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Canadian Urbanism Uncovered

JOHN LORINC: A Graveyard for Small Businesses and other Urban Myths

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Business groups come in various flavours and their messages run the gamut from insightful to irritating. My least favourite is the Canadian Federation of Independent Businesses, which represents 100,000 members across Canada.

Its chief mouthpiece is Catherine Swift, whose message that has been astonishingly consistent over the years: that almost everything governments do undermines small business.

If one took what the CFIB says at face value, you’d have to conclude — all evidence to the contrary — that small business is a vanishing species, done in by idiot bureaucrats, conniving politicians and rapacious banks.

Last week, Swift came out with a report that concluded the City of Toronto is the worst place in the country to do business. One aggravating factor, according to her chorus of sirens: excessive regulation. (You’re glad you were sitting, no?)

It’s hard to know how to respond to that kind of torque, except to note the glaring selectiveness in the analysis. If Toronto’s dead last, why’s the financial industry still here? Why is TTC ridership — an extremely reliable economic indicator — at an all time high? What about all those cars clogging up downtown streets – just driving around for the hell of it? And the cranes — what to make of the cranes?

These kinds of studies remind me of those ominous, nonsensical warnings from the late 1980s that Toronto was on the verge of becoming Canada’s Detroit.

In an interview with Matt Galloway on CBC, Swift neglected to mention that David Miller’s council has moved to ramp down business taxes to eliminate the long-standing gap between the 416 and 905. She forgot about the new street retailer property tax class, moves to protect industrial lands from the clutches of residential developers and the city’s long-standing support for its BIAs.

Swift did, however, trot out the hoary old calumny against the St. Clair West right-of-way and its apparent business-killing consequences — noting that some of the CFIB’s own members had bought the farm because of construction delays. Swift seemed less concerned, oddly enough, about the well-being of the businesses that have toughed it out, as she blithely insinuated that StC-W is a commercial graveyard.

I live a couple of blocks from St. Clair and Christie, and have watched with interest how the street has responded, first to the construction and now to its aftermath. Yes, some small, crappy businesses have vanished, but I’m not sad to see them go. Yet many good ones remained, and there’s been a steady influx of new businesses whose owners are clearly investing serious dollars.

Why? Because they recognize what Swift and others refuse to see, which is that the radical improvement of the public realm along St. Clair is, more than anything else, a boon to street retail and future development. The traffic moves well, the sidewalks are pristine, the parking is abundant, the streetscape, much improved.

Swift won’t acknowledge these confounding details, probably because she hasn’t bothered to come down to the area to see with her own eyes what’s changed. Instead, she, like many others, continues to peddle mischaracterizations and myths.

Strangely, though, the City hasn’t bothered to ante up a rebuttal — a glaring oversight, given that construction is poised to begin on other Transit City lines.

Miller and his allies invested gobs of political energy in the approval fight. But there’s been virtually no follow-through on the back end, apart from a highly localized Buy-St Clair campaign from Councillor Joe Mihevc.

With the right-of-way virtually completed from Yonge to Caledonia, the City should now be aggressively promoting the public realm improvements in a Toronto-wide marketing campaign — not just to rebut the Catherine Swifts of the world, but also to demonstrate to communities slated for the next Transit City lines how the finished product actually looks, feels and functions.

Without loudly touting what’s been accomplished here, isn’t the City is ceding the battlefield and putting the post-Miller Transit City projects in jeopardy?

P.S. If Swift is reading this post, I’d like to extend an invitation to her for lunch (on me) and a stroll on St. Clair West, just to see if reality and rhetoric match up….

photo by Tanja Tiziana Burdi



  1. I heard that interview too and wondered what planet she was living on. St. Clair was almost dead BEFORE the transit upgrade and now I see all sorts of new stores opening and I have many friends along St. Clair who are really excited the end result. Goodbye dollar stores hello diverse retail and places to shop local and meet local.

    For some reason she seemed to leave out every new incentive for business that the City has put in place and seems blissfully unaware of the building boom going on to supply housing for those who work and live downtown. Her conclusions bore no resemblance to reality. But the CFIB is of course one of those 3 staff member lobbying organizations that get far more press than they deserve like the Taxpayers Federation.

