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By Tristan Bock, Senior Director, Property Tax | October 19, 2020

A sector on standby

The COVID-19 crisis brought entertainment, recreation and sports activities in public assembly properties to a complete stop.

The pandemic has disproportionately affected many of the properties in this asset class – a diverse range of facilities from sports arenas and clubs, to casinos and movie theatres. Given that many of these properties rely on large numbers of patrons to drive revenue and profit, the economic impact of government-mandated shutdowns is severe.

Not only do current restrictions have a major financial impact, the public fears of ongoing coronavirus outbreaks sparked by large gatherings will likely lead to continued reluctance to attend or participate in events in many of these properties.

There’s an important opportunity to quantify the damage of lost revenue and increased expenses. This needs to be communicated to assessors, or nothing will change and property taxes will be at a pre-COVID level – a level that clearly doesn’t reflect the current value of many properties in this asset class.

Tristan Bock

Senior Director, Property Tax, Altus Group

Consider these steps to mitigate the impact of COVID-19 on property tax

The massive pandemic-inflicted hit to the bottom lines of many properties in this asset class must be factored into the determination of value, and property tax. Here are some key considerations to mitigate impacts.

Investigate timing of tax legislation to seek adjustments

Monitoring dates for assessment valuation, property condition and appeals in a property’s relevant jurisdiction is critical for seeking adjustments related to COVID-19 impacts.

That time is now in Alberta and British Columbia, which have annual assessment rolls. Even in regions with multi-year assessments where valuation dates pre-date the pandemic, the assessment roll should be adjusted for any kind of condition issues as of December the year prior. So, owners have opportunities to provide assessors with input on the magnitude of the pandemic impact on their property.

As well, in jurisdictions where avenues of appeal are currently limited because of valuation dates, other avenues of relief may be available, such as municipal tax applications. Careful monitoring of legislation within jurisdictions to identify such opportunities is vital.

Quantify pandemic impacts

Many public assembly properties now have an elevated level of risk because of pandemic restrictions as well as lingering consumer fears. This will be reflected in capitalization rates for properties valued under the income approach. Rental and vacancy rates and expense allowances are also affected and need to be quantified for assessment purposes.

For properties assessed on the basis of a cost approach to value, measuring economic obsolescence will be key to quantifying the impact of COVID-19 in determining an appropriate value.

To support the case for assessment value adjustments, companies should retain timely, detailed records of shutdown and reopening dates, and monthly capacity, levels of business and revenue loss. Details of increased expenses to meet public health requirements are also important, such as additional security, cleaning and building upgrades to meet distancing requirements.

This worksheet can help to serve as a guide for tracking revenue loss and increased expenses.

Looking forward: hope this is temporary and act now for protection

While virtual events are tiding people through pandemic disruption, we all have a strong need for human connection. The importance of live experiences in sport, recreation and entertainment venues is central to this.

While hoping the pause in public gatherings is temporary, owners of these properties should act now to protect the value of your assets by actively seeking tax adjustments for cataclysmic COVID-19 impacts.

Tristan Bock

Senior Director, Property Tax, Altus Group

Convey current financial information to assessors

Given the heavy workloads of assessing authorities due to the coronavirus crisis, providing clear and comprehensive information will assist in their property assessment analysis.

If your property is subject to a request for information from an assessing authority, ensure that you provide financial information not only for the specific period requested by the assessment authority, but also current financial data covering the COVID-19 period. While this may be outside the requested timeframe, it is important that assessors understand the full impact of the pandemic.

Occasionally, assessors will reach out for information about certain property types. Again, it is important they see the impact on properties in the recreation, entertainment and sports classification. Be sure to include information covering the total pandemic timeframe to provide them with a complete, current and clear picture.

Managing Property Taxes Through a Pandemic report cover

Manage property taxes for all of your assets, through the pandemic

To help you closely align property tax mitigation strategies with the current marketplace, this white paper presents a current picture of the challenges facing nine distinct asset classes in the time of COVID-19, along with steps to mitigate the impact of this consequential expense.

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