IMA Insti-News | Spring 2022

INSTI-NEWS SPRING 2022

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IMA | INSTI-NEWS

IN THIS ISSUE PAGE

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STAY CONNECTED

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PRESIDENT’S REPORT Caterina Chiarandini, M.I.M.A.

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CASE LAW Karey Lunau, BA LL.B LL.M, CS

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CANADA: REBATES TO TAXES Mark Giavedoni & Pamela Green

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MPAC PRODUCTS AND SERVICE ENHANCEMENTS John Watling, M.I.M.A., MRICS & Peter Dim, MRICS

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FAST TRACK DESIGNATION PROGRAM

IMA ANNOUNCEMENTS

MEMBER ELEVATIONS

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BRACING FOR THE HITS Lori Culbert & Dan Fumano

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2021-22 IMA SPONSORS

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SPRING 2022 ISSUE

Insti-News is published by the Institute of Municipal Assessors with assistance from the Communications Services Committee. Chaired by: Gina Stone, A.I.M.A. Any opinions or recommendations expressed in this issue are those of the contributors and do not necessarily reflect the views of the IMA.

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Institute of Municipal Assessors

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PRESIDENT’S REPORT We are back amid another very busy season for the Institute!

Spring has sprung with the IMA’s 2021/2022 fiscal year ending on March 31, 2022. Despite ongoing pandemic-related challenges, the IMA has performed tremendously well while continuing to pursue our 2020/2023 Strategic Plan. Much credit to our Executive Director, Tyler Callaghan, for his responsible fiscal management and to the many decisions of the IMA’s Board of Directors throughout the year.

Also ending March 31 was Cycle 4 of the IMA’s Continuing Professional Development Program. I am pleased to report the usual high compliance rates from our members, including completion of the mandatory ethics refresher course, “Navigating Ethical Dilemmas.” Again, a big thanks to Tyler Callaghan, as well as the IMA’s highly supportive office staff and the CPD Committee, for all their hard work in seeing CPD Cycle 4 to a successful close.

The very next day, April 1, marked the start of the IMA’s newly launched Fast Track Designation Program. There has been a lot of buzz and excitement around the launch of this program, and to date the FTDP has been an incredible success. We saw very high attendance at the introductory webinar and info session, which resulted in registration numbers well exceeding expectations in this first year. The program is extremely comprehensive and resource intensive, due in large part to the IMA’s commitment to the growth and success of our members. On behalf of the IMA Executive and Board of Directors, I wish all the first-year cohorts the best of luck in their completion of the program.

As a result of the FTDP’s launch, a large focus of the coming year will be on the education front. At the core of the Institute is our mandate to support the education and professional growth of our members. This includes maintaining a large index of quality courses and educational offerings to meet the needs of an ever-evolving industry. To this end, the Institute is looking into acquiring a new full-time staff member in a dedicated adult education role, as well as reintroducing the Education Committee.

Earlier this year, the IMA Executive faced the difficult decision of further postponing our in-person conference due to ongoing pandemic concerns and provincial lockdowns. While we continue to position for possible in-person events later in the year, we also persist in directing resources towards virtual offerings. One event in particular is the upcoming virtual AGM in June.

In addition to the usual IMA business, some additional content is planned, including the unveiling of the IMA’s position statement on diversity and inclusion. This is a very important and meaningful moment for the Institute, and we welcome all members to join in for the special unveiling. I look forward to seeing you all there! Until then, be well and stay safe, everyone.

Caterina Chiarandini, M.I.M.A. IMA President

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INSTITUTE WELCOMES INAUGURAL COHORT TO THE FAST TRACK DESIGNATION PROGRAM

On April 1, 2022, the IMA welcomed the inaugural cohort into its new Fast Track Designation Program (FTDP). Through FTDP, qualifying candidates can earn their A.I.M.A. designation or M.I.M.A. accreditation in as little as seven or nine months, respectively.

Over the next six months, this year’s 64 candidates will be preparing to write their comprehensive exam in early October.

Equipped with self-paced study materials, interactive discussion forums, a dedicated team of instructors, and a series of course webinars, the rigorous preparation schedule requires focus and discipline.

The cohort welcomed 14 brand-new members to the Institute. Forty-nine candidates are pursuing their M.I.M.A. accreditation, with the remaining 15 seeking their A.I.M.A. designation. Details for the 2023 FTDP cohort will be released over the summer months. Learn more about the FTDP here.

Best of luck to all 2022 FTDP candidates! We look forward to celebrating your success.

