Member News

IPTI | Update on U.S. & EU Property Tax Issues: August 2021

The EACC, in partnership with the International Property Tax Institute (IPTI), wants to keep its members up to date with the latest developments in property taxes in the USA and Europe. IPTI has put together below a selection of articles from IPTI Xtracts; more articles can be found on its website (www.ipti.org).

UNITED STATES

New York: Pandemic could cut assessed property values by 10%

The pandemic slammed New York City’s retail, office and hotel sectors, a hit that may mean a sharp drop in property taxes collected next year.

The tentative tax assessment for 2022 shows assessed values of those commercial properties fell 9.6 percent year over year, according to a report in Barclays. And it showed the total market value of those properties fell even more dramatically, nearly 16 percent, according to the report, “The Empire State of Real Estate.” Hotels fell the most, followed by retail properties then office.

The report’s authors were “not overly concerned about the prospects of New York City, but a lasting downturn in commercial and multi-unit residential real estate could pressure its economy for years to come,” they wrote. While the housing market has steadily improved since February, the rental market is still suffering. In June, Manhattan’s apartment vacancy rate was 6.7 percent, up from 3.67 percent last year, according to Douglas Elliman. The number did fall from 7.6 percent in May, signalling an improvement. Still, Covid’s impact on apartment vacancies and the office market’s slow comeback, could depress property values and drive down collections over the next several years, the report noted.

Property taxes account for 31 percent of the city’s annual revenue, and commercial and multifamily properties are the largest contributors to that slice. And they now have the most uncertainty, particularly multifamily and office buildings. That could lead to lasting declines in their assessed value, it noted. The city determines taxable property value through net operating income, which dips when occupancy levels do.

Only 62 percent of employees are projected to return to offices by September, and it’s unclear the amount of space that longer-term hybrid work models will require. Office vacancies, in turn, are expected to peak at over 14 percent in 2023, according to CoStar data cited in the report.

Newer buildings and those redesigned for a post-Covid world will likely be in greater demand, but older Class B buildings are the biggest contributors to the tax roll. Occupancy levels at those properties could drop by up to 20 percent, sinking net operating incomes by as much as 26 percent, the report found.

Overall, multifamily vacancy rates are 10 to 15 percent higher than pre-pandemic levels, which could mean a drop in market value of about 13 to 18 percent, according to the report. Barclays used Stuyvesant Town and Peter Cooper Village apartment complexes as an example. Combined, the massive developments saw net cash flow slip by 33 percent last year and occupancy drop 15 percentage points to 79 percent during that period.

The encouraging news is vacancy rates across property types are falling or nearing their highs, according to the report. Rent levels for multifamily properties are also close to what they were before the pandemic. Meanwhile, some office buildings receiving tax abatements are expected to burn through the benefit in the next few years, eventually boosting the tax roll. An example: The payment in lieu of taxes program benefiting the Durst Organization’s One Bryant Park expires in 2029.

And though never a popular choice, the city could always hike taxes, the report noted. While smaller property owners have pushed back on rising tax rates, the city’s commercial and residential property tax rates are far below average, it said.

Pennsylvania: Philadelphia Suffers Big Uniformity Loss in Commonwealth Court Tax Ruling

The Pennsylvania Commonwealth Court (in Duffield House, L.P. v. City of Philadelphia) unanimously held that the City’s reassessment of only commercial real estate (not residential real estate) in 2018 violated the Uniformity Clause of the Pennsylvania Constitution and that the City must refund real estate taxes to the commercial property owners who appealed their assessments.

The City is required to assess all properties in the City each year at the fair market value of each property. Effective for 2014, the City completed its first countywide reassessments in a very long time. In 2017, the City announced that it had better information to establish the value of commercial properties than it had in 2013 and began reassessing commercial and industrial properties in the City for 2018. The City did not reassess residential properties for 2018.

In Duffield House, a group of commercial property owners challenged their 2018 assessments, arguing that the City violated the Uniformity Clause of the Pennsylvania constitution by reassessing only commercial properties. The trial court found that the City deliberately targeted only commercial properties for the 2018 reassessment while not reviewing the value of other properties. The court agreed with the plaintiffs that this selective reassessment of commercial properties was unconstitutional, effectively ruling that the City could not ignore the law in order to maximize tax revenue.

