A Vancouver commercial property tax consultant is asking government to help the commercial real estate and development industry “bridge the gap” during the COVID-19 pandemic.
That “gap” is the growing absence of revenues as the pandemic continues and businesses either slow down or stop operating.
Government can do more, says Paul Sullivan, senior partner at Burgess Cawley Sullivan & Associates, a retail estate appraisal and property tax consulting group. He’s also a board member of the Urban Development Institute, Pacific Region.
Sullivan was part of an April 3 UDI webinar about the pandemic. His commercial clients include developers that are scrambling to cover costs as they face a market downturn, tenants who are unable to pay rents and growing job losses.
On behalf of the UDI, he has several “asks” of the B.C. government, the most pressing being the extension of the July 2 property tax due date.
By giving property owners until Sept. 30 at the earliest — but preferably until the pandemic ends — they could build a bridge to get to recovery, he said.
“I’m a tenant, so I’m more speaking for the industry when I talk about this, but it extends one of the biggest operating cost liabilities to a point that it will help bridge the gap,” he said in an interview with RENX.
“Let us pay our mortgages so we don’t get foreclosed on, let us pay our staff and you guys (government) will get our money later.
“If you don’t help us, there will be no money later anyway.”
Business could face tough choices
If they don’t get the extension, businesses might have no choice but to lay off staff, he said.
“One or the other is going to happen. We’re not asking for forgiveness. We’re just saying, ‘Let us pay some other bills in the meantime.’ ”
Despite having pledged billions in aid and relief, governments across Canada are coming under fire for not doing enough to help businesses get through the crisis.
The Canadian Federation of Independent Business (CFIB) released survey results this week that said 40 per cent of small businesses are worried about permanent closure. One in four had negotiated deferral agreements with landlords.
In a press release, CFIB executive vice-president Laura Jones said for many businesses, getting through May will be “a total nightmare if things don’t change.”
She called on provinces to reduce property taxes and introduce a rent subsidy for the hardest-hit businesses, such as those forced to close by provincial emergency rules.
B.C. government’s pandemic relief
The province of B.C. has introduced a number of measures, including a one-time $1,000 emergency benefit for workers, deferred employer health tax, deferred sales taxes and a delayed carbon tax increase.
As well, the province reduced the school tax portion of property tax for commercial properties classified as retail, office and industrial, by 50 per cent for the 2020 tax year. The school tax accounts for about half the property tax bill.
That amounts to a savings of about two or three months’ worth of taxes, said Sullivan, which he called helpful.
However, he’s asking government to apply the same break to residential properties, including development lots and apartment buildings.
Sullivan told the UDI webinar audience of 1,500 industry professionals the UDI informally surveyed a half-dozen commercial retail landlords and found 80 to 100 per cent of their tenants were asking for rent relief.
Just five to 10 per cent of office and industrial tenants had sought relief. However, the retail figure represents “hundreds of millions of dollars in rent not flowing to landlords and employers at this time.”
Government, he said, needs to remember owners have already prepaid half their tax bills for the year. Taxes due on July 2 will be for the remainder of the year and those landlords are already burdened by hundreds of millions of dollars in unpaid or deferred rent.
Remove taxes on real estate, development
In an interview, he called the 50 per cent rebate “a good start.”
He said class-1 residential owners pay roughly half the tax burden and much of the province’s development land is class-1 residential, as are the apartment buildings.
“It gives them some relief, and it flows back to individuals in their homes. I don’t get why (the province) didn’t go there.”
The other “ask” is to remove taxes designed to lower prices and reduce speculation, namely the province’s Speculation and Vacancy Tax and the Additional School Tax.
Developers are exempt from the taxes so long as they move forward with their projects, which is likely not possible due to the pandemic, said Sullivan.
Projects on hold, he argues, shouldn’t be liable for the additional taxes.
“Literally, these are several hundred million dollars worth of new taxes on development land,” he said.
Sullivan had one more “ask”: that governments pressure banks to share the burden. His own 42-year-old company was rejected for a $1-million line of credit, despite qualifying six months ago and having a long-standing relationship with the bank.
“As the Bank of Canada rate goes down, (banks) are increasing their mortgage rates to buffer their risks. Why the hell are the governments not nailing the banks?” he asked. “
They’ve been making billions of dollars a year off all of us. Why can’t the banks give a little back?”