Outdated, poor public policy
The government passed the Assessment Act in 1973. Since that time, it has had 39 versions and 75 amendments. At no time did they write (or re-write) the Act in contemplation of changes in market conditions like the ones we’ve seen here in NB since 2021. Let’s look at why that turned out to be such a problem.
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As the name suggests, the Assessment Act supposedly deals with assessment matters. However, it actually includes all sorts of sections dealing specifically with taxation, or sections that limit the assessment so as to reduce the tax payable. That sounds OK on the surface (because hey – less tax), but it’s not.
Why?
Simply put, assessment and taxation are fundamentally contradictory functions. The Assessment Act as it’s written puts the assessor, whose supposed function is to calculate a property’s “Real and True Value”, in a position where he/she often has to determine valuations with one eye on the tax implications rather than focussing solely on the value.
So why is that necessarily a problem? Shouldn’t the assessor be thinking about tax implications when determining assessments?
No, absolutely not. Not ever. Not even a little bit.
Assessment an administrative, not a political, function
Fundamentally, assessment is an administrative function that trained, non-political valuation professionals perform. Their only job is to determine property values for ad valorem taxation. Ad valorem means “according to value”; it’s the method that virtually all tax jurisdictions in Canada use to determine each property owner’s share of overall tax.
With ad valorem taxation, your house’s value is seen as a proxy for what you can afford to contribute to the pool of funds that a municipality needs to operate. Bigger house? Larger contribution. Smaller house? Smaller contribution. It’s far from perfect, as the size of one’s house doesn’t always equate to wealth or ability to pay, but it’s the assessor’s job to work within that.
in contrast, taxation is a political function: it reflects the municipal government’s budget priorities at any given time. We taxpayers give the government money to run the municipality on our behalf, so we should have a say over who gets to do that and how much we give them to do it. And, if we don’t like what they’ve done, we can always “throw the bums out” and put new people who are not bums, supposedly, in their place.
In a nutshell: assessment determines ability to pay, while taxes are what we actually do pay. Remember – assessors do valuation, while politicians do taxation. The word “tax” should never escape an assessor’s lips (and the word “assessment” never escape a politician’s), nor should that word appear anywhere in a properly drafted, revised Assessment Act.
Who should be issuing assessment notices?
The Province issues both assessment and tax notices
Another aspect of the Assessment Act that I would suggest needs changing is the source of the assessment and taxation notices. The Province did separate assessment and tax notices a few years ago: they now issue assessment notices in January (with a valuation date of January 1 of the previous year) and tax notices in March. But the problem is that both of those notices still originate with the Province (the name of the municipality does appear at the top of the tax – not assessment – notice but it is still issued by NB Finance and Treasury Board).
Separation of notices good, but municipalities still off the hook
The result is that one of the beneficiaries of that tax revenue – the municipalities – are able to levy a tax without really having any direct responsibility to the ratepayers for it. They can – and do – dump people’s complaints about tax increases on the doorstep of assessors because, well, why not? Always easier to shift the blame onto a higher order of government (and the wrong department at that) than it is to justify the increased municipal tax revenue themselves.
The perception of who is accountable would change dramatically if the Assessment Act were re-written so that municipalities had to issue their own notices and take direct responsibility (and all the phone calls) for taxation levels.
Assessment equity
No requirement in the Assessment Act for assessment equity
The final, and very important, point that falls under the heading of a revamped Assessment Act is assessment equity.
Often, when people complain about their assessments, their first point is that they purportedly have a similar property to that of their neighbour, but the assessor has valued the neighbour’s property for much less. Leaving aside the fact that two properties are very often not as similar as complainants think, this is a reasonable concern, as the perceived lack of equity and fairness in assessments undermines confidence in the entire process.
Assessment equity encompasses both horizontal equity (i.e., that similar properties should be treated similarly) and vertical equity (that the value for a superior property should be more than that for an average property and vice versa – it’s a bit more complex than that, but this is the essence of it) but there is no requirement anywhere in the Assessment Act for assessors to value properties in this way. And what’s more is that you can’t challenge your assessment on the basis of equity.
Alberta as a basis of comparison
Now, Alberta (on which I draw some comparisons because of my time and involvement there) is different in that each municipality conducts its own assessments and issues its own notices. However, all are subject to the same legislative requirements, among which is the Municipal Government Act.
Its entire basis, when it comes to assessments, is one of assessment equity; in fact, in the Government of Alberta publication entitled “Is your property assessment fair and accurate?”, it states clearly that, in preparing for a hearing before an assessment review board, the objective is to demonstrate “that the assessment on your property is not a fair estimate of its value when compared to the assessment of similar properties in your neighbourhood” (emphasis added).
From my experience, equity among properties assessed on the basis of market value should be the absolute primary consideration within a revamped New Brunswick Assessment Act. This wouldn’t stop people from complaining about high taxes, but it would redirect much of the focus from the level of taxation to whether that amount is fair relative to what others are paying.
However, this would work only in conjunction with changes to the Real Property Tax Act. I’ll cover that in one of my next columns.
This piece was first published in the Northumberland Free Press, 2024-11-30