Mayor Naheed Nenshi told a gathering of Calgary’s business leaders that the problems caused by empty downtown office towers aren’t getting better — in fact they’re “much worse” — but that city council will “have their back” in the months to come.
Nenshi made the comments at a packed luncheon Thursday hosted by the Calgary Chamber of Commerce where he swung between two topics in particular: Calgary’s potential bid for the 2026 Winter Olympics and how the city will tackle the problem of stubbornly high downtown vacancies that are driving up property taxes for businesses outside the core.
“The issue of filling the downtown again is critical to the future success of our city,” he said.
“The challenge is that it’s not getting better. In fact, this year, because of a couple of sales in the downtown core of big skyscrapers at very low prices, it got much worse.”
Calgary has seen property values in the core slide from 32 per cent of the total non-residential assessment base in 2015 to just 19 per cent in 2019, forcing a shift in the tax load away from downtown office towers onto the shoulders of non-residential property owners in the suburbs and industrial parks.
For each of the past two years, the city has spent around $45 million to soften the blow by limiting the increase on non-residential property taxes to five per cent.
But executing the same program in 2019 will cost twice that amount: approximately $89 million.
“I don’t have it,” Nenshi said Thursday. “So it’s important for us to think about what the alternatives are.”
Nenshi told the chamber there are four near-term solutions of varying palatability, including: continuing to spend city savings on tax relief measures; shifting some of the tax burden onto homeowners; accepting the situation as the “new norm” where properties outside the core pay higher taxes than those downtown; and introducing different tax rates for small and large businesses to shield the smaller firms.
In the long run, the key to solving downtown vacancies is growing the economy, both through scaling up local businesses and attracting new ones to Calgary, Nenshi said.
But in the interim, the mayor pledged, city hall won’t let businesses suffer.
“I can tell you one thing for sure,” he said. “We’ve had your back for the last two years, we’ll continue to have your back. We understand the need for small businesses to thrive and to grow, particularly in this economy.”
Zoe Addington, policy director with the chamber, said she is pleased city council is keeping “everything on the table” when it comes to solving the tax shift problem, but would like to see one more potential solution added to the mix: cuts to municipal spending.
The chamber is also concerned at the possibility of introducing different property tax rates for different sized businesses. Addington said it’s not clear how effective a solution focused on company size would be.
“The large variation in (property) value isn’t based on size or number of employees, but rather on location as well as the assessment class — so tax relief based on employee numbers doesn’t seem like it will address the problem,” she said.
Nenshi spent part of his time Thursday talking up another big economic question the city is facing.
Framing a bid for the 2026 Games as a smart economic play for Calgary, Nenshi said the city could spend $390 million to leverage a $4-billion investment from the provincial and federal governments, the International Olympic Committee and private sources.
“That’s not nebulous economic development, that’s actual cash being invested in the city,” he said. “And that’s money we wouldn’t have access to otherwise.”
He said Calgary taxpayers send far more in taxes to Ottawa and to Edmonton than they get back in federal and provincial investments in the city.
“This is a great way for us to get a little tax rebate.”
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