Province says no to Halifax bylaw averaging commercial tax increases

The provincial government has so far refused to sign off on a municipal bylaw designed to soften the blow of tax increases for commercial property owners.

Halifax regional council passed By-Law C-1200, the Commercial Development Districts By-law, in May 2022. The bylaw accompanied a new tiered commercial tax system. With that system, properties in business and industrial parks, like big box stores, are taxed at a higher rate than those downtown and in business improvement districts (BIDs).

C-1200 would allow property owners facing a steep assessment increase to spread out their increased tax bill over three years. As the Halifax Examiner reported in 2021:

Bruce Fisher, the municipality’s [now former] manager of fiscal policy and planning, presented a plan to smooth out tax increases for some commercial properties by averaging out their assessments. The idea is to make taxes more predictable for commercial property owners, even if their properties rapidly increase in value.

[…] when a commercial property’s assessment spikes by 5% more than the average increase in a given year, the municipality will implement the increase over three years.

Fisher gave the example of a property assessed at $1 million. If that property was assessed at $1.3 million the next year, the municipality would phase in the increase. In the year the assessment spikes, the owner would pay taxes based on a $1.1-million assessment, then a $1.2-million assessment the next year, and a $1.3-million assessment the third year.

The recommendation before council was to implement the plan only in “areas serviced by wastewater facilities and a water system,” leaving rural areas out. That’s seen as the easiest way to change bylaws to make it happen, amending the regional plan to create a new “Commercial Development District.”

HRM planned to enact both changes, averaging and tiered rates, on April 1, 2023.

For 2023-2024, the averaging would mostly benefit the commercial properties in the industrial areas. It would shift some of the taxes payable toward smaller properties and those downtown and in BIDs.

In May 2022, HRM submitted the bylaw to the provincial Department of Municipal Affairs and Housing for review and approval.

Province says no

“On January 11, 2023, the Municipality received notice from [Municipal Affairs and Housing] that the department will not approve the by-law for HRM’s implementation on April 1, 2023,” chief financial officer Jerry Blackwood wrote in a report to council’s Wednesday budget committee meeting.

“But subsequent to receiving that letter, we have been invited to have further discussions with them,” chief administrative officer Cathie O’Toole told councillors on Wednesday. “We will be meeting with the province on that and we will be providing an update once we have that meeting.”

Coun. Tim Outhit questioned why the municipality isn’t kicking up a fuss about it. When the province didn’t think HRM was doing enough to increase housing supply, Outhit argued, it came right out and said so.

“What did we do to get the word out when that wasn’t approved? Did we put out any kind of a press release or did we put anything out saying, ‘Sorry, small business we were trying to help you with your increases but we weren’t allowed to do it?'” Outhit said.

City keeping mum until meeting

Mayor Mike Savage said Municipal Affairs and Housing Minister John Lohr called him about the decision.

“The minister was considering it. And there are different points of view on this. One being, some people don’t think it’s very transparent because other people are getting a bigger tax burden because of the averaging,” Savage said.

“We made a decision at council. The minister has agreed to go back with his officials to meet with the CAO and Jerry and others to see if we can work this out. It’s not ideal … They do have the right to approve it or not.”

O’Toole said she wanted council to be aware of the letter.

“We are going to meet with the province. We may be successful in having a discussion where they’ll come back and say, ‘OK, you can proceed,'” O’Toole said. “But council needs to be aware that if the province approves those changes, the taxes to the BIDs increase by about $1 million, so that piece of policy does not actually benefit the business improvement districts this year.”

Outhit asked whether the municipality should be encouraging business representatives to go to the province.

“We aren’t communicating anything at this point in time because it’s not the right point in the process to do that until we understand the province’s concerns and see whether any of them can be resolved,” O’Toole said.

Relations between the Premier Tim Houston’s government and HRM have been fraught, particularly with Lohr. Halifax councillors voiced their concern’s with the minister’s Bill 225, which gives Lohr veto power over municipal bylaws, last year.

Tiered tax rates moving ahead

Meanwhile, HRM is planning to use the tiered commercial tax rates.

The municipality is replacing the former urban, suburban, and rural tax rates with five new zones. Those are business park, industrial park, downtown/community, community, and rural.

Commercial properties in the rural zone are taxed at the same lower rate no matter their assessment value. Using the current 2022-2023 fiscal year as an example, that rate would be $2.662 per $100 of assessed value.

For properties everywhere else, there are also tiers based on assessment.

Properties assessed under $1 million, no matter their location, pay one rate, $2.866. Those between $1 million and $2 million pay a lower rate, $2.716. Properties assessed at more than $2 million are subject to varying rates.

The business park zone sees the highest rate, at $3.566. The industrial park zone rate is $3.166. And then the downtown and community rates are $3.016.

“The new tax structure will shift taxes between competing businesses within the municipality of the same general type, by applying reductions or large increases to the property tax bills based on their geographic location and the corresponding new general rates,” Blackwood wrote in his report.

“Tax burden will shift to businesses that sit within three districts of HRM: City of Lakes/Dartmouth Crossing, Bayer’s Lake Business Park, and Bedford Commons.”

While the most any property’s taxes will go down is $4,500, Blackwood wrote that one property’s taxes will rise $238,000.

Coun. Shawn Cleary found that number misleading.

“I think when comments like that are made it would be really important to give context,” Cleary said.

“The largest increase … that [property] is 11 hectares. It has parking for hundreds and hundreds of vehicles. There are eight buildings, including a mid-rise, on that property. Dozens, not a couple, dozens of businesses.”

Council’s budget committee meets again on Friday to debate spending for the CAO’s office, Finance and Asset Management, and Legal and Legislative Services. The final budget approval is scheduled for April 25.