condo hotel tax 

By Loreth Beswetherick The Whistler municipality is going to be about $450,000 short in tax revenue this year because several condominium hotels have had their tax classification downgraded from commercial to residential. Whistler is appealing some of those re-classifications but condo-hotel owners say the legislation must be changed if a level playing field is to be found. Some of the affected condo-hotel owners have, in turn, mounted their own challenge to the system and are appealing the assessment of "pure" hotels, like the Chateau Whistler. To avoid being assessed by the BC Assessment Authority as Class 6 commercial, several condo-hotels have reorganized the way their rental pools are managed. Under the current legislation, if more than 85 per cent of the contiguous units are in the same rental pool and controlled by one property management company, the entire property is assessed commercial. But, if there are two or more property management companies involved in one building and they control less than 85 per cent of the units each, the entire property is classified as Class 1 residential. As property owner Jim Allard says, some Whistler strata councils are avoiding a commercial classification by simply pulling a percentage of the units out of the rental pool and letting them sit empty. He said reorganizing affairs to minimize the impact of tax is a basic Canadian Charter right. The municipality, is however, challenging the classification of four properties that have used this technicality to avoid commercial classification — Cascade Lodge, Timberline, AlpenGlow and the Marriott Residence Inn. While there are other condo-hotel properties that have residential tax status, RMOW acting director of finance, John Nelson, said the municipality has only launched appeals with the BC Assessment Review Panel on those four because they were the only ones that were re-classified for the 2000 Assessment Roll. The re-classification of those four properties, he said, will represent about a $450,000 shortfall in municipal taxation revenue this year. The RMOW appeals were filed before the end of January but as yet no dates for a review panel hearing have been set. Nelson said the review panel will likely refer the appeals to the BC Assessment Appeal Board "because it is a question of law as opposed to just a judgement on the assessment." He expects the cases could drag on for weeks or months. "These things can go on for some time. In fact they can go on for several years if there is a real complication." Nelson said the RMOW is, in the meantime, working with the Ministry of Municipal Affairs in an effort to close the loophole in the legislation. "We are working with the ministry to review the overall legislation and we hope to come up with some changes in that legislation so that the issue is resolved to the satisfaction of all parties and doesn’t keep cropping up on an annual basis," said Nelson. "We are hoping to have the matter resolved during this calendar year so that there won’t be a similar situation for the 2001 taxation year. Right now there is a lot of concern amongst all the hotel people that it is not a level playing field." While the municipality is appealing those four properties, the owners of units in the Tantalus Lodge say the Assessment Authority itself is appealing the classification of the Tantalus. The Tantalus went from Class 6 commercial to Class 1 residential for the 1999 taxation year, said unit owner and lawyer Bob Marriott. The Tantalus case has, however been adjourned and is still pending. The Tantalus was classified residential from the time it was built in 1979 but, after a landmark case in Victoria involving the Victoria Regent Hotel — and a subsequent amendment to the Assessment Act in 1994 — the following year, the Tantalus — and condo-hotel properties across the province — were re-classified as commercial. Some properties then re-organized their affairs to avoid the commercial classification while others are still pegged as Class 6. This, said Allard, has created an unfair playing filed. "They created this absolute nightmare where you have got stratified condo owners pitted against each other." For example, said Allard, the Glacier Lodge has 99 units with 15 per cent of them in a separate rental pool while the Tantalus, with 76 units, at the time had more than 85 per cent in one pool. The Glacier was classified Class 1 residential while that year the Tantalus was classified Class 6 commercial. That meant owners had to fork out 2.5 times more in property tax. While Glacier owners cut cheques for around $2,000, Tantalus owners had to cough up $5,000. Craig East, who sits on the strata council of Whistler Village Inns and Suites and is one of a group of stratified condo-hotel owners working toward equity in the taxation system, said Whistler was particularly hard hit by the 1994 legislative amendment. He said for over 1,000 local properties, the change represents a $2.5 million impact per year. "It’s absolutely huge. We are paying 10 to 14 per cent of our revenue in taxes, compared to CP Hotels which pays likely under four per cent," said East. "Prior to the change in legislation, we were paying about four per cent, the same as the Chateau Whistler." The difference between a "pure" hotel and a stratified condo-hotel property is that the hotel is assessed on the income generated per room, while condo-hotels have their assessment based on the market value of each unit. Since the units are sold frequently it’s easy to determine market value. East said this is unfair and he and his group have been fighting for equity for the last five years. Their battle has taken them through both the B.C Supreme Court and Court of Appeal. The whole imbroglio was sparked by a B.C Assessment Authority attempt to reclassify the Victoria Regent, a condominium hotel, as Class 6 commercial in the ’80s. The case ended up before the Supreme Court and finally the court of Appeal in 1990, where the judgement was upheld that the Victoria Regent units remain Class 1 residential. Allard, who also owns units in that property, said CP Hotels then complained about an unfair advantage and it was this that prompted the Assessment Authority to redraft the legislation. The change saw condo-hotels classified as Class 6 with assessments based on recent sales while "pure" hotels were assessed on gross income. "It was a tragic stoke of a pen and, effective Jan. 1, 1995, it changed the treatment of widely held strata units throughout this province but, more importantly, it had a huge impact on Whistler," said East. "This classification between pure hotels and condominium hotels that don’t have any bars or restaurants or any other additional sources of income is just totally unfair," said Marriott. "They assess us on the sale price and on a commercial basis and yet, for pure hotels, they use the income approach." East and his group appealed the Chateau Whistler assessment last year but lost. Their argument was that the process is clear: the market must govern taxation. They pointed out two sister properties, the Hotel Vancouver and the Waterfront Hotel, representing 1,000 rooms, were sold in 1997 for a total of $301 million but this was not reflected in the hotels’ assessment. "We said hey, Assessment Authority, there was a significant sale and we thought you would have adjusted the Chateau, it being a very similar sister," said East. "The assessor came back and said sorry, the Vancouver assessment board did not treat it as a sale so they had nothing to go on." East has now taken his battle to Vancouver, where he made his case before the Assessment Review panel last Week, challenging the assessments of the Hotel Vancouver and the Waterfront Hotel with the hope that, if he is successful, the Chateau’s assessment will have to be adjusted. "It is clear the BC Assessment Authority has one set of rules for the sales of major hotels and another for the sale of individual strata hotel units in Whistler." East said that for Whistler strata owners to get equity, the law has to change and this is the route he has chosen to fight for that change. "Unfortunately the RMOW, although they are interested, are not very passionate about getting change as quickly as the strata owners wish," said East. "Both the RMOW and owners are being stymied by Victoria... the problem is the NDP government has too much on their plate politically to deal with this really tragic stroke of a pen." Marriott said if the Tantalus appeal fails, there is always the courts. "But I would encourage the government to look at amending the tax treatment so it is all done on a fair basis." East expects a judgement on his Vancouver appeal in mid April. Nelson said Whistler, in the meantime, has had to reorganize it’s 2000 budget to reflect the expected loss in revenue.


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