The dilemma over how to help Vancouver’s small businesses survive in this high-cost city has sparked a fierce debate, but in the end, city council voted by a narrow margin to shift some of the local tax burden from businesses to homeowners over the next three years.
The debate pitted worry over failing businesses against concern about housing affordability.
People on both sides say the small tax shift approved on Monday – 1 per cent this year, a half per cent in the next two – is largely symbolic and won’t be enough to help those businesses thrive.
And those who voted against the tax shift say it could hurt an important sector in Vancouver: rental apartments.
Those properties are taxed as residences, and will now face a total tax increase of 17.5 per cent this year because their property values have skyrocketed, on top of various increased taxes at different levels.
The shift of 1 per cent of Vancouver’s total tax burden from commercial properties to residential means that a small-apartment owner whose property is worth about $6-million will see taxes go up by almost $1,200 to $7,866. Of that increase, $140 comes from the tax shift.
“People are not going to be happy about this when they find out,” said Mayor Kennedy Stewart, one of five councillors who voted against the shift. The others included two Non-Partisan Association councillors, as well as the two from COPE and OneCity.
The six in favour included the three other NPA councillors and all three Green Party members.
They said it is vital to give a signal that the city is going to help small businesses, even though it will mean a tax increase of nearly 6 per cent tax for residents.
“Residents love their little shops. This was really important,” said NPA councillor Lisa Dominato, who proposed spreading out a 2-per-cent shift over three years. “It’s important that we’re valuing our small-business community.”
Veteran tax analyst and crusader Paul Sullivan applauded of the move, small as it was.
“It’s brave that they did it.”
He said even a few hundred dollars means a lot.
“If you get a $900 savings, normally you need to sell $36,000 worth of product to cover that. It matters.”
He said it was simply part of the regular cycle of “maintenance” the city needs to do to even out taxes as its residential sector booms even as commercial building increase at a much slower rate.
Vancouver has gone through regular debates over losing businesses because of high taxes in the past few decades. Councils from 1994 and then 2007 voted to shift taxes from commercial to residential.
Much of Vancouver’s problems for small businesses arise from the way land is being developed and valued in the province.
If a small one-storey shop is on a piece of land that is allowed to have condos above it, B.C. Assessment, which determines the values of all properties for tax purposes, will value it as though the condos had been built. And all of the future floor space is taxed at the business rate, which is four times the residential rate.
Several areas of the city, especially arterials, are zoned for higher densities.
Vancouver council has been asking the province to split the assessments between business and residential for those kinds of properties.
Mr. Stewart said he wanted to delay acting at city council, because the provincial change would mean real tax relief, instead of a minor adjustment.
He and other councillors, including OneCity’s Christine Boyle, were also concerned that much of the tax relief would go to big corporations. Many opponents of the change named Walmart as an operation that would get a $13,000 tax break.
According to information from government websites, the land Walmart is on, owned by another corporate entity, is worth $69-million and would have paid about $350,000 last year in city taxes alone. If the original budget had gone through, it would have paid an additional $14,633. If the increase is only the 2.2 per cent indicated in the city’s news release, that increase will be reduced to about $7,700.