Report Calls For Major Changes To Assessment And Property Tax Policy
By Robert Thomas
When local caterer and commercial property owner, Bernie Dombowsky, stood up in front of Council on Monday afternoon to express his thoughts about the lack of “common sense” when it came to property tax assessment in Moose Jaw he isn’t the only one.
Dombowsky also may have an unlikely ally, the Saskatchewan Urban Municipalities Association (SUMA), who commissioned a report looking at the regimen on how property taxes are assessed and the need for change in Saskatchewan.
A 159 page report entitled “Review of the Property Tax System in Saskatchewan, April 2022” takes dead aim at the Saskatchewan Assessment Management Agency (SAMA) and calls for the provincial government to make what is seen as much needed change in how assessment works in Saskatchewan. The report does not make recommendations but rather supplies options on how to make changes.
A popular satirical cartoon about how property values are seen by various groups - artist unknown
Although the report is yet to be reviewed by SUMA’s board - on September 23, 2022 - and by SUMA’s City Mayors’ Caucus - on September 27, 2022 - the report was inadvertently publicly released by the City of Saskatoon when it was included as part of the August 22nd agenda of that City’s “Governance and Priorities Committee.”
READ THE FULL REPORT Click the link (then scroll down to to page 35 of document)
In the exhaustive 160 page report, prepared by the International Property Tax Institute (IPTI) for SUMA, SAMA and assessment in Saskatchewan comes under a microscope.
The report contains comparisons about what Saskatchewan assessment for property tax purposes looks like compared to other jurisdictions and several recommendations of necessary changes.
SAMA is the primary property valuation provider in Saskatchewan for the 772 urban, rural and northern municipalities in Saskatchewan.
SAMA provides their valuation services to all municipalities in the province except for Regina, Saskatoon, Prince Albert and Swift Current who do their own property valuations in-house.
CALLS FOR CHANGE
The IPTI report states that there is a perceived need for change to the existing way properties are assessed and then taxed in Saskatchewan.
In its report their report IPTI states the concerns about the present property tax system does not just lie with property owners but also with city managers in the province.
City managers have raised concerns - excerpt from Page 1 of Review of the Property Tax System in Saskatchewan, April 2022
The public asking for change in how properties are assessed and in the end taxed is also highlighted in the report.
Public confidence and reputational damage if no changes are made - from Page 9 of Review of the Property Tax System in Saskatchewan, April 2022
SUGGESTED AREAS FOR CHANGE
The report calls for and provides options for changes to the manner in which properties are assessed in Saskatchewan. Below are some of the major areas the report calls for change in.
Move To An Actual Property Value System
At the present time Saskatchewan purports to have an assessment system based on true and up to date property valuations it is pointed out by the IPTI this is not true.
What Saskatchewan has at the present time is a system of assessed values that are taken from property values that are years old. The values are taken over a four year period based on sales from that time frame.
In the present reassessment 2021 the sales figures used to derive assessment values for property tax purposes were taken from the period of 2015 - 2019. The periods used by valuation agencies such as SAMA is laid out through a property tax manual and legislation controlled by the provincial government.
The IPTI report calls for moves to use a truer and more up to date property assessment - something used in the majority of other jurisdictions according to the report.
Shorten The Four Year Reevaluation Cycle
The IPTI identified the four year reassessment cycle where property valuations are determined from a set of data collected over a four year period - the present 2021 reassessment uses property sales values from 2015 - 2019 - as problematic and needs to be derived from a shortened time period.
For the 2021 revaluation, this base date is January 1, 2019. This means all properties now reflect the value they had as of that date.
The report states there would likely be “less turbulence” from ratepayers when the property valuations were more up to date and more easily understandable by property owners.
The report states there would likely be less property tax appeals from property owners if they better understood the valuation and it closer met property values at the time property taxes are paid.
The City of Moose Jaw has been inundated with property tax appeals and in May 2022 replaced the local Board Of Revision (BOR) with a contracted out of town BOR who have previous employment connections with SAMA in the hopes of reducing the number of successful appeals.
