Bernie Dombowsky has been a long-time business owner in Moose Jaw, but he’s now being forced to move his business because he can’t afford the taxes on his building.
The owner of Charlotte’s Catering, Dombowsky brought evidence to city council on Monday night that there are issues with the way the Saskatchewan Assessment Management Agency (SAMA) assesses properties.
He shared a letter he received from a SAMA appraiser saying that during the last re-assessment cycle, there was one cap rate of 6.81 per cent. During this cycle, SAMA moved to a different market rent and cap rate model that results in “multiple stratification groups.”
Dombowsky noted that there were 17 different groups in Moose Jaw that had cap rates ranging from 3.09 per cent to 9.3 per cent. When it comes to property taxes, the higher the cap rate percentage, the lower you pay in taxes. Meanwhile, in Regina, there is one standard cap rate of 6.967 per cent.
His business fell under general retail with a cap rate of 3.09 per cent, while medical offices, law offices, high-rise offices and funeral homes had a cap rate of 9.3 per cent.
Dombowsky shared a few examples including a law office on High Street compared to a smaller vacant retail space right across the street.
The vacant space was assessed with a total market rent of $16,824 and an assessed value of $600,200. That building saw its property taxes increase by $3,701 from 2020 to 2021. The property taxes were approximately $11,058 in 2021.
Meanwhile, the law office across the street was given a total market rent of $62,106 and an assessed value of $571,000. Their property tax decreased by $7,000 to $10,354 in 2021.
“Once you start losing small retailers on Main Street, tourists are coming to see the tunnels but they are also coming to visit the little shops and once you've lost them, they are gone,” Dombowsky said.
In fact, Dombowsky found that the new model resulted in over $56,000 in lost tax revenue in 2021 versus 2020 on five properties alone.
Coun. Dawn Luhning said she had been in contact with Dombowsky several times before his presentation and, as a member of the SAMA board, she was concerned and wants to understand why there is such a discrepancy.
“I want to, as a board member of SAMA, get a better understanding of the cap rates and how they are implemented in the manuals with SAMA because as a board member we don't necessarily get into the nitty gritty of how these cap rates in the Moose Jaw or Regina,” she said.
Councillors Heather Eby, Crystal Froese, Kim Robinson and Jamey Logan agreed that what was presented to them doesn’t make sense.
Logan said he recently talked to another business owner with a small business of 2,500 sq ft and was assessed at $460,000, triple from the last assessment based on the cap rate of 3.09 per cent and the size of the building. According to Logan, the business owner could have pulled a minimum $100,000 loan from the bank, added 301 sq ft and the assessed value would have dropped by $250,000.
“Do the math, it makes no sense,” Logan said.
Mayor Clive Tolley said it is a very serious issue, but also reminded business owners to complete their business report forms so that SAMA has more information when doing assessments.
“You can help be a part of the solution by completing your business report forms and returning them to SAMA, which gives them more information on which to base their assessment decisions on,” Tolley said.
City manager Jim Puffalt did add that the city did reach out to SAMA with the information Dombowsky presented. SAMA has replied but the city administration is following up with SAMA for more clarity.
It was also released on Monday afternoon that the Saskatchewan Urban Municipalities Association (SUMA) engaged the International Property Tax Institute to review the property assessment and taxation system in Saskatchewan.
The completed report was entitled “Review of the Property Tax System in Saskatchewan, April 2022.” The report does provide options for change on several assessments and taxation policies. The SUMA board of directors will review the report on Sept. 23, followed by the SUMA City Mayors’ Caucus on Sept. 27.
Any potential changes will be brought forward to stakeholders in the future, but no changes are expected to be immediate.