The trial court also found that paying refunds to the affected property owners–estimated by the City to be approximately $48 million before taking into account interest and any use and occupancy tax refunds–was the appropriate remedy, notwithstanding the burden such refunds would impose on the City. Because of this anticipated burden, the trial court allowed the City two years to pay the refund claims to allow time to adjust its finances. The Commonwealth Court first rejected the City’s assertion that the evidence showed commercial properties in the City to be disproportionally underassessed prior to 2018. The court stated that, in fact, the City’s own evidence indicated that residential properties were more likely to be underassessed.

Notwithstanding that evidence, the City announced publicly that it was targeting only commercial properties in the 2018 reassessment. The Commonwealth Court agreed with the trial court that this decision was unconstitutional, finding that “[t]here is no lawful basis on which the City may choose to selectively reassess a certain sub-class of properties at current market value, while not similarly reassessing other sub-classes of properties in a given tax year. By singling out Taxpayers’ properties for reassessment based solely on their commercial nature, the City engaged in disparate treatment of sub-classes of properties within a taxing district.” Thus, the City’s decision to reassess commercial properties was unconstitutional.

Turning to the remedy, the Commonwealth Court noted that the appropriateness of refunds depends on whether the case involves a “facial” or an “as-applied” constitutional challenge. A facial challenge is a challenge to a statute or ordinance in which the plaintiff alleges that the law is de jure unconstitutional and therefore void. In an as-applied challenge, the plaintiff alleges that a particular application of a law or a particular practice is unconstitutional.

In the case of a facial challenge to a practice, Pennsylvania courts frequently have determined that refunds are not appropriate because the court’s decision is the first clear statement that the law itself is unconstitutional and the taxing authorities could presume the constitutionality of a law. Though, importantly, many of these decisions also imply that it would be unfair to force a taxing authority to repay funds it may already have budgeted or spent relying on a law or practice it believed constitutional.

But, in the case of an as-applied challenge, courts are more likely to order refunds, presumably because the taxing authority could have or should have known that its actions were unconstitutional. The Commonwealth Court in Duffield House held that the challenge by the commercial property owners to the 2018 reassessment was an as-applied challenge and that refunding the taxes to those owners who appealed their 2018 reassessments is the only suitable remedy, even if such refunds will place a financial burden on the City. The Commonwealth Court noted that the trial court’s decision to allow the City two years to pay the refunds allowed sufficient time for the City to plan for payment of the refunds to mitigate the harm to its budget.

The Commonwealth Court did overturn a procedural decision of the trial court in which the trial court dismissed the plaintiff’s administrative appeals as moot in light of its order to pay the refunds. The Commonwealth Court held that the trial court lacked jurisdiction with respect to the administrative appeals and that only the City Board of Revision of Taxes can dismiss the appeals, whether upon request by the property owners or sua sponte.

The City likely will appeal the Commonwealth Court’s order, both on the Uniformity Clause issue and as to whether refunds are the appropriate remedy. So, the fight is not necessarily over. But the Commonwealth Court’s decision shows that courts are willing to force the City to follow the law as written, even when the City argues that its practices are designed to raise revenue for the City’s budget. We will continue to monitor this case and related developments.

[The Uniformity Clause requires that “[a]ll taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws” – i.e., all taxes must be imposed uniformly and without discrimination.]

Missouri: Board of Equalization assessed commercial property values

The Cole County Board of Equalization on Thursday upheld the values of commercial properties whose assessments had been challenged for 2021. Board of Equalization members include the three Cole County commissioners; two representatives from Jefferson City government staff if the property is in the city limits; and two at-large positions, which require someone familiar with real estate, building construction, the banking industry or land title business.

Cole County Clerk Steve Korsmeyer chairs the board, but he and Assessor Chris Estes are not voting members.

If dissatisfied with the board’s decision, a property owner can appeal to the State Tax Commission and, thereafter, the circuit court. Among the commercial property owners making appeals were those owning hotels and big-box stores.

“We started seeing the big-box store appeals in 2008, arguing that because their facility was built just to serve their needs, the property value should be lower as the building could be used to serve no other purpose,” Estes said. Assessor’s Office officials said the assessments on the stores and hotels were based on the value of the land on which the buildings sit.

