B.C. Assessment’s job is to assess all properties at “actual value,” which is synonymous with market value. For high-value industrial, commercial and investment properties, however, the assessment system often fails. That ends up squeezing smaller businesses and residential taxpayers to pay more than their fair share.
Although B.C. Assessment has experienced budget pressures over the past 20 years, it does an excellent job each year of assessing the bulk of B.C.’s almost two million properties — the vast majority being single-family homes, condominiums and small commercial/ industrial properties. When doesn’t it do a good job? Often when it assesses complicated industrial, commercial and investment properties, known as ICI.
Large ICI properties sell infrequently and don’t always get registered at Land Titles. Many large transactions can be “share transfers,” or other types of obfuscating ownership changes, that not only hide sale prices, but also allow sale participants to avoid property purchase taxes. Appeal agents often advise clients to ignore B.C. Assessment’s requests for information, including listings, sales, income and other critical information. It’s an offence not to co-operate with B.C. Assessment, but there is no penalty for simply ignoring the agency.
Beyond B.C. Assessment’s weak legislative authority and diminished resources to complete its core function, it also has to manage a significant uptick in appeals. B.C. Assessment faces thousands of complicated, time-consuming ICI appeals every year. Everyone involved — B.C. Assessment, appeal agents and the Property Assessment Appeal Board — knows that this volume of appeals can never be dealt with comprehensively. As many as 50 per cent of appeals are withdrawn by appeal agents each year, their volume having done its magic.
B.C. Assessment staff end up chasing their tails, addressing agents’ random issues, often regardless of merit, and regardless of whether or not an appellant has complied with B.C. Assessment’s ongoing information requests. ICI owners can challenge assessments even when they’ve withheld the necessary information to value the property. They face no penalty for doing so — in the hopes B.C. Assessment will capitulate, which happens often.
Further, the majority of B.C. Assessment’s best lawyers have gone to work for large ICI owners or have left B.C. Assessment due to budget issues.
One ray of light came in a 2010 B.C. Supreme Court decision that instructed the Property Assessment Appeal Board to resolve appeals in a “just and timely manner.” Specifically, it relates to turning over important documentation to both sides in an appeal (2010 BCSC 193). But when assessment staff try to invoke this court case to obtain needed documents, senior B.C. Assessment management often stop them in their tracks, reminding them of the many masters the agency is trying to appease.
Property Assessment Appeal Board stats show very high appeal “resolution” rates, which they attribute to their skills as mediators rather than arbitrators. But in reality, many B.C. Assessment staff just throw their hands up and agree to value the property for a lower amount. Horse trading is common, with an agent offering to withdraw one or more nuisance appeals in exchange for a value reduction on other appeals.
As a result of this ICI appeal volume, “market value” doesn’t appear to be a high priority. With B.C. Assessment and Appeal Board resolution stats paramount, all parties can stay within their ever-restraining budgets — B.C. communities and taxpayers none the wiser.
Are the up to 200 B.C. local governments being well served by this increasingly hobbled ICI system? Simply, no.
Large, under-assessed ICI properties shift their tax burden to smaller, appropriately assessed ICI properties within the same property class. When small ICI owners complain, local governments feel pressured to find creative ways to increase the residential tax rate. And that means homeowners pick up the tab.
Regardless of this situation, there are some simple solutions.
First, if there is no penalty for non-compliance with the Assessment Act, and current appeal board rules are too slack for the thousands of annual appeals, simple changes to the Assessment Act and the board’s rules could fix the problem. Perhaps monetary penalties or the inability to appeal an assessment, or some other such mechanism for non-compliance, would be fairer for all.
Another simple solution lies in guaranteeing B.C. Assessment access to the thousands of independent appraisals completed by other parties for the same property. Why should a property owner get one appraisal for a mortgage, Canada Revenue Agency, a pension or securities commission, etc., while advocating a different value to B.C. Assessment and the appeal board?
Whatever the fix, one is needed. The current costly system is unconscionable and outright cynical. What’s worse, many civic politicians appear to be confused by the process — staying a comfortable arm’s length from any vexing assessment issues.
The entire B.C. Assessment system is controlled by the provincial government. If the provincial government won’t fix the system, perhaps all ICI property taxpayers should appeal, en masse, just as agents do for large properties. The system would grind to a halt and the Union of B.C. Municipalities and the provincial government would have to fix it.
It could then be fairer for all taxpayers — not just those with deep pockets.
Derek Holloway worked at B.C. Assessment for 28 years and is now retired.