Tensions flared at the Penticton city council meeting on Tuesday regarding the approval to extend the economic investment zone (EIZ) bylaw’s sunset clause, at the request of Wildstone Engineering & Construction after it faced project delays with its 48-unit building at 120 Ellis St.
According to a city staff report, the sitting council in 2014 had implemented the EIZ bylaw to “incentivize certain types of development in the downtown – including employment generators and residential dwelling units.” Under this bylaw, more than 19 projects were completed, equalling nearly $32 million in investment in the downtown.
Wildstone was issued a building permit prior to March 1, 2018, a requirement to qualify for the program which provides a tax exemption on the assessed value of the building for a 10-year period for individual strata unit owners. The previous sunset clause of the EIZ bylaw stipulates that developments must have had their occupancy permits issued no later than Dec. 31, 2019, a deadline Wildstone will miss due to weather delays and the local labour market.
With the extension of this clause to June 30, 2020, the 48 unit owners will split a benefit of $49,669.50 per year, totalling approximately $500,000 over the 10-year benefit period. During this time, owners will still pay tax on the underlying land, which is currently assessed at $802,000, equalling $2,961 per year. All taxes collected by the city on behalf of the hospital district, RDOS, school board, etc. are not included in the exemption.
Coun. Jake Kimberley expressed his frustrations with the previous council’s decision to implement the EIZ bylaw in the first place, a comment Coun. Judy Sentes said she resented as it was “not the time” to discuss the bylaw itself but just the extension. Sentes was an elected council member during 2014 when the bylaw passed into effect, as was current Coun. Katie Robinson, who also voiced her disapproval of the bylaw.
“Before I came onto council I was very outspoken about these EIZ zones and giving gifts of tax dollars to development. I was totally opposed to it, and I still support the concept that it is the wrong decision because it does not encourage development per-say. That only happens when there’s a market, and that will determine the development,” said Kimberley. “Tax exemptions do not create development. This is just a farce, the whole thing as I see it, truthfully, because in previous years we’ve never had to do this, and this council we’ve given away millions of dollars under this program, that 99 per cent of the taxpayers in this community have got to recover from. We’re giving it away literally.”
Mayor John Vassilaki also expressed that he was not in favour of the extension, and noted that the newly introduced Official Community Plan recommends no longer implementing EIZ bylaws. Coun. Julius Bloomfield voted in favour of the extension and reasoned that this incentive would greatly affect the unit owners and their budgets if it is not honoured by the city.
“I’m in favour of supporting this matter. My sympathies don’t lie with the developer, they put up their money and build something and take the chances, sometimes they make a lot of money and sometimes they don’t,” said Bloomfield. “But my concerns, in this case, are for the people buying into that development. We’ve got 25 to 30 sales in that building where people have budgeted with the deal that they thought they had, and some of them are young families … If we deny this, the benefits that we’re taking away are not from the developer, it’s those people that have bought in.”
Coun. Campbell Watt also supported the extension because “it’s not a loss in tax revenue, it’s a delay in it” and he doesn’t want to see the project rushed to finish in three months to meet the deadline. Coun. Frank Regher was against the extension, using the example of a resident missing their tax filing deadline trying to negotiate with the government to receive an extension.
“I just think that our practices in bylaws should be followed, they’re not meant to be cancelled,” said Regher.
“I guess I just have a different opinion. I absolutely adhere to the philosophy that has been stated about bylaws, we put them in place for a specific reason and there are consequences when they’re not followed,” said Sentes. “But I see it as one of those times that council has the prerogative to look at the scenario and to address the request the developer brought forward. The whole point of the EIZ is being recognized by this development, and there have been some circumstances that have intruded with their completion date.”
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