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CASE LAW Karey Lunau, BA LL.B LL.M, CS Summary of Magnum Opus Developments (Victoria Park) Corporation v Municipal Property Assessment Corporation, Region 09, 2022 CanLII 1610

In January, the ARB released its decision in Magnum Opus Developments (Victoria Park) Corporation v Municipal Property Assessment Corporation, Region 09.¹ In this case, the ARB was asked to determine whether two apartment complexes should be classified multi-residential (MT) or new multi-residential (NT). The decision, which turned on whether extensively renovated units could be considered “built or converted from a nonresidential use,” provides helpful guidance in interpreting the requirements of the NT class.

4. (1) The multi-residential property class consists of the following:

1. Land used for residential purposes that has seven or more self-contained units ….

10 (2) The new multi-residential property class consists of land described in paragraph 1 of subsection 4 (1) whose units have been built, or converted from a non-residential use, pursuant to a building permit issued,

(a) on or after April 20, 2017 …² The owner had purchased these adjacent properties with the intention of demolishing the existing 84 units contained in 7 low-rise maisonette-style buildings and replacing them with 661 condominium units.³ To get a building permit for the construction of the new buildings, the owner first had to obtain a demolition permit for the existing structures.⁴ The evidence at the hearing was that obtaining a demolition permit for residential rental units in Toronto is time consuming and expensive. After purchasing the property, the owner elected not to proceed with the redevelopment.

Instead, it decided to renovate the existing structures. The owner required a building permit for the renovations.

The existing apartments were vacated, gutted and significantly renovated. The number and type of units did not change but the finishes, windows, doors, roof, and electrical and HAVC systems were replaced, and the units were enlarged (by incorporating a central hallway into the units).

Before:

After:

The owner argued that the renovated units should be classified NT because • the renovations to the units were so extensive that they amounted to “built” units, and • during construction, the buildings were vacant land,⁵ which is a non-residential use, therefore the units were “converted from a non-residential use.”

MPAC argued that the units should remain classified MT because • the purpose of the NT class is to promote the construction of new residential rental units yet there were no new units dded to the rental market as a result of the renovations to the units, and • the owner elected to alter an existing building rather than demolish and rebuild: the owner should not be permitted to say one thing for building permit purposes and another for property tax purposes.

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The Board agreed with MPAC that the properties should remain in the MT class.

The Board held that the purpose of the NT class is to encourage the addition of new rental residential housing but noted that no new rental units were added to the properties.

In determining how to interpret the phrase “units have been built” in the definition of the NT class, the Board relied on Yonge Street Hotels Ltd⁶, which considered whether a significant retrofit of an hotel amounted to an ‘erection’ of a building for purposes of the Commercial Concentration Tax Act⁷, and Trivest Developments Ltd⁸, which considered whether the alterations to an apartment building amounted to a demolition. In both cases, the Court of Appeal held that the plain and ordinary meaning of erecting or demolishing a building did not include alterations “no matter how extensive.” Relying on these findings, the ARB held that, had the legislature intended to provide NT tax relief to renovated units, it would have said so.

The ARB also relied on the ‘unambiguous’ building permits that stated the building was undergoing “Additions/Alterations; Apartment Building Interior Alterations.” The description in the building permits was held to be consistent with the owner’s evidence about the changes made to the buildings.

With respect to the owner’s argument that the units were converted from another use the ARB held that “[n]othing indicates that the renovations were to a property that had a non-residential use. As the vacancy itself resulted from the renovations conducted pursuant to the building permits, it cannot be said that there was a conversion to residential use pursuant to those permits …”

The ARB’s decision in Magnum Opus Developments provides us with clear guidelines to apply when determining whether a property qualifies for the NT class: building permit descriptions are determinative so long as the description is supported by the physical changes.

1. 2022 CanLII 1610 (ON ARB) (https://canlii.ca/t/jlsmf) 2. O.Reg.282/98, s.4(1), 10(2).

3. In Magnum Opus Developments v Municipal Property Assessment Corporation, Region 09, 2015 CanLII 52626 (ON ARB), (https://canlii.ca/t/gkv54) the ARB held that the owner’s July 2011 purchase of the properties was the best evidence of their 2012 current value.

4. Building Code Act, 1992, S.O. 1992, c.3, s.8.

5. As defined in section 1 of O.Reg.282/98: “… once a building … has been occupied the land … cannot be vacant land unless the building or structure becomes substantially unusable.”

6. Yonge Street Hotels Ltd. v. Municipal Property Assessment Corp., Region No. 9, 2005 CanLII 14438 (ON CA) (https://canlii.ca/t/1k90t) 7. R.S.O. 1990, c. C.16 (repealed in 2010).

