B.C. government looking at long term solutions to skyrocketing property taxes for small businesses in cities

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Some kind of experimental tax relief for small businesses in B.C. cities is on the horizon, but no one can say yet exactly how it will work or who will get it.

B.C. Housing Minister Selina Robinson has announced her government will bring in a temporary change for this tax year to lessen the unusual and stressful load for small businesses in B.C. cities where development pressure has resulted in huge increases in property values.

Area mayors had been hoping the government would change its taxation policy to ensure that small businesses would not have to pay the higher commercial tax rates on properties that have been recently rezoned, causing the value of their properties to skyrocket even though there has been no development on them.

It’s an issue that has become a dominant topic in several high-cost B.C. cities. They are seeing businesses close because their lease deals require them to pay the taxes on a building and those taxes have sometimes tripled or quadrupled in just a few years.

That’s a consequence of the province’s property-valuation system, which assesses a building at its “highest and best use,” not its current use. So a one-storey shop is assessed at the value of what the zoning potentially allows on the site, which could be anything from a four-storey building to a 30-storey tower with condo units.

Ms. Robinson said her staff are scrambling to figure out a short-term solution that cities can put in place for this year’s tax bills while they also try to figure out a more comprehensive, long-term change to several pieces of legislation that affect commercial property taxes.

“We can wait for the long-term work but, in the meantime, people are struggling,” the Housing Minister said. “It is unusual for us to go out a little ahead like this but the businesses have been screaming.”

She said the ministry is looking long term at mechanisms to ensure that it’s the property owners who pay a tax bill, not business owners who are renting, as is now the case.

“The whole idea for taxing [the way we do] is to stimulate the owner to do redevelopment. We want to make sure the right person is paying.”

In the meantime, Ms. Robinson said, whatever the temporary tool is, it will be left up to individual cities to decide how to use it and which businesses will get it.

And that has some concerned.

Vancouver Mayor Kennedy Stewart said while he welcomes the province’s movement on the issue after many years of inaction, he worries that many cities won’t have the capacity to do the work of figuring out to which properties the new tax regime can apply.

“I worry that it downloads so much work to municipalities that it would result in many of them not doing anything.”

Paul Sullivan, one of the city’s top business tax experts, said he also worries cities will simply decide not to use the new tool because they’re afraid of being bombarded with requests.

Mr. Stewart also said it’s still not completely clear to him what the impact will be, whether it will apply to all the categories of property that need it, and whether it will be enough to prevent business closings.

One of the most famous in Vancouver was the kitchenware shop Chocolate Mousse that closed in 2019 after the area of Robson Street where it was located was rezoned for much higher density. That sent the building’s property tax valuation, and its tax bill, into the stratosphere.

“Chocolate Mousse over five years had a 600-per-cent tax increase. Would something like this have saved Chocolate Mousse? Is this really going to provide tax relief?” the mayor asked.

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