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This document was published under a previous government and is available for archival and research purposes.

Chapter V, Section B: Property Tax

Modernizing Railway Right-of-Way Property Taxation

In response to municipal requests, the Province initiated a review of the property taxation of railway rights-of-way in 2016. As part of the review, the Province held consultations with municipalities and representatives of the railway industry.

The consultations identified concerns related to three key issues: indexation of rates, variation in rates and implications for shortline railways. The Province announced in the 2017 Budget that it would be taking action to address these concerns by adjusting railway right-of-way property tax rates. For 2018, the government will make further rate adjustments as part of its commitment to modernizing the property taxation of railway rights-of-way.

In addition, beginning in 2018, the Province will also respond to municipalities’ concerns regarding the property tax revenue they receive in respect of high-tonnage rail lines. A number of municipalities in regions with lower rates have noted that, under the current tax rate schedule, property taxes that apply to high-tonnage rail lines in their communities are significantly lower than for less active lines elsewhere in the province. These municipalities have requested that the property taxation of railway rights-of-way reflect tonnage as a measure of property value.

Table 5.6 Proposed Measures to Modernize Railway Right-of-Way Taxation
Key Issues Proposed Measures for 2018
1. Indexation of Rates: Municipalities have expressed concerns that, prior to 2017, property tax rates on railway rights-of-way had not been updated since the late 1990s. Building on progress made in 2017, railway right-of-way property tax rates for 2018 will continue to be updated to reflect average annual commercial property tax changes. This means that municipal property tax rates will increase by approximately $7 per acre for 2018.
2. Variation in Rates: Municipalities have also expressed concerns about the significant variation in railway right-of-way property tax rates across the province. The Province will further reduce rate inequities by increasing the lowest property tax rates on mainline railway rights-of-way to a minimum of $110 per acre in 2018. The lowest mainline rate in 2016 was approximately $35 per acre.
3. High-Tonnage Railway Rights-of-Way: Some municipalities in regions with lower rates have expressed concerns that low property taxes that apply to high-tonnage rail lines located in their communities do not reflect the relative value of these properties. Municipalities will have the option to increase rates per acre on high-tonnage rail lines based on a new adjusted tax rate schedule. This will ensure that property taxes better reflect the level of tonnage transported on railway rights-of-way. Details of the tax rate schedule will be communicated to municipalities and the rail industry in the spring.
4. Shortline Railways: The railway industry expressed concerns about the impacts of potential property tax increases on shortline railways. The Province will continue to freeze shortline railway property tax rates at 2016 levels in recognition of the challenges faced by this sector of the railway industry.

For 2019 and future years, the government will continue to adjust rates and, in consultation with stakeholders, review additional options to reflect tonnage in railway right-of-way property taxation. To support the ongoing review, legislative amendments will be proposed to facilitate the collection of tonnage data and other information. The Province is committed to modernizing the property taxation of railway rights-of-way and remains open to stakeholder input.

Non-Profit Child Care Services in Schools

Child care facilities are often housed in tax-exempt spaces, such as public schools, places of worship, municipal town halls or local YMCAs.

These community spaces play an important role in helping to provide child care services that are accessible and close to the communities they serve. To ensure that non-profit child care services do not alter the tax-exempt status of these community properties, an amendment will be proposed to the Assessment Act to provide a tax exemption to non-profit child care facilities that lease space in otherwise tax-exempt properties.

The proposed amendment would be consistent with the Municipal Property Assessment Corporation’s historic treatment of these facilities.

Assisting Toronto in Supporting Cultural Spaces

External view of 401 Richmond.
401 Richmond is an industrial building turned arts and culture space in downtown Toronto.

The Province recognizes that vibrant communities are made stronger when affordable spaces are available for the arts and culture community. The Province shares the City of Toronto’s interest in supporting the viability of existing cultural spaces and encouraging the development of artistic and creative enterprises. The Province will provide the City of Toronto with the authority to design and administer a new program to provide property tax reductions of up to 50 per cent to qualifying facilities that offer affordable spaces for the arts and culture sector. The City will have full discretion to determine which specific cultural facilities will be eligible under this new program.

This program will operate in addition to a number of existing property tax relief programs that are available to eligible property owners and tenants, including the property tax rebate for charities and similar organizations, the property tax rebate for heritage buildings, and tax exemptions through municipal capital facility agreements.