The IPTI report points to a lack of knowledge on behalf of some BORs and calls for potentially establishing a provincial board as a means to reduce the number of appeals because of inexperience or the lack of training provided to local BORs.
It should be noted that although urban municipalities - represented by SUMA - may potentially favour a shortened reevaluation cycle that rural municipality officials - represented by the Saskatchewan Association of Rural Municipalities (SARM) - interviewed as part of the report favour and see no problem moving away from the present four year reevaluation cycle.
Change The Base Date
The base date for all property reevaluations is two years prior to the reassessment year. This can lead to property taxes which are already at least two years out of date before the valuations are collected.
The present property valuation period are property sales values from 2015 - 2019.
For the 2021 revaluation, this base date is January 1, 2019. This means all properties now reflect the value they had as of that date.
In questioning at Monday’s media scrum MJ Independent asked Mayor Clive Tolley about the time lag in property reevaluations.
We pointed out how many businesses, especially caterers such as Charlotte’s Catering (Council presenter Bernie Dombowsky is a co-owner of this business), had little or no income in 2020 and 2021 due to COVID - 19 pandemic restrictions but were paying property taxes based upon property sales values from 2015 - 2019 when the economy was stronger.
Firms such as caterers were just recovering from having little, if any, work (income) due to the pandemic restrictions which limited gatherings for health reasons and such firms had no control over. Due to the effects of the pandemic commercial property sales values may have gone down in 2020 and 2021 was part of the questioning.
Need For Training
The IPTI report calls for increased training not just for local BORs but also for elected officials “particularly those at the municipal council level who are making important decisions on tax policy” as well as taxpayers themselves on how the property tax system works.
At Monday’s Council meeting Councillor Heather Eby said although she had been at presentations by SAMA for Council she still did not totally understand how Cap Rates work for commercial property taxes.
“I will be honest the Cap Rate is over my head. I don’t understand how they do all of that. We have had SAMA present to us and I still cannot understand it all. But when I can understand none of them make any sense to me,” Councillor Eby said at Monday’s meeting.
A similar sentiment was brought forward by Councillor Dawn Luhning who sits not only as the City of Moose Jaw’s rep on SAMA’s local board but is also the provincial rep for SUMA’s board with SAMA.
“I also had a conversation with SAMA last week because I as a board member of SAMA want to get a better understanding of the Cap Rate and how they are implemented in the manual. As a board member we don’t necessarily get into the nitty gritty of these Cap Rates,” Councillor Luhning said at Monday’s meeting.
The IPTI report also stated there were concerns brought up by taxpayer groups about newly elected members of councils not understand the property tax system and how their voting without knowledge could well have major repercussions.
“It was pointed out that many newly elected, inexperienced council members were called upon to make important policy decisions on property tax rates and the use of other tax tools when they did not have sufficient knowledge about the system and the impact of their decisions on tax bills,” the IPTI reported as one concern raised by a taxpayers group.
On the issue of untrained BORs the main complaints were about ones in smaller municipalities and not the larger urban municipalities such as Moose Jaw.
“The processes and procedures surrounding the BoR, particularly those located outside the main urban areas of the province, were considered to be inadequate. It was said that some BoRs did not have sufficient members and/or the members were not properly trained in dealing with assessment appeals. Hearings at some BoRs were considered to be poorly organized and managed. Some BoRs issued decisions that did not reflect the evidence submitted; some, it was said, clearly did not understand the evidence, and some appeared to be too focused on the tax consequences of their decisions,” the IPTI report stated.
Remove The Province’s Percentage From Formula
As part of property tax policy the provincial government includes rate factors.
The rate factors are used by the Province as a means to impact property taxes in Saskatchewan as they are used as part of the formula when determining final property taxes.
