Small businesses need construction mitigation relief now

Toronto, June 6, 2024 – The Canadian Federation of Independent Business (CFIB) issued an open letter to all Mayors and Councillors ahead of the Federation of Canadian Municipalities (FCM) meeting in Calgary this weekend. The letter highlights the need for municipal governments to provide construction mitigation to small businesses in their communities impacted by projects that are disruptive to their operations. The full statement is copied below.

Small business owners can join our fight by signing our construction mitigation petitions available in Ontario and Alberta.

June 6, 2024

Subject: Small businesses need construction mitigation relief now

Dear Mayors and Councillors:

The Canadian Federation of Independent Business (CFIB) is a non-profit, non-partisan organization representing the interests of 97,000 small- and medium-sized businesses across Canada. We are writing you ahead of the upcoming Federation of Canadian Municipalities conference to urge municipal governments to find ways to mitigate the negative impacts of lengthy, disruptive construction projects on local small businesses.

While major infrastructure projects are essential for urban development, they can be highly disruptive to small businesses. CFIB’s report, Paving a Smoother Road, shows that between 2012 and 2017, 41% of Canadian small businesses were disrupted by local construction projects. Of those, 65,000 small businesses were forced to borrow money, relocate, or close.

More recent CFIB data indicates the problem is getting worse as a startling 72% of small businesses across Canada report they have been impacted by disruptions from local construction projects over the last five years. Nearly a third (32%) of the businesses impacted say they were not given any notice prior to the start of construction projects, and 26% were given only four weeks’ notice or less. Furthermore, just a quarter (24%) of small businesses were officially notified by their government, and only 39% received direct communication from the construction project team. The rest were left to find out about upcoming construction through street signs, local media, word of mouth, and social media.

Small business owners report several common issues during local construction projects, from traffic and noise to dust and debris. Their operations are also disrupted by challenges with courier deliveries and accessibility for customers and staff due to limited parking. Often, these disruptions result in significantly decreased sales. In fact, it is estimated that Canadian businesses lost 22% of revenues in the last five years, and had to spend nearly $53,000 per business on additional expenses (e.g., property damage, cleaning, increased insurance premiums, temporary relocation costs, etc.), due to public construction projects. It is therefore not surprising that 68% of small businesses believe they should be financially compensated when a lengthy public construction project significantly affects their operations.

While the concept of construction mitigation is not new, there have been few programs implemented across the country. However, several municipalities are leaders in this area and their programs should serve as models for other municipalities to follow.

The City of Montreal’s construction mitigation program offers direct financial compensation to small businesses. Montreal recently announced that in addition to the up to $40,000 per year already provided, the City will also offer $5,000 grants to businesses with disruptions lasting six months or longer. These grants are available from the start of a project without any requirement to demonstrate revenue losses. Quebec City has a similar program, offering financial relief for major construction disruptions. Businesses can claim up to $30,000 per year if they are able to show a significant loss of sales.

If direct compensation is not feasible, municipalities should consider offering tax holidays (i.e. temporarily waive property taxes for affected businesses). Property taxes can be particularly harmful for small businesses in times of lower sales because they are profit insensitive. Even businesses with significantly decreased revenues due to public infrastructure projects are required to pay them.

Additionally, municipalities should strive for better planning and communication with the local businesses ahead of construction projects. Business liaison officers should be available to inform businesses before a project starts through to completion. Town halls and face-to-face drop-ins would help address changes to street and business access, concerns about movement and parking of heavy equipment, properly notifying businesses about utility and other service disruptions, and responsibly removing equipment and debris.

The City of Calgary recently introduced a construction mitigation pilot providing eligible businesses in two communities with $5,000 to help mitigate the financial impacts of construction on businesses. Additionally, liaisons are also being put in place to ensure better communication with the business communities. While this is a great start, there is still more work to be done to ensure this pilot becomes permanent and is applicable to all parts of the City.

Finally, it is important projects are completed within a strict timeline, with penalties in place for construction work that goes beyond its expected end date. Far too often, roads remain torn up and storefronts inaccessible long past planned completion dates, prolonging the period of disruption for small businesses. Municipalities should award/penalize contractors for the early/late completion of projects.

As you meet in Calgary this week, CFIB recommends municipal leaders look to the examples set by Montreal, Quebec City and Calgary, and consider implementing similar construction mitigation programs to support small businesses. These programs are vital to maintaining the health of our local economies and helping small businesses survive disruptions caused by construction.

Thank you for your attention to this important matter. If you have any questions, or would like to discuss this further, please contact Keyli Loeppky at keykos@cfib.ca.

Sincerely,

Keyli Loeppky
Director, Interprovincial Affairs

SeoRhin Yoo
Senior Policy Analyst