Thursday, December 18, 2014

Official letters confirm major tax increases in the offing for hundreds of businesses/ /Vancouver

To owners of storefront businesses in older, ripe-for-redevelopment buildings in neighbourhoods throughout Vancouver — Mount Pleasant, Marpole, Fairview, Kerrisdale, Dunbar and more — warmest wishes for a happy Christmas.
You deserve a good season, and you’ll need it. Because odds are January won’t start well, at least, not when it comes to the “prosperous” part of the traditional new year’s greeting. You’re about to be hammered by the taxman.
Formal notices of new assessment values for properties in the city won’t be in the mail until the new year, but letters warning of extreme increases for land zoned for mixed commercial/residential use were sent recently to commercial property owners in several neighbourhoods. Most businesses don’t own their premises — they lease under terms that make them responsible for property taxes — and there is no way to know how many building owners have already shared these letters with their tenants. But the tenants will find out soon enough they will be kicked in the teeth when the 2015 property tax bills arrive next summer.
How hard a kick? This depends on both location and the zoning that applies. But the hundreds of letters sent to the owners of properties in more than a dozen commercial/residential neighbourhoods forecast land assessment increases ranging from a low of about 15 per cent in the King Edward area of Cambie and in some parts of Mount Pleasant, to a high of well over 30 per cent along other parts of Cambie and Mount Pleasant. Most other neighbourhood business districts are looking at increases in the 20- to 30-per-cent range.
These numbers foretell huge increases in most tenants’ property tax bills, although perhaps not quite so huge as appears at a glance.
Paul Sullivan of the consulting firm Burgess Cawley Sullivan notes the over-all value of Vancouver’s business property assessments, including the many companies that don’t have storefronts, is about 10 per cent. This is one of three factors that will determine the size of next summer’s property tax bills.
The level of city spending (likely to rise by a bit more than inflation, although this won’t be settled until spring) and the total number of businesses in the city (likely to be static, as it has been for years) also matter. But a big factor is how individual property values change in relation to the average. With this year’s average about 10 per cent, a 30-per-cent assessment increase translates into a 20-per-cent rise in 2015’s property tax bill.
Sullivan’s back-of-the-envelope calculation suggests an annual tax hike for a typical business in one of these hotspots to be about $16,000. For low-margin retailers, which many of these businesses are, this means they must sell an extra $320,000 worth of goods for the year — almost $1,000 a day — just to pay this increase.
The city’s only policy to mitigate this hotspot problem — land averaging — will delay some of this hit by spreading it over three years.
But averaging doesn’t fix anything — it merely means businesses are pushed to the wall slowly, rather than abruptly. And averaging — whether today’s three-year policy, or a five-year version the city is considering — ironically creates another major inequity.