SHAKEN TO THE CORE
City officials scrambling to address plummeting downtown office building values and a property tax gap that isn’t going away
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.”
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.