Small businesses facing unfair and inequitable treatment with their property assessments could see change this year, as two business owners are leading the charge for an investigation into how the assessment agency operates.
It was standing room only in council chambers on Jan. 9, as over 80 people — business owners and supporters — heard Bernie Dombowsky and Kristy Van Slyck urge city council to push for a secondary audit of the Saskatchewan Assessment Management Agency’s (SAMA) work.
Generally, a secondary audit would only be undertaken in circumstances where there is a question or indication of significant statutory non-compliance with provincial legislation, a council report explained. In those situations, the managing director of SAMA’s Quality Assurance Division (QAD) would request approval from the agency’s board to initiate a secondary audit.
While QAD is independent of SAMA, it is still in the same building — at the agency's headquarters in Regina.
Both Dombowsky — owner of Charlotte’s Catering — and Van Slyck — vice-president of acquisitions and leasing with Viridian Property Corporation — believe there is enough evidence for an audit to happen.
Specifically, they point to how SAMA assesses businesses in different ways, even though — for example — some are across the street from each other.
For example, a small business on High Street West saw its property taxes increase by $3,701 from 2020 to 2021, while a law firm across the street — with 4,000 square feet of more space — saw its taxes fall by $7,000 over the same period.
“With SAMA’s changes in 2021, the small mom-and-pop shops are now subsidizing the institutions,” said Dombowsky.
Both changes occurred because of the adjustments SAMA made to the market capitalization rate — or cap rate — that created more than two dozen property classifications. Some businesses saw higher cap rates, which dropped their property taxes, while others experienced lower cap rates, which increased their taxes.
After the presentation and discussion, council voted 4-0 to have city administration contact SAMA’s QAD to request a preliminary investigation to determine if there is sufficient cause to complete a secondary audit, while QAD must act immediately and provide updates about the process.
Mayor Clive Tolley and Coun. Dawn Luhning were away, while Coun. Jamey Logan recused himself due to a conflict of interest.
Meeting its legislative duty
The only thing residents want SAMA to do is to meet its legislative duty and conduct an audit as laid out in provincial legislation, Van Slyck said.
“You would think that this type of audit would be welcomed by an assessment service provider, as it provides the opportunity for an independent review to show they are doing a proper job and achieving their equitable assessments for a municipality such as the City of Moose Jaw,” she remarked, but that’s not the case.
In Alberta, its secondary audit process is a detailed investigation that digs into issues, while its audit manual is the template upon which SAMA bases its documents, she continued.
What’s interesting about Alberta is it conducts an annual assessment audit on municipalities — it rotates through groups of communities — regardless of problems, although a municipality or the province can request one.
While Saskatchewan has the authority to conduct secondary audits — legislation has been in place since 2006 — there has never been such an audit anywhere, Van Slyck said.
Meanwhile, SAMA’s secondary audit policy does not refer to “significant statutory non-compliance,” nor does provincial legislation. Moreover, the agency suggests the audit is an issue-based problem activated by systematic issues — which is not the case.
Van Slyck asserted that there were inaccuracies and errors in the report that city manager Jim Puffalt provided to council about the secondary audit and SAMA’s QAD.
Doing a proper job
“The audit is a means to determine whether an assessment service provider is doing its job properly. It does not need to be triggered as is being presented in the material by SAMA today,” said Van Slyck.
“Legislation provides SAMA the means of providing ratepayers and municipalities the assurance that assessments are being conducted properly by the assessment service provider.”
Interactions between SAMA officials and ratepayers have been conflicted because ratepayers have accepted statements that the agency has made, only for the agency to backtrack at the Board of Revision and say there was a misunderstanding, she continued.
This has left ratepayers with no recourse for rebuttal because all evidence for inaccurate property assessments must be tendered first.
“SAMA’s inconsistent (assessment) model that came out year after year raises questions about confidence about SAMA’s assessment department. This is best demonstrated by the way SAMA reclassifies and regroups sale properties (even) though there is no physical change to that property,” said Van Slyck, noting the agency is using outdated sales information for its decisions.
