Saskatchewan Municipal Board Assessment Appeals Committee Appeal: 2009-0039 RESPONDENT: Town of Hudson Bay In the matter of an appeal to the Assessment Appeals Committee, Saskatchewan Municipal Board, by: respecting the assessment of: for the year 2009; Archie M. Parkman Box 1538 Hudson Bay, Saskatchewan S0E 0Y0 Lot 11, Block 11, Plan P4054 411 Prince Street Alternate Number: 505011500-01 BEFORE: APPEARED FOR THE APPELLANT: APPEARED FOR THE RESPONDENT: APPEARED FOR THE SASKATCHEWAN ASSESSMENT MANAGEMENT AGENCY: David Wilkin, Chairman Robert L. Edwards, Member Jenny Lai Yu, Member Cynthia J. Schwindt, Secretary Archie M. Parkman No one appeared Kevin Groat Gail Strilaeff This appeal was heard in the Council Chambers, 304 Main Street, in Hudson Bay, Saskatchewan on October 27, 2009.
APPEAL 2009-0039 [Page 2] This appeal is against the decision of the Board of Revision (the Board) for the Town of Hudson Bay pursuant to section 246 of The Municipalities Act (the Act). ISSUES: Did the Board err in its decision by: (i) (ii) (iii) Incorrectly exorcising a lack of objectivity in this appeal? Failing to find that comparable properties have had a reduction of value from 2002 until 2006? Incorrectly accepting sales information from the Saskatchewan Assessment Management Agency (SAMA) dating back to 2000 when there was a new mill being built, while in 2006 there was a downturn in the local housing market? FACTS: (1) The subject property is located at 411 Prince Street, in the Town of Hudson Bay, Saskatchewan (the subject). It is a one family dwelling built on a 50 foot by 120 foot lot. The dwelling consists of 657 square feet, built in 1928, a BO/CO class, very good condition with 56% depreciation. A 188 square foot addition built in 1950, a BO/CO class, good condition with 53% depreciation. A detached garage of 352 square feet was added in 1972, a B class, average condition with 34% depreciation. (2) The assessed values and assessment for the subject property are: Assessed Value Taxable Assessment Land $ 7,700 $ 5,390 Improvements $28,400 $19,880 Total $36,100 $25,270 The retroactive base date of municipal assessments for taxation purposes in the Province of Saskatchewan is June 30, 2006. As a residential property class, the percentage of value equals 70% of the assessed value. (3) The grounds of appeal to the Board were twofold with the first issue relating to: LACK OF CONTINUITY OF ASSESSMENT PROCESS COMPARISON OF OTHER SUCH DWELLINGS BOTH SIMILAR AND NON SIMILAR,... The second issue identified relates to:
APPEAL 2009-0039 [Page 3] SUBJECTIVE ASSESSMENT MY TAX ASSESSMENT ROSE THE SAME AMOUNT THAT MY PROPERTY ASSESSMENT WENT DOWN AFTER LAST APPEAL (4) The record of the Board includes: a) An undated notice of appeal; b) Assessment report from SAMA dated June 10, 2009, signed by Kevin Groat, including a detailed property profile of 411 Prince Street and 409 Prince Street, both dated June 8, 2009; c) Board minutes dated June 24, 2009; d) Decision of the Board, dated July 6, 2009; e) A revised page one of the Decision of the Board dated July 21, 2009; f) A list of sales used to establish the 2002 base year values showing both the 2008 and 2009 values dated May 8, 2009; g) A list of 2006 residential sales provided to the appellant by the Town of Hudson Bay; h) A list of 76 properties showing the amount of decrease or increase in assessment from 2008 to 2009; and, i) Assessment notices for each of the properties listed in h) above. (5) There was an analysis of sales establishing the Market Adjustment Factor (MAF) of 0.76 presented to the Board which was missing from the record. The appellant denied having a copy of the analysis but the Saskatchewan Municipal Board, Assessment Appeals Committee (the Committee) notes that his third ground of appeal is SAMA used sales from 2000 to 2006. The Committee therefore allowed it into the record as AAC R1. (6) The decision of the Board found the following: Due consideration was given of written documentation from both sides and of the base date, which in the opinion of the Board of Revision, the Town of Hudson Bay in 2006 was not in a down turn, but had two mills running and was just starting to feel some effects of some of the bush contractor layoffs. The Board holds that the appellants request to reduce the valuation of the improvement due to lack of continuity of assessments is unfounded as based on the information provided regarding the assessment process of the subject property, the property was assessed properly and fairly according to the manuals and the Municipalities Act, using mass appraisal and cost approach to value. (7) The grounds of appeal to the Committee are: Similar houses went down in price (used as frame of reference on last assessment) Lack of continuity on assessments. What I preceived [sic] as a lack of
