rid of the city of Scarborough, and then, when the residents of Scarborough and the city of Toronto expressed their view in a referendum, the referendum was simply dismissed as, "Only X per cent of the people voted." If Mike Harris used that criterion for becoming Premier, he would have declined to be Premier, because I still don't have the majority of the people in the province voting for him. I appreciate your bringing forward those two concerns and those two issues.
The Chair: Your time is effectively up, Mr Phillips. Actually we're a little over, so if you want to wrap up please.
Mr Phillips: I guess I'll just wrap up by saying I appreciate them, once again, being here to remind us that what was said before the election isn't what took place after the election.
Mr Pouliot: Thank you for your diligence and your education on Bills 103, 106 and 149. I'm not going to spend too much time on the electoral promise of now Minister Al Breach -- I mean Al Leach. It's a telling document. It certainly makes one think. It's now where 90% of the politicians give the other 10% a bad reputation, and I can understand why.
I notice you said at the beginning of your remarks, "Notice what we did to the NDP."
Mr Teichman: I'm sorry I said that.
Mr Pouliot: To my knowledge, we thought about it, we looked at it, and heaven knows that politically we too were not without courage, but we never did impose market value assessment.
Mr Teichman: Correct.
Mr Pouliot: What scares me in your remarks, with the highest of respect, is if we are to be judged on what we think, there is no safe haven, and I would invite some people, before they all come out of the closet, to keep in mind that we need a quorum at Queen's Park.
You seem to say too that it's the rich against us.
Mr Teichman: No, I don't think I've been saying that.
Mr Pouliot: I see the reasonable cloning of Ernesto Che Guevara saying, "Democracy is at stake," and so on. I was a little appalled in our kind of environment that this kind of tone would prevail.
When you present us with what is for you very commonsensical, telling evidence of distortion with these documents, do you factor in the most telling of property value, which is location, location, location?
Mr Teichman: This is precisely my central point, that we should not be putting a wealth tax on location. Some people, that's all they have, that house that's worth $300,000. It's a little semidetached house, and it's the land value. If you knock the house down, it's worth the same; in fact, it might be worth more, because it cost $10,000 to get rid of the house, with the excavator.
What you are doing is putting a wealth tax on location, and the person who's living in that $300,000 house in, say, the Avenue Road and Wilson area is in many respects and many cases far less wealthy than the person who lives down in the Rouge area in a beautiful five-bedroom house. If anybody is to be judged as less poor or more poor, I would think it may be the person in that two-bedroom bungalow.
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Mr Pouliot: I appreciate your point; I respect you and your opinion. Over those hearings we get to know presenters very well. I don't wish to be personal, it's really not me, but sometimes people relate better with their own story. When this comes down and becomes law, gets proclaimed, are your personal taxes going to go up or down? You don't seem like an extremely wealthy person to me. You're like me, ordinary people. We're trying to make ends meet. Are your taxes going to go up?
Mr Teichman: My taxes will go up substantially, and I can tell you that we did a spot check in 1992, and under that impact study, the taxes on average would go up 68% in Lawrence Park.
Mr Pouliot: How many thousands of dollars would that be, or hundreds?
Mr Teichman: We're talking about taxes that would go up from an average of about $5,500 up to $8,000.
Mr Pouliot: What's the price of a property there? I don't know that --
Mr Teichman: Again, that should have nothing to do with it, Mr Pouliot.
Mr Pouliot: But I'm just asking. I'm trying to relate what basis they're going to -- at $8,000, they must be pretty nice properties. I don't know. I live in Manitouwadge.
Mr Teichman: But if you look at the size of these houses, the size of an average house in Lawrence Park is actually not very large. They're much smaller than the average house that's being built up in Richmond Hill and Markham right now. The average size of a house in Lawrence Park is less than 3,000 square feet. You might find that shocking, but it's true.
Mr Wettlaufer: Hello, Mr Teichman. It's been a number of years since you and I have met. You were a client of mine when you were in Kitchener. You forgot.
I was really happy to hear Mr Phillips be very charitable, because Mr Phillips in 1990 supported market value assessment. In his campaign brochure he said here:
"Property tax reform: Honouring Metro Toronto's request, the provincial government has taken the necessary steps to permit Metro-wide reassessment of property tax under a new assessment of market value assessment. This will ensure equity of tax burden between newer and older homes, bringing substantial savings to taxpayers of Scarborough-Agincourt."
Mr Phillips: That's the point. I didn't run against it.
Mr Wettlaufer: I was just reading it. I'm glad that you support it, Gerry.
Mr Teichman, I wonder if you're not being subjective in the presentation of these properties here. The reason I ask that is I would guess that these homes on Elkwood Drive and Delbeatrice Crescent and Cherrydale Court are worth somewhere between $250,000 and $300,000.
Mr Teichman: They are worth approximately the same, in terms of market value, as the houses on the left. In other words --
Mr Wettlaufer: But about $250,000 to $300,000?
Mr Teichman: Yes, I think that would be fair.
Mr Wettlaufer: The reason I say I think you're being subjective is I'm wondering why you didn't present pictures of homes in Rosedale, for instance, with other older communities other than, say, Davisville and Deloraine and Wanless, because I have a modest $270,000, $280,000 or $290,000 home in Kitchener, and I'm paying as much in taxes as a resident of Rosedale who would have a $1-million or a $1.2-million or $1.3-million home.
Mr Teichman: How big is your house, sir?
Mr Wettlaufer: It's not a real big home.
Mr Teichman: But I'll bet it's larger than the one in Rosedale that you're comparing it to.
Mr Wettlaufer: Oh, no, it is not. It's a 1,700-square-foot bungalow. What I want to tell you is I'm paying over $4,000 a year in taxes; I'm paying about $4,400 or $4,500 a year in property taxes.
Mr Teichman: How large is your lot, sir?
Mr Wettlaufer: It's 55 feet. What I'm telling you is that in Kitchener we have market value assessment, and you do not have it here in Toronto. I'm telling you that MVA or CVA or AVA will apply much more equitably.
Mr Jim Brown (Scarborough West): It's nice to see you guys back here. It seems like a month doesn't go by without your being in the halls of this place.
Mr Teichman: And we're not getting paid; we're volunteers.
Mr Jim Brown: But you know what? You probably have better attendance than some of the members.
I just can't resist talking to you guys. I wish I could afford a house in Moore Park, Lawrence Park or Forest Hill, and if I could, I probably wouldn't mind paying the taxes that you're paying. I'm surprised at Gerry, because in my area in Scarborough, we're probably going to get a tax break, finally, after supporting all the better areas in Metro Toronto, so thank goodness that I can now go to my constituents and say: "Finally it's equal. We're on an equal footing. We're paying our fair share, we're paying less, and we're not carrying all those rich neighbourhoods in Toronto."
Mr Lofsky: Can I respond to that?
The Chair: A brief response. We're a little over time, but please go ahead.
Mr Lofsky: You're breaking this up into rich and poor, wealthy people, talking about a wealth tax.
Mr Jim Brown: I'm just trying to look after my constituents, and this is a good idea.
Mr Teichman: Property taxes should not be levied based on wealth. They should be based on services consumed.
Mr Jim Brown: If we were talking about services, there'd be no tax at all.
The Chair: Thank you for your presentation and thank you for coming today. It was a very stimulating and interesting presentation.
This committee stands adjourned until November 4 at 10 am. We will have clause-by-clause consideration of Bill 149.
The committee adjourned at 1617.