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Declining downtown property values could result in $89-million tax relief program for Calgary businesses

Declining value of downtown properties could result in $89 million tax relief program for Calgary businesses
WATCH: Continued drops in property values in Calgary's downtown core are resulting in a big financial headache in the city — especially for business owners. A new report shows that the city will have to spend nearly $90 million to deal with the problem and that could affect homeowners too. Carolyn Kury de Castillo has more.

Ken Meissenger’s sausage shop in Forest Lawn is nowhere near the soaring office towers of downtown Calgary, but the shrinking market values in the core could result in his business property taxes going up this year.

“I am afraid,” said Meissenger, owner of Illichman’s Sausage Shop.

“We’ve got the construction on 17 Avenue the last two years that has knocked our business down over 30 per cent and then they increase the property taxes three years ago,” he added. “So now, if they increase it again, who knows what we’re going to do.”

Downtown assessment values have been dropping since 2016 and that has resulted in a redistribution of the tax burden to non-residential property owners outside the core. Calgary’s revenue-neutral assessment process means a shortfall in property taxes in one sector has to be made up somewhere else.

READ MORE: Downtown Calgary struggles with commercial vacancies while ‘burbs’ boom

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To help ease the burden on businesses, the city established a tax relief program that has cost around $86 million over the past two years.

Now, a city report says the market value of downtown office properties will continue to decrease in 2019. The report goes on to say that if the city wants to keep the tax relief program going, it will cost $89 million, which is more than the past two years combined.

Ken Meissenger’s sausage shop in Forest Lawn is nowhere near the soaring office towers of downtown Calgary, but the shrinking market values in the core could result in his business property taxes going up this year.
Ken Meissenger’s sausage shop in Forest Lawn is nowhere near the soaring office towers of downtown Calgary, but the shrinking market values in the core could result in his business property taxes going up this year. Global News

Ward 5 Coun. George Chahal said business owners are bearing the brunt, but worries about the impact could spill over to homeowners.

“Increasing taxes or placing the burden on others, particularly homeowners, is not something we should be looking at,” Chahal said.

“Other cities have variations and different levels of taxation within the non-residential tax assessment program,” he added. “I think we need to look at that. Small business owners can no longer bear the brunt of the issues we are having in the core of our city and the burden has been placed on them.

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“They are facing a number of issues like higher costs with minimum wage and carbon tax and this is just another one that’s creating a lot of hardships for small businesses. We have to take any measure we can to ensure that we support small businesses in Calgary.”

READ MORE: Economic challenges will continue to weigh on Alberta and Calgary in 2019: economists

Ward 1 Coun. Ward Sutherland said it’s time to start looking at long-term solutions and a “multi-tiered approach.”

“I have to be very clear: it’s not just shifting completely non-residential to residential,” Sutherland said. “I think there has to be a minor shift and gradually — but we need to tier it in different ways.

“We could address it now with the fact that we have a [City of Calgary] Charter and we could do subcategories now which we weren’t allowed to do the last two years. So we could approach it in many different manners and we have to because there isn’t one solution. We have to address this with many solutions.”

READ MORE: Calgary’s downtown core suffering through 1980s-style recession

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Ward 4 Coun. Sean Chu is warning Calgarians to expect service cuts to deal with the worsening issue.

“It’s going to be tough,” Chu said. “We have to tighten our belt as a city.”

“I get it that the city managers have been doing a good job and saving money but we have to cut positions through attrition, not laying off people,” he added. “We have to cut more. We have to tell people that maybe before you would get something done in two hours maybe now it’s five.”

The city will discuss the report at a Priorities and Finance Committee meeting on Oct. 30.