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Keeping businesses in business

RMOW, Chamber looking at ways to reduce tax, rent burdens on local businesses

You wouldn’t know it by the summer crowds in the village, but Whistler businesses are still in a tight spot financially. Overall, profits are still down or flat for many business owners, as the tourism industry as a whole is still affected by a sluggish economy, a higher dollar, rising airline costs, terrorism fears, and cutthroat competition between destination markets.

Locally, businesses also have to contend with highway construction, village construction and Whistler’s reputation as an expensive place to visit.

At the same time operating costs are continuing to grow for Whistler businesses, which are already paying similar rents to the most high-profile shopping areas in Vancouver.

With their bottom line shrinking, businesses are looking to the Resort Municipality of Whistler and the Whistler Chamber of Commerce for relief. For their part, the RMOW is currently looking at tax relief options for businesses, as well as the creation of restricted shopping areas similar to staff-restricted housing. The Whistler Chamber of Commerce is putting together a database for businesses and landlords to help them understand their legal obligations and ensure that rents are fair.

For business owners, these changes can’t come quickly enough – they believe that business will get better, they just want to still be in business when it does.

"If the municipality doesn’t do something to help to control rent and taxes, this town will lose its culture, all the little shops and stores that make this place unique. In a few years it’s all going to be big chain stores," said Jenine Bourbonnais, the owner of Evolution, a local bike, skate and snowboard shop.

"The town must have faith in its own authenticity that is derived from its citizens, not its corporate partners. People come to Whistler to witness the eclectic mix of people living an outdoor, activity-rich lifestyle, they do not come to Whistler to see a candy-coated resort mini mall of mega brands set in the mountains.

"I’m just curious to know what the muni’s direction is, what their vision is for the future. We talk about making it sustainable for residents, but I’d like to see them make it sustainable for businesses as well."

Bourbonnais says her operating costs are already approximately $8,000 a month during the summer for her main shop and the repair shop.

At the same time her business has been surrounded by construction projects for more than three years with the conference centre renovation, the renovation at Tapley’s, the renovation of Village Square, and now the renovation to her own building.

Rent is about 60 per cent of her total costs and most of the remaining costs are her "triple net" expenses – property taxes, strata fees, Tourism Whistler fees, insurance, maintenance, etc.

Her taxes are more than $1,000 a month and Tourism Whistler fees are more than $200. All together she estimates that her triple net costs add $20 a square foot to her rent every year. By way of comparison, rents in Function Junction are as low as $13 a square foot.

"That’s a lot of money to pay out each month, and I’d just like to know what I’m getting for it," said Bourbonnais, who notes that her business doesn’t even have running water or sewage. She pays for garbage collection as part of the building’s strata fees.

"There needs to be a lot more communication, the municipality needs to represent businesses in tourism by giving them more information," she added. "We found out about the renovation to (Village Square) and this building just a couple of weeks before the construction started."

Bourbonnais would like to know if the municipality can do anything to cap rent or commercial property tax growth, and if other resorts are going through the same issues.

If the municipality is powerless to regulate rents and taxes, then she says the municipality should at least be able to ensure that businesses and landlords are getting what they pay for and intervene to ensure that nobody is being overcharged.

Businesses should also be able to appeal their tax assessments, she says, if they can open their books and show the municipality that business is down.

In talks with her neighbours, Bourbonnais estimates that businesses are down around 20 per cent this year. As a result she says it’s becoming harder to be competitive with stores in the Lower Mainland and Squamish.

Bourbonnais would also like to have more say in how the resort is marketed. "Is the vision for this place to be lined with boutique stores? Because we’re really a sports resort, not just for B.C. but for the world, and that’s what my shop caters to. People come here to play, not to shop."

Chris Quinlan, the owner of Behind the Grind, says the recent decline in business has been a wake-up call to stores.

"There’s a quote I like from one business owner – ‘we used to sit back and ride the waves and now we actually have to work’," he said.

His last rent increase was in the neighbourhood of 27 per cent he says, but he had enough advance warning to go through his numbers and make that number work.

"That said with another couple of rent increases and this business isn’t going to be viable. You can’t afford a hundred bucks (a square foot) to sell coffee and sandwiches, at least not at the prices my clients can afford."

Quinlan says he has raised prices slightly in the past to compensate for his growing operating costs, but there isn’t too much further that he can go.

"If the resort is serious and decides that it wants long-term local businesses, then it can do it in two ways," said Quinlan. "They can offer rebates to businesses in their taxes, as long as they can make sure that it goes back to the renter and not the landlord, or they can become a partner this thing – buy a building, build something, and make the rents realistic. I’ve been pushing for that for two years. The best thing to do is to increase the supply and create more competition.

