Upset by recent tax hikes, some business owners are questioning the logic behind changes to property value assessments
By Elayne Duggan
Just because your commercial property assessment falls doesn’t necessarily mean your taxes will do the same.
For some Centretown businesses and landlords, this is the reality of the new method of assessing property taxes.
Edgar Mitchell, owner of the Duke of Somerset Pub at 352 Somerset West and landlord of a commercial building, expresses frustration with the new tax policy.
Mitchell has not yet received his final tax bill, but says that the assessment on the commercial building he rents out declined by about 12.5 per cent, while his taxes are going up by about 40 per cent.
“That just doesn’t compute,” says Mitchell, who is also the chairman of the Somerset Village Business Improvement Area.
“What they’ve done is just decided that despite the fact that a lot of businesses’ assessments have gone down, they’re still going to get the same tax from them.
“When the assessments go down, it means your business is not worth what it was, so where’s the justification?”
On Jan. 1, 1998, the Ontario government introduced a new property tax system called the Current Value Assessment which is based on the property value as of June 1996. In the past, property values were determined across the province using different years to calculate the market value of properties.
“Unfortunately, people’s mindsets were still with the other system, whereas, if they received an assessment notice and they saw it went down 20 or 30 per cent, as under the old system, they made the assumption that their taxes would go down,” says Gerry LePage, executive director of the Bank Street Promenade.
“And what we’re seeing now is even if your assessment has gone down 40 per cent, you could very well see tax increases,” LePage says.
Another change is to the Business Occupancy Tax (BOT). Since the BOT has been eliminated as a separate tax, business tenants will no longer pay BOT taxes to their municipalities. The total amount of this tax has been incorporated into the property tax that owners/landlords of commercial and industrial will be required to pay.
As a result, under the new system, Mitchell and other landlords are expected to act as tax collectors to their tenants since a portion of the rent now goes towards paying city property taxes.
“Whether they are able to pay it, and what the impact is on their tenancy remains to be seen,” says Mitchell.
As a business tenant and owner of Rudy’s Tailoring at 429 Bank St., Milad Bakestani says that because his property taxes increased by $4,000 from about $6,000 to $10,000 annually, he is considering moving to a more affordable building.
He rents the building, and running a small business isn’t profitable enough to handle such a substantial increase. “It will affect my business because I can’t work any more,” he says.
Within the next year, LePage, on behalf of the Bank Street Promenade, intends to petition the provincial government to try to set up a separate class for small businesses to prevent these types of increases from occurring on a regular basis every time there are assessments.
“It’s becoming an exhaustive exercise to try to find means and ways to mitigate against these increases so people can survive,” says LePage.
The tax file
The Issue: Property tax assessment changes
What’s New: The Ontario Government introduced a new method of property assessment called Current Value Assessment.
What it Means: Some business owners may consider moving to more affordable locations.
What’s Next: Executive Director of the Bank Street Promenade says he intends to petition the Ontario Government to introduce a separate class for small businesses to avoid such high tax increases.