Item - 2019.EX2.1

The Executive Committee recommends that:

1.  In respect of calculations to establish 2019 tax rates and tax ratios, City Council elect the following in order to determine the notional tax rates to raise the previous year's levies:

a.  subject to receiving the necessary amendment to Ontario Regulation 121/07 for the 2019 taxation year, to exclude the assessment of a property in a property class from the calculation of the total assessment of the properties in that property class if the current value of the property has increased by 100 percent or more or decreased by 25 percent or more, in accordance with subsection 2.2(4), paragraph 2 of Ontario Regulation 121/07; and

b.  to adjust the total assessment for property in a property class so that the assessment excludes changes to the tax roll for the previous year resulting from eligible assessment-related losses from prior years, in accordance with an election under subsection 19 (4) of Ontario Regulation 121/07 to make subsections 19 (4.2), (4.3) and (4.4) apply.

2.  City Council adopt the 2019 tax ratios shown in Column II for each of the property classes set out below in Column I:

3.  Subject to receiving the necessary amendment to Ontario Regulation 121/07 for the 2019 taxation year, City Council elect to raise the tax rates on the restricted property classes as follows:

a.  on the Commercial Property Classes, by one-half of the percentage tax rate increase on the unrestricted property classes (residential, new multi-residential, pipelines, farmlands, and managed forests);

b.  on the Industrial Property Classes, by one-third of the percentage tax rate increase on the unrestricted property classes (residential, new multi-residential, pipelines, farmlands, and managed forests); and

c.  on the Multi-Residential Property Classes, no tax increase.

4.  City Council continue the previous adoption of two bands of assessment of property in the Residual Commercial Property Class, for the purposes of facilitating graduated tax rates for the Residual Commercial property class in 2019 as set out in the Enhancing Toronto's Business Climate initiative, and setting such bands of assessment for each band shown in Column II at the amount shown in Column III, and setting the ratio of the tax rates for each band in relation to each other at the ratio shown in Column IV.

5. City Council adopt:         

a.  the tax rates set out below in Column V, which rates will raise a local municipal general tax levy for 2019 of $4,383,289,139 inclusive of a 2.55 percent residential, new multi-residential, pipeline, farmlands and managed forest tax rate increase, a 1.275 percent commercial tax rate increase, and a 0.85 percent industrial tax rate increase; and

b.  the additional tax rates set out below in Column VI, which rates will raise an additional special general tax levy of $15,209,430 dedicated for priority transit and housing capital projects (the "City's Building Fund levy"), in accordance with Part 6 of City Council's decision on Item EX22.2 headed "2017 Capital and Operating Budgets".

6.  City Council determine that the 2019 Non-Program Tax Account for Rebates to Charities in the Commercial class be set in the amount of $4,615,957 to fund the mandatory 2019 property tax rebates to registered charities in the commercial property classes, which provision is to be funded, for a net impact on the 2019 operating budget of zero, by the following:

a.  the additional tax rates set out below in Column III be levied as part of the general local municipal levy on the commercial classes set out in Column I and Column II to raise a further additional local municipal tax levy of $4,615,957 to fund the total estimated rebates to registered charities for properties in the commercial classes in 2019.

7.  The final Industrial Property Class tax rate be reduced by subtracting 0.011266 percent from the final tax rate, in order to reduce the municipal taxes on the industrial tax class by $943,000 - being one half of the estimated municipal portion of industrial taxes that were rebated under the vacant unit rebate program for 2017, as directed by City Council at its meeting on May 24, 2017, and the Budget Committee 2019 recommended Non-Program Operating Budget be reduced by the same amount.

8.  City Council allocate $935,000, equivalent to 15 percent of all incremental municipal tax revenue arising from commercial and residential assessment growth in the Tax Increment Financing Zones for 2019, net of any Imagination, Manufacturing, Innovation and Technology Grants attributable to this assessment growth, to the SmartTrack Funding Reserve Fund XR1731, in accordance with Part 19e of City Council's decision on Item EX33.1, headed "Implementation of the SmartTrack Stations Program and the Metrolinx Regional Express Rail Program. 

9.  City Council direct the Chief Financial Officer and Treasurer to report in April to Executive Committee, or directly to Council or a special meeting of Council if necessary, on the 2019 tax rates for school purposes, and the 2019 percentage of the tax decreases required to recover the revenues foregone as a result of the cap limit on properties in the commercial, industrial and multi-residential property classes (the 2019 'clawback' rates).

