[Glen]

While the city, and many here, like to point to the number of condos (or cranes in the skyline) as a useful metric in gauging Toronto, there is another side to the issue.

Have a look at this article regarding Vancouver, which is applicable to Toronto ........

"First, Vancouver’s success in building vibrant, high-density neighbourhoods has come with high hidden costs that nobody at city hall seems to have a handle on. The policies that drive the transformation from commerce to condos need to be rethought with an eye to how to stop losing money on every new tower.

Secondly, it is not fair that business property is assessed by one standard yet taxed according to another. This invites aberrations like the bizarre levy on the Brodie Building. The city justifies tax increases with the logic that at least the owner has an ever-more valuable asset, but this is not the case for business owners, who usually rent.

Thirdly, the total tax burden on businesses is way out of whack. They pay far more than the cost of the services they consume, while home-owners pay far less.

A soaring tax base
How does a prospering city — one experiencing not only an explosion in land values, but also a great deal of new construction that adds hugely to its tax base — get into such mess? It’s easy to see how a soaring real estate market might make it too costly for some businesses to hang on to the sites they occupy, but why do taxes go up so much faster than market-driven prices?

After all, every time a ho-hum commercial block falls to the wrecker’s ball and a condo tower rises from the rubble, the city’s tax base shoots up. A building worth a few tens of thousands is typically replaced by one worth tens of millions, enlarging the base for the city to tax.

It takes some head-scratching to understand it, but this kind of development — something that happens all the time — actually produces a brutal hit to the city budget. It results in your tax bill and mine inching up once again, while the city’s remaining business properties get clobbered.

In the last 15 years, Vancouver has added well over 40,000 new homes, mainly condos or townhouses. A great many of them were built where a business used to be. So the hits on your tax bill really add up.

Indeed, every new condo unit built in the city today will shift $1,000-$1,500 of annual costs to other taxpayers, according to the careful calculations of Paul Sullivan, a property tax specialist with Burgess Cawley Sullivan and Associates, and the technical co-chairman of the Vancouver Fair Tax Coalition."

"The Hidden Cost of Condos
The two-storey Brodie Brush Building at 225 Smithe in downtown Vancouver generates $152,350 in annual tax revenues for the City of Vancouver, but uses just $71,695 in municipal services. If one were to imagine (as we have below) that it was replaced with a glitzy Yaletown residential tower, the city would lose $1,000 to $1,500 on every condo unit built.

The numbers as they are

Assessed land value: $9.75 million
Assessed building value: $90,000
2006 taxes paid: $152,350
Consumption of city services: $71,695
Net benefit to city: $80,655
The numbers if condos are built

Assessed land value: $9.75 million
Estimated building value: $39 million
Total taxes at residential rate: $129,760
Estimated consumption of city services: $234,670
Net cost to city: ($104,910)"

read the full story....... http://www.canada.com/vancouversun/...=2ca47a6b-4f22-4aac-b057-3747d2ab4bdb&k=30948

 

[nfitz]

The numbers as they are

Assessed land value: $9.75 million
Assessed building value: $90,000
2006 taxes paid: $152,350
Consumption of city services: $71,695
Net benefit to city: $80,655

How does one calculate the consumption of city services as being $71,695? Does that include roads? Transit? Cities seem to spend extraordinary amount of $ to get people to work. Vancouver's farebox recovery is only about 50%; if you assume that the employees are all travelling in the same zone to get to work (which seems optimistic), transit alone is costing about $1,000 a year of city services. It's a 2-story building of a fair size. Looks to be about 18,000 ft². 1 person / 200 ft² is a good rule of thumb, so if this was all office space, you'd have 90 people. So $90,000 for transit (more if people travel more than one zone or drive). And consumption of all city services is only $71,695?

I don't think so ... someone has low-balled the costs here. For what agenda?

 

[Glen]

If they low balled it is on the residential side. The majority of the benefit of transportation is to the individual not the company.

 

[nfitz]

If they low balled it is on the residential side. The majority of the benefit of transportation is to the individual not the company.

That's not true. Most transit trips are to get people to work. If you assign all the trips, and other city services, that only get people to the place of business or shopping to residents rather than business, then you completely bias any analysis.

Would the businesses survive if there were neither public transit or city roads to them? No. Ergo, they must assume costs. And an awful lot of it given that required capacity is a function of peak travel, which is a function of business.

 

[Glen]

Yes. Most transit trips are for people to get to work. Not for work to get to people.

 

[nfitz]

Yes. Most transit trips are for people to get to work. Not for work to get to people.

So if we were to eliminate roads and transit, there would be no complaints from the business community?

 

[TOareaFan]

So if we were to eliminate roads and transit, there would be no complaints from the business community?

I think the answer would be "eventually yes"...as there would, eventually, be no business community to speak of

Humour aside, I think the exercise of what side of the tax bill (res or commercial) pays for what city services is a bit of a dog chasing its tail exercise......the reality is that cities provide services and have to pay for those out of the total tax bill.....the establish their tax rates on the two segments so that they end up with enough in total and within that exercise they try to balance some civic objectives....but at the end of the day the total is the total and you have to get there.

