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Finance and Fiscal Transparency

Kris Langenfeld, our new Toronto Mayor

Budget

Revenues

I will push to have council amend the Property Tax model to reflect resident density, thereby making higher density housing comparatively cheaper. More ►

The Property Tax formulas will be amended to account for residential density of the property — the 2-person household, living on two acres of land, will pay proportionally higher property taxes than the 2-acre medium density development that houses 50 families, notwithstanding that the 50 homes will still remit significantly greater taxes based on valuations of 50 individual market assessed homes. The financial incentive will be to promote medium and high-density property development, discourage land speculation keeping accommodation property off the market, and motivate rooming houses to report their status as multi-resident housing, thereby ensuring adherence to city health and safety regulations, reducing the amount of sub-standard housing often associated with rooming houses. Revenues derived will fund infrastructure upkeep and improvement. Details ►

Property Density Surtax

A surcharge will be applied to property taxes to reflect the population density of the property; the following formula for example takes in to account average borough level population density and local (neighbourhood level) population density and gives council the tools to set a target level for the neighbour or borough to adjustment for things like geographic restrictions or regional demand.

Properties with active businesses will apply the surtax reflecting number of employees and number of people working at the location, both counted in full-time employment terms, generally doubling a business property's population density (excluding off-site/telecommuting workers) to significantly reducing the tax surcharge. Regardless of high population density commercial property would have a floor of 100% of the base property tax rate.

Vacant properties not operating a business with an on-site employee pay a significant population density surtax; making it preferable to put a property to use commercially or lease it or begin development of it rather than leaving it sitting empty, even if that use is only as a parking lot with an attendant or leasing cheaply to a small business with numerous employees. Warehousing and storage in high demand areas should begin thinking more vertically, and possibly subterraneously (to a depth resembling permit approved underground parking).

Though the final formula will certainly change, this gives a starting point for public input and discussion.

PropertyTax% × ( 1 + ( ( ( ( Target#R/m²#R/m² ) ÷ Local#R/m² ) × ( Avg#R/m² ÷ ( #R/m² + 0.001 ) ) ) × Factor ) )

Where: #R/m² is the number of household residents divided by the total square metres of property;
Avg#R/m² is the average residents per square metre, for that Toronto borough;
Local#R/m² is the local neighbourhood population density of residents per square metre;
Target#R/m² is the city established target residential density for that local neighbourhood, enabling the recognition that not every square meter of the city is identical while ensuring full transparency and clear disclosure of how such decisions are applied;
Factor is the plugged figure, initially in the neighbourhood of 20%, allowing city council to make city-wide adjustments to the tax so that overall tax revenues remain consistent. As the existing accommodation situation improves, Factor reduces so as to minimize the effect of the property density surcharge; and
PropertyTax% is the total combined property tax (City, Education, and Building fund) rate already used to calculate the municipal property tax liability based on current market value assessment.

Number of residents based upon the average monthly number of residents actually living in a household (for more than half the total days in the month) for the 10 months of the year that the most residents had their primary residence physically in that household — Assessment Act definitions will dictate and existing tax audit systems will be responsible for assessing the accuracy of figures reported by property tax remitters.

Given that the intent is to financially motivate developers to rent out unoccupied residential spaces and to begin construction of development projects, rather than holding undeveloped land for extended periods of time while awaiting improvements in market conditions, protections will be strengthened to ensure that developers are never prevented from beginning construction projects because renters fail to vacate the property, with 60 days written notice, in accordance with all terms of rental contracts, once the developer moves to commence actual construction. The substantial property tax penalty on properties that remain vacant for longer than two months should provide strong motivation for builders to make units available for short term rental prior to commencing construction.

Developers will be entitled to have these increased taxes reduced/waived where there is a delay, of more than two months, in the zoning approval process, where that delay is directly attributable to government, and where the developer was in full compliance with all zoning application requirements. Once construction on a development has begun, population density tax increases will be waived for the term of the development timeline, as set out by the developer in the approved building permit application — those same timelines may be one of the factors considered in determining what projects are/aren't approved by the city.

