Toronto

City approves 10% cap on property tax hikes for businesses

City council has approved a 10-per-cent cap on property tax increases for businesses, following an outcry from shop owners on Yonge Street and elsewhere that were slapped with skyrocketing tax hikes based on soaring assessment values.

Move follows outcry from small businesses hit with 100-per-cent tax hikes

City council has approved a 10-per-cent cap on property tax increases for businesses. (Gary Asselstine/CBC)

City council has approved a 10-per-cent cap on property tax increases for businesses, following an outcry from shop owners on Yonge Street and elsewhere that were slapped with skyrocketing tax hikes based on soaring assessment values.

Council adopted the new tax policy Wednesday by a vote of 38 to 1.

The cap applies to "commercial, industrial and multi-residential property classes" and the cap is 10 per cent of the previous year's annualized taxes, according to the motion adopted by council.

The move follows waves of criticism last year from the owners of dozens of businesses, particularly along the downtown Yonge Street strip, who were stunned by tax bills that in some cases had gone up by 100 per cent.

On Thursday, George Giarous of Northbound Leather on Yonge Street said the cap gives small businesses "a fighting chance, because it was untenable what was happening."

His 2017 tax assessment came in at a 111 per cent increase, he said.

"I had to sit down."

Giarous, whose father started the business in 1970, said he is looking to the city and province to enact more permanent measures, including preventing tax assessments from containing a property's so-called "best use" — or its potential for redevelopment as, for instance, a high-rise condominium.

"We're not growing exponentially. Property values might be due to speculation or tight demand, but the businesses that are contained within these buildings are still chugging along doing the same level of business that we did last year and the year before and the year before that," Giarous said.

"If anything, our business has dropped as a result of every other block being basically shuttered off with hoardings for the building that's happening behind them. And the construction and noise and dust is chasing pedestrian traffic from the area."

City wants small business tax category

To assess property taxes, the Municipal Property Assessment Corporation (MPAC), a not-for-profit corporation that assesses and classifies all properties in Ontario, looks at how much properties are selling for around the building it is appraising in order to determine its current value. That MPAC value is then multiplied by the city's tax rate to determine how much the property owner will pay.

As a result, a hot real estate market like Toronto's translates into higher taxes for nearby businesses. But in August, MPAC denied that it has assessed properties based on their potential value if they were redeveloped as condos.

According to a city staff report attached to Wednesday's council agenda, 5,415 properties, or more than 13 per cent of all commercial properties, had a property tax increase greater than 10 per cent in 2017. Some 424 properties had a tax increase of more than 50 per cent, while 118 properties had an increase of 100 per cent or more.

In October, MPAC conducted a reassessment and some businesses saw their tax increase cut in half.

At that time, the councillor for the area, Kristyn Wong-Tam, said she wants to see a new small business classification just for Toronto. She is working with MPAC, as well as city and provincial officials, on that initiative.

Her constituents, Wong-Tam said then, are "concerned about the way MPAC creates a one-size-fits-all approach."

Her move followed a plea by Mayor John Tory in August to Ontario's finance minister, asking for a "fairer model" of property tax assessments for small businesses.

That same day, MPAC issued a statement saying it was working with local business owners and councillors on the issue. 

Spokespeople for MPAC did not immediately reply to a request for comment Thursday on how that work is proceeding.

More tax changes possible

Meanwhile, the motion adopted Wednesday also directs the city's interim chief financial officer to "engage in broad public consultation" to review further potential changes to property tax policy for 2019 "and future years," which could require requests to the province for changes in legislation.

The motion asks for a report based on those consultations to be brought to the July 17 meeting of council's executive committee.

For his part, Giarous said passing along cost increases to customers isn't always an option.

"Is somebody going to pay me $1,200 for a jacket instead of $600?" he asked. "I doubt it."

"If something gets sold and something gets built, then yeah, increase the taxes accordingly," he added. "But you can't expect the little one-storey, two-storey building to be paying the same taxation as the 50-storey tower next to it."

With files from Nicole Martin

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