A retired property assessor says residential taxpayers in B.C. are getting fleeced by chronically under-valued industrial/commercial/institutional (ICI) properties.
Derek Holloway was a senior appraiser at BC Assessment for 28 years, and he’s been banging this drum for years, reaching out to media outlets across the province with examples of properties sold at rates way higher than assessments.
Holloway points to the New York District Attorney who accused former president Donald Trump of inflating values of some of his assets in financial statements to obtain favourable terms for loans, while deflating the value of other assets to reduce property taxes.
“In B.C., this is a regular occurrence for many large ICIs,” Holloway says. “ICI property owners often hire an army of assessment appeal agents and lawyers to frustrate BC Assessment and the appeal system.”
Holloway gives an example of one large unit in an industrial park in Port Coquitlam that had a $9.6 million assessment in 2020. That went up to $10.1 million in 2021, then $10.7 million in 2022. Also in 2022, the property sold for $22.8 million. The 2023 assessment? That was $16.7 million.
“(The property) never achieved market/actual value for many years (and that is) foregone taxable value. The market didn’t go up by 50 per cent in one year from 2022 to 2023. This large increase will likely drive an assessment appeal to the board in 2023.”
In Chilliwack, there are not many examples of wealthy property owners or large ICI properties, but Holloway has examples at the lower end.
Take the small plaza where our office, The Chilliwack Progress, is located. This 32,670-square-foot property was assessed at $1.45 million in 2017, $1.63 million in 2018, and sold for $4 million in 2018. In 2019, the assessment nearly doubled to $3.05 million, then in two years hit $4.02 million in 2021, the same year it sold again for $5.5 million.
This year? The 2023 assessment is $4.82 million.
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“The market didn’t go up by 87 per cent in one year from 2018 to 2019, nor did it go up by 25 per cent from 2019 to 2020,” he said. “Since the 2021 sale, the assessments are again not keeping up to the market.”
Why and who cares? Holloway says between 2003 and 2016 the property assessment appeal board faced an average of 1,800 appeals per year. From 2019 to 2022, he says “the system has been swamped” with approximately 5,000 appeals per year driven by large real estate consulting firms.
“Many appeals often take years to resolve and, as Burnaby City recognized, these large consulting firms appear to be ‘flooding the system,’” he said. “Either BC Assessment’s ICI valuations are inaccurate and these appeals are warranted, or they’re accurate and these appeals are unwarranted. It can’t be both.”
Why undervalue properties? No need to appeal. When properties are under-assessed so dramatically for years, it lets sleeping dogs lie and creates less work for BC Assessment. Holloway says the above sale evidence points to intentional devaluing.
“What would you do if you were BC Assessment, with the knowledge that you don’t have a fraction of the resources needed to defend thousands of sophisticated assessment appeals every year to the appeal board?”
As for who should care, Holloway says the practice throws the municipal government budgeting process for a loop and taxes not paid by owners of undervalued ICI properties are offloaded to smaller taxpayers.
Asked about this dilemma, City of Chilliwack officials said it’s not true that the city “loses out” nor does it “gain” on any property taxes based on assessment fluctuations, because the tax rates for each classification of property (e.g. industrial, residential) is set separately and in isolation from one another.
Holloway responds that at the very least there is an imbalance if some ICI properties use the appeal system to keep valuations low since the others (usually smaller ones) will have to make up the taxes.
So it would seem the issue is less that homeowners are left to make up for municipal taxes not paid by ICI owners than it is, ICI owners who don’t appeal assessments are making up for owners who do appeal and win.
It’s all a messy and opaque business, and there does not seem to be enough political will to make it cleaner and more transparent.
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