Tax break needed
Contractor says it’s expensive to do business in CBRM.
Ray Embree says if he had known how big the annual tax bill would be, he never would have started building a new duplex on Brown Street in Sydney.
Embree has been working to develop some properties as rental units in Sydney and has purchased enough land to construct five buildings. He built a triplex a year ago, another duplex about nine months ago, and now has the Brown Street duplex under construction.
“Lo and behold, I had no idea what my taxes were going to go to,” he said.
Embree said the buildings’ tax bills average about $7,000. As a result, he’s had to increase the amount of rent he is seeking per unit.
“I’m not going to develop anything at those rates,” he said. “There’s nothing left, you could lose everything by doing this now. If the place goes empty for one month the building can’t pay for itself and you will get a vacancy, eventually. They are gouging you.
“They are making rent unaffordable in Cape Breton.”
Embree said he has other friends who also develop rental properties who have put construction plans on hold or stopped building new units entirely.
“I have contractors who are now saying they are losing work because nobody wants to reno, nobody wants to build,” he said, adding realtors are also losing out on potential sales.
Council and administration in the Cape Breton Regional Municipality have long pointed to inequities caused by the province’s capped assessment program (CAP) as resulting in wildly varying tax bills among neighbours with comparable homes. Embree said while the CAP does play a role, he believes the municipality can help to even the playing field by making the decision to cut tax rates. He went as far as to suggest cutting the tax rate for new construction to promote development and stimulate the economy.
The municipality is limited in actions it can currently take around taxation, under the Municipal Government Act.
Embree estimated if he went through with constructing all five buildings he had planned, it would mean $1.5 million for the local economy — from labourers to skilled trades to landscaping to insurance.
“Every bit of this money is spent back here in Cape Breton, right here, it stays here.
They’re taxing people out of business.”
Contractor Ronnie MacKinnon of New Waterford is working on Embree’s new Brown Street duplex and said he knows of contractors who are losing work both on new construction and renovations because of the tax rate. He said he believes there are millions of dollars in potential tax base not being built by people wanting to move back to Cape Breton, downsize or renovate their homes because the rates are too high.
“People are planning to build houses and when they find out what the taxes are they just stop it,” MacKinnon said. “I lost two houses plus three or four duplexes now. I talked to one guy, he lost four houses. I talked to another fellow, he said he lost five or six sales in a subdivision because of it.
“Something has to be done. We’re a dying economy and we’re dying a slow death because of it.”
MacKinnon said he believes if the tax rate was cut by 30 per cent, putting it in line with Halifax, any lost revenue could be regained within five years due to new construction.
Some of the developers and contractors are talking about coming together and putting their case to CBRM council.
CBRM chief financial officer Marie Walsh said the real issue at play is the CAP. CBRM staff and Mayor Cecil Clarke have met with provincial officials including Minister Zach Churchill on the program and there are discussions about a potential pilot project in Cape Breton because the provincial government is not interested in looking at it Nova Scotia-wide at this time, she added.
“They agree it’s bad tax policy but there’s no appetite to change it right now,” she said.
Walsh acknowledged the current situation is a disincentive for development, and suggested that contractors and developers direct their concerns to their local MLAs, particularly in advance of an anticipated provincial election.
“I think what they need to do is they need to complain to their MLAs because when we meet with the province it is definitely not a priority of theirs to fix that,” she said.
“We do hear it in Cape Breton, and I’m not sure why the other municipalities, people aren’t complaining more. I think our market here is stagnant because of that.”
As for the argument that the CBRM could take action that is within its power and reduce the tax rates to stimulate development and it could then make up the potential lost revenue from new construction, Walsh had a quick response.
“How quickly would that happen? In the long term, absolutely,” she said.
“If we decrease the tax rate then we would have people who are currently paying too low because they are capped so much, they would pay even less and the whole levy that we get from residential taxes would go down. We can’t really afford to take a hit on our revenue just to fix the issue from the CAP.”