City council approves tax incentive bylaw

 

Mickey Dumont

The Portage Citizen –

Vionell Holdings, A Brandon real estate developer, can now take advantage of a tax incentive bylaw the City of Portage la Prairie council passed at its meeting May 14.

Should the project be constructed, and on time, the tax incentive bylaw will see the city forgive taxes on the project over a five-year period

The tax incentive 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. It is expected to be $568,000 in tax savings for Vionell Holdings.

The project is not exempt from school taxes.

“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 the public at council April 23. 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.

Vionell Holdings proposes Meighen Estates to be constructed parallel to Ecole Arthur Meighen School and River Road. Vionell proposes to build four 32-unit multi-family buildings and four 12-unit condo/life lease buildings. In order to build and rent housing at a reasonable rental rate, tax incentives have been sought by Vionell and Meighen Estates Ltd, the owners selling this property to the developer. The multi-family building units will be two and three-bedroom units. No one so far has released information on what a “reasonable rental rate” will be.

On April 23 city council voted 4-2 with Coun. Ryan Espey absent, to approve first reading of the tax break bylaw to entice Vionell Holdings Partnership to Meighan Estates.

Councillors Wayne Wall, Brent Budz and Melissa Draycott voted to approve the tax incentive while councillors Brent Froese, Ryan Espey and Liz Driedger were opposed. Mayor Irvine Ferris cast the tie-breaker in favour to approve the bylaw.

Mayor Ferris has been the council’s most forward supporter of the bylaw. Two of the four delegates at the May 14 meeting claimed Canada Mortgage Housing Corporation (CMHC) statistics the mayor uses to support his argument the incentive bylaw is needed, are not necessarily reflective of a desperate rental market.

“These are my numbers from CMHC,” Mayor Ferris said. “I know that CMHC can miss things at times, however I got to tell you in the last two weeks I have had numerous calls, some of them were from developers against this. I also have had calls from business people and chamber members saying ‘yes, this is absolutely the right thing to do’. I have had a tremendous amount of calls from people who are either renters or want to be renters,” Ferris said. “Every single person I come in contact with I say, ‘do you have a three-bedroom for rent’? I haven’t had one single developer (or) landlord tell me that they have one. Maybe CMHC’s numbers are out a bit, but that’s the same kind of response I am getting from people who live in Portage la Prairie.” Ferris said

CMHC (Canada Mortgage Housing Corporation) tracks vacancy rates for Canadian cities and 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 in his introduction to the bylaw April 23.

Chris Bures, President C.H.B. Developments Inc., a Portage la Prairie developer will have a 64-unit condominium development come on the market at about the same time Meighan Estates does.

“CMHC has indicated that Portage has a vacancy rate of 1.5 per cent for two bedroom-homes and zero per cent for three-bedroom homes which is their survey figure that has been true for many years,” Bures said in his presentation to city council. Bures added a real market report supporting Portage la Prairie’s vacancy rate for three-bedroom apartments is consistent with the majority of other communities in Manitoba — many communities don’t even list three-bedroom apartments.

“Where were these companies throughout these years? Answer is that with recent announcements and anticipated growth they see a strong market. Why as a council would we discount our future tax base? When investors see the investment growth now and had no intentions of investing in the past. Again, a pure business decision that council does not have to be involved in,” Bures said.

He added council’s job is to assure that they are welcome, help to acquire proper zoning, permits and to be aware of the local building codes. “As stated, the expanding industries in our area are currently seeking rental properties for their employees. Yes, this is true. The market will take care of itself with investment such as this one and Erickson Heights Ltd. and other developments currently under progress including our own company’s 64-unit condo/rental options development.”

“We welcome fair development in our community and welcome Vionell based on a fair playing field. Vionell is an experienced developer (See jandggroup.ca) and Meighen Estates is a local investment group and have made a decision to invest into our market based on a good business decision. They know the markets that they are going into and base their investment on these parameters. These investors are large entities and very experienced in their fields so why would the City of Portage find it necessary to support with a tax incentive?” Bures 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. 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.”

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In his presentation, apartment real estate investor Eric Lee, cautioned city council if developers who invest according to market needs “are incentivized, apartment growth is no longer organic, it enters a boom and bust cycle because it encourages over building,” Lee said. “As for the huge need that we sense that we have for additional housing, please don’t misunderstand what is actually happening. Please don’t make decisions on incomplete or incorrect data,” Lee said.

Lee said there is no “mention of milestones or a required timeline of building schedule in the bylaw. The tax discount is conditional to all buildings that receive occupancy permits by Oct. 31, 2021. This seems to be too open-ended to guarantee that these proposed buildings will be able to satisfy the immediate need for housing that this council is trying to address.”

The developer explained there are a number of two and three-bedroom apartments at Goodale Gardens that have been vacant for years that CMHC has failed to capture in its annual polling of landlords. Manitoba housing also has a number of vacant units because they are not rehabbing them.

Mayor Ferris asked Lee if he had any three-bedroom apartments for rent. Lee does not.

“I believe there is a need for this to happen. If somebody is not developing something 2-3 year’s time, we’re going to have a real crunch. We’re going to have people commute to work in Portage and they’re going to go right back to Winnipeg and whatever community,” Ferris said. They’re not going to shop here. They’re not going to pay taxes here. They’re not going to have their kids in school here.

“You got to have housing. If you don’t have it, it doesn’t matter how many jobs you have, people can’t live here,” the mayor said. These projects — 62-units — will have to be ready the end of December 2018.”

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