Province’s property tax meddling yields predictable unfairness

Thursday, May 28th, 2009

Don Cayo

Property tax bills have begun arriving, and in Vancouver — as I predicted in columns last winter — the amounts that businesses owe have shot way up or down for totally arbitrary reasons.

Now, I predict, the province will blame the city for this mess, and the city will blame the province. They’ll both be right.

First, let’s look at who won and who lost.

Most winners are — again, as I predicted — companies housed in downtown towers. They were looking at huge tax increases, because the city won’t rein in spending and the value of office space was holding up better than most property in the city. So it was a godsend when Victoria decreed that their 2009 bills could be based on a lower one-year-old assessment instead on market value as of July 1, 2008.

The losers own or rent more modest buildings in various neighbourhoods. Their property values had more-or-less stalled by the assessment date of July 1, 2008, so — if the provincial government hadn’t meddled — they would have had stable or lower 2009 tax bills.

Now, who’s being billed what?

First, take the example of a string of office towers on West Georgia — numbers 650, 700, 885 and 925. The tax bills for three of these buildings dropped this year by about $100,000 (three to five per cent) each. And for the fourth building, the TD Bank tower at 700 West Georgia, the decrease is closer to $500,000, or 10 per cent.

But for mom and pop in most other city neighbourhoods, the story is quite the opposite.

The tax bill for the building occupied by White Spot at 2518 West Broadway has shot up from $259,000 to $317,000. For the building occupied by Art Works at 891 Cambie, the increase is from $200,000 to almost $229,000. For the block that houses Joe’s Cafe on Commercial, it went from $31,500 to $37,500. And for the home of Goh Ballet at 2345 Main, the tax bill went from just over $30,500 to just over $33,000.

So, if you’re one of the big boys, or one of their tenants, who do you thank for this unsolicited six-figure gift? And if you own or rent a small building, who do you blame for jacking up your tax bill by as much as 15 per cent in a year when city spending has risen by just under six per cent — and when an extra one per cent of the total tax load has been shifted from business on residential properties?

I’m guessing that the province — which has never made a mistake that it won’t try to spin or deny — will point the finger at the city’s policy of land “averaging.” And, to an extent, it will have a point — although only to the extent that the land averaging policy worsens the impact of province’s ill-considered decision to meddle with the most recent property assessments.

The way it works is a little bit complex, but bear with me for a couple of paragraphs.

In recent years, until the province decided to meddle with the assessments, both downtown and neighbourhood properties were generally rising in value, often sharply. But the driving factors were different: Downtown land values weren’t increasing much, but the value of the buildings was. Thus, averaging the assessments of the last three years, which only applies to the land value and not the buildings, wasn’t much help to downtown property owners.

Meanwhile, the land component is what was driving up the value of business properties in most other parts of the city. So averaging helped them a lot.

But this year, the assessed value of most land in 2009 is unchanged from 2008. So instead of having two years with lower-value land — in many cases, much lower value — to drag down the average, now there’s only one. So the policy is providing much less relief than in past.

This explains how a businessman like Mark Greene, who thought he’d be a winner, turns out losing big.

Greene owns a warehouse near False Creek, where land values are skyrocketing. His most recent land assessment was up 51 per cent, and he would have been hammered by his property tax bill this year if not for the provincial intervention that held his assessment at the previous year’s value.

Yet, when Greene’s bill arrived on Tuesday, he was hammered anyway. It was up an astonishing 16 per cent over last year’s. This is thanks to the impact of losing one of the two low-value years that normally would cushion him from such a large increase under the land-averaging formula.

Worse for guys like Greene and those office tower owners and renters, even though the most recent assessments didn’t affect this year’s tax bills, they’ll probably be the starting point for next year’s assessments. So their 2010 tax bills may — I’d say probably will — go through the roof.

In other words, fallout from this incredibly ill-considered policy probably won’t end with this year’s tax bills.

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