Page 1 of Report Finance Department TO: Budget and Corporate Services Committee SUBJECT: Condominium Services & Taxation Report Number: File Number(s): 401-01 Report Date: October 24, 2011 Ward(s) Affected: 1 2 3 4 5 6 All Date to Committee: November 15, 2011 Date to Council: November 28, 2011 Recommendation: For Information Only Purpose: Address goal, action or initiative in strategic plan Establish new or revised policy or service standard Respond to legislation Respond to staff direction Address other area of responsibility Reference to Strategic Plan: Background: N/A On February 28, 2011 the following staff direction was passed: Direct the Executive Director of Finance to provide a policy paper identifying data and workload requirements with respect to condominium services and taxation, and report back to the Budget and Corporate Services Committee in the third quarter of 2011. In May 2008, the previous Council received Finance Report F- 26/08 on the matter of condominium services and taxation. The report provided information on the assessment, taxation and servicing of residential condominiums (see Appendix A). Further to report F-26/08, a staff direction was proposed by Community Development Committee (May 5, 2008) directing staff to report back on the cost of providing services such as catch basin cleaning, storm sewer cleaning and street light maintenance to all residential condominium corporations in the city.
Page 2 of Report Discussion: Property taxation for Municipal Services A memo was provided to members of Council dated May 14, 2008 (copy attached in Appendix B) explaining the complexity in reporting the cost to provide these services due to a lack of inventory of these facilities (catch basins, storm sewers, street lights) on private lands and the uncertainty regarding the state of repair for each of the approximately then 290 (now 300) residential condominium corporations in Burlington. At that time, the preliminary estimates to carry out the inventory, review design standards and assess the state of repair was 2-3 hours per condominium. Council did not approve the proposed staff direction at the Council meeting of May 14, 2008 to proceed any further on this matter. In September 2010, staff were asked to request the City s catch basin cleaning contractor to consider offering the city s unit price and perform a similar service to condominium corporations. The vendor was not amenable to the idea citing concerns regarding asset condition and additional administration effort (see memo from Cathy Robertson dated Sept. 23, 2010, Appendix D ). The Canadian Condominium Institute (CCI), The Golden Horseshoe Chapter relaunched the Fair Tax Campaign (FTC) during the 2010 municipal election. The FTC group made a presentation to the Administration and Finance Committee at the Region of Halton in 2010. The FTC was created because condominium owners are taxed at the residential tax rate (RT), the same tax rate as single family, semi detached and other types of residential dwellings. The CCI s Fair Tax Campaign contends condominium owners are receiving inequitable treatment with respect to property taxes. The FTC feels that they are paying twice (once in their property taxes and again in their condo fees) for certain services. CCI is proposing actions they believe could address their concers: 1 Increase municipal services to condominiums; or 2 Establish multiple tax policy options to lower taxes for residential condos; or 3 Advocate for Provincial legislation changes to create separate property class for condominiums. In Ontario, property taxes are levied to pay for the provision of services on public property for the benefit of all taxpayers. Property taxes distribute the cost of public
Page 3 of Report services among property owners. They are not based on the use of services or the ability to pay. A taxpayer may choose not to use some of the public services (e.g. libraries, arenas) although these services are provided for the benefit of the total population. Property taxes are levied based on a Council approved budget and are calculated based on the current value assessment of all individual properties. Relevant Legislation Assessment Act The Assessment Act, R.S.O. 1990, c. A.31 (the Assessment Act ) determines how properties in Ontario are assessed and sets out the definitions for the property classes used to identify specific categories of assessment. According to the Assessment Act, there are seven property classes; residential, multi-residential, commercial, industrial, pipeline, farm and managed forests. In accordance with the Act, Condominiums fall under the category of the residential property class. As a result, they are taxed the same as all other properties in the residential class based on their individual assessment. Ontario Regulation 282/98 defines the Residential property tax class as follows: The residential property class consists of the following: 1. Land used for residential purposes that is, i. land that does not have seven or more self-contained units, ii. a unit or proposed unit, as defined in the Condominium Act, iii. land owned by a co-operative, as defined in the Co-operative Corporations Act, the primary object of which is to provide housing to its members or land leased by such a co-operative if the term of the lease is at least 20 years, Municipalities do not have the authority to create a specific tax rate for condominiums. If the Ontario Ministry of Finance were to create a new property class for condominiums with a lower tax ratio than the residential property class, there would be an additional tax burden placed on all other property classes. Municipal Act Section 307(1) of the Municipal Act, 2001, S.O. 2001. c.25, as amended (the Act ), precludes removing taxes levied for specific services on any individual sector: All taxes shall, unless expressly provided otherwise, be levied upon the whole of the assessment for real property or other assessments made under the Assessment Act according to the amounts assessed and not upon one or more kinds of property or assessment or in different proportions. The Act does allow a municipality to determine area specific tax rates where a service has been identified; yet, it does not allow determining property class specific rates.
