The property tax system in Nova Scotia is broken

The property tax system in Nova Scotia is broken. It is experienced by both residential and commercial taxpayers as complex, subjective, and marked by the unintended consequences of previous stop-gap measures.   

New Dawn’s recent tax assessment appeal to the Nova Scotia Assessment Appeal Tribunal (NSAAT) and the Nova Scotia Utility and Review Board (UARB) sheds some light on these inadequacies.  

The property tax system – established and governed by the Province and enacted by the Property Value Services Corporation (PVSC) – takes the market value of a building or home (what someone would pay for the dwelling right now if it were for sale) as a representation of the income or wealth of the owner.  

We know that in the residential context this approach doesn’t work.  

The residential property tax Capped Assessment Program (CAP) was introduced because the estimated market value of some homes – driven higher by a variety of forces not related to an owner’s wealth or income – had become so disconnected from the owner’s wealth and income, that residents were losing their homes because they couldn’t afford to pay the taxes.  

This is especially problematic in the Cape Breton Regional Municipality (CBRM) where tax rates are among the highest in the Nova Scotia and the citizenry is among the poorest.  

Tax on income, as is the case with provincial and federal income and business taxes, is a more precise, less subjective way to tax a population (both residential and commercial) and organizations across the country are advancing this possibility as an alternative local tax to tax on property value. 

Today, we know two things to be true: (1) in the residential context, the estimated market (sale) value of a building is not a good stand-in for owner wealth and income and (2) the solution we’ve devised to address this to date (the CAP) has led to all sorts of additional problems and inequities for homeowners and anyone looking to buy a new home.  

NON-PROFIT PARALLEL  

For non-profits like New Dawn, the acquisition or construction of buildings is one way in which they fulfill their mandate to provide or expand affordable services to the community. Most often, the acquisition or renovation of a building is possible because of funding from provincial and federal governments who see the value in the service and facility to be provided to the community.  

Where this is the case, the market value of the building (price for which it could be sold) is again disconnected from the wealth or income of the owner. The non-profit hasn’t built the building because of existing wealth/income, or to increase its wealth/income, but because (a) it wants to provide a community service and (b) funds have been provided by other levels of government as a result of the value they see in this service being provided.  

This, in large part, is the basis for the 2020 appeal of the PVSC property value assessment for the Eltuek Arts Centre.  

INCOME BASED APPROACH MORE APPROPRIATE 

PVSC explains on its website that there are three methods that can be used to determine a property’s value. These are: direct comparison, income, and cost. 

New Dawn’s request of PVSC (via its appeal of its 2020 assessment) was twofold: (1) use the income approach as described on the PVSC website rather than the direct comparison (recent sale price of similar buildings) or cost approach and (2) use actual/real income and expense data, not average commercial market rental income and expenses.  

The real/actual income and expenses of Eltuek confirm that it is not a commercial office building generating commercial office building revenues and profits, as is the PVSC baseline assumption.  

The Eltuek Arts Centre provides affordable working and gathering space for artists and social impact organizations who otherwise would be unable to afford space in Sydney.  

Eltuek lives its vision and values each day, paying professional artist fees, supporting small and local businesses through its purchasing, paying a living wage, providing affordable workspaces to artists, and forging a new artistic reach across Nova Scotia and Canada.  

Since it opened in 2020, Eltuek has had an important impact in the CBRM and is looked to as a model for how to include the arts in community development and vice-versa. 

WHOSE LINE IS IT ANYWAY? 

Throughout the NSAAT appeal process, PVSC pointed to municipalities as the entity responsible for providing tax concessions to non-profits, but just as the residential property tax system is a lasagna of stop-gap measures, the tax landscape for non-profits in Nova Scotia could not be more haphazard.  

In Kings County, more than 100 non-profits and charities have been granted complete tax exemption. This list includes social enterprises who derive revenue from the sale of goods and services to support their mandate – for example, the Ross Creek Centre for the Arts which, with a complete tax exemption, provides space for and earns revenue from artistic productions, arts programming, commercial venue rentals, and summer camps.  

In New Glasgow, the town recently granted a 20-year 100 percent tax exemption to Coady’s Place, a new affordable housing project.  

In Antigonish, non-profits and charities like community centres, curling clubs, activity centres, and interpretive centres are granted 100 percent tax exemptions.   

In Springhill, Nova Scotia, the Anne Murray Centre is tax exempt by virtue of a Nova Scotia Local and Private Act.  

In Halifax, the standing tax exemption for youth centres is 85 percent and the annual tax payment per youth centre is capped at $25,000 (10 percent of what the Glace Bay Youth and Family Centre, slated to open in 2026, will be expected to pay in the CBRM).  

If the Eltuek Arts Centre were in Halifax, it would be subject to a sustainable and predictable maximum tax of $25,000 per year, rather than the $130,000 (after CBRM tax concessions) it paid in 2022. 

As with variation across the province, so too is there variation within the CBRM. The Cape Breton YMCA, for example, is tax exempt by virtue of a 1990 provincial law. The Glace Bay Miners Forum is tax exempt by virtue of CBRM’s E-200 External Organizations Tax Bylaw and the Old Sydney Society is tax exempt by virtue of a one-off CBRM bylaw exempting museums in heritage buildings.  

All good, just haphazard.  

PVSC is relying on a good-will assumption – that municipalities across the province will equitably (within and across municipal boundaries) support non-profits doing community work. When they don’t, it becomes much harder to operate non-profits in some regions – regions like the CBRM, where it might be argued that we need them the most. 

A BROKEN TAX SYSTEM 

The property tax system is broken. It needs a complete overhaul to provide all Nova Scotians with a fair tax system that can accomplish its objective to equitably raise enough revenue for the provision of public goods and services.  

All levels of government need to seriously consider replacing residential and commercial property taxes with an income-based tax that is fair to all taxpayers and that still helps to provide the revenues towns and municipalities need to function.  

One interim step in the right direction would be to begin with non-profits who own their own buildings.  

In the absence of these actions, as assessment values continue to rise (17.8 percent from 2022 to 2023 and 18.2 percent from 2021 to 2022), more non-profits will find themselves taxed out of their existing properties and reluctant to consider construction or acquisition of new properties for service provision and community wellbeing.  

When non-profits own their own buildings, they tend to be more stable over time, have greater control over how they use their space, and don’t have to be overly concerned with market changes rendering them without a place to do their work, as we saw recently with the Townsend Street lease termination for the Youth Project. 

ADDITIONAL RESOURCES 

Eltuek 2020 Property Tax Assessment Appeal (July 2024, UARB) 

Canadian Centre for Policy Alternatives. A Modest Proposal, A Plan to Give Municipalities Access to Income Taxes (March 2024) 

Federation of Canadian Municipalities: The Case for a Municipal Growth Framework 

A Taxing Situation for New Dawn. CBC Information Morning. October 29, 2024