SUPPORTS ITEM NO. 1
CS&B COMMITTEE AGENDA
JUNE 27, 1996
POLICY REPORT
FINANCE
Date: May 28, 1996
TO: Standing Committee on City Services and Budgets
FROM: Director of Finance, in consultation with
the Director of Central Area Planning
SUBJECT: New Trade and Convention Centre Facilities -
Property Tax Implications
CONSIDERATION
A. THAT City Council support the principle that the proposed
Trade and Convention Centre under consideration for downtown
Vancouver not be required to pay property taxes.
If Council approves Consideration Item A, the following are
RECOMMENDED:
B. THAT the property tax exemption apply only to the floor area
utilized for the new trade and convention facility and not
apply to the floor area used for commercial, retail, hotel
or other space deemed ancillary to the direct operation of
the facility.
C. THAT City Council request that the Provincial Government
take the necessary legislative action to achieve this tax
exemption.
D. THAT the City Project Manager notify the Provincial
Government and the new trade and convention centre
development proponents (Concord Pacific Develop-ments,
Greystone Properties, and Marathon Realty) of the foregoing.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services submits A for
CONSIDERATION. Should Council approve A then B, C and D are
RECOMMENDED.
CITY MANAGER'S COMMENTS
The development of expanded convention centre facilities in the
City will have a significant economic benefit, which falls
primarily to the local economy and to senior governments through
increased activity and new tax revenue. The City will not share
directly in these benefits. However, in proceeding with the
facility, the developer will pay all of the related
infrastructure and ancillary public amenity costs so that there
will also be no direct costs involved for the City. Moreover, it
is not anticipated that the City will require additional public
realm benefits, although individual developers may choose to
provide these through the development proposal or rezoning
processes. Support for a property tax exemption for the new
facility is a tangible and meaningful way for Council to
participate in the project and the City Manager therefore
RECOMMENDS approval of A, B, C and D.
COUNCIL POLICY
There is no direct Council policy related to the taxation of the
proposed new trade and convention facilities.
Section 396 of the Vancouver Charter limits property tax exemption to
properties of the City and Crown, charitable institutions, certain
learning institutions and eligible heritage properties.
In 1981, when dealing the proposed convention centre development at
Pier B/C, Council agreed to exempt the centre from property taxes or
senior governments from paying a grant- in-lieu of taxes. The
exemption from taxes was limited to the trade and convention facility
only and did not extend to ancillary uses.
PURPOSE
The purpose of this report is to provide Council with information
about property tax issues arising from the development of the proposed
trade and convention facility in downtown Vancouver and to seek
Council consideration of a property tax exemption for those
facilities.
City Council is reviewing this matter at this time because the three
proponents (Concord Pacific Developments, Greystone Properties and
Marathon Realty) are proceeding to Stage Two of the New Trade and
Convention Facilities Review Program and will be required to prepare
financial proposals as part of their submissions, including property
tax implications.
BACKGROUND
The Vancouver Trade and Convention Centre (VTCC) at Canada Place is
situated on a federally-owned parcel and is operated by a provincial
Crown corporation, B.C. Pavilion Corporation. Amendments to the
British Columbia Enterprise Corporation Act were enacted in 1987
giving the B.C. Pavilion Corporation Crown agent status with all
immunities enjoyed by the Crown. This ensured that the property of
the corporation would be exempt from property taxation and the payment
of grants-in-lieu of taxes. As a result, the existing trade and
convention facility at Canada Place pays neither property taxes nor
grants-in-lieu of taxes.
This exemption does not extend to other facilities at Canada Place.
For example, the Pan Pacific Hotel pays full property taxes and,
although it is exempt from taxes by virtue of its federal ownership,
the Port Corporation does make a payment-in-lieu of property taxes to
the City related to the cruiseship terminal. This arose from an
agreement among the City of Vancouver, Pier B/C Development Board and
the National Harbours Board.
Other properties in Vancouver accommodating trade and convention
activities have varying property tax status:
- B.C. Place is operated by B.C. Pavilion Corporation and pays
neither property taxes nor grants-in-lieu of taxes.
- GM Place and the Ford Theatre are owned and operated by
private corporations and pay full property taxes.
- Simon Fraser University (Downtown Campus) would have been
required to pay property taxes because it is a lessee on
privately-owned land. However, an amend-ment to the
Vancouver Charter, Section 396(1)a(vi), was made in the late
1980s to exempt this facility and its convention space from
property taxes. Beginning in 1995, Simon Fraser University
began a token payment of grants-in-lieu of municipal
property taxes under instruction from the Province.
- Trade and convention facilities operated in hotels are fully
taxable.
DISCUSSION
City Council has confirmed that it will not make a direct financial
contribution to the proposed new trade and convention facility.
However, Council could indicate its support for the project by
agreeing to a property tax exemption for the facility. This would
provide the new convention centre with a significant operating cost
savings and give it the same property tax treatment as the existing
convention centre located at Canada Place.
1. Rationale for a Property Tax Exemption
Council s decision not to provide a direct capital contribution to the
proposed new trade and convention centre was based on the fact that
the City will receive no direct financial return from the development.
Unlike the case of the federal or provincial governments, the City
does not count among its sources of revenue any of the various taxes
that the centre will generate nor does the City levy any non-tax
charges beyond those for cost-recovery activities that arise as a
result of its regulatory or service provision roles. Moreover, the
City will be in a position of providing tax-supported municipal
services to the centre whether or not property taxes are paid.
