Like most things happening at City Hall lately, commercial tax changes have been a long time in the making. What started as a 2015 request—to look at concerns from small businesses in the central business district and main street and commercial corridors—came to the committee of the whole this week. It left with an amendment asking for further details on how a tiered and zoned commercial tax rate system could work in HRM.
"We want to incentivize and demonstrate to the business community and especially the retailers that we are going to take steps to provide lower taxes in these areas where we want to see that vibrancy and that growth," says councillor Waye Mason. But it's no simple task.
Right now, commercial tax rates are determined by the province's assessed value of a property, which is based on a mix of variables from building type to condition, land value (AKA location), size, age and more. With all that, the 2015 staff report says commercial taxes averaged $3.09 per square foot of space. The municipality does not currently have the means to define which properties hold which kinds of business operations, nor can it easily define under the current system which things are considered small business and therefore, as the initial motion requested, are worth incentivizing but it does say there are roughly 5,000 commercial properties in HRM.
And, "because we don't tax tenants directly," says Bruce Fisher, HRM's manager of financial policy, one of the biggest challenges is "if somebody gets a dollar in tax breaks, somewhere else has to pay an extra dollar.
"For every winner there is, there has to be a loser."
In this week's presentation, staff say they're aiming to tackle three things: A perception of a high municipal tax bill, a perception of unfairness and a problem with unpredictability. The main—least complicated—recommendation was a three-year averaging of the commercial tax bill, so if there's a big jump one year, the first portion of the bill could be paid the first year, second in the second and the rest in the third. But that also has its issues—by year two, businesses will be paying part two of year one and part one of year two's bill.
"It may be come more complicated because we'd be piggybacking on increases," Fisher says.
And members of council say it doesn't do enough to address the initial issue. "Our existing system is not a bastion of fairness," says councillor Sam Austin. "It creates its own set of winners and losers left, right and centre."
In an attempt to do more, the committee of the whole passed councillor Sam Austin's amendment asking for a supplementary staff report exploring a zoned and tiered commercial tax regime based on assessed values.
Austin says being able to parse out the tax rate in a tiered manner—similar to how income tax works, the more you earn the more you pay—is better for the municipality than just dropping the entire rate, which could mean "giving up all sorts of tax room to high value properties that don't necessarily need a break."
Many small businesses who don't own the property they exist in likely feel effect of tax rate increases in the form of increased fees and rent, but aren't guaranteed to benefit from a tax rate decrease, since right now it's the property owner who would benefit. City spokesperson says that based on information from other sources, 73 percent of small businesses rent.
Councillor Lorelei Nicoll supported the motion for a supplementary staff report, noting that staff doesn't "have the data to actually help us understand to know which business we actually want to incentivize."
The staff report will return to council with additional information about zoning and tiering, and councillors will be left to make value judgements over which zones benefit which way.
If council moves forward with a tiered model after staff prepares the supplementary staff report, the averaging model that most of council agreed with, won't be able to be applied, and CAO Jacques Dubé warns council that the model Austin is suggesting would be very cumbersome to administer.