Business property tax hits new high

Montreal rates the highest in Canada

Montreal’s business property owners now shoulder a disproportionately higher share of their city’s tax burden — as compared to homeowners — than their counterparts anywhere else in the country, an analysis produced this week by Altus Group says.

The tax rate for Montreal business property owners is now almost four-and-a-half times higher than the one for homeowners — following a steady rise over the last two years.

Montreal’s tax ratio of 4.40, compared with the national average of 3.13, shows the 2013 analysis produced by Al- tus for the Real Property Association of Canada (REALpac).

Montreal’s growing fiscal burden comes at a time when the “general trend” among “most cities in Canada is decreasing commercial tax rates to promote business growth,” it said.

“For the first time, Montreal has vaulted past Vancouver and Toronto and has the highest commercial-toresidential tax ratio in Canada,” said Carolyn Lane, a spokesperson for REALpac, which represents, among others, publicly traded real estate companies, real estate investment trusts and pension funds.

While businesses are ex- pected to pay higher municipal taxes than homeowners, too large a disparity risks driving companies to the suburbs, said Jim Derbyshire, Altus’s global president, property tax consulting.

During a recent Frenchlanguage mayoral debate on the economy, Coalition Montreal candidate Marcel Côté noted that 80 per cent of Greater Montreal’s aerospace industry is located in the suburbs.

“This is a very significant issue that hurts Montreal’s ability to compete,” said Brett Miller, president of the Canadian operations of the real estate services firm Jones Lang LaSalle. “Given the current challenges to attract new business, anything that impacts the cost base for companies is a negative. Furthermore, for the most part, increased taxes are not a landlord issue as the taxes in commercial buildings are paid by the tenants.”

All four main mayoral candidates — including Côté, Richard Bergeron, Denis Coderre and Mélanie Joly — have promised not to raise municipal taxes above the rate of inflation.

Reducing costs has become primordial for Montreal companies which are reducing their downtown office space amid rising unemployment and weak provincial growth. Despite a July rebound in Quebec’s GDP, on Wednesday, National Bank revised its 2013 growth forecast for the province from one to .8 per cent.

Already, a growing number of banks and other companies have been moving backstore operations — including call centres and other services not directed at clients — from the high-priced downtown core to less expensive loft-space in Mile-End.

While still low historically, Montreal’s downtown office vacancy rate has been creeping up, rising from 6.2 per cent during the third quarter of 2012, to 6.9 per cent during the same period this year, shows Jones Lang LaSalle data.

Concern over the widening tax gap between commercial and residential owners were also raised earlier this month by the Canadian Federation of Independent Business, which urged Montreal’s future mayor to curb city spending as a way to cap — and eventually lower — the burden on small and medium enterprises.

“We will ask whoever is elected on Nov. 3 to look at redressing this inequality,” said CFIB economist Simon Gaudreault. “Montreal is not going at all in the same direction as other Canadian cities. In our view it’s because they are having trouble [trying] to control spending, so they are trying to take the easy way out.”

For example, the salaries earned by city of Montreal employees are comparatively higher than those earned by workers doing comparable jobs in the private sector, he said.

While candidates have talked broadly about building thousands of larger housing units to attract families back to Montreal, retaining local business in the city by making commercial taxes affordable would be a strong incentive, he said.

“If you want to attract young families to the city it’s interesting to have job opportunities for them in their neighbourhoods.”