Heritage Property Tax Relief (HPTR) -- slow but steady?

HPTR has been around a long time now -- since 2001, when the then Ministry of Tourism and Culture worked with the Ministry of Finance to develop it.

The timing may seem odd to some -- it was still the Harris era, and in fact Tim Hudak was Minister of Tourism and Culture! After all the cuts to heritage (and other) programs you wouldn't think a new heritage incentive would be at the top of their list.

The opportunity arose from the Harris government's goal (obsession?) of reducing taxes, and the resulting predilection to use taxation instead of grant funding to accomplish public policy objectives. The government was fond of quoting the number of taxes they'd cut! So HPTR was not such a hard sell. If memory serves, the City of Toronto was the chief advocate for the measure, and there were precedents already in the Municipal Act. Ministry of Finance staff were surprisingly supportive.

Section 365.2, "Tax reduction for heritage property", was added to the Municipal Act (later, for Toronto, this became section 334 of the City of Toronto Act). Minister Hudak made the announcement at the Distillery District in Toronto. One more tax cut to add to the list!

The common wisdom is that tax measures are less susceptible to political shifts and cost-cutting than grants or subsidies. Having a legislative or regulatory underpinning, tax tools become more ingrained and are more difficult to change. While this is not altogether true -- technically it's as easy, say, to repeal a HPTR by-law as it is to axe a grant program -- the optics are different: in one case you're "cutting costs", in the other you're "raising taxes", at least on those benefiting from the program.

It is partly for this reason that Heritage Canada (now The National Trust) has for decades lobbied successive federal governments to establish an income tax incentive similar to the very successful Historic Rehabilitation Tax Credit in the U.S. Alas, they have been unsuccessful so far, but we live in hope. Such an incentive would be a major game-changer for many heritage commercial and industrial projects.

In the long absence of provincial grant programs, HPTR is pretty much all we've got at the provincial level targeted to the preservation of Ontario's built heritage. According to unofficial numbers from MCTS, at the beginning of this year (2015):

  • 42 municipalities had passed a by-law enabling them to provide heritage property tax relief
  • 27 municipalities actually reported providing heritage property tax rebates in 2013 (most recent data available)
  • $16.42 million in HPTR was paid out province-wide from 2002-2013, of which about $7.39 million came from the province
  • $4.48 million in HPTR was paid out province-wide in 2013, of which $1.86 million came from the province

While individual municipal programs have been successful, overall the use of HPTR in the province, after over a decade, has been muted. Why the lacklustre response? A few things:

  • it's seen as not a big incentive
  • program design and administration can be complicated
  • municipal reluctance to cut into tax revenues

These factors have led to slow, and relatively small, take-up -- both by municipalities and, where municipal programs do exist, by eligible property owners.

Some observations on the design and administration issues. From the start the requirement for an easement or other agreement with the property owner has seemed cumbersome. It's worth remembering that in 2001 a heritage building could be demolished without the municipality's consent, nor were there provisions in the OHA for the maintenance of heritage property. So the main purpose of the agreement was to ensure that a municipal tax rebate did not go to an owner who then went and demolished their designated house! While today the demolition threat is (largely) gone, maintenance is still an issue and not being well-addressed with property standards by-laws. It makes sense, then, that this should be the focus of the agreement, which also should be kept as simple as possible.

Another potentially complicating factor is that the legislation gives municipalities almost too much choice in designing their programs. In addition to the standard requirements of designation and an agreement, the municipality can set "additional eligibility criteria", which leaves the door wide open, as well as choosing the level (or levels) of tax reduction in a 10-40% range. While this allows for very specific tailor-made programs, it may also present challenges for decision-makers in structuring the program and determining who's in and who's out.

There is also the inherent complication of our municipal structure with most municipalities in an upper tier/lower-tier arrangement. If the local municipality decides on a property tax relief program and the upper-tier doesn't play ball, then of course the tax reduction is less, and less attractive.

Finally, I think it's still not well understood that the province has significant skin in the game! The figures above indicate the provincial share of the costs of HPTR programs is close to 45%.

There's a lot more to be said, but I'll wrap this up by pointing you to three recent reports by municipalities: a program review by the City of Peterborough, which has had long experience with HPTR; a report by the City of Toronto on restructuring their program; and a short report by the Town of St. Marys, which is just looking at establishing a program. Recommended reading for those contemplating a HPTR program or reviewing an existing one (in addition to the ministry's guidance material of course!).

Comments? Just email me at danschneider@live.ca.


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Passing on comments from my former colleague Andrew Jeanes:

Great blog entry! I'm commenting on this rather late, but I wanted to relate a telling anecdote on property tax rebates versus grants as a heritage funding incentive. At its July 2014 meeting, Toronto City Council had two items side by side on the agenda: approval of the city's 2014 heritage grant awards and restructuring of the heritage property tax rebate program. As councilor and as mayor, Rob Ford was notorious for putting a hold on any council agenda item relating to grants. He didn't like the city giving out grants for, well, pretty much anything, and would always block these items from being approved on consent, specifically so he could vote against them. And so it was to nobody's surprise when Mayor Ford placed a hold on agenda item PG34.16, the 2014 heritage grant awards. The total of all grants to be approved was just under $261,000. And again to nobody's surprise, when the item came up for a recorded vote, there was only one vote against the grants. No guesses as to who. Meanwhile, agenda item PG34.15, restructuring of the heritage property tax rebate program, had no holds and passed on consent without a single word of comment from the mayor or anyone else. The total city budget allocation for tax rebates under this program is $2 million dollars, or almost four times as much as the 2014 heritage grants.

Andrew Jeanes
Culture Services Advisor
Programs and Services Branch
Culture Division
Ministry of Tourism, Culture and Sport

About Dan Schneider

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Dan Schneider is a heritage enthusiast, policy wonk, writer and professional heritage consultant. Formerly senior policy advisor with the provincial culture ministry, Dan has much experience with the Ontario Heritage Act and heritage policy issues. A lawyer by training, he was lead policy expert on major changes to the Ontario Heritage Act in 2005 and 2006. His advice is frequently sought on questions related to Ontario's legislative and policy framework for heritage. Based in St. Marys, Ontario, Dan is Principal of Dan Schneider Heritage Consulting. He can be reached at danschneider@live.ca.