Montreal is overcharging shelters
`Compensation' fee for non-profits higher than usual property-tax rate
The City of Montreal appears to be gouging non-profit organizations that provide shelter to the poor with a special “compensation” tax on their buildings despite having a provincial exemption from paying municipal taxes because of the services they provide.
The city has been taxing tax-exempt emergency shelters and temporary accommodations this way for decades, the Gazette discovered. However, this year, the city's annual compensation tax is even higher than the general property tax rate charged to homeowners across Montreal Island.
In contrast, cities like Laval and Longueuil charge nothing to non-profits that own buildings serving as shelters and transitional lodging and that have been granted a municipal tax exemption from the Commission municipale du Québec (CMQ).
The CMQ is the provincial body that determines whether a building qualifies for tax exemption under Quebec's Act Respecting Municipal Taxation. The law has narrow criteria regarding exemptions.
For example, buildings owned by non-profits with transitional — meaning temporary — housing qualify. But permanent non-profit housing, even for low-income Quebecers, doesn't qualify. But how can Montreal tax tax-exempted non-profits?
The Act Respecting Municipal Taxation allows municipalities, if they choose, to charge tax-exempt building owners a “compensation” to make up for not paying property taxes that help pay for garbage collection and other municipal services. It's just that most Quebec municipalities seem to choose not to levy the compensation on their tax-exempt non-profits.
Montreal's compensation tax rate is $0.50 per $100 of the building's municipal valuation, while the city's general tax rate this year is $0.4977 per $100 of valuation.
The Act Respecting Municipal Taxation stipulates that the compensation charged cannot exceed the municipality's general tax rate if the general tax rate is below $0.60 per $100 of valuation, as it is in Montreal.
The city didn't answer last week why it charges “compensation” and why it's higher than the general tax rate. A city spokesperson said the processing of the Gazette's questions will continue after the Easter break.
Organizations in Montreal that work with people experiencing homelessness or at risk of homelessness are among the non-profit building owners that pay the city's compensation tax.
The Old Brewery Mission, for example, is paying Montreal about $125,000 in compensation tax on its eight buildings this year, said James Hughes, its president and CEO. Two of its buildings offer emergency services and the other six provide transitional accommodations to help people get off the street and eventually into permanent housing.
The organization is also developing five more projects with transitional housing in Montreal.
The Old Brewery Mission saw its municipal taxes leap this year — by 8.8 per cent, Hughes said.
He added that his organization was grateful for getting any discount on its taxes all these years because it allows more money to be spent on its services to the unhoused population. The Old Brewery Mission has diligently reapplied for tax-exempt status with the CMQ on each of its buildings every five years, as required by the act.
But Hughes learned from the Gazette last week that the Old Brewery Mission has full tax exemption from the CMQ, and that his organization would be paying zero taxes on all of its buildings if it were in most other municipalities.
“We would strongly encourage the City of Montreal to take a new look at this issue,” Hughes said of the compensation tax.
“That would mean a lot to us. That would mean being able to provide more front-line service than we offer today.”
The Old Brewery Mission's annual tax payment to Montreal would cover the salaries of two additional intervention workers, Hughes said.
“There are 5,000 people who will be homeless tonight, so we need more projects and they need to be where people want to be, which is everywhere,” he said.
“Organizations like ours, who provide essential services, and so many other non-profits that provide essential services would benefit greatly from having a total exemption where there's no compensation tax or reduction but rather full exemptions are offered.”
Montreal has provided grants to non-profit organizations like Old Brewery Mission to build transitional housing. But the city appears to be giving with one hand and taking back with the other.
Diane Pilote, the general manager of Chez Doris, which is also paying compensation tax on its buildings with emergency services and transitional housing in Montreal, was unaware that tax-exempt non-profits are paying zero taxes in other municipalities.
“It is undeniable that any exemption or reduction in our expenses would offer us the possibility of allocating these funds directly to the support of our vulnerable clients, thus allowing to improve our services or reach more women in need,” she said through a spokesperson.
Outside of Montreal, the Gazette found one municipality — Quebec City — that said it charges compensation to tax-exempt non-profit building owners on its territory. Like Montreal, Quebec City's compensation tax to tax-exempted non-profits is $0.50 per $100 of valuation. However, Quebec City has a general tax rate this year of $0.9072 cents per $100 of property valuation.
The Act Respecting Municipal Taxation introduced the optional compensation charge in 1979. At the time, the law capped the maximum compensation that could be levied by a municipality at $0.50 per $100 of property valuation.
An amendment to the act in 2000 removed the $0.50 cap but has continued to stipulate that compensation cannot exceed the municipality's general tax rate.
Even if it's been on the books for decades, the compensation tax is not widely known. In fact, the head of the federation that speaks for all non-profit housing organizations in Quebec said he was unaware of it.
“Oh really? Oh boy,” said André Castonguay, the Quebec Citybased executive director of Réseau québécois des OSBL d'habitation (RQOH), when the Gazette told him about it.
“I didn't know this was done.” Jean-pascal Beaudoin, a strategic adviser with Bâtir son quartier, a technical resource group that constructs affordable permanent and transitional housing for non-profits in the Montreal region, said he's long been aware that Montreal charges tax-exempted non-profits a compensation tax.
“I've been concerned about this for years,” he said.
“They (Montreal) are saying, `Yes, you're exempted from property taxes, but there are services for which you have to contribute, such as garbage collection, snow removal.' So there's an amount, despite everything, being charged.”
What's more worrying is that Montreal's compensation tax has become much more expensive in recent years, he said.
That's because the city has always charged $0.50 per $100 of valuation, even though it has lowered its general tax rate as property values have exploded.
In 1995, for example, Montreal's general tax rate was $2.02 per $100 of valuation. So the $0.50 compensation tax charged to non-profits was one-quarter of the general tax rate.
Montreal was also charging tax-exempt non-profits $0.50 per $100 of property valuation when Beaudoin started working for Bâtir son quartier 20 years ago, he said. But the residential property tax rate in Montreal was $1.50 per $100 of property valuation at the time. So the compensation tax was one-third of the regular tax rate.
As property values have soared, the general tax rate has been lowered. Montreal's general property tax rate dipped below $0.50 for the first time this year.
The charge appears as “compensation — exempt building” on Montreal tax bills that are mailed to tax-exempted building owners.
Tax-exempt non-profits in Montreal are only spared about 16 cents in sundry additional taxes charged by the city to property owners for roadwork, water repair, transit and any local borough tax.
All tax-exempt building owners in Quebec are also exempt from paying school taxes, including on the island of Montreal. However, school taxes in Montreal are administered by the Comité de gestion de la taxe scolaire de l'île de Montréal and not by the city.