A CONUNDRUM
I am starting to feel sorry for our Town Council, even though it is against my better instincts! Once again it appears that they have been hit with a legacy issue, not of their making, but one they have to deal with none the less.
This past week at their General Committee meeting, Council was presented with a staff report entitled ‘Municipal Capital Facilities’ Canada Summit Centre. The main recommendation in the report is “That Town owned property, located at 20 Park Drive be declared for cultural, recreation and tourist purposes as well as social and health services and is for public use.” Sounds boring doesn’t it, but not so! Stay with me.
There are three private entities operating out of the Canada Summit Centre under leases from the Town. They are Algonquin Family Health Team, Motivations Fitness Centre and Oliver’s Coffee Shop. While I am not certain of the status of the Algonquin Family Health Team, Motivations and Oliver’s are private, for profit, operations.
A Provincial agency, The Municipal Property Assessment Corporation (MPAC) has determined that these three operations are taxable tenants and that property taxes apply to the portion of the land that they are occupying under the lease. The assessment to date is $19,590.10. Of this $7,337.26 is applied to education and $8,061.46 to The District of Muskoka. The remainder is owed to the Town.
Sounds fair on the face of it, doesn’t it? After all, homeowners and other private businesses have to pay property taxes, why shouldn’t private entities who just happen to lease space in the Summit Centre also pay property tax? But here’s the rub. When these leases were negotiated by the Town several years ago, the leaseholders were not required to pay property taxes. Further, although there are incremental rent increases every five years, one of the leases is renewable every five years for up to 20 years. Wow! You can hardly blame the leaseholders. If someone handed me a tax free lease for 20 years, I would sign it in a split second. It does beg the question though – who drafted these leases?
So now, who is going to pay those taxes? The Town can write their portion off but they are still responsible for paying the taxes for the Board of Education and the District of Muskoka for anywhere from 20 to 40 years. This of course would be a direct cost to Huntsville taxpayers.
In an effort to get around all of this, Town Staff tabled the proposal last week, that would designate the Summit Centre “for cultural, recreational and tourist purposes as well as social and health services for public use.” You might well ask, what exactly does that mean? According to the report, it means that if the Summit Centre is declared a Municipal Capital facility as described in the Ontario Municipal Act, then ALL the land occupied by the Summit Centre could be considered to be tax exempt. It goes on to say that the current tenants would fall into the purposes as outlined in the Ontario Municipal Act, as Motivations provides recreation and Oliver’s Coffee Shop provides cultural, recreation and tourist services for the Summit Centre…. that last one being a bit of a stretch to put it mildly!
Here then is the conundrum. Council is trying to find a way to save taxpayers a good deal of money because of badly drawn leases by a previous administration. They did not cause the problem but they are trying to fix it. This proposal to fix it however, certainly challenges the smell test. The fact that the Town is only now proposing this designation for the Summit Centre demonstrates pretty clearly that they are doing so specifically to avoid paying taxes on assessment deemed appropriate by MPAC. Surely the services covered for exemption under the Municipal Act are for services offered by the municipality, not by the private sector. To try to squeeze Oliver’s and Motivations into these definitions is like putting round pegs into square holes. Some will see this proposed move as specious and unfair to other retailers in Town who have to include property taxes in their overhead. One observer even wondered if the staff interpretation of the wording in the municipal act smacked of fraud?
Huntsville Council is between a rock and a hard place on his one. Either they go for the tax exemption on the whole building or they are on the hook for the portion of uncollectable property tax for years to come. It is quite possible that they may face the same issue with current and future tenants of the Waterloo Building and the Train Station. I would not want to be in their shoes as they grapple with how to deal with this unfortunate situation. It is a tough one.
NOTE
Don’t forget the joint meeting of the Bracebridge and Huntsville Councils at the Algonquin Theatre on Monday night at 7:00 PM. It is an important meeting about the future of hospital and health care services in Muskoka. The hospital issue is heating up again as described in my midweek edition of Listen Up, get the link here. The meeting tomorrow night is open to the public. It is important to demonstrate that we are not apathetic.
I suppose that there is no workable provision whereby the town could break the lease, evict (at least on paper) the tenant and then enter a new lease that covered the taxes? This could all happen on the same day and service would be unaffected.
I further suppose that it would be way beyond the ability of the District and the School Board to simply send their portion of this tax back to the Town of Huntsville until the leases end and are re-negotiated properly either. This income to these two groups constitutes a windfall caused by their partner (the town) making a mistake. They could get along quite well enough without this money.
Both these ideas still leave the issue of the lease holders effectively getting an unfair advantage over their competition by not having to pay taxes.
The lease holders could gain a lot of goodwill points by simply paying the town the tax they would owe if the lease had been done properly in the first place. There is nothing but pride and greed preventing this from being done but then this is “logic”, the lease is “legal”.
Just some thoughts.
Hi Gene: Many leases include a provision for the payment of property taxes or in lieu of that, the lease price is inflated to cover the cost of taxes. In the case of these leases, neither of these happened so the taxpayer is currently on the hook.
When a tenant pays their rent they have met their obligation. It’s up to the owner to pay the property taxes. That’s the beauty of renting. Duhh
Hi Kathy, Thank you for your comment. You are absolutely correct that the original intention was to fill the building with complimentary services to make it more appealing to users. One clarification – the Town is not asking those businesses to start paying property taxes, they are looking for a blanket exemption on the building so that the Town will not be assessed for property taxes on those businesses in the future.
Hugh – thank you for a well written opinion. I was not aware of this issue. What it brings to light is this: the profound sloppy incompetence of previous Huntsville administrations. The Summit lease, combined with handling/mishandling of the Blackbird Boats lease outlines incompetence and unprofessionalism. With you, I pity the current administration, and wish them well in achieving resolution. Thank you again for a well written piece.
Sounds to me like the intent originally was to incorporate as many uses as possible for towns folk to enjoy at the Summit Centre. A multipurpose destination. Leasing out the space to someone to provide the desired services might be a lot more effective than having to staff and manage it in the town’s budget. Bring in people expert in their area to give the best service. I suppose someone would then argue about just who should get the coffee shop concession and who should get the fitness centre. Perhaps there were proposals and bids way back when. Seems a bit mean spirited to suddenly want taxes paid after all this time.