property tax, newsletter, Property Tax Matters, Fall 2004, canada

Property Tax Matters, Fall 2004

Hiring internal assessment officials creates controversy in Ontario
De-mergers across Québec raise taxation issues
More time for Calgary property owners to appeal
Regina high-rises boomerang closer to market value
Deloitte expands team in Winnipeg
Developers can minimize property tax exposure in British Columbia

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Hiring internal assessment officials creates controversy in Ontario

A move by municipalities to hire internal assessment officials is raising issues for the Ontario assessment community. The role of the new officials is to oversee valuation work that is prepared by the Municipal Property Assessment Corporation (MPAC) for the tax roll, and, more specifically, to file appeals against roll values determined by MPAC and seek increases to assessed values.

“Traditionally, assessments are appealed by the taxpayer, MPAC defends the values, and municipalities ensure the interests of the overall tax base are taken into account,” says Bob Langlois, senior manager with Deloitte’s Property Tax Services group in Ontario. “With this move, the municipalities are filing appeals and becoming active players in the appeal arena.”

Despite the appeal activity of the new officials, Ontario municipalities do not necessarily have the authority to file appeals. “Municipalities are required under provincial legislation to pass municipal bylaws providing them with the expressed and written authority to file appeals,” says Bob. “On a number of occasions, internal assessment officials have acted without this legislative authority and have seen their appeals dismissed.”

Deloitte is currently representing a client where the municipality is asking for a 90% increase in the assessed value. Deloitte is seeking to have the municipality’s claim dismissed on grounds that when the appeal was filed, the municipality had not yet granted itself proper authority by way of a written bylaw. The municipality has since passed a retroactive bylaw granting itself the proper authority.

“Ironically, in the presence of the capping legislation, there is no direct connection between the proposed increased assessment and the tax burden,” says Bob. “The property is currently in a capped position and the proposed increase in assessment does not have an economic impact in the short term.”

Bob compares the scenario to a runaway freight train. “By hiring these officials to file appeals, the tax collector itself is tying up the resources of MPAC, the taxpayer, and internal municipal resources,” says Bob. “No one gets an economic benefit, and the process operates to the economic detriment of one party – the taxpayer.”

Bob suggests the move by municipalities to hire internal assessment experts may be a result of their lack of confidence in MPAC or a heightened awareness of the problems and complexities associated with their main revenue source.

For more information, contact Bob Langlois at (416) 601-6150.

New process empowers municipalities in Ontario
A change is being made to the process for signing the Minutes of Settlement in the province of Ontario. The new policy changes the order of the required signatures from Appellant, MPAC and Municipality to Appellant, Municipality and MPAC.

The Minutes of Settlement is the written document that details the negotiated agreement reached in an appeal. The three parties sign the Minutes to show they are in agreement that the document reflects their understanding of the outcome.

“Usually the third signature (that of the Municipality) is more of a rubber stamp,” says Bob. “By switching the order, the municipality has more of an opportunity to influence the process and interrupt the flow and agreement that has been reached by negotiation with MPAC. The change suggests a lack of confidence that MPAC is acting in the best interest of the municipality and further adds to an already complex process.”

De-mergers across Québec raise taxation issues

It will be one more year before some property owners in the newly merged city of Longueuil and those in the newly de-merged municipalities see a new assessment roll. The new triennial roll previously expected to take effect on January 1, 2004 has again been delayed and is expected for January 2006.

“The fact that there is no change in the assessment does not mean that the status quo applies to the property taxes,” says Roxane Stanners, senior manager with Deloitte's Property Tax Services in Québec. “Studies released by the Municipal Affairs Department predict significant variations in residents’ property tax bills.’’

Impact of de-merger on property taxes

Formerly part of Longueuil	Variation in property taxes
Saint-Bruno	29.3%
Boucherville	11.4 %
Saint-Lambert	11 %
Brossard	-8.3 %

Formerly part of Montréal
Baie-d’Urfé	25.7 %
Mont-Royal	18 %
Dorval	9.6 %
Hampstead	-1.2 %

Roxane says that postponing the reassessments is not the only consequence of the move to de-merge. “There are costs associated with de-merging that will likely get passed on to property owners.”

