Commercial Assessment Averaging Program

Creation of the New Program

Halifax Regional Council has directed staff to implement a rolling three-year Assessment Averaging Program for commercial properties to help increase predictability in property taxes for commercial property owners and businesses. This will add certainty to future operating costs (related to taxation) for business owners with properties experiencing sudden spikes in assessed values.

The phase-in of these assessment increases over three years can be done under provincial legislation, through the creation of a Commercial Development District. To make the program available to as many businesses across the Halifax region as possible, a separate and focused amendment to the current Regional Municipal Planning Strategy (Regional Plan) is required, with amendment approval before the end of 2021. This would allow the development and approval of an Assessment Averaging Program in early 2022, to facilitate the implementation of the program in 2022/23 or 2023/24, depending on the delivery date of the municipality’s new tax billing system.

Information on the program origin is available in the May 4, 2021 staff report and presentation.  Details of the proposed program features can be found in a March 22, 2022 staff report and presentation.  In March 2022, staff identified that the new tax billing system would not be installed in time to implement the program in 2022, so the program will be put into place for the final 2023 tax bill.

Three Phases to Implementation 

  1. Amendment of Regional Plan

    • Halifax's Regional Municipal Planning Strategy (RMPS) was amended to make the program available to commercial properties outside of the Regional CentreThe Regional Centre includes the Halifax Peninsula and Dartmouth within the Circumferential Highway.
    • Staff prepared a recommendation report for the RMPS amendment that was considered and approved by Regional Council on December 7, 2021 (Item 12.3)
    • The RMPS amendment came into force on February 5, 2022.
       
  2. Confirmation of Program Details and By-Law Approval

    • The Assessment Averaging (Commercial Development District) by-law was reviewed by Regional Council at First Reading on March 22, 2022;
    • Once Halifax Regional Council has approved the by-law, it will be provided to the NS Minister of Municipal Affairs for final approval.
       
  3. Communication of Program and 2023 Implementation 

    • Following approval of the Assessment Averaging by-law, the new program will be communicated/explained to the business community, with a focus on commercial property owners, in the Halifax region.
    • Staff will incorporate the new program (“averaged” assessments) into its billing process, which will be seen on final 2023/24 tax bills (due October 2023).


Planned Timeline

 

flow chart demonstrates the planned timeline of program

flow chart demonstrates the planned timeline of program


Proposed Eligibility Criteria 

The proposed program will be eligible to commercial property owners in the Halifax region:

  1. in an area serviced by municipal water and sewer (provincial legislative requirement);

and

  1. with a commercial assessment increase greater than 5% any year.

Other Program Features

Properties with annual assessment increases over the program threshold will have their annual market increase phased in over three years.

No application is required (by the property owner). All eligible properties will automatically be averaged, if their annual increase exceeds that year’s program threshold.

It is estimated that 10% to 25% of all commercial properties would see their assessment “averaged” (reduced) in any given year. So, roughly  550 to 1,350 of commercial properties. This is expected to vary, year by year.

Assessment Phase-in Examples

Example 1 – Property assessment increases more than 5%

Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023
Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023
$1,000,000 $1,300,000 $1,300,000 $1,300,000
Taxable Value 2021 Taxable Value 2022 Taxable Value 2023
Averaging $1,100,000 $1,200,000 $1,300,000

In Example 1, the market assessment of a commercial property increases 30 per cent in year one (2021), then remains unchanged in years 2 and 3. The assessment averaging would apply the $300,000 increase over three years, $100,000 in each year.

Example 2 – Property assessment increases more than 5% for three consecutive years

Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023 Market Value 2024 Market Value 2025
Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023 Market Value 2024 Market Value 2025
$1,000,000 $1,300,000 $1,675,000 $2,125,000 $2,125,000 $2,125,000
Value added from Year 1 $100,000 $100,000 $100,000
Value added from Year 2 $125,000 $125,000 $125,000
Value added from Year 3 $150,000 $150,000 $150,000
Taxable Value 2021 Taxable Value 2022 Taxable Value 2023 Taxable Value 2024 Taxable Value 2025
Averaging $1,100,000 $1,325,000 $1,700,000 $1,975,000 $2,125,000

In Example 2, the assessment of a commercial property increases more than the threshold for multiple years. Each year’s increase is phased-in over three years. In this example, from 2022 through 2024, more than one deferred value is being added to the prior year’s taxable assessment. By 2025, the taxable assessment is equal to the market value assessment.

