Property taxes affect decisions on re-investment in existing facilities, which may affect the long term viability of the operations. Property taxes become a major factor for firms in financial distress due to structural or cyclical factors, because property taxes may constitute a large portion of firms’ fixed costs.
Many municipals use the hybrid of cost-approach assessment system for major and light industries where the value of property is determined on the basis of an assessment “manual” rather than the appraisal techniques used for determining market value. The use of the assessment manual provides stability in the determination of property values because prescribed replacement costs are used.
There are two implications arising from the prescribed assessment practices that impact business decision-making. The first implication is industries that see an appreciation in the value of their properties based on rising commodity prices are not exposed to increasing property taxes. This is one of the reasons why the amount of property taxes a firm is paying is of relatively less concern in a rising market, or when there is robust economic growth. However, the second implication is that if appraisals are not reassessed periodically the property value may deviate substantially from actual market value and over- or under-represent the industry’s profitability and ability to pay based on long term trends in their global competitiveness.
Consequently, the only avenue for firms to seek property tax relief to cope with economic obsolescence and/or cyclical price downturns is to seek tax relief from municipal councils. Municipalities have the ability to set their tax rates to account for changes in economic conditions, but they also have long-term service obligations and may find it difficult to adjust to reductions in tax revenue when economic conditions change.
Verifying your properties and keeping your list current and in-sync with government data can reduce property tax significantly. AdSatis Management staffs have in-depth knowledge of the oil and gas operations, BC Oil and Gas Commission, Alberta Energy Regulator, and Petrinex. Together with many years of experience in property valuation, assessment, appeal, and protest we not only can help reducing your property tax but also help validating and consolidating your data year after year.
Property tax saving is not just for current year, but a long-term saving in the subsequent years. Without monitoring or protesting the assessment, the value of your property assessment may increase more and faster than the market trends, reduce less than its comparables, or worse yet increase in value while the economy is weak. Any of those factors will result in over-tax of your property. Proactively working with municipal assessors to ensure property owners not over-taxed is our goal and mission.