APPEAL 2009-0039 [Page 4] objectivity from appeal board. And finally SAMA went all the way back to 2006 for housing sales when town was building a new mill, in 2006 everything had slowed down (even threats of layoffs) The notice of appeal to the Committee was dated July 21, 2009 and received on July 24, 2009. LEGISLATION: The Municipalities Act: 193 In this Part: (e.1) market valuation standard means the standard achieved when the assessed value of property: (i) is prepared using mass appraisal; (ii) is an estimate of the market value of the estate in fee simple in the property; (iii) reflects typical market conditions for similar properties; and (iv) meets quality assurance standards established by order of the agency; (e.2) market value means the amount that a property should be expected to realize if the estate in fee simple in the property is sold in a competitive and open market by a willing seller to a willing buyer, each acting prudently and knowledgeably, and assuming that the amount is not affected by undue stimuli; (e.3) mass appraisal means the process of preparing assessments for a group of properties as of the base date using standard appraisal methods, employing common data and allowing for statistical testing; (e.4) non-regulated property assessment means an assessment for property other than a regulated property assessment; 194(1) All property in a municipality is subject to assessment. 195(1) An assessment shall be prepared for each property in the municipality using only mass appraisal. (2) All property is to be assessed as of the applicable base date. (3) Notwithstanding subsection (2), land and improvements may be assessed separately in circumstances where separate values are required.
APPEAL 2009-0039 [Page 5] (4) Each assessment must reflect the facts, conditions and circumstances affecting the property as at January 1 of each year as if those facts, conditions and circumstances existed on the applicable base date. (5) The dominant and controlling factor in the assessment of property is equity. (7) Equity in non-regulated property assessments is achieved by applying the market valuation standard so that the assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date. 225(1) An appeal of an assessment may only be taken by a person who: (a) has an interest in any property affected by the valuation or classification of any property; and (b) believes that an error has been made: (i) in the valuation or classification of the property; or (ii) in the preparation of or the content of the relevant assessment roll or assessment notice. (4) The agency is to be made a party to an appeal if: (a) the agency prepared the valuation or classification of any property being appealed; or (b) the appeal is by a municipality or other taxing authority. (6) A notice of appeal must be in writing in the form established in regulations made by the minister and must: (a) set out the specific grounds on which it is alleged that an error exists; (b) set out in summary form, the particular facts supporting each ground of appeal; (c) if known, set out the change to the assessment roll that is requested by the appellant; (d) include: (i) a statement that the appellant and the respondent have discussed the appeal, specifying the date and outcome of that discussion, including the details of any facts or issues agreed to by the parties; or (ii) if the appellant and the respondent have not discussed the appeal, a statement to that effect specifying why no discussion was held; and (e) include the mailing address of the appellant.
