Why are Moose Jaw commercial property taxes twice as high as residential taxes?

Ironically, the $1.1 million in property taxes needed to balance the city budget would be there, had property values been maintained in the commercial sector.

The operating budget documents a loss of $1.04 million in taxes from reductions to business property assessment over the last five years.

Last year alone, the city received $171,000 less than expected as business owners protested assessment values.

Property taxes are based on assessment: the higher the assessment the more taxes owing and visa versa. An $83 million loss in assessment values over five years compares with $131 million in new construction since 2015 – meaning that Moose Jaw gained less than expected in net taxes from new building. Assessments reduced over five years were by negotiation, by the local board of revision, and by appeals to the Saskatchewan Municipal Board. A slew of reasons can be dredged up to explain why commercial assessment and property taxes have fallen so much in Moose Jaw.

The most obvious reason comes from the economy: things are not as rosy as politicians at all levels claim. While there is some validity to this suggestion other reasons influenced the loss in value.

Years ago a change in assessment rules allowed reductions for unused, unusable, or reduced use parts of property.

A less obvious reason for loss of assessment and taxes stems from the assessment valuation process. A property assessment is an opinion of the value by the assessor doing the job, based on interpretations from the manual of rules.

A qualified person tells me many of the downtown commercial properties are in this person’s opinion over valued by the Saskatchewan Assessment Management Board.

This qualified person claims that rent values are partly based on one high rental value charged for a while until the owner closed up shop. And those rental values, claims the qualified person, are prescribed to second floor rents.

Few second floors ever get rented. No one wants to walk up stairs.

Another reason for declining commercial assessment could be the lack of attention paid by successive city councils since the 1980s to this huge commercial property sector.

In the 1980s Moose Jaw fought to maintain and build value in the downtown core. The city funded a business improvement district with more than $250,000 a year to encourage assessment stability.

Severe budget cuts in the early 1990s and years of subsequent zero tax increases made politicians look good but did nothing for the downtown. Commercial assessment values started on a long skid down.

The one major annual downtown activity is now run by Tourism Moose Jaw.

Meanwhile commercial property owners are left paying for the mess. When a commercial owner negotiates an assessment reduction or wins an appeal the lost tax revenue is added to the tax bill of all other commercial property owners.

The $171,000 lost in taxes last year will be spread out among all commercial property owners in 2018. This situation helps explain why commercial taxes on $200,000 assessment are twice as high as residential taxes on $200,000 assessment in Moose Jaw. Remarkably, Moose Jaw commercial taxes are still only fifth highest of 15 Saskatchewan cities.

Ron Walter can be reached at ronjoy@sasktel.net