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Fairness, equity missing in condo taxes

Problem grows as province encourages resort development
1350duggan
Mike Duggan believes the Class 1, 6 issue is hurting sales for condo hotelslike the Nita Lake Lodge. Photo by Maureen Provencal

By Alison Taylor

Jim Allard is livid his property tax bill in Whistler hovers around the $7,000 mark for his Tantalus Lodge condo unit.

Just across the village, at the Glacier Lodge, Allard’s brother pays around $2,000 in property taxes.

“We both do exactly the same thing,” said Allard, who is in the gravel business in the Lower Mainland. “That’s not right.”

The two-bedroom properties are easily comparable, even assessed at roughly the same value. But while one brother pays the residential tax rate (Class 1), the other pays the much higher commercial tax rate (Class 6), even though both properties go into a rental pools when not being used by their owners. A loophole in the provincial tax system allows for the disparity.

After years of Whistler lobbying for solutions the provincial government is now involved in a review. Industry stakeholders have put forward several solutions as part of the review, but to date none of them have been acceptable.

Rick Thorpe, Minister of Small Business and Revenue, was not available for comment before Pique Newsmagazine ’s deadline this week but the ministry’s director of communications, Theresa Lumsdon, confirmed the review has been underway since spring 2006.

“It’s a priority of our assessment system and the matters at hand, especially for strata hotels, are complex and difficult to resolve due to the tax implications on property owners and the revenue impacts on municipalities,” said Lumsdon.

Though all sides are essentially calling for the same thing — fairness and equity in the tax system — the solutions are not easy to come by. Raising one brother’s tax bill, for example, is not a popular option for any government; lowering the other brother’s taxes will have a significant impact on municipal revenues, particularly Whistler’s.

“One of our fears is that (the province will) come up with a solution that is good for everybody else except Whistler,” said Whistler Mayor Ken Melamed, adding that a worst-case scenario could mean a $2.5 million budget shortfall for the municipality.

Whistler’s position is that the solution should be revenue neutral to municipalities.

“It’s completely the province’s responsibility and they know they have a big challenge,” said the mayor. “If it had been easy it would have been fixed by now and this is one of those very complicated, very divisive issues that I think, ultimately, it’s going to require the province to take a tough position.”

Whistler has been asking for resolution on the issue for several years. It was the proverbial canary in the tax classification coalmine, sounding the alarm to the provincial government about problems in their tax classification system for several years. Whistler had long been the lone community with a multitude of condo hotels, and as such most affected by the issue.

Now, the effects are rippling outwards from the resort, across the province and being felt in more than just the back pockets of Whistler condo hotel investors like Jim Allard.

It has become clear that a resolution must be found, because the uncertainty around property taxes is hamstringing the development of condo hotels — a potential problem for a province committed to doubling tourism by 2015.

“Right now if strata hotels are put into Class 6 almost assuredly they’re uneconomic,” said Mike Duggan, president and founder of the Boutique Hotels and Resorts of B.C.

“The issue here is that both myself personally and many others, I think, have embraced the premier’s goal of doubling the tourism industry, but to do that we need more infrastructure and certainly one of the key elements of further infrastructure was strata hotels. And if we’re muzzling that opportunity I am puzzled about where exactly we will see the growth in the tourism industry, because I actually cannot see it.”

He uses Whistler’s Nita Lake Lodge, one of the association’s eight boutique hotels under construction, to illustrate his point.

One quarter of the 78 hotels rooms in that Creekside development have not yet been sold. Duggan believes they’ll continue to sit on the market until there’s a resolution to the Class 1/6 issue.

“I would say they’re not going to move until such time as there’s some certainty related to the taxation,” he said.

The province has clear policy around tax classification. At the heart of the issue, however, is a clause in the policy that says if a complex splits into two management companies with one company controlling no more than 85 per cent of the building, and it meets all the other requirements, it can qualify for much lower residential or Class 1 taxes.

Duggan puts it simply: “avoid front desks.”

“I think the movement towards tax avoidance has created some of the most challenging customer service models that we could possibly ask for — multiple front desks, multiple managers in units,” added Duggan. “It’s just a travesty.”

Tourism Whistler’s Diane Mombourquette, vice president of finance and operations, has the anecdotal and factual evidence to back it up.

Stories of bad experiences where guests can’t check into their rooms because there is no front desk, or the front desk at the complex doesn’t manage their rooms, are what Tourism Whistler is up against.

“There is a real impact on our business,” said Mombourquette.

“The ultimate worst case scenario would be in the case of an emergency and you weren’t able to locate the people because you don’t know the property manager who’s servicing that room.”

As the issue spills beyond Whistler’s boundaries to other ski resorts, CanWest Ski Areas Association is also sitting up and taking notice and lobbying for resolution.

“We are interested in selling a really great sport with good service to people and we don’t want to see irregular management interfere with that,” said Jimmy Spencer, president and CEO of the association. “We want to see a sound solution which serves the industry well and that, more importantly, serves our guests well.”

A solution, however, remains out of reach for the time being.

Ministry spokesperson Lumsdon could not give a definitive deadline for a resolution other than to say: “We would like to have this done sooner than later.”

Meanwhile, it’s getting tougher for the “little guys”, who as Allard says, are getting punished for the inequity in the tax classification.

He is calling on the municipality to reign in its spending.

“It’s easy to just keep taxing the condominium owners or the part time owners because they’re not very visible, they don’t vote,” he said. “But they (the municipality) really need to get their spending under control.”

Whistler maintains it’s unfair to have a solution imposed on them that will have potentially tremendous impacts on its budget.

“We live in a time when local governments are actually trying very hard to keep taxes down and they’re very respectful and mindful of the cost of doing business in their communities,” said Melamed.

This year, for the first time in the 25 years he’s owned his Tantalus Lodge unit, however, Allard has considered selling and getting out.

“This year I have been very seriously thinking about getting out and… I was almost going to get out and go to Sun Peaks and then I find out that they’ve just run into the same problem that we’ve got.

“This is not a Whistler problem anymore.”