View Royal is considering lowering the portion of municipal taxes collected from businesses in time for its 2012 budget talks.
Currently business owners in View Royal are taxed about four times the rate charged for a residential property of the same assessed value.
The Town has the third largest gap between business and residential rates in the Capital Region (behind North Saanich and Metchosin) and the 15th largest in the province.
Director of finance Kathleen Day said there are many reasons a business should be expected to pay more than a residential property owner.
“Businesses … have more ability to pay. They’re in the community to generate revenue,” she said. “Like with income tax, there’s the philosophy that people who make more should pay more.”
But according to the lobby group Canadian Federation of Independent Business, the tax businesses pay shouldn’t be more than double the residential rate. View Royal’s finance department issued a report on what it would take to meet that target.
Business taxes account for a quarter of View Royal’s annual revenue.
If the business rate was two times the residential rate, it would leave a $600,000 hole in its budget, which would require a 14 per cent residential tax hike to make up.
The report also suggested several intermediary options, such as bringing the business tax ratio down to 3.5 per cent which would trigger a 2.8 per cent increase in residential taxes to maintain the budget at 2011 levels. The Town could also reduce services to make up for the shortfall.
At its Jan. 11 meeting, Town council discussed the report, but didn’t make a recommendation of what option to pursue.
“We’ll look at again during budget planning,” Mayor Graham Hill said.
Couns. Heidi Rast and John Rogers both expressed interest in charging businesses less.
“This is something we could do to attract more business,” Rast said. “It could be part of our economic development plan.”
Generally business tax is adjusted year-to-year to reflect market values of a business property compared to a residential one. But between 2007 and 2009, there was no adjustment in the rate, despite the value of businesses increasing faster than residential properties. This resulted in businesses paying an increasingly higher proportion of the total taxes collected in the Town.
For business owner Barb Fetherstonhaugh, a reduction in business tax couldn’t come at a better time. Her business, Pete’s Tent and Awning, has been faced with tough times.
“Between the economic downturn and the effects of construction on Island Highway, and soon Craigflower bridge, it’s getting harder to run a business in View Royal,” she said, noting that being located on the newly upgraded Island Highway also contributed to the assessed value of her business leaping up 10 per cent this year.
“A lot of business owners won’t speak out about this, but I’ve spoken to many who are facing the same problems.”