If you could change one thing about Toronto, what would it be?

[taal]

Glen, what's your proposed solution to employment problem?

And yes, it may be hard for some Toronto residents to admit (including my self) but it does exist. The attitude of, lets ignore it and hope things turn for the better is all to easy (likely the exact approach of city council).

Glen, from what I can see (given facts you've posted and other sources), the downtown core (greater core, not just finical sector) is relatively safe. In other words, I personally think we'll start seeing job growth again here one the recession subsided. Admittedly it'll be at a much slower pace then some parts of the 905.

Other office districts in Toronto are taking a beating though, with pretty much 0 to negative growth outside the greater core (including areas like Y&E, Y&C and Y&B but the surrounding suburbs are the worst hit i.e. Sheppard & 401 ...)


Anyway, so, what's your proposed fix to help reverse the situation.

If enough time passes with no action, is it possible office rent rates will drop so much that they'll make development more attractive here again?

 

[GraphicMatt]

Long-term, I think rising oil prices will curb some of the "let's move to the 905 to an awesome office park right by a highway exit" stuff.

I don't think it's so much downtown-versus-905, though, as it is Toronto suburbs versus 905 suburbs. Why would any business choose to locate themselves in, say, Etobicoke when Mississauga is right there with a lower tax rate.

 

[taal]

Long-term, I think rising oil prices will curb some of the "let's move to the 905 to an awesome office park right by a highway exit" stuff.

I don't think it's so much downtown-versus-905, though, as it is Toronto suburbs versus 905 suburbs. Why would any business choose to locate themselves in, say, Etobicoke when Mississauga is right there with a lower tax rate.

Right, but I'm not sure that will pan out the way you predict. If anything it'll be a catalyst for more concentrated 905 commercial developments - a lot of these areas will have good transportation in the future - with the Yonge extension and BRT projects along Hi-way 7. Although I doubt we'll lose our car culture mentality higher oil prices can lead to even more negatives; That is, middle/high class residents moving out to live closer to where they work. Right now, there are many people (including my self) that live in Toronto but work in the 905. Downtown will likely be safe as you mention - the rental rates are a big stumbling block there already - so if companies are will in to pay more (as they have been) that might not lead to a problem.

But still ... the growth rate downtown will likely be less then many 905 employment areas. The point is, there is a problem, and although it might not seem that way not to the general public it is a serious one.

 

[Whoaccio]

Long-term, I think rising oil prices will curb some of the "let's move to the 905 to an awesome office park right by a highway exit" stuff.

Doubtful. Maybe it might curb some of the exurban stuff (i.e. "I live in Barrie but commute daily to Mississauga"), but the fuel costs for the typical suburban jobs park aren't really that high. An extra 10 minutes to one's commute would add more costs in time-value than most people's fuel bill. When you look at lower land costs, lower taxes, better transportation, gas prices will have to be double digit at the pumps before there is any serious threat to the 905's competitiveness.

 

[taal]

Doubtful. Maybe it might curb some of the exurban stuff (i.e. "I live in Barrie but commute daily to Mississauga"), but the fuel costs for the typical suburban jobs park aren't really that high. An extra 10 minutes to one's commute would add more costs in time-value than most people's fuel bill. When you look at lower land costs, lower taxes, better transportation, gas prices will have to be double digit at the pumps before there is any serious threat to the 905's competitiveness.

Right, exactly - although "exurban" might not be it, it might also spur more concentrated development in the 905 around employment lands - this will likely lead to worse transportation from a car prescriptive, in other words - driving to these locations will be more difficult then driving downtown. Also, downtown will always have the transit advantage - there is no sign of this changing, although transit projects will improve the ability to reach certain suburban employment districts just as much, if not more money / effort will be spent improving the transportation to downtown but as I've already indicated it's not downtown that has the most to worry (although, slow job growth (not negative / stagnate) vs the suburbs in downtown is still worrisome).

 

[Glen]

How in Gawd's name do you start worrying about the faint possibility that building new AAA office buildings, which is WHAT YOU ARE ADVOCATING, can THEN be a negative???

I have not said, here or at any other time, that the addition of these buildings is negative. I do believe that they hold very little significance with relationship to the larger problem. The firms that occupy such space generally need to be located downtown. It is the companies (or divisions) that have more discretion in location that we should be worried about. These types of employers, while not in shiny buildings, make up the vast majority.

This might be of interest to you........ http://www.chass.utoronto.ca/~nowlan/papers/commercial_taxes.pdf

If it helps you chill on what'll happen once someone moves into a new building, Ubisoft is seriously considering taking some or all of Corus' old space when Corus moves to the Quay. I'm assuming that, since Dexia is coming out of other RY space downtown, it'll be filled by similar businesses. I don't know where Telus, Bay-Adelaide, or PWC tenants will be coming from, but I'm betting that all of them will be new positives to downtown job figures.

