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January 22 2020

Varcoe: ‘Definition of insanity’ — again, council wades into tax relief for businesses

This article was originally published by the Calgary Herald on January 22, 2020.

If deja vu is the sense that something has happened once before, what do you call it when the same feeling keeps returning, over and over again?

For Calgary city council, you call it just another day of debating commercial property taxes — with new plans for yet another tax-relief program to aid local businesses facing hefty increases in 2020.

On Tuesday, the finance committee agreed in a narrow 4-3 vote to craft a new $30-million program to help cushion the blow for those non-residential property owners.

If it all sounds tediously familiar, it is.

The same mind-numbing debate happened several times last year, before council finally agreed in June to create a $130-million rebate program to cap non-residential property tax increases at 10 per cent.

But the intervention only came after a tax rebellion erupted when the annual bills went out, as 8,000 commercial properties initially faced double-digit increases. Several-hundred business owners and their supporters descended on city hall one summer morning to call for action.

The last-minute assistance program in 2019 followed on the heels of a $45-million relief initiative for businesses in 2018 — and a $41-million Phased Tax Program (PTP) in 2017.

All of these programs were supposed to be temporary.

Yet, they didn’t actually address the underlying problem at play: a major realignment in downtown property values caused by lower energy prices, fewer jobs in the core and rising vacancy rates.

A steep drop in the value of downtown office buildings shifted about $250 million of taxes on to businesses operating outside the core, causing taxes to soar at some strip malls, retail and other commercial properties.

At Tuesday’s meeting, the committee backed another temporary program, limiting commercial property tax increases to 10 per cent from last year’s levels, a move that should help about 5,000 eligible properties.

But the concept didn’t come before another round of hand wringing.

“What is the definition of insanity … doing the same thing over and over again and hoping for a different result,” Mayor Naheed Nenshi told reporters after the meeting, when asked about his colleagues’ trepidation about the latest proposal.

“We know the PTP is imperfect. Last year I stood up and said the PTP is imperfect, let’s find a better solution. We did not find a better solution.”

The latest program will be funded by $10.6 million unused from last year’s rebate system and $19 million from the city’s fiscal stability reserves.

The proposal will go to city council next month for a final decision, where it will face more scrutiny and debate.

“This current process, where it’s crisis after crisis and Band-Aid after Band-Aid, it’s four years that this has been going on … it has to stop,” said Coun. Jeromy Farkas, who voted against the program.

“We need to address this once and for all. And there’s no other way around it besides significant reductions to our spending.”

Nenshi said the new proposal will help some businesses facing sizeable tax hikes this year, noting council also took steps last fall to have homeowners shoulder more of the tax load. (The shift redistributed about $60 million of taxes onto homeowners.)

“Ultimately, this has to be a transition to a new normal,” the mayor said during Tuesday’s meeting.

The program “is about preventing the most egregious cases, the people who will stand up on the steps of city hall, and helping those folks, but also understand that we’ve made a structural shift.”

However, if councillors think they’re going to be praised by business owners for creating another short-term assistance program, they’re mistaken.

Calgary Chamber of Commerce president Sandip Lalli said council needs to look at an entire package of changes to deal with the situation, not just another piecemeal program.

The business group wants to see a comprehensive plan that includes cutting city spending, generating revenue by selling off non-core municipal properties and continuing to adjust the tax ratio.

“You are not going to get a different result until you have a long-term structural change,” Lalli said in an interview.

“The critical disappointment here is the fact it is, again, just a one-off solution.”

Kelly Doody, who helped organize last summer’s protest after her own business saw its taxes skyrocket, said the relief programs have not been effective.

“I am blown away this is still the solution on the table,” said Doody, who runs the Social School in Inglewood.

“It’s hard not to shake your head when the so-called solution to last year still saw my taxes double … Every business owner I talk to says they need to stop spending.”

If there is a positive strand for council to grab, it’s that property values have begun to stabilize for the downtown towers.

That should take some of the pressure off.

But if council fumbles the ball again as it did last year, expect angry business operators to be back outside city hall.

“I don’t think it’s going to be a rally so much as a revolt,” said Doody.

Chris Varcoe is a Calgary Herald columnist.