The vacant unit rebate program provides tax rebates to property owners who have eligible vacancies in commercial and industrial buildings. To receive a vacant unit rebate owners must apply and meet eligibility criteria before being awarded a rebate of 30 per cent (vacant commercial space) or 35 per cent (vacant industrial space).

Owners of commercial or industrial assessed property that are entirely or partially vacant are eligible to apply and benefit from the rebate. Seasonal and leased properties are not eligible for the rebate. Though residential and multi-residential property owners also experience vacancies, these properties are not eligible for the rebate.

Vacant unit rebate statistics:

The vacant unit rebate program was originally implemented to address the Province's decision to move the business occupancy tax liability from business tenants to property owners in 1998. In 2001, it became mandatory for municipalities to provide a vacant unit tax rebate program. As of Jan. 1, 2017 the vacant unit rebate program is no longer a mandatory requirement.

The City's 2018 operating budget includes an estimate of $950,000 to fund the vacant unit rebate program. The program is funded as part of the overall tax levy and is subsidized by all property classes, including residential property owners. The additional education tax component of the rebate, funded by the Province, results in a total projected rebate of $1,550,000 provided annually to commercial and industrial property owners. 

The Province also allows for potential changes to the Vacant/Excess Land Property Tax Subclass Reductions. Commercial and industrial properties or portions of these properties can be assessed in a Vacant and Excess Land Property Tax Subclass. Taxable assessment included in these subclasses is taxed at a fixed percentage rate below the tax rate of the broader class. These properties are discounted at 30 per cent of the full Commercial rate and 35 per cent  of the full Industrial rate.

In response to municipal and stakeholder requests, the Province is allowing municipalities to propose changes to their Vacant Unit Rebate Program and Vacant and Excess Land Subclass Reductions. This allows municipalities to tailor the rebate and reduction programs to local needs after engaging with the local business community and taxpayers as a whole. Council has directed City staff to begin a consultation process with the general public, including the business community in order to gather input and feedback on available options and their impacts. 

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider. 

Here are some things to consider:

• Vacant unit rebates are funded by all property tax classes
• Vacant unit rebates reduce the costs for long-term vacant properties.
• Chronically vacant and long-term vacant properties may have an adjusted property assessment that already accounts for vacancies before the vacant unit rebate is applied. This can provide owners of vacant properties the ability to reduce their property taxes based on both a reduced assessment and a vacant unit rebate.

Several options have been proposed:

1. Continue to administer the program as is.
2. Adjust the rebate to increase or decrease the value by class. An example would be to reduce the value of the industrial vacant unit rebate from 35 per cent to 30 per cent to align with the rebate for commercial properties.
3. Phase-out or end the program – eliminate it by a specific year or over a period of years. For example:  applications received for the 2018 tax year would be eligible for a rebate of 20 per cent; applications received for the 2019 tax year would be eligible for a rebate of 10 per cent; no rebate would be offered for the 2020 tax year and subsequent years.
4. Apply a declining rebate for consecutive applications. An example would be to amend the vacant unit rebate eligibility to limit the eligibility period for properties to three years in a 10-year cycle.
5. Tailor eligibility requirements to include or exclude specific property uses, property types, and/or a property based on its adherence to local property standards bylaws. An example would be to include eligibility criteria such as adherence to building code related property standards bylaws.

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider.

Several options have been proposed:

1. Continue to administer the program as is.
2. Phase-out or end the program – eliminate it by a specific year or over a period of years.
   For example: subclass discount would be 20 per cent for the 2019 tax year, 10 per cent for the 2020 tax year and no discount for the 2021 tax year and subsequent years.
3. Adjust the discount to increase or decrease the reduction value by class.
   An example would be to reduce the value of the industrial properties discount from 35 per cent to 30 per cent to align with the discount applied to commercial properties.

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider.

Public input gathered through the online survey will be provided to council for its consideration in a staff report to the administrative policies committee in May 2018.

City staff's final recommendation to council on the future of the vacant unit rebate program and the vacant/excess land property tax subclass reduction program will consider:

• public input,
• precedent set across other Ontario municipalities and
• analysis of the program's fiscal ramifications in the context of the overall municipal operating budget.