The City of Revelstoke will have to deal with budget uncertainty for the foreseeable future caused by “aggressive” re-assessment appeal practices, caused mainly by Revelstoke Mountain Resort owner Northland Properties appealing assessments on its condo units at the Sutton Place Hotel.
In a report discussed at Revelstoke City Council’s Nov. 12 meeting, city finance director Graham Inglis explained why property tax revenue projections have gone from stable and predictable prior to 2008, to the current wild swings that are making nailing the city budget very difficult.
The BC Assessment Authority (BCAA) assesses property values in B.C. They issue their tax assessments in the first week of January. A few months later, municipalities like Revelstoke finalize their budget, and then set a tax rate that will raise the amount of money budgeted.
Inglis explained that prior to 2008, assessment appeals were rare and insignificant to the budget process.
“In recent years however, there has been a shift towards aggressively appealing assessment values by the larger corporate property owners,” Inglis explained. “This has resulted in some significant assessment value reductions and reclassifications from higher taxed classes to lower taxed ones.”
Inglis explained to the Times Review that Northland Properties is appealing the assessment category in which condos are categorized.
For example, if an individual condo is rarely rented out as a hotel room in one year, the owner can appeal a commercial assessment to BCAA, arguing it should be assessed as residential for the past year. If successful, the City of Revelstoke would gather far less taxes on the property because the residential tax rate is far lower than the commercial one.
The assessments go both ways; a property that is classed residential one year can be commercial the next if it’s rented out enough to trigger a taxation threshold, which is determined by BCAA.
The appeals are typically sorted out after the city is done with the budget, meaning the city often receives far less tax income than it budgeted for.
For example, so far in 2013, the total negative impact on tax income for the city is $209,395. In addition, some appeals from 2011 and 2012 are still in the appeal process. They could add up to $41,689 in losses for the city. Together, it’s about $250,000.
It looks like the city will have to live with this “ambiguity” in “perpetuity,” Inglis explained to council. Inglis prepared his report to inform council about what’s going on.
Mayor David Raven said getting docked about a quarter of a million dollars late in the year was “a bit of a kick in the head.”
Raven told council: “It eats up whole parts of the restraint that council has practiced over the past year. In fact it will eat up the tax increase we put forward to build our reserves. Council has taken the course of pursuing some fairly restrained budget practices to build our reserves in a fiscal way. At the end of the day, the rug is pulled from underneath us.”
In response to questions from the Times Review, Inglis said the City of Revelstoke had been forecasting a general operating surplus of about $500,000 for this year, but that will be halved by the supplementary assessments.