News / Vancouver

Another year, another tax shock for small Vancouver retailers

In 2017, a huge spike in property values rocked the city's local businesses. Don't expect a reprieve this year, experts warn.

Shoppers on Robson Street on Jan. 1, 2018. The owners of Chocolate Mousse, a kitchenware shop that had operated for 33 years, announced they would be closing their business because of a huge property tax increase.

Jen St. Denis / Metro Order this photo

Shoppers on Robson Street on Jan. 1, 2018. The owners of Chocolate Mousse, a kitchenware shop that had operated for 33 years, announced they would be closing their business because of a huge property tax increase.

A slow-motion emergency for community retail in Vancouver will continue this year if city council doesn’t move quickly, say two small-business advocates.

BC Assessment will release property value assessments for 2018 this week. In 2017, most commercial properties in Vancouver experienced a whopping 40 to 300 per cent increase. Don’t expect a reprieve in 2018, said Paul Sullivan, a partner with appraisal firm Burgess Cawley Sullivan.

Sullivan expects another 30 per cent increase, while downtown properties can expect a 100 per cent jump. Small business owners often shoulder the bulk of rising taxes because most pay property tax directly through their leases.

In the last month of 2017, one West End business provided a grim example of this effect: the owners of Chocolate Mousse, a kitchenware store near Robson and Cardero, announced they would be closing after 33 years because their tax bill nearly doubled to $130,000 — exceeding their rent.

Over the Christmas season, owners Jane and Karen Tennant left a poignant message with a window display showing their miniature storefront floating on heavenly clouds surrounded by angels, the question “Christmas future?” and on the floor, a pile of Monopoly money.

The owners of Chocolate Mousse, a kitchenware store in Vancouver's West End, created this window display after announcing they would have to close their store following a huge increase in property tax.

Jen St. Denis/Metro

The owners of Chocolate Mousse, a kitchenware store in Vancouver's West End, created this window display after announcing they would have to close their store following a huge increase in property tax.

“Merchants are not hiring new staff, in fact they’re laying staff off,” Sullivan said. “They’re going out of business at a far more rapid pace than they used to. The churn of tenants going through premises is increasing as people are unable to financially survive the increased cost.”

Stephen Regan, executive director of the West End Business Improvement Area, echoed that warning. Certain portions of Robson Street and Davie Street saw a huge spike in property value because of a relatively new community plan that rezoned those areas to allow for residential development. Regan is expecting another increase of around 25 per cent this year. He recalled when an increase of 10 per cent was considered onerously high; that now seems “quaint,” he said.

The city and BC Assessment have offered tools to ease the blow of rising property values, but Sullivan and Regan said there’s a big problem with how those policies were rolled out that will come to a head this year if it’s not addressed.

One such policy is three-year averaging — it averages out the building value over three years and bring down the tax increase to a manageable level.

Then there’s another tool known as split assessment: in the past, properties that could be redeveloped into residential buildings were often assessed with the unbuilt density factored in, but all at the higher commercial tax rate. BC Assessment has now begun to assess that unbuilt potential with a combination of the lower residential tax rate and higher commercial rate, which also eases the tax burden for businesses.

But businesses owners who qualify for three-year averaging don’t qualify for split assessments, Sullivan said. And because of the extraordinary increase in 2017 and ongoing rise in 2018, three-year averaging will become much less effective this year.

“It’s going to be devastating for the level of taxation for small businesses in the West End,” Sullivan predicted, adding that other neighbourhoods are also affected.

Sullivan and Regan are calling on the city to allow some businesses to qualify both for three year averaging and split assessments, and to extend three-year averaging to five years. So far, Sullivan said, the response from city council has been slow.

While city planners recently began consultations on how to help “legacy businesses” in Vancouver’s historic Chinatown, Sullivan said it’s not just Chinatown that needs help: it’s every neighbourhood business district across the city.

“There are other things affecting retail, like online shopping, but taxation is something we can do something about,” Sullivan said.

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