In property tax appeals, who helps cities?

Ontario is the largest assessment jurisdiction in the world, and it has some of the most complex properties. Particularly in the realm of complex industrial properties, there have been several high profile appeals.

A recent article from Sudbury, Ontario lamented the tax losses such appeals bring to the City. (Read here) While Sudbury is not some small town (The City of Greater Sudbury has approximately 166,000 people according to its website), the single year property tax appeal losses of $3 million for 2019 are no doubt a problem.

So what can a municipality do? The article mentions that “companies hire experts in the field — tax agents — whose job it is to save their clients money,” and acknowledges that these experts can be very ‘savy’. But is it as one sided and sinister as it all seems?

The fact is, an ethical expert should arrive at the same value regardless of who is the client. I have on many occasions advised taxpayer clients that they are under-assessed. The assessors and municipalities never hear of this, because those taxpayers generally don’t appeal. (Not a surprise). Also, both as an assessor and a municipal adviser I have determined that assessments under appeal should be increased, not reduced.

So if some properties don’t appeal because they are under-assessed, is it possible that some which are appealed are also under-assessed? Certainly. Especially in the realm of complex industrial properties, the importance of having the right adviser is so important. Often the arguments raised by tax consultants sound convincing, but they lack the specifics to actually prove a reduction. When you hear expressions like “external obsolescence” and “excess capital costs”, it can sound reasonable (and intimidating). If the municipality has someone in their corner who could tell them if this appeal has a solid basis, or is it all just talk, they could often avoid significant tax losses. It can be difficult to find such an expert - many just talk about such things, but have never presented such issues to the Board. With a credible expert advising a town, they can have move forward with confidence.

But isn’t that MPAC’s job? Not exactly. MPAC produces the assessment roll. MPAC represents MPAC on assessment appeals. Their interests often align with the municipalities, but that doesn’t mean they represent them. If, in the course of an appeal, they become convinced that the property is in fact over-assessed, they will settle. If they become convinced that the taxpayer’s case is strong enough to likley convince the Board, they will often settle.

None of this is a criticism of MPAC - it is simply their job. It becomes especially difficult when considering complex industrial properties. The issues on these properties are some of the most challenging in the appraisal field. It isn’t like there are a long list of sales of similar properties to use as comparables. So sometimes MPAC has to make a difficult decision. Even if they feel they are probably right, they might decide it is best to settle for a large reduction, instead of risking an even larger one at hearing.

But complex cuts both ways. Quite often the issues aren’t as clear-cut as they seem. Sometimes properties really are over-assessed, and the taxpayer deserves to have a portion of their taxes refunded. Sometimes not. Having someone give them a detailed analysis of the valuation issues can be of great value to a municipality. It’s true - a review by a well-qualified expert won’t come cheap. But neither will a large assessment reduction. Often, the money spent on such an expert is the best money the town ever spent.

What is this factory worth? And who do you trust to tell you?