Some of those costs include the transition committees that are in place in each affected municipality and the cost of reorganizing the delivery of services and activities. Similar costs were incurred just a few years ago when transition committees were in place to orchestrate the mergers.

Property owners in other municipalities will, however, have their properties re-assessed according to the regular triennial cycle. Some of the municipalities setting new rolls for January 1, 2005 include:
Belœil
Boisbriand
Bromont
Lévis
Mirabel
Rimouski
Saint-Jérome
Salaberry-de Valleyfield
Terrebonne

For more information, contact Roxane Stanners at (514) 393-5146.

More time for Calgary property owners to appeal

Calgary property owners may soon have more time to appeal their assessments to the Assessment Review Board. A recent decision by the Court of Queen’s Bench may motivate The City of Calgary to change its procedures and extend the 30-day appeal period to allow for delivery of the assessment notices from the assessment department. This could mean an additional seven days for property owners residing in Alberta and 14 days for property owners residing outside of the province to file assessment complaints.

“The interpretation of the Municipal Government Act by the Court of Queen’s Bench clearly states the appeal period begins once the assessment notice is received from The City of Calgary and not the day the notice is issued, as is the present policy,” says Bob Brazzell, with the Calgary office of Deloitte.

“Based on this interpretation of the Municipal Government Act and the Interpretation Act, Calgary property owners are allowed seven days from the assessment notice mailing date before the clock starts on the 30-day appeal period.”

Deloitte agents have successfully argued this point to the second-level Municipal Government Board in several appeals. However, it is the verdict of Court of Queen’s Bench on a judicial review of a decision by the Municipal Government Board that may finally lead to changes to the City’s policy.

The submissions in The City of Calgary v. Lewis Chow and the Municipal Government Board were heard by the Court of Queen’s Bench in June 2003. Deloitte intervened in the hearing to defend the decisions of the Municipal Government Board. The decision of the Court of Queen’s Bench released in February 2004 upheld the decision of the Municipal Government Board, and, in effect, confirmed the Board’s interpretation of the relevant legislation as providing seven additional days for the filing of assessment complaints.

“We intervened in the Court of Queen’s Bench proceedings to defend an interpretation of the assessment legislation that was hard won at the Municipal Government Board,” says Bob. “We were pleased with the court’s ruling. It shows that the courts remain sympathetic to taxpayers and their rights of appeal.”

It is anticipated that in 2005 the complaint filing period will be extended by The City of Calgary from 30 to 37 days.

For more information, contact Bob Brazzell at (403) 503-1338.

Regina high-rises boomerang closer to market value

After seven years of ongoing dispute, the Court of Appeal recently put an end to the confusion about a fair market adjustment factor (MAF) for high-rise office buildings in downtown Regina. In a recent test case, The City of Regina v. Harvard Developments Ltd. et al, the Court of Appeal upheld the Regina Board of Revision’s use of a 0.30 MAF for the 1998 taxation year.

The present debate over Regina’s 1998 office building MAF started when the assessor replaced the MAF of 0.60, already under appeal, with the MAF of 0.85. This increased the assessed value of 23 downtown high-rise properties by 40%. Similar buildings in the neighbourhood, including other high-rise properties, were valued with a 0.30 MAF. “The property owners couldn’t understand why they would have values that were nearly three times higher than their neighbours,” says Archie Fieldgate, Saskatchewan manager with Deloitte's Property Tax Services in Regina.

The 23 owners appealed this unprecedented increase to the Board of Revision, which agreed and recalculated the MAF at 0.30 according to the Saskatchewan Assessment Manual and the applicable legislation. The assessor felt the Board of Revision had not followed the Manual and appealed to the Assessment Appeals Committee of the Saskatchewan Municipal Board, which, agreeing in part with the assessor, recalculated the MAF at 0.60. Both the assessor and the 23 appellants were dissatisfied and appealed further to the Court of Appeal.