For a reason that I can't explain....I spent a few hours on the weekend reading the City of Brampton's 2011 financial statements. All pretty mundane stuff and the only thing that raised an eyebrow was a set of charts at the end where they showed what percent of the taxpayers' dollars went where. The interesting thing that around 50% of a commercial taxpayer's taxes went to cover the cost of schools while the percent that an individual homeowner's tax bill that went to the same place was sub-40%. Last I heard, businesses don't send kids to schools but homeowners do.....but, somehow, the combined efforts/needs of the city/region/schoolboards produced this awkward looking balance. The point is the same though....there is a total number of dollars needed and two sets of taxpayers to draw that from.

 

[taal]

Vancouver can get away with this though ... unlike Toronto ... as the commercial rates are very similar throughout the region. So the only thing to worry about is non-local competition (i.e. other provinces / countries).

 

[nfitz]

The interesting thing that around 50% of a commercial taxpayer's taxes went to cover the cost of schools while the percent that an individual homeowner's tax bill that went to the same place was sub-40%.

Those aren't municipal taxes though. That tax rate is set by the province, which also receives all the revenues. It isn't even distributed to local school boards either, it just goes into general provincial revenues.

 

[taal]

That's another problem actually. The 416 business education tax is higher then the 905 (I think 20-30% more I don't recall) ! The province was committed to addressing this by 2015 last I checked, by making them equal.

 

[nfitz]

That's another problem actually. The 416 business education tax is higher then the 905 (I think 20-30% more I don't recall) ! The province was committed to addressing this by 2015 last I checked, by making them equal.

I'd never realised this! I didn't believe you until I started checking the rates.

That seems grossly unfair, especially given the higher relative valuations in Toronto. Why should a business in Rexdale be paying significantly higher education taxes than one across the street in Mississauga?

 

[taal]

Glen can probably chime in more with the details, its a historic thing from what I recall. I'd be curious to know if they're still on track for addressing this.

Anyway its not a large amount in comparison to the city charged tax so it won't make a huge difference.

 

[fedplanner]

I'd never realised this! I didn't believe you until I started checking the rates.

That seems grossly unfair, especially given the higher relative valuations in Toronto. Why should a business in Rexdale be paying significantly higher education taxes than one across the street in Mississauga?

So let me get this straight... business properties have a higher education property tax rate than those in the surrounding suburbs? Does Toronto get any additional benefits for paying this higher rate?

Ditto the comment about paying a higher tax rate on the higher relative valuations... Sheesh.

Was this something the popular and urban-friendly Premier Mike Harris instituted...

 

[taal]

http://www.andrewspicer.com/article298.html

Much more disappointing, however, is the case of provincial education tax rates on commercial properties. As John Barber explained in the Globe on Tuesday, they simply have a special rate for Toronto, for no reason at all:

[Finance Minister Greg] Sorbara's adherence to Tory policy was made even more plain by his decision not to address even more irritating anti-Toronto provisions in the property-tax regime, especially its wildly inequitable business education tax. Under the Tories, all businesses in the province were required to pay taxes for education at a standard rate -- except in Toronto and other cities where, by historical accident, they paid taxes for education at two times or more the fictional standard rate.

Provincial spending on Toronto schools is no greater than it is anywhere else, but Toronto businesses still pay far more than others to receive an identical service. City businesses pay education tax at a rate of 2.3 per cent of their assessed value, while businesses just across Steeles Avenue in Vaughan pay 1.76 per cent. Unless you think that income-tax rates should also vary depending on where taxpayers live, there's no policy rationale for it at all. It's just a crude grab.

City officials have estimated that reducing Toronto education tax rates to the regional average would save local businesses $120-million a year. Appropriating even half of that "tax room" to fund threatened municipal services would still leave enough behind to permit a substantial tax cut for businesses.

But Mr. Sorbara never even mentioned the business education tax. Instead of doing what is so obviously right -- deciding to levy a universal tax at a standard rate -- he gave the city a limited "right" to raise business taxes even higher. The reason why he balked is likely the same reason why the Tories failed in their promise to level the tax field: Being fair to Toronto will require other towns and cities to pay higher education taxes. For reasons that have nothing to do with fairness and everything to do with politics, that will never happen.

I've often wondered -- isn't this a violation of our rights to equal protection under the law? What gives the province the right to arbitrarily charge different tax rates to its residents based simply on where in the province they live? Those municipal borders were created by the province to begin with, and we're all citizens of Ontario -- so why does Queen's Park discriminate?

This is an older article and I think the difference isn't so high anymore i.e. 2X and it was suppose to be addressed by 2015 or so.

 

[fedplanner]

The article doesn't state that the tax is being lowered and is suppose to be harmonized by 2015. Are you sure about that?