Is CityPlace Toronto’s next ghetto?

[k10ery]

Toronto has never cut it's business tax rate ...

A while back the province changed the rates at which cities are aloud to increase commercial rates; essentially 3:1. i.e. every 3% increase to the residential rate can only increase commercial rates by 1%.

Yes, but Toronto has been dropping its tax ratios. And the rise in residential values means that the residential rate is dropping, so even with a fixed tax ratio the business rates are dropping (as a percentage of property value).

Toronto's industrial tax rate (including education tax) was 9.9% in 2000. By 2008 it was down to 4.3%. Revenues have not dropped quite that fast, but they have dropped.

What bothers me is, when a company decides to leave the core, as the gross rental rates are more expensive (this should be the case regardless of the tax differential) never is the outer 416 considered, it's always the 905. The reason being for everything we discussed above.

Honestly it doesn't make sense to have the same commercial tax rate applied throughout the city. Or if it does, the commercial rate must be more comparable with the 905.

Interesting, would Toronto be permitted to set up a special tax district - say west of Kipling and north of Finch, and charge lower commercial/industrial tax rates there? Then they could cut rates to compete with Peel and York, but keep the revenues coming in from the CBD.

 

[freshcutgrass]

meh, I think the core will always be home to some of the low/medium income neighborhoods

I think there will always be "some" low/medium income housing, but not "neighbourhoods". In fact, having the mixed income demographic is good. Ghettoization implies the opposite. We aren't going to be designing and building low-income "neighbourhoods" any more, and the ones we did (like Regent Park) are already being re-designed into mixed-income neighbourhoods.

Most of what we have, are grey/brownfields. As undesirable areas, it meant they were also low-rent areas, and they naturally had more low-income residents. But all these areas either are being completely gentrified...or will be. Toronto's downtown core area has been undergoing massive gentrification for a while now, and is picking up steam, rather than slowing down. Good thing we have massive amounts of grey/brownfields to keep it going for a while.

Of course, unless it involves subsidized housing, a lot of these low-income people are just going to be displaced elsewhere, creating low-income "ghettos" in areas that were once considered bucolic "suburban" (old boroughs) areas people were fleeing to avoid the "ghettos" of the core....and eventually older parts of the 905.

It's easy to see why the gentrification of the downtown core area will continue...it's popularity and draw is easy to understand...it has huge momentum that makes itself even more desirable as gentrification continues. Not so easy to make most older high density nodal areas of the old boroughs become desirable enough to get gentrification going.

 

[taal]

I think there will always be "some" low/medium income housing, but not "neighbourhoods". In fact, having the mixed income demographic is good. Ghettoization implies the opposite. We aren't going to be designing and building low-income "neighbourhoods" any more, and the ones we did (like Regent Park) are already being re-designed into mixed-income neighbourhoods.

Most of what we have, are grey/brownfields. As undesirable areas, it meant they were also low-rent areas, and they naturally had more low-income residents. But all these areas either are being completely gentrified...or will be. Toronto's downtown core area has been undergoing massive gentrification for a while now, and is picking up steam, rather than slowing down. Good thing we have massive amounts of grey/brownfields to keep it going for a while.

Of course, unless it involves subsidized housing, a lot of these low-income people are just going to be displaced elsewhere, creating low-income "ghettos" in areas that were once considered bucolic "suburban" (old boroughs) areas people were fleeing to avoid the "ghettos" of the core....and eventually older parts of the 905.

It's easy to see why the gentrification of the downtown core area will continue...it's popularity and draw is easy to understand...it has huge momentum that makes itself even more desirable as gentrification continues. Not so easy to make most older high density nodal areas of the old boroughs become desirable enough to get gentrification going.

Maybe, but massive office growth needs to occur to sustain it. We're seeing it today but will it continue ? Maybe, maybe not ... that's really the key though. You wouldn't have all this growth without all the employment.

 

[taal]

Yes, but Toronto has been dropping its tax ratios. And the rise in residential values means that the residential rate is dropping, so even with a fixed tax ratio the business rates are dropping (as a percentage of property value).

Toronto's industrial tax rate (including education tax) was 9.9% in 2000. By 2008 it was down to 4.3%. Revenues have not dropped quite that fast, but they have dropped.



Interesting, would Toronto be permitted to set up a special tax district - say west of Kipling and north of Finch, and charge lower commercial/industrial tax rates there? Then they could cut rates to compete with Peel and York, but keep the revenues coming in from the CBD.

Good question, I'm really curios what the net rental rates were in the older suburbs of Toronto.

