• Real property tax hikes ‘huge one-shot pill to swallow’
• Minister lauds $450m revenue increase over 5 years
• Landlord sees downtown hikes of 250% and 184%
By NEIL HARTNELL
Tribune Business Editor
Real property taxpayers were yesterday said to be “absolutely livid” after receiving bills that doubled and tripled their 2022 payments following the recent New Providence-wide revaluation.
David Morley, Morley Realty’s principal, told Tribune Business he was likely to be among many challenging their assessments after his residential real property tax bill rose from “less than $4,000 to just under $10,000”, adding that such hikes were “a huge one-shot pill to swallow” for many homeowners and businesses still struggling to recover from COVID-19’s devastation.
Commercial property owners have been hit equally hard. One downtown Nassau landlord, speaking on condition of anonymity, told this newspaper that the 2022 tax bills they had received for their two properties on Market Street had increased by 250 percent and 184 percent year-over-year, respectively.
While conceding that the properties may not have been revalued “in a long time”, they argued that the Government was “hammering” them with a huge increase in their tax burden at a time when only two of eight pre-COVID tenants had returned. And this duo were only paying 50 percent of their pre-pandemic rent, resulting in a substantial income loss.
The concerns coincide with Senator Michael Halkitis, minister of economic affairs, asserting in an article published in today’s Tribune Business that the recent New Providence-wide assessment by Tyler Technologies will end real property tax inequity by ensuring all “pay their fair share” as a result of updated and accurate valuations (see Page 3B).
With The Bahamas’ fiscal crisis forcing the Government to “no longer tolerate” deadbeat taxpayers and bill duckers, Mr Halkitis said it believed the combination of revaluations and new properties added to the tax roll will generate an extra $450m in revenues for the Public Treasury over the next five years - an average of $90m per year.
And, implying that the majority of this sum will come from previously-delinquent taxpayers and high-end home and business owners whose real estate was under-valued, the minister asserted that “nearly 70 percent of owner-occupied properties” will see no increase when they receive their 2022 bills.
To cushion the blow of sustaining such “a correction all at once”, Mr Halkitis said the Government is providing a $312.50 tax rebate to all owner-occupied properties, although this is likely to make little difference to someone who has received an increase equivalent to Mr Morley’s.
While right-thinking persons will agree that all property owners must pay their fair share, and that valuations should be accurate, many are likely to question the wisdom of implementing such extensive hikes all at once and at a time when families and businesses are trying to survive, and recover from, the ravages of the COVID-19 pandemic.
“With my house, my real property tax has more than doubled,” Mr Morley told Tribune Business yesterday. “The comment given to an agent in my office from a contact in the real property tax office was there are absolutely livid homeowners who have been down to the Real Property Tax Office since the assessments came out to the extent it was so serious they threatened to burn down the place.
“It’s ridiculous how much it’s gone up. Mine went from less than $4,000 and it’s now risen to just under $10,000.... I would question the 70 percent. It seems that based on the feedback I’m getting everybody is getting hit.” He added that his company had also been informed by Real Property Tax Office contacts that just one-third of the 2022 assessments have to-date been sent out.
The Morley Realty principal said he was likely to challenge the 2022 valuation placed on his Port New Providence residence on the basis that the last lot sale in the eastern New Providence gated community, involving a comparable lot size to his own, was $480,000. Yet his land alone had been valued at $750,000 in the 2022 cycle.
He added that the Real Property Tax Act allowed the chief valuation officer to assess property values every five years, and “if this is not done it’s not the property owner’s fault. Pointing out that a 25 percent tax increase this year, and a similar hike in five years time, would be easier for taxpayers to absorb, Mr Morley said: “But don’t slam people with a 100 percent increase in one shot.
“It’s a huge pill to swallow especially in this economy and market right now..... My biggest fear is that this country is getting so expensive to live in. If you look at real property tax alone, with the increase it’s a significant challenge to pay especially in these tough economic times.” He pointed, in particular, to rising food store prices and the anticipated further increase in inflation for 2022.
However, while the Department of Inland Revenue had in the past required taxpayers to pay their bill in full to “qualify” to challenge a real property tax valuation, and only provided a refund on the following year’s bill if successful, Mr Morley said it appeared this practice was no longer being followed and aggrieved persons have until March 31, 2022, to appeal.
