Businesses laud change in city’s tone
Business owners and neighbourhood business associations say they’re encouraged by changes to Montreal’s non-residential tax system introduced on Thursday as part of the city’s 2019 operating budget. “I think we’re finally getting some, I wouldn’t go as far as saying respect, but at least an acknowledgement of the fact that small businesses are important in the urban tissue and that maybe we’re paying too much of our share,” said Philippe Sarrasin, the owner of the Librairie de Verdun, an independent bookstore on Wellington Street. Like many business owners, even though Sarrasin rents the space his store occupies, property taxes aren’t included in his rent. Instead, Sarrasin’s landlord passes the municipal tax bill directly to him. That means he’ll benefit directly from the 10 per cent reduction in property taxes on the first $500,000 of a building ’s evaluation that was included in the budget. That tax cut won’t make a huge difference for his business, but it will help, he said. What he finds more encouraging is the change in tone from the city. “I think we were sometimes pictured as whiners,” he said. Included in the budget was a commitment to reduce the gap between residential and non-residential property-tax rates. According to real estate-focused consulting firm Altus Group, non-residential property-tax rates in Montreal are 3.78 times higher than residential rates. “Year one, is it going to make a huge impact? Of course not,” Sarrasin said. “But further down the road, I think it will, and the fact they’re thinking like that now, that’s something very encouraging and for that we are thankful.” Of businesses on Wellington street, 98 per cent will benefit from the tax cut, Mayor Valérie Plante said during a visit to the bookstore earlier on Friday morning. But she acknowledged that areas with higher property values won’t see the same effect, but promised to do more. “For me, this is the beginning,” she said. Small businesses on commercial streets are facing a number of challenges, said Billy Walsh, the head of the Societé de Development Commercial Wellington. “This budget brings solutions for one of the difficulties they’re facing,” he said. But more than the direct support for businesses in the budget, it’s the recognition of the contribution that small businesses play to the vitality of Montreal’s neighbourhoods that he’s happy to see in the budget. “It’s one step forward in the initiative of creating a better environment for businesses. Is the work done? Not yet,” he said. Mike Parente, the executive director of the SDC St-Hubert, said he’s pleased to see the tax cut but he said the city needs to keep looking for ways to make the system more equitable. Montreal’s hot real estate sector has pushed land values up, he said, and because property taxes are based on those values, they’ve risen accordingly. That doesn’t make sense, he said. “You should never have your tax base based on speculation.” For businesses that rent, they’re stuck paying more in taxes, even though they don’t see any benefit from the building’s increased value, he said. But, not all businesses will benefit. The tax cut echoes one introduced in Toronto, which reduced taxes on the first $1 million of a building’s evaluation, that didn’t always have the desired effect. “Depending on where a small business is located, this policy can hurt small businesses if they happen to be located inside a larger office building,” said Adam Found, a senior fellow at the C.D. Howe Institute. Still, he said the budget included some good measures. The think tank takes an annual look at property-tax rates in the largest city in every province and has “consistently found Montreal to have the largest locally-driven tax burden on business investment compared to all the other municipalities we look at,” Found said. That leads to less investment, and because residential tax rates are lower, it incentivizes investment in residential development, rather than commercial, he said. Montreal isn’t just competing with cities in other provinces for business investment, said Yves Godin, executive vice-president for Quebec at the Altus Group. It’s also competing with off-island suburbs that have lower taxes. When an office tower is built on the south shore, that’s a sign that Montreal’s tax rates are making the city less competitive, he said.