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2018-11-05 18:19
Thank you. I'm here to speak to clauses 385 to 414 regarding the First Nations Fiscal Management Act changes in front of you.
This act came into effect in 2006 and has established a strong framework for first nations who opted into the regime to implement taxation and fiscal management and to access long-term financing to meet their economic development and infrastructure needs. There are three first nation institutions that operate under this act. We refer to these as the fiscal institutions. They include the First Nations Financial Management Board, the First Nations Finance Authority and the First Nations Tax Commission.
This act, like the First Nations Land Management Act, is optional. However, more than one-third of first nations across the country have chosen to exercise their fiscal powers under this regime. That's 239 first nations and soon to be 266 first nations.
These amendments are mainly administrative but they are important to the continued evolution of the regime. These were developed in partnership with our first nation fiscal institutions in order to improve their daily operations and respond to the needs of their member first nations.
Budget 2018 committed an additional $50 million over five years, with $11 million ongoing for these institutions to expand their operations nationally. These changes will help them do so.
I would like to give you a few concrete examples of what these amendments will achieve.
There are bijural concerns with the current act. This means that there are inconsistencies between the civil law and common law concepts that speak to rights and interests on reserve lands. These must be addressed in order to ensure national consistency, particularly as we implement in Quebec.
There is a need to strengthen the liability protections for the institutions and their staff as their work continues to evolve. For example, the financial management board is partnering with the Assembly of First Nations and the government to develop a new fiscal relationship. We need to ensure that this work is included.
There is a need for regulations for taxation on lands that are shared by more than one first nation. We refer to these as joint reserves. First nations under this regime want to be able to tax these lands. These amendments will help them do that.
To continue to evolve the regime, there is also a need for regulations to enable aggregate indigenous organizations delivering public services to be able to access the regime to meet their infrastructure needs. For example, the First Nation Health Authority in British Columbia, which delivers health services to all the first nations in that province, has asked for access to the regime for this purpose.
Finally, these amendments will enable first nations under this regime to access their Indian monies upon a successful vote by their communities. These are monies held by Her Majesty for the use and benefit of first nations.
In summary, this regime is optional and first nation-led. These amendments are mostly administrative. They are clarifying language, addressing operational issues for the fiscal institutions and their members, and expanding access to those who have asked for access to the regime.
I'm open for questions.
Robert Eisenberg
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Robert Eisenberg
2017-10-03 15:36
I'm really in your hands. I was asked to be here. This is not really a deputation.
I will tell you some of the challenges we face. I'll try to make it reasonably quick, and I'll do it in more of a point form rather than a discussion.
Our company has been restoring old buildings for 40 years now, and we do it for profit, although we would do it for nothing because my partner, Michael Cruickshank, and I love what we do. I just want you to know that this is a profitable endeavour, and one can do very well indeed restoring and retrofitting these older buildings.
There are several costs associated with restoration, renovation, and retrofit that distinguish the process from new construction. The design process, for example, ends in a new building when you get your permits. It begins in an older building when you get your permits because you have no idea what you're going to come up against. That causes unforeseen expenses. Borrowing costs are generally higher for older buildings.
The building code and municipal objectives follow a labyrinthine zoning bylaw, especially here in Toronto, and the building code was not designed, really, for a retrofit of older buildings. For example, we may be asked to do earthquake protection to one of these older buildings, and the building was never really designed to accommodate that kind of interior structure. It can be very expensive and awkward because you might find pipes all of a sudden or beams and columns threatening to go across windows and obscure the very historical things that you wanted to protect.
Adding insulation to roofs increases the snow load because the heat doesn't escape to the roof to melt the snow, and these buildings were not built to withstand the kind of snow loads that adding insulation to the roof entails. We have been asked to green our roofs, which we do, but when you green a roof, the same thing happens. It involves extra insulation just by adding the earth and the greenery, and there are structural anomalies characteristic of older buildings.
Then we have the labyrinthine zoning bylaw. I'll just give you a couple of quick examples. We may be asked for a payment in lieu of being able to provide parking. These buildings are often built lot line to lot line, and often the sites that house older buildings just don't accommodate the required parking. Now all of a sudden you're stuck with a payment for which you get no benefit.
On parkland dedication for change of use, there is no predictable way of knowing whether a use within our building is industrial or office, but to change from industrial to office may be considered to be intensification, which may require parkland dedication development fees, and it may not even conform to the zoning bylaw because it may be zoned industrial. I'll give you an example of the kind of thing I'm talking about. We have a printer in our building, and because printing today is now done on computers, it is absolutely an office use. There is no question. There are no three-coloured presses or anything like that. It is an office, and in fact, all other customers are office, but guess what? That's considered industrial. We have a customs broker in one of our buildings, and all of his customers are, in fact, industrial. They're importing largely from the United States, and they work with industrial uses, but guess what? They're called “office”. If we were to convert from the printer, which is an office use, to technically an industrial use, it could involve all kinds of things. It can be six months before we get approvals, and by that time, you've lost your tenant prospect.
