Developer tax incentive passes first reading

“In order to build and rent housing at a reasonable rental rate, tax incentives have been sought by this company and Meighen Estates Ltd, the owners selling this property to the developer”: Coun. Brent Budz Mickey Dumont/Citizen photo

Mickey Dumont for The Portage Citizen –

With arguably unprecedented financial interest in Portage la Prairie due to major business investments, real estate developers are also taking interest in the City of Possibilities and want to know what, if any incentives exist for them to do business here.

City of Portage la Prairie city Council April 23 narrowly approved first reading of a bylaw that would set a precedent to give tax incentives to for profit commercial home developers.

Council voted 4-2 with one councillor absent, to approve a tax break to entice Vionell Holdings Partnership to construct four 32-unit multi-family buildings and four 12-unit condo/life lease buildings.

Vionell Holdings proposes Meighen Estates to be constructed parallel to Ecole Arthur Meighen School and River Road.

The tax discount (according to one bylaw document is $243,000 based on the 2018 mill rate) provided will be over a five-year period after the occupancy permit is granted for each specific building with year one being a 100 per cent discount; year two an 80 per cent discount; year three 60 per cent; year four 40 per cent and ending in year five with a final 20 per cent discount

Councillors Brent Froese and Liz Driedger voted against the tax incentive bylaw while councillors Melissa Draycott, Brent Budz, Wayne Wall and Mayor Irvine Ferris voted to move the bylaw expected to hear second and third readings and possible final approval at the May 14 regularly scheduled council meeting. Councillor Ryan Espey was absent from the meeting.

Background documents show Meighen Estates Ltd and Vionell Holdings Partnership made a private presentation to city councillors on April 9, asking for the tax incentive.

In its report to council, the city’s finance, legislative and property committee said, “In order to build and rent housing at a reasonable rental rate, tax incentives have been sought by this company and Meighen Estates Ltd, the owners selling this property to the developer,” Coun. Brent Budz said in introducing the new business to council.

“CMHC (Canada Mortgage Housing Corporation) tracks vacancy rates for Canadian cities and they have identified that the City of Portage la Prairie has a 1.5 per cent vacancy rate for two-bedroom apartments and no vacancies for three-bedroom apartments. The city and its economic development office are aware that new and expanding industries in our community are currently seeking rental properties for their employees,” Budz said.

Tax incentives are not new to the city, and to other Manitoba cities, particularly those wanting to incent developers to build inventory of affordable rental properties, Budz explained in 2010, a tax discount was provided to the owners of Sage Grove Apartments for a 10-year period and at a declining discount, commencing at 100 per cent and reducing 10 per cent per year. The cities of Winkler, Dauphin and Steinbach have used tax incentives and discounts to incent developers to build their city’s property inventory.

“I have some serious reservations about this bylaw which I plan to vote against,” Coun. Froese said. “This council has worked very hard to find efficiencies in our operations to reduce the tax burden to taxpayers while maintaining our essential services. Forgoing the tax revenues which we legitimately ought to collect on these new buildings will make it much more difficult in the future to maintain those services,” he said and added the incentives are not much more than “corporate welfare”. Froese added the city does not have a policy to deal with incentives. “We’re doing this in absence of any policy. It sounds like we are being open and transparent and encouraging growth at any level, but in fact this is a pretty specific ask and we don’t have a policy about what we would like to encourage,” Coun. Froese said. “My experience in the past four years is that anybody coming to ask for tax relief has not received even a hearing by council. There have been a number of projects about to be built in this community that have been stalled by a council reluctant to support them.”

Coun. Melissa Draycott

“This is a need in our community and in the end it has no cost to us to go forward with it”: Coun. Melissa Draycott Mickey Dumont/Citizen photo

Coun. Draycott said the city does not have to pay any “increased amount out of pocket, then we already do to service that area. This is a no brainer for me.

“This is a very aggressive build which is part of the allure of it. We have a need in our community, not only for our existing residents, but for those who are coming in to do work in our community and for those who will stay,” she said.

She said the cost to the city for the five-year tax relief plan, “is nothing. Currently we are not looking at increasing our services to address this particular development. This will be coming to our city if we approve this…there’s a little bit of a tax relief, but for years and years to come there will be taxes paid by these developers. This is a need in our community and in the end it has no cost to us to go forward with it.”

Coun. Driedger disagrees and said the city does not have to offer the tax incentive. “The developer is well-established and a tax incentive is not going to make or break what they are proposing,” she said. “They (Vionell Holdings) are going to be realizing profits on their building regardless of if we give them this tax incentive or not. This indicates to me we are losing 4.5 per cent of taxes by giving this incentive,” she said.

“We have to be very careful as a council and we have to be understanding the issue of precedent,” Coun. Budz said. “We talked a little bit about precedent that has happened in our city and in some of the comparable cities, but I was speaking in my financial plan outlying about what we’re experiencing. This city has not seen this type of growth, ever. That goes for commercial development, for real estate development, rental development and so we as a council have to be very prepared to deal with this and potentially more asks,” Budz said. “The only thing I would say if this is supported tonight, that we have to have our minds open for the potential for additional asks on this city for graduated increase in revenue over a period of time on very significant investments.”

The finance chair did not mention if the city was prepared to entertain any “asks” that may be retroactive.

Coun. Wall agreed with Coun. Budz and added, “I’m certainly looking forward to the $568,000 in tax revenues in years to come. We can certainly use it.”

“Growth is never free,” Coun. Froese cautioned. “Everything you add people to a city you increase the cost of doing business, the cost of increase traffic on the roads, the costs of more books borrowed at the library, more visits to the pool and the park and so on. You can’t have growth without expecting costs to increase and we need to collect the taxes to cover those increased costs,” he said.

Admitting voting in favour of the Vionell Holdings tax incentive, “is going to make me as popular as a skunk at a picnic, I will be voting for this,” Mayor Ferris said.

“We have a number of times in our history when we have used incentives. One of the few levers that municipal governments have is taxes as far as encouraging or discouraging certain type of development.

“I want to be really clear. This is not money that we have. These are chickens that we should not be counting. We don’t currently have this tax revenue and we will not have this tax revenue unless something gets developed there.

“I can say to people in the development community in Portage la Prairie we need rentals in this community. Currently the PRED (Portage Regional Economic Development) office is taking reservations for people who want to rent out their bedrooms. So, if you have a project you’re thinking about that involves rentals, come and see your council. We’re open for business.”

Be the first to comment

Leave a Reply

%d bloggers like this: