Business tax break back on table

Relief from high bills due to office vacancies in core would cost $41M

The city is being urged to repeat a program that offers relief for rising non-residential property taxes outside the core caused by downtown office vacancies.

But even as the city emerges from a crushing economic downturn, there are concerns that a longer-term solution is needed, with downtown assessments forecast to potentially remain depressed for another decade.

Last year, city council approved a $45-million subsidy program that limited non-residential municipal tax increases to a maximum of five per cent. The program was funded through money from the city ’s fiscal stability reserve, also known as the rainy-day fund.

Without that relief, suburban business owners would have experienced major property tax hikes. Empty downtown offices have led to a $4-billion drop in assessed value for those buildings, forcing a redistribution of non-residential property taxes that lays the burden on business owners in other parts of the city.

The 2018 proposal from the city ’s chief financial officer, which will go before the city’s priorities and finance committee on Tuesday, would benefit close to 7,500 nonresidential accounts and cost the city $41 million, according to city administration’s estimates.

As with the program rolled out in 2017, property tax hikes would be capped at five per cent.

“Looking at the pros and cons, this does seem to be the best option,” said Zoe Addington, director of policy and government relations at Calgary Chamber of Commerce.

The program wasn’t without its glitches in 2017.

Despite $45 million budgeted for the program, less than $26 million in credits had been applied as of last week, according to the report.

Addington said those delays are largely due to assessment appeals holding up the process and leading to uncertainty.

“What they found was that it took a while for the money to go out,” she said. “The appeal process means that you don’t actually see that tax relief until your bill is finalized.”

But even if those issues get sorted out this time around, Addington said this is only a temporary solution. She said the city can’t continue allocating more than $40 million in reserves each year to help suburban business owners, given that values downtown aren’t expected to recover for about a decade, according to some estimates.

“Last year was supposed to be a one-time thing, this year they’ve kind of said this is a one-time thing. The challenge is those increases are being hidden every single year,” Addington said. “This isn’t going to be resolved in the next year or two. Come 2019, all those increases that have been covered are still going to be there. They’ve just kind of covered off, paid your bills for the year. It just postpones the problem and there’s no longterm solution.”

Coun. Ward Sutherland, who sits on the city’s finance committee, said he doesn’t see this strategy lasting past 2019.

“The valuations obviously haven’t come back up, we’re going to do it again,” he said. “We can probably afford to do it one more year after this year but that would be it. We’ve got to come up with a better solution.”

Coun. Sean Chu, another member of the finance committee, acknowledged it was a “short-term fix,” but a necessary one.

“The money is not that big, really, once you spread it out,” he said. “Outside of the downtown area, those businesses are taking the brunt from the decrease in the downtown areas. I have heard quite a bit from the small businesses that it’s causing them a lot of trouble. We need small businesses. They’re the ones that hire all the people and pay all the wages and support the city.”