The city should, and you, should have little concern where the jobs are locates within the city. Like rearranging the deck chairs on the Titanic, it is of little consequence. The concern for the city is the total value of its commercial assessment base, which greatly subsidizes the residential class.

 

[Glen]

Glen, what's your proposed solution to employment problem?

The only solution that the city has, is to become tax competitive with its neighboring (competing) municipalities. This should should have been done ten years ago. Current plans to shift the burden are glacial and tenuous at best.

 

[taal]

The only solution that the city has, is to become tax competitive with its neighboring (competing) municipalities. This should should have been done ten years ago. Current plans to shift the burden are glacial and tenuous at best.

In the sense that they will work but very slowly?
I really wonder about the 401-DVP area - what's stopping companies from locating there, decent transportation ... is tax the only issue? Is land much more expensive as well?

So what I mean to say is, let's assume the city and the 905 are 100% matched, from a tax point of view, will we see many offices relocating here to Toronto?

 

[Riverdale Rink Rat]

Either new buildings are a positive or they're not.

Your first quote from above:
I am concerned that Telus and RBC Dexia might behave in a similar fashion to Corus. Whereby occupancy will be a result of consolidating existing offices under a new roof. The effect might be a dilution of commercial assessment values with no new net assessment base growth.

I have not said, here or at any other time, that the addition of these buildings is negative. I do believe that they hold very little significance with relationship to the larger problem. The firms that occupy such space generally need to be located downtown. It is the companies (or divisions) that have more discretion in location that we should be worried about. These types of employers, while not in shiny buildings, make up the vast majority.

The city should, and you, should have little concern where the jobs are locates within the city. Like rearranging the deck chairs on the Titanic, it is of little consequence. The concern for the city is the total value of its commercial assessment base, which greatly subsidizes the residential class.

>> Glen, I'm sorry. Your first quote portrays these buildings as a negative -- or, at best, neutral with a negative spin. Yet, they're major positive additions to the rentable commercial space in the City of Toronto, as the companies are moving out of other City of Toronto space (TD Centre, Dufferin corridor, etc.). So, unless the landlords in those buildings are not renting the vacated space to a new company (at any marginal rate whatsoever), any of that vacated space which is occupied will be occupied by firms that will contribute to the commercial assessment base growing.

 

[GraphicMatt]

The tax thing is a tough issue because it gets political - Miller may very well not lower business taxes this year, because that would have to come with a similar hike in residential property taxes. (Realistically, there will probably be a big hike anyway, and adding an increase to off-set a lower commercial rate would make the bad look worse.) It doesn't matter how good your reasoning is, drastic property tax increase = losing an election.

The thing I'm most interested in is how did Toronto get here in the first place, with low residential property taxes and high commercial tax rates? Does it have something to do with the left-wing development-is-bad mantra of councillors in the 70s and 80s? The Jack Layton types who killed the DRL because it would bring too many people downtown?

 

[Glen]

In the sense that they will work but very slowly?
I really wonder about the 401-DVP area - what's stopping companies from locating there, decent transportation ... is tax the only issue? Is land much more expensive as well?

Actually land zoned commercial/industrial is usually substantially cheaper inside Toronto than outside. Look at the comparison here (481 Hanlan vs. 601 Canarctic) ........
http://southofsteeles.blogspot.com/2007/09/coincidence-of-south-of-steels-and-sos.html

While I don't believe that tax is the only issue, it is the most important one that the city can control. Toronto has a lot of advantages that it can leverage as far as making it an attractive place to work, it just needs an environment that will allow it to happen. The disparity between land/property values in this city has removed any financial incentive to develop any thing other than residential. NYCC is a good example, what was once planed to be a true mixed use area has seen nearly all non residential projects cancelled and converted to residential.

So what I mean to say is, let's assume the city and the 905 are 100% matched, from a tax point of view, will we see many offices relocating here to Toronto?

Perhaps we might see some relocating back into the city. Most likely what we would see is that during the next period of growth, Toronto will grow grow proportionately along with its peers. Not move in the opposite direction.

 

[Glen]

Your first quote from above:
I am concerned that Telus and RBC Dexia might behave in a similar fashion to Corus. Whereby occupancy will be a result of consolidating existing offices under a new roof. The effect might be a dilution of commercial assessment values with no new net assessment base growth.




