HomeMy WebLinkAboutFIN-07-133 - Payments in Lieu of Taxes/Heads & BedsREPORT
Report To: Councillor B. Vrbanovic, Chair, and Members of
the Finance and Corporate Services Committee
Date of Meeting: December 3, 2007
Submitted By: Pauline Houston, General Manager of Financial Services
& City Treasurer
Prepared By: Pauline Houston (2646}
Wards}Involved: ALL
Date of Report: November 27, 2007
Report No.: FIN-07-133
Subject: Payments-in Lieu of Taxes/ Heads and Beds
RECOMMENDATION:
THAT the City of Kitchener take the following action regarding the taxation of "heads and beds"
properties under Section 323 of the Municipal Act:
1. Request the Minister of Finance to amend the prescribed amount for the purposes of
section 323 of the Municipal Act to allow for inflation over the past 20 years;
2. Refer the issue of the prescribed amount for the purposes of section 323 of the
Municipal Act to the Provincial-Municipal Fiscal Service Delivery Review to establish a
mechanism to review the prescribed amount on a regular basis and make adjustments
for inflation;
3. Forward the resolution to the Minister of Municipal Affairs and Housing, the Minister of
Health and Long Term Care, the Minister of Training, Colleges and Universities, the
Association of Municipalities of Ontario, the Council of Ontario Universities, the Ontario
Hospitals Association, Cities of Kitchener, Cambridge and Waterloo and local Members
of Provincial Parliament.
SUMMARY:
At the November 26th meeting, members of Council requested a report regarding the payments-
in-lieu of taxation of "heads and beds" properties.
REPORT:
The Assessment Act and the Municipal Act are the governing legislation for property taxation.
Under the Assessment Act, public hospitals, public educational institutions and certain other
specified properties are exempt from property taxation. Despite this, Section 323 of the
Municipal act allows a local municipality to levy an annual payment-in-lieu of taxation ~a "PIL"}
on some of these properties including universities and colleges and public hospitals. The
annual tax is based on a prescribed amount and the number of full time enrolled students for
colleges and universities ("heads"} and the number of provincially rated beds for public hospitals
~"beds"). These PIL taxes are generally referred to as "heads and beds" taxes. The Ministry
also establishes the formula for the sharing of these taxes with upper tier municipalities and
school boards.
The Ministry of Municipal Affairs and Housing provides the number of "heads and beds" on an
annual basis. In the City of Kitchener, "heads and beds" taxes are collected from the Wilfrid
Laurier University, Conestoga College, Grand River Hospital, St. Mary's General Hospital and
soon the University of Waterloo School of Pharmacy will be added to the list.
The prescribed amount for the purposes of section 323 of the Municipal Act ~"heads and beds")
is $75 per head/bed as specified in Ontario Regulation 384/98. The amount was last changed
in 1987 and has been in effect for 20 years. Over the same time, the cumulative CPI increase
in Ontario has been approximately 65%. Clearly, the "heads and beds" rate has not kept pace
with inflation as the amount would be approximately $124 if it had been adjusted for inflation.
There are two ways in which the payments-in-lieu of taxes from universities, colleges and public
hospitals could be increased. The Province could change the way such properties are taxed to
require the payment-in-lieu amounts to be calculated based on the current value assessment for
the property and the applicable property tax rates. With this change, colleges, universities and
public hospitals would be taxed the same ways as other federal, provincial and municipal PIL
properties. This action would require legislative changes as both the Assessment Act and the
Municipal Act would have to be amended. Alternatively, the Province could increase the
prescribed "heads and beds" amount through an amendment to OR384/98. The later is
obviously an easier change.
A number of municipalities (including The Region of Waterloo, the cities of Waterloo and
Kingston} have expressed concerns that the "heads and beds" rate has not increased in 20
years while the cost of providing municipal services has. The recommendation in this report
supports their concerns
FINANCIAL IMPLICATIONS:
In 2007, total "heads and beds" taxes were $530,475 based on 7,073 heads and beds at the
prescribed amount of $75. The City's share was $209,531. Based on the 2007 PIL calculations
and sharing, each $1 increase in the "heads and bed" amount would generate $2,794 in
additional revenue for the City. If the "heads and beds rate had kept pace with inflation and
been increased to $124 for 2007, the City would realize additional revenue of $136,894.
Pauline Houston, CA
General Manager of Financial
Services & City Treasurer
PH/mf