A prominent local business group is calling on the federal government to keep making payments in lieu of taxes on all of its current properties in the capital’s core for the next 10 years – even on buildings it eventually sells – to help fund efforts to revitalize Ottawa’s downtown.
The Ottawa Board of Trade says a guaranteed revenue stream from the feds would help offset shortfalls in transit revenues since the pandemic and provide additional capital for programs aimed at enticing more people to live downtown such as office-to-residential conversions.
The recommendation is among five “immediate actions” the organization is urging from governments and community groups in a bid to rejuvenate an urban core that has hollowed out since the pandemic.
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Ottawa Board of Trade president and CEO Sueling Ching said federal government employees accounted for more than half of all downtown workers before COVID-19 triggered a massive move to hybrid work that has turned many government office towers into empty shells.
Ching said downtown merchants are suffering now that many civil servants are working remotely. She believes the federal government owes it to businesses to help them adapt to the new reality.
“When they changed their workforce strategy, it had a tremendous impact on the health and vitality of the downtown core,” Ching said. “This city was built for the federal government. I’m not saying it has to go back to the way it was before, but we are saying there is a role and responsibility for them as an anchor employer to work with the city to transition us into the new version of our city core.”
The federal government is exempt from paying property taxes to municipalities. Instead, it makes payments in lieu of taxes, which are based partly on property values.
In 2022, those payments amounted to nearly $120 million for properties the federal government owns in the City of Ottawa.
Earlier this year, the feds said they intend to divest 10 aging office properties in the National Capital Region as part of a long-term plan to “optimize” their real estate portfolio.
Ottawa Mayor Mark Sutcliffe said such a move could have major repercussions for the city.
“That’s going to have an enormous impact on our economy and on city tax revenues and on downtown businesses,” he said in an interview with OBJ on Wednesday.
“We need to know that there is going to be some support from the federal government for that transition. I’m still hopeful that it will turn out to be a great opportunity for the city – that we can reimagine downtown and do some amazing things – but it will take time and we need support during that time from our federal partners.”
The Board of Trade also wants the federal and provincial governments to provide more funding to help OC Transpo cover its operational and capital costs.
With ridership down since the pandemic, the city’s public transit commission is facing a $49.8-million hole in its 2024 budget. That could force OC Transpo to cut back on service, which Ching says would only make traffic congestion worse and discourage people from coming downtown.
“We can’t have a transit system that is barely serving the needs of our current situation,” she told OBJ. “What we want is to have a transit system that is reliable, that builds confidence for people to use it – in this case, to get in and around the core.”
Ching said the Board of Trade is having “ongoing conversations” with local MPs and Treasury Board officials about federal funding for programs such as office-to-residential conversions that could help make up for the loss of office workers.
“We have to re-envision how to make downtown a vibrant community that’s mixed use, not monoculture as it has been,” she said. “Transitioning our downtown core from what it has always been is going to take time and support. We don’t want to be going down the path that we see other, particularly U.S., cities going down.”
Her organization also wants the City of Ottawa to look at additional incentives for developers to turn obsolete office space into apartments or launch new housing projects downtown, including waiving development charges and providing tax breaks through measures such as a downtown Community Improvement Plan.
The city is already taking steps in that direction. Council recently approved a plan to temporarily cut fees that developers pay in lieu of parkland on downtown conversion projects.
Ching said that while that’s a good start, she’d like to see the city sweeten its incentives and eliminate red tape that delays site plan approvals for conversions and other development projects.
Sutcliffe said he’s willing to look at additional ways of spurring new development in the core.
“We’re open to ideas, but we can’t eliminate fees and eliminate revenues without a full understanding of what all the implications are,” he said.
“If there’s more that we can do, I’m open to having that conversation. Everybody needs to understand – it’s not like we can just wave a magic wand and all of a sudden we’ve got a bunch of residential buildings downtown. It’s challenging and expensive and some buildings are just not suitable for (conversion).”
The Board of Trade’s latest recommendations stemmed from its ongoing work with a prominent think-tank, the Canadian Urban Institute, and organizations such as Ottawa Tourism, the National Capital Commission and Invest Ottawa to develop a strategy for rejuvenating the city’s core.
Last week, those organizations gathered with more than 100 community and business leaders for a one-day summit that produced the latest recommendations.
The Canadian Urban Institute is now working on a report that Ching says will include a comprehensive “action plan” for rejuvenating Ottawa’s downtown. Ching said the report is expected to be completed early next year.
Meanwhile, another local committee examining similar issues, the Downtown Revitalization Task Force, is expected to release its final report soon.
A spokesperson for the committee told OBJ last month the report was in its final draft stages.