Local pubs and shops can’t keep up with rising costs
“Religiously,” Ken Hampton goes to his local pub every Thursday for fish and chips.
Or he used to, until this week. His beloved Dover Arms held a wake Sunday and pulled its last pint after 40 years of serving the West End.
The Dover Arms will always have a place in Vancouver history as the city’s “first neighbourhood pub following legislation in 1972 that ended the hotel-industry monopoly over the sale of draft beer,” according to The Chuck Davis History of Metropolitan Vancouver.
But now the Arms is the latest Vancouver institution to shut down, succumbing to a system where tenants are stuck with soaring property-tax bills while landowners watch their assets increase in value.
“It got to the point where we couldn’t afford to be there anymore,” said Bill Kerasiotis, 42, whose family has run the Dover Arms since his father John opened it. “It’s a hard pill to swallow.”
Pub regulars assumed the Arms was joining a growing number of vacant storefronts on Denman Street because the business owners faced a steep rent hike, but that’s not exactly the case. Rent wasn’t cheap, but it had been stable for a few years, Kerasiotis said, Arms management had a good relationship with the landlord and sales were steady. The increased pressures, though, came from ever-rising property taxes.
Many consumers may not realize that when property taxes go up for a big multi-tenant commercial building, the property owner isn’t on the hook — the tenants are.
Most of Vancouver’s small businesses (including the Arms) pay what’s known as a triplenet lease, meaning tenants are responsible not only for paying the landlord the rent, but also maintenance fees and property taxes, explained Paul Sullivan of property-tax consultants Burgess Cawley Sullivan and Associates.
Triple-net leases are common across Canada, but in Vancouver’s crazy property market, it’s become impossible for some mom-and-pop operations to cope with huge property-tax increases.
Property taxes are based on the assessed value, which as B.C. Assessment explains, looks at “a property’s highest and best use — the most probable use of a property that would return the highest value, considering legal, economic and social factors.”
But a property’s highest and best use may not be a neighbourhood joint with live music and great fish and chips. While a long-running pub — or for that matter, a deli, hardware store or barbershop — may add immeasurable value to a neighbourhood’s character, its highest and best use, as far as B.C. Assessment is concerned, could more likely be a mixed-use retail development with five storeys of residential condos above. That criteria doesn’t factor in the value to the community provided by a bowling alley where generations of families held birthday parties or a pizzeria where half of your high school had their first work experiences.
Of the current tax structure, Vancouver Coun. Raymond Louie said, “we’ve identified a failing.” But it’s not B.C. Assessment’s fault — they’re doing the job they’re legislated to do.
That’s why since last year, a group including Sullivan, Louie and fellow Vancouver Coun. Geoff Meggs, and development industry representatives have met with the B.C. government to discuss changing the legislation to create a more fair and sustainable way to tax small businesses.
The goal, Meggs said, is to change legislation “to link the taxes more closely to the actual use of the property, rather than its potential at highest and best use.”
“The landowner may receive the benefit of increased assessments, and the taxes aren’t a problem for that landowner because they can pass them on,” Meggs added. “The increased value of that property is a win for the owner and a loss for the Dover Arms.”
The situation in Vancouver is such that it’s tough for a business owner to stay afloat even if he’s his own landlord. This week, news broke in the Vancouver Courier that retailer 3 Vets would close in November after 70 years of serving Vancouver. Co-owner Jerry Wolfman, 67, said even without the need to pay rent, “the property taxes and the overhead have far surpassed the economic viability of this business at this location.”
“Had we had to pay the rent at the going rate, we would have been long gone,” Wolfman said, adding his family’s business has operated at a loss for a few years.
“We are paying out of our reserve to keep this business running,” he said. “We opted to stay because we love what we do, even though it’s costing us money to do so.”
After years of fending off purchase attempts from developers, Wolfman said Tuesday his family decided to sell the property to an undisclosed developer for an undisclosed price.
“It’s happening all over the city,” he said. “Look at Kingsway, the volumes of high-rises that are exploding along the Kingsway corridor and the disappearance of the independent businesses.
“Who didn’t hang out at Wally’s Burgers on Friday nights?” Wolfman asked. “Who didn’t do fivepin bowling at the Ridge Bowling Alley?”
The assessed value of the 3 Vets property at Yukon Street nearly doubled over the last two years, B.C. Assessment records show, from $6,394,400 for 2015 to $11,962,100 for this year.
Meanwhile, Louie said, the pace of progress with the provincial government has been “frustrating.”
“But my frustration is minuscule in comparison to those small-business owners whose livelihoods are now being threatened by this long delay. Clearly, they are victims of a system where there’s an imbalance against them,” Louie said.
“It has taken several years now for us to convene just a couple of meetings,” Louie added, saying progress is on hold until after the May 9 provincial election. He said he hopes whichever party forms the next government will approach this issue with some urgency.
Wolfman hopes so, too. “But it’s too late for us,” Wolfman said. “It’s too late for the Dover Arms … We’re just another icon going down the tube.”