‘You can’t plan for what’s coming’: businesses taxed by annual increases
Between 2010 and 2017, the property tax bill at Alain Bourgeois’s business more than doubled from $18,961.15 to $46,383.89.
That’s an increase of almost 145 per cent over seven years for Le Pourvoyeur, a pub in the Jean-Talon Market, or an annual increase of around 14 per cent.
Over that time, the non-residential property tax rate in the Rosemont–La Petite-Patrie borough has risen by an average of 3.19 per cent per year.
On Wednesday, Montreal Mayor Valérie Plante stood firm on the need for city taxes to go up by an average of 3.3 per cent as the city adopted a $5.4-billion budget for 2018 at the close of a stormy debate in council.
“When I opened this business, I looked into the prior year’s taxes and it was an increase which I considered, at the time, to be normal, so I didn’t plan, in my business plan, to have a rise of $30,000,” Bourgeois said.
Now, with the non-residential tax rate in Rosemont–La-PetitePatrie set to increase by 4.6 per cent, Bourgeois will see another increase.
“I’m kind of tired of it,” he said. “It’s going up faster than anything else.”
Bourgeois’s taxes have risen faster than property rates because the assessed value of the building in which his business is located has increased.
In 2010, the city valued the building at $448,000. By 2017, that had risen to $1,226,167. His 2018 tax bill will be based on an assessed value of $1,305,300.
While part of that came after he did renovations, the assessed value of the building has increased on its own as property values in the area have risen.
That can mean steep and unexpected increases.
“You can’t plan for what’s coming,” he said.
While Bourgeois rents the space where the pub is located, he has what’s called a triple-net lease — that means he’s responsible for property taxes, building insurance and maintenance.
Leases like these are common for commercial properties.
Bourgeois said he thinks property taxes should be based on the rental value of a property — not its overall value.
That would help businesses prepare.
“This system is a brake for commercial development,” Bourgeois said.
Nearby, on St-Hubert St., it’s a similar story.
Mike Parente, the executive director of the SDC Plaza St-Hubert, said he looked at the property tax charged to eight commercial buildings on the street. Since 2008, those bills have risen by between 66 and 136 per cent.
“We’re looking at huge increases, important increases that eventually hurt the businesses,” Parente said. “You can budget for three per cent, you can budget for four per cent, but how do you budget for a 20 per cent increase?”
The biggest increases often come after renovations that make the city itself look nicer, Parente said, but also come with a rise in property values.
Many Plaza St-Hubert merchants have triple-net leases, Parente said.
“When you’ve got a tenant in there, he’s not seeing any benefits from the increased value of the building,” he said. “The city knows this problem and we keep being told, no matter what the administration, we need better powers and so on and so forth, but what about the existing powers you have now? Everybody else is doing something, even in the province. Why can’t we?”
Parente said the problem goes back to 2003, when the city eliminated the stand-alone business tax. While it ensured the city’s revenue would remain stable if, for example, a business shut down — because the property owner would have to pay the same rate whether the space was occupied or not — it means tax bills have risen along with the increase in property values.
Between 2010 and 2017, the city of Montreal’s property-tax revenue rose from $2.6 billion to $3.6 billion.
It also means taxes can be driven up by real estate speculation, Parente said.