George Giaouris is considering shutting down his Toronto business, Northbound Leather Ltd., after 30 years because of a devastating setback: After paying $4,000 per month in property taxes for 2016, Mr. Giaouris, 54, is now being asked to pay double that.
Northbound Leather Ltd. is one of several small businesses along Yonge Street dealing with higher property-tax bills. Some owners, such as Mr. Giaouris, are facing hikes of 100 per cent or more according to their 2017 property assessments – which, critics say, is a result of an unfair and unpredictable tax system that treats big and small buildings the same way.
"I can't afford to build a 50-storey building, let alone pay my taxes and neither can my neighbours. We don't want anything more, we are just asking to be treated fairly within our limits," said Mr. Giaouris.
The Municipal Property Assessment Corporation (MPAC), which assesses the property values for all buildings in Ontario every four years, said the concerns of these businesses are being heard and a review of these properties is happening.
"Property assessments within the Heritage District on Yonge Street, between Bloor and College, are in the process of being revised to ensure the values reflect the local market," an MPAC spokesperson said in an e-mail to The Globe and Mail.
But with the 51-year-old House of Lords hair salon set to close in October partly due to increasing property taxes, many entrepreneurs on Yonge Street are afraid. The Yonge Street Small Business Association is organizing meetings and handing out pamphlets to make the public aware of the issue.
MPAC assesses properties according to potential value of the land and "best use" rather than its actual use. This means that small businesses, in places such as Yonge Street, are expected to pay similar property tax as if they were to develop a 40-storey condo. As prices for nearby homes soar, prices for all types of properties in the area rise, whether it's a stubby shop or a towering plaza.
While cities and towns rely on the taxes as an important revenue source, critics say the assessment system is unfair. Queen Street and King Street have faced similar difficulties with property assessments, said Councillor Kristyn Wong-Tam, who represents Ward 27, Toronto Centre-Rosedale.
"Right now the MPAC model of the assessment is not working. Small two- to three-storey buildings should not be assessed in the same way as a large development site is assessed," said Ms. Wong-Tam. "It's very disturbing; small business owners and operators are the lifeline of Yonge Street in many ways. We need them."
Mr. Giaouris said he believes too much is being expected from these businesses, adding, "We can't be expected to both add character and vibrancy to the street and make 'best use' of the property. It's like trying to get two types of milk from one cow."
Sanjoy Kundu, a landlord and owner of costume shop Theatrics Plus, paid $20,000 in property taxes last year. This year, he estimates it will be close to $40,000. The hikes may mean his business will have to shut down as well, he said.
"I don't want to close down – this is my livelihood, it's what I use to take care of my family," Mr. Kundu said. "There is a service that I offer to our community that no other store in Canada has. I don't want to lose that."
Along with encouraging businesses on Yonge Street to appeal their assessments, Ms. Wong-Tam said she is working to get MPAC to change the way it assesses smaller properties.
"In the long term, we will ask them to reconsider the way they evaluate these properties so people don't have to be shocked every four years when their properties are reassessed," she said.
The atmosphere among the small business community on Yonge Street is tense. Typically, commercial real estate landlords pass tax increases directly to tenants, who pay a "base rent," as well as an additional rent that includes a yearly adjusted tax. Some landlords have not told their tenants about the tax increases because they are afraid they will close up shop.
"I've never seen anything like it," said John Kiru, executive director of the Toronto Association of Business Improvement Areas, which represents more than 40,000 local businesses. "Small businesses in this city are starting to reach the tipping point, which is when tenants are actually paying more annually for taxes than they are for rent to the landlord."