City committee votes to phase out rebates for vacant properties

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A provincial program that forces municipalities to give property tax rebates to owners of vacant properties is one step closer to being cancelled after Ottawa city council's finance and economic development committee agreed to phase out the scheme by 2018.

The original staff report recommended cancelling the program by 2019, but Cumberland Coun. Stephen Blais successfully moved to phase it out by 2018. Only Rideau-Goulbourn Coun. Scott Moffatt dissented.

The vacancy rebate program allows owners of commercial and industrial buildings to apply for hefty tax refunds 90 days after their properties become vacant. The program cost the city $17 million last year, and $70 million since 2009.

Commercial property owners are eligible for 30 per cent rebates, while industrial property owners can receive a 35 per cent refund on their property taxes.

Rewarded for letting buildings rot

Most of the handful of public delegations at the committee meeting were in favour of phasing out the program. David Jeanes, president of Heritage Ottawa, was particularly supportive of the measure as it relates to helping combat so-called "demolition by neglect," arguing the rebate awarded landlords who leave their empty heritage buildings to rot.

However, Dean Karakasis of the Building Owners and Managers Association (BOMA), told the committee that commercial property owners are facing many challenges including federal government layoffs, reduced demand for office space and stiff competition for brick-and-mortar retailers from online shopping.

Karakasis also disputed the idea that cancelling the program would lead to lower commercial vacancy rates, which now stand at about 11 per cent in Ottawa.

"It seems a little absurd to me," Karakasis told the committee.

While he agrees there may be a few examples of landlords who might delay renting because they're getting a tax break, he said most property owners would prefer to rent their spaces rather than get a mere 30 cents back for every $1 they pay in property taxes. 

Moffatt interested in rebates for small business

Moffatt dissented on cancelling the rebate because he wants to know whether the scope of the program can be scaled back to help only small businesses.

A relatively small number of properties assessed at more than $25 million generally received half the rebate money. However, small businesses — those assessed as worth less than $2.5 million — account for most of the property owners who receive the rebate, but only get 12 per cent of the money.

Moffatt would like to know whether the rebate program can be directed solely at these small property owners, which he believes "need help the most." 

If narrowing the program is allowed, it would cost the city $2 million instead of $17 million.  

Program cost ballooned

It's been a popular program nevertheless.

The city only budgets $7 million to cover the program, but in the last two years received over 900 applications from property owners seeking $17 million worth of rebates.

The vast majority of the properties are commercial, and most are in the core of the city, according to the city treasurer's office.

Earlier this year the province announced it would allow municipalities to manage the rebate programs however they liked.

Cities must still formally request a regulatory change from the province by July 1.