Calgary Herald - - CITY + REGION - CHRIS VAR­COE Chris Var­coe is a Cal­gary Her­ald colum­nist. cvar­[email protected]­media.com

As Cal­gary city coun­cil faces an­other headache from the steep drop in the value of down­town of­fice build­ings — and in the taxes it col­lects — a new re­port shines a spot­light on the fall­out for lo­cal busi­nesses.

A study re­leased Wednes­day by real es­tate re­search firm Al­tus Group found Cal­gary ex­pe­ri­enced the largest jump in com­mer­cial tax rates among 11 ma­jor Cana­dian cities this year, climb­ing 9.5 per cent.

The nearly dou­ble-digit in­crease came on the heels of a big­ger 11.4 per cent hike in 2017.

“The thing with Cal­gary is that the com­mer­cial rate is ris­ing at a some­what alarm­ing rate for peo­ple,” said Kyle Fletcher, ex­ec­u­tive vice-pres­i­dent with Al­tus Group in Cal­gary.

Ac­cord­ing to the re­port, the ra­tio be­tween com­mer­cial and res­i­den­tial taxes is also widen­ing in the city, grow­ing by al­most 12 per cent in 2018, the largest in­crease in the coun­try.

A com­mer­cial prop­erty owner in Cal­gary would face civic taxes roughly three-times that of a res­i­den­tial prop­erty owner with a sim­i­lar value.

It’s not un­usual for com­mer­cial prop­erty own­ers to pay higher rates than home­own­ers, but the gulf in Cal­gary is grow­ing due to the num­ber of empty down­town of­fice build­ings.

“The down­town of­fice mar­ket con­tin­ues to strug­gle and this is hav­ing the ef­fect of driv­ing down of­fice as­sess­ment val­ues, ul­ti­mately re­sult­ing in a shrink­ing over­all as­sess­ment base,” the re­port states.

With more than one in four down­town of­fice build­ings un­oc­cu­pied, the out­look for next year isn’t im­prov­ing.

“All in­di­ca­tions are we’re in for an even sharper in­crease on the tax rate in 2019,” Fletcher cau­tioned.

Ris­ing prop­erty taxes aren’t a shock to most lo­cal busi­ness own­ers, par­tic­u­larly those out­side the down­town. They’ve seen the pain first-hand on their an­nual tax bills in re­cent years.

But their frus­tra­tion is mount­ing.

“I am just an old en­tre­pre­neur and they can’t just keep off-load­ing all of this,” said Fred Hamil­ton, who has op­er­ated Lin­coln Ex­te­rior Ren­o­va­tions in the city for 39 years.

“These in­creases we are faced with are mas­sive.”

Armed with copies of his com­pany’s old bills, Hamil­ton points out his prop­erty taxes have climbed by al­most a third since 2015 to $10,000 this year.

Based upon a pre­lim­i­nary as­sess­ment of his build­ing, he ex­pected the tab to rise above $13,000 for 2019, an­other 30 per cent bump in just one year.

The un­der­ly­ing prob­lem is the down­town tax base that helped keep taxes low for every­one is now shrink­ing.

The gleam­ing tow­ers south of the Bow River shed more than nine per cent of their as­sessed prop­erty value last year — $1.6 bil­lion — and en­dured a $3.8-bil­lion skid the year be­fore.

Un­der the city’s rev­enue-neu­tral as­sess­ment sys­tem that must oc­cur ev­ery year, these build­ings are pay­ing less in taxes to re­flect their drop in value.

A sharp de­cline in the down­town rev­enue has shifted the taxes to other non-res­i­den­tial prop­er­ties out­side the core.

“Cal­gary has made the de­ci­sion to put the bur­den on busi­nesses in a way other cities haven’t,” said Zoe Ad­ding­ton of the Cal­gary Cham­ber of Com­merce.

“Busi­ness own­ers are happy to pay for their fair share, but this goes beyond what is rea­son­able,” added Am­ber Ruddy of the Cana­dian Fed­er­a­tion of In­de­pen­dent Busi­ness.

City as­ses­sor Nel­son Karpa said mar­ket con­di­tions are one fac­tor, but he noted Cal­gary is also con­sol­i­dat­ing its busi­ness tax into the com­mer­cial prop­erty tax sys­tem. The move is caus­ing non-res­i­den­tial rates to in­crease, although the study doesn’t re­flect that busi­ness taxes will be elim­i­nated next year.

In its de­fence, coun­cil has taken steps to soften the blow, us­ing $90 mil­lion from its re­serve funds to limit prop­erty tax in­creases on busi­nesses at five per cent dur­ing each of the past two years.

But the ap­petite for an­other ad hoc pro­gram seems to be wan­ing. City hall will re­lease a re­port next week that will show the mag­ni­tude of the dilemma for 2019.

As Coun. Di­ane Col­ley-Urquhart said this week, it’s a “cometo-Je­sus” mo­ment for coun­cil.

Where will this mo­ment of rev­e­la­tion leave busi­nesses and home­own­ers?

Some coun­cil­lors sug­gest the city should look at spread­ing the tax bur­den to Cal­gary’s 500,000 home­own­ers, as well as busi­nesses.

How­ever, this would be po­lit­i­cally ra­dioac­tive and coun­cil­lors would need ther­mal un­der­wear to stand the heat.

“We have a high busi­ness tax com­pared to other cities. And, un­for­tu­nately, you would have to shift some of the busi­ness tax to the res­i­den­tial — some of it — to cre­ate that bal­ance,” Coun. Ward Suther­land said ear­lier this week.

“Oth­er­wise we are go­ing to put busi­nesses out of busi­ness.”

Judg­ing from the re­ac­tion of an­gry tax­pay­ers and en­trepreneurs, this shouldn’t be the first op­tion.

The pri­vate sec­tor has faced tough cuts since the re­ces­sion hit in 2015. City hall needs to find ways to re­duce its own spend­ing, Hamil­ton in­sisted.

His com­pany, which em­ploys six peo­ple and an­other dozen ren­o­va­tion-crew mem­bers, hopes to break even this year, given the dif­fi­cult econ­omy and ris­ing tax bur­den from all lev­els of gov­ern­ment.

“It’s like they just don’t get it,” Hamil­ton con­cluded.

“You just can’t put that type of fi­nan­cial load on dur­ing a re­ces­sion. It makes it worse.”


Fred Hamil­ton of Lin­coln Ex­te­rior Ren­o­va­tions holds up his re­cent tax as­sess­ment no­tice on Wednes­day. Hamil­ton points out his prop­erty taxes have climbed by al­most a third since 2015 to $10,000 this year and ex­pects the tab to in­crease to $13,000 for 2019.


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