APPEAL 2009-0039 [Page 6] 246 Subject to section 224(5), any party to an appeal before a board of revision has a right of appeal to the appeal board: (a) respecting a decision of a board of revision; and (b) against the omission, neglect or refusal of that board to hear or decide an appeal. 247(1) An appellant, including a municipality, other taxing authority or the agency, bringing an appeal to the appeal board shall serve on the secretary of the appeal board a notice of appeal setting out all the grounds of appeal. (2) A notice of appeal pursuant to subsection (1) must be in the form established in regulations made by the minister. (3) The appellant shall serve the notice of appeal mentioned in subsection (1): (a) within 30 days after being served with a decision of the board of revision; or (b) in the case of the omission, neglect or refusal of the board of revision to hear or decide an appeal, at any time within the calendar year for which the assessment was prepared. (4) The appellant may file a notice of appeal pursuant to this section personally, by registered mail, or by ordinary mail. 252 Subject to section 253, and notwithstanding any power that the appeal board has pursuant to The Municipal Board Act to obtain other information, an appeal to the appeal board pursuant to this Act is to be determined on the basis of the materials transmitted pursuant to section 250. 256(1) After hearing an appeal, the appeal board may: (a) confirm the decision of the board of revision; or (b) modify the decision of the board of revision in order that: (i) errors in and omissions from the assessment roll may be corrected; and (ii) an accurate, fair and equitable assessment for the property may be placed on the assessment roll. (2) If the appeal board decides to modify the decision of the board of revision pursuant to subsection (1), the appeal board may adjust, either up or down, the assessment or change the classification of the property. (3) Notwithstanding subsections (1) and (2), a non-regulated property assessment shall not be varied on appeal using single property appraisal techniques.
APPEAL 2009-0039 [Page 7] (3.1) Notwithstanding subsections (1) and (2), an assessment shall not be varied on appeal if equity has been achieved with similar properties. (4) After a decision is made pursuant to subsection (1), the secretary of the appeal board shall, by ordinary mail, send a copy of the decision together with written reasons, if any, for the decision to each party in the appeal. MARKET VALUE ASSESSMENT IN SASKATCHEWAN HANDBOOK (THE HANDBOOK): 1.3.1 Market Valuation Standard Market Valuation Standard assessments (referred to in the municipal Acts as non-regulated property assessments ) are as of the base date set by SAMA. According to the municipal Acts the market valuation standard is...achieved when the assessed value of the property: (i) is prepared using mass appraisal; (ii) is an estimate of the market value of the estate in fee simple in the property; (iii) reflects typical market conditions for similar properties; and (iv) meets quality assurance standards established by order of the agency; The municipal Acts define mass appraisal as...the process of preparing assessments for a group of properties as of the base date using standard appraisal methods, employing common data, and allowing for statistical testing;. The IAAO (Property Appraisal and Assessment Administration, 1990, page 651) has a similar definition for mass appraisal - the process of valuing a group of properties as of a given date, using standard methods, and allowing for statistical testing. Market value is defined in the municipal Acts as...the amount that a property should be expected to realize if the estate in fee simple in the property is sold in a competitive and open market by a willing seller to a willing buyer, each acting prudently and knowledgeably, and assuming that the amount is not affected by undue stimuli;. Estate in fee simple is also referred to as fee simple estate. It is defined (Appraisal of Real Estate, 2 nd Canadian Edition, 2002) as absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, expropriation, police power and escheat. Difference Between the Market Value and the Sale Price
APPEAL 2009-0039 [Page 8] Sometimes the market value assessment of a property is confused with the sale price of an individual property. However, the sale price is not necessarily the market value assessment on a property. The sale price is a historical fact. It is the amount the purchaser agreed to pay and the seller agreed to accept under the circumstances surrounding the sale. Market value is not a historical fact it is an estimate within a range. A sale price might not equal the market value assessment on a property for any of the following reasons: The sale might not have occurred in the assessment year or the date on which the property was valued. The purchaser or seller might not have been aware that similar properties were selling for more or less than the price for which the property was purchased. The buyer or seller may have been unduly motivated (for example, urgency due to being transferred to another city, needed to sell property as part of a division of matrimonial assets, etc.) The sale may have involved a trade, partial interest, special financing, personal property, or assumed leases. Assessors gather information on properties that have sold and determine the ranges of sale prices in the marketplace. This statistical data is used as part of the process for calculating market value assessments. Sale price information helps to develop market value assessments. Assessments are calculated by analyzing the range of sale prices of groups of properties at a specific point in time. Several sales of similar properties are compared to determine typical market values of specific types of properties that have similar characteristics. While the actual sale price of a property might be in the same range as the sales of similar properties, the resultant market value assessment is a composite analysis of all of the similar sales. Key Characteristics of Market Value The key characteristics of market value are: It is the most probable price estimate within a range, not the highest, lowest, or average price. It should also be fair and equitable. It is expressed in terms of a dollar value. It assumes a transaction between unrelated parties in the open market.