8. Re Trivest Developments Ltd. et al. and City of Toronto, 1986 CanLII 2754 (ON SC), (https://canlii.ca/t/g16dx); aff’d 1986 CanLII 2734 (ON CA) (https://canlii.ca/t/g17p2)

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CANADA: FROM REBATES TO TAXES: THE EVOLUTION OF TAX TREATMENT FOR VACANT PROPERTIES IN ONTARIO Mark Giavedoni, Partner – Certified Specialist (Real Estate Law) – Gowling WLG - Hamilton Pamela Green – Partner – Gowling WLG - Hamilton In Ontario, the system for managing property taxes has undergone major changes in the last three decades. Several of these changes are aimed directly at tax programs regarding vacant properties to ensure that municipal policy objectives are met.

In recent years, we have seen two specific changes. First, to ensure businesses are appropriately taxed and not receiving unintended reductions, many municipalities have removed a longstanding Vacant Unit Rebate Program. Second, in an effort to address concerns over the availability of affordable housing, municipalities are beginning to implement taxes on vacant residential properties.

Below is a review on how taxes and rebates have been and will continue to be used as mechanisms to address municipal objectives regarding vacant properties.

The rise and fall of the vacant unit rebate program Prior to the mid-1990s, property valuation and taxation policies in Ontario were much more opaque than they are now.

The Province administered the property taxation policy and, rather than a predictable valuation procedure, property value assessments reflected the policy objectives of the government.

During this time, businesses were required to pay a separate levy called the Business Occupancy Tax. This tax was assessed against any commercial or industrial entity that occupied a taxable property. Business owners were billed directly and were responsible for paying the levy. The owners of the property had no responsibility for payment or collection of this tax.

In 1998, the introduction of Current Value Assessment ("CVA") changed Ontario's property tax system. Under CVA, assessment values reflect the realizable value that an owner could obtain from selling their property in an arm's length transaction, rather than a value that was reflective of government policy objectives.

Simultaneously, the Provincial government decentralized the administration of property tax policy to municipalities. However, municipalities were still restricted when choosing which policy options they could employ. The Provincial government maintained certain province-wide tax requirements that municipalities were required to include in their policies. For example, the Province required that the portion of property tax that was previously recovered in the form of the Business Occupancy Tax would be rolled into the regular property tax payable on commercial and industrial properties.

This requirement was significant as it shifted the responsibility for paying the Business Occupancy Tax away from business owners and onto property owners. Even if a commercial or industrial business was not actively being used in a business operation, the property owners were still required to pay the Business Occupancy Tax. In order to compensate for this, in 2001, the Province of Ontario introduced the Vacant Unit Rebate Program to owners of vacant commercial and industrial buildings. This program allowed owners of vacant commercial or industrial property to apply to their municipality for a temporary reduction in property tax owed, lasting for as long as the property remained unoccupied.

This policy was intended to replicate the previous practice, where the Business Occupancy Tax would not be paid if there were no active businesses operating on a property. As property owners became used to these new practices, their practices changed as well. In fact, many property owners began to actively manage the assessment and taxation of their properties.

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When the Vacancy Rebate Program was introduced, it was the practice of the Municipal Property Assessment Corporation (MPAC) to set assessment values on the basis that the property was fully occupied. Therefore, the method of rebating or reducing the taxes payable when the property was not fully occupied made sense. However, over the past two decades, this valuation practice has changed.

As property owners began to actively manage the assessment of their properties, it became common for an owner to file an appeal. Through these appeals, multiple property owners across the Province were able to successfully argue that the value of their properties should not be based on the assumption that their properties would be 100% occupied at all times. A growing number of these successful appeals led MPAC to gradually change its valuation practices and to factor in what portion of a property would be vacant on average. As a result, the assessment value of commercial and industrial properties with tenants gradually decreased to reflect what portion of a specific property was normally unoccupied. In other words, property owners were seeing their taxes rebated or reduced without the need to apply for vacancy rebates.

Even though property owners were now having their “base amount” of taxation reduced automatically to reflect occupancy levels, the Province continued to require municipalities to provide the Vacancy Rebate Program. As a result, commercial and industrial property owners could obtain reductions and tax savings for vacancy via two separate reductions: the Vacancy Rebate Program and the now common practice to adjust taxes to reflect average vacancy.

Municipalities brought this anomaly to the attention of the Ministry of Finance. The Ministry of Finance responded by initiating a review of the Vacancy Rebate Program in 2015. The review led to a new legislative framework that increased the flexibility awarded to municipalities in administering property tax schemes. As highlighted in the 2018 Ontario Budget, most municipalities have taken the opportunity to remove the vacant property rebate altogether: In the 2016 Budget, the Province introduced a legislative framework to give municipalities broad flexibility to refine their vacancy rebate and reduction programs. This greater flexibility enables municipalities to tailor these programs to best reflect local circumstances, while considering the interests of local businesses. While municipalities that decided to modify their vacancy programs have implemented a variety of changes, 80 per cent of those municipalities will phase out the municipal component by 2020.¹ Multiple municipalities have chosen to eliminate the rebate, including but not limited to the following:²

