A Tax Class for Heritage Gets the Cold Shoulder

Artscape Youngplace building frontArtscape Youngplace, a culture hub on Shaw Street, Toronto

Picking up from last time:

The City of Toronto and the province are joining forces to address the tax squeeze in which a number of Toronto properties find themselves.

About 20 arts/culture hubs, aka creative co-location facilities, will get slotted into a new property tax subclass and be entitled to a 50% reduction in taxes. Whether, as Toronto tax assessments continue to climb, this will be enough to preserve these facilities in the long-term — or be effective only for a few years — remains to be seen.

In case you were wondering, it does seem like the province is open to letting other municipalities in on the act. Hamilton and other GTA cities are or soon will be facing similar pressures on their creative hubs.  Ottawa too?

Certainly, it is not just culture facilities like 401 Richmond that are at risk from rapidly escalating tax assessments. Heritage buildings in the commercial and industrial tax classes are particularly vulnerable, and very, very few of them will qualify for the new creative co-location facilities subclass.

As we saw last time, Toronto’s January 2017 appeal to the government asked for help with the property assessment predicament for not just culture hubs, but heritage properties more broadly. That part of the council motion read:

City Council request the Government of Ontario to work with municipalities to examine property assessment for listed and designated heritage properties, including tools that would support the conservation of heritage properties and Municipal Property Assessment Corporation property-assessment tools and processes.

While the culture hubs request has gotten traction, the heritage properties request landed with a thud.  The province seems to think this has been addressed. Has it?

We’re talking of course about heritage property tax relief (HPTR) programs available to municipalities since 2001 under the Municipal Act.[1]

So, should you like the idea of a heritage tax subclass, similar to the new creative co-location facilities subclass, as an answer to the issue with heritage properties, what about the provision already in place for a municipality to offer property tax rebates for designated properties of 10 to 40%?

Is this really the same sort of thing?

HPTR was introduced because the province recognized that historic buildings often have higher maintenance and repair costs. HPTR programs require owners to enter into a heritage easement or similar agreement to retain and maintain heritage features.

As the province’s guide to HPTR says:

This new program was developed by the Ministry of Culture and the Ministry of Finance in response to requests from municipalities, heritage organizations and property owners for a permanent tax incentive to promote heritage conservation.

The property tax relief encourages and supports owners to be stewards of their heritage properties, so that Ontario’s heritage is protected for future generations.[2]

The purpose of HPTR is clearly to promote heritage conservation and in particular good maintenance of heritage fabric.

The purpose of a hypothetical heritage tax subclass would be to offset the higher taxes on heritage properties resulting from increasing assessments — assessments based not on properties’ existing use/development value but on their potential use/development value. Because of heritage restrictions, heritage properties generally do not have the ability to increase in size and generate more income with which to pay higher taxes.

So these two measures target different, if related, public policy goals — one to help owners with property preservation costs and one to help keep heritage properties viable.

But explaining this appears to be a bit of a challenge.

And certainly a heritage tax subclass would catch far more properties than the creative co-location facilities subclass and raise a whole host of implementation questions.

I guess we’ll see if the heritage properties predicament is still on the City of Toronto’s back burner … or is off the stove entirely. Likely the latter — it seems that, with the creative hubs measure in the bag, the city’s attention has now turned to the analogous plight of small businesses, like the iconic Le Select restaurant.[3]

The city has already taken some concrete steps on this front including capping annual tax increases on commercial properties as an effort to support local business.[4]

As with creative hubs, many of these are located in old buildings, so any solutions here will incidentally benefit heritage too.
 

A restaurant frontage with a lush patio out front during the dayLe Select Bistro, Wellington Street West, Toronto


Note 1: Section 365.2, "Tax reduction for heritage property”, was put in place in 2001. For more on HPTR see OHA+M from March 5, 2015: “Heritage Property Tax Relief — slow but steady?”

Note 2: See the MCTS guide here.

Note 3: See https://www.theglobeandmail.com/report-on-business/small-business/sb-managing/toronto-eyes-new-tax-class-that-could-spell-relief-for-small-businesses/article36777477/

Note 4: At its January 31 and February 1, 2018 meeting Toronto City Council voted to limit tax increases for the commercial, industrial, and multi-residential property classes by capping taxes at 10 percent of the preceding year's annualized taxes. It also directed city staff to “engage in broad public consultation to review additional property tax options for 2019 and future years, as well as any potential requests for legislative change for such options, and report to the July 17, 2018 meeting of Executive Committee.”

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Just wanted to tell you that I really enjoy your blog posts. As someone who has no background in heritage issues, I find every entry a learning opportunity. 

The City has in effect withdrawn the HTPR program for Woodlawn and other similar residential properties by establishing rules that cannot apply. My insurance costs alone are one third higher than standard properties and heating and cooling are much higher because storm windows would be out of keeping. Any maintenance must be done as and when required. Regards, Michael 

Thanks for finally writing about >A Tax Class for Heritage Gets the Cold Shoulder | Heritage Resources Centre | University of Waterloo

About Dan Schneider

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.