  2. TTC ridership is an economic indicator? Possibly, but I would have thought it’d be negatively correlated with economic growth.

  3. Bravo, John. I agree with your observations on St. Clair. The ROW and Art Barns are both causing noticeable improvements in the area.

  4. I think the City of Toronto might consider a statistic this unbelievable to be a non-threat.

    Those willing to believe that Toronto is the absolute worst place in the entire country to start a business are the sort that would never consider Toronto to begin with.

    This isn’t a slight, in any way, to people who would prefer to stay out of Toronto, I sense this perspective is important to the diversity of experience and livability of all Ontario (and Canadian) cities.

    Obviously, some businesses will do better established outside of the GTA, in different provinces, in different cities, and if this is the case they should be encouraged to do so. Only though careful analysis and market research can this kind of decision be made. A report this misleading does a disservice to all small business owners who take it into consideration, whether they decide to start a business in Toronto or elsewhere.

  5. It’s strange though that you begin with the issue of small businesses floundering then argue that

    “If Toronto’s dead last, why’s the financial industry still here? Why is TTC ridership — an extremely reliable economic indicator — at an all time high? What about all those cars clogging up downtown streets – just driving around for the hell of it? And the cranes — what to make of the cranes?”

    None of that represents small business; it’s largely big banks and large construction firms. Streetscape improvements are great, but let’s be honest and admit that aesthetic improvements like St. Clair are the exception to the rule when much of the city has ugly wooden poles and overhead wires. Postering doesn’t seem to be controlled in any way, every part of the city has the huge yellow traffic signals instead of the more attractive and compact black units you can see in Montreal or Washington and prominent parts of the city always seem to have sidewalks patched with asphalt.

  6. MarkG: I presume you mean that if the economy is growing, people are getting wealthier and so switch from transit to private vehicles. I think John’s point (and the real-world phenomenon) is that transit ridership is positively correlated with economic activity in that people get on the bus (or subway, or streetcar) in order to go somewhere to earn or spend money. When they have no money to spend, or no job at which to earn it, they don’t take the TTC but instead stay home.

  7. Let’s answer your questions…

    Q. Why is the Financial Industry still here?
    A. Because they are ‘attached’ to the core. They need to be close to other, firms, courts, offices, government administration offices, hospitals, UofT, etc. You should note that even with the firms that ‘must’ be downtown, they have moved or expanded back office activities outside the city. In fact within the whole F.I.R.E. sphere, outside of finance, nearly the entire growth of the Insurance, Real Estate sector has occurred outside of Toronto…….

    “City of Toronto employment in the sector grew at 2.3 percent during the recent four-year period
    (2000-2004), higher than the overall employment growth rate of 1.5 percent. However, when
    taken into the geographic context of the 905 versus 416 regions, financial services growth in the
    905 eclipses that of the City of Toronto recording growth rates of more than 6 percent over the
    four and 10-year periods.
    Sub-sector trends reveal mixed performance. The City of Toronto has a slightly higher share of
    the Banking sub-sector (51 percent) than the rest of the CMA. The City has also had a recent
    spurt in the short term that reflects buoyant retail banking activity, notably with the introduction
    of foreign banks such as ICICI, HSBC and recently the State Bank of India.
    Insurance and Securities/Investment have driven Financial Services’ regional growth during the
    past 10 years. However, the City of Toronto has lost ground in the Insurance sub-sector over the
    four and 10-year periods, recording negative growth while the 905 racked up double-digit
    growth over the four-year period and 8.7 percent over the longer term. The 905 share of
    insurance employment now stands at 59 percent surpassing the City of Toronto at 41 percent.”

    Keep in mind that this is occurring in the area of Toronto’s greatest strength.

    Q. Why is TTC ridership — an extremely reliable economic indicator — at an all time high?
    A. Perhaps increased gas prices or improved service. Why was the previous peak ridership twenty years ago, when the region was nearly half the size? The increase in traffic has mainly occurred on regional roads. The number of Toronto residents that now travel outside of the city to work has increased dramatically. Between 91-01 the number of downtown residents that commuted to work outside the city increased by 14.3%. The number that come into the city for work has shown the opposite trend.

