Opinion | The pandemic wiped out almost four decades of business growth in Toronto. City hall’s tax cuts won’t fix that

Toronto city hall has posted some new numbers about the state of the city’s business economy. They’re bad. Real bad. Just a relentless parade of bad numbers.

Let’s start with a big one. According to the newest edition of Toronto city hall’s annual employment survey, this city closed out 2021 with 69,990 business establishments. To find a time when this city had fewer businesses, you must go way, way back. The last time this city was so bereft of business was in 1984.

That’s nearly four decades of business growth wiped out. And remember, in 1984 the city had a much smaller population — we’ve grown by about half a million since then.

Over the last two pandemic years, the city has seen a net decline of 6,570 businesses. The decline of 3,480 in 2020 was the most city hall had ever counted. And 2021 was only barely better, with a further drop of 3,090.

If you want to grasp for silver linings, maybe you could point to the fact that these remaining businesses are employing more people than they did previously. The number of employees per business increased in 2021, up to 20.7 from 19.8 the year before.

But this silver lining isn’t so sterling, I’m afraid. “The increase in the average number of employees demonstrates a greater number of closures among small businesses,” concludes the report.

Which brings us to another sad stat: businesses with nine or less employees represented 95 per cent of the businesses that permanently closed during the pandemic.

OK, enough with the numerical carnage. The conclusion is clear: Toronto businesses have been wrecked. Small businesses especially. So what’s Toronto city hall going to do about it?

The answer, so far, is not enough. Aside from the CaféTO program for on-street patios, which served as a real lifeline for restaurants, the most concrete action taken to date by Mayor John Tory and Toronto council is the implementation of a property tax reduction targeted to small business.

A good idea, but council opted to define small businesses based on criteria including location, the assessed value of the building they operate in, and — for downtown businesses — square footage.

The result is that a bunch of the 29,000 addresses receiving a property tax break of 15 per cent this year seem to stretch the definition of small business. There are addresses, for example, matching payday loan stores, fast food locations and drugstore chains. Many legitimate small businesses, like some located in malls, are left out entirely.

Worse, because Tory and council didn’t want to increase property taxes for homeowners — despite Toronto having some of the lowest residential property taxes in the GTA — the $27 million total cost of the tax reduction targeted to small businesses is being offset by increases for the remaining businesses that don’t fit the city’s criteria.

And the hits keep coming. A report going to Tory’s cabinet-like executive committee this week acknowledges that the city has no way to force landlords to pass on this small business tax reduction to their commercial tenants.

The report says the city is somewhat confident that most — potentially up to 85 per cent — of commercial leases are structured so tenants pay the property taxes directly, so they’d get the reduction. But that still leaves, in the best case, potentially 4,000 eligible businesses who can only watch as their landlords enjoy a tax break.

Not ideal, to say the least.

If city hall wants to get serious about turning around this city’s dire business climate, it needs to get more aggressive at reducing Toronto’s business property taxes overall, even if it means shifting the tax burden to Toronto’s residential class. Enough with trying to pick winners and losers by arbitrarily defining what a small business is.

But it’s not just about taxes. It’s also about bringing people out after two long pandemic years, with street festivals, cultural events and other celebrations that get people spending money at local businesses. It is utterly unconscionable, given the state of the city’s economy, that there is any doubt whether Taste of the Danforth will happen this year. City hall should be moving heaven and earth — and those CaféTO patios, if absolutely necessary — to program a jam-packed summer of events.

Waive permit fees, provide logistical support and ignore the fun-haters who complain about noise and street closures. Do whatever it takes.

With numbers this dire, just hoping for Toronto’s economy to recover is not an option. This city lost decades of business growth in a couple of years. Please, let’s not wait decades to build it back.

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