July 28, 2000

Honourable Ernie Eves
Minister of Finance, Province of Ontario
Frost Bldg. South
7 Queen’s Park Crescent
Toronto, ON  M7A 1Y7

Dear Mr. Eves:

Re:            COMMERCIAL / INDUSTRIAL PROPERTY TAXES
          EFFECTIVE JANUARY, 2001                   

We would like to first take this opportunity to commend the direction that your government has taken in the 2000 Ontario Budget delivered by you on May 2. We support the bold initiatives taken in recognizing that for the Ontario economy to expand to its full potential, the fiscal policies and tax system must be consistent with the need to stimulate new private sector investment and increase the competitiveness of Ontario based businesses large and small.

With these objectives in mind, we are growing increasingly concerned by the absence of public direction by your Ministry relating to the post-2000 property tax regime which could have a significant impact on our members if they are unable to both anticipate and prepare for the changes. Specifically, we understand that the current rules, which have capped property tax increases for non-residential property tax classes in 1998, 1999 and 2000, will not be extended for 2001 and 2002. As you are also aware, the Ontario Property Assessment Corporation is also in the process of updating the assessments for all properties in Ontario based upon a June 30, 1999 valuation date, which new assessments will be effective January 1, 2001.

We are concerned that the combined impact of the removal of the property tax caps together with adjustments arising from the new assessments will cause severe hardship to small businesses that may not have the financial resources to cope with a substantial and unanticipated increase in their property tax bills.

The Fair Municipal Finance Act also incorporated the concept of “fairness ranges” which prescribed desired tax ratios for all property classes in relation to the tax rate of the residential property tax class. Municipalities were encouraged to reduce the property tax ratios for individual property classes where the transitional tax ratio fell outside of the fairness range. Further, where the tax ratio fell outside of the fairness range, municipalities were precluded from raising the tax rate for that class where it would further increase the tax ratio for that class.

Several property owners with tenants with gross leases also experienced hardship because amounts previously billed by the municipality directly to the tenants for BIA levies and the former Business Occupancy Tax effective in 1998 are included in the final property tax bill sent to the property owner. Legislation was subsequently introduced by your government affording these property owners the statutory right to collect these amounts from their tenants irrespective of the original lease terms. This change continues to create hardship for property owners who are unable to collect these amounts from tenants or who have vacated properties where a portion of these amounts must still be paid by the property owner.

Existing legislation provides that the owners of vacant property are entitled to a reduction in the tax rate only if the property was vacant continuously for three months prior to October 1of the preceding year. As you know, this has also caused significant hardship to owners of vacant properties that do not meet these stringent criteria and find themselves paying full tax rates for properties vacant for substantial portions of the year. Your Ministry has previously announced that these rules would be changed to allow for a proportional property tax reduction based upon the actual months of vacancy.

We wish to make every effort to inform our members as early as possible of any property tax changes anticipated in 2001 that could have a material impact on their property tax burden. Accordingly, we would appreciate your response to the following questions at your earliest convenience to enable us to provide the necessary information to our members to enable them to plan for the change:

1.       Will the existing cap on increases in property taxes for non-residential property tax classes be discontinued in 2001? If not, what will the likely capped increase rate be?

2.       Will the fairness ranges contemplated in the Fair Municipal Finance Act be re-instituted with a corresponding requirement that municipalities phase in tax rate reductions over 8 years for property tax classes with a tax ratio outside of the prescribed fairness range?

3.       Will property owners with tenants under gross leases in place in 1998 continue to be statutorily entitled to recover from their tenants the BIA assessments and the portion of property tax attributable to the former Business Occupancy Tax?

4.       Will the rules relating to vacant rental property be amended to provide for a property tax reduction based upon the actual period of vacancy?

We are hopeful that a timely response from you to the aforenoted questions will enable us to inform our members of the tax changes anticipated in 2001 and the planning measures which they should take now to enable them to prepare for the changes. We thank you in advance for your prompt attention to this matter. In the interim, should you have any questions or wish to discuss this matter further, please do not hesitate to contact the undersigned.

Yours very truly,

James E. (Ted) Farron, C hairman
Linda E. Smith, President