Where are you getting those numbers from ? They don't sound right, maybe in terms of the industrial. The 3:1 ratio for commercial tax rates is enforced province wide, that means even the 905 must be loading more of the burden to resendtial.

It doesn't matter anyway, the absolute difference is huge, we're talking about 1.8 X i.e. almost double the commercial rate! About 30% of the problem is provincial i.e. commercial eductuaial tax rates are higher in the 416, I believe the province is suppose to be fixing this but 2015 but who knows.

 

[freshcutgrass]

Maybe, but massive office growth needs to occur to sustain it. We're seeing it today but will it continue ? Maybe, maybe not ... that's really the key though. You wouldn't have all this growth without all the employment.

I don't really agree that massive office growth needs to sustain increased residential growth in the downtown core. But it doesn't hurt that there is office space growth, and that will probably continue.

First of all, not everyone wants to be there just because they want to be close to where they work....there are plenty of other draws as well. The residential population has been outpacing the working population for a while, and will continue to do so. The downtown working population is still much larger than the residential population, but I can see the day where this will be reversed, or at least they will be even.

Secondly, a lot of the commuting office workers can simply be supplanted by the downtown dwellers (sometimes they are the same people).

 

[toraerach]

Secondly, a lot of the commuting office workers can simply be supplanted by the downtown dwellers (sometimes they are the same people).

Not every job is in an office. More and more people are working from home. On top of that you'll have a good deal of people working in retail (though a retail job that pays enough to support downtown housing is hard to find), people who work in healthcare (in large hospitals and in smaller doctor's offices), educators, artists, etc. A journalist doesn't necessarily need to be in an office building, nor does the owner of a cafe, a professor, or a dentist who rents out retail space. And you can add into that a large number of students attending the expanding post-secondary institutions downtown. None of these groups probably even come close to the amount of office workers in the area, but I'd imagine that taken together, they constitute a rather large chunk of the population.

 

[taal]

You guys are right, of course, a good example, I live @ Yonge and Eglinton and work in Markham, I could see my self moving downtown too one day ... maybe ...

So I'm sure that'll happen, working at home continues to increase as well. Retail / tourism / institutional / public sector (i.e. health care), all these generate jobs as well.

Given the amount of jobs in the core today, we could probably have a massive residential boom for years and still have demand. Of course, they key point there is that companies continue hiring young people or older people chose to live downtown as well. All of this can happen.


What I meant is in the long term, job growth must also occur (in whatever form).

 

[k10ery]

Good question, I'm really curios what the net rental rates were in the older suburbs of Toronto.

Where are you getting those numbers from ? They don't sound right, maybe in terms of the industrial. The 3:1 ratio for commercial tax rates is enforced province wide, that means even the 905 must be loading more of the burden to resendtial.

It doesn't matter anyway, the absolute difference is huge, we're talking about 1.8 X i.e. almost double the commercial rate! About 30% of the problem is provincial i.e. commercial eductuaial tax rates are higher in the 416, I believe the province is suppose to be fixing this but 2015 but who knows.

The 9.9% is so high it's hard to believe, but it's right. (Butit does include provincial education tax that like you said is coming down.)

In2010, Toronto's commercial tax rate was 3.5% and Mississauga's was 2.4%. So less than 50% difference now. I wonder if it shows up at all in the net rental rates. Land's got to be cheaper on the Toronto side, unless people think it could be rezoned as residential.

 

[taal]

The 9.9% is so high it's hard to believe, but it's right. (Butit does include provincial education tax that like you said is coming down.)

In2010, Toronto's commercial tax rate was 3.5% and Mississauga's was 2.4%. So less than 50% difference now. I wonder if it shows up at all in the net rental rates. Land's got to be cheaper on the Toronto side, unless people think it could be rezoned as residential.

3.37%: Toronto's commercial rate as of today (this includes the educational component):
2.28%: Missiaga
2.00%: Markham

your right, about 50% higher then Mississauga only ... I swear these were a little higher ... actually I see have this figure '3.59' but not sure from which year this was.


At the end of the day though, it all comes down to what % of the total gross rental rate the taxes are, if it's significant, 50% is a pretty big difference !

 

[k10ery]

your right, about 50% higher then Mississauga only ... I swear these were a little higher ... actually I see have this figure '3.59' but not sure from which year this was.

Well, Toronto has been cutting business taxes pretty aggressively since 2005 and it is hard to keep up with where they're at.

As a sign of this, Toronto took in $749.6 million in revenues in 2010 from taxing commercial and office building properties. If Toronto had applied its higher 2002 rates to that same base (I know, strong assumption) it would have taken in just over $1 billion.

