Commercial

Vancouver
Commercial

BC Businesses Want to Vote in Municipal Elections

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A new alliance representing over 10,000 businesses in British Columbia is fighting back against what it believes is an excessive tax regime, and one of its solutions is to reinstate the commercial vote in municipal elections.

The Business Tax Alliance (BTA), composed of Ryan ULC and a horde of Business Improvement Associations, says 7% of properties in Vancouver carry 45% of the tax burden, and considering 95% of the city’s commercial tax base is comprised of small businesses of 50 employees or less, the current regime isn’t sustainable. Among the BTA’s solutions is to introduce a modified version of the municipal business vote, which was terminated in 1993.

“Back then, if you were a corporation or a tenant or a resident, you got one vote in the jurisdiction you were set up in, so if you had a business registered in Burnaby but you lived in Vancouver, you got one vote in Burnaby and one vote in Vancouver. Then we got a left-leaning government that said we needed to protect the electorate from people who rent parking stalls and storage lockers,” Paul Sullivan, Principal and Regional Leader of Ryan LLC’s Vancouver office. “Instead of refining the business vote, they killed it.”

Under the BTA’s proposal, if a business were licensed in the same city in which its owner resides, it would only get one vote. Vancouver’s last mayoral election was decided by fewer than 1,000 votes, and with such narrow margins, a business vote could conceivably wield outsized influence, which Sullivan says would force politicians to heed merchants’ concerns.

READ: Vancouver Merchants Pay Among Canada’s Most Lopsided Property Taxes

“The business vote will change the outcomes, and with some power in elections, business will start getting representation and policy because we’ll have a say,” he said. “In 1983, the province gave the power of taxation from themselves to the cities — how much tax is paid by business versus residential — and 10 years later they killed the commercial vote. You can see how things got out of check.”

Commercial properties are also taxed on the basis of highest and best use, meaning a single-storey building that’s zoned for, say, four floors essentially gets taxed on air. Further complicating matters for businesses is their triple-net leases, which shift the property tax burden from landlord to tenant.

The BTA also proposes creating a tenth property class that would receive a lower tax rate, including a 50% School Tax reduction, as compensation for their overvaluation, or what Sullivan calls the “air tax.”

“Property taxes cannot pay for social agendas and politicians these days are being elected on social agendas, not on core services, and it’s creating major problems with taxation,” Sullivan said. “Government has been windfalling taxes for decades. If you can imagine, air consumes no municipal or provincial services, yet we’re taxing it at a commercial tax rate. It’s time for government to give a little back. The problem is not triple-net leases; the problem is they’re gouging these properties. We need to come up with a method to tax them less so government collects less. They can’t fund their social programs with property tax; it’s not designed for that, it’s designed for core services, like water, fire, sewer, planning.”

Restaurateur Mike Jeffs, 53, owns four restaurants in Vancouver and says he’s at his wits’ end dealing with the municipal government. Although self-described as “Not an anti-tax zealot,” he claims there’s an obverse relationship between the taxes he pays and the services he receives.

“I’m not an anti-taxer but my taxes have gone up astronomically and my services have gotten worse. I don’t know what they are doing with our taxes every single year because every single service is getting worse. The only thing they do well is give parking tickets,” Jeffs, owner of three Nook restaurants and Oddfish, said.

During the pandemic, the City of Vancouver allowed bars to open roadside patios seemingly overnight, meanwhile Jeffs had applied to open a fenced sidewalk patio, but two years and $40,000 in fees later, he had still not received an approval.

“There’s no accountability, nobody to reach out to, nobody to contact you to speed things along. You send things to the city and wait,” Jeffs said. “Two years it took to get approved. They made a mistake and they said it never should have happened. It was the usual city bullshit. This money comes out of our pockets. We pay rent on these spaces and they don’t care. This comes out of the small pool of money that is available to pay our staff and ourselves. It just has to stop. I don’t know how it goes on this long. Elected officials are knuckleheads. I don’t care who gets elected, bureaucracy runs it.”

Jeffs describes the relationship between small business and City Hall as adversarial. For example, restaurants pay for their own garbage pickup, and when there’s a break-in, Jeffs says police, with whom he typically prefers a distant relationship, are painstakingly slow to the scene, recounting how they had once declined to view security camera footage.

“If you step over the sidewalk a sixteenth of an inch, they breathe down your neck,” he said. “There was a city program to put murals up in businesses in various neighbourhoods during COVID and the one on my wall was defaced. The city sent me a demand letter that I had to fix it or they would for $1,800 at cost to us. It was during COVID and my restaurants weren’t even open. They’re incapable of common sense and they don’t even work with us. There’s a reason I speak out against the city and it’s because they’re incompetent. There’s no way to communicate with them and there’s no accountability.”

In the provincial capital of Victoria, which has a metropolitan population below 400,000, property values, and taxes, are high. According to Bev Highton, Owner and Broker of NAI Commercial (Victoria) Inc., a realty brokerage, it isn’t uncommon for the city’s aspiring small business owners to become disabused of their entrepreneurial dreams when he sits them down and crunches the numbers, like their base rent, triple-net and common costs, as well as their property taxes.

“Any small business looks at what their gross rent is and they say, ‘Jeez, we can’t possibly afford that,’” Highton said. “There’s nothing a landlord could do about the imposition of massive property taxes, so they go somewhere else. This is particularly true of properties caught up in the so-called highest and best uses the BC Assessment Authority applies to sites. People think it’s the nasty old landlord who passes it on to the poor tenant, but the tenant has to wrest it out of the customer base, and if they can’t they go out of business. It’s a bit of a nasty circle.”

Irrespective of whether or not an application has been tendered to rezone or redevelop a building, it’s assessed at highest and best use, which Highton calls outrageously inflated.

Citing a business down the road from his office, Highton said, “In 2019, it was valued at $2.6 million and then it went up 31% in 2020 to $3.4 million, and 27% more to $4.3 million in 2021, which doubled the value and increased taxes by a huge factor. This was passed on to the tenant who was reeling from the impact that high valuations put on their property when there was no intention of redeveloping the site at all. It’s like me dreaming of owning a Lamborghini and being taxed as if I own it. So this is a problem for a lot of small businesses.”

READ: Vancouver’s Industrial Facility Shortage Could Hurt BC’s Economy

The provincial government has been aware of the problem for quite some time and even created the Interim Business Property Tax Relief program, however, uptake was scarce because, as is government’s wont, it was a bureaucratic nightmare.

“So while the government recognized the disparity of valuation and impact on businesses and commercial tenants, cities didn’t take advantage of it because of the bureaucracy it would take trying to manage it,” Highton said. “So the BC Assessment Authority’s mandate to use the highest and the best use formula in every case is really the root of the problem. It seems that the valuation of a property should be on the basis of current use and not some esoteric use down the road if the property is put in for a rezoning or redevelopment application.”

Sullivan says the provincial government and municipalities treat the commercial property tax question like a hot potato, but taxed to the hilt, merchants are demanding change — the BTA is a smaller group than its Fair Tax Coalition counterpart so that its message remains concise. However, heeding the discontent, BC’s NDP government has stated — erroneously, Sullivan says — that triple-net leases are the problem and that it will introduce legislation next year to deal with it.

That could open up a new can of worms, Sullivan says.

“Property owners enter into long-term leases with businesses on the basis of risk, and if you shift all the risk you change the dynamics of the lease, and the landlord will no longer give long-term leases,” he said. “There would be unintended consequences for this major market and how it works. It will pit landlords against tenants and create massive litigation. In our view, it’s not the problem; in our view, they’re simply collecting too many taxes from these properties.”

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