"Rent-restricted housing gave the village its life, and rent-restricted commercial spaces will have the same effect."

Although most of his customer base is local, Quinlan says visitors to the resort do seek out independent businesses.

"People are getting sick and tired of going to the big names, they want to go to all the little places that are ‘mountain town’, that are a little bit unique, and they’re just not finding it," he said.

Councillor Nick Davies says the municipality did give local businesses a small break in their taxes this year.

"It’s not what I would call a significant reassessment, but it was significant in that I’ve persuaded council that this is an issue that needs to be looked at… with a view of possibly doing something more aggressive next year," he said. "Sometimes we just have to put the patch in to get people moving in the right direction."

According to Davies, on properties that are assessed the same value by the provincial assessment authority, commercial property owners pay about four times more than residential property owners. At the same time commercial tenants aren’t protected by as many laws or regulations, and they don’t have the same avenues to appeal.

"One of the things we’re talking about at the municipality, and we’re actively thinking about how we might do this, is bringing some commercial property onto the market that is restricted the same way that employee housing is restricted… if we can do that we might be able to force the market downwards," said Davies.

"Are rents overpriced? I’ll agree that it’s very expensive and that the value that some landlords are trying to charge is completely out of sync with the types of revenues that businesses in this resort are able to generate. We have to be concerned about the guests here, we can’t be a rip-off community."

Keeping local businesses is crucial to Whistler because independent owners provide colour, variety and a higher level of service, he adds.

Ian Davis, a member of the Whistler Chamber of Commerce Landlord Tenant Task Force, says the municipality has to be sensitive that the taxes applied to commercial spaces are simply passed on to tenants. Although he would like to see commercial tenants be able to appeal their tax assessments, there would need to be some more incentive for landlords to appeal assessments on their tenant’s behalf.

The Chamber of Commerce is working on an online registry in a partnership with real estate companies "to try and ease the antagonistic relationship that exists between commercial tenants and commercial landlords," said Davis.

The registry would have details about each category of space, information about laws and regulations, and what the rents and triple net expenses are for each space. This will allow landlords and tenants to compare prices in the same buildings and areas, ensuring that everyone is being treated fairly.

Although Davis says it could backfire in some cases if landlords realize that their rents are low for a given area the long-term benefit is that all of the stakeholders will know where they stand.

The fact that most businesses generally sign long-term leases of three years or more with their landlords prevents any kind of reactionary re-pricing, says Davis.

"At the end of the day I think landlords know the value of having their spaces rented, and don’t want to be perceived as overcharging – and knowing that they haven’t set the rent that will only depend on some very optimistic levels of success for the tenant to be able to continue to pay," said Davis.

Don Wensley, a commercial landlord and realtor with spaces in the village and Function Junction, says he has only one vacancy and 43 active leases. He also has a reputation of being a landlord who takes long-term view of the situation.

"I don’t think I’m any more sensitive or generous than other people," said Wensley. "I want to be successful. And I’ve decided that the best way to have my buildings full is at reasonable rents instead of partially full at exorbitant rents."

He estimates that his clients in the village pay anywhere from $9 to $13 a square foot in taxes each year. One 1,200 square foot space pays more than $13,000 a year in taxes. Another 522 square foot space, with an assessed value of approximately $275,000, pays over $5,000 in taxes.

In comparison, his Function Junction clients pay between $2.65 and $3.25 in taxes per square foot.

"By the time (village tenants) pay taxes and rent and strata fees, it is just an enormous burden," said Wensley.

"What’s the cure? I don’t know. If we say reduce commercial (taxes) and increase residential, we’re crazy because residents are also paying a huge tax burden.

"The problem is that the city administrator, the mayor and council, the parks department, the fire department, have practically no concern for the financial welfare of the public. In my opinion they treat the municipal budget as though the taxpayers have an unlimited amount of money available to be squandered at the whim of the municipality."

The municipality, in setting its annual budget, determines what the mil rates on provincial assessments have to be, and not the other way around, which doesn’t give the municipality much incentive to cut their budgets.

Wensley also believes that Whistler is a victim of its own success, as businesses have no choice but to try and recoup some of their rising costs from visitors.

"There are a number of reasons business is a bit slow right now. Many people blame the highway improvements or the economy. However, the cost of recreation, housing, taxes and commercial rents have made Whistler unaffordable for the average family. Our success is killing us."