U.S. Congressional testimony has said that Donald Trump “inflated assets when it served his purpose and deflated his assets to reduce his real estate taxes.”
Why should anyone in B.C. care? This is common practice for B.C.’s big property owners as well. Under-assessed mega-properties are shifting property taxes to smaller commercial and residential taxpayers.
The Assessment Act requires of B.C. Assessment that all properties be valued at “market” value, as of July 1, each year. Residences and small commercial properties are easier to value, due to an abundance of market information. The same is not true of large commercial properties.
The Assessment Act says it’s an offence to not cooperate with B.C. Assessment when it asks for property information. Unfortunately, because there’s no penalty for violating the Act, large commercial owners often ignore these requests. Consequently, B.C. Assessment lacks standard valuation information, like that provided in appraisals for banks, pension commissions, securities commissions, Canada Revenue Agency, and so on.
Commercial assessment appeals have dramatically increased in recent years, compounding an already strained assessment/appeal system. From 2002 to 2016, the number of appeals to the Appeal Board ranged from roughly 1,500 to 2,000 annually. In 2017 and 2018, the appeal volume went up by 50 per cent to around 3,400 appeals annually. In 2019, appeal numbers skyrocketed to almost 5,200 appeals, three times the average number seen between 2002 and 2016.
Of these numbers, typically up to two-thirds are very complicated commercial appeals, which require critical information from the property owner.
Unfortunately, the Assessment Act is so weak and Appeal Board rules so easily avoided, B.C. Assessment often can’t adequately address the bulk of these appeals. The public perception is that B.C. Assessment and the Appeal Board have unlimited resources. Nothing is further from the truth. Corners are cut in each appeal year to meet budget requirements. Large property owners are well aware of this situation and have been turning up the heat, appealing more and more properties.
Cynically, up to 60 per cent of these appeals are eventually resolved when they’re simply withdrawn. These withdrawals occur deep into the process, after exhausting B.C. Assessment resources. At this pressure point, maximum leverage is achieved for the appellant and the horse trading begins. For example, an appeal agent will agree to withdraw, say, three appeals, if the assessor will give a reduction on another appeal. B.C. Assessment regularly capitulates, whether a value reduction is merited or not.
This provides rosy appeal resolution statistics for both B.C. Assessment and the Appeal Board – the illusion of a job well done. It happens in the shadows, removed from B.C.’s local governments, and more importantly hidden from taxpayers they represent.
The provincial government controls the entire assessment system. They write the legislation, run B.C. Assessment, and appoint members of local Review Panels and the Provincial Appeal Board. Simple solutions are available, such as changing a few minor provisions in the Assessment Act. Perhaps non-compliance with the Assessment Act could result in the forfeiture of the right to appeal an assessment.
Other solutions could be stronger Appeal Board penalties for non-compliance with its rules.
One very simple solution would be to require a property owner to declare all their existing appraisals done for other purposes, as is required in Washington State.
Provincial governments give blanket assurances to local communities about their assessments, but have cut funding behind the scenes. Further, the assessment and appeal system appears to bend over backwards for the high-end commercial real estate class, whether or not they comply with provincial legislation or Appeal Board rules.
The system encourages high-value property owners to appeal in ever greater numbers, making the system work for them, not for the average B.C. property taxpayer.
Each B.C. community has a responsibility to hold B.C. Assessment to their legislative mandate – for all taxpayers, not just a privileged few.
Derek Holloway is retired after 28 years as auditor at B.C. Assessment