    Q. And the cranes — what to make of the cranes?
    A. You mean the ones for condos? For the most part all that means is that the city is adding more outbound commuters. You should also note the disconnect with Toronto’ population growth vs. the number of residential units (hint shows more of a redistribution rather than aggregate growth).

  8. Now lets investigate your other contentions.

    1. David Miller’s council has moved to ramp down business taxes to eliminate the long-standing gap between the 416 and 905

    Nope. The gap will not be closed. Pay attention to the ratios and future growth on the residential rates.

    2. She forgot about the new street retailer property tax class, moves to protect industrial lands from the clutches of residential developers and the city’s long-standing support for its BIAs.

    Moving quicker to a rate that is still to high is of little comfort. Perhaps if the city did not have a tax rate which being so high devalued industrial properties, they would not be so cheap, and therfoere less attractive to redevelop.

    3. Re St. Clair.
    Let’s see what happens to the area after those properties lose their cap protection.


    Here are some questions for you John,

    How much rent does Spacing pay, and how much property tax? What percentage of its full CVA taxes does the Robertson Building pay?

    Toronto’s program to lower business taxes is insufficient. There has never been any feasibility studies to determine the impact of the end point rates (2.5x that of residential). Yet there is evidence* that even at that ratio, one of two things will happen. Either businesses will continue to find the burden to much and continue to flee, or the high taxes will continue to erode the non commercial tax base, or both. In any event the the shrinking of the non residential tax base implies a greater shift in taxes towards residents than planned for.

    Ask Gary Duke, or Les Liversidge. Look at all the vibrant areas in Toronto, like Kensington, west Queen West, Ossington, The Beach, etc. All contain old buildings that have been protected by capping. No one has done any feasibility studies to see what would happen once they reach their full tax rates. Most are paying less than 50% of the taxes they would at the end point of Toronto’s program to reduce the ratios.

    For example, I was looking at a listing of a commercial property on Queen ST. recently. A 2800 sq foot 2 story building with taxes of 9,000 per year. Those taxes are being capped. Eventually they will reach more than $30,000 per year(uncapped 2.5x residential). Do you want the exact address to see if the tenant will be able to afford such an increase?

    If you were really serious about this issue John, you should have researched it better. Having Cathrine Swift participate so you can point to atypical, anecdotal evidence to defend the status quo, is hardly instructive.

    How about asking Dr. Enid Slack to participate? I will buy both of you lunch!

  9. John,

    One last point while I await your responses.

    One must ask how committed is Mayor Miller and council to lowering business tax? In early Spring Miller was quoted as saying “”We have a program to reduce commercial property taxes in Toronto – particularly on small businesses,” said Miller following a special Executive Committee meeting looking at the city’s $8.7-billion operating budget. “That is going fast – we’re cutting faster than we thought. But next year is going to be a tough budget year, and I’m hoping to evaluate whether we can slow that down or not next year.” .

    NB. The reason it is working faster than planned is that the relative size of the non residential tax base is shrinking. Combined with the 1/3 of residential tax increase rule, any change in relative size will be reflected in the mill rate. It is not the program that is working faster than planned, it is the continual erosion of the non residential tax base.

  10. Re the construction cranes – how many of the contractors working on those construction projects are small companies? Perhaps not the main construction firms themselves (e.g. Ellis-Don or PCL), but the subcontractors – who does the plumbing, electrical, drywalling, who builds the cabinetry, etc? Or does “small business” only apply to storefront retailers?

  11. In the long term it is likely that St Clair West businesses will improve, but I would point out that the ROW is not completed. I do not yet see all of what you see. The current bus service is still very challenging–cycling and driving more so. With the construction still ongoing, parking is not abundant nor is the traffic moving well. The ROW will be up and running to Lansdowne by Christmas. With construction gone and busses converted into streetcars, I expect that’s when things will get better. Claiming that the ROW is improving the area, when it is not yet running west of the subway, seems to me a little premature. Once it is running, I expect that is when you will get your rebuttals and hear more from the project boosters.

