A larger-than-anticipated tax relief package, that would help shield Calgary businesses from increases to property taxes in 2021, is one step closer to becoming a reality.
The city’s priorities and finance committee approved a proposal from Ward 11 councillor Jeromy Farkas on Tuesday that would see the city use $44 million from its reserves to keep non-residential property tax increases at zero this year.
“These are really unprecedented and, frankly, brutal times for local businesses through no fault of their own,” Farkas said.
“As a council, we have to do absolutely everything in our power to help these businesses survive.”
The proposal is a significant increase from the $21-million plan that council approved during budget deliberations in November in an effort to cap non-residential property tax increases at 10 per cent.
City administration recommended spending less to achieve a cap on increases at 10 per cent. According to the city, 2,000 businesses would have been sheltered from an increase. It’s unknown just how many businesses would benefit under the latest proposal.
Farkas’ proposal still needs approval from city council in the coming weeks.
If council as a whole gives the go-ahead, funds previously approved by council for the Phased Tax Program (PTP) would be used to pay for it, including $23 million from the city’s Fiscal Stability Reserve.
Warehouses larger than 100,000 square feet were set to see a more than 20 per cent hike in their taxes compared to their bills in 2020, without rebates in place. Some retailers along 17 Avenue S.W. were facing similar increases.
“I’m going to do a lot more math between now and council to determine just how much of a break that is for your average 17 Avenue business,” Mayor Naheed Nenshi said.
“But that argument swayed me, saying we can afford it — we’ve got a little bit of money left in our rainy day fund, and it’s really raining for a lot of those businesses.”
City administration attributed the increase to the sharp decline in property values for businesses impacted by the pandemic, like hotels; as well as the continued impact of the slumping values and high vacancy rates in the downtown core.
Some retailers on 17 Avenue said the taxation issue has been concerning since 2014.
“I saw my property tax go up between 200 and 300 per cent,” Walls Alive owner Greg Stebbe said. “The tax, frankly is so high to begin with, that that any increase seems unjust,”
Stebbe said his business was fortunately allowed to stay open throughout most of the pandemic, unlike many of his neighbours.
While the fallout of COVID-19 is expected to hurt many businesses across the city, Stebbe said the impact is doubly felt when combined with the continued effect of the oil price slump.
“There is no, there is no homeowner, I don’t think, in Calgary that has been faced with that kind of an increase,” Stebbe said. “There needs to be a rethink here about where we’re going and how we’re going to get there.”
Committee endorsed Farkas’ proposal nine votes to one on Tuesday, with only Ward 9 councillor Gian-Carlo Carra in opposition.
Carra said his vote was symbolic of his concern with the approach of annually using reserves to cover increases to property taxes.
“All the relief and support that we can provide for small businesses is very good. However, this is a problematic approach,” Carra said.
“It’s one thing for a council to set itself up for short-term gain… but we’re setting the next council up for long-term pain because of this short-term gain; and that’s a problem.”
City council has used more than $200 million in reserve funds every year since 2017 to help with the city’s tax shift.
Economist Trevor Tombe said the approach is a short-term measure and is not a solution to the issue.
“I think if we had a more unified property tax system, where Calgarians as a whole shared in the burden of the downtown values dropping — rather than just businesses in isolation — then we could have a more sustainable solution to this,” Tombe said.
He added that it is important for Calgarians to participate in the discussion about potential reforms to municipal taxation in the upcoming election campaign.
“It’s something thing that is going to be with us for some time,” Tombe said.
“Unless oil prices sustainably get back above $100 (per barrel) and things are booming again, then this is not a problem that’s going to solve itself.”