SHAKEN TO THE CORE

City of­fi­cials scram­bling to ad­dress plum­met­ing down­town of­fice build­ing val­ues and a prop­erty tax gap that isn’t go­ing away

StarMetro Calgary - - FRONT PAGE - MADE­LINE SMITH

City of­fi­cials say they don’t have an easy an­swer for how to ad­dress plum­met­ing down­town of­fice build­ing val­ues that have left a lin­ger­ing prop­erty tax gap that isn’t go­ing away and could see other Cal­gary busi­nesses pick­ing up at least part of the tab.

City man­ager Jeff Field­ing said Tues­day that the past three years have seen more than $12.5 bil­lion in lost prop­erty value from highly val­ued down­town of­fice space, amount­ing to a $192-mil­lion tax bur­den that has to be shared be­tween 13,815 com­mer­cial prop­er­ties in Cal­gary.

“This is our hot po­tato. I’ve never seen any­thing like it,” Field­ing said. “It’s unique to Cal­gary.”

In 2017 and 2018, the city pulled a to­tal of nearly $90 mil­lion from its fis­cal re­serve fund in an ef­fort to cap non-res­i­den­tial prop­erty tax in­creases at 5 per cent.

Mayor Na­heed Nen­shi said it’s un­likely that the city will be able to shield busi­nesses in the same way in the com­ing year.

City coun­cil saw a pre­sen­ta­tion about the is­sue dur­ing an all-day closed ses­sion on Oct. 11. After the vote to keep the ma­te­rial con­fi­den­tial failed on a 7-7 tie, it was re­ferred to the pri­or­i­ties and fi­nance com­mit­tee, where the pub­lic pre­sen­ta­tion was sub­se­quently post­poned twice due to last week’s Olympics dis­cus­sion.

At Tues­day’s com­mit­tee meet­ing, coun­cil­lors rec­om­mended the cre­ation of two task forces to present a re­port on the non-res­i­den­tial tax is­sue in early 2019.

But after col­laps­ing oil prices in 2014 led to the gut­ting of Cal­gary’s of­fice tow­ers, there isn’t a clear way for­ward for Cal­gary as Al­berta’s econ­omy con­tin­ues to re­cover.

Down­town of­fice va­cancy rates are still high at around 30 per cent, and Cal­gary’s un­em­ploy­ment rate re­mains at 8.2 per cent.

The cur­rent sit­u­a­tion means that if a build­ing’s value in­creased by 10 per cent last year, Field­ing ex­plained, they could be look­ing at an es­ti­mated tax in­crease of up to 28.7 per cent.

“I’m telling you, I don’t know what to do here,” Field­ing said. “This is one of the in­ter­est­ing things about this prob­lem: peo­ple are say­ing, ‘You had this prob­lem for two years. Why the hell aren’t you do­ing any­thing with it?’

“It’s a very sim­ple prob­lem and it’s very spe­cific to a select num­ber of build­ings and it’s go­ing to per­sist for a while.”

Field­ing said that be­cause the prob­lem is so spe­cific to highly val­ued build­ings down­town, the fix isn’t found in sin­gle broad mea­sures like in­creas­ing res­i­den­tial prop­erty taxes or cut­ting the city’s bud­get.

Po­ten­tial op­tions, he said, in­clude re­view­ing the city’s non­res­i­den­tial prop­erty tax classes, im­ple­ment­ing a 2019 non-res­i­den­tial tax re­lief pro­gram and al­low­ing the mar­ket to set­tle into what may be its “new norm.”

“In­cre­men­tally, we can make a dif­fer­ence, but I can’t solve this prob­lem that hap­pened over one year,” Field­ing said.

Ward 8 Coun­cil­lor Evan Wool­ley said he was frus­trated to see a lack of con­crete op­tions to find a way for­ward. “That’s what every­one keeps say­ing is there’s no magic bul­let, but what we’re hop­ing for is a whole bunch of lit­tle things we can do.”

After the meet­ing, he said telling busi­ness own­ers who are strug­gling that this is “just part of the sys­tem” is “un­ac­cept­able.”

“We ex­pected to see the bot­tom of this, and we’re not. We’re sup­port­ing the small busi­ness com­mu­nity through sav­ings ... There’s other ways we need to sup­port that.” Full story at thes­tar.com/cal­gary

“THIS IS OUR HOT PO­TATO.”

Jeff Field­ing

CHRISTINA RYAN FOR STARMETRO CAL­GARY

In 2017 and 2018, the City of Cal­gary pulled a to­tal of nearly $90 mil­lion from its fis­cal re­serve fund in an ef­fort to cap non-res­i­den­tial prop­erty tax in­creases at 5 per cent. Mayor Na­heed Nen­shi says that’s un­likely in the com­ing year.

City man­ager Jeff Field­ing says he’s un­sure what to do about the tax gap.

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