Big changes are coming for big box stores after Halifax councillors voted to change their commercial tax system.
Halifax regional council held a virtual committee of the whole meeting on Tuesday to consider three options for a new commercial tax system.
Currently, HRM has two commercial tax rates: urban/suburban at $2.9530 for every $100 of assessed value, and rural at $2.6160. The options presented on Tuesday, which HRM has been working on for years, add more rates to try to iron out some inequities in the current tax system.
Namely, commercial properties in walkable areas of the peninsula or in downtown Dartmouth, where land is worth more, end up paying much more per square foot than big box stores in car-dependent places like Dartmouth Crossing or Bayers Lake.
Bruce Fisher, HRM’s director of financial policy and planning, presented three options to councillors on Tuesday, all of which raise the same amount of tax money for HRM.:
- “Tax Relief to BID Areas with above average taxes”
- “Tiered Tax Relief for Small Properties”
- “Tiered Tax Relief with Tax Zones”
Under Option 1, property owners in the Business Improvement District (BID) areas currently paying the most taxes — Spring Garden Area Business Association, Quinpool Road Mainstreet District Association, Sackville Business Association, and Downtown Halifax Business Commission — would pay lower tax rates. Other areas’ tax rates would stay the same.
Option 2, Fisher’s recommend option, would create tiered tax rates based on property value, no matter the location. On the first $1 million of assessed value, property owners would pay $2.803 (a reduction of 15 cents). On assessed value between $1 million and $2 million, they’d pay $2.653 (a reduction of 30 cents). And on assessed value over $2 million, they’d pay $3.103 (an increase of 15 cents).
Option 3 sort of combines the first two, adding zones to the tiered tax scheme: business parks, high density, industrial, small medium enterprise, and rural. The tax rates for properties assessed at up to $1 million and between $1 million and $2 million are the same as under Option 2, but the rates for assessed value over $2 million are different. In business parks and industrial areas, assessed values over $2 million would be taxed at $3.513 and $3.103, respectively.
After Fisher’s presentation, councillors heard from people representing business groups. They were split into two camps: big business representatives opposing all three options and BIDs supporting Option 3.
Ann-Louise McKinnon with Centrecorp Management, representing Dartmouth Crossing, argued HRM’s proposed options would harm the businesses it was trying to help.
“Targeting big box areas may seem like an attractive option, but if you scratch the surface, you will really see that what you’re doing is tilting the taxation field against these areas, and the businesses including the small businesses and locals that are located within these areas,” McKinnon said.
“We’re not in favour of any of the options. It does not treat the businesses fairly … Let the market sort out the winners and losers.”
Paul MacKinnon with the Downtown Halifax Business Commission argued shifting the tax burden to those big box areas is more fair than the current system.
“Under Option 3, a restaurant like 2 Doors Down on Barrington Street will pay less, Scotia Square will pay marginally less, and Walmart will pay more. That seems pretty fair to me,” he said.
Coun. Waye Mason asked his colleagues to defeat the staff recommendation and move ahead with Option 3.
“It would ease the burden slightly on businesses, especially on smaller properties and would shift it to larger businesses and in different geographic areas,” Mason said.
“And it would mean that in many cases, the Walmarts and Costcos would pay more. I think it needs to be noted that big box stores have not suffered in COVID like small businesses, and in fact many of them have made out very well and have had record profits reported publicly in the last little while.”
Coun. Tony Mancini, whose district includes Dartmouth Crossing and Burnside, wasn’t sure any of the options would be fair.
“We need to support small business by all means, but we also need to support big box stores. They’re all businesses, and we try to be as fair as possible,” he said.
Coun. Sam Austin agreed it’s never going to be fair for everyone.
“It would be easy to say well, because we don’t have a perfect solution, we should therefore do nothing,” Austin said.
“And I think that would be the wrong conclusion because the current system already is picking arbitrary winners and losers as it is, and for the longest time, the arbitrary winners have been primarily the big box stores. They can build the giant facility out on the edge of town where land values are lower.”
Councillors voted down the staff recommendation, and voted in favour of Option 3. Mancini, along with councillors David Hendsbee and Paul Russell, voted no.
The changes will come into effect in the 2023-2024 tax year.