PETER CONRADI/Bullet News
The City of Niagara Falls, Niagara Region, the Ontario Lottery and Gaming Corp, and MPAC have spent about $1 million of taxpayer money defending and challenging the property assessment of the two Niagara Falls casinos. And the meter is still running.
While OLG and the two levels of local government recently settled an eight-year dispute over how much property tax the casinos should pay, a new battle has begun which will continue to mean big bills from outside lawyers and consultants.
Niagara Falls chief executive Ken Todd told Bullet News the City has spent nearly $400,000 challenging the assertion of OLG that the casino properties were over-assessed since 2004.
“We don’t know the exact cost yet, but it’s in that neighbourhood,” Todd said. “And now it’s not over yet.”
OLG refuses to say how much they have spent on legal fees, claiming client-solicitor privilege. But Todd guesses it would easily be the same amount as Niagara Falls and “maybe more.” Add to that the price tag on experts hired by MPAC (they’re another government agency who won’t return messages on this issue), and it’s not much of a stretch to see the total cost reaching seven figures.
“And the only ones getting rich are the lawyers,” said Todd. “OLG is in for at least the same amount and maybe more. When all the parties start adding staff time … We have two government agencies taking on a municipality. The only ones benefitting are the lawyers, and the only ones losing are the taxpayers. I walked out of one meeting, I was so frustrated.”
The fight began in 2004, the very year Fallsview Casino opened. The slot machines had barely been plugged in before OLG launched an appeal of their property assessment at Fallsview and at Casino Niagara. OLG owns Fallsview but rents space for Casino Niagara from Canadian Niagara Hotels. OLG still pays the property taxes for both.
After eight years of meetings and negotiations and evaluations and appeals, MPAC slashed the Fallsview assessment for the 2013 tax year to $278 million while Casino Niagara fell to $36.5 million.
What that means in real dollars to the local government is that Fallsview will pay $3 million less in property taxes to the City of Niagara Falls in 2013, and $3 million less to the Region.
The re-assessment also means Niagara’s two casinos will receive a $16.4-million property tax refund that will cost the City of Niagara Falls $3.8 million, the Region $4.2 million and the school board $5.3 million. The OLG rebates break down as $13.3 million for Casino Niagara and $3.1 million for Fallsview.
The Fallsview repayment will be split about 50-50 between the City and Region; the Casino Niagara refund also includes school board taxes.
Ironically, this protracted disagreement has been resolved just in time for all parties to start another one. The Region and City are appealing the 2013 MPAC tax assessments for both Casino Niagara and Fallsview – cuts in the 50 per cent area that have created budget problems for Niagara Falls council.
MPAC is the agency that assesses property values in Ontario. Owners are able to appeal the assessment if they think it doesn’t reflect an accurate market value. In 2012 the average single-family detached home in Niagara Falls increased in value to $221,000 from $210,000 over the last four-year period.
With a business, though, the process is more complicated. It takes into account things like cash flow and revenue. Owners are still able to appeal, though, and OLG has been arguing that Niagara assessments are too high, given what it says is the declining state of the industry and unlikelihood of future gains with the possibility of more competition if places like Toronto and Hamilton open casinos.
The municipality maintained the casinos were actually assessed too low. Todd said in the case of Fallsview alone the building occupies perhaps the most valuable piece of commercial land in the city, with a prime view of the falls.
MPAC had initially assessed Fallsview at $564 million and Casino Niagara at $134 million back in 2004. The negotiations had those figures adjusted to $648 million and $211 million respectively – both wins for the City and Region. It didn’t stay that way. The deal recently reached saw 2008 numbers drop to $628 million and $111 million respectively, and then in 2012 they fell again to $450 million and $54 million.
The 2013 numbers signalled more bad news for the municipalities and led to their appeal.
Todd said the City still feels frustrated with the process. He said MPAC, OLG and the City all hired outside consultants to bolster their cases, since no one locally had the expertise to study the value of a property such as a casino. The City used a company out of California with a track record in this industry.
“There was a lot of legal wrangling back and forth about the right value,” he said. “There was a lot of legal wrangling over access to information. MPAC went out and engaged an expert to do an independent property evaluation and that came up with numbers that were different from the $564 million. They were lower.
“We said, ‘This isn’t right, give us your information.’ Well, that wasn’t forthcoming. We had to go hire our own expert, and our numbers came out higher. We got into a position where we had OLG and MPAC stacked against us. It was like David fighting these two Goliaths. We got the point where enough was enough and we had to settle this. But we’re the losers in all of this.”
Todd said the City also argued – and continues to argue – with MPAC over the methodology used to assess the casinos. Every asset depreciates with time, but Todd said Ontario Lottery and Gaming is arguing that after almost 10 years running, Fallsview Casino has a ‘residual value’ of zero. Residual value defines what the asset – the casino – is worth at the end of its useful life.
“One of the factors was the difference between what their accountants had done and what ours had done. This residual or terminal value calculates the depreciation over time and they are basically saying there is no value. How can there be not value? The building is there, the land is there. Even if the casino disappeared, what is that land worth? It has to have a value and they have to pay a fair tax on it.”
This latest rebate news comes at a time when Niagara Falls councillors are wrestling with a budget shortfall, and already holding the casinos and OLG responsible for much of that. Words like “disgraceful” and “unbelievable” and “poor corporate citizens” have been fired at the casinos from council chambers lately.
The 2013 assessment reduction has left Niagara Falls with a huge hole in its budget. Fallsview Casino paid about $7 million in city taxes in 2012 and will pay about $2.8 million less in 2013. Casino Niagara paid about $4.1 million in total municipal taxes in 2012 and will pay about $1.2 million in 2013. The city’s operational budget is currently $3.1 million in the red – and that’s after a three per cent tax hike has already been factored in.
Niagara Falls Mayor Jim Diodati said the issue is causing “discontent” in the community.
“It’s a very negative thing,” he said. “It passes the burden on to the rest of the taxpayers in the community. It’s very frustrating to deal with this . . . It’s a real bone of contention.”
The casinos would argue they are playing within the rules – rules that allow the system to consider the value of their business when determining property assessment. And the numbers are declining.
Niagara’s casinos took in $599.8 million in 2010-11, down from $617.9 million the previous year and $632.7 million two years ago. They had 8.4 million customers in 2010-11, 9.1 million in 2010-09 and 9.5 million in 2009-08.
Still, Diodati said that does not justify the city taking such a large hit. He said the value of the casino land is not decreasing, and that assessment decreases such as this creates bad feeling in the community – among residents and fellow businesspeople alike. And he worries what other hotels and attractions in the city will do when they learn about the Casino’s windfall.
“I’m sure this might encourage others to launch their own appeals. And when people do that it will again will be passed on to taxpayers. They are setting the stage for discontent and for a lot of resentment.”
About 4,500 people work at the two casino properties in Niagara Falls, which makes Fallsview Casino and Casino Niagara the No. 2 local employers behind only the District School Board of Niagara, according to figures from the Region.
Fallsview, wholly owned by OLG, pays property taxes as a payment-in-lieu, meaning school taxes are not applied. Casino Niagara pays school taxes because it is located in a commercial building owned by a private company. However, Canadian Niagara Hotels president Dino DiCienzo Jr. said his contract with the government makes OLG responsible for paying the property taxes.