Calgary to look at shifting business tax burden to homeowners
'It is not popular,' says Coun. Jyoti Gondek, who put forward the motion
Calgary council is studying if it can alleviate the tax burden on businesses by raising taxes on homeowners.
"What we've learned is that the program that we've used over the last couple of years was not as effective as it should have been," said Mayor Naheed Nenshi.
"We have gotten into a situation where some businesses in the city are seeing a lot of potential damage and that's not right and it's not fair."
A sharp decline in taxes coming from increased vacancies in the downtown core has hit the city hard in recent years. It was a big shift for a city that largely relied on that downtown tax income.
Supply of downtown office space is expected to balloon to around 45 million square feet in 2019 as Telus Sky is completed, with demand sitting closer to 33 million square feet.
There's been about $14 billion in lost property value since 2015, with an annual $258 million tax impact shared by nearly 14,000 properties, city documents showed — meaning that money needs to be made up somewhere.
This is a decision that should have been made years ago.- Coun. Jyoti Gondek
In 2017 and 2018, the city limited business property tax increases to no more than five per cent, and made up the difference by taking money from the city's fiscal stability reserve fund.
That was the proposal on the table again this year — taking $44 million from savings to help limit hikes to no more than 10 per cent, but Nenshi said it would be just a temporary fix.
Council is also weighing raising residential property taxes to rebalance the ratio between home and business property owners, to the tune of an additional $65 in 2020, 2021 and 2022, on a $475,000 residential property value. Council is also trying to find savings, and could implement a separate small business tax bracket.
Coun. Jyoti Gondek suggested an alternative solution.
She brought forward a motion suggesting an even larger tax shift to homeowners, but then using the aforementioned $44 million for rebates to residential property owners.
"If you think about it in quite simplistic terms, if you give a business $100 to apply against a million dollar tax bill, it's not a lot. If you give a homeowner $100 to apply against a $2,000 tax bill, that's a much different situation," Gondek said.
"It is not popular. I understand that. I'm already getting the onslaught of messages about 'Gondek loves taxes.' This is a decision that should have been made years ago."
'Businesses are suffering'
Gondek said to call the 'downtown tax shift' an urgent situation is understating its severity.
"We have seen record numbers of businesses closing. We have seen record unemployment," she said. "This is a serious situation we have to help our business community."
Alison Karim-McSweeney, executive director of the International Avenue Business Revitalization Zone, said if homeowners are concerned the property tax increase they should consider the situation small businesses are currently in.
"If these businesses are suffering … it would also affect people who own homes and people who are working and living in Calgary. So it's a problem that we're all in together," she said.
The council committee voted to study Gondek's idea, and it will approve a plan to help business property owners at its March 18 meeting.
With files from Scott Dippel