Halifax Business Leaders Say Proposed Tax Increase Is Unaffordable
HALIFAX – To say small businesses have had a hard time over the past two years would be an understatement. In fact, it’s hard to conjure up the words to describe the burdens put on entrepreneurs during Covid-19; lockdowns, reduced foot traffic, and reduced consumer confidence are only a few.
So, it’s understandable why the Halifax business community was taken aback when HRM staff this week proposed a 5.9 percent hike on the average property tax bill for 2022. Of that number, staff says 2.9 percent is needed for the normal operating budget, while three percent is for Halifax’s commitment to start transitioning to a greener municipality and fight climate change.
That would amount to roughly $120 for the average residential property, but more than $2,000 for the average commercial property. For many small businesses that survived the pandemic, finding the extra money would be difficult.
Halifax Chamber of Commerce President Patrick Sullivan said he was “extremely surprised” by the number staff came up with.
“We are still in a state of emergency; there are still businesses that are not yet back to full capacity,” said Sullivan. “For every increase, they’re thinking about making right now, someone has to pay for it; and that someone may not have had a good two years.”
Halifax Mayor Mike Savage has already publicly stated that he thinks 5.9 percent is too much. He has asked staff to come back with a report on how to achieve a budget with a 3.7 percent increase. This could mean using Halifax’s cash reserves, cutting spending in certain areas, and taking on more debt.
“Five point nine is too high coming out of Covid. My particular concern is small businesses, like restaurants, who have been through a very difficult time,” says Savage.
“My view on taxes is you don’t raise them just because you can, you raise them because you have to.”
Savage wishes he could offer a different rate for small businesses separate from large corporations but the province hasn’t granted the municipality that power. And it might not until the Spring session of the provincial legislature.
“We don’t have the opportunity yet to look at differentiating commercial rates,” says Savage. “Council has expressed for years the wish to be able to support small and medium-sized businesses.”
But Savage sees an opportunity to, hopefully, get some help from the feds. Mayors from across Canada are reportedly asking Ottawa for money to help with city transit systems, which have suffered since 2020 due to reduced ridership. Savage is among those Mayors.
With people having gone out less since the pandemic, and busses operating at 2/3 capacity for health reasons, the city busses aren’t bringing in the ticket fares they once were. Savage estimates this has caused a $5-$10 million shortfall.
“It means our revenue is down dramatically. It’s going up bit by bit, but it may not hit 80 percent next year.”
Council will ultimately vote a few months from now on what the tax increase (if any) will be. No number is set in stone. Savage is convinced, however, they can keep the number below 5.9 percent.
Sullivan has some ideas on how the HRM can save money before hiking taxes. He thinks there are certain projects the city should review.
He points to the Halifax Forum heritage site, which will cost more than $70 million to refurbish, although the city has said it hopes to recoup costs by bringing aboard private investors. Sullivan didn’t go so far as to say they should scrap the Forum project, but that such things should be reconsidered in the post-Covid-19 financial realities.
“Life is about decisions and, again, people have to pay for these things,” said Sullivan.
Another business group that has spoken out against tax increases is IPOANS. The investment property groups says landlords, especially small landlords, can’t afford yet another expenditure at this time.
“It’s just one more blow against the investment property owners, especially the small landlords that collectively manage [thousands] of units,” says IPOANS director Kevin Russell.
Over the past two years, landlords have faced massive increases in the cost of insurance, building materials, and energy. This winter, they are reporting up to 25 percent increases for snow removal services.
And with the province’s recent decision to keep a two percent rent cap in place for two more years, Russell argues it’s getting harder for small landlords to even break even.
“They don’t have the financial capacity to keep continuing having these increases, whether it’s a tax increase [or something else],” argues Russell.
“It does impact the larger landlords…but they have the financial capacity and the sophistication to manage through this.”
Russell says a lot of people don’t realize that small landlords barely make a profit while they rent their buildings. Instead, they make enough to pay off their mortgage plus expenses, then sell the building when they’re ready to retire–only then does profit roll in.
“Their investment strategy was ‘I don’t need to increase my rent every year because I just want to make sure I’m breaking even and at the end of the day, when I sell my property…that’s my payday.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].