Permits, Timelines, & Fines

Permit applications will include explicit deadlines for commencement and continuation of projects; part of obtaining planning approval may require developers shortening project timelines and/or delaying final eviction of tenants, until immediately before the postponed commencement date, with a commensurately shortened overall project timeline. The city will not dictate builder timelines, it will simply seek to persuade developers to minimize vacancy times or alternatively to potentially deny approval of particular projects in favour of competing options that will be ready for occupancy significantly earlier; but naturally the quality of overall concept, design, and craftsmanship, coupled with builder track record, will always remain the primary deciding factors in application approval.

• Fines will be levied against developers for significant delays (excluding delays caused by government actions disclosed in or part of the application) causing projects to fail to meet deadlines stipulated in the approved permits; fines, calculated (where appropriate) on the basis of rental income previously received for that property, will be meant to provide additional incentivization to developers to either delay commencement, and rent out existing properties, or push forward to completion and occupancy, or pursue alternative options with other developers, as opposed to allowing a partially completed project to sit for years while the developer pursues financing or new partnerships or other similar circumstances that some less experienced builders have faced. Where such fines are levied, they may, in part, be used to partially compensate financial loses, experienced by non-speculative investors, in relation to deposits paid on uncompleted projects; that is, primarily, for first-time buyers.

• The city will ultimately have the right to expropriate, at cost, any development that is delayed (by causes other than those attributable to government, i.e. delays that can be ascribed to the developer and/or foreseeable market events) where the delay extends beyond 125% of permitted deadlines (i.e. a 24-month project that is still uncompleted, and clearly will not be successfully completed within a reasonable timeframe thereafter, at a 30-month mark after the actual date of construction commencement), or for a 24-month project that has not been commenced within 6 months (i.e. 25% of the overall project schedule) of the permitted construction commencement date (and after all previous residents had vacated the property) and where it is clear that the project cannot and will not be completed within an additional 25% (i.e. 6-months) of the permit approved completion date).

• Developers will have recourse to city council and to the courts, to demonstrate that the project can be completed within a reasonable timeframe, in the general vicinity of an extra 25% of the approved total project timeline beyond the permitted completion date, so as to avert expropriation of a project.

• Additional profits to the city, in excess of all costs and expenses, resultant of such expropriation, to be divided between the city and the developer(s) in consideration of: costs and risk exposure of each party; efforts by any party to simplify/shorten/complicate/lengthen the process of getting the properties built and ready for occupancy; as well as any misstatement/nondisclosure of facts during the permitting application/approval process.  Less

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Tax exempt status for religious property will require a ten-year commitment to receive tax exemption, or the associated property taxes and penalties are payable. More ►

There currently exists a practice, by some commercial landowners, to support the use of otherwise vacant property by religious organizations, with the property owner benefitting by avoiding property taxes through exemptions from taxes on land used for religious purposes.

It would be wholly inappropriate for government to ever take any action that might tend to favour or bias, for or against, any particular religious group or organization, and I am personally committed to the principle of the separation of church and state; but it is also inappropriate for anyone to abuse society's religious allowances for secular benefit or profit.

To curb the potential for abuse of religious status to avoid property tax exemptions, in accordance with the Assessment Act, by-laws will be amended such that property owners will henceforth be obliged to make a 10-year commitment in order to receive the tax benefits of property used for religious purposes; where property is converted to non-religious use within a decade of religious tax benefits initially being claimed for that property, those tax exemptions will be retroactively disallowed and the land owner will be obliged to pay the equivalent of the reassessed value, with the usual interest and penalty costs that would have been incurred had the property not been property tax exempted and those taxes remained unpaid. Any portion of property completing a full decade of continuously primarily religious use will be exempt from retroactive tax recalculation. Where property ownership is transferred, sellers will be obliged to fully disclose potential liabilities associated with prior religious tax exemption benefits and new owners will take on any potential liability. Retroactive tax penalties will not predate enactment of these changes to Toronto's tax code, and property presently being used for existing religious purposes will not face additional costs for time periods predating enactment of such tax code changes.  Less

A full review, with thorough public consultation, of all existing property tax exemptions and allowances, beyond those codified in the Assessment Act and its regulations, will be undertaken in order to ensure that all those enjoying the benefits of being resident in Toronto also pay their fair and equitable share of municipal operating costs.

