The City of Revelstoke will lose over $550,000 in tax revenue per year on an ongoing basis after Revelstoke Mountain Resort (RMR) successfully appealed many of its property tax classification assessments.
In addition to the ongoing loss tax revenues each year, the city will have to pay back retroactive taxes it collected for the years 2016–2018, all of which were part of RMR’s successful appeal. That amount totals $1,548,944.
The successful appeal was revealed in the City of Revelstoke’s 2018 Annual Report, which was tabled at Revelstoke City Council’s June 18 meeting.
The appeal case involved the classification of condos inside the Sutton Place Hotel at the base of RMR. Many of the units in the existing buildings at the resort base are privately owned. The owners of the individual condos put them into a pool that allows the resort to rent the rooms out much like hotel rooms.
Prior to the appeal, these condos were classified as “class 6” commercial properties and were charged a significantly higher rate of taxation. RMR appealed to the BC Assessment to have them reclassified as “class 1” residential properties, which pay a much lower rate.
In B.C., BC Assessment is responsible for setting property assessments and setting annual assessed values for B.C. real estate. Local governments, such as the City of Revelstoke, are not directly involved in the assessment of properties.
Although the City of Revelstoke will have to remit $1,548,944 back to BC Assessment, the city had established a special reserve fund to cover this eventuality. Each year for over at least five years, the city had put funds into the tax equalization fund that was established to provide a buffer if RMR’s appeals were successful. That reserve fund sat at $1,137,308 at the end of 2017. An additional amount was added in 2018, but with the subtraction of the $1,548,944, it sat at $31,002 in the 2018 report.
BC Assessment’s Property Assessment Appeal Board released its decision on March 5, 2019.
RMR’s taxation appeals were not only for condo units in the Sutton Place Hotel. The resort was also successful in appeals on undeveloped lands that it owns near the resort. Some of those assessments included new split assessments to account for agricultural uses.
City of Revelstoke Director of Finance Tania McCabe said that RMR has beekeepers operating on some of its properties and the resort argued that the large undeveloped lots should be classified as agricultural land, not residential, which would result in much lower assessment and taxes. The assessment appeal decisions show new split classification between residential and agricultural on some properties, and corresponding reductions in tax rates.
In a statement to the Mountaineer, RMR VP of Operations Peter Nielsen said the assessment appeals were a “standard business practice” designed to align RMR assessments with similar properties.
“The tax appeal was to ensure our properties were being treated fairly and consistently with similar properties throughout the province,” Nielsen wrote. “With our commitment to continued investment at the resort, we anticipate our tax contributions to the City or Revelstoke will continue to increase over time and provide increasing benefits to the community.”
A BC Assessment spokesperson provided links to the Property Assessment Appeal Board website, and a link to procedure and a link to the procedure the assessment authority uses to classify short-term strata rentals. said the agency regularly updates municipalities with information on outstanding appeals.
What does this mean for the Revelstoke taxpayer?
In 2018, the total amount of property taxes collected by the city was $11,538,000. The refund to RMR for that year was $564,072, or approximately 4.9% of the city’s property taxation revenue.
Based solely on taxation revenue, the city would have to make up the approximately 4.9% in property taxes just to make it back to zero. However, property taxation revenues are not the only source of revenue for the city. The city’s revenue for 2018 was just under $21 million, including other sources of revenue such as fees and grants.
City of Revelstoke Director of Finance Tania McCabe said that the assessment determination is up to BC Assessment. “It is what it is. BC Assessment has to follow the legislation they’re required to follow,” McCabe said. “They are following those rules and it’s correcting what was done incorrectly for a number of years.”
She said she’s working through the setback by “belt tightening” in the city departments. “I’m not going to say it won’t be a challenge,” McCabe said, adding that the city will need to take “a really hard look at the budget.” She said a low snowfall this past winter would provide a budget buffer since snow removal costs were low. (The snow removal budget is Revelstoke’s annual budget wildcard — it can vary by hundreds of thousands depending on snowfall.) McCabe said she’d communicated the news to city department directors and asked for budget savings.
McCabe said the city also has other reserve funds in place to mitigate unexpected shocks to city revenues.
McCabe also noted that the new hotel at the base of RMR, which received development permit approval at the June 18 council meeting, will be operated as a hotel, not individually owned condos, so the city won’t have the same issue with the new hotel.
Revelstoke Mountain Resort’s assessment appeals have been recognized as a risk to city tax revenue for years. See this story from 2013, and this one also from 2013. The reassessments caused budgeting issues after the city was forced to refund taxes well after the annual budget was completed.
What’s changed this time is the BC Assessment determination appears to be permanent, although there will be some variability depending on the occupancy levels in individual condo units each year, and other factors.
Want to learn more?
Appeal decisions can be found on the Property Assessment Appeal Board website. The specific appeal numbers for Revelstoke Mountain Resort’s appeals for 2016, 2017 and 2018 are: 2016-20-00060, 2017-20-00039, and 2018-20-00031. The vast majority of the adjustments came in the 2016 year, and the remaining two years show the adjusted value.
The formula for determining whether a short-term rental strata lot is commercial or residential is complex and can involve split classifications and grandfathering in of older units. It is also dependent on the number of units controlled by one entity. For more details, See BC Assessment’s explainer on the classification of strata lots used for short-term rentals.