Retail Council of Canada has traditionally focussed its advocacy efforts at the federal and provincial level. However over the last several months and years we have been increasingly engaged with over 3,600 municipal governments across the country.
What is driving this change? Simply put two things – 1) municipal governments need cash to fund their operations and are looking for alternatives beside raising property taxes and 2) local councillors are increasingly responding to populist demands.
This has the potential to impact retailers in two ways. First, municipalities are seeking creative ways to raise money. The proposed parking stall tax that is being considered by the City of Toronto, which would result in a $1 day tax on unpaid parking spots, and the Regional Sales Tax that was considered and defeated by the Vancouver Regional Municipality are prime examples of this types of issues. Populist issues are as varied as the demands constituents place on local councillors and include fining retailers for stolen shopping carts that are found in local neighbourhoods and banning plastic bags of certain thickness in an effort minimize litter.
Retail Council of Canada is addressing these issues with the same passion as we bring to our federal and provincial files. We seek to ensure that any municipal actions are harmonized across the country and the costs and impact on small, mid and large retailers are understood and minimized by local governments.
Toronto Parking Levy Issue
The City of Toronto is experiencing a revenue shortfall (about $607M) for 2017. As a result they are examining several potential revenue tools to eliminate the gap.
Retail Council of Canada is getting involved in the parking levy tool/issue because it is precedent setting in Canada as no other municipality has one. Vancouver had a parking levy in 2006 but the expected revenue did not materialize and administration and enforcement costs proved to be significant. As a result the levy was replaced with an advalorem tax (a tax based on the value of the property) on paid parking which generates about $20M annually.
Retail Council of Canada and the Coalition (of property owners) are meeting with Toronto Councillors and the Mayor’s office to discuss this issue emphasizing that this option would negatively impact retail and would impact the city’s ability to attract investment and remain competitive with neighbouring jurisdictions. Over the last few months RCC and the Coalition have met with a number of Councillors and the Mayor’s office and will continue to do so until year end.
In the meantime, City Staff will be issuing a report at the end of November analyzing the various revenue tools. City Council will be meeting to discuss this topic December 5 and 6 and is expected to finalize the City Budget by late January 2017.
Depending on the per day amount levied on parking spaces, this issue is important to retailers because it could increase operating costs in the neighbourhood of $100M annually in the City of Toronto.
- Parking tax will get a bumpy ride: Briefing note (Toronto Sun)
- Real estate coalition says commercial parking tax a ‘grenade’ for Toronto business (Toronto Star)
Municipal Parking Levy a Poor Choice for Revenue: Businesses and Jobs Threatened
October 13, 2016, TORONTO – The Commercial Real Estate Industry Coalition, a consortium of all of the major Toronto real estate associations, released a report today opposing a new parking levy on commercially-owned parking stalls in the City of Toronto, and describing why it would be a poor choice for financing the City’s budget deficit. The report explains 10 good reasons why it’s a bad idea.
A parking levy is a tax applicable to all parking spaces occupied or unoccupied, above or below ground, at a set daily rate. It is levied against the owner of the parking space. It is to be distinguished from a parking sales tax, which is added to the charged cost of parking for a specific parking space actually occupied by a vehicle.
A parking levy on parking spaces is a hidden tax, akin to another property tax, that will be paid by the property owners and their tenants. Ultimately, part of the increased costs will be borne by consumers, likely in the form of higher grocery bills, higher cost of goods sold in retail outlets, and higher rent recharges in office, retail and industrial properties, or lower incomes for business owners. As it will be hidden, it is not specifically anti-car, as drivers won’t see it.
Toronto is already a high cost city, both residentially and commercially, and adding more tax burden to businesses and properties in the city will just make the problem worse. At the highest rate proposed in the City’s KPMG report, the parking levy could amount to a de facto 44% commercial property tax increase on businesses in the City of Toronto. The resulting increased costs of doing business in the city would make relocating to 905 or elsewhere that much more attractive.
A parking levy actually works at cross purposes with the City’s stated goals of increasing transit infrastructure and ridership, to the extent it may force businesses back out to the suburbs. City residents with jobs in 905 are hardly going to use transit for the reverse commute. We have a hub and spoke transit network, designed to bring people to the core and back out, ill-suited to diffused jobs in the 905 (perhaps except for SmartTrack).
Experiences from Greater Vancouver’s attempt at a parking levy illustrates that the levy is administratively difficult to implement and causes a range of problems and distortions. While the parking levy has garnered attention due to its unrealistic revenue projections, it is important to note that the levy has failed each time it has been proposed in Canada. Mentions of a successful “parking tax” almost always refer to a sales tax on paid parking spaces.
Most importantly, it is not a tax that just gets absorbed by big business, with some deep pocketed entity easily able to afford the hit. City staff and Council may not understand that a parking levy is a charge that will flow through to tenants under typical retail, industrial, and office net leases. So it will be large and small businesses, including small retailers and family businesses that will be hit. As shown in the backgrounder to this release, that financial hit can be proportionately very large. It potentially diffuses through to all economic activity in the city, depending on where it is ultimately applied, and has serious economic repercussions.
“The retail and office sectors are likely to bear most of the increased cost from a parking levy.” Says Michael Brooks, CEO of REALPAC. “At a time when Toronto’s competitiveness significantly trails other Ontario regions, a parking levy, as it has been proposed, would be another unfair burden on Toronto’s business community—especially real estate. The city needs to become more affordable not less so.”
Overall, this report concludes that a parking space levy is a poor financing tool to help the City fund its operating or capital budget gap.
Director, Government Relations.
Retail Council of Canada
416-922-6678 Ext. 225
About the Commercial Real Estate Industry Coalition:
The Commercial Real Estate Industry Coalition is comprised of the Real Property Association of Canada (REALPAC), the Toronto Financial District BIA, the Building Owners and Managers Association Toronto (BOMA Toronto), NAIOP Greater Toronto, the International Council of Shopping Centres (ICSC), the Building Industry and Land Development Association (BILD) and the Retail Council of Canada (RCC).