Sound fiscal management

I will bring an accountant's view to Toronto politician and bureaucratic spending.

Every reasonably fiscally responsible person puts at least some effort into investigating alternative sources for purchases, rather than just looking at the one or two most expensive suppliers that put in the effort to track us down and offer to sell to us; city purchasing actually fails to meet even that low expectation of responsible management. I will change that, implementing the systems and procedures necessary to cut the waste and realize the savings that so many mayoral predecessors have tried, but for the most part failed, to achieve. More ►

Many city departments, such as police, currently use the MERX tendering system to obtain quotes for municipal purchases; for those that don't know, MERX is publicly-traded, for-profit corporation that posts selling opportunities online, enabling suppliers to purchase a membership that allows them to search posted opportunities they are interested in bidding on; and to pay a fee to MERX for submitting a bid electronically through their systems. Most Canadian and many American branches of government, as well as many large corporations and industries such as the construction industry, use these services for many billions of dollars worth of contracts annually. The system understandably eases the workload of government purchasing by simply uploading desires and waiting for someone to knock on the door and offer to fill your wishes (for a price).

The downside, particularly for taxpayers, is that this often means that only those companies that purchase the nominally priced membership, and pay additional employees to review searches results on the site, are the companies that actually quote on available projects. This will often mean that only a few potential bidders will submit a quote, leaving government often purchasing on the basis of a single valid bid, where two or three bids might be received, but half of those are disqualified for one reason or another, and the billpayer, taxpayers, are stuck with an invoice for whatever crazy amount the one supplier offered. It would be like buying all of your household supplies only from the flyers that turn up in your mailbox over the course of the month.

In August, this system had Toronto Police paying $5.80/roll for parking ticket paper — essentially printed yellow 3"-wide plasticised adding machine tape; a million dollars worth of it. A million dollars to buy from the one of only two paper suppliers that bothered to submit a valid bid; and the other half of that same two-part contract was a $¼M purchase from a single bidder. Take a few minutes and search the web and see how much cheaper you can find rolls of paper, buying them at retail prices for packages of 10 – 15 rolls. How much of that million dollars could you have saved, of your tax dollars, in just a few minutes of your time at home on the computer? Now multiply that by all the other things that municipal government buys. Even if only 10% of Toronto's $11.5B annual budget is spent on purchases of third party goods and services, and even if only a fraction of those transactions utilize this wasteful purchasing structure, that is many millions of dollars waiting to be saved. By the way, Tory still voted to go ahead and pay the $5.80/roll for these purchases.

I will use a corporate-world, private-sector background in accounting to address the nitty-gritty details of city operations, identifying and curbing the waste, in order to realize savings.  Less

Fiscal transparency

A 2 – 4 page financial statement on the state of Toronto finances will be provided at the city's fiscal year-endMore ►

Along the lines of the recommendations adopted in the 2017/18 Toronto Police budget format changes, all Toronto departments will have concise, meaningful financial documents, with drilling-down to lower level details identifying: amounts, percentages, historical comparisons, person counts, internal and external vendor costs.

Taxpayers will have the option of receiving (unless it's cheaper/less wasteful to bulk print and bulk mail copies to every household) a hardcopy of this small report, and the public will have online access to all the summary and detail information about where tax revenues are spent, what amounts/types of other revenues are collected, and what exceptional transactions occurred, who approved them, and who received the benefits, etc.  The 400+-page budget reports will still exist, in the background, but in addition to them being accessible online, they will be summarized, in publicly accessible and readable format, for Toronto government's financiers, her taxpayers, to easily obtain and understand.

Developing business practices and financial reports for effective management is a part of what I did for years in business consulting as part of a two-decade accounting career and I will employ those skills on behalf of Toronto taxpayers.Less