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City of Hamilton

The Corporation of the City of London

The Corporation of the City of Brantford

City of Toronto

The Corporation of Haldimand County

The Corporation of the City of Peterborough

The Corporation of the City of Cornwall

Incorporated Village of Hilton Beach

The Corporation of the Town of Prescott

The Corporation of the Town of Espanola

The Corporation of the City of Kawartha Lakes

The Corporation of the County of Prince Edward

The Corporation of the County of Essex

The Corporation of the City of Orillia

The Corporation of the Town of St. Marys

The Corporation of the Town of Gananoque

The Municipal Corporation of the City of Ottawa

City of St. Thomas

The Corporation of the City of Guelph

The Corporation of the Town of Parry Sound

The Corporation of the Town of Thessalon

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For those municipalities that still provide the Vacancy Rebate, generally, a property owner must meet the following criteria to qualify: 1. Pay provincial land tax on land located in a non-municipal area, or pay property tax on land located in a municipal area and their municipality has a vacancy rebate program; and 2. The property/building qualifies for the municipality’s particular vacancy rebate program. The following buildings will likely qualify for a vacancy rebate: a) Entirely vacant buildings - A commercial or industrial building that was entirely unused for at least 90 consecutive days. b) Partially vacant commercial buildings that are unused; clearly delineated or physically separated from the used portions of the building; and either:

i) capable of being leased for immediate occupation, or

ii) not capable of being leased for immediate occupation because it was undergoing or in need of repairs or renovations, was under construction, or was unfit for occupation.

c) Industrial buildings that are unused and clearly delineated or physically separated from the used portions of the building.³ While these criteria generally apply, individual municipalities may have different criteria for their particular rebate program.

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The rise of vacant residential property taxes As commercial property vacancy rebates are being phased out, we are now seeing municipalities turn their attention to a different type of vacancy: vacant residential properties.

In 2017, the provincial government implemented Ontario’s Fair Housing Plan. This plan made changes to the Municipal Act (the Act) to provide interested municipalities with the option to introduce a tax on vacant residential units.⁴ This tax is intended to encourage property owners to sell unoccupied units or rent them out to address concerns about residential units potentially being left vacant by speculators and affecting the availability of affordable housing.

For a municipality to implement a vacant residential unit tax, the Minister of Finance must first pass a regulation designating the municipality as permitted. Once the regulation has been passed, municipalities are enabled to introduce the tax.

Currently, Vancouver is the only municipality in Canada that has an active vacant home tax program. However, with the changes that came in 2017, municipalities in Ontario are now making moves to replicate Vancouver’s program. For example, the City of Toronto has approved a plan to implement a vacant home tax beginning in 2022. The City of Ottawa has also approved the implementation of a vacant home tax beginning 2022. While exact details for the plans are still forthcoming, it appears Toronto and Ottawa both intend to levy a 1% tax for properties that are vacant at least 6 months in a calendar year.

On July 5, 2021, the City of Hamilton followed in the steps of Toronto and Ottawa by voting to approve the drafting of a bylaw addressing the taxation of vacant residential properties. According to a report to Hamilton’s City Council, “The main objective of implementing a Vacant Home Tax (VHT) is to encourage owners to rent out empty properties in order to increase the supply and affordability of housing.”⁵ As with Toronto and Ottawa, specific details about Hamilton’s plans will become available in the coming months.

It is unclear to what extent municipalities will take advantage of their new potential authority to implement such a tax.

However, additional municipalities, such as Mississauga have already expressed interest in implementing a similar program.

As municipalities endeavor to change and implement programs to manage the commercial and residential property markets, it can be difficult to stay up to date. Where property owners may be used to receiving a rebate for the vacancy of their property, this may no longer be the case. For instance, owners of residential properties may soon be facing additional taxes or obligations for failure to maintain occupancy of their properties, and some municipalities have already implemented licensing requirements for vacant properties over a specified duration.

1. 2018 Ontario Budget at p 297.

2. This list is current to the date of the article. See O. Reg. 325/01: Tax Matters - Vacant Unit Rebate for a complete list of municipalities that are now exempt from providing a rebate.

3. See Applying for a Vacancy Rebate, online: MPAC for more details on applying for a vacancy rebate.

4. See Ontario, Municipal Act, 2001, S.O. 2001, c. 25, section IX.1.

5. City of Hamilton, Brian McMullen & Ken Leendertse, Report: Considerations to Implement a Vacant Home Tax in Hamilton (FCS21017(a) / PED21114) (City Wide).

