Agenda Index City of Vancouver

POLICY REPORT
URBAN STRUCTURE

TO:

Vancouver City Council

FROM:

Director of Current Planning in Consultation with the Director of Financial Planning and the Community Project Manager of Downtown Eastside Revitalization Program

SUBJECT:

Property Tax Incentives for Heritage Properties in Chinatown

 

RECOMMENDATIONS

GENERAL MANAGER'S COMMENTS

COUNCIL POLICY

Council recognized the value of conserving the unique heritage precincts of Chinatown and Gastown in 1971, and requested the Province to designate the lands within the areas as historic sites.

In 1994 Council rezoned Chinatown to allow for two separate zoning schedules (HA-1) and (HA-1A). The Chinatown Historic Area District Schedule (HA-1) corresponds to the provincially designated site boundary, and the HA-1A Schedule includes the remainder of Chinatown. Council also adopted Design Guidelines for each Schedule, Heritage Conservation Standards and Rehabilitation Guidelines and removed a number of buildings in Chinatown from the Heritage Register.

On July 28, 1998, Council confirmed principles to provide general guidance to actions and planning in the Downtown Eastside, Chinatown, Gastown and Strathcona, which include encouraging legitimate commercial activity, improving conditions on the street level, improving existing SROs, reducing crime, and helping community people to find allies and seek a common future.

On July 23, 2002, Council approved the Chinatown Vision which includes directions to help guide City policy decisions, priorities, budgets and capital plans in the community.

On August 1, 2002, Council approved a heritage management plan for Gastown, involving a number of tools to promote the retention and upgrading of heritage buildings. That program included the options of offering property tax exemptions and density transfers off site for redeveloped sites and grants to assist property owners with the conservation of heritage facades. The program of facade improvement grants was extended to Chinatown.
SUMMARY AND PURPOSE

When approving the Chinatown Vision and the Gastown Heritage Management Plan, Council requested staff to report back on the implications of extending the heritage incentives for Gastown to Chinatown. Facade grants have been approved for both communities, subject to approval funding through the Capital Plan. This report recommends that the property tax exemption program, recently approved for Gastown, be extended toChinatown. The Program would be available for a 5-year period to help kick start building rehabilitation and economic activity. Further analysis of the effectiveness of bonus density incentives is underway and staff will be consulting with the community on the findings of this work prior to reporting back to Council early in the new year.

BACKGROUND

Many of the circumstances in Chinatown parallel those in Gastown. For example, both were designated as heritage areas by the Province in 1971 after which the areas enjoyed considerable economic activity and building revitalization. However, in more recent years economic conditions in both areas have been difficult due to the impacts of the illegal drug trade, weak demand for commercial and residential uses and the costs associated with renovating heritage buildings. Rehabilitation of heritage buildings in Chinatown is further hampered by the fact that many of the buildings are on narrow sites and the property ownership pattern is fragmented and decentralized making property acquisition and redevelopment difficult.

Council has recently taken steps to address the situation by approving the Chinatown Vision, the facade upgrade program (subject to approval of funding through the 2003-2005 and 2006-2008 Capital Plans) and transfer of the heritage designations for Chinatown from the Province to the City to simplify administrative procedures.

When approving these initiatives Council instructed the Director of Current Planning to report back on developing effective heritage conservation strategies and implementation tools, including property tax exemption, to conserve Chinatown's built environment.

DISCUSSION

Existing Heritage Incentives for Chinatown
The HA-1 Zoning District Schedule currently allows Council to approve additional density for a site equal to 2.0 FSR for transfer off site when an owner agrees to restore a heritage building that is designated and listed on the Heritage Register. Since this provision was added to the Schedule in 1994, no owners have applied to receive the incentive. There may be a number of reasons for this including a lack of awareness about availability of the incentive among property owners or the amount of incentive is insufficient to meet the additional costs of restoring the heritage building.

Determining Incentive Amounts
Staff recommends that the "shortfall cost" approach be used to determine the amount of incentive(s). This is the same methodology approved for Gastown and can generally be described as the amount required to make a project viable in a restoration and re-use project. Shortfall costs are determined by deducting the costs of the project, land/building and profit from the capital value of the completed project. A development proforma analysis would beused to determine the amount of incentive required. The actual amount of each incentive would be determined through site-specific analysis based on objective measures of market values and costs, and it is anticipated that some negotiation of the incentive would be needed.

Although a detailed analysis of rehabilitation costs for buildings in Chinatown has not yet been completed, many of the buildings are of the same vintage and have similar construction characteristics (unreinforced masonry) as their counterparts in Gastown where under current economic conditions the estimated shortfall costs are $1.2 million per building on average.

