Commercial property owners in Eastern Canadian cities faced far higher tax rates than those in the West in 2016, although average rates across the country have continued a long-term decline.
Montreal, Halifax, Ottawa and Toronto have the highest commercial tax rates among ten key urban markets, while Vancouver, Calgary, Saskatoon and Edmonton have the lowest. Montreal's rate of $37.75 per $1,000 of assessed property value, is almost triple the $13.86 Vancouver property owners pay.
The figures were calculated by Altus Group, for the Real Property Association of Canada (REALpac), which represents owners and managers of commercial real estate, such as pension funds and real estate investment trusts.
When it comes to residential tax rates, the annual analysis shows that Halifax has the highest rate, at $12.03 per $1,000 of assessed value, while Vancouver is the lowest at $3.17. However, the report notes that the high assessed values of real estate in cities such as Vancouver and Toronto mean the actual tax paid by property owners is still high, even if the rates are lower than in other cities.
Indeed, even if tax rates are falling, as they are in Winnipeg, Vancouver, Toronto, Ottawa and Montreal, steadily rising assessment values mean "taxpayers may not see an improvement on their property tax bill," the report said.
Michael Brooks, chief executive officer of REALpac, said officials in cities such as Vancouver have decided "to shield their homeowners from paying a higher amount of property tax just because the value of their houses has gone through the roof."
In Calgary, both commercial real estate taxes and residential tax rates have climbed sharply in the past year. Commercial rates were up 12.3 per cent, while residential rates jumped 7.3 per cent. The increases were mainly because of an increase in municipal and provincial budget requirements, the study said.
Mr. Brooks said the values of commercial properties in Calgary – particularly office buildings – have "fallen off a cliff." Consequently, city officials may have to increase the tax rates on offices to ensure they collect the money they need. That could create tension with owners who are already in financial difficulty.
Despite some increases in commercial and residential tax rates, such as those in Calgary, the average rates among all ten of the cities surveyed have fallen steadily for years. The average commercial tax rate per $1,000 of assessed value is now $23.94, down from around $38 in 2003. The average residential rate is $8.77, down from about $16 in 2003.
One of REALpac's key concerns is the relationship between commercial and residential tax payments. The ratio between the two indicates how much of the local tax burden falls on the owners of offices, retail spaces and industrial buildings – compared with homeowners.
The commercial real estate industry has been lobbying for years to get the ratio to a level of about 2 to 1, far lower than the current average level of 2.9 to 1 in the 10 cities it surveys. It says lower ratios help cities attract companies and jobs.
At the high end, Vancouver's ratio is at about 4.4, while Saskatoon is the lowest at about 2.0.
Mr. Brooks said in some cities, officials don't feel the need to reduce the ratio because they know commercial owners don't have voting power. "They are plucking this business goose, hoping that it won't squawk too loud, trying to get as much as they can from the non-voter so they can be re-elected by the voter."
Toronto's ratio of commercial to residential tax receipts, at about 3.8, is second-highest after Vancouver. But Toronto's ratio has fallen for 12 consecutive years, reflecting the city's desire to reduce commercial property taxes as part of its effort to get businesses to stay in the municipality and not move to outlying regions.
Still, REALpac notes that Toronto is nowhere near its target ratio of 2.5, which it had planned to reach by 2020.