Concerning realty taxes, properties are now taxed at their highest and best use, so if we have a building that doesn't maximize density for the site, we may be taxed as though it did. In many cases our rental rates are lower than they would be for conventional new buildings, yet we would be taxed as though it was a conventional new building because that would be its highest and best use. In many cases the realty taxes are unreasonably high.
There are other things, too. For example, the historical board at the city—it's now called heritage—might require us to restore the old building or the old windows. Well, it can cost a couple of thousand dollars to restore an historical window. To replace that window with thermal pane, by the way, might cost a quarter of that.
One of the things we've done at the Toronto Carpet Factory, an office complex of 140 businesses, is restore an old chimney. That chimney is 150 feet high and it is a historical chimney. It speaks of the historical background of this particular property. It's absolutely elegant. We've spent over $150,000 restoring that chimney. It would have cost us about $50,000 to tear it down.
We've even restored a railway track. They used to bring the bolts of carpet and the thread, the raw materials, up on this railway. We've not only restored it, we've put in a brick bed to house that. There's absolutely no commercial value for us to have done that.
Getting to where the government might come in, it would be, first of all, to encourage municipalities to simplify the building code and make it more conducive to the restoration of old buildings, simplify the zoning bylaw, but also where they've required things such as the restoration of old windows, there should be perhaps a subsidy for doing just that. If they want special locks and special equipment for the doors and air conditioning units that no longer work and don't conform to the historical nature of the building, there should be some kind of compensation.
I can't speak directly of the types of compensation, but I know realty taxes have been used as an inducement to restore old buildings, and obviously direct subsidies and any kind of other tax break, as well as low-interest loans, for example, to compensate for the fact that mortgage companies are loath to lend to some of these historical buildings.
That's not a very colourful or dramatic exposition, but perhaps that's helpful to you.
Jody Kliffer
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Jody Kliffer
2017-02-09 10:00
Thank you.
Thank you to the committee for hearing what I have to say today about land banking.
By way of background, this is a piece of research I did at graduate school, at UBC, back in 2007. That's why I'm reporting to you as an individual today. It's just something that came out from my past and has followed me like a wounded dog for seven years. So here I am before you to talk about some of the highlights of land banking as a tool that's been used throughout North America.
Basically when you think about poverty, it tends to manifest itself in many different ways. When we think about the solutions to it we have to have a holistic approach that involves both the health and education employment components of poverty, but also the built environment and how poverty has struck down a lot of our communities and neighbourhoods.
Poverty in Saint John, like many communities, is concentrated in pockets, which you've probably heard a lot about today. Especially in eastern Canada, these neighbourhoods have a lot of older building stock. CMHC tells us that anything built before 1930 has a very high occurrence of needing repairs, which is basically the entire building stock of the urban core of Saint John. It's not that it all needs repairs, but it certainly falls in the category of being built before 1930.
As some of these communities have experienced decline over the past 50 years, for various reasons, what tends to go down is community pride, tax revenue for cities and provinces, the safety of these communities, and reinvestment in lateral adjacent properties or properties in a similar area because there's no confidence among the private sector. What goes up at the same time is a cost to city resources to send emergency response vehicles to police these neighbourhoods—fire trucks, ambulances, and so on. Future blight also goes on the rise in these communities, as do crime rates. That cycle of decline enters into a very aggressive pattern, and it's hard to turn away from that without strategic thinking.
How does decline typically happen? As we know, for different reasons an owner of a property is not able to pay their mortgage, whether it's an absentee landowner who no longer sees value in the return on investment on their property or it's a landowner who, for whatever personal reasons, is unable to make mortgage payments. Tax accumulates on that property. Eventually it becomes abandoned and begins that cycle of deterioration, if it hasn't already entered that state, and the property is foreclosed. Then it goes to tax sale. This process takes about seven years or longer, and meanwhile there's been no reinvestment in the property. As time goes by, the return on investment on those properties becomes even more bleak.
So what is a land bank and how does it interface with these problems? The mission of a land bank is to restore integrity and community pride to these neighbourhoods and stabilize that process of decline. We'll talk in a bit about how it does that. It is a strategy that deals with the poverty of our built environments that form the physical conditions of poverty around us. It started in Michigan back in 2001, I believe, in a town called Flint, but later was adopted by Detroit, and now has spread across America, from San Francisco to St. Louis to Cincinnati to almost every major urban centre that has some form of abandonment. It's been a very useful and strategic method to return properties and buildings to new uses in the communities and stabilize that process of decline. Although it has not yet been adopted in Canada, I think it looms as a potential new strategy for us to consider.
The structure of a land bank is that typically it is a quasi-governmental organization comprised of about nine or so members; a couple typically are politicians, to build in the transparency of a land bank. It's a not-for-profit body. It looks at real estate properties in the city where it's working and tries to assign value where the regular real estate market has failed to assign value to these properties anymore. Basically it looks at properties that nobody else is looking at.
How does it work? It has three areas of interest. It acquires land sometimes through purchase, sometimes through donation. A lot of times you'd find somebody who doesn't want to actually own a property because they just inherited it, or there's no value to them. Land banks have the unique ability to expropriate land if the right circumstances are present for them to activate that power, which in the States is given to them by the state.
