Chopping tax rebates for vacant buildings

Program offers incentive to not renovate, holding up development

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.