    I recommend going a bit further west than Christie and the Wychwood Barns before patting ourselves on the back too much. More businesses have closed in the areas west of Joe Mihevc’s constituency office than have opened. They weren’t all sports bars and dollar stores. The area between Winona and Dufferin, in particular seem to have been hit. A lot of the stucco and paintjobs on the outside of buildings that look like investment by the owners were in fact covered by the city’s beautification payouts.

    BTW Google Streetview has captured the construction and the transition. Check it out when you have a moment. My favourite faà§ade improvement so far is at Ontario Fashion Textiles near Lansdowne. It’s all brick no stuccovery low key but it looks great.

  12. Some very thoughtful comments here, as one would expect at Spacing.

    Looking at municipal taxes over the last decade, there is a strong downward trend in business tax rates. It was started by Lastman and continued every year, except for 2004, by Miller.

    In 2001 the commercial, industrial and residential mil rates were 2.66%, 3.71% and .70% respectively.

    In 2009 they were 2.04% (1.98% for small businesses), 2.20% and .60%. Note all mil rates have fallen as property values have grown much faster than the city budget.

    The ratio of commercial to residential rates has fallen from 3.8 in 2001 to 3.4 in 2009 (3.3 for small business). The industrial/residential ratio has fallen even faster over the same period from 5.3 to 3.7.

    There is still a long way to go, but this is real and sustained progress.

  13. Mikeb,

    The stretch between Winona and Dufferin is a classic example of a retail strip whose businesses are radically out of sync with the economic status of the adjoining neighbourhoods. A great many of the stores that closed on that stretch were truly dismal, and the ROW did all the residents living north and south a favour by smoking them out. How many bars and dollar stores and mysterious junk shops do you need?


  14. the issues are complex and confusing:

    Catherine Smith represents a valid political segment with a valid set of views, informed views, defensive views. I think I know some members of that business organization.

    while the views that lead to infrastructure improvements like StCW are visionary views, technical views, make work views. Serious crystal ball stuff which can’t be minimized.

    and all of them are strong political issues with huge dollar allocations, so we can’t trivialize any of it pro or con without disrupting somebody’s lunch ticket, or losing focus on long range goals.

    St. Clair West is very wide, like Spadina, and applying that kind of infrastructure is reasonable for the city in my opinion.

    Cranes and condos certainly are indicators of new vigor in a general way.

    I am interested in more of the long term vision that reduces congestion and improves transit for all of Toronto.

    For instance, are there new tunneling projects slated, any overhead rail ideas? Is the Gardiner still considered too ugly by many people with political clout? – I never found it ugly, and usually find it useful and pleasant (more pleasant than being stuck in a tunnel).

  15. Swift reminds me of the old Yogi Berra axiom “nobody goes there anymore – it’s too crowded”.


    I recently walked the length of the St. Clair ROW, and was struck by two things. The first is how unfortunate it is that it has taken so long to complete. But the second is that when it *is* complete, it is going to make that part of St. Clair a real jewel.

  16. “For example, I was looking at a listing of a commercial property on Queen ST. recently. A 2800 sq foot 2 story building with taxes of 9,000 per year. Those taxes are being capped. Eventually they will reach more than $30,000 per year(uncapped 2.5x residential). Do you want the exact address to see if the tenant will be able to afford such an increase?”

    As the taxes slowly rise on a building like this the value of the building, therefore the uncapped taxes, will fall (or rise more slowly then average) because one of the things that make this building valuable to the low taxes it currently pays.

    This means the taxes won’t go as high as you claim.

    Also, as the capping disappears, the buildings who now pay more then uncapped taxes, like the office towers, will pay less taxes which help bring some jobs back to the city.

  17. Darwin,

    Yes. The process is the capitalization of taxes into values. I mention it on my blog and give an example. I have corresponded with a number of experts about the process. In this particular case, I weighted my calculations taking this into account. There is currently a considerable amount of distortion in the way MPAC values small commercial properties. This has much to do with being based on comparison sales, ignoring the income approach. In Toronto, which has seen numerous cases of commercial properties redeveloped into residential, there is a disconnect between market values, and income based values. Simply put, it is small commercial properties that pay a price for redevelopment speculation. Many small properties have higher values per sq. ft. than the Class ‘A’ towers.

