Rossland city council wants to make changes to a tax break it offers businesses to improve their properties.
Council instructed its staff last week to draft amendments to the revitalization tax exemption bylaw to ensure it’s not giving some businesses advantages over others.
“To me it was a good bylaw, and it definitely served its purpose. But now times have changed,” says Mayor Kathy Moore.
The revitalization exemption bylaw has undergone changes since it was first introduced in 2010.
Originally, a business making improvements to its property could apply to pay no additional municipal taxes for five years if their property was given a higher assessment because of those improvements.
“Let’s say you have property assessed at $1,000, and after improvements it’s assessed at $2,500,” explains Moore. “Well, if that increase in assessement then brought your taxes up, you would be exempt on paying the municipal tax portion of the incremental increase.
“You are still paying tax on the original value of $1,000, not on the increase.”
Josie Hotel benefitted from exemption
Many businesses applied for the exemption over the years, but one of the biggest beneficiaries has been the new Josie Hotel on Red Mountain.
It applied for the exemption in 2016, when its property was asessed at $1.525 million. Its tax bill at the time was $19,437. Three years later, with a 100-room upscale hotel on the property, the assessed value is $7.438 million. Its tax bill would be $83,022 without the break.
Under its five-year exemption (which ends next year), the Josie will have saved about $208,000 in muncipal taxes.
“It does give them a break because they didn’t have to pay increased taxes on the assessed value during the years they were building the hotel,” says Moore. “So it does help them, as it helped a number of other businesses that took advantage of the program.”
It’s important to note the exemption only applies to Rossland muncipal taxes, which makes up about 55 per cent of a business’ total tax bill. A business still pays the full assessed tax rate to the regional district, and school board, as well as police, hospital, parcel taxes, and any other charges that might apply.
In 2018 council changed the bylaw to tone down the scale of the tax break. Instead of a full exemption for five years, it gave businesses a gradually decreasing tax break instead — 100 per cent in the first year, 80 per cent in the second, 60 in the third, etc.
Now the city is adding more restrictions.
Moore says the bylaw was first introduced during tight economic times, and was designed to spur business owners to maintain and improve their properties.
But she says, “the economic situation is different, the economy is stronger. So we did make some changes to it last [council meeting].”
Under the changes council asked staff to develop, no new business will be eligible for the exemption if they will compete with an existing business.
“We did find, yes, it does give an advantage to the new business over a business that is established,” says Moore. “The intent was because an established business doesn’t need the helping hand that a new business does. But the argument is, you have one hotel doing well, and another hotel comes in and is competing.”
Still unfair, says hotelier
One example of that is a hotel owner on Red Mountain who says the exemption has damaged his business.
Martin Lundh owns the Ram’s Head Inn, a long-established hotel on the edge of Red Mountain.
He pays $30,000 in municipal and other taxes on his property every year.
“$30,000 is a huge chunk to make with 12 rooms and two suites,” he says. “I’ve been basically working for free for nine years.
“I work 100 days in winter, 6 in the morning until 10 in the evening,” he says. “I love this place. But I need every dollar to come up with the $30,000.”
He says the Josie Hotel, which is getting the tax break, is offering deals he can’t compete with.
“Suddenly they had a $75 per night deal in December. Normally we make $8,000 to $10,000 on Nordic skiers and people who come before Christmas,” he says. “This year we had zero customers.”
It’s not much improved for the summer for him either, he says.
“We have offered $112 rooms in the summer for years. Now I have to compete with a four-star hotel with a full restaurant offering rooms for $110,” he says.
Not only does the Josie Hotel get a tax break he doesn’t, he points to the new Nowhere Special Hostel, right next to his hotel, which is also taking advantage of the five-year, phased-in revitalization tax break.
Lundh says he doesn’t mind paying property taxes, he just wants it to be fair.
“I understand you have to pay taxes, but everybody should have to pay. Our businesses are right next to each other, and we are both selling rooms. And one of us is paying taxes and the other is not.”
He’s not sure how he can compete, even with the revisions the city is considering.
“I like it that they will change it so it won’t happen again, but the damage has already been done to the Ram’s Head,” he says. “I would like to get the five-years-off, 55 per cent from my property taxes as well.
“That would make it fair to me.”
Council has to adopt the proposed changes to the exemption bylaw by mid-July to make its budget deadlines.