is-i- BRAMPTON CITY COUNCIL Date: December 2,2013 natg=, Dece^ar l[,2xp[2 Subject: Write-off of uncollectible taxes 49 Hillcrest Avenue Unit # 208

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1 is-i-.. BRAMPTON Report City Council brampton.ca FlOWef Gty The Corporation of the City of Brampton BRAMPTON CITY COUNCIL Date: December 2,2013 natg=, Dece^ar l[,2xp[2 Subject: Write-off of uncollectible taxes 49 Hillcrest Avenue Unit # 208 Contact: Roman Parzei, Director of Revenue and Risk Management ( ) Overview: This report recommends the write-off of $46, of uncollectable taxes for the property at 49 Hillcrest Avenue - Unit 208 Recommendations: Based on the following report, it is recommended: 1. That the report from Roman Parzei, Director of Revenue and Risk Management, Corporate Services Department, dated December 2nd, 2013 to the Council Meeting of December 11th, 2013 re: Write-off of uncollectable taxes - 49 Hillcrest Avenue - Unit 208, be received; and 2. That Council approves the write-off of $46, of taxes as uncollectable under the authority of Section 354 of the Municipal Act, Background: The property at 49 Hillcrest Avenue, unit 208 is a unit with an assessed value of 172, in the Commercial Tax Class. Annual Taxes for 2013 were $4, The account is currently in the 3rd year of tax arrears with outstanding taxes, penalties and interest totaling $99, as of December 2nd Based on Section 373 (1) of the Municipal Act, 2001, this account will be liable for a registration of a tax arrears certificate in January 2014 and the City will be in a position to conduct a tax sale in The majority of the tax arrears on this account are due to an apportionment approved by Committee of Council on June 1st (Report # J3-1- Land Tax Apportionment- Attached as Appendix I). Outstanding supplementary taxes charged to

2 X3-I-2 the property owner, Ontario Inc., were unpaid and therefore apportioned to three individual units (unit 106, 204 and 208) still in their ownership. Current Situation: The City has been contacted by lawyers representing Business Development Bankof Canada (BDC). The owner of the property at 49 Hillcrest Avenue - Unit 208 is in default of the mortgage on the property which is held by BDC and the amount of the outstanding mortgage exceeds the assessed value of the property. The Municipal Act, 2001 provides that the City's tax lien is subject to every claim, lien or encumbrances of the Crown, which includes the Business Development Bank of Canada as a Federal Crown Agent. As a result, even if the City were to proceed with the registration of a tax arrears certificate in January 2014 and eventually conduct a tax sale in 2015, this action would be ineffective in recovering the taxes owing to the City as BDC would rank ahead of the City. BDC has advised the City that they are proceeding with a power of sale of the property. On November 26th 2013 BDC notified the City that they received an offer in the amount of $130, for the sale of the unit and the offer has been accepted on the condition that City of Brampton Council approves a partial write-off of the taxes owing. The City has been advised and has confirmed that the sale will create a significant shortfall/loss for the BDC. BDC holds a first mortgage on the property in the amount of $228, and BDC is currently owed a sum in excess of the registered mortgage. BDC has proposed that the net proceeds of the sale be split 50/50 between BDC and the City and that the City write-off the remaining taxes. The following is a breakdown of the sale and associated costs: Gross Sale Price of the Unit $130, Less Sale Costs $ 10, Less Real Estate Fees $ 6, Less Outstanding Condo Fees $ 8, Net Sale Proceeds $ City share of net sale proceeds $52, BDC share of net sale proceeds $52,441.79