Page 4 of Report The area specific rates on the different classes of property must be in the same proportion to each other as the tax ratios established for the property classes. The Act also allows for limited tax rebates by municipalities. Rebates can only be provided to eligible charities (section 361) and to vacant commercial or industrial property (section 364). Section 365 of the Act, permits municipalities to cancel, refund or reduce taxes if they are considered by Council to be "unduly burdensome". If the municipality chooses to do so, they are required to define "unduly burdensome" in the by-law. In Burlington this section is utilized for the seniors grant of $450 based on specific criteria being met, i.e. receipt of Guaranteed Income Supplement. Roles and Responsibilities for Assessment and Taxation in Ontario The assessment and taxation system begins with the legislative framework set by the Government of Ontario. The principal ministry involved in setting assessment legislation is the Ministry of Finance, through the Assessment Act. Ontario Regulation 282/98 determines the different property classes in Ontario. There are only two residential property classes, residential and multi-residential (rental with 7 or more units), mandated by regulation. CCI believes that condominiums should be given their own tax class at a rate something less than the RT (Residential Full Taxable) tax rate to compensate for the lack of servicing on their properties such as catch basin cleaning and fire hydrant maintenance. However, the decision on whether or not to change/move condominiums to a separate property class lies solely with the Province of Ontario. In 2002, representatives from several condominium corporations requested that the Ministry of Finance establish a separate property class for residential condominiums. The Ministry reviewed the request and in the Ministry s report, Property Assessment And Classification Review Recreational Complex, it was recommended at that time that residential condominiums remain in the residential property class. The reason given was: The fundamental premise of our property tax system is that properties should be taxed on the basis of their market value, not on the basis of the relative use that property owners make of local services. The Municipal Property Assessment Corporation (MPAC) is responsible for classifying all properties in Ontario into the correct property class and for assessing these properties for taxation purposes based on the Assessment Act. MPAC analyzes all sales as at January 1 st of the base year (currently Jan 1, 2008) to determine the Current Value Assessment (CVA). Sales that are considered arms length transactions from a willing seller to a willing buyer are used in their analysis of current value assessment. Staff have been advised by MPAC that when determining the CVA for condominiums
Page 5 of Report only condominium sales are used (ie. high rise condo sales for high rise condo unit CVA analysis). The City is required to bill taxes according to the assessment roll provided by MPAC. City/Regional Services The municipal services that are of particular concern to the condo owners (based on their presentations) are provided below with the bracketed information identifying whether the City or Region is currently responsible for the service provision: Catch Basin cleaning (City) Streetlight maintenance (City) Snow clearing (City) Fire hydrant maintenance (Region) Larvaside Control (Region) Garbage, recycling, green cart and bulk collection (Region) As indicated above, the Region of Halton is responsible for fire hydrant maintenance, larvacide/west nile control on public property as well as waste collection. Staff has been advised that the Region does provide waste collection services to residential condominiums with the exception that some condominiums do not currently receive GreenCart collection. However, some condominiums may receive more frequent garbage collection than other residential property owners due to their size. Regional staff reports (CS-53-10, and SC-20-11) were presented to the Regional Administration and Finance Committee on this matter. Of the services listed above, the city is responsible for snow clearing, catch basin cleaning and streetlight maintenance on public property. Residential condominiums are located on private property, similar to single detached homes. The upkeep of this private property is the responsibility of the property owner. Upon purchase of a condominium unit the buyer is aware, through their agreement, that maintenance and services within that condominium development is their responsibility, both financially and otherwise. Municipalities Surveyed Recently staff surveyed a number of municipalities to obtain information on this matter to provide comparators. The following municipalities were found where some form of action was taken (mostly with respect to garbage collection services).
