They Gravelled Paradiseâ€¦
Saskatoon has been in the middle of a ‘boom’ for the past half decade. Residential, commercial and office buildings have been springing up all around us — “around” being the operative word, because the majority appear to be at the ever-expanding fringes of our city limits.
In the heart of the city, the number of new developments can be counted on one hand, while wrecking balls have turned a much larger number of buildings into piles of rubble. And what’s generally risen from that rubble, on real estate that is arguably the most valuable and vital to the long-term prosperity of Saskatoon?
Surface parking lots. Sigh.
There’s no shortage of either demand or good ideas to help re-animate these dusty tracks of land in Saskatoon’s downtown. Unfortunately, the same forces that are driving Saskatoon’s economic upswing are also conspiring to keep construction cranes from crowding the downtown skyline.
As real estate prices keep pushing higher, some owners of these vacant lots know that a potential higher selling price in one, two or five years will mean more dollars in their pockets — good ol’ land speculation at its finest. Other developers, unable to pull together the backing needed to make their developments viable, continue to bide their time in hopes of capital dollars coming their way.
Held hostage in this game of Monopoly are existing downtown business owners who’ve worked their butts off to help revitalize the downtown core into a thriving place to work, live and play. Even more importantly, the city as a whole suffers, as needed development shifts outside of the downtown and adds to the increasing and economically unsustainable effects of urban sprawl.
So if it’s in the best interest of Saskatoon to see the development of these vacant downtown lots, why do we have so many?
Sadly, Saskatoon is largely the author of its own misfortune. Like many cities, Saskatoon taxes vacant land at a much lower rate than developed land, because the City appraises the value of land based on the amount of development on it. This is why making improvements to your own home results in a higher appraised value and a higher tax bill. (Think about that next time you grumble about the rundown shack in your neighbourhood.)
So in the downtown, why spend millions to hundreds of millions renovating an existing building or constructing a new building when you can throw down some dirt, put up a parking meter and start profiting from your land immediately, with hopes of a much bigger payday in the future?
There’s a growing trend across Canada and North America of cities who’ve realized the problem they’ve created, and who are altering how they tax vacant and under-developed properties. So how are they doing this?
In Montréal, a parking lot tax has been put in place that increases with proximity to the downtown, and the profits are put towards improving public transit. A similar parking tax has been in effect in downtown Vancouver for years, as has a cap on the number of parking spots.
This may seem counter to the tiresome mantra that so many people pull out about Saskatoon’s downtown — “thereisn’t enough parking!” (in fact, we have a glut of parking, but that’s a column for another day) — but have you been to downtown Vancouver lately? There aren’t many signs of the parking lot tax harming development.
An even more effective system is something called a Land Value Tax (LVT). An LVT assesses property tax based on the permitted use of the land. For example, if the lot is zoned for a 20-storey mixed-use commercial/residential building, the amount of tax is calculated by how close the development on that lot is to the maximum permitted use. A parking lot would only represent a small amount of the permitted use, so the land would be taxed at a higher amount, essentially meaning owners would be paying extra to use the land inefficiently.
By charging a higher tax rate on the growing number of vacant lots in the downtown, the City would be providing an incentive to owners to either develop the land or sell to someone who will. This would lead to an increase in the amount of development in the downtown core, limiting the need to develop on the edges of Saskatoon and reducing the long-term cost of providing and maintaining expensive infrastructure and services that City Council is already struggling to keep up with. Not to mention improving the cultural and economic engine of our city.
So what are we waiting for, Saskatoon?