Tax holidays needed to reduce burden posed by construction delays

It’s time to start supporting the success and growth of small- and medium-sized businesses by helping to alleviate challenges they face // By Joseph Falzata, Public Policy and Advocacy Intern, Canadian Federation of Independent Business

This past summer, I stopped by my local flower shop to pick a bouquet for my sister’s graduation. When I arrived, the storefront was obscured by caution tape and orange pylons. I assumed the shop was closed for construction and rushed off without any flowers, already practicing my apology speech. It was only later when I learned the construction was only being done on the sidewalk, and the florist had actually been open the whole time.

I’m sure many readers have had similar experiences. Struggling to find parking on construction-ridden streets or opting to dine at a different restaurant to avoid noisy equipment are just two examples of how construction projects push customers away from local shops.

As of 2024, the Canadian Federation of Independent Business (CFIB) discovered that nearly seven in ten small- and medium-sized businesses (SMEs) in Canada have been affected by construction projects over the last five years. On average, each affected business lost 22 per cent of their annual revenue and incurred around $10,000 in additional expenses related to things such as cleaning or repairs.

Small businesses generally do support public construction projects. Vital services like public transit require constant maintenance so they can operate smoothly and bring patrons through the doors of small businesses. But when the rumbling of jackhammers shakes the shelves of local coffee shops and deters customers from coming in for months – or sometimes even years – after the project was supposed to be completed, small businesses deserve compensation for their losses.

Construction mitigation

Direct financial compensation is the most obvious form of construction mitigation that municipalities can use to help small businesses, but it’s not the only option. Municipal leaders must also strive for better communication with small businesses. In 2024, a CFIB survey found that one in three (33%) of SMEs were unaware of construction projects prior to the project’s beginning. Cities should offer a business liaison officer as a dedicated contact for business inquiries and implement a “no surprise rule” to inform businesses before shovels touch the ground.

It would also be suggested that projects also be completed within a strict timeline, as each extra day of construction-based disruptions results in decreased revenue for affected businesses. This could mean using a comprehensive planning approach involving the “dig once” principle to ensure projects are completed once they’ve started. Municipalities could also introduce policies that reward construction contractors for projects completed early and penalize those that run long. Cities could also opt to implement a “tax holiday” which would temporarily waive property taxes for affected businesses. Property taxes are profit-insensitive, so regardless of how well businesses are performing financially, they are still required to pay. A tax holiday could be incredibly useful in lowering the expense burden when sales are low, especially since according to CFIB data, property taxes continuously rank as the top cost constraint for small businesses.

Current projects

There are a small handful of municipalities across Canada that have established comprehensive mitigation plans to financially assist businesses affected by construction. In 2023, the City of Montreal began offering construction mitigation relief to businesses suffering from the collateral effects of public projects. Eligible small businesses were awarded $5,000 if a major infrastructure project was in progress near their establishment. An additional $40,000 in financial assistance was offered to businesses whose revenue decreased by at least five per cent in the previous fiscal year due to public construction projects in their area. Quebec City also offers a similar program, providing up to $30,000 a year in financial relief for a business if they are able to show a significant loss of sales due to construction.

But for small businesses outside Montreal, Quebec City, Levis, and Calgary, relentless construction projects continue to chip away at potential revenues, and no mitigation plan exists to help those impacted.

Such is the case with Toronto’s Eglington Light Rail Transit (LRT), where, after over a decade, the project painfully pushes its thorns in the side of small business along its still-unfinished tracks. Reductions in parking spaces, the relocation of bus stops, and the mess of scaffolding are just some of the ways that the project is redirecting foot traffic away from local businesses.

But as already mentioned, the point isn’t that construction is inherently harmful. Construction is essential, and when projects are completed, they tend to help businesses grow and bring benefits to the local community. However, when dust, debris, and noise pollution push customers away from business doors, governments must step in to financially support small businesses and encourage construction to finish quickly. In this way, business owners can continue to serve their local communities, and no one has to show up at their sister’s graduation empty-handed.