The assessments upheld included Lowe’s on Missouri Boulevard, which the Assessor’s Office valued at $9 million while the company believed the property value was $5.4 million. Kohl’s on Stoneridge Parkway had an assessor’s value of $6.7 million while the company valued the property at $6 million. Neither company had representatives at Thursday’s proceedings.

For Fairfield Inn on West Truman Boulevard, the BOE agreed with the Assessor’s Office the value of the property was $2.83 million, not the $2 million the hotel owners thought it should be. No one representing the hotel came to Thursday’s proceedings, and no supporting material for the owners was presented. The assessor’s value of $9.7 million was also upheld for Capitol Plaza Hotel on West McCarty Street, whose owners believed the value was $6 million. And the BOE agreed with the assessor the Courtyard by Marriott on Bolivar Street, which opened in December, has a property value of $9.175 million. No one appeared representing either hotel.

Another commercial property the BOE upheld the assessor’s value on was Texas Roadhouse on South Ten Mile Drive. It was noted in their paperwork, the company talked about lost revenues due to the COVID-19 pandemic, but it was for the Midwest in general and not specific as to what may have occurred at the Jefferson City property. The board upheld the assessor’s value of $1.8 million compared to the $1.5 million value the owners believed the property was worth.

The BOE also approved some stipulation values of property. This occurred after officials from the Assessor’s Office lowered their values after meetings with property owners. One of those occurred on an office building in the 900 block of Wildwood Drive, which the assessor valued at $1.5 million while the property owner valued it at $800,000. The stipulated values the BOE approved was $1.3 million.

The BOE also approved three stipulation values on hotels owned by Vivek Puri. The DoubleTree Hotel on Monroe Street had originally been appraised at $6.6 million but was reduced to $4.6 million. The Hampton Inn on Country Club Drive was assessed at $2.9 million but was reduced to just more than $2 million. And the Comfort Suites, next door to Hampton Inn, was assessed at just more than $3 million but reduced to $1.9 million. Puri said this would help after lost revenue suffered during the pandemic.

The board also declined two requests for properties to be considered tax-exempt. The first was for the Goodwill store on South Ten Mile Drive. Goodwill officials asked for the exemption, as they did in 2017, because Goodwill is a 501(c)(3) nonprofit group. They noted the store employs 35 people, many of whom are economically disadvantaged and/or have disabilities. Lawyers representing the Assessor’s Office said the tax-exempt issue needed to be looked at further because Goodwill hasn’t shown no private profit is resulting from its operation, and “its purpose may not be entirely charitable.”

The BOE also denied a tax-exempt request from the Missouri Community Action Network on its new property on Emerald Lane. The network is made up of local, private, nonprofit and public agencies that work to alleviate poverty and empower low-income families. MoCAN officials said since 2010 they had not paid property taxes at their old office on Williams Street. Estes said this had nothing to do with the change in location as it was a change in legal opinion from his lawyers, who believe the organization doesn’t qualify for exemption because it requires members to pay dues, and much of what it offers isn’t meant for the public.

Cole County Eastern District Commissioner Jeff Hoelscher and Western District Commissioner Harry Otto voted for MoCAN to have tax-exempt status, but the remaining voting members of the BOE voted against. This included Presiding Commissioner Sam Bushman, Jefferson City Administrator Steve Crowell, Jefferson City Finance Director Margie Mueller, Dana Wildhaber representing the real estate industry, and Ken Otke representing the building construction industry.

The BOE did approve a request for tax-exempt status for multiple properties owned by Capital Region Medical Center. The hospital’s attorney, Joe Bednar, said CRMC has been exempt since 1952 because it is a not-for-profit entity and doesn’t turn away anyone regarding their ability to pay.

Estes apologized that Bednar and other members of the CRMC leadership team had to come to the BOE. Estes said he advised them to file the appeal because the review of CRMC’s application did not get completed.

“My normal legal counsel could not work on this matter because of a conflict, and I had other attorneys who started to review the case but never finished it,” Estes said. “I’d ask the BOE to go ahead and send this on to the State Tax Commission so we can get a proper review done and the commission make a decision.”

“Basically what you are saying is our arguments are uncontested by you and it’s your responsibility as the assessor,” Bednar told Estes. “You don’t have an argument against us. You’re waiting for a lawyer to tell you if you were right or wrong, and I think it’s inappropriate of county government and the Board of Equalization.”

