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Big box retailers win tax appeal case against City of P.A.

The City of Prince Albert argued that major corporate businesses have in recent years started to engage professional tax agents to aggressively challenge cities across Canada.
WalMart Prince Albert
Walmart Canada led the appeals against the City of Prince Albert

PRINCE ALBERT - Five big box retailers have won a five-year old tax assessment appeal case against the City of Prince Albert, leaving taxpayers to cover a whopping $652,000 in tax revenue reductions.

Out of the 15 commercial properties in Prince Albert in 2017 that challenged their tax assessments at the Court of Appeal level, only Walmart, JYSK Canada, Canadian Tire Corporation, Sport Check, and Marks Work Warehouse were successful.

After several decisions moving through appeal bodies including the Board of Revision (BOR), Sask Municipal Board (SMB) and the Court of Appeal (COA), the companies were ultimately successful in challenging how the Cost Approach appraisal method for commercial property assessments is applied in Saskatchewan.

“City assessors applied the rules fairly and correctly as it was set out in legislation and guides,” City Assessor for the City of Prince Albert Vanessa Vaughn said in a press release. “We followed the process of mass appraisal but are now dealing with the burden of a significant loss.”

The City of Prince Albert issued a press release on September 22 arguing that major corporate businesses have in recent years started to engage professional tax agents to aggressively challenge cities across Canada. Since the assessment appeal process can take several years to complete, these business strategies have created a great deal of uncertainty for municipal fiscal planning.

“The assessment system is set up to allow for property owners to appeal and it’s their right to go through the process,” said Mayor Greg Dionne. “It’s just incredibly disappointing. These businesses are some of the most profitable in Prince Albert and the result of their appeal is that our residents, who are the customers that support them, will need to pay more. With the obvious exception of Canadian Tire, there is very little, if any, support these corporations offer to our community.”

When contacted on Friday, Associate Dealer of Prince Albert Canadian Tire Malcolm Jenkins said he was kept in the dark about the appeal by Canadian Tire head office, but believes its standard procedure across large retail businesses.

The Daily Herald attempted to contact the corporate offices of Walmart, JYSK Canada, Sport Check, and Canadian Tire Corporation, but did not receive responses by press time.

The City said there are taxation tools available to protect other taxpayers from having to continue to absorb the impact of the decision benefitting the big box retailers.

“The property tax bylaw for this classification of commercial properties was adjusted in 2020 to protect revenues of $430,000 in 2020, a measure which has already contributed to the City’s fiscal stabilization. These tools will be considered in future years to fairly address revenue impact going forward,” said the media release.

At the upcoming Council meeting on Monday, the City’s elected officials will debate a report from City Assessor Vanessa Vaughan that recommends that the combined appeal impact from these appeals and other outstanding commercial appeals of $829,553 since 2017 be funded from fiscal stabilization.

The five big box retailers that were granted their application for leave to appeal will see a reduction in tax assessments for these commercial properties after the final decision. That means a decrease of $652,000 in municipal taxation revenue for the City of Prince Albert.

According to the report, the assessment principles in these five cases were applied fairly and correctly by City assessors as set out in province-wide legislation and guides. However, the COA found they are incorrect for these appeals.

There were also 18 outstanding commercial property appeals from 2019 waiting to be heard at the SMB level. The appeals were recently withdrawn by the appellant after a review of the Board Record based on these decisions.

The Cities Act requires that refunds be administered once a decision is received. The initial impact for the five properties will result in a municipal refund of $652,165. The remainder of the taxation revenue loss is for the outstanding SMB appeals still waiting to be heard. The total potential municipal taxation revenue loss is $923,213.76.

“Administration is aware that in the past City Council has expressed the sentiment that the public should be aware that multinational corporations profiting from our community are challenging their assessment values, which in turn impact their property taxes. Some of these corporations do contribute back to the community,” reads the report. “It is notable, however, that appeals are legislated right, and the risk of an appeal loss is part of the process.”

Because the appeal process can take several years to complete, it has created a great deal of uncertainty for municipal fiscal planning, according to the report.

The City of Prince Albert budgeted $100,000 for Board of Revision appeal losses in 2022 and there is currently $93,661 remaining in this account. The remainder of the $829,552.76 will be funded by fiscal stabilization.

In March of 2020, a Tax Tools and Communication Follow Up to Assessment Appeals Risk report provided information on the development of the five commercial tiers that were created to provide the ability to use tax tools to adjust the mill rate factor for the properties that affect taxation revenue loss due to assessment appeals. This method allows the tax burden loss to be recovered from the appealed properties, rather than having it passed on to the local and smaller commercial businesses.

In 2020, City Council’s intention from the Assessment Appeal Risks report was the Property Tax Bylaw would generate an additional $430,500 from the commercial tiers that would be put aside for these potential losses. These extra taxation dollars then flowed into fiscal stabilization at the end of the year as part of the surplus.

According to Vaughan’s report, the intention was then to budget an additional $430,000 in following years to set aside for these potential appeal losses but given the uncertainty around the outcome of appeals, the additional revenue was used to fund other budget priorities in 2021 and 2022.

The report ends by stating that the tax tools available through the commercial tier method will be considered again in the future to address revenue impacts these losses have had on municipal operations.