Province prepared to listen about possible tax breaks in Toronto Hydro sell-off
Premier Kathleen Wynne’s government will be all ears if Mayor John Tory asks for tax concessions to expedite the sale of Toronto Hydro.

TheStar.com
Sept. 30, 2016
Robert Benzie and David Rider

Premier Kathleen Wynne’s government will be all ears if Mayor John Tory asks for tax concessions to expedite the sale of Toronto Hydro.

But no such formal request has come from Tory, and Finance Minister Charles Sousa cautions the city would have to account for a 22 per cent provincial transfer tax.

“Toronto Hydro will be subject to the same conditions as everybody else,” Sousa told the Star in an interview.

That suggests the city could be on the hook for $220 million in transfer tax if a $1-billion stake in Toronto Hydro were sold.

“Toronto Hydro would have to abide by that transfer tax number,” the finance minister said, noting he lowered that levy to 22 per cent last year from 33 per cent. It will go back up to 33 per cent in 2019.

While there are write-offs the utility could use to reduce its transfer tax tab, the more complicated matter of a departure tax has yet to be determined.

Senior government officials, speaking on background in order to discuss sensitive matters, say Tory has yet to formally ask Queen’s Park for any such tax breaks.

They said Wynne’s administration is willing to listen to any pitch from the mayor and council — especially if the money the city saves in provincial taxes is plowed back into municipal infrastructure.

Amanda Galbraith, Tory’s communications director, said Friday the mayor “had initial discussion several months ago with the premier about the fact that council has asked the city manager to report back on asset monetization, including Toronto Hydro.”

“That is the extent of those discussions,” said Galbraith, adding the mayor’s office is “awaiting the report from the city manager, which was directed by council, around how we make best use of city assets to meet the growing needs of our city.

“To be clear: the mayor is not bringing forward anything. City council voted to direct the city manager to report back on this and other city assets.”

Toronto Hydro pays the city an annual dividend that amounted to $56 million last year.

Sousa’s office said Friday that a departure tax would apply if public ownership of the utility fell below 90 per cent.

“The Ontario government does not possess the information necessary to calculate departure tax until the information is provided by the taxpayer, and once such information is provided it would be confidential taxpayer information,” said Kelsey Ingram, the treasurer’s press secretary.

Ingram said such a levy “parallels regular income tax rules for companies whose tax status changes from taxable to tax exempt.”

As a publicly owned company, Toronto Hydro now makes what are known as “payments in lieu of taxes” — or PILs — instead of corporate income tax.

“The departure tax is a mechanism that ensures taxes are appropriately collected when a company ceases to be 90 per cent municipally owned and leaves the PILs system,” she said.

“A company that pays a departure tax amount has had a gain on the value of its property while in the PILs system which needs to be recognized.”

Wynne stressed the province, which is selling off a majority stake in Hydro One, would not prevent Toronto from doing the same thing.

“It is up to the city of Toronto council and the mayor to have this discussion and to make a decision about their utility. It is up to them,” she said Thursday.

Energy Minister Glenn Thibeault has underscored that.

“The decision to privatize Toronto Hydro is up to Toronto city council. There are no ifs, and or buts . . . that is the council that makes the decision,” said Thibeault.

Still, NDP MPP Jagmeet Singh said he’s worried “the Liberals can encourage the privatization by offering special tax loopholes.”

“The reality is the premier can make it a lot easier for Toronto Hydro and other local utilities to privatize if she gives the municipalities a tax break,” said Singh (Bramalea-Gore-Malton).

“So, the Liberal government can actually encourage this decision if they waive that tax,” he said, adding “it’s very clear that privatization increases costs.”

Tory said last week that the city must examine ways to bankroll new infrastructure.

“We have an obligation to look at all the options including unlocking the value that already exists in Toronto Hydro, while keeping it in public hands. We must . . . identify a way to pay for large-scale projects that are urgently needed,” the mayor said.

Wynne’s government is using $4 billion of the $9 billion it expects to raise from selling 60 per cent of Hydro One for new public transit, highways, and bridges. The remaining $5 billion will pay off the transmission utility’s debt.