The BOE then voted to approve CRMC’s request for tax exemption on real and personal property at 1125 Madison St., where hospital-based clinics and offices are located, and at 1500 Southwest Blvd., where Capital Family Care Medical Clinic is located. The BOE also approved personal property tax exemptions at Capital Region Clinic located in the 3700 block of West Truman Boulevard, 1700 block of Christy Drive, 900 block of Eastland Drive, 3300 block of West Edgewood Drive, 1000 block of Madison Street and 400 block of East High Street.

Because the BOE found CRMC should be given an exemption, the assessor has no right to appeal to the State Tax Commission. The Assessor’s Office recently concluded 45 informal hearings with residential property owners regarding 2021 assessments, Estes said. “There’s no statutory provision for doing these, but we want to know if there is a problem and certify values that can save both sides from going through an appeal,” he said. “Ninety-five percent of the time our values are being upheld by the BOE or the State Tax Commission if they are taken to those entities.”

Estes said his office sends notices only for increases, not if there was a decrease in value or if the assessed value stayed the same. Notices were sent for 1,303 of 39,408 parcels in Cole County.

Illinois: Assessor hiked values for commercial properties but review board erased gains, data show

The Cook County assessor significantly hiked values of commercial properties in nine south and southwest suburban townships last year, a change that might have substantially lessened the property tax burden for homeowners. However, the Cook County Board of Review wiped out nearly all of the increases, which resulted in huge tax reductions for many businesses, according to newly released data from the assessor’s office.

The data support the view that Assessor Fritz Kaegi faces powerful real estate tax appeal attorneys and other political forces in his efforts to reform Cook County’s grossly unfair and logic-defying method of calculating property values. “This office has been organized to deliver favors to a small handful of winners at the expense of the rest of us,” Kaegi said at his 2018 inauguration. “It’s an approach that is an out-of-date relic of urban machine patronage politics, completely idiosyncratic to Cook County. No other place is like this.”

The assessor’s office created a website that allows the public to compare 2020 values determined by the assessor’s office to revised values set by the Board of Review. The dashboard also shows the most valuable properties in each township. The site is cookcountyassessor.com/township-av-2020. I reviewed data for nine south and southwest suburban townships and found astonishing differences in values set by the assessor and Board of Review. The board cut values by nearly 50% in many cases.

The data also show how homeowners in the south and southwest suburbs bear a much greater share of the property tax burden to fund schools and other services compared to northern and western suburbs due to a relative lack of commercial and industrial businesses in the region. Countywide, homeowners bear 58% of the tax burden while owners of non-residential properties pay 42%. However, the residential share of the property tax burden by township is 80% in Lemont, 75% in Palos, 73% in Orland, 71% in Bremen, 67% in Rich, 65% in Bloom, 63% in Worth, 57% in Thornton and 54% in Calumet.

Representatives of the assessor’s office said the goal of last year’s triennial reassessment of south and southwest suburban townships was to accurately reflect market values of commercial properties that had been subjectively determined for years.

In Orland Township, for instance, the assessor’s office set the total assessed value of non-residential properties at $466 million in 2020, a 36% jump from the $341 million figure set by the Board of Review in 2019. When the Board of Review completed its handling of property tax appeals in 2020, however, the total plunged to $340 million, or $1 million less than in 2019. In Rich Township, the assessor hiked non-residential assessed values by 55%, to $240 million in 2020 compared to $154 million by the Board of Review in 2019. The Board of Review in 2020 wiped out most of the gains and set total values at $177 million.

In Thornton Township, the assessor determined non-residential assessed values were $486 million in 2020, a 40% spike from the $346 million figure the Board of Review set in 2019. The board set the total 2020 value at $373 million. Similarly, in Worth Township, the assessor determined non-residential properties had an assessed value of $684 million in 2020, up 41% from the $483 million set by Board of Review in 2019. But the board erased most of the gains and set total values at $525 million in 2020.

Other townships experienced similar reversals, though total values were less. In Palos Township, the assessor set 2020 assessed valuations at $194 million, up 35% from the $143 million set by the Board or Review in 2019. In 2020, the Board of Review reduced the assessor’s valuations to $154 million. In Bremen Township the assessor increased valuations of non-residential properties by 37% to $275 million in 2020, up from $200 million set by the Board of Review for 2019. But the Board of Review in 2020 set assessed valuations at $216 million.

