You have just 10 days left to reduce your property tax burden for 2016.  The appeal period expires at midnight 31^st December.  A successful appeal now is a gift that keeps on giving . . . since this is the first year of the tri-annual re-assessment cycle, the reduction in your assessment will continue through three full years.

Commercial property assessments increased by an average of 21.4% for next year in St. John’s.  This would not matter if municipalities exercised the same fiscal restraint as the private sector and held the line on spending.  They would then be able to drop the tax rate by a commensurate amount.  Unfortunately this does not happen:  the temptation is just too great.  Initially they tend to reduce the tax rate somewhat but then it rapidly regresses to its pre-assessment level.  Our research clearly shows that municipalities quickly expand their spending to take advantage of their “increased fiscal capacity”.  For most commercial properties, realty taxes are second in line only to debt service as a percentage of the rent.  Irrespective of whether you pay the taxes directly or recharge them to your tenants, property taxes have a direct impact on your bottom line since tenants will ultimately seek rent relief if their gross rent, including taxes, falls out of line with competing properties.  Be proactive, property taxes should be managed like any other expense.  Effective property tax management requires a solid understanding of the assessment process.

The basis for your Year 2016 assessed value, is your property’s Market Value on 1^st January 2014 (the “base date”).  In practice the market value requirement is often cited by the City of St. John’s Assessment Division and other assessment authorities in defence of their assessed values, but in our experience property is often assessed at less than Market Value to discourage appeals.  Of course it would not matter if all property were under-assessed by the same percentage amount since the tax load would still be distributed equitably:  but such is not the case.  Fortunately the Assessment Act does provide protection against such shenanigans by including a requirement that all properties in each municipality be assessed in a uniform manner … so like properties should carry similar assessments.  In practice it is not quite this simple:  you have to compare the sum of all commercial assessments in the municipality with their aggregate market value … a herculean task unless you have access to the City of St. John’s Assessment Division database.  Since they are unlikely to be that generous we have compiled our own database to assist you.  We can also run a variety of analyses comparing your property’s assessment with others in its peer group.

The Bottom Line:  You should appeal if your property is assessed at more than, (1) its Market Value on 1^st January 2014, or (2) the assessment of other, comparable properties … or if you harbour any doubt that your property is over-assessed.

Action Required:  None, if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and you file an appeal, be careful not to restrict your grounds of appeal.  We recommend that you use the following wording: “The assessment is excessive, unfair, not uniform with other assessments, and any other grounds that may appear.  Praise the Lord and pass the ammunition.”  If you prefer we will file the appeal for you.  If you would like advice on whether to appeal, call our Newfoundland Tax Team, André Pouliot or Mark Turner at (709) 722-1811 (St. John’s) or 1-800-567-3033 (toll free) and pick their brains.