Although Charlottetown has experienced a small boom over the last few years in downtown office construction, it is also quite apparent that we have a problem finding tenants for some of our existing office and commercial buildings. In some cases, as companies were setting up shop here, these vacant buildings were passed over in favor of new construction because the market, increasingly, demands a different kind of office space — larger footprints, providing more square footage per floor.
In other cases, property owners seem unwilling to lease their space. Are they just content to pay the property taxes on a vacant building rather than pay for expensive upgrades and renovations and take their risks in a competitive market? If yes, the provincial Real Property Assessment Act is potentially underwriting that risk averse trend, costing the City of Charlottetown unknown thousands (millions?) in tax revenue, not to mention the eyesore of dilapidated, boarded-up buildings in our downtown core.
The reason is right in the definitions on page 1 & 2 of the Act. Commercial is property that is used by a business. If you don’t have a business running you default to non-commercial.
(d) “commercial realty” means real property owned by the Crown or any person, used or occupied by any industry, trade, business, profession, vocation or government business and includes real property used or occupied
(i) “non-commercial realty” means all real property except commercial realty;
Essentially, once the business moves out a property no longer meets the definition of a commercial property in the Assessment Act. And as you can see from this table, that’s quite a significant drop in your tax bill, and all you have to do is close shop!
So this has nothing to do with municipal zoning (i.e. commercial vs. residential) which is a planning tool, but rather how the province defines properties for assessment purposes. In my opinion, once your building is vacant and in disrepair, this is an incentive to avoid the risks of re-entering the commercial property market. And by all accounts this is one source of the problem in Charlottetown.
What is the answer? Are commercial tax rates just too high, generally? Would forcing vacant property owners to pay the commercial rate really be enough incentive for them to get back in the game and make a go of it? Or is the commercial rate just too much of a burden for some property owners to overcome?
I don’t have the answers to these questions. But there is discussion on council about trying to correct this situation and I hope we do what’s best to create a vibrant and successful commercial environment in downtown Charlottetown.
This seems to me a clear, albeit unintended, incentive for keeping buildings empty. And it seems like the kind of fancy loophole a clever building owner might embrace. And, apparently, has.
I hope something can be done about this.
Would letters to the province help?
I’m not sure if that’s necessary at this point Ann. By all accounts our finance committee is intending to tackle this, and if they need reinforcements to twist provincial arms, I’ll put the call out to the blogosphere.
Just FYI, I had mentioned before about a 5-year wait before you could revert to the non-commercial rate. That’s what I had heard, but the Act says nothing about that. Apparently you are eligible as soon as you clear the building out.
While this post is almost a year old, this issue is still relevant. The same properties are still vacant and Homburg has decided to sue one of the worst offenders before his investments are negatively affected by the properties that are “vacant, under-occupied, derelict, dilapidated, run down, unsightly, susceptible to fire, susceptible to crime and vandalism and are non-compliant with the city’s bylaws or building codes.”
Rob, I understand from the mayor’s comments that the city wants to steer clear of this particular dispute, but has the finance committee made any progress in the past year on the underlying tax issue that has perpetuated this situation?
Hi Nathan,
Unfortunately, it doesn’t seem to be a priority and there is some disagreement about how to deal with this. I have discussed it a number of times with other councillors and city staff. I had been told in the past that the business community was concerned a tax penalty would unfairly target everyone, but I have been approached several times lately by people, such as yourself, who tell me otherwise.
I’ve had some meetings recently with “stakeholders”, as they say, and I think this issue may come to a head in the next few months.