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Potential changes for taxpayers sitting on vacant land

Regional council is currently in discussions to eliminate tax rebate programs for landowners sitting on vacant industrial or commercial land.

By Dave Flaherty/The Oshawa Express

Commercial and industrial land owners in Durham may see some significant changes over the next few years.

At the Feb. 6 committee of the whole meeting, council tentatively approved several recommendations from the finance department, including the elimination of discounts and rebates for owners of vacant/excess commercial and industrial lands.

If passed, the new rules will also see a gradual reduction of the industrial class tax rate.

Currently, owners of vacant or excess commercial lands receive a 30 per cent tax discount from the region, while similar owners in the industrial tax class get a 35 per cent discount.

In addition, owners of commercial or industrial units that have been vacant for 90 consecutive days can receive additional rebates of 30 or 35 per cent.

Local municipalities administer the rebate program on an application basis.

During a presentation to council, commissioner of finance Jim Clapp said these policies resulted in  $5.7 million in tax discounts in 2017.

The region will phase out the discount and rebate programs over a three-year period and eliminate them entirely in 2020.

Clapp pointed out that eliminating these programs would not likely result in higher tax bills for most industrial landowners.

The overall industrial tax rate will decline from 2.26 in 2017 to 2.19 this year, further decreasing to 2.11 in 2019 and 2.04 in 2020.

Clapp estimated that 81 per cent of industrial class ratepayers will see a decrease on their tax bill.

The commissioner said he saw an “opportunity to make a correction to the industrial tax rate” and make the region more competitive in comparison to other jurisdictions.

Over the past 20 years, the industrial share in overall regional taxation has declined substantially, a trend expected to continue.

In 1998, industrial properties represented 8.7 per cent of tax revenue, but it’s expected that amount will fall to 2.1 per cent by 2020.

“The decline is really as a result of one major situation, and that is the decline in industrial assessment,”  Clapp noted.

As the industrial class share declines, it means residential taxpayers take on more of yearly budget increases, he added.

Oshawa councillor Amy McQuaid-England said by receiving discounts and rebates, landowners were being “subsidized by residential taxpayers.”

“What is their motivation to create new jobs if they are getting discounts,” she said.

However, she wanted to immediately eliminate the incentives.

“Phasing it out doesn’t do anything for the 84 per cent of [residential] taxpayers who are fronting the bill,” McQuaid-England said. “If I don’t use my basement, I don’t get a discount on my taxes. It’s not fair.”

According to Clapp, spreading out the changes over a three-year period made more sense from a “practical standpoint.”

Clarington Councillor Joe Neal, who opposed the plan, said even three years was “very aggressive.”

“It doesn’t fit into the real world,” Neal said, adding that industrial developments can sometimes take up to 20 years to complete.

“This could drive industrial development into the ditch.”

Oshawa Councillor Dan Carter said some landowners may simply pass increased taxation onto their tenants.

“I’ve come across this with local business owners at the Oshawa Centre,” he says. “The landowner divides that bill up as they see fit and smaller tenants pay a bigger share.”

Neal also believes this could result in landowners almost immediately tearing down facilities, using the old K-Mart strip mall in Oshawa as an example.

“Will the end result not be that will get knocked down right away. To keep that mall up with one tenant just makes no sense,” Neal stated.

However, Clapp countered that eliminating the discounts and rebates will put the responsibility on landowners to take action.

“The whole idea is to make it more economically beneficial to the neighbourhood and city as a whole, instead of being rewarding for it sitting there vacant,” he said.

The recommendations will be before regional council at its Feb. 14 meeting.