Two Victoria councillors are crying foul over a city decision to give a 10-year “tax holiday” to people buying units in Customs House — a development that they say is being marketed as one of the priciest luxury condo projects downtown Victoria has ever seen.
“This development is being marketed as the most expensive and most luxurious condos in Victoria,” said Coun. Jeremy Loveday.
“I’m happy to see this project moving forward in terms of the revitalization of this building, but I don’t think the city or everyday taxpayers should be subsidizing some of the most wealthy through this tax credit.”
Condominiums in the project adjacent to the Inner Harbour on Government and Wharf streets have been reported to be selling for $800,000 to more than $10 million. Units currently on the Multiple Listing Service are priced between $1.6 million and $3.09 million.
Loveday was supported by Coun. Ben Isitt, who wanted to ensure short-term vacation rentals would not be permitted in the new condominiums. “I have zero interest in giving a 10-year tax holiday to a ghost hotel,” Isitt said.
The 10-year tax break, which ultimately won city council approval, is to offset the $6.5-million cost of seismic upgrading of the 1914 heritage-designated Customs House. It is being renovated by developer Stan Sipos at an estimated cost of $28.1 million.
Some councillors said that Customs House met the seismic program criteria, was vetted by the Victoria Civic Heritage Trust and, therefore, should be approved.
“I did not support it [the development] from a land-use and planning point of view, but in terms of fairness I have to support what’s before us today because it meets the requirements of our current program,” said Coun. Pam Madoff, noting that the objective of the tax program is to “stabilize our heritage buildings.”
“If we started to only give tax incentive to buildings that were being retrofitted for a particular type of accommodation, it’s the buildings that suffer,” Madoff said.
Coun. Geoff Young said it’s not a matter of if, but when a major earthquake will occur.
“At that time, every building that is vulnerable will be lost and that includes a lot of our heritage building stock,” he said.
“We all know the negative economic ramifications of that.”
Coun. Chris Coleman said it’s unfair to call what is actually a program of tax deferral a “tax holiday.”
“What happens with this program is the improvements are made, the seismic capacity is increased and the tax then goes up in year 11 when they start paying,” Coleman said.
“Part of the genius of this whole process is by year 18, I believe, the taxpayer is more than made whole and we end up making more money on the future benefit.”
The estimated value of the tax exemption will be $5.4 million over the 10 years, which is less than the $6.5-million cost of seismic upgrading, city staff say.
The tax break is applicable to the Customs House portion of the development, in which about 22 condominium units are to be built. It does not apply to the addition which is replacing the 1957 Federal Building.
The city’s tax incentive program was initiated in 1998 to assist heritage-designated building owners with the cost of seismic upgrading to help encourage converting the upper floors of downtown heritage buildings for residential use.
Since it was introduced, the program has created 694 residential units in 43 buildings, city staff say.