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MEMBER ELEVATIONS AFFILIATE MEMBERS

Anthony Sgro

Independent

Name

Company

Roland Urban

MPAC Mississauga

Michael-Anthony Amiro

MPAC Pickering

Amber Walsh

MPAC Kingston

David Bressi

MPAC Hamilton

Carolynn Waterton

MPAC Owen Sound

Kyle Chapman

MPAC Mississauga

Mary Zubert

City of Waterloo

Alison Clarke

City of Hamilton

Jaret Clugston

MPAC Thunder Bay

Joseph Dingemans

MPAC Ottawa

Amy English

Student

Name

Company

Katherine Flagler

MPAC Peterborough

Tomas Baca

MPAC Toronto

Nicholas Gowing

MPAC Kitchener

Kelly Blakely

MPAC Pickering

Alannah Hamdic

MPAC PIckering

Jennah Carere

City of Brampton

Patricia Harden

MPAC Pickering

Brianna Dignem

MPAC Pickering

Andrew Heipel

MPAC Kitchener

Erin Dillon

MAA St. John’s

Colin Highsted

MAA Gander

Bradley Duce

MPAC Toronto

Jason Holmes

MPAC Windsor

Megan Heron

MPAC Peterborough

Matthew Johnson

Service New Brunswick

Jamie Maletta

MPAC Thunder Bay

Stefan Kerr

MPAC MIssissauga

Terri-Ann McLean

MPAC Muskoka

Andrea Kilpatrick

Service New Brunswick

Andrew Rodgers

City of St. John’s

Christopher Kordos

MPAC Ottawa

Judy Sauder

MPAC Sudbury

Steven Krbavcic

MPAC Barrie

Janice Sooley

MAA Corner Brook

Dave Legge

MPAC London

Matthew Stevens

MPAC Tretonn

James McAdam

MPAC Kitchener

Jaroslaw Wowk

City of Vaughan

Ross McIntosh

MPAC Hamilton MPAC Kitchener

Odgarig (Gary) Zagdsaikhan

MPAC Cornwall

Shaun McLaren Joseph McMillan

City of London

Sadie McQuinn

MPAC Kitchener

Suzanne Miller

MPAC Pickering

M.I.M.A.

Nazli Motiee-Tehrani

Loblaw Companies Ltd.

David Moxam

MPAC Brockville

Name

Company

Robin Muwanga

Government of Canada, Calgary

Cindy Brown

MPAC London

Nathan Nugara

Town of Innisfil

Robyn Ferguson

MNP, Calgary

Jake Parry

EMCO Corporation

Jim Rilling

MPAC Mississauga

Francois Gallant

Service New Brunswick

Shelby Roper

MPAC Barrie

Bryan Gawtrey

MPAC Toronto

Sabrina Savoie

Service New Brunswick

Saffraz Khan

MPAC Toronto

Paul Schmitchen

MPAC Mississauga

Salma Sedigh

MPAC Mississauga

Shurnette Service

Independent

A.I.M.A.

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ONTARIO UPDATE: MPAC PRODUCTS AND SERVICE ENHANCEMENTS At MPAC, continuously improving our products and services is a key priority, and to support property owners’ access and understand their assessment information, we recently enhanced property profiles for business properties and the Property Assessment Notice with new user-friendly features.

As part of our commitment to delivering quality, traceable assessments, MPAC publishes three levels of valuation information: 1.

Methodology Guides: comprehensive guides that explain the appraisal industry standards and methodology MPAC applied.

2. Market Valuation Reports: detailed reports explaining how MPAC applied the methodology to value properties.

3. Property Profiles: detailed property information reflecting the application of the documented methodology and analytics. This information is available self serve through AboutMyProperty™ or through a request.

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John Watling

MRICS, M.I.M.A., Manager, Research & Advisory Services

Peter Dim

MRICS, Senior Appraisal and Market Specialist, Research & Advisory Services

In 2019, MPAC redesigned the residential property profile for better readability, with larger text, easier to read tables, and an improved organization of content. Based on positive feedback from property owners, these changes have now been applied to non-residential profiles, as well as other enhancements based on the valuation approach.

For income business properties, there are now two versions of the property profile available in AboutMyProperty: • •

Detailed Profile: includes all valuation details and is available to the property owner and/or representative through AboutMyProperty using the Access Code on the Property Assessment Notice.

Summary Profile: provides limited valuation details and is intended to fulfill tenant requests and comparable selections.

Tenants can request copies of the summary profile by contacting our Customer Contact Centre.

For cost business properties, we have implemented a number of changes, including: • • •

The reintroduction of the building improvement summary list; The building improvement list is locked to match the improvement list in the Automated Cost System (ACS).

Enhancements to ensure the cost valuation highlights Functional Obsolescence as Excess Capital Cost and Excess Operating Cost.

Following page one of the profile, which displays all basic property information regardless of property type, cost and income profiles now also include valuation summaries.