Victoria University

The City of Toronto has raised concerns with the property tax treatment of businesses located on land owned by Victoria University. Currently, tenanted portions of this land benefit from a unique property tax exemption that other businesses and universities in the province do not receive. This has raised concerns of inequity with respect to business properties and reduces revenues to the city that could be used to fund important services.

Ontario is committed to a property tax system where everyone pays their fair share. To support this objective, the Province is proposing amendments to the Victoria University Act that would ensure the municipal tax exemption applies only to lands owned and occupied by the university.

This will enable the City to treat tenanted portions of land owned by Victoria University fairly and consistently with other public institutions and businesses. To mitigate the impact for the University’s tenants, the proposed amendments would provide for the tax changes to be phased in over a number of years.

Airports

Airports play an integral role in Ontario’s transportation infrastructure and provide significant economic benefits to local economies. To ensure that municipalities with airports and the authorities that operate them are treated fairly, the Province is planning to conduct a review of the current approach used to calculate payments in lieu of property tax (PILT).

Airport authorities in Ontario make payments in lieu of property tax based on the number of passengers that travel through the airports annually. The passenger rates used to calculate the PILT have not changed since they were introduced in 2001. The review of the PILT program will include consultation with affected municipalities and airport authorities.

Creating Consistency in Business Vacancy Rebate and Reduction Programs

In the 2016 Budget, the Province introduced a legislative framework to give municipalities broad flexibility to refine their vacancy rebate and reduction programs. This greater flexibility enables municipalities to tailor these programs to best reflect local circumstances, while considering the interests of local businesses. While municipalities that decided to modify their vacancy programs have implemented a variety of changes, 80 per cent of those municipalities will phase out the municipal component by 2020.

With respect to education property taxes, the Province currently mirrors any municipal property tax decisions related to the vacancy programs. This has resulted in different treatments of education property taxes across the province, as each municipality modifies the programs to best suit its local needs. As a result, the Province announced in the 2017 Ontario Economic Outlook and Fiscal Review that it would review approaches related to the education property tax portion of the vacancy rebate and reduction programs in consultation with municipalities and the business community.

As a result of the review, the government will align the education property tax portion of these programs with the changes made by municipalities, ensuring greater consistency across the province. This initiative would begin in 2019 to ensure that businesses have time to plan for any necessary program changes.

Ongoing Integrity of Education Property Tax Revenue

As announced in the 2016 Budget, the government introduced a technical adjustment to the property tax rate calculation to ensure that municipalities and the Province are able to address any unintended effects of specific in-year property tax assessment changes, such as assessment appeal losses.

To support the ongoing integrity of education property tax revenues, the Province is maintaining the adjustment to education property tax rates for 2018. The Province will also continue to monitor education property taxes going forward, including expanding its capacity to accurately track and verify the remittance of these taxes.

Supporting Fair and Accurate Property Assessments

The Municipal Property Assessment Corporation (MPAC) is responsible for assessing more than five million properties in the province. In preparing property assessments, MPAC relies on information received from property owners to ensure it has accurate and up-to-date facts as the basis for valuation.

For the 2016 assessment update, the Province introduced an Advance Disclosure process to support an open and transparent exchange of information regarding complex and specialized business properties. This program enhances the accuracy and predictability of MPAC’s valuation process by enabling business property owners and municipalities to contribute to determining assessed values before assessment rolls are finalized. The Advance Disclosure process is expected to result in assessed values that are more accurate and lead to fewer appeals.

To further strengthen the Advance Disclosure process, the Province is proposing that an earlier valuation date be used as the basis for property assessments. For the next assessment update, which will take place for the 2021 taxation year, assessments would be based on a valuation date of January 1, 2019. This earlier date would facilitate a more effective valuation process that allows for meaningful and open exchange of information among MPAC, property owners and municipalities, leading to more transparent and accurate property assessments.

The Province also wants to make it easier for property owners to comply with MPAC’s requests for information. Work is underway to review the format of MPAC’s requests, ensuring that material sent to property owners is clear and reasonable. As well, the Province wants to ensure that property owners who comply with MPAC’s information requests are not disadvantaged during the valuation or appeal processes. To support this objective, the government plans to introduce amendments in fall 2018 to provide a framework for addressing non-compliance.

These measures aim to create an environment that encourages the full exchange of information in order to improve the accuracy of property assessments and support a fair and transparent property tax system.

Updated: March 28, 2018
Published: March 28, 2018