Jon Willing, Ottawa Citizen
The finance and economic development committee voted Tuesday to accelerate the cancellation of a commercial and industrial vacancy rebate beyond what the city treasury department recommends.
The committee backed a motion from Coun. Stephen Blais to kill the vacancy rebate over two years, rather than three years, to mirror what the City of Toronto is doing.
“We’re obviously disappointed that they would make that change,” said Dean Karakasis, executive director of Building Owners and Managers Association of Ottawa.
“We weren’t overly supportive of the original report. We still seem to be running into the same issue here of ignoring what this program was all about.”
Phasing out the vacancy-rebate program over two years would mean the city can stop budgeting $6.9 million for tax breaks in 2019. The money would be freed up for other city programs.
One man, however, is urging council to reinvest the money in small business.
Joshua Thatcher, store team leader at Whole Foods, said the money should be invested in local entrepreneurs during their startup phases. Those successful startups could then fill commercial real-estate vacancies, he said.
Today, property owners can claim a 30 per cent tax break for commercial land and a 35 per cent tax break for industrial land if parts of the buildings are vacant for 90 consecutive days.
The committee’s recommended plan would decrease the vacancy rebate to 15 per cent in 2017 and eliminate the discount in 2018.
Karakasis highlighted the “misunderstanding” of the rebate program. The program started when collection of the former business occupancy tax fell to landlords in 1998 and the city increased the property taxes. The vacancy rebate was made available to offset empty units.
According to Karakasis, landlords are adjusting to changing trends in the commercial market, such as the growth of online shopping and a decreased reliance on physical retail space.
At the same time, the city’s office vacancy rate is about 11 per cent, but the city doesn’t consider it unreasonable. The downsizing of the federal government has been a contributing factor.
Coun. David Chernushenko questioned whether cancelling the vacancy-rebate program would prompt landlords to adjust rents to fill empty units.
Karakasis said the industry is already lowering rents to make units as attractive as possible.
The city should be prepared for more property owners challenging their land-assessments in attempts to lower their property taxes, Karakasis said.
The Municipal Property Assessment Corp., not the city, is in charge of putting a value on land for tax purposes. The city uses those assessments to determine the property taxes.
Coun. Scott Moffatt was the only committee member who voted against the plan to end the rebate program.
Council will vote May 10.