• •

For income properties, valuation summaries vary based on property type, and can include total property value, tax class partitioning, property level adjustments, land summaries and improvement summaries.

For cost properties, valuation summaries have been added for total property value, land summaries, improvement summaries and yardwork summaries.

These summaries provide a snapshot of all valuation information, with detailed valuation breakdowns in the sections that follow.

Questions? If you have any questions about these new features, please contact Industry@mpac.ca.

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BRACING FOR THE HITS: HOW BIG LANDOWNERS ARE CUTTING THEIR PROPERTY TAXES, AND HOW IT AFFECTS YOUR MUNICIPALITY AND YOU

Lori Culbert

Reporter, Vancouver Sun

Dan Fumano

City Columnist, Vancouver Sun

While many B.C. homeowners were shocked this month by soaring property valuations from B.C. Assessment, the vast majority will not appeal.

But in recent years, owners of large, high-value properties have increasingly hired specialists to appeal property assessments.

When they are successful, local governments are forced to reimburse a portion of their property taxes.

None of this is illegal and the appellants say they want to pay the correct amount but not more.

But this volatility has resulted in municipalities refunding hundreds of thousands, sometimes millions, of dollars in tax revenue.

Municipal officials say they have limited ways to recoup that money, including dipping into reserve funds and boosting taxes for everyone else, including those with much smaller businesses and homes.

The total assessed value of B.C. properties under appeal to B.C.’s Property Assessment Appeal Board more than tripled over the last five years to greater than $100 billion. But different sources disagree on what’s causing the rise, and what it means.

Properties under appeal in B.C. The number of properties appealed and their assessed values have soared in recent years.

Source: Property Assessment Appeal Board • NOTE: Data reflects cases before the Property Appeal Assessment Board, not those handled by B.C. Assessment.

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It is “a massive issue,” says Coquitlam Mayor Richard Stewart, one of several municipal leaders who has demanded the provincial government make changes to this appeal system.

“We’ve seen municipalities having to adapt their budgets enormously in order to allow for the volatility of the taxes,” said Stewart, who has been mayor since 2008.

“We knowthat everybody’s going to have to pay into a pot to get rid of this debt.”

It is hard, though, to get people to understand why they should care about assessment appeals, and how they can directly hit the financial bottom line of every household, he said.

“How do you tell someone that this process has essentially taken money out of their pocket, and put it in the pocket of landowners who own a 50-acre parcel downtown?”

But major property owners and their representatives who spoke with Postmedia insist they are not trying to skirt their tax obligations, and only appeal assessments they believe are incorrect.

Derek Holloway, a retired accredited appraiser with B.C. Assessment, near the Seaspan property in North Vancouver District. PHOTO BY JASON PAYNE /PNG

At issue here is what B.C. Assessment calls the “risk to roll”: Each year, the government agency warns the province’s 162 municipalities about any assessments under appeal, so city halls can prepare for possible reimbursements.

This was a fairly smooth process until about five years ago, when the number of appeals began rising. Over those five year, in a city like Burnaby, property tax reimbursements from successful appeals grew 20-fold.

B.C. Assessment argues the values it places on the province’s two million properties are relatively stable, as less than two per cent of those properties have been appealed annually in recent years. But with surging land values, even a relatively small number of appeals can represent big financial disruptions for municipalities.

Burnaby had to repay $6.4 million in already collected property taxes because of successful appeals of 2020 assessments.

Coquitlam paid out $1.8 million that same year. North Vancouver District has set aside $6.8 million it may have to return to a single land owner, pending the outcome of a lawsuit on an assessment appeal.

‘Never seen these numbers before’ “I’ve never seen these numbers before,” said Noreen Kassam, Burnaby’s chief financial officer. “Never mass amounts like this number of appeals, or this whole concept of making deals (to lower property taxes). That was never an issue for us until just a couple of years ago.”

There is a two-tiered process to appeal the assessments released every year in January. The first step is to lodge a complaint

by Jan. 31 with the Property Assessment Review Panel, which conducts 30-minute hearings, and any agreed-upon changes are made before municipalities set their tax rates, typically in May. But most complex appeals, often involving big, expensive commercial properties, aren’t typically settled at this first stage, so landowners have until April 30 to launch a second challenge before the Property Assessment Appeal Board, which is independent from government.

The number of properties appealed to this second-stage appeal board fluctuated between 3,000 and 4,000 from 2012 to 2017, averaging roughly $20 to $30 billion in assessed value.

But then the numbers started to climb. In 2021, there were 7,100 properties under appeal worth $103 billion, according to figures provided by the appeal board.

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The financial impact has grown so daunting for city halls that, in September, 95 per cent of delegates to the annual Union of B.C. Municipalities convention backed a motion asking the provincial government to review the appeal process, and to improve timing and transparency.

