There are “two classes of Iqaluit citizens” when it comes to property taxes: those who live in residential units and pay residential property taxes and those who live in similar units but pay commercial property taxes.
So says Nunastar Properties Inc. president Ed Romanowski, who appeared in front of the city’s finance committee Tuesday to ask councillors to consider changing a 2018 bylaw. He and members of the mayor’s housing task force say it creates an inequity among taxpayers and hurts developers.
“[Developers in Nunavut] already have the highest cost in Canada to build residential development,” Romanowski said. “We want fair taxation.”
The Government of Nunavut has an overarching law that has some control over how the city charges property taxes.
The Property Assessment and Taxation Act — which Coun. Romeyn Stevenson said Tuesday is “extremely problematic and needs a lot of repair” for a number of different reasons — states that buildings must be taxed based on their predominant use.
Nunastar owns building 350, for example, which has commercial space on the bottom floor and two floors of multi-family residential units above it. Under the territorial government’s law, it should be taxed in the residential class because the majority of the building is residential.
But in 2018, the city passed a bylaw that contradicts the territorial property assessment act, Romanowski said.
The bylaw makes it so that owners of multi-family buildings that also have a business on the first floor pay 54.2 per cent more in property taxes than owners of multi-family buildings that do not have a business on the first floor, he said.
“Explain to me why that inequity makes sense. Nobody has been able to explain it,” he said. “Nobody.”
The result: increased expenses for property owners, who are already experiencing inflation in other areas of their operations, such as insurance, construction and water bills, said Romanowski.
Nunastar, which owns three of the 30 multi-use buildings in Iqaluit, has plans to build between 350 and 400 units in the city over the next few years, but the company can’t secure the necessary financing, Romanowski said, because of rising costs, which are currently around $470 to $500 per square foot of residential development.
He said costs to operate properties increase about 9.5 per cent each year, but the company only passes on those expenses in rent increases of about 2.6 per cent each year.
“That deficit makes it very difficult to finance new projects,” Romanowski said. “When we go to them [the banks] and we’re showing a decreasing margin, there aren’t many people that are happy, and how do you then build new homes?”
If council were to make the change the committee proposed, it would create four new mixed-use property tax classes that will determine tax amounts by the percentage of commercial and residential space within a multi-use building.
This option would also bring about a 5.54 per cent property tax hike across the board, according to city estimates, for the city to maintain current revenue levels.
But any option that would propose a lower tax rate for mixed use buildings would require an increase in other property tax rates, said Alison Drummond, Iqaluit’s senior director of corporate service.
“On all of these [options], there is a necessity to increase the tax rate across the board to maintain the revenue level that the city requires to operate and provide these essential services,” she said.
Coun. Kyle Sheppard, the finance committee chairperson, agrees a change needs to happen, but he asked Romanowski how the city could sell what seems like a tax break for corporations.
Romanowski said the 5.54-per-cent estimate is rough, and that a tax break for the company simply isn’t the case.
“To suddenly say that the tax increase will just be eaten up or gobbled up as profit by us is a very bad misrepresentation,” he said, “because we’re dealing with costs that have increased far greater than any cost that we could’ve passed onto the renters.”
Mayor Kenny Bell made a motion that council instruct city staff to research the amount this will cost residents and developers, but that if staff can’t pull the information together by January 2022, then the city move ahead with amending the bylaw.
It passed unanimously.
Another motion was passed to request council to lobby the territorial government to change the property assessment act for 2023 so that the city can assess property tax by square footage.
David Venn, Local Journalism Initiative Reporter, Nunatsiaq News