Comment 28021

By A Smith (anonymous) | Posted January 02, 2009 at 13:14:43

Councillor Bratina, why not drop the commercial tax rate to 1% on the area between James and Catherine? This would require zero upfront costs to the city, but it would be pure profit to anyone who currently owns a building in that area. On a $1 million dollar assessment, this would translate into a savings of $35,700 per year. This figure, 3.57%, would also be the extra return on its gross invested capital.

In effect, the city would be removing a 3.57% fixed cost to investors, creating a huge incentive to locate in this area. Over time this tax advantage would be bid down to zero, but by that time property values will probably have increased 2-300%.

Even if the city simply broke even on the amount of money it got from lowering commercial tax rates, it would likely make it up on the residential side. Since there would be many more jobs coming with the new commercial developments, demand for residential properties would drive their prices up as well. Therefore, assuming that residential property tax rates remain unchanged, the added commercial activity would still ensure that the city saw a marked increase in overall tax receipts.

Just think of low commercial tax rates as being a loss leader, but to be more accurate, probably a break even leader.

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