Proposed Incentives for Chinatown
It is proposed that the following package of incentives be available to cover the shortfall amount:

a) Facade Improvement Grant
This has been approved in principle by Council and would provide 50% of eligible costs up to $50,000 per principal facade for building owners who are prepared to improve the exterior appearance of their buildings. Staff have been working on the procedures for reviewing and assessing requests for the facade improvement and property tax exemption programs and will report these to City Council shortly.

b) Property Tax Relief Program
Section 396A of the Vancouver Charter authorizes Council to pass bylaws granting property tax exemptions to heritage properties for conservation purposes. Staff are proposing to have Council utilize this authority as it has in Gastown. This would provide property tax exemptions for up to 10 years to cover the "shortfall costs" involved in completing a major rehabilitation of a building. The main objective would be to encourage full upgrading of buildings thereby ensuring their conservation for the long term while stimulating economic development in the area.

The Director of Finance notes that the Section 396A provisions of the Charter gives Council the authority, by by-law, to provide an exemption from property taxes for heritage buildings. In short, this means removing the full value of the property from the taxable assessment roll, thereby providing a 100% tax exemption for a specified period up to 10 years.

Removing taxable value from the assessment roll will effectively "transfer" the taxes that would have been paid by these renovated properties to all other properties on the tax roll. However, the rationale for providing the incentive is that without it, the renovation work, new property value and increased taxes would not be realized. Based on estimates of the annual cost provided by Planning staff and based on the work completed in Gastown, the amount of exemptions will be approximately $240,000 (based on estimates of two buildings/year). Section 396B of the Vancouver Charter includes reference to repayment of tax exemptions should the building be destroyed and for alterations without authorization.Owners seeking property tax exemptions (and/or bonus density) will be required to enter into a Heritage Revitalization Agreement or a Section 219 covenant satisfactory to the City.

As the anticipation is that the exempted buildings would not be upgraded without the benefit provided through the tax exemption, the additional taxes paid after the exemption is completed will at least partially compensate taxpayers for their support. Furthermore, renovation of buildings in the area will help to create an environment that is more attractive to retail and commercial activity.

c) Bonus Density
A technical analysis is underway comparing the existing bonus density provisions to those approved for Gastown to determine which would be most effective in facilitating building rehabilitation. Once completed, staff will engage the community in determining the optimal incentives for Chinatown and this will be reported to Council early in the new year. In the meantime, if a property owner wishes to take advantage of a density incentive, the existing provisions are available.

d) Federal Tax Incentives
It should also be noted that should a Federal tax incentive program be established in the future, those incentives would be applied first and therefore reduce the amount required from the City.

Eligibility for Incentives
There are 166 sites in Chinatown of which 32 are listed on the Heritage Register. Seventy of the sites are in the HA-1 Zoning District and are provincially designated; the remainder are in HA-1A and CD-1 zones.

Owners of heritage buildings (listed on the Heritage Register) that are also designated or "protected" heritage sites (in HA-1) will automatically be eligible to apply for property tax incentives when a major rehabilitation (including seismic and life safety upgrading) is completed. Sites listed on the Heritage Register in the HA-1A zone could also be eligible subject to agreeing to a heritage designation. Those neither on the Heritage Register nor designated could seek to be added to the Register and agree to designation to qualify for property tax relief. In all cases a Heritage Revitalization Agreement would also be required in order to secure the conservation and ongoing maintenance of the heritage building.

It is estimated that the likely uptake of incentives in Chinatown will be two buildings per year. As in Gastown, over the 5-year program approximately 30% of the heritage buildings would be upgraded.

Annual Reporting
In order to keep Council abreast of activity in Chinatown staff are recommending an annual report be prepared. This will also allow Council to address emerging issues and to monitor the effectiveness of the program on an ongoing basis. As part of the annual report staff will monitor the housing stock, including the low-income housing stock, and would report any significant changes to Council. The reporting on Chinatown will be done concurrently with Gastown.

Promoting the Incentive Program
In order to assist with promoting the incentive program, the Director of Current Planning is recommending that a proactive information campaign be completed. This would include translation of promotional and explanatory materials and holding community information meetings that engage property and business owners and residents of the area to advise them of the incentive program. Funding in the amount of $5,000 is being requested to support this.
Staffing
Work on developing the polices and procedures for the incentive programs and resources for implementation (for Gastown) is well underway and will be reported to Council shortly. Should Council approve the program for property tax exemptions in Chinatown, the report back will also include staffing considerations for extending the program to Chinatown.

Community Input
Staff have discussed the proposed property tax incentives with the Vancouver Chinatown Revitalization Committee and the Chinatown Historic Area Planning Committee and both groups have indicated a strong level of support for incentives to encourage revitalization of the City's historic core.

CONCLUSION

This report recommends extending the property tax relief program to Chinatown to facilitate the conservation of heritage buildings and economic revitalization in the area. Approval of the program is consistent with, and will directly contribute to meeting, the Chinatown Vision Directions.

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