However, there is no question that additional trade and convention
facilities will provide a broader public benefit to the community in
which the City will share. For example, increased tourism will result
in better opportunities for business and employment. There will be
the demand for additional hotel, restaurant and other commercial space
that will benefit residents, as well as visitors, and have the
potential to generate additional property taxation revenue to support
a range of municipal activities. It is the availability of these
benefits against which Council should consider the exemption of any
new facilities from property taxation.
In addition to acknowledging these indirect benefits and to providing
a significant operating cost saving for the operator, Council support
for a property tax exemption for the proposed site would also have the
advantage of placing the new and old facilities on the same footing
with respect to municipal property tax.
Dealing with a property tax exemption at this stage of the proposal
review process is difficult because there are a variety of possible
ownership and operating arrangements, each with different implications
for property taxes. For example, a facility owned and operated by the
federal or provincial government would be exempt from property
taxation by virtue of the involvement of the Crown. In this case,
payments-in-lieu of taxes would depend on the willingness of the
senior government to pay them.
However, an equally likely scenario would see the facility owned
and/or operated by a private company either on public or privately
owned land. In these scenarios the facility would likely be taxable.
While it is premature to determine the assessed values and taxes
payable for any of the trade and convention centre proposals,
preliminary analysis suggests those costs could be in the range of
$4.0 million to $8.0 million (1996) annually, depending on the site
chosen for the facility. Of this amount, approximately 55% ($2.2
million to $4.4 million) would be for municipal taxes with the balance
due for schools and regional levies. If payments-in-lieu of taxes
applied, the costs to the development would be similar.
If the new facility qualifies for a tax exemption because it is owned
and operated by a senior government, Council could agree to waive
payments-in-lieu of property taxation. In the case of a taxable
operator, Council does not currently have the legislative authority to
provide a permanent property tax exemption. The result would be a
situation in which the municipal portion of the property tax bill
would have to be waived annually, likely by means of a grant requiring
approval of two-thirds of Council. In both of these situations, only
the municipal share of the tax bill could be waived, the balance being
under the control of the other taxing authorities, most notably the
provincial government for school purposes.
If Council supports the creation of a similar property tax environment
for the proposed trade and convention centre as exists for the VTCC at
Canada Place, the most appropriate way to achieve it would be to
request legislative action by the provincial government. This could
come in the form of an amendment to the Vancouver Charter, as was the
case with Simon Fraser University, or through passage of special
purpose legislation, as was the case with the B.C. Pavilion
Corporation. This course of action is recommended if Council agrees
to tax exempt status for the project.
2. Property Taxes During Construction
An issue closely related to the property tax exemption for the
proposed projects is the application of property taxes during
construction of the new centre. Currently, all three sites are either
taxable (Concord and Marathon) or are subject to payments-in-lieu of
taxes (Greystone). These payments will continue until such time as
the proposed provincial legislative action is completed, perhaps
including the period during construction. As with the longer term
exemption put for consideration in this report, Council support should
be exercised by encouraging the province to deal with this issue early
in the process. Should appropriate legislative action not precede
construction, staff will report back to Council on it options to free
the developer from its municipal tax bill.
3. Other Facilities at the New Trade and Convention Centre
Each of the proposed new convention centres includes a variety of
ancillary uses related to the development, including hotels,
commercial and retail space and/or cruiseship facilities. If Council
supports tax exemption for the convention centre itself, these
ancillary facilities should be excluded from that exemption even if
they share an operator with the convention facilities. This ensures
these commercial operations will be dealt with on a basis consistent
with the hotel, retail and commercial operations elsewhere in the City
and with the existing VTCC at Canada Place.
4. Other Related Issues
a) Payment of Utility Fees
While a property tax exemption may be a consideration for the proposed
trade and convention centre, there is no justification for extending
this exemption to utility (sewer, water and other) fees. These are
charges imposed on users for the actual costs of using utility systems
rather than for the general support of municipal services as is the
case for property taxes. These costs are currently paid by the VTCC
and should extend to the new facility.
b) Regional Development Cost Charges
The Greater Vancouver Sewerage and Drainage District is awaiting new
provincial legislation that would allow collection of a regional
development cost levy on all new development to offset the costs
associated with some regional capital works. This charge is
anticipated to be in the range of $0.50 - $1.00 per sq. ft. for
commercial development and should apply to the new trade and
convention centre.
FINANCIAL IMPLICATIONS
Each of the three sites under consideration currently pays either
property taxes or a grant-in-lieu of taxes. Offering an exemption
from property taxes would result in an immediate loss of tax revenue
for the City. Currently the three sites under consideration pay
annual general purpose property taxes in the amount of $300,000 -
$500,000 respectively.
With build-out of the new centre, the value of this tax exemption
increases. For example, the trade and convention centre at Canada
Place currently has an assessed value that would translate to
approximately $2.7 million in property taxes, of which $1.5 million
would be general purposes taxes.
As noted above, property taxes on the proposed convention centre
facilities could range from $4.0 - $8.0 million (1996) annually,
depending on the site chosen for the facility and the level of
development. If the full tax exemption is provided, the City will
forego general purposes taxes in the range of $2.2 million to $4.4
million annually depending on the site chosen and the extent of the
development involved.
CONCLUSION
Council support for an exemption from property taxes represents a
significant financial contribution to the success of the new trade and
convention centre. The City will forego revenue yet be obligated to
provide normal municipal services. While it is premature to respond
to each potential ownership and operational outcome, Consideration A
and Recommendations B, C and D attempt to ensure that all proponents
receive equitable treatment on property taxes.
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