Tax Hikes For Big Box Stores, Tax Cuts For Small Businesses Under New Halifax Plan
HALIFAX—Halifax Regional Municipality will make major changes to its commercial tax laws so some large companies will pay significantly more.
Council made the decision on February 15 when it voted in favour of new rules meant to ease the tax burden on small businesses.
The plan will create new commercial tax zones in the city based on already established business and industrial parks.
Zones containing a high proportion of small businesses (think Quinpool or Spring Garden Roads) will see some commercial property taxes go down. Zones containing mostly big box stores (like Bayers Lake Business Park) will see some commercial property taxes go up.
Two Options For Tax Relief
Council has been grappling with how to provide tax relief to small businesses for at least a decade.
For about eight years, a series of motions, reports, and public engagements have wound through the municipal process trying to answer that question.
A new staff report capped off much of that work and gave council several options for changing the city’s commercial tax rates.
The municipality doesn’t have the power to make every change it wants so it was left with three options everyone agreed weren’t perfect but addressed the problem.
Of the three options on the table, only two were seriously considered.
The first (Option 2) is a system that would give tax breaks to lower-value commercial properties in urban and suburban areas of the city.
Essentially, property owners would pay lower taxes on the first $2-million of their property’s value, and slightly higher taxes on anything above that.
The tiered tax rates would mean savings gradually taper off until properties hit $5-million of value. Any commercial property worth more than that would end up paying more.
The other option (Option 3) would also give tiered tax relief but base that relief on geographical location.
Under that system, the city would create commercial tax zones based on already established business and industrial parks.
Zones containing mostly small, downtown businesses would have a lower tax rate, while zones containing mostly larger companies like big-box retailers would have a higher tax rate.
The breakdown is complicated but is illustrated in the table below.
BIDs Want Taxes Based On Location
Leaders of several of HRM’s Business Improvement Districts spoke to council on February 15 to argue in favour of Option 3
Paul MacKinnon, the CEO of the Downtown Halifax Business Commission, was adamantly against the staff recommended Option 2. He argued the property-assessment-based scheme “presumes small businesses exist in small buildings.”
“That may be generally true of owner-occupied buildings, but walk through any large, downtown property and you will see the sandwich shop in the same building as the national bank branch,” he said.
He said he was concerned that Option 2 would mean a tax increase for any property worth more than $5-million.
“That’s 18 percent of all of our properties, representing likely in excess of 40 percent of individual businesses downtown,” he said.
“This completely goes against the goal I hope we all share of making the downtown more competitive and helping [businesses] recover that have disproportionally been hit by pandemic restrictions.”
Big Box Reps Say Option 3 Is Unfair
Meanwhile, other business leaders pushed back on the geography-based system of Option 3.
Ann-Louise McKinnon is a general manager at Centrecorp, which manages Dartmouth Crossing. She argued Option 3 targets the “perceived success” of big-box areas “without actually helping the retailers you claim you want 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,” she said.
She and others pointed out the scheme would mean wildly different tax rates for the same kinds of businesses in different “zones” of the city. That could end up pitting one area of the city again another.
“Treating the exact same businesses differently doesn’t seem very fair,” MacKinnon said.
Council Fine With Big Box Stores Paying More Tax
Despite those concerns, many councillors were unapologetic in their support for Option 3.
Coun. Waye Mason argued the whole point of adjusting commercial taxes in the HRM is to make things easier on small businesses in specific areas of the city. He said he’s absolutely fine charging big box stores more tax.
“It’s about trying to lower taxes on main streets and in downtowns and increase them in other areas to compensate, at no net loss, while providing clear incentive to concentrate business where we all want,” she said.
Coun. Patty Cuttell pointed out that property assessments in the city’s business parks have trended down in recent years, meaning businesses in them are paying less tax.
Meanwhile, many big-box stores like Costco made more money than ever during the pandemic.
But in downtown areas like Quinpool and Spring Garden Roads, property assessments are going way up as small businesses struggle to stay afloat.
“Right now there are winners and losers if you really want to break it down. And the small businesses, particularly in the area where we’re seeing a lot of market investment … pushing up assessments are suffering more than ever and they really need support.”
Coun. Tim Outhit, meanwhile, added that the proposed tax changes are more about economic development than they are about fairness.
“It’s fine that our business parks are doing well. It’s fine that our industrial parks are doing well… but we know the Quinpool Roads, the Spring Garden Roads, the Bedford highways, the Agricola Streets, we know folks are struggling there with their taxes and we know that an increase to a small business is not [a small thing] the way it is to a big box store,” he said.
Implementation In 2023/24
After hours of debate, all but three councilors voted in favour of the geography-based Option 3. Couns. Paul Russell, David Hendsbee, and Tony Mancini were the three dissenting votes.
City staff will now work to draft a policy for the new tax system in time for the 2023/24 fiscal year. Council must still vote on the final draft before it officially becomes law.
Council’s vote also included instructions to staff to review the program following the 2023 final tax bill and report back to council.
Trevor Nichols is the associate editor of Huddle, based in Halifax. Send him your feedback and story ideas: [email protected].