Commercial values shot up a whopping 48% last year in Bloom Township, but only temporarily. The assessor determined the total value of non-residential properties in Bloom was $220 million in 2020, up from the Board of Review’s determination of $148 million in 2019. The board set 2020 valuations at $170 million. In Lemont Township, the assessor set total valuations of non-residential properties at $81 million in 2020, a 32% spike from the Board of Review’s figure of $61 million for 2019. The board arrived at a figure of $69 million for 2020, a 13% increase from 2019.

In Calumet Township, the assessor raised valuations of non-residential properties 32% to $49 million in 2020 from the Board of Review’s $37 million for 2019. The board set values at $39 million for 2020, a 5% increase from the previous year. The Board of Review has defended its work, assessor’s office representatives said, by saying it conducts detailed examinations of tax appeal requests on an individual basis, whereas the assessor must determine valuations for more than 1.8 million parcels countywide.

“The board has always been an avenue for taxpayers to contest an assessment made by the county assessor that they believed incorrect or unjust,” according to the Board of Review website. Shopping malls, retirement communities and apartment complexes are among the most valuable commercial properties in each township, data showed.

Maine: Bangor’s largest commercial properties lose millions of dollars in value

Some of Bangor’s largest commercial properties have lost millions of dollars in taxable property value following a year in which the retail and hospitality industries were hard hit during the COVID-19 pandemic.

The city’s most valuable commercial property, Hollywood Casino, has dropped in value by $6 million from a year ago. Bangor now pegs the casino’s value at $69 million, according to the city’s recently finalized tax assessment records for the fiscal year that started July 1.

Another of the city’s large commercial properties, the Bangor Mall, saw its property value decline by about $5 million in the past year, to $15.5 million from $20.5 million, marking the latest year in which the long-struggling mall has seen its property value decline.

Those drops in assessed value will translate into lower tax bills for some of the city’s largest property taxpayers. The owners of the Bangor Mall will pay about $345,000 in property taxes, a drop of more than $125,000 since last year. Hollywood Casino will pay about $1.5 million, or $200,000 less than it did last year.

Several of Bangor’s largest retailers, especially those in the Stillwater Avenue area, saw noteworthy declines in their property values as well. Walmart on Stillwater declined by about $925,000 to $16.1 million, the value of Lowe’s on Springer Drive fell by $400,000 to $11.5 million, Target on Longview Drive saw its property value decline by $275,000 to $9.4 million, and the assessed value of Home Depot on Stillwater fell by $100,000 to $5.9 million.

The lower property values for the casino, mall and large retailers show how the pandemic’s effects on businesses in the Bangor area are catching up with municipal tax bills. The city’s retailers and hospitality businesses saw major declines in revenue last year as COVID-19 restrictions forced some to close temporarily and others to reduce their capacity, and the virus curtailed travel among tourists and business people. Altogether, those drops in business translated into a $30 million reduction in commercial property value across the city, Bangor Assessor Phil Drew said in June.

At the same time, a booming housing market resulted in residential properties adding $70 million in aggregate value, leading homeowners to assume a greater share of the city’s property tax burden.

But there are signs the pandemic’s economic downturn among Bangor retailers was only temporary. Sales tax collections in the Bangor area were higher in May 2021 than they were for the same, pre-pandemic period in 2019, according to Maine Revenue Services. However, lodging and restaurant sales still hadn’t recovered to pre-pandemic levels.

May — the month Gov. Janet Mills lifted businesses’ capacity limits and indoor mask requirements for vaccinated customers — is the latest month for which state sales tax data are available.

At Hollywood Casino, the facility still hasn’t returned to running the same number of slot machines and table games as it did before the pandemic, but revenues this spring eclipsed 2019 levels, according to data from Maine’s Gambling Control Unit.

Between April and July of this year, the casino recorded $1 million more in revenue than it did in the same period in 2019.

The city assessor’s office valued all of the property in Bangor at $2.55 billion for the new fiscal year, up from $2.48 billion a year ago. Property owners will owe a total of about $57 million based on the new tax rate of $22.30 per $1,000 of property value, which is a drop from last year’s tax rate of $23.20.

