500-per-cent property tax increase will change the face of Yonge St.: Keenan
The increase is based on the potential value of the land. For small business owners that means if a 40-storey condo is built next door, they are taxed as if they had a 40-story condo.

TheStar.com
Aug. 3, 2017
Edward Keenan

Might as well start with a disclosure: 20 years ago, I worked for a summer for the Yonge Street Small Business Association, and for John Anderson, the proprietor of a furniture shop called Morningstar and the ringleader of the merchant and landlord group. So I know, and have warm memories of, the people and area I’m writing about here — I have a conflict of interest in this story because I made a little money once upon a time from these people and places.

Back then, they had funding from the federal government to pay me minimum wage to paint storefronts. For a summer, I lugged cans of paint up and down a 36-foot extension ladder, putting colour on the first and second floors of restaurants and clothing stores on Yonge between College and Bloor.

On Wednesday evening, I went back to Anderson’s Morningstar storefront — now moved across the street — for an emergency meeting of the business association. A lot of the businesses there have endured the ups and downs of the two decades since: Nail’s Attraction, Rock Variety, Hockridge china shop (there since 1900), Cat’s Cradle, ABC Books. Many of them still occupy the two- and three-storey storefronts that have long defined the strip.

But a lot has changed in the area since then, too. The laneway food stands of Roy’s Square are gone, replaced by a giant glass condo tower at Bloor. Across the street, Stollerys is gone, replaced by a construction site that will be a condo tower. North and south of Wellesley, whole blocks have now been turned into giant holes in the ground that will become condo towers.

And these changes, inevitably, bring other changes. And those changes, the merchants and landlords gathered Wednesday night said, represent a crisis for small businesses.

While the meeting was taking place, the Star reported that rock ’n’ roll haircut institution House of Lords was closing up shop because, after 51 years in business, a property tax hike — “double taxation,” the owner called it — was just too much to absorb.

At the meeting a half a block south, John Anderson was telling about 40 assembled merchants sitting among the carved wooden doors for sale in the rear of his shop that he expected House of Lords closing would be just the beginning — as many nodded along, he proposed tracking the businesses that shuttered due to tax increases and labeling them the “Mayor Tory Cemetery.”

Although the discussion soon made clear it isn’t John Tory who’s responsible for the tax increases they are complaining about. It’s the provincial agency that does property tax assessments, MPAC. Because of the recent sales in the neighbourhood to condo developers, every building on the strip has been reassessed according to the value of its “highest and best use,” in the lingo of the province. Which means a little T-shirt shop in a 14-foot-wide, two-storey Victorian brick building is assessed taxes as if it were a 40-storey condo with a Shopper’s Drug Mart in the podium.

House of Lords owner Paul Burford called it “double tax.” John Anderson was talking about a “100 per cent tax increase in one year.” Other landlords, pointing to the assessments, were talking about a 500 per cent increase in their taxes by 2020.

It looks like this: one landlord in attendance showed me the tax bill on his building in the 500-block of Yonge. In 2016, he paid just over $22,000 in property tax. In 2017, he was asked to pay more than $48,000. And that increase was the first year of a four year phase in — so he was told to expect similar increases every year until 2020.

It is standard in commercial real estate for landlords to pass property tax increases directly to tenants — commercial leases include a “base rent” paid to the landlord and then an “additional rent” premium that absorbs all costs such as taxes, which is adjusted each year. But landlords in attendance said they couldn’t pass these increases to tenants, because the small retailers would be bankrupted, leaving the space vacant and the landlord with the bill.

George Giaouris owns a building in the 500 block (“I’ve been here on Yonge St. since I was 9 years old,” he says) and operates his own shop, North Bound Leather, on the main floor. “My second floor tenant,” he said at the meeting, “I’m supposed to tell them, ‘Your base rent is $15 per square foot, now the assessment says your share of the (taxes), according to the assessment, is $22 per square foot?’ That’s just wrong. I can’t do that.”

Some would say Giaouris and others like him ought to just sell their buildings to developers who can build something to justify the “highest use” taxation. But adding insult to injury, the landlords along Yonge don’t even believe the valuations mean anything. The area is now covered as part of a Heritage Conservation District, which means the many existing two- and three-storey buildings that remain must be protected, as is. Any new towers to be built would have to be set behind the existing storefront buildings, in order to preserve the character of the neighbourhood.

Which means the option of building a big condo there to cash in isn’t even really available.

This is, in a nutshell, very similar to the problem facing the converted warehouse building at 401 Richmond St. I wrote about earlier this year, where property taxes charged to little gallery and artist studio spaces were set to triple — again thanks to “highest and best use” assessments reflecting condos going up on other lots in the neighbourhood.

Unless we want every neighbourhood where a new residential condo is built to soon be razed and replaced by walls of identical towers, it’s a problem with our tax system we need to find a solution for.

Those in attendance seemed to feel that taxes should be based on the current use of a property — not some speculative “higher” or “better” use. A tiny book shop should be taxed as a tiny book shop, not as a massive condo that may or may not be viable on that site 20 years from now.

Linda Malone, director of the IAM Yoga studio at 680 Yonge, told the meeting very specifically she and others were not anti-condo. In fact, she said, it was customers who live in some of the more recently built new units who she thought made her fledgling business viable.

As the city changes, she said, it may even be that a lot of the businesses on Yonge would have to find a side-street location—perhaps even her own. “But who here feels that we are being penalized at the expense of big developers?” she asked, and almost everyone in the room raised their hands. “We want a reasonable increase so we, as business owners, can find out if our businesses can grow with the city of Toronto. A 500 per cent tax increase is pushing us out.”