Profound changes in commercial taxation needed for Montreal recovery

We have used this space some dozen times to criticize the Plante administration’s traffic,construction and anti-car policies. We were gratified to hear her words last week that she “hears the frustration” of Montrealers over road, traffic and construction conditions and that she plans to bring some reason and order to her administration’s planning. But she said nothing of the damage and destruction wrought by her administration’s pursuit of initiatives such as the reduction of St.Catherine St. to one lane of traffic and the elimination of all parking. Independent businesses need traffic and parking to bring customers. As we have pointed out, without those, recovery will be nearly impossible.

We will not repeat all the arguments made before, except to remind the Mayor that the Retail Council has warned that some 30% of storefronts may close permanently downtown by November and the Bar and Restaurant Association of Quebec thinks as many as 40% of its members may be out of business by the end of October.

These numbers are vital to keep in mind as the city continues its work on its 2021 budget. Downtown Montreal is one-third of Quebec’s GDP. If we are to keep people employed as support programs terminate, profound changes are necessary to commercial taxation in this city. The rent subsidy program is coming to an end this month. That program allowed commercial landlords to work with their commercial tenants to cover the costs of rents. Without that program, landlords will not be in a position to forebear or forgive certain portions of rent so their commercial tenants — particularly their small and medium sized ones — from continuing their recoveries.

Many businesses have already closed. Many others have moved to the suburbs. The latter is the very thing Mayor Plante pledged to stop. The average small or medium sized business that closes costs 15 jobs according to the Quebec Association of Commercial Property Owners(QACPO). To expand the example, if 200 businesses close that represents 3000 jobs lost. That’s 3000 workers and their families who will find it hard to put food on the table.

In this 2021 budget, the Plante administration must give commercial landlords the tools to be more flexible with their tenants. The first and most vital reform would be to give commercial landlords who reduce rents a dollar for dollar reduction in their taxes. The city can fund that by eliminating certain programs that are not essential such as the green policies that have cost hundreds of millions such as the $85 million purchase of thousands of hectares of land in Pierrefonds to create Canada’s largest park. Montreal already has more green space per capita than any major city.

The second major reform is the elimination of Plante’s ‘vacancy tax’ imposed on commercial landlords who have vacant storefront space for a certain period. It was put into place to squeeze landlords who allegedly were waiting to get the strongest tenants. It was wrong when it was implemented, it is useless now. Today, retail spaces will be empty for a log time and not through any machinations by landlords to get higher rents.

The third reform is to rationalize the base rates on commercial properties with residential ones. Commercial rates are just too much higher to make any sense in today’s economy.

Fourth, the city must pledge its share of GST/TVQ revenues that it obtained a raise on when Montreal was granted more taxation powers when it was declared a Metropolis several years ago to be applied against a reduction in commercial property taxes. That reduction would be passed on directly to businesses and/or landlords for the express purpose of covering rent reductions necessary for small and independent businesses to survive. The QACPO estimates that the city has collected some $67 million since 2018 for its share of GST/TVQ. Sums like that would go a long way to help commercial landlords and tenants work out rents without government supports to help businesses continue.

Finally, the city must plan for and implement a three year commercial property tax freeze so that landlords and tenants can plan through at least one business cycle. No increases for three years. And for any vacant space, there should be a proportional reduction in taxes on a square foot basis.

If these measures are not implemented, more and more businesses will be abandoned. Whole blocks of downtown, Cote des Neiges and other areas will deteriorate. And with that deterioration we will see increases in criminality, homelessness, street drug pushers among other urban plagues. Mayor Plante, is that really the legacy you want to leave?

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