“The people of Moose Jaw deserve fair and equitable taxation and this will only occur when a secondary audit occurs,” she added.
Change is needed
Dombowsky’s issues with the agency go far beyond the original inequities, he said, since he believes SAMA’s “heavy-handed treatment” of business owners filing appeals is driving away businesses.
Last year was Charlotte’s Catering’s 30th year in Moose Jaw, but because Dombowsky felt he was on trial during his appeal presentation to SAMA, he put up a “for sale” sign — only the building was for sale — and purchased a property in Regina for a new business home.
“I feel in my case, SAMA abused their discretion to defeat my appeals,” he said.
Since SAMA’s cap rate model is flawed, Dombowsky wondered whether council would help restore confidence in the business community and demand adjustments to the 2023 tax roll; this prompted applause.
Pursuing the secondary audit would change the system and make the cap rates correct, Van Slyck told Coun. Doug Blanc.
While true, that process would take more than a year, said Dombowsky. He didn’t think the shops on Main Street or his business neighbours could afford another year of “death-rate taxation.” Instead, he wanted the 2023 tax roll fixed, prompting more applause.
The secondary audit wouldn’t be time-consuming because it’s laid out in The Cities Act, said Van Slyck. Once initiated, SAMA must make corrections within a year, or the tax roll cannot be approved.
If the secondary audit is triggered, it happens, and the results are unfavourable, what happens then, asked Coun. Heather Eby.
“Fire SAMA! Fire SAMA!” someone shouted from the gallery, prompting prolonged applause.
Not every business will receive back the same amount on its re-assessed values, but the agency will closely investigate their actual market value, said Van Slyck. It will be fair once the data is corrected because that is how SAMA is legislated.
City hall contracted SAMA and chose to use it as the assessment service provider, but there are other options, she continued. Meanwhile, SAMA has said its operations are expensive and the whole process is complicated — which is untrue.
“There are other service providers out there that could do a good job. Or we could bring it in-house like we used to,” she added, prompting more applause.
While no one on council was around in 2006 when SAMA was hired, reports suggest people weren’t happy with the in-house assessment service either, said Eby.
Coun. Jamey Logan wondered why — if other Saskatchewan municipalities also use SAMA and it uses one manual — Moose Jaw has many different cap rates while others have a few.
Moose Jaw’s numbers are “so wild” compared to other municipalities — even though everyone uses the same manual — because of the information SAMA enters into the ratios, said Van Slyck. The agency collects business sales over four years, so different data goes into the model.
“That is why I keep saying that data inputted into the model was incorrect, insufficient and inappropriate,” she added.
Coun. Blanc was concerned that QAD might not be truly independent of SAMA but admitted he didn’t have enough information to confirm that.
He wondered whether this situation would end if the primary audit said a secondary was unneeded. He also wondered, if a secondary happened, whether SAMA would simply increase the taxes of the bigger businesses — banks, law firms — to compensate, which wouldn’t fix the problem.
“The assessment should be done on all businesses, whether small mom-and-pop or larger ones,” he said to applause.
The municipality can go to the provincial government if it disagrees with the primary audit decision, while there are other steps it can take, said city manager Jim Puffalt.
From past presentations, the biggest component missing from this discussion is common sense, said Eby. She believed that two buildings across from each other on High Street West should pay the same tax rate.
Coun. Kim Robinson — an accountant — said that quality assurance usually means a company uses the right standards and regulations. However, a QA audit won’t identify if the cap rate is broken.
While he didn’t see another formula to fix the situation, he thought SAMA should adopt its Alberta counterpart’s action to conduct secondary audits on municipalities annually.
This issue is a big problem for residents, as evidenced by the large gallery crowd, said Coun. Crystal Froese. She thought SAMA should prioritize this secondary audit request and move quickly.
“There should be a fair way to assess properties in the city,” she added.
The next regular council meeting is Monday, Jan. 23.