Enforcing fair property tax ratios

​Businesses in Ontario pay much higher property tax rates than residents, despite using fewer services. The Ontario Municipal Act requires municipalities to tax commercial and industrial properties at a ratio of 0.6 to 1.1, but many municipalities have no plans to comply.
 
For 2024, the City of Peterborough moved to increase its business tax ratio from 1.5 to 1.65, shifting added tax burden onto the business community in order to minimize the rate increase for homeowners. This trend is causing concern among businesses across Ontario.
 
The Peterborough and the Kawarthas Chamber of Commerce has put together a policy resolution on this tilted “Enforcing fair property tax ratios” that we have submitted to the Ontario Chamber of Commerce (OCC). It will go to the membership to debate and vote on in April, at which point approved resolutions become part of the advocacy efforts of the OCC for the next three years.
 
Our resolution:
 
Commercial and Industrial property taxes in Ontario municipalities are calculated based on a ratio of what residential property owners pay. For example, if a municipality has a commercial tax ratio of 1.75, commercial property owners are paying 175% what a resident is paying for the same amount of property tax assessment.
 
The Ontario Municipal Act Reg. 386/98: Tax Matters – Allowable Ranges for Tax Ratios sets an allowable range for property tax on commercial and industrial properties at 0.6 to 1.1.
 
A quick look at tax ratios from a selection of municipalities from across Ontario from 2023 demonstrates that this range is not being followed:
 
                Commercial        Industrial
Barrie                    1.43       1.51
Milton                   1.46       2.09
Peterborough    1.5         1.5
Brantford             1.75       2.25
Guelph                  1.84       2.2
North Bay            1.88       1.4
Woodstock         1.9         2.63
Sudbury               1.91       3.45
Belleville               1.92       2.4
Kingston              1.98       2.63
Thunder Bay       1.98       2.37
Clarington           1.98       2.49
Sarnia                    2.02       2.4
Niagara Falls       2.15       2.95
Sault Ste. Marie 2.31       4.38
 
Municipalities are coming under increasing financial pressure due to factors that include inflation in everything from capital projects to wages, increased demand for services, and an increased role in areas like public health and homelessness. Despite this pressure coming from a variety of sources, they essentially have one tool for raising the funds to do it — property taxes.
 
More financial pressure on municipalities is leading them to further increase tax ratios to the benefit of residents at the expense of the business community.
 
The City of Peterborough spent a decade lowering its commercial and industrial tax ratios to 1.5, achieving that several years ago. This year it voted to increase the tax ratios to 1.65, shifting $3 million in taxation from residents to businesses. Businesses in the City of Peterborough will on average pay 22% more in property tax in 2024.
 
Similar stories are playing out across Ontario and businesses cannot continue to bear the brunt of property taxation on behalf of residents. Businesses use fewer services but are expected to pay significantly more for them.
 
It is clear Reg. 386/98 of the Ontario Municipal Act has no teeth. Municipalities across Ontario have been charging property tax ratios well outside the allowable range for decades with no plans to change. The Government of Ontario needs to put some teeth in the act and hold non-complying municipalities to account.
 
Recommendations
 
That the Ontario Chamber of Commerce urge the Government of Ontario to:
 
Enforce existing property taxation ratios set out in the Ontario Municipal Act Reg. 386/98: Tax Matters – Allowable Ranges for Tax Ratios by withholding provincial support — including access to provincial funding streams — to municipalities that:

1. are not taxing commercial and industrial properties at the required rates or
2. are not actively transitioning to the required rates based on a plan that specifies gradual decreases on a timeline approved by the Province.