>> Glen, I'm sorry. Your first quote portrays these buildings as a negative -- or, at best, neutral with a negative spin. Yet, they're major positive additions to the rentable commercial space in the City of Toronto, as the companies are moving out of other City of Toronto space (TD Centre, Dufferin corridor, etc.). So, unless the landlords in those buildings are not renting the vacated space to a new company (at any marginal rate whatsoever), any of that vacated space which is occupied will be occupied by firms that will contribute to the commercial assessment base growing.

RRR,

As far as the city is concerned the only way the assessment base grows is by value, not square footage. That is the figure that they should concern themselves with. Especially as how the ratio relates to the the residential class. Adding space without new demand, does not necessarily increase taxable assessment. It may just redistribute and/or dilute the existing base.

Maybe with both need a beer on a sunny patio.

 

[Glen]

The tax thing is a tough issue because it gets political - Miller may very well not lower business taxes this year, because that would have to come with a similar hike in residential property taxes. (Realistically, there will probably be a big hike anyway, and adding an increase to off-set a lower commercial rate would make the bad look worse.) It doesn't matter how good your reasoning is, drastic property tax increase = losing an election.

The thing I'm most interested in is how did Toronto get here in the first place, with low residential property taxes and high commercial tax rates? Does it have something to do with the left-wing development-is-bad mantra of councillors in the 70s and 80s? The Jack Layton types who killed the DRL because it would bring too many people downtown?

You answered your own question in the second paragraph. Council has chosen to do what gets them elected, not do what is right for the long term.

Here is a pretty good history.....

In The Beginning - Before Current Value Assessment

Property was assessed; that is, the municipal government sent out a valuator who examined the property and determined its value. And once a property was assessed, that assessment stood indefinitely. The last assessment before CVA was done in the 1940's. It would probably never change unless you renovated or added to your property. Each year the municipality would figure out how much tax rev. it wanted and then it would set the tax rate - so for example, if the assessor said your property was worth 100,000.00, and the tax rate was set at 1%, you would pay 1% of 100,000.00 i.e. $1,000.00. But when it comes to tax, governments really don't want the taxpayer to understand what is going on, so instead of talking about tax rate, it talks about "mill rate". So, remember, "mill rate" is just another word for tax rate.

This method of property assessment gave stability to the system. If your property was assessed at $100,000.00 in 1956, unless you made changes to it, it would stay at 100,000.00 year after year. You knew that the municipality would change the tax rate from time to time, but you also knew that the rate would rise reasonably slowly, so you always had a good idea of what your taxes would be as years went by. As the City expanded i.e. new homes and buildings were built, they were assessed when built, so the values would be higher than on older properties. So for example a house built at College and Ossington in 1956 might have been assessed at say 30,000, but the identical house built at Finch and Victoria Park in 1966 might be assessed at 40,000. But when you bought that house you knew what the assessment was and you knew with reasonable certainty what your annual tax bill would be. If you thought the taxes were too high or outside your budget, you didn't buy that house, you bought a different house with lower assessment.

This did lead to anomalies. For example, over a long period of time, as market values rose, assessed values stayed the same. So it could well happen that a new, modest-size house at Steeles and Islington might be assessed higher than an large, older home in Rosedale, although the Rosedale home would bring much more money on the market. But the market has a way of straightening out that kind of discrepancy, because the market value of each home reflects in part the annual tax bill. If the taxes on a home are $1,000 a year, a buyer takes that into account when considering what he is prepared to pay for it. If that same home had an annual tax bill of $15,000, he may not be willing to pay nearly so much for that home. So the price of the property reflects in part the level of tax imposed on it. .
----
When the move to CVA was made, in order to insulate (think Rosedale, Forest Hill) the residential property class from dramatic tax hikes a number of policies were adopted. The move to CVA was a wholesale abandonment of the principles of the previous MA and also the new one, being that all classes were to be taxes approximately the same. With the potential for complete financial ruin for many businesses in Toronto, the province enacted some restrictions. The two most relevant would be that, within your property class, the tax rate would be averaged over a period of time. So over a period of time differences between properties in the same class would be removed. The rate at which this could happen is capping. If you were paying less than the class average the city could not raise your taxes (excluding normal budgetary increases) more than a set amount. This was has fluctuated between 2.5 and 5%.
................

http://www.toronto-bia.com/images/stories/taxes/property tax explained.pdf

 

[taal]

Would the current plan not eventually equate the commercial tax in Toronto and the 905?

Yes it'll be a while, but won't it accomplish what you want in 15-20 years?

 

[Glen]

Would the current plan not eventually equate the commercial tax in Toronto and the 905?

Yes it'll be a while, but won't it accomplish what you want in 15-20 years?

Yes it will eventually even the rates. Though that is like closing the barn door after the horses have left. Keep in mind that the effects of the current climate are ongoing, so the delay is not academic.