I pay property tax too!

In today's Citizen, Roger Greenberg (CEO of Minto Group and principal participant in OSEG) writes that "Municipal realty taxes and the $3.8 million-per-year savings that the city would otherwise lose on Lansdowne Park ranks ahead of our financing".

As I have noted in previous postings, the City has consistently failed to adequately provide for the maintenance of Lansdowne Park in the past. There is no reason to believe future City budgets would provide significant money for the park. Thus the expenditure-avoided argument is invalid. It would be similar to arguing that if I sold my yacht, I could buy a new car. Since I have no yacht, the argument makes no sense.

The claim that the City enjoys some sort of windfall in property taxes from the proposed project at Lansdowne Park needs to be carefully considered.

Unless it is a special exemption (a church for example), every privately owned piece of real estate is subject to property taxes. If Mr. Greenberg's company built a commercial building anywhere in Ottawa, it would be subject to property taxes.

But if Minto built its building in Barrhaven (just as an example) it would be subject to full property taxes and there would be no discussion about the revenue to the City being used to pay off any specific capital investment by the City. It would be assumed the Barrhaven Minto building (as an example) would be bearing the tax burden as its share for services delivered by the City. For instance, if there were a fire in the building, firemen would come to rescue the occupants and extinguish the fire. Stated simply, property taxes are to pay for City services.

My property taxes on my humble residence, and taxes paid directly or indirectly by others, go into the pool of funds which pays for the services we all receive. The tax revenues are not earmarked to pay for specific investments by the City.

So what is so special about the proposed commercial developments on the Lansdowne Park land?

Now some might argue that additional private investment (such as building shops at Lansdowne) generates additional revenue for the City. That is correct and that is one reason the City encourages investment.

But commercial investment responds to a perceived demand. If we expect demand for consumer goods to grow, the market will respond and new retail outlets will be established, not necessarily on Lansdowne Park, but anywhere. Wherever that retail investment occurs, tax revenue will be generated for the City.

I cannot imagine that Mr. Greenberg and his partners really want taxes paid on development at Lansdowne to be dedicated to paying off city investment in the stadium and civic centre. That would only be possible if city services were not delivered to the shops, offices, hotel etc. proposed for Lansdowne. Under such a plan firemen would stand by and let occupants be burned to a crisp in the new Lansdowne hotel. This is unimaginable.

My position is that property tax revenue generated by commercial activity at Lansdowne would be generated by other commercial investment if the Lansdowne development does not go ahead. People will spend their money somewhere else and taxes will be paid.

The assertion that the City's investment in redevelopment of Lansdowne is carried or repaid through property taxes on the property should be dismissed from the discussion.

But there is an interesting question about taxes and commercial development at Lansdowne. Property taxes are calculated on the basis of an assessment by MPAC (Municipal Property Assessment Corporation). The assessment takes into account the value of the land and of the building. But the proposal for Lansdowne seems to have the City providing land rent-free for the commercial development on the site. This might mean that the assessments for Lansdowne commercial development are artificially low because no land value is considered.

In other words, there is a possibility that commercial development on the Lansdowne site is doubly subsidized -- no payment of rent for the land and artificially reduced property taxes. Both of those subsidies would be unfair. It would be unfair to businesses trying to compete against a subsidized competitor. It would be unfair to all taxpayers who have to pay more tax to make up for those who benefit from paying less than their fair share.

I should also make one final point about the quotation from Mr. Greenberg. He uses the expression "ranks ahead of our financing". Indeed that is the nature of taxes. Tax collectors don't fool around. Of course taxes take precedence over repayment of the private group's investment. Just try not paying your income taxes in order to reduce what you owe on your credit card.

But Mr. Greenberg raises the question of the ranking in which investors are paid in the Lansdowne proposal. That is exactly my point -- OSEG gets its money first and the City is left with whatever is left.