California: Despite Pandemic, LA County Real Estate Prices Rise for 11th Consecutive Year

L.A.’s already pricey real estate market is getting pricier. Los Angeles County’s 2021 Assessment Roll, which looks at all taxable property in the county as of Jan. 1, grew by $62.9 billion to $1.76 trillion — that’s the 11th consecutive annual increase.

“We were all a little bit pleasantly startled to find out that the Assessment Roll, despite the pandemic, would grow during a pandemic-induced recession,” L.A. County Assessor Jeff Prang said.

Real property sales added $44.9 billion to the roll, while a Prop. 13 mandated consumer price index adjustment added $16.4 billion, and new construction added $8.8 billion.

The total evaluation of the roll amounts to $17 billion in property tax dollars. The money, Prang said, will be used for public education, first responders, public health and other services.

“It’s a positive, forward movement, which means that local government and schools will have growth in property tax revenues which will ensure jobs and services and things people rely on during a pandemic,” Prang said.

Not all measures grew during the most recent period, though. There was a reduction of $5.5 billion in business personal property, a category that includes machinery, boats and aircraft.

“That’s largely because a lot of restaurants paying property taxes on their cooking equipment were exempt,” Prang said. “Since it was not being used, they were being granted a reduction in assessed value.”

Prang said some asset types, like hospitality, suffered, while “residential properties went through the roof.”

He said the assessed value of single-family homes increased an average of 22%.

UCLA Ziman Center Director Stuart Gabriel said he has seen an increase in desire for homes, especially in suburban areas.

“With the pandemic and post-pandemic, there’s been a remarkable evolution in what we call within metro area or intra metropolitan locational preferences,” he said. “A rough way of characterizing this is that the suburbs were out of favor pre-pandemic and came in favor post-pandemic.”

“We’ve seen very significant upward movement in demand,” he added. John Loper, an associate professor at USC’s Price School of Public Policy, said that trend is also bearing out among renters. “If you look at rents, the suburban areas are doing much better in the rental markets than the urban areas,” he said.

Loper added that during the Covid-19 pandemic, more millennials decided to purchase homes as well.

Besides residential, Prang said, industrial assets also fared well.

“Another area which benefited was warehouse, industrial space with a lot of companies moving to telework and to a mail-based operation, they needed warehousing space in order to process the shipment of goods,” he said.

Meanwhile the value of refineries decreased as fewer people were driving.

Prang said that so far this year, things have remained “relatively stable” as far as home sales go, but there is some uncertainty still on the commercial side, especially with the new delta variant of the coronavirus.

“We’re going to need a little bit more time before we can forecast what will happen in the next year,” Prang said. “While things seem to be moving at a relatively optimistic direction at this point, there’s so much uncertainty, and the residential market is overheated.”

He does, however, expect to see an increase in commercial businesses filing decline-in-value applications.

Prang is also proactively looking at properties like hotels to see if they have declined in value and will consider offering some tax relief if they have.

EUROPE

United Kingdom: More high street stores close as retail recovery stutters

The end of lockdown has come too late to prevent fresh store closures on Britain’s high streets as businesses count the cost of 18 months of pandemic disruption, the latest update on consumer spending has shown.

Despite a boost to activity after the lifting of restrictions, the trade body for the sector, the British Retail Consortium, said the pace of recovery was slowing and more town centre sites were falling vacant.

The BRC said reform of business rates was vital to ensure investment in bricks-and-mortar retailing amid signs of a permanent shift towards online shopping during the Covid-19 crisis.

Its monthly retail sales monitor showed annual sales growth of 6.4% in July, well down on the three-month average of 14.7%.

Helen Dickinson, the BRC’s chief executive, said: “July continued to see strong sales, although growth has started to slow. The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations.”

Dickinson added that online sales remained strong, with the BRC figures showing a digital penetration rate of just under 50% for non-food items, up from 30% two years ago.

“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment,” the BRC chief executive said.

“Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital retail offering. The government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels.

“Retailers want to play their part in building back a better future for local communities, and government must give them the tools to do so.”

Separate figures from the credit card company Barclaycard showed shops may have suffered from consumers spending more of their money on going to the cinema, theatre and sporting events.

Barclaycard said spending on its cards was 11.6% higher in July than in the same month two years ago as people took advantage of their “newfound freedom”. Entertainment experienced its first growth since the pandemic arrived in the UK in early 2020.