3 X3-1-B The total outstandingtaxes, penalties and interest as of December 2, 2013 are $ 99, If Council accepts the BDC proposal, the write-off amount is $46, Additional to the net split ofthe netsale proceeds ofthe unit, BDC has proposed that theywould also split with the City on a 50/50 basis any proceeds from potential recovery from the mortgagees/guarantors on any Court action for recovery ofthe outstanding debt, up to the amount owed to the City. Given the priorities set forth in the Municipal Act, 2001, staff is of the view that this represents a fair compromise and itguarantees the City with recovery of a portion of the tax arrears. The $46, write-off would be shared between the City, Region and School Boards in proportion to their respective taxes rates, which are 25.07% City, 24.71% Region and 50.22% School Boards. The estimated write-offs are: City Share Region Share School Boards Total Share Taxes $11, $11, $23, $46, There are two additional units in the same condominium development, currently owned by the same property owner/developer, for which substantial amounts are owed to BDC in excess of the value of the units. BDC has proposed that similar write-offs be considered for these units, 106 and 204, when they are eventually sold. Further reports recommending write-offs for these units will be required once BDC has received acceptable offers to purchase. Corporate Implications: There are no corporate implications. The 2013 budget for tax write-offs is sufficient for this adjustment and other anticipated transactions for the balance of the year.

4 Conclusion: The reduction of outstanding taxes on the property at 49 Hillcrest - Unit 208, will expedite the payment of the outstanding taxes and bring the account up to date and place the property in a tax revenue generation position. It also provides the City with certainty as to the amount that will be recovered on the sale of the property and resolves all potential priority claims as between the City and the Business Development Bank of Canada. Roman Parzei *4ayu : Director, Revenue and Risk Management ff Peter Honeybome Executive Director, Finance and Treasurer Attachment: Appendix I - Report J3-1

5 Report Committee of Council bramptonca FlOWet City Committee of the Council of The Corporation of the Cityof Brampton Date: May 18,2011 COMMITTEE OF COUNCIL File: F PATE: Jung. I ;3-Q [ Subject: Land Tax Apportionment Contact: Don McFarlane, Director of Revenue (905) Overview: This report is to obtain Council approval of the apportionment of unpaid taxes on the property formerly described as 49 Hillcrest Ave. in accordance with Section 356 of the Municipal Act, On November 23,2007, the Municipal Property Assessment Corporation ("MPAC") issued omitted assessments on 49 Hillcrest Ave. for lands associated with Peel Condominium Plan ("PCP") 801. The omitted assessments were issued by MPAC for each of the 2005,2006, and 2007 tax years and were not parsed out to the separate units of PCP Ontario Ltd. (the "Owner") filed assessment appeals on these omitted assessments with the Assessment Review Board ("ARB") Representatives for the Owner negotiated a settlement agreement with MPAC and City staff to revise the omitted assessments which were accepted by the ARB on May 28, The Owner has not paid the adjusted taxes based on the agreed to settlement despite several collection attempts. The Owner still maintains ownership of three separate units from PCP 801. Due to these special circumstancesjthis apportionment transfers the unpaid taxes from the expired parent assessment roll for the entire 49 Hillcrest Ave. block only to each of the three units in PCP 801 still owned by Ontario Ltd. Each of the units 106,204, and 208 will share one-third of the assessment and be responsible for one-third of the subsequent taxes.

6 X3-1-& Recommendations: 1) That the report from Don McFarlane, Director of Revenue, Financial &Information Services Department, dated May 18, 2011, to the Committee of Council Meeting of June 1, 2011 re: 2011 Land Tax Apportionments (file F ) be receivedand 2) That due to special circumstances, apportionment of unpaid taxes under Section 356 (1)(b)(i) of the Municipal Act, 2001, would not be appropriate and that the unpaid taxes for the lands covered by the assessment roll number listed in Schedule A to this report, be apportioned to three specific units in Peel Condominium Plan 801 as indicated in Schedule A. Background: Apportionments are required when a property originally assessed in one lot or block is split into two or several additional portions to reflect the revised configuration of the lands. It should be noted that these transactions only re-distribute existing assessment and do not create any new assessment. The Municipal Act, 2001 (the "Act") sets out the procedures to be followed for the completion of the re-allocation of assessment through this apportionment. The procedure includes: notifying property owners of the report being submitted to Council, Council's review and approval of the apportionment, notification to the property owners(s) of Council's decision, and property owner appeal rights to the Assessment Review Board (ARB). The Act provides that under normal circumstances unpaid taxes are to be allocated in proportionto the relative assessment value of the new roll numbers (Section 356 (1)(b) (i) unless, "if the council is of the opinion that an apportionment under subclause (i) is not appropriate due to special circumstances." On November 23, 2007, the Municipal Property Assessment Corporation ("MPAC) issued omitted assessments to Ontario Ltd. (the "Owner") for the property at 49 Hillcrest Ave. The assessments were for additional assessment value added to the assessment roll by the construction of Peel Condominium Plan ("PCP") 801 which was registered on March 6, The Owner objected to these additional assessments through an appeal to the Assessment Review Board ("ARB"). Through the next two years, the Owner had several communications with MPAC and the City and finally agreed to 'Minutes of Settlement' on revised assessments in March The omitted assessment for 2005 was cancelled and the assessments for both