    In land economics, they say value determines taxes and taxes determine value. Which is why both a tax rate of 0% and 100% produce no tax revenue. The key is finding the rate that produced the most revenue and continues to grow the assessment base. Here is a good example from John Barber (2006)

    ” Even Ernie Eves and Mike Harris knew that wasn’t fair, so the finance minister instituted a program to reduce Toronto’s business-education tax rate to a reasonable level over a period of five years. Unfortunately he cancelled the phase-in two years later, and the McGuinty government, crying poor, has failed to bring it back. The result is that today, the excess provincial take is a major component of the “tax gap” that is driving investment out of town.

    But something quite astonishing happened when taxes did fall. Between 1998 and 2000, a period when assessments were frozen, the Business Education Tax rate in Toronto fell about 10 per cent — equivalent to a 5-per-cent cut in overall business taxes. But when Ontario properties were revalued in 2001, it turned out that commercial assessments in Toronto had increased by about 40 per cent.

    By comparison, commercial assessments in the rest of Ontario, without the benefit of steep BET cuts, only increased 14 per cent over the same time period,

    Even if the Toronto tax cuts were responsible only for a fraction of the huge gain in property values, they were self-financing — just as supply-side theory predicts.

    Over the same two-year period, Toronto gained an impressive 100,000 new jobs — the sharpest growth in employment since the mid-1980s. Was that a coincidence? I don’t think so. Nor does coincidence seem to explain why employment immediately levelled off and began to decline when the tax cuts stopped.”

    Unfortunately the city’s financial projections do not take this dynamic into account, hence the decrease in the relative value of the commercial/industrial tax base. I was told from someone in the Mayors office that they projected that the move to CVA taxes would increase taxes on some Bloor St. addresses 4-5x. I was dismissed when I told them that wold not happen.

    Now put your self in the position of the property owner. Currently the building is valued at approx $300 per sq. ft. Residential in the area is valued much higher. If the value going forward is to fall, with increasing taxes, there is going to be growing incentive to rezone/develop that into residential. Producing a loss of revenue for the city.

    Going forward if the value of commercial properties fall, relative to residential, that implies a that the tax rate must rise to make up for diminished revenue. Toronto, though, can only raise rates on non-residential at 1/3 the rate of residential.

  18. Speaking of Google Street View, I did what someone suggested and took a virtual walk down the ROW. I don’t know if it’s just me, but when I was clicking west just past Humewood Dr I got diverted into some back alley, though the map still showed me on St. Clair W. Someone else try it and let me know if my computer is the crazy one.

  19. Winnona and Arlington at St. Clair is actually the spot I was talking about where residents are excited about new stores/eateries opening: since construction began.

  20. Joel, Street View does that now and again; if the car goes down a nonconventional route that parallels the mapped one, it can get confused with the data and give you the wrong one.

  21. There are several problems with the ROW-saved-St.-Clair narrative. The Wychwood Barns project is independent of the ROW, for one thing. There was plenty on St. Clair other than dollar stores and bars pre-ROW, for another. (Pain Perdu and surroundings come to mind.) Other neighborhoods have demonstrated that you don’t need a ROW to “smoke out” underperforming businesses — rising rents in improving neighborhoods will also do that just fine.

    Given its proximity to good neighborhoods, it is natural to expect that St. Clair would have improved over time. A more interesting question would be: did the ROW project hasten the improvement of St. Clair, or delay it?

  22. Andrew,

    I’m not suggesting that you need to build a right of way to get rid of dollar stores. I’d say the revitalization of StCW began about a decade ago, and has been moving along reasonably steadily ever since. But the problem with the neglected state of the public realm is that it discouraged pedestrian activity and street life. For some time, it’s been really unpleasant to sit at outdoor patios along there because the crumbling street kicks up so much dust. And in that setting, I think you attract highly transient businesses. The ROW did take time to complete, but the post-construction activity will make up for lost time because StCW is now a much more pleasant, pedestrian-scale environment than the very wide arterial it once was. A standard re-paving job would have dealt with the dust but not the scale.


  23. So John, why don’t you provide the information I asked for? How much rent and property tax does Spacing pay, and where on the capping schedule is it?

