It’s in the Bag: A Tax Class for Culture Hubs

You’ve surely heard of 401 Richmond? The building at 401 Richmond Street West at the corner of Spadina Avenue in downtown Toronto has been making news for a while now — and not in a good way.

An illustration of the Macdonald Manufacturing Company, a large industrial buildingA historical etching of the Macdonald Manufacturing Company

401 Richmond is a designated structure — it’s an old factory that goes back to about 1900. Originally home to the Macdonald Manufacturing Company, the first maker of lithography on tinware in Canada, it was later taken over by the Continental Can Company of Canada. In 1994, threatened with demolition, 401 Richmond was purchased by Margie Zeidler and its restoration and renewal began.

Today, the building has been transformed into what is often called a creative hub, a haven for arts and culture groups. Its 200,000 square feet house an eclectic tenant base that reflects the immense variety of artistic practices and entrepreneurial endeavours taking place in the city core. 401 Richmond is home to art galleries and artist-run centres, fashion designers, film makers, jewellers, architects, animators, graphic artists, and much more.

The “much more” at 401 Richmond includes a number of charitable organizations — which, by the way, will soon count Architectural Conservancy Ontario among them.[1]

An image of a red brick building on a busy street at night, 401 Richmond401 Richmond today

401 Richmond is often cited as an exemplar for Jane Jacobs’ idea, expressed in her famous line: “Old ideas can sometimes use new buildings.  New ideas must use old buildings.” Because “new ideas”, or those that generate them, often can’t afford to pay market rates, the 401 Richmond model subsidizes them with below-market rents.

But what happens when big-city development pressures greatly increase property values, resulting in soaring property assessments and taxes?  The 401 Richmonds, and the artists and creative groups inside them, are put at risk.

Where new property assessments reflect the potential value of a new condo, completely ignoring the current use, and taxes on the property jump accordingly, something will have to give. As columnist Murray Whyte put it in the Toronto Star:

Under the current tax regime, building owners who weren’t maximizing profits through sky-high rents or redevelopment had a gun to their heads. They were being taxed for that virtual building anyway, so why not sell and let someone build it? What that always means is an old building sacrificed for new, and eclectic use supplanted by homogenizing forces of market rates.[2]

The warning signs in Toronto were not new but things came to a head with the very public plight of the revered 401 Richmond. The building, which had been experiencing tax increases of about one percent per year, saw its taxes balloon by 90 percent between 2012 and 2017, from $446,689 to $846,211. Its future looked grim.

The city belatedly took action. Led by Councillor Joe Cressy, who has been in the forefront on the issue, city council passed the following two-part motion in January 2017:

1.  City Council request the Government of Ontario to work with municipalities to examine property assessment for listed and designated heritage properties, including tools that would support the conservation of heritage properties and Municipal Property Assessment Corporation property-assessment tools and processes.

2.  City Council request the Government of Ontario to work with municipalities to explore opportunities to support non-profit arts and culture organizations and incubators, including property assessment tools and changes to the Ontario Culture Strategy to support the continued vibrancy of the sector. (emphasis added)

The province looked into it and responded last September.  The government would be more than happy, it said, to work with Toronto on addressing the creative hubs issue. (On the first part of the motion dealing with heritage properties broadly … apparently not so much.)

The vehicle for tackling the issue would be a new tax subclass for arts/culture hubs in both the commercial and industrial tax classes.  The catchy name for this is the Creative Co-Location Facilities Subclass.

City staff initially proposed a 30 percent reduction in taxes for properties affected.  But, last Monday, February 12, on a motion by Councillor Cressy, Toronto city council approved a 50 percent tax reduction for culture hubs that have five or more “creative enterprise” tenants and meet other criteria.[3] For qualifying properties, the class will apply to their 2018 tax bill.

About 20 Toronto facilities — almost all of which are also heritage properties — will qualify for the tax relief. A long time coming but very good news for 401 Richmond, Artscape sites like Wychwood Barns, and others like them!

Now the ball passes to the province to put the new subclass in place. This can be done by regulation so it should happen pretty quickly. As to whether the new measure will be available to other municipalities, based on experience, once Toronto has pioneered an approach the province usually lets others in on it too.[4]

But, hey, what about other heritage properties, ones that aren’t creative co-location facilities?

For next time.

A busy event infront of a building during the day


Note 1: ACO is moving out of its cramped quarters at 10 Adelaide Street East, its long-time home, in March.

Note 2: From “Good news for 401 Richmond — but what took so long?“, Toronto Star, September 26, 2017

Note 3: The criteria for a “qualifying property” are:

a)         Minimum Scale/Physical Space: The property must consist of a physical building (i.e. not a virtual network), with a minimum net rentable area of 10,000 square feet, or a minimum net rentable area of 5,000 square feet, where the property is owned by the City of Toronto or houses more than 40 separate tenants that meet the definition of “Creative Enterprises.”

a)         Multiple Tenants: The property must have a minimum of five (5) distinct, full-time tenants that meet the definition of "Creative Enterprises.”

b)        Concentration of Creative Enterprises: A minimum of 51% of tenants in the building, in relation to the total number of tenants, must be Creative Enterprises. In addition, Creative Enterprise tenants must occupy a minimum of 51% of the property's net rentable area.

c)         Free programming and cultural activities for the public: A Creative Co-location Facility must offer at least twelve cultural programs that are offered free of charge to members of the public over the course of the calendar year, with no less than ten months of the year featuring such programs. Cultural programs are events, educational sessions or activities that relate to areas of activity described under the Framework for Cultural Statistics, which are:

•   film-making workshops or the screening of films or video;

•   authors readings or workshops related to book publishing;

•   presentation of performing or visual arts;

•   interpretation of cultural and natural heritage; and,

•   live music presentation.

Note 4: In announcing the province’s green light for the initiative, Trinity-Spadina MPP Han Dong said he hoped other municipalities would also be interested.

 

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About Dan Schneider

Dan Schneider

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Dan Schneider is a heritage enthusiast, policy wonk, writer and professional heritage consultant. Formerly senior policy advisor with the provincial culture ministry, Dan has much experience with the Ontario Heritage Act and heritage policy issues. A lawyer by training, he was lead policy expert on major changes to the Ontario Heritage Act in 2005 and 2006. His advice is frequently sought on questions related to Ontario's legislative and policy framework for heritage. Based in St. Marys, Ontario, Dan is Principal of Dan Schneider Heritage Consulting. He can be reached at danschneider@live.ca.