Page 6 of Report City of Hamilton The City of Hamilton provides garbage collection services to the residential and multiresidential property class. Since 2004, the City has put additional focus on recycling; and, in 2007, an organics collection was introduced to multi-residential properties. Region of Waterloo The Region of Waterloo approved multi-residential garbage and recycling collection and rebate program in October, 2003. The region provides garbage collection services to condominiums and rental townhouses, where large trucks can pass freely (approximately 2,300 units receive this service). The region will also compensate highrise condominiums $29.00 per unit if it is not possible to collect the garbage by the Region s regular contractors (approximately 40,100 units receive an annual rebate). City of Toronto The City of Toronto provides garbage and recycling collection services to the residential and multi-residential property class. The cost of the service is comprised of the initial fee for the base volume at a cost of $175 and the fee for the excess volume, is estimated at $12.81 per standard cubic yard of un-compacted waste and at $25.63 per standard cubic yard of compacted waste. In addition, the City provides a rebate of $175 per unit per year to the multi-residential properties participating in the City s Solid Waste Collection Program. City of Brantford Garbage collection and recycling service is provided, either at the curb or onsite if the trucks can access the condominium property. The City of Brantford also provides maintenance (cleaning and flushing) of catch basins and fire hydrant testing and maintenance. If there is an issue to be dealt with, the condominium corporation must pay to fix the problem. In May 2011, Brantford City Council approved that in addition to the existing catch basin maintenance agreements with residential condominiums, the City will provide inspection and cleaning services for stormceptors (piece of equipment within the storm sewer system). The inspection and maintenance will be done in two parts: sediment and contaminant levels will be inspected annually and cleaning of units will be done on a three year cycle. Commercial and industrial property owners, on whose property a stormceptor is installed, will remain responsible for inspection and cleaning of their own stormceptor unit.
Page 7 of Report The City of Brantford requires a Certificate of Insurance naming the City as additional insured before they will provide any services on private property. While these services are provided to condominiums, both townhouse and highrise condos, it is not provided to multi-residential (rental properties with 7+ units) properties. Brantford Council was approached by the owners of the multi-residential properties in 2009 to ask for the same consideration but the request was denied. Town of Markham The Town of Markham formed a working group in 2007 to identify issues/options with respect to services received and taxes paid by condominiums. The Working Group recommended to their council to support the creation of a new property class for residential condominiums. Markham Council unanimously supported the recommendation and forwarded the resolution to the Province (see Appendix C ). Data and Workload Requirements Currently, there is a lack of a complete inventory of catch basins and street lighting on private property. The vast majority of the infrastructure was installed in developments since the early 1970s. Similar to the May 2008 and Sept. 2010 memos (Appendices B & C), a significant amount of staff time would be required to research the original site plan approval files to gather and record the data (estimated 2-3 hours per residential condominium with approximately 300 condominium corporations in Burlington). In addition, following the research and data collection there would be required technical expertise to perform site visits to determine not only the inventory per Condominium Corporation, but also the design standards and state of repair. Currently, there are approximately 300 residential condominium corporations (low rise, high rise, mid rise, townhouse, detached bungalows, etc). If the city were to consider providing services on any private property, permission to enter private property would need to be obtained along with addressing liability issues. If technical testing was required on site, a certificate of insurance, naming the City as additional insured, would be required. Financial Matters: It is important to point out that the cost of providing the City services such as catchbasin cleaning and streetlight maintenance to residential condominium properties is not currently included in the city s budget. Without a complete inventory of catch basins and streetlights located on the 300 residential condominium properties, it is not possible to estimate the additional cost to the City budget.
Page 8 of Report Requests for the City to provide these services could also be made by other private property owners such as apartments (multi-residential class, rentals), commercial and industrial condominiums, in addition to approximately 2200 single family dwellings that also have catch basins on their properties. Communication Matters: Finance staff met with Mr. Al Siaroff and Mr. Ed Keenleyside on May 20, 2010 to discuss the CCI Fair Tax Campaign. Staff also participated in a Ward 5 meeting on May 26, 2010 where Ed Keenleyside, city and regional staff provided information on this topic. Conclusion: This report provides information regarding condominium services and taxation. It also provides information on actions taken by other municipalities in this regard. Respectfully submitted, Joan Ford Acting Executive Director of Finance 905-335-7600 Ext. 7652 Appendices: A. Report F-26/08 B. Memo dated May 14, 2008 C. Town of Markham motion D. Memo dated Sept. 23, 2010 Notifications: (after Council decision) Al Siaroff Name Ed Keenleyside Mailing or E-mail Address asiaroff@cogeco.ca ekeenleyside@cogeco.ca Approvals: *required *Department City Treasurer General Manager City Manager
Page 9 of Report Committee Disposition & Comments Council Disposition & Comments To be completed by the Clerks Department 01-Approved 02-Not Approved 03-Amended 04-Referred 06-Received & Filed 07-Withdrawn 01-Approved 02-Not Approved 03-Amended 04-Referred 06-Received & Filed 07-Withdrawn