7 r3-t and 2007 were reduced to reflect unfinished portions of the condominium. The 'Minutes of Settlement' were accepted by the ARB and 'Notices of Decision' were released on May 28,2010. The City processed the appeal decision on June 8, 2010 and tax calculations were revised to reflect the new assessments. Several statements of taxes and overdue notices have been sent to the Owner both before and after the appeal process. There have not been any payments made on the parentaccount since For 2008 taxation, MPAC deleted the "parent*' roll number of 49 Hillcrest Ave and created 15 new property roll numbers representing each of the units in the condominium. The original property owner and developer still maintains ownership of three units in the condominium complex. Current Situation: As required by the Municipal Act, the owner of each of the properties listed on the schedule have been notified by mail at least 14 days before the meeting at which this matter will be considered. A second letter will be sent to each of the property owners affected by this transaction to indicate the amount of unpaid taxes assigned to their property and advising that if they wish to appeal this decision to the ARB, they must do so within 35 days of the Council decision. Due to the special circumstances of this property, including the Owner's full involvement with the review of assessment, agreement to Minutes of Settlement for the Assessment review, and lackof response to efforts to collect outstanding taxes on the original parent roll, it is appropriate to apportion the arrears from the now deleted "parent" roll number originally owned by Ontario Ltd. to each of the three "children" units they continue to own within the complex (units 106,204,208). Corporate Implications: There are no immediate corporate implications. The apportionment of taxes does not affect other departments. The reallocation of the total taxes is revenue neutral. Conclusion: The apportionment of taxes is often required when land configuration changes. The assessment roll is delivered by MPAC to the City in December of each year. It is very common for land changes to occur after the return of the roll due to severances or consolidations. To ensure accurate taxation, It is necessary to apportion the unpaid taxes of the pre-severed lands to reflect these changes and the new owners of these

8 X3-1-8 lands. Property owners do have the option to appeal the apportionment to the ARB if they disagree with the amount. The ARB cannot increase or decrease the overall amount, but can only re-allocate within the affected parcels. Respectfully submitted, Original Signed By Original Signed By Z-^ 4* - Don McFariane Director of Revenue -f kmju Mo lo Lewi: Lewis Commissioner ommis! of Financial & Information Services and Treasurer Appendices: Schedule A Report authored by: Martin Fmnegan, Manager oftax Billing andadministration

9 Appendix: A Summary of Apportionment of Taxes For Hearing on June 1,2011 Jo-Anne Valiquelte (905) Pa9e 1of1 Finance Taxation May Apportionment & S2HN2 LocaMon LeaalDscr Tax Year Assessment ^"TZt M HILLCREST AVE UNIT 106 PEEL CONDO PL 801 LVL 1UN ,334 32, M HILLCREST AVE UNIT 106 PEEL CONDO PL 801 LVL 1UN ,050,000 37, M HILLCREST AVE UNIT 204 PEEL CONDO PL 801 LVL 1UN ,333 32, M HILLCREST AVE UNIT 204 PEEL CONDO PL 801 LVL 1UN ,000 37, M HILLCREST AVE UNIT 208 PEEL CONDO PL 801 LVL 1UN ,333 32, M HILLCREST AVE UNIT 208 PEEL CONDO PL 801 LVL 1UN , , Li (A) % I TXR5850