Example 3 – Property assessment does not increase more than 5%

Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023
Market Value 2020 Market Value 2021 Market Value 2022 Market Value 2023
$1,000,000 $1,050,000 $1,100,000 $1,150,000
Taxable Value 2021 Taxable Value 2022 Taxable Value 2023
No Averaging $1,050,000 $1,100,000 $1,150,000

In Example 3, the market assessment of a commercial property increases 5.0% in year 1, 4.8% in year 2 and 4.5% in year 3. Since these increases do not exceed the annual 5 per cent threshold, the full market value is taxable in each year. Assessment averaging is not applied.

 

Commercial Property Assessment Averaging 
Questions & Answers

What does this new program aim to do?

The Assessment Averaging Program for commercial properties aims to help increase predictability in property taxes for commercial property owners and businesses. It is hoped this will add certainty to future operating costs related to taxation for business owners with properties experiencing sudden spikes in assessed values.

Why is this referred to as an "Assessment Averaging" program?

For many property owners, the three-year phase-in will result in the same taxable assessment as taking the average of their current year and two prior year assessments. 

Looking at Example 1, the 2022 taxable value of $1,200,000 equals:
($1,000,000 + $1,300,000 + $1,300,000) / 3 = $3,600,000 / 3 = $1,200,000

How will this program help increase predictability for commercial property owners and businesses?

Currently, property owners pay tax on the most recent assessed value. Under assessment averaging, property owners with large assessment increases will pay only a portion of that increase in the first year. A commercial property with a value increase above the 5% threshold, will have all or part of the assessment increase phased-in or “averaged” over three years, providing more time to adjust to the increased value.

Will decreases in assessed value be phased in?

No. Decreases will apply immediately. 

Could my “averaged” assessed value ever exceed the market value on my annual assessment notice from the Property Valuation Services Corporation (PVSC)?

No. Your “averaged” assessed value (that tax rates will be applied to) will never be higher than the market value assessment provided by PVSC.

Are increases in value due to new construction included in the assessment averaging?

The impact of new construction (carried out by a property owner) on a property’s assessed value, generally, can be anticipated. However, some increases in assessment, especially due to market forces, cannot be predicted. Assessment increases up to $1,500,000 will be eligible for phase-in (for properties increasing in value more than 5 percent). 

Why was $1,500,000 chosen as the maximum phase-in amount?

There are several reasons:

  • It focuses the program on predictability for higher-taxed small properties, which municipal staff have seen to be those properties with assessed values between $1,000,000 and $2,000,000.
  • It takes away disincentives for small properties to grow or for other properties to renovate or modernize their facilities. 
  • It recognizes that large capital investments will be made with an expectation of increased assessments and increased property taxes. 
Does the implementation of this program mean the municipality will generate more or less tax revenue?

The program is designed to be “revenue neutral,” meaning it is not intended not change the total amount of commercial tax the municipality collects in any year.

Who is eligible for the program?

The proposed program will be eligible to commercial property owners in the Halifax region who are located in an area serviced by municipal water and sewer - as shown in Schedule 1 of the proposed Commercial Development District By-law - and have an increase in commercial assessment of more than 5 percent.

When will this program be available?

The program will be effective for the 2023/24 taxation year, so eligible commercial property owners will start to see assessment averaging on their final property tax bill in the fall of 2023.

Halifax Regional Council is now reviewing the Commercial Development District By-law which describes the new program.  The municipality is also in the process of replacing its property tax billing software, which will be required to implement the program in 2023.

Where can I find more information? 

More details on the program, including the proposed Commercial Development District By-law, are available in the March 22 staff report and presentation.

 

Contact Us

For more information or to provide comments/feedback on the proposed program, please contact Andre MacNeil at HRM Finance: macneia@halifax.ca.