Commercial tax fix could provide relief for small businesses

The bill would allow municipal councils to voluntarily offer tax relief on commercial properties if taxes rise suddenly based on the development potential of the space above the property.

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Small business groups say they are encouraged by new provincial legislation aimed at providing relief from huge property tax bills, but there is worry the changes won’t come in time for the 2023 tax year.

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The bill would allow municipal councils to voluntarily offer tax relief on commercial properties if taxes rise suddenly based on the development potential of the space above the property.

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Jude Kusnierz, executive director of Beaumont Studios, a Vancouver-based non-profit which has faced a 300-per-cent jump in property taxes in the span of five years, said she is not confident the tax relief will come fast enough to shield the group from a major property tax jump in 2023.

“At the end of the day, I’m hopeful, but I’m concerned it’s too little too late,” said Kusnierz, who said the non-profit is indebted to their landlord who has temporarily deferred the tax increases.

Kusnierz, on behalf of Beaumont Studios and five other arts groups, recently sent a “letter of desperation” to the City of Vancouver asking for immediate action on an issue that has forced some non-profits and small businesses to close their doors.

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The problem arose because properties are assessed and taxed not on their existing use, but on their “highest and best use,” which in many cases might be a new multi-story condo building with ground-floor commercial space.

That means some mom-and-pop businesses operating in older low-rise buildings on increasingly expensive land have seen their property taxes double or triple in a few years.

When property taxes go up on a large commercial building, the tenants rather than the property owner are on the hook for the taxes. But most small businesses have a “triple-net” lease, which includes rent, maintenance fees and property taxes.

B.C. Finance Minister Selina Robinson said the legislation is a direct response to concerns raised by small business owners and non-profit groups since 2010. The province is working with municipalities to make sure the tax relief can take effect next year, she said.

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The Municipal Affairs Statutes (Property Taxation) Amendment Act was introduced in the legislature on Monday and underwent second reading on Tuesday.

“We recognize (the legislation) is new so we are ramping up support for municipalities so that they can act quickly and provide relief as needed,” Robinson told Postmedia on Tuesday. “We worked closely with municipalities who said, ‘We can get this done.’ ”

Vancouver Mayor Kennedy Stewart said in a statement he is pleased with the proposed legislation, which gives municipalities flexibility to provide tax relief on a case-by-case basis.

Stewart, who pushed the province to make the reforms, said depending on when the legislation receives royal assent, “it could be implemented as early as 2023 to provide immediate relief to eligible properties.”

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Paul Sullivan, a senior partner with Vancouver property consulting firm Burgess Cawley Sullivan and Associates, was skeptical of that promise.

He said municipal governments have an Oct. 31 deadline to make decisions that would affect the 2023 tax year. The Oct. 15 municipal elections is another hurdle, he said.

“I am extremely skeptical of the ability for a bill to pass that fast, have an election, and pass a bylaw at the City of Vancouver on one of the most contentious issues we’ve been dealing with for over a decade,” Sullivan said. “We’re hooped already for the 2023 tax year.”

Sullivan, who has spent years consulting for the government on the issue, said the business community was looking for leadership from the province.

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Instead, the province has “passed the potato back to the municipalities”, Sullivan said, “because they don’t want to deal with the issue.”

Robinson rejected that argument, saying “municipalities know what their communities need” so it wouldn’t have been effective to “blanket” the same tax relief measures across the province.

Annie Dormuth, B.C. provincial affairs director for the Canadian Federation of Independent Business, said the intent of the legislation is good but small businesses still face a huge amount of uncertainty.

Because the tax relief measures aren’t mandatory, Dormuth said that leaves the discretion to municipalities, which take the financial hit for any tax breaks.

“So there’s a lot of uncertainty around whether or not this will be an effective tool and whether real property tax relief will be felt on the ground level by small businesses,” she said.

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Fiona Famulak, CEO of the B.C. Chamber of Commerce, welcomed the proposed tax reforms, saying in addition to dramatic increases in assessed value, businesses are also facing higher inflation, rising interest rates and increased labour costs.

“We are pleased the provincial government is taking steps to address this issue by giving municipalities the ability to provide relief to small businesses and non-profit organizations through new tax rate flexibility,” Famulak said in a statement.

B.C. Liberal leader Kevin Falcon said he supports the proposed legislation, but pointed out that Opposition house leader Todd Stone has spent years pushing for such a tax fix through a private members bill introduced five times over the last five years. The bill was not endorsed by the NDP government.

[email protected]

— with file from Dan Fumano

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