Chop­ping tax re­bates for va­cant build­ings

Pro­gram of­fers in­cen­tive to not ren­o­vate, hold­ing up de­vel­op­ment

The Hamilton Spectator - - COMMENT - An­drew Dreschel’s com­men­tary ap­pears Mon­day, Wed­nes­day and Fri­day. adreschel@thes­pec.com 905-526-3495 @An­drewDreschel AN­DREW DRESCHEL

Ev­ery year about 500 va­cant busi­ness build­ings in Hamil­ton re­ceive tax re­bates from the city that end up cost­ing tax­pay­ers about $3.3 mil­lion an­nu­ally.

The pro­gram may be a sweet deal for the prop­erty own­ers, but chances are it’s liv­ing on bor­rowed time.

The city is study­ing a num­ber of op­tions, in­clud­ing elim­i­nat­ing the re­bates, slap­ping time lim­its on them, or phas­ing them out. Why? Ac­cord­ing to Ja­son Thorne, head of city plan­ning and eco­nomic de­vel­op­ment, the pro­gram is act­ing as a “dis­in­cen­tive” for own­ers to fix up empty spa­ces and store­fronts across the city, but es­pe­cially in the down­town.

“There are prop­er­ties that are vi­able for ei­ther de­vel­op­ment, re­de­vel­op­ment or for restora­tion and oc­cu­py­ing that aren’t mov­ing be­cause there are fi­nan­cial in­cen­tives in place not to move and not to change,” Thorne said.

“And that’s hold­ing back the Re­nais­sance we’re hav­ing in the city.”

A coun­cil-directed re­port on the is­sue is ex­pected to be ready at the end of the month. The gen­eral is­sues com­mit­tee will then de­bate it at the June 7 meet­ing.

Though tech­ni­cally the sta­tus quo is also in play, re­al­is­ti­cally it’d be noth­ing short of a mar­vel if rev­enue-hun­gry coun­cil­lors don’t make a move to cur­tail the tax breaks.

The ar­range­ment, known as the va­cant unit tax re­bate pro­gram, was estab­lished by the prov­ince in 1998 as part of an over­all tax­a­tion facelift that in­cluded ef­forts to help the own­ers of busi­ness prop­er­ties weather tough eco­nomic times.

But in Fe­bru­ary of this year, the prov­ince fi­nally gave sup­pli­cat­ing mu­nic­i­pal­i­ties the flex­i­bil­ity to di­rectly elim­i­nate or ad­just the pro­gram. Coun­cil needs to sub­mit the pro­posed changes to the prov­ince by July 1 in or­der for it to kick in for the 2018 tax year.

As it stands now, com­mer­cial and in­dus­trial prop­erty own­ers can ap­ply for a 30 per cent re­bate on the prop­erty tax on their va­cant prop­er­ties. The city re­ceives about 500 to 550 of th­ese re­quests an­nu­ally, which costs the city about $2.3 mil­lion in lost rev­enue plus a loss of about $1 mil­lion in ed­u­ca­tion taxes.

Some prop­er­ties only ap­ply for the pro­gram once; oth­ers ap­pear to have de­vel­oped a se­ri­ous de­pen­dency, ap­ply­ing for the re­bates year af­ter year.

Per­haps sur­pris­ingly, Thorne says the re­view hasn’t gen­er­ated much push­back from those who ben­e­fit from the re­funds — at least so far.

On the other hand, he’s had some pos­i­tive feed­back from busi­ness own­ers who are in­vest­ing in their own prop­er­ties but have con­cerns about nearby de­serted and derelict build­ings.

“They get con­cerned when not only is noth­ing hap­pen­ing, but that the neigh­bour next door who’s got a va­cant store­front, who’s prop­erty is un­der­de­vel­oped, is ac­tu­ally in­cen­tized (by the re­bate) to con­tinue do­ing noth­ing.”

Staff is also re­view­ing the tax dis­counts the city gives for va­cant and ex­cess com­mer­cial and in­dus­trial land, which an­nu­ally costs $3 mil­lion in lost rev­enue and $1 mil­lion in ed­u­ca­tion taxes.

It’s easy to see why slash­ing th­ese give­aways is mighty tempt­ing from a rev­enue and city-build­ing per­spec­tive.

Keanin Loomis, pres­i­dent and CEO of the Hamil­ton Cham­ber of Com­merce, per­son­ally sup­ports the re­view.

“When it comes to re­an­i­mat­ing spa­ces in the lower city or in­cent­ing de­vel­op­ment on sur­face park­ing lots, I’m all for it. If that’s the tool that’s re­quired to do that, then let’s do that.”

But Loomis also notes that at this point the cham­ber hasn’t taken an of­fi­cial po­si­tion be­cause it has yet to nail down what the implications will be for cer­tain classes of busi­ness.

To that end, the cham­ber is seek­ing re­sponses from its mem­bers. The city is also seek­ing feed­back. All in, it’ll be in­ter­est­ing to see how many del­e­ga­tions show up to speak for — or against — the sta­tus quo at the June 7 meet­ing.

It’s easy to see why slash­ing th­ese give­aways is mighty tempt­ing.

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