The council could lose more than £200,000 in business rate contributions from Debenhams, according to a property consultants.
Colliers International says that as part of the retailer’s insolvency deal, it has roughly halved the business rates it pays for many of its stores for the coming year.
A spokesman for Colliers said this means the local authority would lose £151,029 on the company’s Monks Cross branch and a further £93,961 on the Davygate shop.
And they said it sets an “uneasy precedent” for councils with other struggling retailers in their area.
Public purse compromised
John Webber, from Colliers, claimed the business rates system itself is to blame for shops getting into financial trouble. He added:
In the long run, if by using a company voluntary arrangement a retailer is let off the hook of some of its business rates liabilities and this practice is followed by other struggling retailers, we will see the public purse massively compromised.
Local authorities will not have the funds they have budgeted for to run local services, which we already know are tightly stretched.
And on the business side we may see the emergence of a two-tier high street with those stores who have been run efficiently and have embraced the changing retail market place paying much higher rents and rates, than those like Debenhams who have not followed such a prudent path.
The well run will be subsidising the poorly run.
Last month Debenhams announced it would be closing 22 stores – neither York branch was on the list. Any cut in rates would be from this year and not permanent.
A report for a council meeting in March says how, as part of the 2019/20 revenue budget, £33m of retained business rates represents 26 per cent of the authority’s income.
The report revealed that supermarkets and large stores, including several at Vangarde, are the biggest contributors to rates in the city. Tesco at Clifton Moor had the highest charge – £1.55 million.
In the city centre, the stores with the biggest rates bills are Marks and Spencer, Primark and Boots. The report adds that hotels including The Grand and The Principal are “significant rates payers”.
The meeting heard that some empty shops in the city do pay business rates while others, like the former BHS on Coney Street, do not. Councillors were told that one of the ways landlords can avoid paying rates on an empty property is by removing the toilets to claim it is not fit for use.
The council said it is unable to comment as there has been no confirmation on rates yet. Debenhams has been approached for a comment.