The difference is $250 million - just about the real size of the 2012 budget hole, as I recall.

 

[taal]

Well, Toronto has been cutting business taxes pretty aggressively since 2005 and it is hard to keep up with where they're at.

As a sign of this, Toronto took in $749.6 million in revenues in 2010 from taxing commercial and office building properties. If Toronto had applied its higher 2002 rates to that same base (I know, strong assumption) it would have taken in just over $1 billion.

The difference is $250 million - just about the real size of the 2012 budget hole, as I recall.

I guess I don't quite understand how the taxation system works exactly; I'm sure Toronto has NEVER cut business tax rates, or resedential rates for that matter. The goal over the last 10 years or so is too simply shift more of the burden onto resedntial properties.

I can't speek for today but a couple ago we likely took in less commerical revenue then many years back because ... there were simply less jobs in Toronto in 2007 (and maybe Today?) then there were in the 2000 (or earlier).


Maybe another thing is that new properties get breaks on their taxes as far as I'm aware, maybe that factors in a little.


I mean, how else do you explain the lack of development anywhere outside the core / Yonge in the last 10 years or so, if you go back even further i.e. 15/20 years there have only been a handful of projects in the outer 416.

Maybe the argument someone used earlier i.e. these areas tend to be poorer now, and business want to locate where there employees mainly live. My difficultily with that is, take Mississauga, I'm sure many employees live in markham and the like, so a central location around the 401 is probably better.

 

[k10ery]

Toronto is cutting its percentage tax rate. But if commercial property values are rising faster than residential ones then the actual levies paid by business could still be rising. I am pretty sure business levies are falling in real dollars since 2000.

I am just saying, Toronto is taking in a lot less revenue because of that tax cut. If it hasn't spurred new projects or new jobs in the outer 416 then it's not working well. If we still had those revenues we could spend it on infrastructure that might attract jobs too.

 

[taal]

Toronto is cutting its percentage tax rate. But if commercial property values are rising faster than residential ones then the actual levies paid by business could still be rising. I am pretty sure business levies are falling in real dollars since 2000.

I am just saying, Toronto is taking in a lot less revenue because of that tax cut. If it hasn't spurred new projects or new jobs in the outer 416 then it's not working well. If we still had those revenues we could spend it on infrastructure that might attract jobs too.

Assuming for a second the rates are lowering; or at the very least getting more in line with the 905.

They're still 50% greater ! Again it comes down to what % of gross rents taxes account for, assuming it's significant, if you were a business, and there were offices just south of steeles and just north, why wouldn't you pick the ones just north, you can save 50% !

 

[nfitz]

I guess I don't quite understand how the taxation system works exactly; I'm sure Toronto has NEVER cut business tax rates, or resedential rates for that matter.

Toronto has cut residential tax rates almost every year for years. Commercial and Industrial too.

The current city tax rate for residential property is 0.562%. Last year it was 0.590%. In 2003 (last year of Lastman) it was 0.657%. Since 2003, Toronto commercial rates have dropped from 2.31% to 1.83%.

Unlike the province, the rates are set each year, based on the budget. Instead of just having a rate set, the budget is set, and then the tax base is divided by the budget amount, to get the rate; with adjustment so the residential/commercial/industrial rates are set to the desired ratio.

 

[taal]

Toronto has cut residential tax rates almost every year for years. Commercial and Industrial too.

The current city tax rate for residential property is 0.562%. Last year it was 0.590%. In 2003 (last year of Lastman) it was 0.657%. Since 2003, Toronto commercial rates have dropped from 2.31% to 1.83%.

Unlike the province, the rates are set each year, based on the budget. Instead of just having a rate set, the budget is set, and then the tax base is divided by the budget amount, to get the rate; with adjustment so the residential/commercial/industrial rates are set to the desired ratio.

So essentially, given the CVA (i.e. the assessment of the properties) and the amount of money in absolute dollars terms the city wants, the tax rates can be cut.

Going out on a limb, is a lot of this the result of rising assessments ? What about the fact that many older properties are very slowly having their CVA increased to the correct values. I guess that'll shift more of the burden to these older properties, but city wide the tax rates can still drop.


Compared to the 905 though, I'd image they'd be going through the same thing i.e. cutting their tax rates as the assessment of their properties go up disproportionally to increases in the budget. Of course some 905 communities reap massive returns from development charges, but in time that'll lower as there is less land to develop.

Either way, as it stands today the difference in the commercial tax rate between the 416 and 905 is very high.