Vacant and excess land subclass tax rate discounts

Considering the options

The City is reviewing the vacant and excess land subclass tax rate discount and considering options for the future of the discount program. The options we’re considering are to:

  • Keep the current tax rate discounts;
  • Eliminate the discounts in 2020; or
  • Phase out the discounts over two years, starting in 2020.

Resident and taxpayer feedback

We asked Guelph residents and taxpayers for feedback about the future of the program through a survey. The survey closed on May 26, 2019.

We’ll summarize the survey results and feedback and include it in the report we’ll present to Council. In the report, we will make a recommendation for Council to consider for the future of the discounts. Council will review the report and decide on the future of the program.

Background information

Property assessments

In Ontario, the Municipal Property Assessment Corporation (MPAC) assesses properties and classifies them into different classes and subclasses, depending on the property’s use. City Council sets the tax rates based on the budget, which then determines the amount of property taxes that property owners need to pay based on the class and subclass of their property. Read our factsheet, “How does the budget impact property taxes?,” for more information.

The vacant and excess land subclass

The vacant and excess land subclass only applies to commercial or industrial property. Vacant land is land that has no buildings or structures on it. Excess land is land that is not needed to serve or support the existing development.

If MPAC assesses a property as excess or vacant land, this means that there are no improvements on the excess or vacant portion of the land. The City then provides a 30 per cent tax rate discount to these subclasses.

How the City uses property taxes collected from vacant and excess land

Taxes collected from vacant and excess land are used in the same way as taxes collected from all other property classes. Taxes collected fund services outlined in the tax-supported operation budget, such as roads and bridges, parks, waste collection, recreation centres and buses.

Vacant and excess land subclass discounts

Previously, the Ontario government required all municipalities to give tax rate discounts to commercial or industrial property owners who have vacant or excess land. The City of Guelph currently gives a tax rate discount of 30 per cent to properties in these subclasses. There are no discounts for vacant or excess land for any other property classes, such as vacant properties classified as residential or multi-residential.

Amendments to the Municipal Act outlined in Bill 70, Building Ontario Up for Everyone Act (Budget Measures), 2016, gives municipalities the option to make changes to vacant and excess land subclass discounts. This change allows municipalities to determine at the local level the best way to ensure all property owners pay their fair share of property taxes.

Any change to the vacant and excess land subclass discounts would not change the amount of revenue raised through taxation—it would only change the distribution of taxes between all property classes. This means that property owners of vacant or excess commercial or industrial land will see a tax increase and all other property owners will see a tax decrease, but the total amount of taxation revenue raised stays the same.

Education tax rates

A portion of property taxes paid to the City goes towards education. The amount is determined by the Ministry of Finance, and helps to fund the elementary and secondary school system throughout Ontario.

In the past, owners of vacant or excess commercial or industrial land received an education tax rate discount. The Ministry of Finance has decided to phase out this discount. In 2018, a common discount of 30 per cent was used. In 2019, the discount is reduced to 15 per cent. In 2020, the discount will not exist at all for education tax rates.

Options: What should the City do with the tax rate discount?

There are pros and cons for all three of the options we’re considering for the tax rate discount. The information below summarizes how property taxes look based on each option.

Option 1: Keep the current tax rate discounts

Commercial and industrial vacant and excess land owners will continue to receive a 30 per cent tax rate discount on their property taxes. All other property classes will continue to subsidize this discount. Annually, the discount amounts to approximately $925,000 that all other property classes subsidize.

Note: This option is not consistent with the Ministry of Finance’s two-year education tax rate phase-out process in place for 2019 and 2020.

Option 2: Eliminate the discounts in 2020

With this option, the tax discounts will be eliminated in 2020. This will increase the tax rate for commercial and industrial vacant and excess land by 42.31 per cent. (The tax rate increase is based on the 2019 assessment roll return. The actual tax rate impact will differ slightly based on changes to the City’s assessment base.) This will shift a total of approximately $925,000 in taxes onto commercial and industrial vacant and excess property owners in 2020.

Eliminating the discount in 2020 will give property owners time to prepare and budget for a tax rate increase before the changes come into effect.

The tax rate for all other property classes will decrease by 0.38 per cent. (The tax rate increase is based on the 2019 assessment roll return. The actual tax rate impact will differ slightly based on changes to the City’s assessment base.)

Note: Eliminating the tax rate discount immediately is not consistent with the Ministry of Finance’s two-year education tax rate phase-out process in place for 2019 and 2020.

Option 3: Phase out the discounts over two years, starting in 2020

This option will see a phase out of the discounts starting in 2020, and an elimination of the discounts in 2021. This will increase the tax rate for commercial and industrial vacant and excess land by 21.2 per cent in 2020, with a similar tax rate increase in 2021. (The tax rate increase is based on the 2019 assessment roll return. The actual tax rate impact will differ slightly based on changes to the City’s assessment base.)

This option will give property owners in this subclass time to prepare and budget for the tax rate increase.

The tax rate for all other property classes will decrease by 0.19 per cent in 2020, with a similar decrease in 2021. (The tax rate increase is based on the 2019 assessment roll return. The actual tax rate impact will differ slightly based on changes to the City’s assessment base.) This will shift a total of approximately $463,000 in taxes to commercial and industrial vacant and excess property owners in 2020 and in 2021.

This option provides a three-year complete phase out period that will help to reduce the impact of the tax increases caused by the elimination of the education discount rate.

Note: This option follows the Ministry of Finance’s two-year education tax rate phase-out process in place for 2019 and 2020.

How to tell if your property is affected

All properties in Guelph will be affected by changing the vacant and excess land subclass tax discounts. Take a look at the assessment code on your final tax bill, or contact the tax office at tax@guelph.ca to determine how your property will be affected.

Vacant or excess land assessment codes have a “U” or “X” as a middle letter. These properties will see a tax rate increase if the tax discount is eliminated or phased out. All other assessment codes will see a tax rate decrease.

What are other municipalities doing?

Other Ontario municipalities are reviewing their vacant and excess land tax rate discount. Some municipalities similar to Guelph have decided on the future of their discount program, while others are still deciding on the future of their programs.

  • The Region of Waterloo (includes Kitchener, Waterloo and Cambridge) and the Region of Durham (includes Oshawa, Ajax, Whitby and Pickering) will no longer give discounts after 2018.
  • The Region of Halton (includes Burlington, Halton Hills, Milton and Oakville) has received Council support to eliminate the discounts after 2019.

It is difficult to determine if a municipality is keeping the tax rate discount because there will not be a change in their property tax program. Communications is not typically given when there is no change to a program.

For more information

Contact the City’s tax office at tax@guelph.ca or 519-837-5605 for more information about the tax rate discounts and the options we’re considering.