(Updated) The latest about your property taxes

The following is a news release issued today by Ontario Premier Dalton McGuinty, followed by a response from the Ontario Chamber of Commerce that calls McGuinty's announcement "Band Aids on top of Band Aids":

*************************** McGuinty government gives municipalities tools to ease residential property tax burden

TORONTO, March 15 - The McGuinty Government today announced that municipalities would be given greater flexibility and autonomy in setting their property tax rates.

"With a strong housing market, homeowners in many communities across Ontario have experienced substantial increases in their property assessment," Finance Minister Greg Sorbara said.

"We are giving municipalities the tools they need to better manage the impact of reassessment on their residential taxpayers."

Under the current system, in several communities including Toronto, Ottawa, Sarnia and London, business taxes could go down, while residential property taxes rise substantially.

Through regulation for the 2004 taxation year, the Minister of Finance will give municipalities the ability to offset the impacts of reassessment by avoiding tax shifts from business onto residential property taxpayers.

This change, on its own, if implemented by municipalities, would be revenue neutral as levels of taxation on each class would neither go up, nor go down. Under the current system, Toronto and 35 other municipalities are prevented from increasing municipal taxes on certain business property classes, leaving residential property taxpayers to pay for improved or additional municipal services this year. Through regulation for the 2004 taxation year, the Minister of Finance will modify the levy restriction by allowing municipalities to apply a municipal tax rate increase on the business and multi-residential classes that is no more than half of any municipal tax rate increase on homeowners.

In other words, a municipality seeking a 2 per cent increase in residential taxes could raise business taxes by 1 per cent.

"This will give municipalities the ability to share the burden of any municipal tax increases while continuing to reduce the municipal taxation gap between business and residential property taxpayers," said Sorbara.

In making this decision, the Ontario government is balancing the needs of municipalities for revenue and tax stability with the concerns of business about their property tax burden.

"The McGuinty government is committed to a new way of doing business with municipalities," Municipal Affairs and Housing Minister John Gerretsen said.

"We believe that individual municipalities are in the best position to determine how to deal with the municipal tax impact of higher assessments on homeowners and we are giving them the tools to make those decisions in time for their 2004 budgets."

The government plans discussions with key stakeholders on further changes to the property tax system, designed to make the system simpler, and more responsive to local needs, such as the possible creation of a small business property tax class. For more information visit www.gov.on.ca/fin

Backgrounder Since the release of the 2004 reassessment data, the government has heard from an overwhelming number of municipal leaders that the current rules governing the setting of municipal property tax rates are too restrictive in that:

- They do not permit municipalities to effectively respond to market value swings that may occur between property classes in a reassessment; and - They do not permit all municipalities to access their full tax base to raise revenue for the funding of local infrastructure and service needs or to keep pace with inflation.

For the 2004 taxation year, the Minister of Finance, through regulation, is allowing the following two flexibility adjustments: 1. Municipalities, in addressing tax shifts due to reassessment, will be permitted to increase the tax ratio of one or more business property classes to the extent necessary to maintain the existing municipal tax burdens between the residential and business classes.

2. Municipalities with property classes that are subject to limits on their levy increases, can apply a municipal tax increase to those classes, but only by an amount that is no more than half of any tax rate increase applied to the residential class.

The modifications to the levy restriction policy will give municipalities the flexibility to share the burden of any municipal tax increase across all property classes, while continuing to reduce the gap between business and residential property taxes. In making this decision, the Ontario government is balancing the needs of municipalities for revenue and tax stability with the concerns of business about their property tax burden.

The Minister of Finance also proposes to have a series of discussions with representatives from the municipal and business communities on stakeholder concerns about the complexities of the capping and clawback mechanisms, the future implementation of assessment averaging, the challenges of the short timelines in the reassessment and municipal budget cycles, and the inability of municipalities to target tax relief to small business. **************************** Band Aids on top of Band Aids are not the solution to property tax problems

TORONTO, March 15 - Today's announcement from Ontario Finance Minister Greg Sorbara will do nothing to address any of the problems with the property tax system in Ontario -- nor will it address the budget challenges facing municipalities.

"We're pleased to see that the province recognizes the present system is broken," said Len Crispino, President and CEO of the Ontario Chamber of Commerce. "But this is another Band Aid on top of other Band Aid solutions." The OCC has communicated extensively with the Ontario government on needed reforms to the current property tax systems, including advocating for a property tax review panel to address the systemic problems and inequities in the system. "Business knows that capping business property taxes wasn't a solution.

But what we need is not more of the same but a fair and equitable tax system in Ontario," said Crispino. "Business isn't a faceless machine with bottomless pockets -- business is part of the community -- your neighbour -- the sponsor of your baseball or hockey team."

The OCC passed a resolution at its last annual general meeting calling for the establishment of a property tax review panel. Its mandate should be to:

- Review Ontario's property tax system, including progress in moving towards current value assessment with the goal of ensuring that Ontario's property tax system is equitable across the province;

- Identify and establish an economically healthy property tax burden for each class of property;

- Identify options for a more equitable business education tax;

- Evaluate the heritage tax program;

- Develop a long-term solution to the capping and claw-back policies;

- Identify existing meaningful expert research data regarding property tax burdens and rates and their impact on economic activity;

- Provide detailed analysis of the full financial impacts of recommendations on all property tax classes; and,

- Develop expert research data regarding property tax burdens and rates in order to achieve and maintain the forgoing objectives.