Raising property taxes can be the deciding factor between a business staying open or closing, attracting a new tenant for an office space or leaving that property vacant.
As a way of dealing with the tax impact of higher assessments, municipalities were given new rules by the province this year providing them with more flexibility in spreading the tax burden to other classes, away from residential taxpayers. In southern Ontario, especially, residential has become a greater chunk of the pie in the tax burden.
The province says the regulation will reduce the municipal taxation gap between business and residential property taxpayers.
In some northern communities like Thunder Bay, city councillors were in the midst of struggling with a possible 12-per-cent tax increase during their April budget deliberations.
And the business community was making it clear, that the city’s main providers of job growth could not handle a major hike.
“The business community already pays more than its share of taxes,” says Mary Long-Irwin, president of the Thunder Bay Chamber of Commerce. “We’re one of the highest in Northern Ontario,” bested only by Elliot Lake.
Gaps in taxation
Long-Irwin says in their findings last year, a Thunder Bay residential property valued at $100,000 paid $1,600 in municipal taxes, while commercial and industrial properties worth $100,000 pay on average, $7,400.
With almost half the tax base spread out among less than 4,000 businesses, she says shifting more onto commercial property owners ultimately affects their bottom line.
“It will rob us from having businesses growing and won’t send a positive message to people that want to locate in Thunder Bay. We need to make sure our taxes don’t hinder that growth.”
Long-Irwin says there are other budget options available.
“It’s not about cutting services and increase taxes, we believe you can increase your base by encouraging and growing the business in the community.
“Because we’ve lost thousands of jobs in the forestry sector, it impacts all of us, so we need to make sure we grow that sector by providing opportunities for cheap, affordable, abundant energy and that will increase industry and tax base.”
After a decade of regulatory tweaking at the provincial level, John Wilson, property manager for C&C Properties in North Bay, says the property tax system still remains lop-sided.
Wilson, the largest owner of commercial properties in North Bay’s downtown, says they are still getting whacked, paying $5 in property taxes for every $1 paid by homeowners - a “ridiculously high” figure and a deterrent when it comes to recruiting prospective tenants.
“When you’re recruiting from southern Ontario to Northern Ontario, it is a bit of an impact telling someone accustomed to paying 50 to 60 cents per square foot, to pay $1.50 to $1.60,” Wilson says.
Wilson says the gap between commercial and residential has caused a glut of commercial office space in his area, something he calls “an economic development block.”
The City of North Bay has made cuts to offer one-third less on the industrial tax base, but Wilson finds no evidence of new companies coming North.
Wilson is part of a local group attempting to address the situation from the provincial end.
The provincial Liberals may have removed the cap on taxes for commercial and industrial sites put in place by the previous Conservative government, says Wilson, but the claw back provision remains.
Critics complain the claw back provision prevents property owners who win an assessment appeal from being granted any tax reduction because the area’s tax base is not large enough.
Wilson is part of a steering committee of downtown merchants looking to change the legislation by retaining counsel to do an evaluation on its “constitutionality and defendability.”
“The provincial Tories were recommending that municipalities move toward a one-to-one (residential-commercial tax ratio), that’s the ideal, so that someone with a $200,000 residential assessment pays the same taxes as $200,000 commercial.
North lacks industrial tax base
“In the North, because we don’t have an industrial tax base that fills up the kitty, that’s our major problem. That’s why this (clawback) legislation is a problem for northern municipalities...”
Wilson says there is a wide disparity between property values between the north and south.
Factory and storeowners have always been taxed out higher than residential homeowners, adds James Caicco, a Sault Ste. Marie city councillor and local realtor. But with the provincial cap removed, his council will have to further study the situation during their budget deliberations.
“People don’t understand when how much taxes that commercial sector pays,” says Caicco, who also sits as Sault Ste. Marie Chamber of Commerce director. “When we talk about a one or two per cent increase on a residential property, sometimes that comes out to $25. But it comes to thousands of dollars for commercial ratepayers.
“Every community is unique, but the more decision making they give to municipalities, the easier for us to prefer an effective budget for our community.”
