BC wants to exempt big industry property taxes while small businesses fail

BC wants to exempt big industry property taxes while small businesses fail
19 Oct 2018 by Amy Robinson

It's Small Business Week across the country. In B.C,  small businesses represent 98% of businesses (<50 employees), 84% with less than 5 employees. Barely a day goes by without the closures of longstanding small retail businesses in cities across B.C. Many are blamed on the shake up in the retail sector. However many businesses cite strong sales, but blame their demise on drastic increases in property taxes as a result of increased assessments and neighbourhood planning. When neighbourhood plans allow for increased density, existing properties are no longer taxed based on the current use of the property, but at their 'highest and best' use. Many stores, restaurants and service providers are currently located in a small commercial spaces with little residential development above. If the area is rezoned to allow development for several more floors of development in the area, the building is then taxed as if the building were already built. Those taxes are most often passed down to commercial tenants in 'triple net' leases that include rent, maintenance fees and property taxes. To add to the burden of taxes, cities like Vancouver tax businesses at approximately 5 times the rate for residential properties, and yet, until the buildings are redeveloped and there is clarity on whether the unbuilt space will be developed as residential or commercial units, the unbuilt space is taxed at the much higher commercial rate. The burden of business taxes and the system of assessment has forced many small business closures in recent years, as their property taxes double, triple and quadruple overnight.

There is no data on the number of commercial businesses that have closed in recent years. However, judging by the number of media stories, and the closure of Dover Arms Pub, Wonderbucks, Just Cruisin', Chocolate Mousse, just to name a few, it is dozens of businesses representing hundreds of lost jobs in the City of Vancouver alone. There has been no government action on the closure of small retail, restaurant and service businesses. However, the B.C. Government has recently proposed an amendment to the B.C. Assessment Act that would alleviate the burden of taxes on affected heavy industrial businesses. The proposed amendment would allow them to continue to be taxed at the current form of development rather than their highest and best use. Selena Robinson, Minister of Municipal Affairs and Housing proposed Bill 42 Assessment Amendment Act (media release October 15, 2018) to "authorize B.C. Assessment to continue assessing qualifying properties based on their current industrial use rather than their future highest and best use for a period of two years with the option for extension" with the goal of providing "significant property tax savings prior to re-development and support the continued operation of the facility." The legislation would only apply to class 4 businesses - properties like saw mills, mines, smelters, large manufacturers, etc. The Ministry states that it is aware of "at least one facility that employs dozens of personnel that is facing a several-fold increase in property taxes as result of the discrepancy between valuation and classification — an increase that would put these very important jobs at risk." 

It seems odd that the B.C. government is not proposing to include class 5 (light industrial) and class 6 (commercial) businesses in this amendment. It claims to be basing the amendment on the potential threat to a single business while ignoring many others in class 4 and 5 that have closed or are threatened. And the argument that these business closures have far-reaching impacts on communities beyond them doesn't hold water when you consider how many local jobs and suppliers are impacted when commercial or light industrial businesses close. All their inventory and service suppliers are heavily impacted - from the growers and ranchers they buy from, to the local artists, crafters and manufacturers they stock, to the banks/credit unions, accounting firms, insurance companies, office supply and other service providers they use. LOCO BC has been measuring the economic impact of local businesses for many years and publishing these impacts here (studies) and here (business impact measurement). If the government is going to provide this benefit to heavy industries in the province, it should also extend the benefit to include class 5 and 6 businesses. The government's own data shows that there are about 50 000 jobs in the forestry, fishing, mining, quarrying, oil and gas sector, but 300 000 in retail and another 200 000 in accommodation and food services. It is unreasonable that the government would extend this amendment to class 4 businesses but not other classes of business who have been severely affected by drastic property tax increases in recent years.