Outdated, poor public policy
The government passed the Assessment Act in 1973. Since that time, it has had 39 versions and 75 amendments.
They did not write (or re-write) the Act in contemplation of changes in market conditions like the ones we have recently seen here in NB. The Assessment Act which, as the name suggests, supposedly deals with assessment matters, actually includes all sorts of sections dealing specifically with taxation, or sections that limit the assessment so as to reduce the tax payable. These are tax issues cloaked in assessment garb and should have no place in a revised Act.
This mélange of assessment and taxation is poor public policy because it is fundamentally contradictory. It puts the assessor (whose supposed function is to value property at its “Real and True Value”) in a position in which he/she often has to determine, and answer for, the tax implications of a valuation decision, and we saw in 2021 and 2022 just how problematic this can be. In a properly structured system, the word “tax” should never escape an assessor’s lips.
Assessment an administrative, not a political, function
At its roots, assessment is an administrative function – the taxation authority hires people trained in valuation to determine property values for ad valorem taxation; in contrast, taxation is a political function – it reflects the government’s policy and budget priorities at any given time. Placing these two divergent functions in the same legislation, namely the Assessment Act, is a recipe for disaster.
Who should be issuing assessment notices?
The Province issues both assessment and tax notices
Another aspect of the Assessment Act that needs to change is the source of the assessment and taxation notices. Now, as a result of a recommendation in the Auditor General’s 2017 report, the government has separated assessment and tax notices. They issue assessment notices in either October or January (note: they have changed this to January for all notices, starting in 2024) and tax notices in March. This is a step in the right direction, but the problem is that both of those notices still originate with the Province.
Separation of notices good, but municipalities still off the hook
Although issuing a notice in October (this has changed, as noted above) is puzzling in general (particularly for commercial properties with December 31 year-ends), this is an overall improvement precisely because it is the first step in weaning people off the age-old NB tradition of mixing assessment and taxation. However, there is still a serious problem in that one of the beneficiaries of that tax revenue – the municipalities – are not the ones who issue those notices. As a result, they reap the benefits of being able to levy a tax without having any direct responsibility to the ratepayers. They can – and do – dump people’s complaints about tax increases on the doorstep of the Assessment Branch 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 result is that, when people have issues with their taxes, they contact the people at the Assessment office, who of course have nothing to do with taxation, as Property Assessment Services sets neither the provincial nor the municipal rate of taxation. The perception of who is accountable would change dramatically if the municipalities were 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 the same property as 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 a lack of equity and fairness in assessments undermines confidence in the entire process.
Assessment equity encompasses both horizontal equity (i.e., that the value for similar properties should be similar) and vertical equity (that the value for a superior property should more than for an average property and vice versa). There is no requirement anywhere in the Assessment Act for assessors to value properties equitably in NB. Even though assessment is at its heart mass appraisal (i.e., the research of many properties providing the required assessment metrics for valuing single properties), assessed value is defended on the basis of a specific property’s valuation as of January 1 of the taxation year (note: this is changing to January 1 of the previous year, starting in 2024) at both the Request for Review Stage and the Appeal stage. It’s clear how easily that approach could create perceptions of skewed process, with two fundamentally properties on the same street each potentially valued very differently.
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 is one of 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 would not obviate people from expressing concern about taxes being too high, but it would change the focus from the amount of potential 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. Next: the Real Property Tax Act
This article first appeared in the Telegraph Journal in June 2023 (not available there any longer).
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Taxing New Brunswick: An Insider’s Guide to Successfully Challenging Your NB Property Assessment (available on Amazon)