The yacht club subsidy: how the city’s tax cut program gets it all wrong

The Royal Nova Scotia Yacht Squadron. Photo: Halifax Examiner

We’re fortunate to have dozens of nonprofit organizations doing socially important work in our community: health clinics, boys and girls clubs, organizations to help the homeless and forgotten youth, groups providing space for adult day care, teenage drop-in centres, childcare, hospice centres for the dying.

The list is varied, but the one thing they all have in common is a lack of resources. It’s amazing how a scrappy staff and dedicated pool of volunteers can stretch limited funds, but there is inevitably not enough to get the job done. The last thing many of these groups need is to pay a hefty property tax bill. It makes sense, then, that the city extends considerable tax subsidies to the organizations, effectively cutting their taxes, which doubly makes sense considering that many of them are offering services that would otherwise fall to government.

But while cash-strapped nonprofits serving communities of need deserve all the support they can get, the city’s one-size-fits-all tax subsidy program also gives tax breaks to multi-million dollar yacht clubs sitting on prime oceanside property. This ultimately deprives the cash-strapped orgs of further support. There is, after all, a limited pool of money—why are we giving some of it to millionaires?

Royal Nova Scotia Yacht Squadron

Take, for example, the Royal Nova Scotia Yacht Squadron, on the Northwest Arm. The RNSYS exemplifies every stereotype of a high-end yacht club. It is the oldest yacht club in North America, founded in 1837. “It has ties to Britain’s royal family, with Queen Victoria approving the use of the ‘royal’ prefix, and King Edward VII presented the club with its most treasured trophy, the Prince of Wales Cup, in 1860,” explained Steve De Belie, a board member who for some reason felt compelled to author a code of ethics for the club in 2005.

The property is assessed at just under $5 million. “Senior” memberships for people over 35 years old include an “entrance” fee of $1,190, with annual dues of $2,000. Mooring a boat at the club marina cost an upfront fee of $2,660 and seasonal fees of $1,545 for a boat under 45 feet in length, ranging up to an upfront fee of $3,830 and seasonal rental fees of $5,065 for a boat over 60 feet in length.

And yet the club pays a pittance in taxes. With no subsidy, the RNSYS would pay a tax bill of $63,382 this year on the two waterfront parcels it owns. But the subsidies slash those taxes by over $40,000, to just $23,126 this year. The club has been collecting such a tax break for many years. (Most of the tax cut amounts cited in this article come from this document.)

A senior membership for someone over 35 years old at the Bedford Basin Yacht Club is $748 annually, although actually keeping a boat at the club will cost more than $1,000 annually, depending on the boat’s size and services needed. Taxes on the Bedford club’s property would total $31,279, but thanks to the city subsidy, it pays just $11,246, a break of over $20,000 each year.

Simply applying to berth a boat the Hubbards Yacht Club for more than one year running will cost you $2,500, with an annual rental fee of $1,000 on top of that if you’re approved. The club would pay $10,823 in taxes, but after the subsidy it will pay just $4,184.

The importance of political judgment

It’s true that the yacht clubs serve more than the filthy rich. They host low-cost learn-to-sail classes open to anyone, rent out their facilities to other organizations, and serve as something of a community hub in some cases. Moreover, membership costs for young people just getting into the sport are affordable for most working people.

Still, these are not cash-strapped, scrappy non-profits extending basic social services to communities of need. Would anyone at the Royal Nova Scotia Yacht Club even notice if the top-priced membership fee was raised from $2,000 annually to, say, $2,500 annually—more than enough to cover the full tax bill?

The Waegwoltic Club on the Northwest Arm gets over $150,000 in tax subsidies from the city.

And it’s not just yacht clubs. The South End Lawn Tennis Club gets an annual subsidy of over $23,000. The very largest identifiable tax subsidy package goes to the Waegwoltic Club on the Northwest Arm, the “urban social club and recreational facility,” which gets a whopping $153,788 cut to its tax bill, this year alone.

Another city document—a staff presentation given to the grants committee in November—shows that one organization categorized as “Sport, recreation & leisure” owns property assessed at $3,131,000; without relief, the tax bill would be $93,187, but with the tax subsidy, the organization will pay just $2,330 in taxes this year.

Here are some more details:

Unfortunately, the second document does not name the organizations receiving these large subsidies—so we don’t know if the “health/medical, advocacy & international aid” organizations are doing important work the community would broadly support, or if they’re, say, spa-like detox centres for rich people like Rob Ford. When I asked for more detail, I was rebuffed, with the explanation that the numbers given to the committee were “for discussion purposes only.”

To be fair, the grants committee is looking to “rationalize” the tax subsidy program, and so is considering several proposed changes to it at the committee’s meeting next week. But while the proposed changes will tighten up the extreme situations—the organization with $3,131,000 worth of property may see its tax bill increased from $2,330 $12,524—it still sees all non-profits as equally worthy of tax subsidies.

Is it morally justified to give clubs that service a wealthy clientele such tax cuts? In the logic given to the committee by staff, yes. All the groups are filling some social need, and therefore should be extended a tax subsidy.

This is the perfect example of city government “rationalizing” tax policy out of the political process, leaving no room for sensible judgment. But giving tax subsidies is necessarily a political process. There’s no way around it: Yacht club apples are simply not hospice centre oranges—there is a qualitative difference between the two.

We cannot “rationalize” the politics out of it; they are inherent to the process. It takes discerning people charged with the task of making those value judgments and spelling out those differences. That’s why we elect people.

A note on language. The grants committee calls its tax subsidies “tax relief.” Early on in my coverage of this issue, mayoral assistant Josh Bates sent me a note urging me to not adopt that language, and pointed me to an interview with George Lakoff, a linguistics professor at UC Berkeley. (Bates said he is not writing in his official capacity, but rather because he thought I’d be interested in Lakoff’s position.) Said Lakoff:

The phrase “Tax relief” began coming out of the White House starting on the very day of Bush’s inauguration. It got picked up by the newspapers as if it were a neutral term, which it is not. First, you have the frame for “relief.” For there to be relief, there has to be an affliction, an afflicted party, somebody who administers the relief, and an act in which you are relieved of the affliction. The reliever is the hero, and anybody who tries to stop them is the bad guy intent on keeping the affliction going. So, add “tax” to “relief” and you get a metaphor that taxation is an affliction, and anybody against relieving this affliction is a villain.

Lakoff is right. Moreover, the city has long recognized that tax cuts given to non-profits are in fact subsidies, which is why the cuts are administered by the Grants Committee and are marked as a city expense for accounting purposes.