Simmi Sandhu, chair of the appeal board, said far more appeals are being settled at the first review stage, but the appeals that come to her board tend to be larger, higher-value commercial and industrial properties that “have more difficult appraisal issues that need more time to review.”

It is not the appeal board’s role to consider whether the outcome of appeals has any effect on property taxes, she said. Rather, the independent board’s main purpose is to determine whether original assessments were accurate.

Sandhu said she could not comment on why appeals have increased, but noted the appeal board has hired more staff to keep up with the pace. She also insisted that mediated resolutions and rulings by her board are transparent.

An average of 94 per cent of all appeals that come to the board are solved through mediated resolutions involving B.C. Assessment and property owners, a less-time consuming process than holding a hearing and writing a decision, she said.

Overwhelmed by the volume of appeals Some municipal leaders fear, though, that the appeal board, or PAAB, is overwhelmed by the sheer volume of appeals.

A Burnaby city staff report last year said it was “clear the PAAB does not have the necessary resources to meet the increase in appeals. … The growing number of appeals can result in a backlog of complex cases, which in turn could result in the PAAB reaching decisions that it would otherwise not have done so if volumes were not as high.”

The report also raised concerns about some people “appealing a number of properties, being successful on a few and withdrawing the remaining appeals.” When asked about this trend, Kassam said some property owners may be “flooding the system” with appeals, which cost only $30 each.

The appeal board annual report shows half of appeals have been withdrawn in recent years.

Appeals more than quadrupled over five years in Burnaby, and during that time the city’s property tax reimbursements grew from $270,000 in 2016 to $6.4 million in 2020. Appeal numbers started to fall in 2021 and paybacks also went down, although 68 per cent of that year’s appeals remain to be adjudicated.

And a single large appeal can have a big impact.

In 2019, an agent appealed the $197 million assessment of the large Saputo dairy plant on Lougheed Highway, which sold the year before for $209 million. The appeal resulted in the assessed value being lowered by $11 million. That meant a loss of hundreds of thousands of dollars of property taxes, Kassam said.

The overwhelming number of appeals means the city has a hard time keeping track of all the mediated settlements, which do not come with written decisions, said veteran Burnaby Coun. Colleen Jordan.

“People have a right to appeal,” Jordan said. “But it needs to be transparent and it needs to be accountable.”

‘This is about paying what’s correct’ Paul Sullivan, the property tax agent who handled the dairy plant appeal, said that case demonstrates the complexity of these valuations. The adjusted

Burnaby Coun. Colleen Jordan by the Saputo dairy plant in Burnaby. PHOTO BY ARLEN REDEKOP /PNG

assessment more accurately reflected the significant costs of remediating the industrial site for future development, he said.

“This is about paying what’s correct.”

Sullivan, one of Metro Vancouver’s most prominent property tax agents, says several factors are driving the rise in appeals,

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including longer delays in the development process, which increase holding costs for development sites and complicate valuations.

Another reason for the rise in appeals, he said, are the new taxes imposed under the B.C. NDP, including the additional school tax and the speculation and vacancy tax. Many appeals are not only arguing the value of assessments, but the way new taxes are imposed.

He cited the example of a Vancouver property where the owner, the Musqueam Nation, is developing rental housing. The site was hit with an additional school tax of $2.2 million, which is supposed to apply to residential properties assessed at over $3 million.

Sullivan appealed on behalf of the Musqueam and the appeal board ruled in his favour last year, saying applying additional school tax on a rental housing development would be “contrary to the stated objective” of the tax.

He has hundreds of other properties — with a combined assessed value in the billions — under appeals that are contingent on the outcome of the Musqueam case. But those are all on hold, after the B.C. government appealed the appeal board’s ruling on the Musqueam case.

Sullivan’s Vancouver firm, Burgess Cawley Sullivan, was acquired last year by Ryan LLC, a Texas-based tax consulting firm. Ryan’s U.S. operations were the subject of a scathing investigation published this week in USA Today under the

headline: “Firm helps companies get rich with ‘questionable’ tax refunds, tactics that exhaust officials.”

He insisted the story has no relevance to Canadian property taxes and the work his office does in Vancouver.

One criticism in the USA Today story was echoed by sources in B.C.: Ryan’s success with appeals is good for clients who can save millions, but puts upward pressure on everybody else’s taxes.

Sullivan, though, disputed that characterization, saying it is “convenient” for elected officials to shift blame for rising taxes to a small number of large property owners.

“We’re an easy target,” he said. “They would prefer that the pension funds and the developers should pay more than their share … so that the homeowners should all pay less.”

