Millions of dollars in record real estate sales in Saint John logged during the final three months of 2020 – including one building that sold for 131 per cent above its assessed value – are adding to frustration with Service New Brunswick's finding of almost no growth in the city's tax base heading into 2021.
"I have no idea what is going on," said Saint John city councillor Donna Reardon, a frequent critic of Service New Brunswick's valuation of properties in Saint John.
"It doesn't make sense when I look at the numbers. If there is a systemic bias against Saint John as far as evaluating properties, then we have a real problem."
Reardon was reacting to news that a historic office and apartment building at 1 Charlotte St. sold for $935,000 to a Prince Edward Island company on Dec. 17.
It's one of a number of record property sales in the city in 2020 that have local officials convinced the tax base is growing, but that Service New Brunswick has so far not reflected in its own valuations.
For 2021, the agency has assessed 1 Charlotte St. to have a market value of $404,600. That's more than a half million dollars below its sale price, and the same valuation it gave the building last year.
Simmering frustrations with property valuations
Every $100,000 in a property's assessed value by Service New Brunswick is worth $1,785 to the city in property tax on residential and apartment buildings, and $2,678 on commercial buildings.
"It's a huge problem," said Reardon.
Frustrations with valuations on properties like 1 Charlotte St. in the city have been simmering for weeks.
In October, the province released its findings of municipal tax bases for 2021 based on property assessments and estimates provided by Service New Brunswick.
The agency's finding of 0.1 per cent total growth in Saint John property values for 2021 ranked 78th among the province's municipalities, only slightly better than the tiny southern New Brunswick village of Meductic, with a population of fewer than 200.
The finding meant there would be almost no property tax revenue growth for the city for its 2021 budget. It also stunned Saint John officials, given what they believed had been a hot real estate market through the summer and near-record spending on new construction projects in the city.
"It is incredibly frustrating," Saint John Mayor Don Darling said at the time. "We want to have confidence in the assessment system. People want to trust it. [I'm] so, so disappointed."
Since then, real estate markets in Saint John have only gotten hotter, deepening suspicions that Service New Brunswick has made a significant error in its evaluation of the value of city properties and is cheating the municipality out of needed tax revenue.
According to the New Brunswick Real Estate Association, 2020 was a record year for property sales and prices in all areas of the province, including in Saint John.
It claims agents in southern New Brunswick sold 225 properties in November, 30 per cent more than last November and at prices that on average were 9 per cent higher
"Home sales continued to defy expectations in November," Corey Breau, president of the Saint John Real Estate Board, said in a news release last month. "2020 has been a record-breaking year for our region."
Local real estate agent Charlotte Pierce said that has also been her experience.
'We don't chase individual sale prices,' Service NB says
In one transaction in December, Pierce said she had clients interested in a multiple-family property on Clarendon Street, which was assessed by the province to be worth $133,100.
The property got 10 offers, and sold for $163,000.
"We didn't have much chance after that," said Pierce, who has found both demand and prices have been high.
"That has been a common theme through the purchases of a lot of properties, especially multi-units. It really really has been quite busy through the summer and fall with buildings, especially four units and above."
For 2021, Service New Brunswick has valued the Clarendon Street property well below its sale price at $135,700, a 1.95 per cent increase over its 2020 valuation.
City officials see nothing in what happened in 2020 in local real estate that supports a finding that total property values increased by 0.1 per cent, but Service New Brunswick said individual sales can be deceiving.
Some transactions are not at arm's length, according to the agency, and sometimes buyers overpay in a way that would distort assessments if it they were adopted at face value.
"Property assessment services use mass appraisal methodology to assess all properties in New Brunswick. We do not chase individual sale prices," Service New Brunswick said in an email.
"To chase individual sale prices would cause significant impact to our current system and could be devastating to establishing fair market value."