Real estate coalition says commercial parking tax a ‘grenade’ for Toronto business

TheStar.com
Oct. 13, 2016
By Tess Kalinowski

Retailers will bear a disproportionate burden of a commercial parking levy’s effects if the city decides to implement such a revenue tool - and it will be small merchants that suffer most, says a coalition of real estate and business groups.

In November, Toronto’s executive committee is expected to consider the tax among a dozen new ways of bolstering the city’s bottom line. It’s not certain they will adopt any of the ideas.

A parking levy of between 50 cents and $1.50 per day on every paid and unpaid parking spot could generate up to $575 million annually. But an Altus Group study for the Real Estate Industry Coalition says the tax would spell disaster for smaller shops, particularly those in suburban strip malls.

A strip mall with 50 parking spots could face a $27,375 parking bill on top of the property taxes it already pays, says the report, to be released Thursday.

The average mall tenant would pay $10,000 a year on a 2,000-square-foot store if it was charged $1 a day per parking space. That would require the store to generate $167,000 in additional sales, according to an estimate by the International Council of Shopping Centres, quoted in the Altus report.

In the likely scenario that public institutions such as universities and hospitals were exempted from the parking tax, 60 per cent of the revenues would likely be generated by retail and office properties, said Brooks Barnett, manager of government relations and policy for the Real Property Association of Canada (REALpac).

“This is a grenade for businesses in the city, who are trying to remain competitive amid level after level of regulations and financial challenges that don’t seem to stop. We’re sympathetic to the city’s goals. We believe there are fair ways of meeting those objectives,” he said.

Industrial property owners or tenants would pay about 17 per cent of the total, about $62 million a year, based on a $1 daily parking tax. That could have the effect of pushing manufacturers outside the city, according to the report.

“Manufacturers already face much higher land prices in Toronto compared to other municipalities in southern Ontario,” says Altus.

Mayor John Tory and city council have pledged to keep property taxes at or below the rate of inflation next year. But as of the beginning of this month, Toronto was facing a half-billion dollar operating shortfall.

Among the revenue tools that have been floated at city hall are hotel, congestion, amusement, vehicle registration and alcohol taxes. A report done for the city by KPMG said those fees could raise between $4 million and $220 million per year.

While some city councillors see the parking tax as a reasonable way of forcing business to contribute to services such as the Scarborough subway, Tory’s spokeswoman said this week that the mayor is continuing to reserve judgement until the revenue tools discussion comes before council.

The real estate industry coalition thinks that a property tax increase would be a more equitable source of money for housing, transit and other services.

Toronto needs to find a tax that is “good for the entire city’s economic development,” said Barnett. The parking levy would inevitably favour some geographic areas.

“If you’re Scarborough, if you’re North York, if you’re Etobicoke, if you’re a councillor in those areas, you’re certainly going to see the pinch of a parking levy on your businesses a lot more than a downtown councillor,” he said.

A property tax is also a more reliable source of revenue, says the real estate coalition.

When Vancouver tried to implement a similar parking tax, 5,100 businesses out of 29,600 appealed their assessments, prompting the government to eliminate the fee in favour of a property tax, notes the Altus report.

The real estate industry coalition includes REALpac; the Building Owners & Managers Association (BOMA) Toronto; the Building Industry and Land Development Association (BILD) Toronto; and the Toronto Financial District Business Improvement Association (BIA).