Raheel Ahmed, Barclaycard’s head of consumer products, said: “July’s major sports fixtures and the heatwave kept the nation in good spirits, providing more reasons to celebrate together, and giving the entertainment industry its long-awaited boost back into growth.

“While some sectors took a small step back as the post-lockdown ‘honeymoon’ period cooled, July was a positive month overall. However, with inflation expected to rise, it will be interesting to see how this impacts consumer spending behaviour over the coming months.”

The retail specialists Springboard said high street footfall continued to grow in the first week of August, rising by 1.4%.

United Kingdom: Business rates relief cut to 66% as BRC and KBB retailers question a ‘broken’ system

Retailers around the UK will have to pay a third of their business rates bill after the Government reduced its relief scheme in England from 100% to 66%.

The British Retail Consortium welcomed the fact that there would be some continuing help for struggling retailers with business rates bills, but added that it regarded the system as “intrinsically broken”.

BRC chief executive Helen Dickinson (pictured) said: “While continued business rates relief is welcome, the simple fact is that the system is intrinsically broken. This limited relief will not go far enough to support those retailers that were shuttered for months during lockdowns and are now starting to trade their way back.”

Dickinson added: “The Government must now stand by its business rates review commitment to reduce the burden rates place on businesses and ensure that the system reflects current market conditions, not outdated valuations from 2015. The Government must ensure there are no further delays to the outcome of the fundamental review and put in place bridging relief until we move to a more sensible system which takes account of market realities.”

Figures suggest that some two million premises took advantage of the business rates relief scheme, saving the companies involved around £14 billion. Many smaller KBB retailers are, in any case, eligible for 100% business rates relief anyway.

We polled our kbbreview100 think tank of retailers nationwide to ask what they thought about the development. Two-thirds of respondents said they had taken advantage of the rates relief scheme. None said they felt the change to 66% would adversely affect their businesses going forward.

Trevor Scott, chief executive of RFK in Rugby, said: “This scheme was one of many instigated during the pandemic to help businesses to survive. It was very helpful, as it kept cash in the business that, certainly in the early days, was sorely needed. Realistically, for our industry at least, that time has passed, so we are happy to restart paying in line with the changes to the scheme.”

Richard Reynolds, chairman of CP Hart, suggested that surging customer demand should make paying the rates bill a little easier: “Of course, any reduction in support will put pressure on cash flow ¬ but the lifting of lockdowns and surge in customer demand should make further support unnecessary.”

Ian Coghill, a director of Riddle and Coghill in Edinburgh, was grateful for the help, but disparaging about what he believes he gets for his rates money: “Any assistance was helpful, as we were forced to close as an industry for a considerable time and are still being restricted by the current shortages of goods that the various governments have created due to the pandemic. Add to that the ludicrous road management schemes now making town centres even less attractive to visit and I don’t know what we are actually getting of value by paying rates to start with. You have to pay for parking and you can’t put a sign up without planning permission. Business rates aren’t value, they’re extortion.”

Darren Taylor, managing director of Searle and Taylor in Winchester, was also unimpressed with the iniquities of the rates system. He said: “The high street is in constant battle with online retailers. These online-only businesses rarely pay business rates. If they do, it’s at a much lower rate, as the set ‘rateable value’ will be lower on an out-of-town warehouse than on a high street.”

One KBB studio owner who preferred to remain anonymous commented: “We took full advantage of the business rates relief – and rightly so, given that it was the Government that prevented us from trading, causing us huge financial challenges as a result. The residual trade restrictions continue to have serious implications for our ability to trade and service the pent-up demand. In my opinion, the Government should have absolutely zero call on any business taxes for as long as they put obstacles in our way to free and open trade.”

Federation of Small Business national chair Mike Cherry echoed the BRC’s sentiments on business rates: “For too long the business rates system has been outdated and regressive, and the ongoing pandemic has only highlighted the need for serious reform in the months ahead. But over the past few months, many small firms have benefited from the retail, hospitality and leisure relief which has helped to ensure businesses don’t go under and jobs are saved.”

Authors:

  • Paul SandersonPresident | psanderson[at]ipti.org
  • Jerry GradChief Executive Officer | jgrad[at]ipti.org
  • Carlos ResendesDirector | cresendes[at]ipti.org

Compliments of the International Property Tax Institute – a member of the EACCNY.