“In this test case, the Court of Appeal specifically emphasizes that the assessed value of any building must reflect a fair and just proportion to the assessed value of other similar buildings,” says Archie. “Further, it also discusses the relative weight appropriate for controversial sales. This landmark decision is the first to outline the importance of these principles and how they might be applied.”

In Saskatchewan, all assessments must follow the complex Manual and comply with all applicable legislation. MAF calculation is one of the final steps in arriving at an assessed value and changes in the MAF directly affect building assessments.

"The rules are so complex that their application often gives rise to legitimate disputes; the process is virtually impossible for most normal businesses to understand," says Cameron Hall, Deloitte's Property Tax Services practice leader for Saskatchewan. Cameron confirms that these 23 cases are part of a larger group of over 225 office property assessment appeals filed from 1998 to 2004 that Deloitte presently represents in Regina.

For more information, contact Archie Fieldgate at (306) 565-5259 or Cameron Hall at (403) 503-1317.

Developers can minimize property tax exposure in British Columbia

Property taxes are a major fixed cost for development sites. Jim Davis, manager with Deloitte's Property Tax Services group in Vancouver, suggests developers consider the following strategies and implications of developing land to minimize their exposure to property taxes:

1. Consider the tax rates of the municipality when you are choosing your location.
“Property tax rates can vary substantially across the province,” says Jim. “A site assessed at $1 million and classified as business/other will pay close to $22,000 if located in Surrey and $29,000 if located in Vancouver. In Coquitlam, the tax bill would be over $31,400.”

2. Try to have a site placed in the residential class, rather than business/other.
“Next to the overall assessment, the classification of the development site will have the greatest impact on the tax bill,” says Jim. “In Vancouver, for example, a developer owning a development site and not obtaining the beneficial tax rate will pay over four and a half times more in property tax per year as a holding cost.”

Developers looking for assistance minimizing exposure to property taxes can work with Deloitte professionals. The Deloitte's Property Tax Services group in Vancouver offers the following services to developers:

Estimating property taxes through all stages of development from site selection to finished product
Offering strategies to capitalize on key dates BC Assessment uses in their calculations
Concluding whether the overall assessed value is fair and equitable
Ensuring that the property is assessed at the lowest possible tax rate

Jim suggests developers start considering their opportunities today. “For the upcoming 2005 property assessment year, there are specific dates during the next several months that will have a major impact on your tax bill. Failing to take advantage of these dates can lead to a property tax bill five times higher.”

For more information, contact Jim Davis at (604) 640-3009.

Deloitte expands team in Winnipeg

The addition of the Property Tax Services group of Colliers Pratt McGarry to Deloitte’s Winnipeg office has added new size and depth to its commercial and institutional services.

“Our office is now the largest property tax services provider in Manitoba,” says Doug Betker, Manager with Deloitte Property Tax Services in Winnipeg. “We’re thrilled David Sanders and Kerry Reimer have joined our team to help our new clients make a seamless transition to Deloitte. They add over 18 years of experience and knowledge of the Winnipeg market to our office.”

For the past ten years, David has served as director of Real Estate Advisory Services for Colliers Pratt McGarry, developing and leading the real estate firm’s property tax services. He has conducted successful assessment appeals for all types of commercial and institutional properties.

Kerry has eight years of experience in the property tax field as a senior associate in the Real Estate Advisory Services group of Colliers Pratt McGarry. He was responsible for marketing, administration and business development for the group, and assisted in the preparation of property and business assessment appeals at the Board of Revision and the Municipal Board.

“We want to welcome our new clients to Deloitte,” says Doug. “We look forward to working together to ensure that they are paying only their fair share of property and business taxes.”

Clients new to Deloitte are encouraged to contact Doug Betker at (204) 944-3557 for assistance or for more information about Deloitte’s services.

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