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April 7 2020

Varcoe: Council throws out a lifeline, defers property taxes

This article was published in the Calgary Herald on April 7, 2020.

Calgary city council has faced plenty of heat from businesses over the thorny topic of property taxes in the past three years.

In the last few days, it’s faced a new call — to put off collecting this year’s property taxes for several months because of the COVID-19 pandemic.

On Monday, council wisely agreed to let property owners, including businesses, defer paying their municipal property taxes until Sept. 30, instead of the end of June, without interest or penalty.

To be clear, it doesn’t eliminate or reduce the tax amounts initially adopted last November.

But it does provide a much-needed respite from paying property taxes in the midst of a crisis, a significant decision that should help employers and employees facing a serious cash-flow crunch.

The city is saying to Calgarians, “don’t worry about property taxes for now,” Mayor Naheed Nenshi said Monday.

“They will be due at the end of September … but at least this takes that pressure off of people’s shoulders.”

There is a ton of pressure.

With so many people applying for employment insurance and businesses having to close their doors in the past month due to the coronavirus, any assistance is welcome.

Governments at all levels are taking proactive steps to remove some of the financial burdens from cash-starved companies and leave money in their pockets.

Taken together, these moves should help some businesses — as well as homeowners — weather the storm.

“It’s a good first step. It’s providing relief for the small businesses,” said Annie Dormuth of the Canadian Federation of Independent Business.

“We would’ve liked to have seen more of a property tax holiday for small businesses, understanding that municipal governments are a little bound on how far they could go,” she said.

“We will take the relief as it comes.”

Given the magnitude of the problem, everyone understands more needs to be done.

Tax deferrals will have to be repaid come October. The economy will likely still be in recovery mode in the fall.

“The deferral is just going to give our business owners breathing room,” said Calgary Chamber of Commerce president Sandip Lalli.

“They have no revenue coming in. So when they do get to September, how is this going to work for them? Will they have had enough time to generate enough revenue … It gives them time to think through different scenarios.”

The city previously estimated property taxes on a typical Calgary home are expected to rise by 7.5 per cent this year, or about $150 a year.

Last week, the chamber wrote a letter to council seeking a deferral on the property tax bills.

It also asked the city to create a program for 2021, similar to this year’s phased tax program for commercial property owners, to lessen the tax burden on local businesses.

The group also wants the city to work with the province on a commercial rent strategy, with the goal of providing direct financial assistance to landlords, who would then waive rents for small and mid-sized tenants.

There are many challenges to overcome.

A new survey by CFIB of its members in Alberta found 32 per cent said they don’t have the cash flow to cover their April bills. And 62 per cent do not believe they’ll be able to make up for lost revenues when the emergency ends.

Michael Evans, president of Atlas Development Corp., which owns or manages 41 commercial properties, said tax deferral and other forms of relief will help his tenants.

“We are inundated in our business with requests from tenants large and small seeking rent relief and it’s understandable. Their businesses in some cases have gone to zero and been forced to close,” he said.

“These tenants are in the emergency ward. We are caught between lenders. There is only so much we can do … Everyone has to come to the party.”

There is plenty of pain to go around.

A report released Monday by the Conference Board of Canada projects that in March and April the country will suffer record job losses of 2.8 million jobs.

Board chief economist Pedro Antunes said almost 16 per cent of total job losses, or 444,000 jobs, will occur in the restaurant industry.

Antunes said Alberta will be particularly hard hit because of the drop in oil prices. He projects 26,000 jobs across Canada will be lost in the oil and gas extraction sector, as well as the services and support activities tied to the energy industry, over the next few months.

Once social distancing measures are relaxed, the economy and employment levels should rebound in the back half of the year, but it will take time for the labour market to fully recover.

“The big, hard question for a lot of small businesses is how to maintain and get themselves through this period of, essentially, a very hard hit to revenues,” he said.

All of these factors mean the city must take more action and provide more relief in the weeks ahead, even as it struggles with the impact on its own bottom line.

City manager David Duckworth noted the city can’t run a deficit like other levels of government.

“The 90-day tax deferment or delayed payment could potentially have an impact of … $180 million on our cash flows, so we have to be very, very careful with what we bring forward,” he added.

For businesses, Monday’s step matches a deferral introduced by the province on the education portion of property taxes.

But more assistance will be required.

“This buys us the time. This takes a bunch of strain and pressure off the businesses and residents who don’t know how they are going to pay their bill, but it cannot be the full answer,” Nenshi said.

“At least it’s the beginning of something.”

Chris Varcoe is a Calgary Herald columnist.