Kate F. Mackenzie
Only 46 percent of Bank Street businesses will qualify for a recently announced city tax break for small businesses, according to Christine Leadman, executive director of the Bank Street BIA.
The 15 percent tax break was approved by Ottawa City Council in October and will come into effect in 2022. It will be phased in at a rate of 7.5 percent over two years.
Leadman said the overall impact the city is providing for small businesses is commendable but won’t help all businesses. The rest will see a slight increase in their taxes to offset the $9.9 million that the tax break will cost.
A staff report to the city’s Finance and Economic Development Committee (FEDCO) estimates 5,800 properties or 10,000 small businesses will benefit from the tax break.
The property must be less than 25,000 square feet to qualify, explains Michelle Groulx, executive director of the Ottawa Coalition of Business Improvement Areas (OCOBIA).
“It’s a difficult situation where you see some businesses who are in larger properties that will not get that discount,” she said. “The larger properties, or their taxes, are going to be increasing to a degree to achieve that parity.”
The discount will ultimately bring more equality to how larger and smaller properties are taxed. Previously, businesses in larger properties like shopping centres were already taxed at a lower rate than the properties that will receive the reduction, Groulx explained. “This discount is actually bringing the small properties closer to the level to where the shopping centre has been taxed over the past few years,” she said.
Yukang Li, the executive director of the Chinatown BIA, said the tax break will be good and might attract new businesses to currently vacant spaces. Most small businesses in Chinatown will qualify. Li said the businesses and property owners he has spoken with are “very much looking forward to it.”
Although a decrease in taxes is a positive step toward helping small businesses, a concern mentioned by Councillor Eli El-Chantiry, during the October 5 FEDCO meeting, is that business owners “are at the mercy of the landlords” in receiving the discount.
Groulx said it’s a fair concern and, if tenants do not see their commercial tax go down, it’s “highly questionable” and should be reported.
However, according to Councillor Catherine McKenney, who supports the tax break, the city does not have the authority to fine property owners that do not pass on the discount. “It will be a good-faith gesture; we’re hoping that the property owners pass it along,” McKenney said.
Since the commercial tax is charged separately to the tenant from the base rent, Groulx expects it to be an easy transfer with landlords simply passing down the actual cost.
“Where I see complications is if a tenant has a bundled up type of commercial lease with their property manager,” she said. “I don’t see it very often. But where it does exist, I think commercial tenants are going to have to go in and talk [with their landlords] about what that tax is, [b]ecause it is the full intention of this program to be able to pass that discount on to the tenant.”
Jim Sherman, the owner of Perfect Books on Elgin Street, said the tax break and any support are “more than welcome.” Sherman said he has an extremely positive working relationship with his landlord and is not concerned that he won’t pass on the discount.
Groulx said the BIAs are on high alert to inform all of their members that the tax discount is coming and to expect to see a change on their bill in June 2022. Additionally, the City of Ottawa is listing all properties that will qualify for the discount on their website.