The second area of work it does is it maintains land. It creates green lots. The property building is way beyond feasible repair. It knocks the building down and creates a green lot instead of having blight. It can put community gardens into these spaces to offer food to the community, and it can restore buildings if they've not deteriorated enough to require being knocked down.
The third area of activity of a land bank is to divest itself of land. It's not there to hold land forever; it is there, rather, to repurpose it and reposition it. A land bank could go to affordable housing outfits to offer side lots to adjacent neighbours once the building has been removed and it has become a green lot, or it could go to new development if it's been able to acquire several adjacent properties. You could reposition that for sale.
One of the powers that is needed, typically, by a land bank in the States is the power to clear property taxes. A lot of times, a barrier to reinvestment in property is that the taxes have accumulated for so many years. A land bank has the power to eliminate those taxes. Another power needed is the power to clear the title on land. A lot of times, especially in older cities where there have been estates and inherited lands, the title can get very confusing over time, and that's a barrier to reinvestment. A land bank has the power, as I mentioned, to expropriate land, a power given to them by the state. Decisions are made by the committee when that is an appropriate power to exercise. A land bank can expedite the foreclosure process, so instead of taking seven to eight years, the process goes to about two years. The building in question doesn't reach that critical state of decline. A land bank can also make quick decisions. It doesn't have to vet its decisions through any government body, such as a city council. It's empowered to make decisions on its own by its own governance structure.
The benefits that fall out of a land bank have been robust in a lot of the communities that have them in the States. There's neighbourhood beautification, to start with. Land banks have stabilized the decline of the communities they operate in. There's new tax revenue in a lot of cases for the buildings that have been repurposed. They result in safer streets. They have more affordable housing that has been turned over to outfits that are active in that portfolio. They've retained a lot of old building stock because, instead of buildings going too far down the path of decline, land banks are able to stabilize that process more quickly and return these assets to the community. In some cases, they improve the food supply to the community, as more community gardens tend to operate.
The financing of a land bank has typically come through seed funding that comes from the government or from not-for-profits. They're able to operate because they don't pay taxes on the properties that they own. One revenue stream beneficial to land banks is the increased taxes to any properties repurposed for use in the private sector. For five years after a property is repurposed, the land bank retains the increased taxes. So it goes to the land bank for five years before it's returned entirely to regular format. Land banks are also able to generate revenue from any sales of properties.
Why Saint John? The evidence is clear. I think we have a lot of properties where poverty is concentrated—especially in some neighbourhoods where Kit's group and other groups in our community work in the north end. The real estate market has not been successfully assigning value to a lot of the properties and buildings. If we don't do something soon and the status quo remains our strategy, then demolition and further decline is probably everything but certain.
Thank you.
Jody Kliffer
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Jody Kliffer
2017-02-09 10:43
I would say it would be ideal to have that scenario. Right now, there's a group that has been looking at doing a pilot project in the north end, where they are pulling together different community not-for-profit operators and some private sector investors to try to get a seed of the idea growing.
I think really, to answer your original question, you would need to have a research position that was fully paid and funded to investigate how we can look at a land bank operating in Canada under the umbrella of whatever policies and regulations we have, because we're different from what happens in the States. They would need to figure out and map out what these differences are, how this can be active in operating in different provinces, and do that in partnership with different levels of government, because again, it's going to be important that it gets buy-in from the municipal government as much as it does from the federal government.
John Hopkins
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John Hopkins
2016-10-05 13:25
As a change of tack, I'm not going to the energy sector this time, but I would say, from our perspective as the chamber of commerce, what we would like to see a focus on is a return to balanced budgets. That is probably the priority for us. We would like to see the government move in that direction.
I'm not sure there is an appetite for this whatsoever, but I'll put on the table that there should be a review of the suite of taxes that we have. Are we taxing in the right way? I look at some of the OECD countries, and in a place such as Sweden, their VAT is 25%, but then their income tax rates are quite low, very low. In Canada, it's 5%, and then our other rates are higher. I won't even tell. You all know what the rates actually are, but there may be an opportunity to ask whether we are taxing things the right way.
Not that this has anything to do with this committee or the finance department at all, but as a country, we continue to levy property tax. It's the most archaic tax we could possibly have, yet that's what we fund our municipalities and education with. Isn't it time that we really stopped and said this is something that may have worked 150 years ago but doesn't really work today because it's a capital tax? It's arguably the worst form of taxation that you could have.
Anyway, I've gone on and on. I'll stop there. Sorry, Mr. Chair.
View Jennifer O'Connell Profile
Lib. (ON)
Thank you, Mr. Chair.
Thank you, all, for coming.
In the models or the analysis in regard to disposable income, you mentioned that for things like mortgage payments, interest on that is not calculated within that. That would be additional. What about something like property taxes? Is that a factor in your calculations for the disposable income?
Chris Matier
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Chris Matier
2016-06-09 11:58
Other...government transfers are. Old age security payments or EI benefit payments, let's say, would be part of that income, and then the taxes that come out of it, but not property taxes.
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