Don Cayo
Sun
Most business and residential taxpayers ended up worse off, yet a relative handful of elite B.C. businesses really did save mega-bucks this year thanks to provincial meddling with the assessments on which 2009 property tax bills were based.
But now it looks as if market forces will brutally hammer some businesses — mostly office buildings and retail outlets — when their 2010 tax bills come out. The good news, if this is what you call it, is that mostly businesses that enjoyed this year’s savings will be hit.
And the rest of us? We’ve already paid the price for Victoria’s spin and folly, as we’ve seen our 2009 tax bills nudged up a notch or two higher in order to cover the shortfall stemming from the big break for the privileged few. Now it looks as if we’ll ride the transition back to market mechanisms without much further pain.
But be assured that if, as I predict, most of us get to enjoy a relatively happy ending to this sad saga, it will be due solely to good luck. Because there’s not a hint of good management in this tale.
It started when the provincial government, alarmed by the sputtering economy and the unexpected softening of home prices, decided to pretend to do something about it. It announced that, for one year only, property owners could use either the July 2007 or the July 2008 assessment figure — whichever was lower — as the basis for their 2009 tax bill.
This sounds good if you say it fast, but in reality it’s smoke and mirrors. Property tax in any given year is a zero-sum game. Municipalities decide how much money they want, then divide by the total tax base to figure out the tax rate. If one property owner saves money by getting a lower assessment, then others pay more — it’s as simple as that.
And that is what happened.
For some of us — for example, most condo owners in Vancouver — our 2007 assessment was just a few percentage points lower than the 2008. For higher-end homes and many businesses, the difference was a little a greater, although still not huge. But for a few business properties — mainly the high-end office towers — the savings were very large.
Of course almost everyone chose the 2007 figure, because it was almost always lower. But most of us didn’t save any money. When our municipalities added up the total value of assessed property, the figure was quite a bit lower than it would have been if they’d used the 2008 assessments. So the tax rate worked out to be quite a bit higher — and the total amount of money they extracted from our pockets and purses remained exactly what it would have been if the government had left well enough alone.
What did change, of course, is the proportion of the total that each taxpayer had to pay. If your 2007 and 2008 assessed values were static or nearly so, the proportion you had to pay actually rose. And if 2007 was a lot lower than 2008 — in other words, if your property was recession-proof and still rising in value — you would then pay a smaller proportion. You’d save money, possibly quite a lot.
When this year’s tax bills came out I documented how, in a year when Vancouver’s spending rose six per cent, the tax bills for several office towers — buildings whose value continued to soar despite the recession — actually dropped by six-figure sums (by $500,000 in the case of the TD Bank building on Georgia). Meanwhile, the bills for businesses in more modest blocks were consistently higher, some as much as 15 per cent higher. Increases for homeowners tended to be a bit lower.
B.C. Assessment is still calculating July 2009 assessment values — the basis for next year’s tax bills. But my analysis of real estate prices suggests what the trends will be.
According to figures from the Real Estate Board of Greater Vancouver, the average home price — condos, attached or detached — was on a steady upward curve in July 2007. It peaked around July 2008, and by July 2009 was rebounding from a low point a few months before. Thus the July 2009 value is roughly halfway between the values of the previous two years, meaning the likely change in the 2010 assessed values won’t be great.
Ditto for many businesses, especially industrial properties, according to figures compiled for me by Shawna Rogowski, the director of research at Colliers International.
But for some business properties — mainly large retail spaces and some office space — prices have, despite the recession, gone relentlessly up. That means the 2008 assessment values, which were never the basis for a tax bill but remain on the books as the starting point for the latest assessment, are quite a bit higher than 2007 figures. And the 2009 prices are quite a bit higher than the year before.
This means you can expect assessments for these kinds of properties to rise sharply at a time when others do not much more than hold their own. So the proportion of the total tax bill falling to the owners or renters of these properties will soar — I’m guessing 50 per cent or more in many cases.
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