Property taxes killing local businesses
Councillors and industry association looking at ways to lighten the burden
While Vancouver politicians wait for the next B.C. government to create a more fair way to tax small businesses in an environment of soaring land values, some experts say there’s one option in the municipal tool kit that could provide relief to business owners struggling to deal with ever-rising, property-tax bills.
At a time when Vancouver’s beloved business institutions are falling prey to rising property taxes and shutting down — including, this week, the Dover Arms, Vancouver’s first neighbourhood pub — it may seem like city hall would want to do anything possible to help keep businesses afloat.
But this move may not be a politically easy or appealing one.
Property-tax agent Paul Sullivan says it’s worth considering a significant shift to reduce the tax burden for Vancouver’s businesses, which have, he says, borne a disproportionate amount of the city’s tax bill in recent years.
Of course, shifting the burden away from businesses would put it on the shoulders of residents, a move that Sullivan (and everyone else) acknowledges wouldn’t be popular, especially in a city that’s already famously unaffordable. Sullivan says while only eight per cent of the properties in Vancouver are commercial class, they’re responsible for paying about 46 per cent of the tax levy. He also said recent analytical reports show Vancouver businesses receive roughly $1 worth of services for every $2 of tax paid.
“The commercial class of properties has borne an unreasonable, disproportionate amount of the cost of running this city, in light of all this residential growth,” Sullivan said. “You can’t have commercial properties continue to subsidize the residential tax base.”
Sullivan, a senior partner at Burgess, Cawley, Sullivan & Associates Ltd., has spent years calling on the B.C. government to change the way property values are assessed, because the current model has made it difficult, if not impossible, for many local independent businesses to survive as the land below them increases in value so dramatically year after year.
Since most Vancouver businesses pay what’s known as “triple-net” leases, they’re responsible not only for paying the landlord the base rent, but also maintenance fees and property taxes. It’s the last of those three that’s been causing hardship for business owners while land values have soared in recent years, especially in Vancouver, because the “highest-and-best-use” assessments are based on the maximum commercial potential of a plot of land. That means a commercial property might be taxed based on the value of the five-storey, mixed-use development that could be built there, not the independent small business operating there now.
Some businesses have seen property-tax bills more than double from one year to the next, forcing some long-running and well-loved institutions to shut down, everything from decades-old bowling alleys to movie theatres and burger joints. This week, Vancouver’s iconic outdoor retailer 3 Vets prompted an outcry by announcing it would close this year after 70 years in business.
In the last year, Sullivan has joined with representatives from the Urban Development Institute and Vancouver city councillors Raymond Louie and Geoff Meggs, and met with the provincial government, to discuss changes to the Assessment Act.
Earlier this week, Vision Vancouver Coun. Louie told Postmedia News that he’s “frustrated” with the pace of progress on this issue at the provincial level, but hopeful that whichever party forms the next government after the May 9 election will approach the issue with urgency.
Responding to Louie’s comment, NPA Coun. George Affleck said that while Louie wants to shift blame to Victoria, the city could take action to lighten the tax burden for businesses. Affleck acknowledged the idea of the tax shift is “somewhat controversial” and residents don’t want to pay more taxes, but said he believes the load is carried disproportionately by businesses right now.
Anne McMullin, president and CEO of the Urban Development Institute, has been involved alongside Louie and Sullivan in the meetings with the provincial government. McMullin, whose organization represents commercial, residential and industrial-development industries, said: “Municipalities are loath to put increased taxes on residents, because it’s the residents that vote. ... In order to keep the voters happy ... the tax burden often gets put on business.”
Affleck said the question of shifting the tax burden could become an issue in next year’s municipal election. Louie said he would welcome such a discussion. But however the burden gets shifted, it doesn’t seem to be getting any lighter.
You can’t have commercial properties continue to subsidize the residential tax base.