Sydney non-profit wants break on municipal taxes, says its income is limited

A community development agency in Sydney, N.S., is appealing the assessed value of its main downtown property to the Nova Scotia Utility and Review Board, claiming the taxes are too high for a non-profit with limited income.

New Dawn Enterprises wants the review board to assess its Eltuek Arts Centre based on its actual rental income rather than the building's replacement cost, which would result in lower municipal taxes.

But the Property Valuation Services Corporation — known as PVSC, the provincial assessor — says it is following provincial legislation and New Dawn's property value, based on replacement cost, is appropriate.

"I think there's a fair way to do it, which is based upon your ability to pay tax," New Dawn vice-president John Whalley said Tuesday, after a board hearing into its 2022 assessment appeal. "If you're doing it on this cost approach, I think it's quite foolish."

In 2013, New Dawn bought the former Holy Angels high school and Sisters of Notre Dame convent on George Street for $250,000. It invested about $17 million in the property, with about $10 million of that coming from the provincial and federal governments, and converted the buildings into below-market-cost rentals for administrative offices and the arts community.

At first, its assessed value was about $500,000 and the annual tax bill was about $25,000.

Assessments spiked after renovations

But after renovations were completed, the assessment shot up in 2020 to $3.8 million and in 2022, the year under appeal, the assessed value was set at $4.85 million.

That created a tax bill from Cape Breton Regional Municipality of around $250,000.

Whalley said New Dawn's property assessment this year is nearly $6 million, which is almost eight times its 2023 income of roughly $770,000.

According to figures supplied by New Dawn, three other non-profit commercial organizations in Sydney — the YMCA, the Cape Breton Centre for Craft & Design and the Horizon Achievement Centre — have assessed property values that are less than double their 2023 income.

Whalley said if New Dawn's actual income was used, the assessment value would be under $2 million and its municipal property taxes would be much lower.

"I think the far better system, particularly for not-for-profits, is that the valuation should be on their income and then they would be paying based upon their ability to pay."

Whalley said it's not fair for a non-profit to be subject to sudden and dramatic increases in property value.

He told the review board the federal and provincial governments invested in the arts centre on the understanding that New Dawn would provide affordable space to the arts community, which could not pay market rates.

Afterward, he told reporters that was not necessarily written into the funding agreements.

"I actually was not party to the negotiation of those agreements, but I would say to you … I think it was if not explicit, I think it was absolutely implicit that that was the agreement New Dawn was making," Whalley said.

"Otherwise, why would they provide public funding?"

Testifying at the board hearing, PVSC director of commercial valuation standards Matthew Whittleton said legislation does not allow assessors to take into account the non-profit status of property owners.

Mandate to 'value at market value'

"Our mandate is to value at market value and that is what we strive to achieve," he said.

Rental income can be used as a method of assessing commercial property value, but the rentals have to be market-based, Whittleton said.

"With regards to taxation, that is in municipal hands, so we don't look at the taxation."

The Municipal Government Act does permit exemptions and tax reductions for non-profits.

PVSC submitted figures showing the municipality reduced New Dawn's 2022 municipal taxes on the Eltuek Arts Centre by $145,768, exempting some of the property and charging the lower residential tax rate on the rest, leaving the agency to pay $107,390.

Whalley said New Dawn has to fight for a tax break every year and it would be less "precarious" to have the property value reduced.

He said the current system is unsustainable for New Dawn.