Vancouver mayor Kennedy Stewart blasts new B.C. law meant to lessen taxes for some small businesses

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A B.C. law introduced Monday aimed at offering relief to small businesses hit by astronomical property-tax increases won’t be of much help at all, says Vancouver’s mayor, who derided the proposed interim policy as complicated and unworkable and something that could potentially worsen the problem.

Municipal Affairs Minister Selina Robinson, who introduced the proposed new law in the legislature Monday, said it would allow cities to give discretionary relief to categories or subsets of businesses that are being hardest hit by property-tax increases.

But Vancouver Mayor Kennedy Stewart and tax experts say they doubt many cities will be able to put the new provincial policy in place.

“We’re not happy at all,” Mr. Stewart said. “We straightforwardly asked for something [more workable] with ample time to get it passed and they didn’t do it.”

Vancouver and a few other cities have seen mounting concern the past decade over a phenomenon in which a small business in a one- or two-storey building gets hit with massive tax increases because the assessed land value has skyrocketed.

That can happen if speculators start bidding up local prices on commercial properties or if a city rezones land to higher densities, which almost always increases its market price.

Even if the properties don’t get developed, the land gets valued as though it will be, and that is a much higher figure than previously. Compounding the problem, the entire piece of property is taxed at a commercial rate, even if the future development is going to be mostly residential. The commercial rate is about four times the residential rate.

Since commercial leases often require the operator to pay the share of taxes for the space being rented, that means huge payments from people who will never ultimately benefit from any redevelopment of the property.

Certain commercial areas in Vancouver, such as the recently rezoned West End, as well as the City of North Vancouver, Victoria and some other hot spots seen as high value, have been particularly hard hit.

Under the provincial change, cities would be given the power to subtract some of the assessed value of a property that is assigned by the assessment authority. Since taxes are determined by land value, that would reduce the tax bill.

But Ms. Robinson said each city will have to draft its own bylaw to suit local needs, with a requirement that the city allow the exemptions under certain conditions.

The city will have to define what it deems to be a too-high tax increase over a base year from 2015 on, will need to ensure that any property exempted have a commercial tenant that will be seriously affected by a large tax increase and will need to also ensure that the increase in value is coming from a higher value for the land, not some kind of improvement that’s been made to the buildings.

She said cities will be given three more weeks than normal to pass a bylaw in time for this year’s tax season, with a deadline of April 22.

But Mr. Kennedy said that although city staff will scramble to see if anything is workable, it’s hard to imagine they can sort through the implications for thousands of properties in that time.

He said he is concerned small businesses could end up paying more than they would with no change.

That’s because the share of taxes businesses pay of the overall bill – about 44 per cent in Vancouver – doesn’t change. So if one business pays less, the others pay more.

Tax expert Paul Sullivan, who has advocated for a different system of tax assessment on these kinds of development properties for years, said he can’t see the province’s changes working.

“This is pass the buck and leaves little time to make this process meaningful,” he said. “I would be surprised to see municipalities having adequate time to properly impose such a bylaw. “

Representatives of several cities affected by the problem had been meeting with the province since December, 2018, to lobby for a solution. They had specifically asked for an overall change in the province’s tax-assessment system, so that there could be split assessments on properties that haven’t been developed yet.

That would mean that the future development would be classified at least partly as residential if that was what the zoning specified. The assessed value of the land would still be high, but the tax rate on that value would be lower.