The owner of a Wellington St. W. restaurant is blaming the province’s method of assessing the value of downtown properties for a tax hike of more than 500 per cent since 2007.
Frédéric Geisweiller has taken to Instagram to protest the value assigned to the land on which Le Sélect Bistro sits, and to promote an online petition that calls for changes to the way the Municipal Property Assessment Corporation (MPAC) sets the value of commercial properties in downtown Toronto.
Geisweiller says the property his restaurant is on has been designated as “land in transition” for which the “highest and best use” is as a development site.
To him, this suggests the province sees more value at that location in a condo tower than in his bustling two-storey French restaurant, which has been operating since 1977 and currently employs 80 people.
“Their mandate is to assess your property not on what it is but on what it could be,” Geisweiller said, comparing the situation to taxing an individual who is living on an artist’s salary based on their potential to be a rocket scientist.
“Why would we have to pay tax on something that does not exist except in the imagination of an MPAC evaluator, that we could be something that we’re not? It’s deeply flawed logic,” he said.
“This is what is so infuriating in this whole thing. The jobs for the 80 people count for nothing.”
When Le Sélect moved into its 432 Wellington St. W. location in 2007, the municipal property tax bill was $31,276. In 2020, that bill is projected to rise to $203,710, according to documents Geisweiller provided the Star.
The taxes saw a sharp uptick in 2017, when they leapt to $93,667 from $60,131 the year before. The assessed value of the property has increased from $2 million in 2014 to more than $6.5 million in 2019.
In a written statement to the Star, spokesperson Paula Chung said “MPAC is legislatively required to assess property based on current value, which is its market value as of a legislated date.
“In order to determine current value, we look at what a property would sell for on the open market. Commercial properties in Toronto are assessed by analyzing sales of similar commercial properties in the market,” Chung wrote.
Geisweiller said he has been trying to get the province to reduce his assessment, or get the city to introduce a tighter cap on how much the taxes can go up since the rate first spiked for 2017.
After meetings with MPAC and politicians, a formal appeal and a presentation to the city’s executive committee, the best he has been able to achieve is a hearing date set for next year and a 10-per-cent cap on tax increases introduced by the city.
“I argued that 10 per cent was also unsustainable,” Geisweiller said. “At the moment, the rate of inflation is less than 2 per cent a year, so how can you justify such a difference?”
The provincial government has announced plans to review the “accuracy and stability of property assessments,” said Ministry of Finance spokesperson Scott Blodgett.
Meanwhile, Blodgett said, “municipalities have a number of programs and tax policy tools available to mitigate the impacts of reassessment and tax changes for property owners, such as graduated tax rates and optional property classes. These can be used to reflect local circumstances.”
But Councillor Joe Cressy, whose ward includes Le Sélect, said the city remains bound by the province’s method of assessment.
“It is a fundamentally broken model that prioritizes tax revenue over the economic viability of small and independent businesses,” Cressy said
He described capping tax increases, or increasing commercial taxes at a lower rate, as merely “reactions to the fundamental problem.”
“It’s a band-aid, not a solution because that’s a cap based on the assessment.”
The city sets the tax rate, which is a percentage of the provincially assessed property value.
“We can try to tinker around the edges as we do and to use every tool in our tool box to mitigate the highest and best use assessment model,” Cressy said. “But at the end of the day, the assessment model needs to change,”
He said that if the province created a separate assessment category for small and independent businesses, the city could make up the difference in revenue form the taxes it collects by spreading it out over the other “tens of thousands” of commercial properties in the city.
“How we assess taxes should be on the basis of our provincial and city-building objectives as opposed to a cookie-cutter approach,” Cressy said, adding that if we want arts, culture, heritage and thriving small businesses, we need tax policies to reflect that goal.
“I got married at Le Select, damn it. I want to see them stay,” he said.
MPAC agreed to adjust its assessment so Le Sélect’s property taxes would drop by $100,000, Geisweiller said, an amount he called “inconsequential.”
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“The neighbourhood is changing. There is nothing I can do about this because it’s the life of a city,” he said. “Things change for the good or the worse but what we can influence is the taxation if not the use of the land.
“The taxation is deeply unfair, and that’s what we’re after.”
The city collects approximately $2.6 billion a year in taxes on all types of commercial properties, including small business, large office towers and shopping centres, said communications adviser Ashley Hammill.
Since 2018, a 10-per-cent cap on tax increases applies to all properties within the commercial, industrial and multi-residential property tax classes, she said.
“In Toronto, particularly in high-demand or redevelopment areas such as downtown, the price paid for a property will often reflect its value to a prospective buyer as a development site, rather than its value in its current use,” Hammill said. “Toronto’s caps on tax increases are intended to provide a measure of protection against large tax increases for all business properties.”
But MPAC’s assessment methodology, known as the “highest and best use” system, has nonetheless put enormous financial pressure to local businesses and organizations across the city, said Claire Nelischer, project manager at the Ryerson City Building Institute.
Last year, Nelischer and her colleagues researched the impact of the assessment methodology, with Le Sélect Bistro as one of their case studies.
“On Wellington St. it’s especially dramatic,” she said, noting how the development of condo and office towers across the street has pushed up assessed values of properties that have not been developed.
“Le Select is burdened with these extraordinary property value and property tax bills, but the reality of their business hasn’t changed,” she said. “They still have the same number of seats in their restaurant, they’re still a two-storey building, so they don’t have the capacity to pay those annual property tax bills that they’ll be receiving.”
Nelischer said small businesses are in a similar situation in areas across the city where there’s development growth. She said both the city and the province need to find solutions to these concerns and create a small business subclass with a separate tax rate or rebate, like they did at 401 Richmond St. W., where property taxes were reduced by up to 50 per cent for cultural and creative businesses. Cressy said that was done by the province after the city “fought” for it.
“People really love those spaces and those businesses,” she said. “We understand that they contribute to what makes Toronto Toronto, and we’re scared and sad to be losing those beloved places.”
The problem, however, said Nelischer, could be how to determine what qualifies as a small business — is it just main floor units? Only independent businesses? Shops below a certain square footage? Only certain types of retailers?
“This is not to say that a small business subclass is impossible, just challenging to implement,” she said.
Le Sélect moved from its longtime location on Queen St. W. in 2007 because there were too many chain stores gentrifying the area and pushing small businesses out, Geisweiller said. He chose Wellington St. W. because of its beautiful architecture, mixed neighbourhood character with blue- and white-collar workers around, including in the garment industry and auto shops.
“It was a microcosm of what the city is made of, which was very attractive. Now, of course, this is changing,” Geisweiller said. “The redevelopment in this area is humungous, it’s gigantic and it’s displacing a lot of people who have been working and living in this neighbourhood for years.”
Geisweiller remains optimistic that Le Sélect will persevere in the face of steep tax hikes, but he said he worries such policies are driving out small business that make a neighbourhood vibrant in a way that condos can’t.
“We bring life and character,” he said. “It’s not something that a condo can offer. A condo is essentially a lack of life. It doesn’t animate the streetscape. We do. We put colour on the streetscape.”