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With a deep knowledge of property tax legislation and the British Columbia real estate market, Altus Group is well positioned to help our clients flag issues and recognize opportunities for potential savings.

Background

In 2015, the City of Vancouver ended the “across-the-board averaging” program and replaced it with a targeted land averaging program for a small proportion of eligible properties. Only residential, light industrial, and business properties whose value has significantly increased over the previous year are eligible. The intent of the program is to focus specifically on “hot” properties until they are no longer “hot”. The thresholds are set annually by Council.

Targeted 3 Year Land Averaging Program

From 2015 onward, only properties that received assessment percentage increases over a threshold will benefit from the program.  The general idea of the threshold takes the average increase of a certain property type and increases this by 10%.  The only property types that benefit from this land assessment averaging program are residential, light industrial and commercial properties classified by BC Assessment. The table below demonstrates the mechanics of the targeted program.

The 2017 threshold percentage change is calculated based on the difference in the taxable value from 2016 (figure from your 2016 main tax notice) to the assessed value for 2017.

Therefore, say if a residential property assessment total value increased by 44.00% (based on the calculation provided) it does not qualify because it is not above the threshold of 44.37763%.  If, however, it increased by 45.00% it would apply.  For commercial and light industrial properties, an increase of over 38.52743% is required in order to qualify for land averaging.

Impacts

According to the City of Vancouver, for 2017 it is anticipated that approximately 3,300 (22%) of commercial/light industrial properties will now qualify for land averaging.  For residential properties, it is forecast that approximately 19,500 (10.3%) will qualify.

The Property Tax Burden

From a property tax burden perspective, according to the City of Vancouver:

“The vast majority of properties below the “threshold” will pay slightly higher taxes to subsidize the tax relief for those “hot” properties.”

In addition, there will be influences on the calculation of the property tax mill rates now that the assessment roll is no longer based on a special averaged roll but actual assessed values for the majority of properties.

According to the City, reducing the business tax share from 52% to 43% and improving the business tax rate ratio from 6 to 4.1 over the past 10 years has become one of the most significant developments within Metro Vancouver.

Critical Closing Thoughts

This program raises some interesting points for debate.  The former program was equitable because it was applied uniformly across all properties. While the minority of taxpayers will receive tax relief, the majority of taxpayers will be worse off as a result.  In addition, there have been peculiar situations where two properties, both assessed for the same assessed value, have different tax liabilities because, in percentage terms, one increased more than the other from the prior year.  Many would argue that, in these cases, both taxpayers ought to pay the same amount.

In addition, the difference between benefiting from tax relief and subsidizing another taxpayer’s tax relief will come down to a hundredth of a percentage point (0.01%).  We have seen a consistent spike in assessment appeals seeking to amend the assessed values in order to pay less in property taxes.

Overall, the property owners that just qualify for the program will benefit and the property owners that just miss out on qualifying will be disadvantaged.

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Phil GertsmanGertsmanbu-commercial-property-tax tax-assessment-appealsvancouver

Executive Vice President, British Columbia & National Incentives, Property Tax

Last updated on September 12th, 2019 at 12:58 pm

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