Business Federation Demands Compensation for Small Businesses Affected by Construction Projects
Canadian businesses impacted by city construction should be compensated, according to the Canadian Federation of Independent Business (CFIB).
The CFIB, representing over 97,000 small and medium-sized businesses across Canada, sent an open letter to mayors and councilors on June 6, urging local governments to consider implementing construction mitigation programs similar to those in Montreal and Calgary.
“These programs play a crucial role in supporting local economies and helping small businesses endure disruptions caused by construction projects.”
Loeppky and Yoo referenced a CFIB report indicating that 41 percent of small businesses encountered disruption from municipal construction between 2012 and 2017. Out of those, 65,000 businesses had to borrow money, relocate, or close due to revenue losses.
They highlighted that the issue was escalating, with 72 percent of businesses reporting disruptions from construction projects in the past five years.
The disruptions have impacted sales and brought about noise, dust, and debris in the affected areas, they added.
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“Challenges with courier deliveries and accessibility for customers and staff due to limited parking have also disrupted operations,” the letter stated.
The letter revealed that Canadian businesses have suffered a 22 percent revenue loss over the past five years and had to shell out about $53,000 per business for expenses related to construction disruptions like property damage, cleaning, increased insurance premiums, and temporary relocation costs.
“Frequently, roads remain under construction and storefronts inaccessible well beyond scheduled completion dates, prolonging the disruption for small businesses,” the letter added, suggesting that city governments should incentivize early project completion and penalize delays.
Sixty-eight percent of small businesses believe they should be compensated when construction impacts their operations, according to Loeppky and Yoo.
Mitigation Measures Suggested
The letter called for municipalities to establish construction mitigation programs akin to Montreal, which offers financial compensation to affected businesses.
Loeppky and Yoo highlighted that Quebec City operates a similar program, where businesses can claim up to $30,000 per year if they can demonstrate significant sales losses.
The authors suggested that municipalities could offer “tax holidays” instead of direct compensation to businesses impacted by construction projects.
“If direct compensation is not feasible, municipalities should consider providing tax breaks (i.e., temporarily waiving property taxes for affected businesses),” they recommended, noting that property taxes can be detrimental for small businesses when sales are low as the tax is not profit-dependent.
“Even businesses experiencing significant revenue drops due to public infrastructure projects are still required to pay property taxes,” they added.
Communication Challenges
In addition to revenue loss concerns, the authors raised issues about communication regarding construction projects. They noted that 32 percent of businesses did not receive advance notice before work began, and 26 percent received four weeks’ notice or less.
The letter also expressed worries about how businesses were informed about construction projects, with only 24 percent receiving official government notifications and 39 percent hearing directly from the construction team. The remaining businesses learned through street signs, local media, social media, or word of mouth.
“Municipalities should aim for improved planning and communication with local businesses prior to initiating construction projects,” they concluded.
