A pedestrian crosses a quiet downtown in Ottawa on March 23, 2020.BLAIR GABLE/Reuters
The city of Ottawa has unveiled plans to lower property taxes on small businesses and raise them on enterprises such as big-box stores, part of a wider effort among Ontario cities that is facing delays from the province.
The Ontario government announced in November its intention to allow municipalities to adopt an optional property subclass for small businesses, which would allow city councils to set lower rates for small establishments struggling economically during the pandemic.
The provincial government passed legislation to make the change in December, but has not yet released the regulations that cities require to enact the new rates. Ontario municipalities, including Toronto, Ottawa and Hamilton, had to go ahead with 2021 budgets without setting lower rates for small businesses. The province has also proposed, but not confirmed, that it would match municipal tax reductions.
On Friday, Ottawa Mayor Jim Watson announced that the city would permanently lower property tax rates by 10 per cent for an estimated 7,800 small businesses. The city would make up the revenue by raising property-tax rates by 0.68 per cent on large commercial spaces, specifically citing big-box stores such as Walmart and Costco.
Ottawa said an average small business could see its annual property tax bill drop $1,000, with an increase of $700 for an average large business.
The discount would take effect in 2022, pending the release of the provincial regulations. Mr. Watson said Ottawa City Council would have gone through with the lower rates sooner if they could have.
“Certainly our preference would have been to have seen [the regulatory work] done sooner,” he said. “That’s not the case, so we’ve laid out a plan that we think is both affordable and realistic, and implementable for 2022.”
Mr. Watson said the tax-rate changes would not affect residential homeowners. He added that landlords would be required to pass the savings on to commercial tenants or the discount would be revoked.
A spokesperson for the Ontario Ministry of Finance declined to give a timeline for the regulations or provide a reason for the delays, saying only that municipalities will be notified when the regulations are ready.
Toronto Councillor Kristyn Wong-Tam, who has pushed for the separate small-business rate in her city, said the subclass policy is an effective tool because it allows councils to treat different classes of business differently.
For instance, many small businesses, such as those in personal care, have been forced to close for weeks at a time under public-health orders, while larger stores that sell groceries can continue to operate.
“Commercial property taxes in Toronto are very high and right now main-street small businesses have been closed and in some cases for over a year,” Ms. Wong-Tam said. “They are being punished for not being big-box retailers who have been allowed to stay open.”
Ryan Mallough, director of provincial affairs for Ontario for the Canadian Federation of Independent Business, said his group applauded the province’s proposal in the fall, and has been disappointed to see the delays in implementation.
“The sooner they can implement those changes and help reduce property taxes for small business owners the better,” Mr. Mallough said.
Spokespersons for Hamilton, Waterloo Region and Peel Region said councils were reviewing the subclass option, but were waiting on the regulations to be announced before making a decision.
The Ontario government released the 2021 budget on Wednesday, which included a second round of small-business grants worth up to $20,000. The budget also said the province would indefinitely postpone property-tax assessments, which had originally been scheduled for 2020. The budget did not include guidance on the optional rates for small businesses.
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