Submission to COTA 2015

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Support for COTA amendment request Part XIII s. 331

From WoodGreen Community Services

COTA Reference Policy Amendment Request directed by Toronto City Council Category Origin
Part XIII

s. 331

Vacant unit rebates

Amend the Vacant Unit Rebate provision for commercial and industrial properties to enable the City to establish graduated vacant unit rebates to induce and incent owners and tenants to meet eligibility criteria that align with the City’s economic growth and job creation objectives.

Finance and Taxes Council decision

ED19.4, Feb 20-13

Response to  Financial Sustainability Q.3 Are there changes to current tools that could contribute to municipal financial sustainability (i.e. ability to meet current and future financial needs)?

As a group working with innovative solutions for vacant storefronts along main streets, we support the City of Toronto’s amendment request. Failing granting the city the power to amend the Vacant Unit Rebate, we recommend capping the Vacant Unit Rebates to one year for MPAC designated property types: Neighbourhood Retail with residential above. The current structure impoverishes communities both socially and economically. Detailed reasoning of these recommendations can be found below.

Local Impact

Long stretches of vacant shops discourage pedestrians and shoppers, contributing to the decline of the local economy.  In 2012, the Danforth East Community Association (DECA) set out to address this issue along a stretch of Danforth Ave –a once thriving commercial strip. Working closely with the property owners of vacant buildings, DECA undertook to persuade these owners to hand over their space and infuse the area with new energy using pop-up shops. The primary goal of the project was to increase the foot traffic on the street, and the Pop-up Shop project activated these vacant storefronts with inviting, sought-after temporary businesses, clustering local shopping options for residents in the area.

The project currently operates as a partnership between WoodGreen Community Services and DECA, and since the project started in 2012, 29 shops have popped up, 5 new businesses have been incubated, and commercial vacancy rates are down to less than 9% (from 17% a year and a half earlier.) To date, we have worked with a dozen property owners (including one developer) and six realtors. We have had discussions with many more in our attempt to activate empty stores (some of which have been empty for several years) along Danforth Ave. These conversations have demonstrated a range of reasons commercial properties remain vacant for long periods of time.

These issues are not isolated to the City of Toronto, as referenced by author and empty space innovator, Marcus Westbury, in Creating Cities (2015) who eloquently lists the many reasons for persistent vacancies, which contribute to main street decline. He argues if commercial properties are held simply as assets, they fulfill their purpose, “while literally doing nothing” (2015, p. 35) for community.

A policy that perpetuates this problem is the current vacant tax rebate built in to the municipal tax structure. It incents decline and preclude short term flexible leases,  which would revitalize commercial strip.

Case Examples

We have direct experience with two well-intentioned property owners who have indicated that the commercial vacancy tax rebate prevents them from readily participating in our project. While they appreciate the efforts to bring new energy to the street, they are challenged to find a way to participate if it doesn’t make financial sense. In both these cases, the cost of losing the vacancy tax rebate, accounting for the three-month waiting period before re-applying, acts as a disincentive to activate the spaces with short-term arrangements; appealing to a property owner’s goodwill can only go so far when the bottom line doesn’t support the proposal. In addition, the commercial vacancy tax rebate has been cited by at least 1 other property owner who declined participation in the project and is most certainly a factor with other property owners who are not so bold as to mention it. Finally, the very existence of this tax rebate is often cited by local retailers and residents as a frustrating policy, and feeds the perception that it contributes to the economic decline of commercial main streets.

Scope of Problem

In a report dated April 25, 2014, prepared by  City of Toronto Economic Development and Culture staff, 10 798 properties are identified as neighbourhood retail, with residential above, in the City of Toronto. A closer examination of this property type is warranted, as it represents commercial properties woven into the fabric of neighbourhoods. Where these properties remain vacant for long periods of time, the impact on the neighbourhood is significant. Based on the report, over a 12-year period from Jan 1 2001 to Dec 31 2013, 1,950 properties in this category applied for the rebate. Of these, 47% of these properties collected the vacancy rebate for more than one year.

Toronto is not the only municipality trying to fill empty storefronts. Over the past 2 years we have met with leaders in New Tecumseth, Oshawa, and Bruce County. All cite examples of how the vacant unit tax rebate has been an impediment to filling vacant stores.

Summary

This rebate is no longer relevant in commercial areas where a strong local economy should be encouraged to thrive. The tax rebate has thwarted our efforts to energize empty properties in at least 3 cases, and encourages underutilization of empty spaces. Creativity needs to flourish; there should be no empty spaces. Changes in economic conditions, increased popularity of short-term arrangements, and a new ways of doing things is changing the landscape of commercial property arrangements.  We need the policies to encourage these activities, building vibrancy on main streets, not deterring it.

We support the policy amendment requested by the City of Toronto. At the very least, the vacant unit rebate should be limited to one year along streets defined as Avenues by the city of Toronto.

APPENDIX

To whom it may Concern:

As a mid-rise developer my primary business is the acquisition of commercial property in effort to maximize their highest and best use and redevelop those lands accordingly. The majority of my development sites are along avenues such as the Danforth, that currently are a main thoroughfare with street retail having a strong presence. Such retail is usually what makes the area sustainable, walkable and a desirable place to live.

However, there are challenges that arise with respect to the potential to lease these properties. As the zoning and sales process for redevelopment projects can be quite lengthy, there is often a one to two year time gap between the acquisition of the property and the start of construction. In most cases, developers, such as myself, struggle to lease out the vacant space in effort to obtain even a minimal amount of rent through the utilization of short term leases. However, the barrier is set quite high, and in many cases, the tradeoff between receiving the minimal rent and the fear of losing the vacant unit tax rebate often dissuades us from pursuing any effort to lease the space at all. This leaves developers with stretches of vacant store fronts under-utilized as they await years for demolition.

Recently, pop-up culture has become quite a phenomenon in our cities and can become an economic driver to take advantage of the temporary uses these vacant storefronts can offer. Notwithstanding their benefit it is important to recognize that the value of the vacant tax rebate is imperative to the development community in order to enable the financial feasibility of redevelopment projects.

It would be beneficial to the province and the economic viability and vibrancy of our neighborhoods to add an additional provision to the tax rebate allowing a property owner to benefit from short term leases while not sacrificing their qualification for the rebate.  The added value will be a source for developmental growth that would be otherwise impossible.

Sincerely,

Marlin Spring Investments Limited