Why the New Brunswick government invented over $50M in renovations

Jill Jollineau was away when her property tax bill arrived the first week of March, but her bank immediately started removing an extra $150 a month from her chequing account to pay what the bill demanded. 

Jollineau hadn't seen the increase coming, so the money wasn't there and her account dipped in the negative for the first time in her adult life.

"They overdrafted my account which I have to pay a penalty on and interest on without any warning to me that this amount would increase," said Jollineau.

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"I end up paying a penalty for their deception — which is what it is — deception."

Jollineau is angry.  

She is one of 2,048 New Brunswick homeowners stung by a scheme that saw the province invent expensive renovations for houses — many of which had no work done — and then charge property tax on the fabricated amounts.

It's totally disrespectful of me as a citizen.-Jill Jollineau

In Jollineau's case, Service New Brunswick concocted a figure of $79,780 in renovations to her tiny 860 square foot home — or "major improvement change" in the parlance of the department — and then raised her tax bill a stunning 52 per cent because of the phantom improvements.

"I am hurt and disappointed," said Jollineau, a retired high school math teacher who has seen some poor calculations in her day, but nothing like this.  

"It's totally disrespectful of me as a citizen."

Service New Brunswick insiders who spoke to CBC News on the condition of anonymity say the origins of the tax scandal are in a decision made last year to fast track implementation of a new automated assessment system.

The system uses sophisticated aerial photography analysis — pictometry — and has a solid international reputation.  But those familiar with what happened say it had not been properly field tested to give managers some experience in how to operate it or see how it would handle the peculiarities of New Brunswick.

"It was a runaway train in a live testing environment," said one person.  "Fast track had no time for quality, only revenue. It was unstoppable even amidst major warning signs regularly communicated by staffers."

The original plan, according to multiple sources was to introduce pictometry slowly over two or three years. That would allow time to see how it valued properties differently than traditional methods and tweak it where necessary.

"Do systems [old and new] in parallel and check back and forth," said a source about how the original plan to ease the new system into place was supposed to work.

Cautious approach, abandoned

But insiders say that cautious approach was abandoned last year with the encouragement of the Premier's Office, which liked the idea of automating assessment and saw no need to implement it slowly.

"They pushed the modernization from a three year plan to a one year plan — less than a one year plan. It was a disaster from the beginning." 

On Friday, Premier Gallant appeared to confirm he was aware of the push to implement the new assessment system quickly, but said he knew nothing of the fabricated renovation scandal that insiders say rapid deployment eventually produced.

"My understanding is that there was talk if this should be done over two years or one year and I believe that the one year was more preferable by many," said Gallant. 

"With that said there is no way that I would have accepted that they [Service New Brunswick] would say well we're going to hastily evaluate these properties using our own little formula."

In part, the popularity of the new assessment system was a belief it could unearth properties around the province that were significantly undervalued. Backers of the system predicted it would generate higher revenues for municipalities and the province without the need for property tax increases.  

Early testing of the system in Moncton, back in 2015, seemed to confirm that, when house sizes began coming in larger than expected. 

"Everyone patted themselves on the back because they could now raise assessments 10 or 20 per cent across the board and look like heroes," said one person familiar with that early Moncton test. "They actually believed that was what was happening."

It was eventually discovered the houses were no bigger, the new system was simply measuring them differently. It was calculating square footage from roof line dimensions including overhanging eaves - not actual living areas inside the homes — making houses seem suddenly larger.

Error not detected

That error was not detected for some time, but by then the idea of deploying the system widely in greater Moncton, greater Saint John, greater Fredericton and other smaller communities was already in full bloom.  

Internally, however, there was conflict in the department. Some senior managers on the modernization team are said to have pushed against the sudden switch — but were losing those arguments. 

As results of the new assessment system began to be checked for accuracy last fall, the problem of inflated house sizes generated by the new roof top measurement system emerged.

Fixing the problem threatened to lower property tax revenues to municipalities. But they already had amounts they were to receive in 2017 guaranteed by the province, meaning it was the one on the hook for any revenue shortfall.

[It was] a plan of action. A thought out deliberate decision by head office to add in large values for [renovations] without checking if there actually was any.- Official

"They were searching for revenue because they weren't going to meet those targets they promised the cities," said one source

It's in that environment that senior managers decided to manipulate the tax bills for 2,048 homeowners who the new assessment system had flagged as requiring the largest assessment increases.

The homes had all been pegged to have their assessments raised above 20 per cent and that would have generated a large tax increase to help meet revenue targets. 

The problem was a consumer protection law that limits property tax increases in New Brunswick to 10 per cent per year, unless there have been "major" renovations to a home.

By declaring all of the homes to have been renovated without knowing if they had been or not – even fabricating exact amounts for how much they had been renovated — the management team managed to evade the 10 per cent tax increase limit meant to protect homeowners like Jill Jollineau.

"[It was] a plan of action. A thought out, deliberate decision by head office to add in large values for [renovations] without checking if there actually was any," said one official.

"[But] all errors, mistakes, cover ups, poor results and bad decisions are all fast track related."

Jollineau says she does not accept her 52 per cent assessment increase on her small home as accurate and has appealed, but is appalled the province falsified a renovation amount on her home to deny her right to a 10 per cent increase cap on her property tax bill.

"I am amazed that this has even happened," said Jollineau.