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Toronto Council Approves 50% Tax Break For Creative Hubs

Toronto City Council has voted to reduce property taxes by 50% for creative and cultural hubs in the latest effort to offset rapidly rising commercial building assessments in the GTA.

401 Richmond Toronto City Council Joe Cressy David Plant Artscape tax break MPAC
The converted factory building 401 Richmond has been home to art installations and not-for-profit creative groups since the late 1990s.

“This could really make a big difference,” said David Plant, executive director of  Trinity Square Video, one of nearly 140 cultural businesses and not-for-profit tenants at the historic downtown 401 Richmond Street West building.

“This could provide encouragement to other building owners to say, 'Maybe I can get better value out of my building by investing in creative hubs like this.'”

The Monday council decision, which still requires approval by the provincial government, would create Creative Co-Location Facilities subclasses for the 2018 taxation year. Eligible buildings would be required to have 51% of tenants judged to be creative enterprises, charge tenants below-market rent and have a minimum rentable space of 10K SF, among other requirements.

The special designation is aimed at making it easier for the industry to continue to operate amid significant increases in commercial property tax.

“[Property tax increases are] driving creative industries out of our city,” Ward 20 Councilor Joe Cressy said at city council’s 2018 budget session Monday night.

“This hurts the economy. It’s about this notion that 21st-century cities are driven by their creative economy. That’s the type of urban core and the type of dynamic that the Amazons of this world want to be attracted to. It’s what drives growth.”

401 Richmond tax break property tax assessment mayor John Tory David Plant.
The central courtyard, 401 Richmond

Though an executive committee decision earlier this month decided on a 30% tax break for qualifying properties, Cressy successfully filed a motion Monday to raise that to 50% to reflect tax assessment realities.

Cressy told council the property assessments were rising so rapidly that 30% was not enough to assure survival.

“Thirty percent could be wiped out in another assessment cycle,” Cressy said. “The 50% will ensure that organizations in the future like 401 or Artscape not only are here to stay, but they are here to thrive.”

Tim Jones, CEO of the nonprofit Artscape organization, which operates 11 buildings in the city, said the 50% tax break is a big improvement. 

"It's excellent news. We've been sort of struggling for some time," Jones said.

He said Artscape operations have been experiencing double-digit tax increases with one Artscape building in the Distillery District enduring a 106% increase over five years. 

"I think there needs to be changes to the very way that properties are assessed," he said.

Plant, a member of a 401 Richmond tenant-steering committee, said treating the 401 like other high-rise commercial buildings downtown will only drive them out — if they have not left already.

“The irony of the situation is that many of us are not-for-profits funded by the city and province. We’re being asked to give a significant chunk of that back to pay the increased taxes,” Plant said.

He said buildings like 401 Richmond are unique to the downtown and play a significant role in the community.

“You have to ask — what is attracting the condo developers in the first place? Why are the Amazons or the Googles coming here? There are just few buildings like this.”

Still, this new tax designation, which is expected to impact less than 20 Toronto buildings and amount to a reduction of around $1.6M in tax revenue to the city in 2018, points to a much bigger GTA problem — commercial property tax assessment.

Artscape Youngplace creative hub tax break Toronto City Council David Plant
Artscape Youngplace on Shaw, one of several buildings operated by the not-for-profit organization Artscape

The province’s Municipal Property Assessment Corp. decides property tax based on a "highest and best use" formula. This assesses buildings not on their actual size and use, but the site’s potential use. Earlier this year, small-business owners on Yonge Street successfully got MPAC to reassess their properties after massive property tax increases threatened their operations.

“401 Richmond is assessed on the basis of being a GAP or a Starbucks, whereas Artscape and their facilities are assessed on the basis of being condos," Cressy told council.

“These are facilities that aren’t assessed and taxed on the basis of what they are and how they contributed to the innovative economy that is our city, but rather what they could be if they were simply sold off for the most value for the money on the basis of highest and best use.”

But it is an issue for which there appears to be no clear and easy solution. 

During a recent council meeting where a 10% yearly cap on commercial property tax increases was approved, Toronto Mayor John Tory said the city’s assessment system was very poor. 

“We won’t have gone too far if we don’t get some fundamental reform [on] assessment policy that takes into account the fact that not every single piece of property in Toronto is going to be a motel, office building or a condo,” Tory said.