Tax reductions for vacant land being eliminated

WELLINGTON COUNTY – In an effort to spur economic development, Wellington municipalities are moving to eliminate the tax break that owners of vacant commercial and industrial land have been receiving.

County council has cancelled the discount of 30 to 35 per cent, and local councils have either done the same or are considering the move.

In Erin, the discount is expected to be maintained until at least 2020, recognizing that some landowners have been told that they are not allowed to build until a wastewater treatment system is built, which could take several years.

Municipalities will not collect more tax money overall. The discounts have been subsidized by other taxpayers, so when they are eliminated, homeowners will get a slight tax adjustment.

“People who have vacant land, or in some other cases empty commercial, they were getting a bit of a tax break and we’re going to be eliminating those,” stated Guelph-Eramosa Mayor Chris White, chair of the county’s Administration, Finance and Human Resources committee, in an April 26 report to county council.

“In our case, for example, it makes for absentee landlords and they shouldn’t necessarily be rewarded, and at the end of the day the residents pick up the difference. 

“It’s not like this money isn’t needed. So this is an opportunity to take a little pressure off the residents and try to get it on the vacant landowners.”

Two years ago, the provincial government provided municipalities will the option of eliminating the vacant land discounts.

“The recommendation is in line with the province’s interest in ensuring tax competitiveness and consistency for taxpayers,” states a county public notice.

In a related move, some local municipalities have also been eliminating or adjusting a similar tax break on vacant space in business buildings in recent years. 

This does not apply to county taxes.

Guelph-Eramosa will host a public open house on May 6, at the start of the 7pm regular council meeting, to get input on the possibility of eliminating the vacant unit rebate program and the vacant land tax reduction.

In a March report to the committee of the whole, finance director Linda Cheyne said council could “eliminate the financial incentive for properties to remain vacant.” 

She said council has the authority to maintain, increase, reduce or eliminate the tax breaks, or make them apply only to specified business areas.

While owners would have to pay more, she noted there is currently a duplication of tax reductions, since the Municipal Property Assessment Corporation (MPAC) already allows for vacancy and obsolescence discounts in property valuations.

Centre Wellington, Wellington North and Mapleton have already eliminated the vacant land discount.

In Erin, Mayor Allan Alls said it would be a “double slap” for the town to tell businesses they can’t build, but then charge them more to hold the land until a sewer system is in place.

“I have the same reservations,” said councillor John Brennan. “We have a lot of vacant land because we have made it compulsory.”

Staff will consult local business groups and report back to council before a final decision is made.

Erin finance director Ursula D’Angelo recommended delaying the change until 2020. She reported that 53 properties would be affected, with an average town increase of $308 for vacant commercial lands, and $410 for industrial, based on current assessments.

The town residential tax rate would drop by .3%, with a benefit of less than $4 on a home assessed at $500,000.

County wide, 307 properties are affected. County and education taxes will shift, depending on their share in different municipalities. 

In Erin, property owners will pay an extra $835 on average to the county for vacant commercial land, and an extra $1,332 for vacant industrial land. The average homeowner will pay $7 less to the county.

Erin has not eliminated the vacant unit rebate, but its new Community Improvement Plan (CIP) says it is under consideration. 

Once that tax revenue is recouped, council may decide to reinvest it in CIP incentive programs to support new growth or in improved municipal services.

In Puslinch, based on the results of a public open house, council eliminated the vacant unit rebate, effective in the 2018 taxation year. They supported elimination of the vacant and excess land property tax subclass tax reductions, effective in 2019. 

In Minto, the vacant land change would mean approximately $7,200 in additional township taxes on 38 properties in 2019, with an equal amount of reduced taxes on all other properties. 

The change for an average residential property would be only about $2. The affected property owners would pay a total of about $8,300 more in county taxes.

– With files from Patrick Raftis