For the second year in a row, virtually every major waterfront industrial business in the District of North Vancouver has appealed their tax assessments, and at least one is warning that tax increases may force them out of business.
District council voted Monday night to finalize their 2019 budget and set tax rates for each class of property. While residents can expect the usual three per cent average increase, rates for several heavy industrial players are going up 78 per cent, on average.
The hefty levy is intended to raise another $3.5 million, which the district will keep in reserve in the event the appeals are successful. All told, there’s a $10-million liability hanging over the district’s head thanks to the appeals, said district CAO David Stuart.
Heavy industrial assessments skyrocketed in 2018 after a 27-acre property on McKeen Avenue sold to Wesbild Holdings Ltd. for $115 million – three times higher than its assessed value. BC Assessment used the McKeen sale as a new price comparison, dragging all the other industrial lots’ assessments up with them by about 218 per cent, triggering a cascade of appeals, which can take years to reach a resolution.
The basis of the appeals, Stuart said, is that the land the properties sit on has become polluted over the years and the assessments do not reflect the costs that would be required for environmental remediation, if the land were to be sold.
Allied Shipbuilding’s financial manager James O’Connell appeared at council on May 6 to warn the tax increases were a threat to their continued operation. Since 2017, the company’s taxes have climbed from $181,000 to $570,000, he said.
“Municipal taxes are the biggest challenge that we face as a business and it’s Allied’s largest fixed cost,” he said, noting that their tax bills today are 120 times higher than they were in 1969. “These tax increases make operating in the district unviable.”
O’Connell said the higher levy for 2019 was both punitive and unnecessary.
“Major industry is being pre-emptively punished for exercising our right to appeal what we feel is an unfair outcome,” he said.
Seaspan also urged council to opt for lower taxes in 2019, for Allied’s sake.
“They’re not only a key employer in the district, they’re a key strategic partner for us in terms of maintaining our tugs and our equipment,” said Billy Garton, Seaspan’s lawyer. “Anything that threatens their business is of great concern to us.”
Exacerbating the matter has been the 2004 Port Property Tax Act, Stuart said, which gave the province the power to “cap” the assessments for port terminals and set their assessment valuations. The act was intended the spur port export facilities to invest in infrastructure. At the time the act was passed, the capped and uncapped properties had roughly similar values but they’ve diverged drastically.
The average assessment for the uncapped properties including Seaspan, Allied, Chemtrade and ERCO Worldwide are valued at about $2.8 million per acre, Stuart said, while the capped properties, which include Fibreco, Western Stevedoring and Kinder Morgan are about $561,000 per acre. Their tax bills will actually be going down by an average of 17 per cent, according to the district.
“They start to enjoy huge discounts at the expense of the uncapped ones so there’s a real equity problem there,” Stuart said.
Stuart has been lobbying the province to make the act more equitable and predictable. “At the end of the day, we’re concerned about this process continuing and losing jobs and industry on the North Shore,” Stuart said. “That can’t be good public policy.”
At the May 6 council meeting, Coun. Lisa Muri argued against the higher industrial tax for 2019, saying the local businesses should be helped while the district lobbies the province to fix the Port Property Tax Act.
“Given that the appeals process will take at least two years, if not more, relief being applied to non-capped properties could be given within the next year and we would continue to be in a good place,” Muri said, adding that Allied and Seaspan have been major North Shore employers for decades. “We need to continue to make sure that they are competitive. As we increase these tax rates on them, we further erode that ability for them to remain in the community.”
Coun. Betty Forbes and Mayor Mike Little agreed, but the majority on council did not and opted for a higher tax rate for 2019.
Coun. Jim Hanson said he felt a duty to protect district residents and added that the district’s industrial tax rates are still competitive with the rest of the Lower Mainland’s.
“Residential taxpayers could find themselves being liable for taxes, which ought to be paid by major industry if [their] tax appeals are successful,” he said. “Put bluntly, I do not favour giving a tax break to major industry if the consequence of that tax break is going to shift the tax burden over to the residential class. That would not accord with my conscience.”
If the businesses lose their appeals, council could decide to lower the industrial tax rate going forward to compensate the heavy industrial tenants for the higher rates they’re paying today, Stuart said. But he added, unless the Port Property Tax Act is changed, the capped properties would continue to benefit disproportionately.
“So it’s really a fundamentally inequitable situation,” he said.
The entire mess could have been avoided if BC Assessment had been doing a better job keeping an eye on industrial land sales elsewhere in the region, according to Derek Holloway, a retired assessor who now works as a consultant.
“Quite simply, they didn’t increase values as they were moving up everywhere else in the Metro Vancouver area,” Holloway said. “If they had all gone up modestly each year for a three or four or five year period of time, it may not have been such a shock.”
As for the industrial tenants’ chances of winning their appeals, Holloway isn’t making any predictions.
“They have to have the evidence,” he said.