“Who knows what the goal posts will be, and I’m sure they will move a number of times,” he added. This was backed by an attorney, speaking on condition of anonymity, who revealed: “I have a client’s residential tax assessment notice for Cat Island, which says the deadline for contesting the assessment is January 31, 2022, and a residential tax assessment for New Providence, which says the deadline for contesting the assessment is March 31, 2022.
“I have also just got another one for clients in Long Island where they say it’s commercial, and it’s a private home they occupy.”
The downtown landlord, meanwhile, who said they had seen their real property tax bills jump by 250 percent and 184 percent, respectively, said they knew of other owners in the East Bay Street and Dowdeswell Street areas who had suffered increases of up to 330 percent - meaning their tax burden had more than quadrupled.
They added their accountant had warned that their Business Licence would not be renewed if due real property tax is not paid, which could result in their company’s bank account being frozen due to lack of compliance.
Describing the situation as “another nail in the coffin” for downtown Nassau and its revival prospects, the property owner told Tribune Business: “We just received real property tax re-assessments for two properties in Market Street. One represents a 250 percent increase and the other a 184 increase.
“This comes on the heels of both properties losing commercial tenancies and income for the last 18 months or more. That is, seven out of eight tenants closed their shops/offices. Two of the eight have returned, paying rent at less than 50 percent of pre-COVID rent levels.
“The existing tenancies and economic climate downtown do not support the increased tax rate. Downtown property values have taken a beating since the decline of downtown began about 20 years ago. At this point downtown needs a tax break not more tax which finally breaks the camel’s back,” they added.
“Many downtown buildings are old, and the cost of keeping them standing has not been compensated by the revenues in the last several years. If the reduced revenue is to go to real property tax instead of maintenance, more buildings will be left to deteriorate. The tourism product, such as it is downtown, will take another downturn.”
Some will argue that tax incentives have yet to spur a concerted downtown Nassau upswing, but the property owner said the tax hike was occurring at the worst possible time when they were having to finance major structural repairs to one of their Market Street properties after tenancies “flatlined”.
“I don’t remember them revaluing in a long time,” they conceded, “but to go from $3,000 to over $9,000 in a year or two years when we have minimal rental income and are facing major structural repairs, it’s not matching up.”
As for the other Market Street property, where the real property tax bill had risen from $2,400 to over $4,500, the owner said they had been saddled with repaying a $4,000 Water & Sewerage Corporation bill by a tenant who, having departed in June 2020, had also failed to pay rent for a year during a period that was largely pre-COVID.
“All of downtown had a collapse in rentals because of COVID-19,” the landlord added. “It’s very hard to keep a building maintained when you have people skipping on their rent for a year. Someone needs to get a vision of where we’re going with downtown and hammering us with real property tax is not doing any good.
“Do I fill in the cracks in the mortar or pay real property tax? I don’t know if we got $30,000 in rent for the whole year. There have been times when we had rent in the high-five and low-six figures, but right now we’re scraping the low-five figures. That’s a vastly different scenario, and to come up with $9,000 in this climate.........
“It’s a really sticky wicket. It’s like taking a crippled horse and whipping it to go faster. It might not go at all. If I cannot repair a building and get some rent, I will have no income at all.”
They added that their residence had seen a $200,000 increase in its real property tax valuation, rising from $300,000 to $500,000, with the bill rising from $900 to $2,800. While raising no objection to this, they added that they were seeking the return of their owner-occupier and old-age discounts that had been removed this year.
There is little doubt that the Davis administration is targeting real property tax as source of much increased revenue. The Auditor-General’s report for 2017-2018 estimated as much as $600m in uncollected real property tax was outstanding. Although a good portion of this will likely have to be written-off, it was also revealed that 40 percent of real property tax bills never reach the taxpayer.
Simon Wilson, the Ministry of Finance’s financial secretary, recently told Tribune Business that the Government is aiming to more-than-triple annual real property tax collections to at least $400m as a key component in its ambitions to achieve a 25 percent revenue-to-GDP ratio.
He said it felt yearly property tax collections should be equivalent to 3.5 percent of Bahamian gross domestic product (GDP) or economic output as opposed to present yields of around 1 percent.
Mr Wilson also noted that The Bahamas’ property tax compliance rate was “around 25 percent”, compared to the 90 percent average achieved by many countries on real estate-based taxes.