At a time when most local businesses are still struggling their way back from over a year of COVID restrictions, some say they’ve recently been hit with an unwelcome surprise in the form of a significant property tax increase.
Brady McDonnell is one of the business property owners with a case of sticker shock.
McDonnell owns Edgewater Studio, a custom tile shop that he runs from two industrial condos in the City of North Vancouver.
When he opened his tax notice this year, “I was completely shell shocked,” he said.
McDonnell said his property tax bill has increased by one-third in the last two years, going from just under $21,000 in 2019 to almost $28,000 this year.
“What shocked me is the size of this increase,” he said.
The net effect is an immediate $500 a month increase to costs, said McDonnell.
The increase couldn’t come at a worse time for many businesses, he said, noting he’s watched some small businesses go broke during COVID, while others are barely hanging on.
“A lot of people are saying they’re really concerned about small business,” he said – but he adds the tax increases don’t seem to show it.
McDonnell isn’t the only one floored by recent business property tax increases.
Jim Myers, who owns a number of business properties in North Vancouver, calls the tax increases he’s seen “outrageous.”
Most tenants in his buildings are on triple-net leases, said Myers, which means tenants are responsible for paying property taxes.
“I have hairdressers on Lonsdale who have really struggled in the past year. We’ve helped them out as much as we can. And now they’ve got a 30 per cent increase in the triple net. ... It’s just not fair,” he said.
Some tenants may walk
Myers said he’s had one fitness group close up during COVID, despite getting several months’ free rent. “They got to the point where they’ve had to quit,” he said. Since then, another fitness group has moved in to the space, he said. But he worries about what will happen when they see the tax increase. “I may have tenants who are going to say, ‘That’s it. We’re done,’” he said.
“What’s happened here with these tax increases is wrong. It’s a slap in the face,” he said. “The province, the city, the district – they’ve all got to step up and help.”
Patrick Stafford-Smith, chief executive officer of the North Vancouver Chamber, said Myers isn’t alone in that sentiment.
“I’m hearing that this is a major hit,” he said. “And I’m worried that it’ll have an impact on some people trying to determine whether they can make a go of it or not.”
According to tax information provided to the North Shore News, the increases have been due to a combination of rising assessed values and increases in the provincial portion of the tax bill – with the latter making up the lion’s share.
Provincial 'school' tax the biggest increase
A year ago, in the first wave of COVID, the province gave a break to commercial property owners, reducing school taxes by an average of 25 per cent. The move was a one-time measure, which saved commercial property owners in B.C. a collective $720 million, according to the Ministry of Finance.
This year, however, that help has run out and businesses are shocked when they open their tax bills. In addition, some properties have risen in value much more than the average for their property class, creating additional tax headaches.
While businesses appreciated the provincial help last year, “there seems to be a lack of sensitivity to the challenges that are still faced by businesses,” said Stafford-Smith. “It’s a hit to some businesses when they are down and weak.”
According to the Ministry of Finance, while the school tax help has ended, the province is still providing more “targeted” help to the worst hit sectors, including grants for major tourism operators and tax incentives for hiring. The province has also provided municipalities with the ability to grant tax relief to some businesses in hardship cases.
Day of financial reckoning ahead
Stafford-Smith said that solution was “doomed to fail,” however, and amounted to downloading the problems on to municipalities. “It’s not a fair, equitable approach.”
Both the provincial and federal governments have stepped in to offer help to businesses over the past year, including rent subsidies from the federal government to businesses that qualify. Many of the more recent programs are in the form of partially forgivable loans.
But Stafford-Smith said as the economy reopens, there will be a day when governments start to withdraw their financial life support.
“The concern is when [the programs] do come to an end, we’ll see another reckoning,” he said. “And that’s going to be the challenge.”