$17 million in property taxes returned B.C. Assessment did not provide someone to be interviewed, but issued a statement that said the most accurate way to understand the impact of appeal decisions on local governments is to examine property tax reimbursements.

City halls repaid an estimated $17 million in property taxes following successful appeals of 2019 assessments, the most recent year provided by the agency, compared to $7 million in 2016. This equates to 0.35 per cent of all taxes collected being returned in 2019, up from 0.17 per cent three years earlier.

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B.C. Assessment says the total number of properties appealed across B.C. over the past two years dropped, from a high of 32,000 in 2019 to 22,000 in 2021, but said it did not have the reimbursement data for those years.

It has become clear that whether tax paybacks also went down over the last two years would depend on the outcome of the large files at the appeal board.

Derek Holloway, a retired accredited appraiser who worked for B.C. Assessment for three decades and handled appeals, predicts this challenging situation will worsen before it gets better. He said his former employer is excellent at assessing house and condo values, but increasingly doesn’t have enough staff or expertise to properly assess more complicated commercial properties or to handle the large number of appeals in recent years.

“Thousands of complicated ICI (industrial, commercial and investment) properties under appeal is crushing B.C. Assessment,” said Holloway, who continues to track the assessment business closely. “It’s getting worse every year.”

The UBCM motion to review this appeal process was put forward by the City of Coquitlam, where appeals grew to 265 in 2020 from 57 in 2016, and almost all involved a professional agent. The 2020 appeals resulted in the city reimbursing $1.8 million in property taxes, mainly to large corporations and developers, said a report by the head of finance, Michelle Hunt.

For example, Anthem Properties, a Vancouver real estate company, received one of the highest reimbursements of nearly $300,000, after appealing the assessments of 19 properties in Coquitlam.

Anthem CEO Eric Carlson said it is easier for B.C. Assessment to evaluate similar houses on the same street, and much harder to value “complicated mixed use” properties.

“Anthem only appeals assessments that it has determined to be materially incorrect,” he said in an email.

In Coquitlam, Anthem has several large developments under construction with various residential and retail uses, which makes assessments challenging, Carlson added.

“It is logical then that the assessments would be incorrect, and that on appeal Anthem would be refunded that portion of taxes paid on incorrectly assessed properties.”

Coquitlam’s loss of revenue from these types of appeals was covered by the city’s reserve fund, but that is not sustainable in the future, Hunt’s report said.

“Coquitlam is among several municipalities who are now struggling to understand how best to manage appeal costs.”

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Stewart, the mayor of Coquitlam, said some appeals are perfectly fair, including those involving homeowners. He also places no blame on the staff of B.C. Assessment or the appeal board, who are trying their best in a system “with enormous challenges.” Nor does he have harsh words for most large property owners or their appeal agents, as they are just trying to save money.

But, he said, the overall system must change.

For example, he argued, large commercial appeals should be settled more quickly and the risk-to-roll predictions should better take into account the likelihood of successful appeals.

“At least it would reduce the potentially enormous impacts of these large-scale appeals, two years, three years later on municipality finances,” Stewart said.

B.C. Assessment is overseen by the Finance Ministry, and the appeal board falls under the Attorney General’s Ministry.

Neither ministry would provide someone to be interviewed about this issue, but instead provided statements.

The Finance Ministry said it is working on a property assessment review that will examine appeals and revenue instability as a result of commercial land owners paying unexpectedly high property taxes. But the challenges related to the overall issue of the high number of appeals will not be addressed, the statement said.

The Attorney General’s Ministry said, despite the volume of appeals, the appeal board has been able to maintain its performance targets: In 2021 it settled nearly all residential appeals by the end of the year, and three-quarters of commercial property appeals.

$6.8 million pay back North Vancouver District is another municipality that has had to dig deep into its reserve funds.

Seaspan appealed the assessments for a large waterfront property for the years 2013 to 2019, when the assessed value grew from $22 million to $222 million. After Seaspan argued, in part, that the land was too polluted for it to be assessed at fair market value, the appeal board substantially lowered its assessed value for each of those years.

B.C. Assessment and the district took this case to B.C. Supreme Court, which ruled the matter should be sent back to the appeal board for “reconsideration.” But Seaspan has now continued this fight in the B.C. Court of Appeal.

Meanwhile, the district has set aside $6.8 million in case it loses and has to reimburse a portion of the company’s property taxes.

“When something like Seaspan comes along for North Vancouver District, they don’t have a huge tax base. And it’s a real hit that they’re taking,” said Holloway, the retired appraiser.

“North Vancouver District, Coquitlam, and Burnaby’s particular experiences are but a sample of what happens when B.C. Assessment’s original assessments, and those that result from the appeal process, create budget instability for local taxing jurisdictions.”

With research by Postmedia librarian Carolyn Soltau

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