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By Altus Group | June 2, 2020

In May, Altus Group partnered with the Alberta Hotel and Lodging Association to provide a webinar helping hotel owners and managers understand the assessment and property tax system in the province.  

The following is a summary of the webinar. If you would like more information, please contact Brock Ryan or Dave Mewha 

The oil price crisis followed by COVID-19  

Hotel assessments place the most significant weight for the upcoming year on the financials from the past year.  Assessed value on July 1, 2020 is based on the financial numbers from July 1, 2019 to June 30, 2020. 

Unfortunately, in Alberta things went from bad to worse, with the price of Western Canadian select slipping from $40 a barrel down to $10 barrel, eventually becoming negative. Following that on March 11th was the start of the pandemic.  The silver lining is that, unlike provinces that have a valuation date of January 1, 2020, Alberta hotel assessments will factor in this year’s experiences into this year’s valuation.  

Basic assessment & taxation considerations

With respect to basic assessment taxation considerations, there are three important considerations:

  • Ad valorem taxation, which means according to value
  • Non-residential assessment differences
  • How your actual hotel assessment is derived on an income and expense averaging basis, which is different than other properties types

The Ad valorem System  

The amount of property tax required by the province and a municipality are set first, then they are distributed across an entire assessment class. A property owner’s tax bill is a function of two things: the assessed value and the tax rate. The only variable that can be addressed by the taxpayer is the assessed value. 

Non-Residential Assessment Differences  

Non-residential assessments, which is also commonly understood to be the commercial class, have different assessment equations across asset type.  

  • Land and Industrial: in general, rely on a single year of sales data and sales comparisons 
  • Office and Retail: in general, rely on a single year of income and other financial data 
  • Hotels: relies on a three-year calculation of actual income and expenses 

How hotels are assessed in Alberta  

Hotel assessments are unique as a commercial class property in that, for all intents and purposes, the value is site specific, meaning it relies on actual performance rather than market data. While the methodology varies across jurisdictions, these points will always be true: 

  • The assessed value must reflect the real estate only 
  • The deduction for furniture, fixtures, and equipment is taken prior to capitalization 
  • Allowances for reserves and intangibles are included 
  • Large jurisdictions use a three-year weighted average performance 
    • Current weighting in Calgary is 50%, 30%, 20%  
    • Current weighting in Edmonton is 70%, 20%, 10%

The assessment and complaint cycle 

The Cycle 

  • Property Tax Assessments are issued annually   
  • Assessments are a reflection of the value of the property on July 1st of previous year  
  • Appeals must be filed within 60 days of Assessment notice receipt  
  • Tax rates are typically set after appeal period ends  
  • Tax bills are mailed in May and tax payments are due June 30th   
  • “Pre-Roll” period begins in the fall 

Assessment Request for Information

The Assessment Request for Information (ARFI), is the assessors opportunity to receive annual financial data to support the assessment calculation.

In Alberta, it’s a legislative requirement that you reply to an ARFI to maintain the right to appeal your assessment.

What relief measures are currently available  

  • 6 month deferral of provincial portion of Property Taxes available (April – September)  
  • Province froze property tax requisition at 2019 level  
  • City of Calgary allowing deferral of monthly and lump sum payments until October  
  • City of Edmonton allowing deferral of monthly and lump sum payments until September  
  • Many smaller jurisdictions have deferral programs ranging between 3-6 months   
  • No abatement programs announced to date  
  • Municipalities and Province lobbying for Federal assistance  

Visit our Alberta & COVID-19: Property Tax updates page for more information on deferral programs, details from various jurisdictions, and how you can take advantage of the programs. 

SWOT analysis

S
Strengths
W
Weaknesses
O
Opportunities
T
Threats

Strong Industry Leadership

Access to Best in Class Property Tax Expertise

Site-specific Valuation Approach

Availability of Financial Information

Fear of Transparency

Businesses Don’t Vote 

Not the Favorite Child: O&G

Municipal Perception that Taxation targets Guests not Operations

Clear Unified Message from Industry 

Aggressive Push to Recognize Declining Assessment Base 

The Valuation Date

Assessment Request for Information Compliance

Bill 7 and Business-friendly UCP

Pressure to Freeze the Roll

Pressure to Move to Pre-COVID Valuation Date

Inaction by Membership

Municipal Financial Challenges

Missing Your Chance to Appeal

 

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