Item - 2021.EX27.7

The Executive Committee recommends that:  

1.  City Council adopt the small business property tax subclass for the commercial property tax class (the "Subclass"), approve the Subclass eligibility criteria, the process to approve the inclusion of properties in the Subclass, and the process to address requests for reconsideration, appeals and other provisions related to the implementation and administration of the Subclass, and amend City of Toronto Municipal Code Chapter 767, Taxation, Property Tax, to add the Subclass, all in accordance with Attachment 1 to the report (October 13, 2021) from the Chief Financial Officer and Treasurer.

2.  City Council direct the Chief Financial Officer and Treasurer to include, as part of 2022 recommended Operating Budget and the 2022 recommended tax policies, rates and ratios, effective for the 2022 taxation year, that:

a.  the residual commercial property tax class and the graduated tax rates for that property tax class be discontinued; and

b.  a single tax rate be adopted for the commercial property tax class.

3.  City Council adopt a tax rate reduction for the Subclass of 15 percent of the commercial property class tax rate, and City Council direct the Chief Financial Officer and Treasurer to ensure that the recommended tax rate for the commercial property tax class be set so as to fully fund the costs of the tax rate reduction provided to the Subclass.

4.  City Council appoint the Director, Revenue Services, to the role of Program Administrator as defined in Ontario Regulation 282/98, (the "Regulation") and delegate to the Director, Revenue Services the authority to exercise the powers of the Program Administrator under the Regulation including the authority to assess and annually designate those properties that meet the eligibility criteria for inclusion in the Subclass, to amend the eligible properties from time to time as properties become ineligible for inclusion in the Subclass due to changes in assessment value, usage, or other changes affecting eligibility, and to hear requests for reconsideration of inclusion or exclusion of properties from the Subclass, all in accordance with the Regulation.

5.  City Council appoint the Controller to the role of Appellate Authority as defined in the Regulation, and delegate to the Controller the authority to exercise the powers of the Appellate Authority under the Regulation including the authority to hear appeals of inclusion or exclusion of properties in the Subclass in accordance with the Regulation.

6.  City Council direct the Chief Financial Officer and Treasurer to report back to the Executive Committee after the initial year of the Small Business Property Tax Subclass (the “Subclass”), and provide any recommendations for changes to the design of the Subclass, taking into consideration:

a. the experience and relevant empirical data gathered from the first year of operation of the Subclass;

b. the objective of the having the Subclass provide a benefit to as many small businesses as reasonably and feasibly possible; and

c. the objective of ensuring that other commercial properties are not unduly burdened by an expansion of the Subclass, and that such changes also do not impede the much-needed recovery of Toronto’s office and business districts.

7.  City Council direct the Chief Financial Officer and Treasurer, in consultation with the City Solicitor, to report no later than the first quarter of 2022 on:  

a. the feasibility of developing a mechanism for ensuring that Subclass property owners with tenants in gross leases pass down the benefits of reduced property taxes to those tenants; and

b. if such a mechanism as described in Part 7.a. above is not feasible on the part of the City, whether there are any changes to Provincial law which could achieve that objective.

 
8.  City Council direct the Chief Financial Officer and Treasurer to report before the 2023 taxation year on the feasibility of:

a. adding Business Improvement Areas to the geographic areas covered under the Subclass, under section 3(a)(B)(i) of Attachment 1 to the report (October 12, 2021) from the Chief Financial Officer and Treasurer;

b. developing additional criteria and/or an application-based system that would allow for strip malls, which have small businesses as tenants, to be included within the Subclass; and

c. developing an application-based system that would allow for additional small commercial properties, which fall outside of the current eligibility criteria of the Subclass, to be included within the Subclass.

9.  City Council authorize the City Solicitor to submit the Bills necessary to amend Municipal Code Chapter 767, Taxation, Property Tax, to give effect to City Council's decision.

At its February 2, 3 and 5, 2021 meeting, in its consideration of Item EX20.5: Property Tax Policies for 2021 along with a supplementary report entitled Supplementary Report: Considerations for Implementing a Small Business Subclass, Council adopted a series of tax policy recommendations for 2022 and future years.

In its consideration of these items, Council directed the Chief Financial Officer and Treasurer to conduct the analysis, program design and stakeholder consultations for a small business property tax subclass. The recommendations also included that the small business property subclass tax rate be set at a percentage reduction from the commercial general tax rate as soon as possible and no later than 2022.

In response to this direction, a number of City divisions worked collaboratively to design, prepare and deliver a series of online stakeholder consultation sessions, as well as an online survey, that were conducted over the course of June to August 2021. The feedback and information received from the various consultation sessions and online survey inform the conclusions and recommendations in this report.

This report seeks Council approval for the eligibility criteria, program parameters and administrative structure and the proposed financial requirements, including any required by-laws or by-law amendments, to implement the small business property tax subclass for the 2022 taxation year.