BC to waive $5.4 million in school taxes on 7 Burnaby properties
After a policy change on split assessments, the province waived school taxes to ease the sudden property tax hike on the affected developers.
The BC government is planning to waive over $5.4 million in school taxes on seven Burnaby properties after a change in BC Assessment processes.
The seven properties, assessed at a combined $1.6 billion this year, are among over 100 properties that are being affected by changes in how split assessments are done in the province.
And the province is waiving school taxes for all of those properties this year.
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The Amacon ruling
Until recently, the guidance for determining qualification for a split assessment came from a 2016 BC Supreme Court ruling, in a dispute between real estate developer Amacon and the assessor of its property.
The Amacon case was specifically beneficial to property owners who had not developed their property to their fullest potential as allowed by zoning laws. Properties are assessed at their “highest and best use,” rather than at their current use. That means land with a single-storey building zoned for a highrise would be assessed with a highrise in mind.
But if the property was only being used for commercial purposes, that highrise valuation would be taxed entirely at the business rate, which is much higher than the residential rate. That was the case until the Amacon court ruling.
In that case, the court sided with the property assessment appeal board (PAAB) and Amacon, and against the assessor of the property, in deciding the property could have a split assessment.
The ruling led to a slew of appeals of property value assessments with the PAAB. And that culminated in millions of dollars of property tax refunds from the City of Burnaby alone.
According to the Vancouver Sun, city halls in the province refunded a combined $17 million in 2019.
Between 2017 and 2019, the annual refunds from PAAB decisions in Burnaby ranged from $318,000 to over $2 million, before hitting a high of $6.4 million in 2020. (The vast majority, $5.6 million, of the 2020 refunds were a result of the PAAB clearing a backlog of cases from prior years.)
As of Jan 10 this year, the PAAB-issued refunds in Burnaby are valued at nearly $1.5 million for 2021.
“In all likelihood, the reduced tax load might perpetuate commercial land use and delay the desired residential development.”
As such, the issue of property value appeals has been a pressing one for Burnaby in recent years. Last year, city staff noted a trend “of appealing a number of properties, being successful on a few and withdrawing the remaining appeals,” overloading the capacity of PAAB for a time.
In late 2020, city councillors said they were in a “state of shock” at the state of property value appeals in the city.
And director of revenue services Richard Rowley told the financial planning committee this week that the bulk of the appeals were coming from developers with hefty resources, rather than from private homeowners.
Turning the tide
But a pair of more recent PAAB decisions in 2020 and 2021 reversed course from the practices set out in Amacon.
The more recent of the two, between Edward Von Dehn and the assessor of two of his properties in Vancouver, affirmed the 2020 decision in determining the Amacon decision “represented a departure from some of the board’s earlier decisions on [land] use and disuse.”
In fact, the 2020 decision, between Sea Gull Leasing and the assessor of its property, formed the basis for much of the Von Dehn decision.
In particular, the two decisions concluded that unused airspace above the current use of a property does not constitute land.
“When the owner of land elects to use the land by improving it with a surface parking lot and a one-storey building, it has elected to use the land for that purpose, foregoing potential higher-density uses,” reads the Sea Gull Leasing decision.
“In doing so, the owner has converted the entirety of its land to the surface use.”
“The intent [is] in part to mitigate the possibility of property owners passing tax increases onto their tenants for 2022.”
Photo: Dustin Godfrey / Burnaby Beacon
The Von Dehn decision noted that changing the density that is allowable on a property doesn’t “create or diminish land,” and land is defined by the two-dimensional surface—not the usable airspace.
What’s more, the PAAB noted reducing the tax burdens for commercially used properties “would be at cross purposes with the land use controls designed to encourage residential development.”
“In all likelihood, the reduced tax load might perpetuate commercial land use and delay the desired residential development,” the Von Dehn decision noted.
Waiving school taxes
As a result of these decisions, BC Assessment has changed its procedures, reversing split assessments for over 100 properties, according to a City of Burnaby staff report.
The report, which was presented to the financial planning committee this week, noted seven Burnaby properties affected by this.
Those include the City of Lougheed and Amazing Brentwood malls, as well as the Southgate development, among other properties.
Those three properties alone were assessed this year at $370 million to $407 million apiece, with estimated school taxes ranging from $1.23 million to $1.35 million each.
An order in council issued by the provincial government late last year authorized the cancellation of school taxes imposed on those and other properties affected by the BC Assessment change.
“The intent [is] in part to mitigate the possibility of property owners passing tax increases onto their tenants for 2022,” reads the city staff report.
But City of Burnaby staff said the move was “not without issue.”
“Our main concerns [are] that we’ve been advised that it’s been a blanket approach,” Rowley said.
In the report, staff said the city has sought “additional analysis from the Ministry [of Finance] for the long-term implications of such a change.”
“It is currently unclear if school taxes in general will increase to cover the $5.4-million write-off proposed for 2022,” reads the report.
The changes also come with a $3-million windfall for the city, increasing the combined city taxation of the properties from $5.4 million in 2021 to about $8.4 million this year.
So while the province has provided a one-year exemption from the school tax, Rowley noted that the property owners still have an incentive to launch an appeal of their assessments.