    You might find that Spacing might be ‘smoked out’ from rentrification itself. That or Margaret will have to tolerate a decrease in the value of her building. Hmmm…. maybe we could see some nice lofts going in there.

  24. These libertarian blowhards usually annoy me but she’s dead right about excessive regulation. Never mind business, it’s become annoying enough just being a private citizen using a public park in Toronto.

    Food carts just as an obvious illustration – if Portland OR can have thai food carts and people aren’t dropping dead in the streets there’s no reason at all we can’t. In spite of the proven fact that it can be safe, we’re still stuck with hot dogs and a tiny bit of bland, council-approved biryani.

  25. Glen: no offence, but I sort of doubt John has any clue was Spacing pays in rent. He’s a writer.

  26. You can ask us about our rent but we won’t tell you since its none of your business. But the last thing that is hurting us is small business taxes.

  27. OK Matthew, I don’t want you to share any state secrets. I know that you have a small office so, perhaps, the effects would be negligible. For other types of commercial tenants, like book stores, it is a huge issue.

    Lets look at the Dark Horse downstairs. Assuming 2000 sq. st. at a CVA of $250 per sq. ft. If taxed at current levels that would amount to over $19,000 per year.

  28. So would you care to share just what place in the capping schedule your building is at?

  29. Well Matthew it is on your site that once of your columnist raised the issue. Using anecdotal evidence, opinion and dubious measurement tools (TTC ridership), while ignoring city, Stats-Can and other data to rebut a point made with actual hard data, John (and Spacing) should be held to account.

    You, and he, could provide information on your own circumstance, yet refuse.

    Since John has set the bar low with regards to evidence, perhaps he would like to comment if he is happy that the following examples were also ‘smoked out’………

    Stephanie Burnett, who operates
    a 1,500 square foot antique store
    on Dundas Street, with a 2004 commercial
    tax bill of more than
    $13,000.00. “We will be closing the
    store by the end of this year,” says
    Ms. Burnett. “My partner and I have
    been subsidizing the taxes from our
    employment income, and we can’t
    continue to do so. Unfortunately we
    have six permanent part-time a nominal reduction. Many of those
    people were locked into extraordinary
    high levels of tax on modest
    properties with no possibility of
    John Wakulat, President of the
    TABIA, asks “Where is the fairness?
    It’s a constant acceleration of tax
    increases on small business while at
    the same time confiscating reductions
    which should follow assessment
    decreases. The Province has
    failed to address this fundamental
    employees, five students and one
    senior who will also lose out.”
    Ms. Burnett is only one of many.
    Angelo and Judy Ciniello have
    received an $11,000.00 tax bill on
    their Lakeshore Boulevard hairdressing
    salon assessed at
    $262,000.00. Beverley Don and her
    husband run a 1,000 square-foot
    art store near Yonge and Lawrence.
    “Our CVA cap is over $13,000.00,”
    says Ms. Don. “We couldn’t continue
    to operate the store at that level
    of taxation.”

  30. Hey Glen,

    Can you send me your tax return from last year? I’d like to analyze it for my own curiosity. Or how about your SIN number?

    You sound and look like an jackass demanding that the magazine reveal their taxes. Its just plain rude. And somehow you justify it because the writer of this post wrote about small biz taxes? C’mon! Mr Lorinc did not write about Spacing’s taxes or challenges; he addressed it as a “city as a whole” issue.

    Stop trying to make this an issue about Spacing, and focus on the topic at hand: does TO tax it’s small businesses too much. Otherwise, you sound like petty even if you know the topic through-and-through.

  31. Frank,

    I am not trying to make this an issue about Spacing, other than pointing out the poor analysis done by John. I sought the information from John, or Matthew, simply because I know that the building Spacing is located in had a very old assessment. As such it will not felt the full impact of Toronto’s tax policies and would serve as a good example of a real and impending problem. As does the Dukes Cycle example that I have on my blog. Property taxes were $15,000 per year. Uncapped they would be about $90,000. If you had ever been to Dukes, you would know that $90,000 is an absurd amount to pay. Because the building was destroyed, the cap has been removed. Today, they empty lot pays more in taxes than the old building. Duke’s is never going to return to the old location.