APPEAL 2009-0039 [Page 9] It assumes a willing buyer and a willing seller with no advantage being taken by either party. It recognizes the present use and potential use of the property. Three Approaches to Value There are three standardized approaches to estimate the assessment of a property: Sales comparison approach Cost approach Income approach. (also referred to as the rental income approach) The Three Approaches to Value How Market Value is Estimated Property Type Sales comparison approach Cost approach Income approach Compare sales prices of similar property being assessed Market value of land + (cost of improvements depreciation)= value of property Analyze future benefits (i.e., income-producing potential of the property) - Residential - Commercial - Unique and special use - Residential/ Commercial (limited market data) - Incomeproducing (i.e., rental properties) Highest and Best Use (also referred to as Most Probable Use ) One or more of these three approaches to value are used to arrive at a property s assessment using the Market Valuation Standard. Estimating the highest and best use of the site as-if-vacant is an essential prerequisite to applying the appropriate approach to value. Typically, the five criteria that are considered during a highest and best use analysis are: The use is from among those legally permissible; The use is physically possible; The use is financially feasible; The use is the most probable of those that are possible;
APPEAL 2009-0039 [Page 10] The use is maximally productive. Highest and best use is a more or less synonymous term for most probable use when understood properly 1. The highest and best use of a property is also estimated a second time, namely, for the property as-improved. The existing improvements will always be the highest and best use of the property as-improved, except, possibly, where the subject property and the neighbourhood are in transition to another use. An example would be where an older smaller home is located on a street that has been partially redeveloped with arterial commercial developments, such as, restaurants, shopping centres and suburban office buildings. In such case, and depending on land prices and expected future benefits, the most probable use as-improved may be for commercial redevelopment. The following is a brief outline of each approach, and the types of properties for which each is best suited. Sales Comparison Approach (Value in Exchange) This approach is based on the theory that the market value of a property is directly related to the sale prices of similar properties. When property types are relatively similar, the sales comparison approach provides a dependable indication of market value. This approach is best suited to residential properties and investment types of property that sell frequently on the open market or where there are sufficient sales to use this approach. The sales comparison approach is based on the assumption that a purchaser would not pay any more to purchase a property than for comparable properties of similar utility. Cost Approach The cost approach is used when the property being valued is recently constructed, or nearly new. It is also applicable in situations where there are no or limited comparable sales available, or when the improvements are unique or specialized (for example, courthouses, fertilizer blending plants, or large recreation facilities). The cost approach is based on the assumption that a purchaser would not pay any more to purchase a property than it would cost to buy a similar lot (or site) and construct an improvement on it with similar utility. An improvement is attached to the land and is expected to remain. Values for properties that are assessed using the cost approach are determined by applying the following formula: Market value of land + [cost of improvements (i.e., buildings) depreciation] = total value of property by cost approach
APPEAL 2009-0039 [Page 11] The assessor first estimates the market value for the land separately, usually through application of the sales comparison approach. The cost of improvements is estimated using either the reproduction or replacement cost method. The reproduction cost method is the cost associated with the reproduction or exact duplicate to the structure for which an assessment value is being sought. The replacement cost method is the cost associated with the construction of an improvement or building with the same utility as that for which an assessment value is being sought. The replacement cost method is the technique normally used. An estimate for all forms of depreciation is then subtracted from either the reproduction or replacement cost. Sales are used to adjust for depreciation within mass appraisal application of the cost approach. Obsolescence can also be measured by capitalizing any income lost due to the obsolescence. Market value, using the cost approach, is the result of adding the estimated land value to the estimated depreciated replacement cost of the improvement. CONCLUSIONS AND REASONS: [1] This Committee has received an appeal against a decision of the Town of Hudson Bay Board of Revision, and on the basis of the presentations of the appellant and respondent, must decide if the record shows that an error has occurred. The role of the Committee is not to redo the hearing. Rather, the Committee is to review the evidence from that hearing and determine whether the Board came to the proper conclusion in rendering its decision. Should the Committee conclude that the Board did not come to the proper conclusion based upon the evidence before it the Committee is then required to do what the Board ought to have done. The onus is upon the appellant to demonstrate to the Committee where the Board has erred. Issue (i) The Board s lack of objectivity in this appeal [2] The appellant s appeal noted that one area of concern was the fact the Town of Hudson Bay and SAMA selected the members of the Board resulting in a lack of objectivity on the part of the Board.