The formula for the final property tax bill is a two step process:
Assessed Value X Percentage Of Value (set by the Province) = Taxable Assessed Value
Taxable Assessed Value X Adjusted Mill Rate (set by the municipality) = Final Property Tax
IPTI saw the Province adding a Percentage Of Value “as an unnecessary and unhelpful complication which adversely impacts consistency, simplicity and transparency that are the hallmarks of a good property tax system.”
According to the IPTI report the Province has used their powers to control rate factors to assist business and industry.
Change by Province to percentage to assist business - from page 23 of Review of the Property Tax System in Saskatchewan, April 2022
It needs to be noted although the Province changed the rate factor from 100 percent to 85 percent for commercial/business/industrial properties the rate factor for residential properties is 80 percent.
The move towards a policy of ‘Tax Fairness’ - where a commercial property has the same property tax as a residential property of the same assessed value - is a policy adopted by the City of Moose Jaw that has slowly been reducing the commercial mill rate to allow for “tax sharing” between commercial and residential properties.
MASSIVE AMOUNT OF INFORMATION
To fully understand and successfully appeal your property tax is a daunting task according to Dombowsky.
At this past Monday’s Council meeting he related his experiences with successfully appealing his commercial property’s taxes at the local BOR only to have SAMA appeal the decision to the Saskatchewan Municipal Board (SMB) where he ultimately lost.
IPTI report notes the seemingly myriad of Acts regarding property taxation - from Pages 77 and 78 of Review of the Property Tax System in Saskatchewan, April 2022
MARKET EVIDENCE IGNORED
As part of their report the IPTI interviewed stakeholders about their feeling on the legislation and their dealing with assessors.
A common concern raised was the inability to challenge the batch method of arriving at property valuations used in property assessments.
A batch method is where data from property sales in the same property tax classification (commercial, residential, agricultural and industrial) in the four year sales period of the reassessment is used for establishing assessed values for property tax purposes.
The concern was raised that although assessors had the ability to use individual discretion when it came to property tax appeals but very few assessors would do so as the legislation does not allow the use of single property appraisals in property tax appeals.
Concerns raised by inability to rely on property market evidence - page 108 of Review of the Property Tax System in Saskatchewan, April 2022
Critics went so far as to tell the IPTI in interviews that they felt “some assessors ‘hide behind’ the legislation; they are not willing to look for evidence beyond the relatively narrow scope they employ in building their valuation methods.”
As inferred by Dombowsky it is up to the appealing property taxpayer to prove the assessment agency wrong - in his case SAMA - something that is daunting for the average property taxpayer. The IPTI report backs up his assessment of successfully appealing property taxes.
“The situation in Saskatchewan is that the burden of proof lies with the taxpayer,” the IPTI report states.
“Because market value based assessments in the province must be prepared using mass appraisal, it is specified that neither the assessor nor the BoR can vary a non-regulated property assessment using single property techniques or change the assessment when the original assessment was comparable to similar properties. The taxpayer in Saskatchewan is therefore subject to a considerable burden of proof when challenging an assessment on valuation grounds” IPTI report page 139.
POSITIVE CHANGE
When it comes to changes to the system the IPTI gives options. Options that the IPTI sees as positive for the collection of property taxes. Options that would be major but in the IPTI’s opinion make for a more equitable property tax system.
The IPTI points out the present system is legislated to strictly follow the Assessment Manual which has the force of law has the benefits of “stability, consistency and equity.”
A rigidity that is seen not only as unfair by many, but also has the effect of leaving many confused when they try to go through the myriad of legislation governing the applicable Act and Regulations that govern the Assessment Manual. The IPTI report calls for an upgrade and modernization to consolidate it all into one easily accessible source.
Despite the benefits of the present approach the IPTI report points out moving “to a ‘true’ market value system that would ensure all properties were assessed on the same basis at the same date. If undertaken properly, by experienced assessors using all available evidence and professional judgement, this option would significantly improve the property tax system in Saskatchewan and lead to enhanced fairness and equity among taxpayers.”
The IPTI is expected to consult again with SUMA after the municipal lobbying group reviews the report and its recommendations.