Rhino's Ramblings: A Taxing Affair
Robert Thomas
If you ever want to draw the ire of a Moose Jaw property owner just ask them what they think of their property taxes. Believe me, you will get an earful that is none too complimentary. People in Moose Jaw are angry when it comes to taxes. For most people, they are cropping up more and more on everything as our governments look for the means to spend themselves out of oblivion.
In Moose Jaw, the need for money has hit a critical point, as the collapse in resource and commodity pricing has forced the province into austerity mode; just at the time the dilapidated state of our infrastructure has almost reached the crisis point.
The City is facing an uphill battle as we have reached a point where much of the work we have put off cannot be put off any longer. It’s reached the point where we need to borrow $30 million to complete the work which needs to be done just in 2018 alone. With tens of millions in work required in 2019, 2020 and going forward just to stabilize the situation. It’s an ugly fact of life that we need to get used to.
Absent of a miracle, the City of Moose Jaw is going to have to come up with a financial miracle. For the past couple of years we’ve had a band-aid miracle and it’s name has been photo radar.
It has helped make up the shortfall in the 2018-2019 capital budget. Those two radar cameras out near where the TransCanada Highway and 9th Ave NW are our own money making mills. They’re something the City treasury could use more of, especially if they catch out-of-town drivers who really don’t have the time to stop, let alone complain about it.
The biggest aspect of local taxes is the business community who say they are being over-taxed. Led by the business lobby group Canadian Federation of Independent Business (CFIB) tremendous pressure has been placed upon local councils to reduce commercial property taxes.
Under the auspices of a term called ‘tax fairness’, the CFIB has lobbied extensively, arguing that a commercial property having the same property tax assessment as a residential property should pay the same property tax. It’s what they call "fairness", when it comes to property taxes.
The argument seems compelling until you realize it needs to be expanded to all taxation combined; if the entire issue is based upon fairness. Businesses can write off their property taxes, whereas residential properties – unless you’re running a home based business – cannot.
For years, Moose Jaw worked upon a formula where taxes were collected in a manner where each property class or type of property paid a certain percentage of the tax dollars the City needed to raise.
The amount of tax dollars required in each property class was defined and the City simply needed to take the property assessment in that class, multiply it by the mill rate and extract the correct amount of taxes to cover that property class’ percentage of required taxes. On paper, it all seems straightforward; nice, neat and all scientific; that is, until the assessor makes an error and a property owner wins a tax appeal. As the amount of successful property tax appeals grows, it seemingly shifts the tax burden from that property to other properties in the same property class.
This is why the WalMart case is so significant. A store the size of WalMart winning a big assessment appeal quite readily distorts what is demanded of other commercial property owners.
Walmart successfully argued their 2013 assessment of $11,215,900 for property tax purposes was wrong because the Saskatchewan Assessment Management Agency (SAMA) used the wrong assessment approach. In the end, WalMart had their property tax assessment reduced to $6,872,800.
And it wasn’t just in Moose Jaw where Walmart was fighting hard to lower prices or...oops...should I say lower their assessment. They did it in Weyburn, Estevan and Yorkton, as well all cities where SAMA has the contract for tax assessment.
It all came down to a final leave to appeal, this past January, where in a written decision a Saskatchewan appeals court justice denied SAMA’s request and wrote “I am satisfied none of the grounds of appeal have merit. All are destined to fail.”
It leaves me thinking, how could SAMA, the experts we hire to run our local property assessments, get it so wrong? Could it be true that Walmart simply used its deep pockets to win such a decisive victory or is there more to it? Does the problem lie somewhere else?
With 2017 being a reassessment year, in a four year cycle, the number of assessment appeals was once again high. Successful assessment appeals wiped out $40,927,42 of assessed property values with $34,562,000 from the commercial property class and $6,365,400 from residential properties.
Now, does the problem lie with the local Board of Revision? If you look at the Board’s decisions and how many of them have been supported upon appeal, including the 2013 WalMart case, it’s hard to place the blame on them.
In my opinion, the problem lies somewhere within SAMA. And businesses and residential property owners are not out beating the system; they are merely standing up for their rights and being proven correct for doing so. As one successful residential assessment appellant told me, it’s SAMA using their deep pockets to fight people who simply give up.
But how does this all play out in the context of taxes...or should I say tax fairness? How does this affect the little guy like you and me?
What we are seeing is a tax sharing approach where the overall tax shift is slowly shifting the burden from commercial to residential property owners. Big wins like WalMart’s and other commercial property owners can only accelerate the process towards the CFIB’s call for ‘tax fairness’. Commercial property owners simply cannot continually absorb assessment losses and the resultant surcharges.
In the end, somebody has to pay the bills and that’s people like you and me. Whether we can afford it is another thing...and is it fair?