My FEDCO delegation on Tax Rebates for Vacant Commercial Properties

My remarks to Ottawa City Council, FEDCO Committee regarding Tax Rebates for Vacant Commercial Properties. A three year cap on the tax holiday is a start but I wanted to encourage Council to push even harder. In the end FEDCO members did not change the motion from its original form, but I support it nonetheless.

Mr. Mayor and Councillors, thank you considering this motion to put a cap on a harmful subsidy.  I am supportive of the motion in its current form but am here to encourage you to amend it to go even further. I would encourage you to petition the Province to do away with vacancy rebates altogether.

Simply put, the City is a provider of services. Whether a property is fully used, partially vacant, or completely empty, the road it sits on still needs to be plowed and money needs to be set aside for inevitable sewer and water replacements. All property owners should be paying a fair share of those costs.

One could argue that an empty building puts less strain on city services, so perhaps they are deserving of a rebate. But the City of Ottawa is faced with an infrastructure deficit across the entire city, so that argument falls flat. A building may sit vacant for a year, but the property owner will still benefit from a publicly funded water and sewer replacement 15 or 20 years in the future. They must be made to pay their share of those costs today, whether their building is full or vacant.

The vacancy rebate is also a net-tax increase for everyone else in Ottawa.

When a property becomes vacant the result is a 30 or 35% rebate to the property owner, and an offsetting increase in taxes to all other Ottawa residents and businesses. The province, in effect, is forcing the economically successful and productive parts of Ottawa to subsidize the failing and less productive parts of Ottawa.

We should be doing no such thing.

We should not subsidize vacant properties for three years, or two, or even one. Neither the Province or the City should be mitigating the risk a private investor takes when investing in a property. If a property owner cannot afford to pay their property taxes because their building is vacant, they should cut their losses and sell it to someone who can put it to use.

Colloquially, what I'm saying to landlords is, if you can't stand the heat, get out of the landlord kitchen.

Another reason to do away with the rebate altogether is the tendency for subsidies to result in perverse outcomes. One such possible outcome is alluded to in the staff report, which reads in part:

Some extended vacancy situations will require further consideration should the province adopt a three year limit. These include properties ... such as shopping centres where there is always a small amount of vacant space.

Here staff is contemplating the scenario where a shopping centre, perhaps Billings Bridge, always finds itself vacant to a certain degree. Why we should be subsidizing a normal situation? Shopping Centre owners have already factored the loss of revenue from a vacancy into the rents for their other tenants. They set their rents based on an assumed, predictable, vacancy rate.

I would be willing to bet that the existence of the vacancy rebate does not factor into Cadillac Fairview's calculations when negotiating a new lease. They know Rideau Centre will have a certain vacancy rate at any given time and they build that into their rents. In effect, they already force their other tenants to subsidize vacancies, which is as it should be. Any money they might receive from the City of Ottawa likely goes straight to their bottom line.

If the old Sears store at Rideau Centre sits empty for three years while the LRT is being built, should the Province be forcing us to help Cadillac Fairview out with that? I think not - after all, they are about to benefit greatly by the public's investment in an LRT station at their front door. I think they'll do just fine.

In the last three years the vacancy rebate has redistributed $20m from residents and successful businesses to commercial and industrial landlords.

I am appearing here today as a residential taxpayer who does not want even my small portion of the that $20m to go to commercial landlords with vacant buildings. I will also be a candidate in the next provincial election, and I hope you will pass this motion in its current or amended form so I can champion your petition in that context.

Thank you for your time.