New Brunswick

'More questions than answers': Measly tax base growth stuns Saint John's mayor

Despite rising real estate prices and near-record amounts of new construction, Service New Brunswick's failure to detect much growth in Saint John property values this year has guaranteed there will be little new tax revenue for the cash-strapped city in 2021.

Don Darling is upset record housing prices and development spending appear to go undetected

Saint John Mayor Don Darling questions the accuracy of property tax growth assigned to the city for 2021 by the province, despite record development and a booming real estate market. (Roger Cosman/CBC)

Despite rising real estate prices and near-record amounts of new construction, Service New Brunswick's failure to detect much growth in Saint John property values this year has guaranteed there will be little new tax revenue for the cash-strapped city in 2021.

It has also revived concerns in Saint John about the dependability of Service New Brunswick's property assessment work and the agency's role in worsening the city's ongoing budget crises.

"It is incredibly frustrating," said Saint John Mayor Don Darling. "We want to have confidence in the assessment system. People want to trust it. [I'm] so, so disappointed."

Last week, the provincial Department of Environment and Local Government released updated community funding calculations for each municipality in New Brunswick for 2021, based on property valuations done by Service New Brunswick, which showed only marginal growth of $8.3 million in Saint John's tax base.

That ranked 16th among New Brunswick municipalities, and came in behind places such as Bathurst, Campbellton and the Fredericton suburb of New Maryland, and it was a fraction of the growth calculated for the two other larger cities of Fredericton ($165.5 million) and Moncton ($149.9 million).

Work is underway on an 83-unit luxury apartment building in Saint John's uptown, part of record development spending in the city this past summer, according to city officials. (Roger Cosman/CBC)

It was also the least amount of growth recorded in Saint John since 2014 when the city's tax base shrank following a $55-million reduction by Service New Brunswick in the assessed value of two J.D. Irving Ltd. paper mills.

Darling is disheartened by how low the province's 2021 growth numbers are for Saint John, but mostly because he does not believe they are true.

"We can't sustain ourselves with a growth rate of 0.12 per cent. We need to understand what is going on in our city, what is going on with an assessment process, which is, of course, led by the province," said Darling.

Tax base amounts in each municipality are derived from property assessments carried out annually by Service New Brunswick. In Saint John this year, there was little worry about valuations being stagnant given the city's active real estate market and significant projects already under construction.

A $200-million upgrade of Saint John Port facilities, which counts toward the city's tax base, is fully underway and several multimillion dollar commercial and residential developments are rising around the city. 

Three weeks ago, Saint John's deputy commissioner of growth and community development, Amy Poffenroth, told a city council committee that construction activity in the city in both June and July was the highest of the last decade and $75 million in building permits had been issued before the start of August.

"This is much higher than a typical year," said Poffenroth.

Telegraph Square is a six-storey commercial and residential development being built on Saint John's Canterbury Street. Service New Brunswick will not say what dollar values it assigned to partially built developments as part of Saint John's weak 2021 tax base growth calculations. (Robert Jones/CBC)

"Permit revenue projections for the end of the year have been modified to reflect a better year than what we had even anticipated, despite the slow spring we had with the COVID pandemic situation."

Two of the largest developments are in the heart of what has become an active uptown real estate market, including a six-storey commercial and residential building on Canterbury Street and a seven-storey luxury apartment complex going up five blocks to the east on the site of the demolished Gothic Arches building.

Those developments are part of a larger trend in real estate in the city's core south end where residential properties have been selling for record amounts for more than a year.

Real estate agents in Saint John routinely list properties and close deals at 50 per cent or more above official Service New Brunswick assessed values in uptown neighbourhoods.

However, that has not generated significant growth in the city's tax base because the agency has been reluctant to accept the transactions as true market prices, instead substituting its own market analysis in setting taxable assessments.

This Saint John heritage home on Mecklenburg Street sold in July for $565,000, which was 146 per cent above its assessed value. It's one of 18 residential properties sold since May in the uptown area for a combined $2 million more than they are taxed for, based on Service New Brunswick valuations. (Robert Jones/CBC)

In July on Mecklenburg Street, a restored heritage home assessed and taxed to be worth $229,500 by Service New Brunswick was listed for sale at $599,000 and eventually sold for $565,000. Rather than accept that as a true market price, the agency has adjusted its own property value estimate only slightly to $256,400.

Around the corner on Queen Square in August, a home sold for $340,000, 70 per cent above its official assessment. That sale too has been ignored as a sign of the property's true market worth. Instead, Service New Brunswick has increased its valuation of the building $4,000 to $204,100.

Since May, property records show there have been 18 residential sales in the uptown area for a combined $2 million above what Service New Brunswick had valued their market prices to be. But instead of those record prices fuelling a $2-million increase in the city's tax base, Service New Brunswick has raised its assessments on the group by a combined $54,500.

It's at least the second year in a row Service New Brunswick has been reluctant to accept real estate sales in Saint John's uptown area that are significantly above assessed values as being true market prices.

The twin Harbour View apartment buildings on Union Street were bought in early 2019 for $3.5 million and then renovated. They were among a number of real estate transactions in Saint John that year that Service New Brunswick determined were above true market prices. They are assessed at $2.6 million. (Robert Jones/CBC)

Earlier this year, after issuing lower assessed values for a group of houses bought on Horsfield Street, an apartment building on Union Street and a row of commercial buildings on King Street, Service New Brunswick put out a statement listing a number of reasons it does not consider sales prices to necessarily reflect a property's true market price.

"In some cases, properties are purchased based on interests that are specific to the purchaser and not necessarily a reflection of the general market for the area," the statement said.

"In other situations, the property may have been purchased without firsthand knowledge of the local market. Some properties may also be acquired by real estate developers and/or investors with an intent of future redevelopment which may not be reflective of the current use of the property."

On the issue of ongoing construction projects in the city, Service New Brunswick says those values have not been prepared yet since properties have until Jan. 1 to gain or lose value before their final assessments and tax bills are set.

The agency will not reveal what dollar values it assigned to developments that are in progress to form the 2021 tax base estimates released last week, but acknowledged the city might not be getting full credit for what they are worth on Jan. 1. 

"If assessments increase between now and January 1, then the figures will be captured in the 2022 tax base," said Service New Brunswick spokesperson Valerie Kilfoil.

She said a meeting has been scheduled for this Friday in Saint John for Service New Brunswick to explain to city officials how assessments were done this year and to "answer any questions or concerns."

Darling says with development in the city booming but Service New Brunswick appearing to pick up little of that in it its assessment, there will be plenty of questions.

"It's not translating to the cranes and the record starts and record real estate sales. We have more questions than answers," said Darling.

About the Author

Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

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