Victoria College, owner of some of Toronto’s poshest commercial real estate, used false arguments to offer the city a fraction of the millions of dollars it owes in property taxes, a scathing confidential report alleges.

The city staff report, not made public, but reviewed by the Star, advises city councillors to reject an “unacceptable” proposal, also secret until now, made by Victoria University, a federated college at University of Toronto.

Councillors on a city committee, armed with the advice, recently recommended staff resume negotiations with the college, but, if no deal is reached by September, urge the Ontario government to scrap the college’s unusual exemption from paying property taxes on its enviable land holdings.

Council will consider the issue later this month.

The college offered, the report says, to make ex-gratia — that is to say, not legally obligated — payments of $100,000 per year for up to five years. This is in exchange for the college making no payments in lieu of taxes on land under buildings including The Colonnade mall on Bloor St.’s “mink mile,” where tenants include ritzy retailers Cartier and Prada, and an upscale apartment tower being built nearby.

The city does get property taxes on commercial buildings atop Victoria land.

But, the report says, a longstanding exemption on the land, itself, cost the city more than $20 million in lost taxes between 2013 and 2016 for three sites on Bloor St. W., 131, 151 and 153, as well as 8 St. Thomas St. and 110 Charles St. W.

While accepting the “goodwill nature” of the college’s $500,000-payment offer, city staff said “it pales in comparison to the taxes the city would collect if Victoria University’s tax exemption was the same as other public educational institutions in Toronto.”

Ryerson, York University and others pay commercial property taxes on university land used for commercial purposes.

The 1951 Victoria University Act makes all of that college’s land tax-free.

The U of T enjoys a similar blanket exemption, but voluntarily makes payments in lieu of taxes of about $240,000 a year, on three small leased commercial properties.

U of T does, however, pay nothing in lieu of what would be an annual $250,000 tax bill on the site of its subsidiary University of Toronto Press, at 5201 Dufferin St.

The confidential city staff report scoffs at Victoria’s offer to negotiate payments in lieu of taxes for commercial properties subject to new leases signed after the college and city reach a deal.

“The issue is especially problematic, considering duration of existing leases for Colonnade at 131 Bloor St. W. and 151 Bloor W. ends in June 2060,” the report states. A lease for redevelopment of 8 St. Thomas St. “terminates in the next century, May 2104.”

Waiting so long to collect payments for the properties is “unacceptable,” says the report. It notes that the taxable buildings are decreasing in value, while the value of the untaxed land will continue to rise.

The report attacks a central tenet of the college’s argument: that any payments in lieu of taxes will hurt students by depleting the college’s commercial cash-flow now directed to academic matters.

While the college refused to show the city its commercial leases, the report says, the city was able to get, through public court files, lease documents for three of the properties.

“These leases clearly make Victoria University’s tenants responsible for paying property taxes and similar levies, whether current or imposed in the future,” the report states, and they don’t make the college vulnerable to lawsuits if the college passes on to tenants the cost of any additional payments made to the city in lieu of taxes.

“The leases we have been able to review suggests to us that tenants are responsible for property taxes and similar levies in the existing leases Victoria University has for its other properties, which we have not been able to review.”

The college says the exemption, as granted in the 1950s, to help it revitalize a part of the city “in decline,” should remain in place.

The report dismisses that, noting that, today, the U of T-area properties are in “a highly desirable neighbourhood that is home to many of the city’s luxury retailers, some of which are tenants of the Colonnade,” the report states.

It adds that it’s unfair that “Victoria University can pass along a portion of its tax exemption to high-end retailers like Cartier and Prada when neighbouring private commercial property owners competing for the same tenants cannot do the same . . . .

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“Further negotiation and discussion are required to see if the city can reach a satisfactory agreement. Failing that, the treasurer and city solicitor recommend the city approach the province for legislative change.”

Jennifer Little, a spokeswoman for Victoria University, said the college is not familiar with the confidential city staff report, so it will not comment on its reported contents as the college works “closely and productively” with the city on a solution.

“We look forward to continuing our discussions,” she said in an email. “We are confident that we will able to come up with a resolution that is acceptable to both sides by the September deadline.”