[TrickyRicky]

Glen, your posts on these subjects have been consistent in other threads. Largely however they do point out a significant point of historical significance, that Toronto had been taking its commercial and industrial sectors for granted for decades and continues to do so today. I think that is an important message for some who don't seem to believe the extent of the imbalance between the suburbs and the city proper growth during the 90's. That said to be honest I think that trend has largely played out. There will continue to be a greater absolute value of development in the 905 but I believe we are seeing a resurgence of growth in the 416. In the era moving forward the 905 job creation machine will be put under serious strain and taxes are the least of their worries.

 

[Glen]

Interestingly though, places like MCC also had zero office developments, in spite of the fact that it's in a jurisdiction with low commercial property tax rates. I wonder why.

AoD

Zoning?

Mississauga has not had much trouble attracting office development.

 

[AlvinofDiaspar]

Glen:

Actually, the MCC is zoned office commercial for the longest time and there was no development for oh, the past 15 years (similiar to downtown) in spite of the fact that it is in a jurisdiction with low(er) taxes. My point is, tax rates isn't necessarily the only or predominant factor in locational decisions.

That said, I am sympathetic to the issue of Residential-Commercial imbalance and I do think it's an issue that should be addressed.

AoD

 

[Glen]

Glen, your posts on these subjects have been consistent in other threads. Largely however they do point out a significant point of historical significance, that Toronto had been taking its commercial and industrial sectors for granted for decades and continues to do so today.

It is more than that. It shows that Toronto is completely mismanaged. This is not a new development. At times in the recent past the city has lobbied the province for the ability to tax commercial properties even more.

Using the report I linked to earlier, compare city revenues for the construction of a 100,000 sq ft. office building.

Mississauga = $1,004,452
Toronto = $ $256,879

Going forward it is assumed that Toronto's higher taxes would produce more ongoing property tax revenue. While its rate might be twice as high, the values after development are not equal. In the case sample the Toronto property would have a value of 13.7 million while the Mississauga one would have a value of 18 million. Also as shown by the report because the end value is so much less in Toronto (gross rents are less to accommodate higher taxes) the potential developer would loose money constructing such a building in Toronto.

As shown in the report, even though the land cost are ~1 million less and the development charges and sundries are ~3/4 million less in Toronto, it is still not feasible to build such a property.

In the end, as has been happening for over a decade, nothing gets developed in Toronto. So it's higher taxes produce $0 in revenue by means of scaring off development and jobs are created outside the city.

 

[AlvinofDiaspar]

Glen:

The report didn't indicate whether it was gross or net rent - to go from that to making the assertion that the report supports your thesis is a bit of a leap of faith. In fact, what the report DID present as its' findings is that similar pressures (e.g. deindustrialization, centrifugal forces of development) are present in a number of North American jurisdictions in different contexts.

AoD

 

[Glen]

Glen:

The report didn't indicate whether it was gross or net rent - to go from that to making the assertion that the report supports your thesis is a bit of a leap of faith. In fact, what the report DID present as its' findings is that similar pressures (e.g. deindustrialization, centrifugal forces of development) are present in a number of North American jurisdictions in different contexts.

AoD

Sorry I meant to say net rents. Which is what the report shows (pages 88 and 92). Even before taxes, maintenance and insurance (TMI), the rents are higher in Mississauga.

 

[AlvinofDiaspar]

Glen:

Exactly, but you have no information on what the additional rent component is - which is required to make the assertion that this component is what pushes the gross rent above that of Mississauga so as to make building in Toronto not worthwhile , thus supporting your thesis.

Besides, what proportion of the taxes are directly attributable to City of Toronto, and what to the province in the form of educational taxes?

AoD

 

[Glen]

Glen:

Exactly, but you have no information on what the additional rent component is - which is required to make the assertion that this component is what pushes the gross rent above that of Mississauga so as to make building in Toronto not worthwhile , thus supporting your thesis.

Besides, what proportion of the taxes are directly attributable to City of Toronto, and what to the province in the form of educational taxes?

AoD

Using the Net Present Value figures one can calculate the property tax. Using the reasonable assumption that it will be comparable to assessment value.

Toronto 4.474% of 13,745,659 = $614,980
Mississauga 2.764% of 17,975,093 = $496,831.57


I know, not perfect but somewhat reasonable of an estimation. I also agree that the province has been on the screw Toronto businesses bandwagon. From its higher education taxes to reneging on a freeze until rates reached the fairness ratio. I sometimes wonder how the Sobara Group might have benefited from all this.

 

[urbanfan89]

Gotta wonder what those figures will be in ten years, after all the 905 municipalities run out of development fees and are forced to sharply up tax rates to pay for badly needed infrastructure upgrades.

Especially if hour-long daily drives become unaffordable to the average Joe, who has to cope with soaring food and energy prices at the same time.

 

[JasonParis]

Taxes sure have something to do with it, but I think it was also the culture of the time that persuaded many businesses to give it a go in the 905 instaed.

With Toronto's business taxes being equalized (slowly) with the 905 and with all the green benefits of locating downtown (or along mass transit), I think the 416 will be just fine.

 

[TrickyRicky]

I agree with your city mismanagement theory Glen but my point is that contrary to your subject thread moving forward I see positive momentum in the core and negative momentum developing in many of the 905 municipalities.

 

[AlvinofDiaspar]

Glen:

Something is not quite right - it would take about 20 years for the difference in commercial tax rate (~200K/yr) to even out the lower cost of development in Toronto (~4M) assuming all other additional costs are equal (which we know they aren't - e.g. education tax)

AoD

 

[Glen]

Glen:

Something is not quite right - it would take about 20 years for the difference in commercial tax rate (~200K/yr) to even out the lower cost of development in Toronto (~4M) assuming all other additional costs are equal (which we know they aren't - e.g. education tax)

AoD

You are looking at the developers shortfall which is not the issue here. It is the cumulative revenue for the city. Form Day one the Mississauga development would net the city about 3/4 of a million more than Toronto would receive form the same project. Going forward, Toronto would recuperate its initial shortfall after 6 1/4 years.

The reality is that, because the net rent is lower (I believe to allow for the higher taxes) the market value of the finished building is lower in Toronto. As the report shows, developer's would much rather pay a 1.75 million more for land and development charges in Mississauga because you end up with a building worth more than 4 million more than the same one in Toronto. In Mississauga the developer can make $6.34 per ft.. In Toronto he would loose $7.00 per foot.

Developers are not in the business of loosing money. So the idea of Toronto recuperating revenue from higher taxes becomes academic as it will not be built in Toronto.

Toronto tax climate has given it a lot of nothing while the surrounding regions have been getting something of something. With jobs being gravy.

 

[urbandreamer]

Maybe it's not businesses that are fleeing to the suburbs but rather new immigrants are fleeing to the suburbs and setting up suburban-based small businesses!

I think it makes too much sense.

 

[scarberiankhatru]

I don't doubt that businesses do move to the 905 for suburban cheapness, but I agree with others than the article's genericness is highly counter-productive...if a restaurant closed, I'm sure the Sun would blame it on fleeing to the 905, too.

Liversidge sold his Willowdale office (a house he "loved" that had been converted into a commercial space) at Yonge St. and Steeles Ave. when it no longer "made sense" to keep it because of burdensome taxes.

He now rents about the same amount of space in a new, modest-sized three-storey office building.

So, he owned an office (converted house) that was probably worth in excess of $600,000, and chose to sell that and rent space instead. He's hardly "fleeing" to the 905.