Good morning. Wendy Cox in Vancouver this morning.
The new, right-of-centre city council in Vancouver apparently decided to get ugly news coverage out of the way with its budget when councillors approved a property tax increase of 10.7 per cent last month. Businesses would pay another percentage-point increase on top of that.
To howls of opposition, Mayor Ken Sim acknowledged the increases are hard: “Frankly, they suck,” he said at a news conference.
The city is now trying to make them suck a little less for some. Vancouver is going to pilot a new property-tax-reduction program that will tax small businesses, arts groups and non-profits based on what they actually are, rather than on what they could become.
As Frances Bula reports this weekend, it’s an effort to address a problem that has affected British Columbia cities, and some in Ontario, where properties that have only a small, usually older, building on them are assessed and taxed according to what the rezoned and redeveloped properties near them are paying.
The experimental program, possible because of a change in provincial legislation last fall, will reduce Vancouver city taxes for about 1,360 commercial and industrial properties by amounts as high as $12,000. The average reduction will be $1,800.
Although the problem has been acknowledged for years, one of Vancouver’s most successful chefs and restaurateurs put a public face on it three years ago. John Bishop announced he would be closing his iconic Kitsilano restaurant, Bishop’s, because he simply couldn’t afford to keep the doors open. The restaurant was in an older, two-storey building along the tony neighbourhood’s main shopping street, but it was assessed based on sales of nearby properties with similar characteristics.
In a low-rise building like Bishop’s, where there were a few apartments over the restaurant space, the valuation becomes the same as if a multi-storey condo complex with retail along the bottom was built there. In Bishop’s case, the assessed value of the building more than doubled in only four years, going from $3.7-million in 2016 to $8.4-million in 2020.
Frances noted that the issue arose in the past couple of decades as cities tried to solve their housing-shortage problems by rezoning for higher densities along many of commercial streets. That encouraged developers to build much larger new buildings, ranging from four storeys to 30 storeys where allowed, on those arterials. But it has also meant that anyone who doesn’t redevelop is assessed based on the property values of fully built-out sites nearby.
Adding more pain to the situation, those properties are taxed at the commercial rate, which is about four times the residential rate, until they are actually redeveloped as residential.
The pilot will not apply to the vast majority of the city’s approximately 15,000 properties that are zoned commercial or industrial.
To be eligible, a property has to meet several criteria. Its land value has to account for 95 per cent of its total assessment, it has to have been occupied on Oct. 31 last year and the assessed value can’t be more than $5.4-million. As well, the business on the property cannot be a government agency, a bank, a national or international chain store or restaurant, a big-box store, a hotel, a gas station, a car dealership or an auto-service centre, among many other exclusions.
Councillors have acknowledged figuring out which businesses are eligible is a work in progress. Representatives of the Greater Vancouver Board of Trade and the arts community asked for a delay until some of the rules were worked out. But councillors felt an imperfect system that brought relief to some was better than a perfect system that made everyone wait.
This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief Mark Iype. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.