10.  City Council adopt the property tax capping policy, for the 2019 taxation year, to limit tax increases (for the 2019 taxation year) for the commercial, industrial, and multi-residential property classes by capping taxes at 10 percent of the preceding year's annualized taxes, through the adoption of subsection 292(1), paragraph 1, of the City of Toronto Act, 2006.

11.  City Council amend the Municipal Code Chapter 767, Taxation, Property Tax (Section 767-11B) to change the definition of a "low-income disabled person", to add a further category of disability support by adding the words: "(6)  Such other financial support(s) or circumstances in respect of a person's disability, that, in the opinion of the Treasurer, establish that a person is a low-income disabled person for the purposes of this section"; and that the necessary corresponding amendments also be made to the definition of "low-income disabled person" in Municipal Code Chapter 849, Water and Sewage Services and Utility Bill (Section 849-14.1) to reflect this change.

12.  City Council determine that:

a.  the instalment dates for the 2019 final tax bills be set as follows:

i.  the regular instalment dates be July 2, August 1, and September 3, 2019;

ii.  for taxpayers who are enrolled in the monthly pre-authorized property tax payment program, the instalment dates be July 15, August 15, September 16, October 15, November 15 and December 16, 2019; and

iii.  for taxpayers who are enrolled in the two installment program, the final instalment date be July 2, 2019; and

b.  the collection of taxes for 2019, other than those levied under By-law 2-2019 (the interim levy by-law) be authorized.

13.   City Council adopt:

a.  the tax rate for municipal purposes for the Creative Co-location Facility subclass of the Commercial and Commercial Residual Property classes be set at a 50 percent reduction of the Commercial and Commercial Residual Property class tax rate for 2019 and all following years; and

b.  the tax rate for municipal purposes for the Creative Co-location Facility subclass of the Industrial Property class be set at a 50 percent reduction of the Industrial Property class tax rate for 2019 and all following years.

14.  City Council approve revised eligibility criteria for the Creative Co-Location Facilities Property Tax Subclass by creating a new membership-model category of eligible properties, outlined in Attachment 1 to the report (February 19, 2019) from the General Manager, Economic Development and Culture.

15. City Council authorize the appropriate officials to take the necessary actions to give effect to City Council's decision and authorize the introduction of the necessary bills in Council.

This report recommends the 2019 municipal tax ratios and tax rates arising from the concurrent adoption of the City of Toronto's 2019 tax supported Operating and Capital Budgets.

The 2019 tax rate increases arising from the 2019 tax supported Operating and Capital Budgets and the tax policy decisions recommended by the Budget Committee are as follows:

Table 1 - 2019 Recommended Property Tax Rate Increases

The Creative Co-Location Facilities Property Tax Subclass (the "Subclass") was established by City Council and the Province of Ontario in 2018 to support the affordability and sustainability of cultural and creative spaces in Toronto. The Subclass provides property tax relief to qualifying properties housing a cluster of creative enterprises, and incentivizes the provision of below market rent and the retention of affordable spaces for the arts and culture sector.

The purpose of this report is to respond to direction from Council to review the impact of the Subclass within twelve months of its implementation, and recommend amendments to the eligibility criteria. In 2018, six properties representing 238,397 square feet of creative space were designated as qualifying properties under the Subclass, resulting in a total property tax savings of $378,995, of which $201,453 is municipal taxes and $117,542 is education taxes. There were no requests for appeals.  

This report recommends that City Council authorize the creation of a second category of eligible properties within the Subclass that will include membership-based co-working facilities for creative enterprises, operated by a non-profit organization. No changes are proposed to the existing criteria for tenant-based properties.

Membership-based co-working facilities act as incubators for start-ups and emerging creative enterprises. Under this operating model, creative enterprises purchase a membership which provides them with access to shared working space, equipment, technology, and professional development services such as training, workshops and access to a network of peers. These services are offered at discounted rates, and would otherwise be a cost barrier to many emerging creative businesses and professionals. As shared workspaces become more and more common, limiting access to this subclass to not-for-profit operators will ensure there is no unintended impact to City revenues from membership-based worksites.