Maxed Out 

Killing the Golden Goose: Part II

After the US Civil War, carpetbaggers from the North descended on the South like Christians invading Infidels during the Holy Crusades. It was all about plunder, wealth and power. Instead of swords and arrows, the carpetbaggers brought rigged laws and bogus tax assessments and cheated the defeated southerners out of pretty much the only thing they had left – their land.

With the might of corrupt law enforcement behind them, the carpetbaggers encountered much frustration but little real opposition. One story, possibly apocryphal, was told about a particularly egregious little weasel named O’Grady who roamed the hill country of the Virginias duping hillbillies out of what he was sure was valuable coal land.

O’Grady was oily and duplicitous and had more tricks for cheating a man out of his land than street hustlers have for shaking spare change out of tourists in New York City. Sometimes he’d pretend to be their friend and front them the tax money they didn’t have, only to foreclose a short time later. Sometimes he’d tell them bold lies of future riches and get them to "partner" with him. The terms of partnership were all in O’Grady’s favour and soon enough he’d own the land outright.

His favourite ruse though was to insult the landowner, to needle the man to the point where he’d haul off in frustration and smite the scoundrel a mighty blow. Of course, he always managed to have a bought and paid for sheriff’s deputy nearby to witness this violent assault, arrest the assailant and let the wheels of justice do the rest of the work for him.

On the last day of O’Grady’s life, he was angling for one of the prettiest patches of hill country he’d ever seen. The semi-literate man who owned it traced his claim back several generations to a pioneering grandpappy. He was tall and lanky and, like all remote hill people, suspicious of strangers and taciturn in their presence. He’d sold off enough timber and tobacco to have the cash to pay the newfangled tax bill and he’d turned down an offer to partner with O’Grady.

So O’Grady was deep into insulting the close-mouthed man when his life came to an end. He’d run down his land, calling it worthless, and he’d thoroughly demeaned the ramshackle house the man and his family called home. He’d called his wife ugly, his children stupid and suggested his mother may not have enjoyed the blessings of a sanctified marriage. The landowner had sat stonefaced through O’Grady’s tirade, calmly smoking a corncob pipe and ignoring the increasingly frustrated little man.

So the sheriff’s deputy, lurking behind nearby bushes, was particularly surprised when he saw the man jump to his feet, pick up a nearby axe and sink the blade several inches into O’Grady’s skull, killing him instantly and nearly taking his head clean off.

After prolonged questioning, all the gentleman had to say was, "He shouldn’ta said that about my dawg," referring affectionately to a blue tick hound sleeping peacefully on the porch.

You never know which straw is going to be the final straw.

The final straw for the Greater Fool condo owners was when the B.C. tax assessment authorities decided they’d play along with the Real Hotel owners’ complaint about an unlevel playing field and tax condo hotels at commercial rates. What were already marginal investments suddenly got worse when the tax bill doubled.

The Greater Fools were able to tolerate indifferent and sometimes questionable tactics employed by the property management companies. They gritted their teeth and swallowed hard when they paid their quarterly "fees" to the WRA, in reality a second level of tax. They suffered the indignity of often negative cashflows, remembering with bitter irony the glowing projections they’d been shown before they signed on the dotted line.

But the tax man shoulda let their dawg alone.

They banded together, overcoming one of their inherent weaknesses: isolation. They appealed the assessment. They lost. But in losing, language was employed suggesting the concept of "commercial" rested on the fact that one management company "ran" the property like a hotel and if a certain percentage of the Greater Fools’ condos weren’t managed by that company, the whole commercial tax classification fell apart.

Thus begat the proliferation of equally over-priced property management companies. Thus begat the guests’ confusion at check-in time. Thus begat the onerous bylaw mandating a monopoly position for property management companies on any new condo projects – a bylaw I’m certain the muni will live to regret.

The muni has moaned about "losing" millions of dollars of tax base. While technically true, this complaint is disingenuous. Six or seven years ago, when the assessment on condos was changed from residential to commercial, the muni received an enormous windfall of tax base they never expected to have. I don’t remember them moaning about that. Rubbing their hands with greed, yes. But windfalls quickly become entitlements, so the muni has been in the forefront of fighting the Greater Fools’ quest for fairness.

The problem is condo hotels, which underpin the success of Whistler nearly as much as the mountains themselves, are neither fish nor fowl. They aren’t really residential, although their value is most definitely determined more like a house than a business. And they certainly aren’t commercial. Commercial property value is determined by the property’s cashflow after expenses but before financing and taxes. Using a commercial valuation technique, condos would be nearly worthless. So that technique isn’t used. Thus, they’re valued like houses and taxed like businesses.

Recognizing this gap in taxation alternatives and the importance of condo hotels to Whistler’s future – somebody has to keep owning and buying them – I can’t understand why the municipality and the Greater Fools, and for that matter even the property management companies, haven’t been twisting the province’s arm to come up with a more fair, split-the-difference kind of assessment.

Whistler needs good snow to be successful. We benefit greatly from the relative value of the Canadian Peso compared to the US dollar. We need delicious restaurants, high speed lifts, curio and T-shirt shops, snowmobile tour companies and all the rest of the diversions that go in to making a memorable holiday. But we also desperately need the condos. Even now, there are only three or four "hotels" in all of Whistler. All the other lodging in town, the condos, the timeshares, the quarter bags, all depend on an inexhaustible supply of Greater Fools to get built and to maintain a strong secondary market. Whistler is bush league without them and the problem is getting worse, not better, with this game of all-or-nothing chicken being played out in tax court.

And that’s why the golden goose is worth two columns I could have used to tell those cute dog and cat stories.

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