Tory asks Ontario finance minister to find 'fairer model' for taxing small businesses

Mayor John Tory wrote that he's "anxious" to work with the Ontario finance minister to improve a system that leads to "unreasonable" tax hikes for small businesses.

Mayor wrote in letter that current tax hikes are ‘unreasonable and impossible to prepare for’

Property taxes increased by nearly 100 per cent for a group of Yonge Street buildings in June - the kind of "unreasonable" hike that Mayor John Tory said needs to be done away with. (Petar Valkov/CBC News)

Toronto Mayor John Tory has asked Ontario Finance Minister Charles Sousa to work with him to find a "fairer model" of property tax assessment for small businesses after staggering tax hikes of up to 100 per cent. 

In an open letter to Sousa tweeted out early Thursday morning, Tory wrote that the Municipal Property Assessment Corporation (MPAC) is "not working" for the city's small businesses, leading to "unreasonable" tax hikes that are "impossible to prepare for." 

MPAC, a not-for-profit corporation that assesses and classifies all properties in Ontario, looks at how much properties are selling for around a building it is appraising in order to assess 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, something that Tory wrote can cause "sticker shock" that leads "many businesses to consider closing their doors." 

Two spokespeople for the finance minister did not immediately respond to a request for comment Thursday.

Yonge Street properties to be re-assessed

In June, the owner of a group of buildings on Yonge Street spoke to CBC News after he discovered his property taxes had doubled — a cost he said he'd have no choice but to partially pass on to the small businesses he rents to. 

Another Yonge Street business, Eliot's Bookshop, is now teetering on the edge of closure under the burden of exponentially growing property taxes. 

Independent bookstore Eliot's Bookshop may soon close for good after 22 years at Yonge and Wellesley streets because of rising property taxes. (Google)

After an uproar, MPAC committed to re-assessing about 80 small commercial retail properties in the Yonge Street heritage conservation district, something Tory called "a good first step" in his letter. 

On Thursday, MPAC issued a statement to say it has been "working diligently" with small business owners and local councillors on the issue in recent months.

"Recognizing the area's designation as a Heritage Conservation District and the availability of more recent property sales data, it was determined that reductions to the assessed values were warranted," the statement said. "The affected small businesses have already been made aware of the reduction and MPAC will issue official reduced property assessment notices in September with values reflective of the heritage designation."

In his letter, Tory also called for a larger overhaul in how the assessments are done, arguing that MPAC's methodology "does not effectively account for the current use of a property, nor the undue pressure that its valuations place on tenants."

But MPAC's statement noted that "at no point" has the agency assessed the properties based on their potential value if they were redeveloped as condominiums.

Tory concluded by saying that he's "willing and anxious" to work with Sousa on finding ways to improve property tax assessments "before more jobs are lost."

Mayor John Tory said Thursday that members of the small business community were supportive of his letter. (Guillaume Cottin/CBC)

Tory also addressed the issue Thursday at his regular meeting with the Toronto Association of Business Improvement Areas. He told reporters Thursday afternoon that TABIA members "were supportive" of the letter and he expected Sousa to be "sympathetic."

"Retail right now is going through a period of massive transition itself, much like the media businesses is doing and many other businesses. So the last thing they need is for some, I believe relatively out of touch, bureaucratic organization like MPAC to impose upon them massive tax increases when they are just trying to stay competitive and carve out a new role for themselves in a new world."

'How much stuff can you sell?'

Rob Sysak, executive director of the West Queen West BIA, said Thursday that if property tax hikes put independent shops out of business, that neighbourhood will lose all of the character that makes it unique.

"You can walk to Parkdale, you can walk to Liberty Village, to Kensington, to Queen Street West, Chinatown. There's so many different flavours all within walking distance," Sysak told CBC Toronto. "That's what's in danger of disappearing. We're going to be one colour, one flavour, boring."

In general, the two-kilometre stretch of shops has seen a 40 to 50 per cent increase in its assessments, he said. One member of his BIA went from $4,900 a month in taxes to just under $8,000. That means property owners will pass that increase on to tenants, he noted.

"That can't happen," he said. "People can't keep going. How much stuff can you sell?"

He said individual assessments should only consider the nature of the business at the property being assessed.

Rob Sysak, executive director of the West Queen West BIA, says if property tax assessments keep rising, costs will be passed along to small business owners, who won't be able to pay. (Andy Hincenbergs/CBC)

Billy Dertilis, chair of the Danforth Mosaic BIA and owner of Red Rocket Coffee, said businesses in his area are looking at extra costs of about $1,000 per month, "which is a big load to bear."

"The fact that property values are increasing does not necessarily mean we are making more money," Dertilis said.

Small businesses are going to soon face the extra pressure from the province's proposed $15 minimum wage, which would come into effect on Jan 1., 2019.

"I don't know where a lot of businesses are going to find the leeway or the margins to pay for that," Dertilis said. 

"We need to have more businesses that are homegrown, where the business owner is actually someone's neighbour and they get to know their clientele and create that sort of community feel and community connection."