APPEAL 2009-0039 [Page 12] [3] The respondent stated as a point of clarification that SAMA had no input into the makeup of any Board of Revision. [4] The Committee finds it has no jurisdiction to decide the makeup of any Board of Revision and no further comment will be made on this issue. Issue (ii) Failing to find that comparable properties have had a reduction of value from 2002 until 2006 [5] The appellant referred to two listings of properties in his arguments, the first being a list of the properties that established 2002 assessments showing the 2008 values and the corresponding 2009 values. [6] The appellant argued that all of the properties on the first list in the Facts section (4)f) received a reduction in assessed value while his property received an increase of $4,250.00. In his opinion there was something drastically wrong with his assessment. [7] The second list in the Facts section (4)h)i) relied on by the appellant in argument, were 76 properties in Hudson Bay that indicated the difference in assessments for 2006. Again he argued that a lot of the properties he considered comparable or better properties than his dropped in assessed value while his increased. [8] In response to arguments based on the first list, the respondent argued the properties used to establish the 2002 values are not the same ones used to establish the 2006 values, and that increases or decreases in value occurs depending upon individual circumstances for each property. [9] The respondent referred to the second listing of 76 properties as just a list of assessment changes and nothing more. In his opinion this listing does nothing to prove the appellant s claim of invalidity of the valuations in Hudson Bay.
APPEAL 2009-0039 [Page 13] [10] The Committee is cognizant of subsection 195(7) of the Act which reads as follows: Equity in non-regulated property assessments is achieved by applying the market valuation standard so that the assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date [11] The property under appeal is residential and therefore a non-regulated property. As such the goal is to find market value as of the base date using market valuation standards of a mass appraisal system. The law does not dictate a certain manual be followed, or that a specific method be used, but the test is whether the property in question is valued at market and has the same relationship to market as comparable properties. [12] The arguments put forth by the appellant concerning the two aforementioned listings do not show that a constant relationship with market value does not exist. While the exhibits show a change in assessed values, what is lacking is a comparison to market values using sales to prove his point, and there was never any sales information provided to the Board or Committee on these two listings. [13] The Committee finds the appeal fails on this ground because the appellant did not offer any evidence or argument to prove there was not a reliable relationship with market value as of the base date for the properties provided. Issue (iii) Incorrectly accepting sales information from SAMA dating back to 2000 when there was a new mill being built, while in 2006 there was a downturn in the local housing market [14] The appellant argued the values of properties in Hudson Bay have dropped from 2000 until 2006 and that SAMA should not have used the earlier sales as they took place when the town was more prosperous than it was in 2006.
APPEAL 2009-0039 [Page 14] [15] In support of his position he presented a listing of sales received from the Town of Hudson Bay for 2006 identified as (4)g) above. He noted, in amongst those sales were four properties that had sold more than once and had dropped in value from the original sale to the sale in 2006. [16] The respondent provided an analysis of 2000 to 2006 sales used to calculate the MAF of 0.76. [17] The Committee notes the analysis does not provide a final assessment to sales ratio (ASR) study that established the grouping s relationship to market value. While it is acknowledged the appellant has not directly challenged the relationship to market value in so many words, it is the view of the Committee that in taking the position the values in Hudson Bay have dropped from 2000 to 2006, he is in fact arguing the current assessments have no relationship to the market of 2006. [18] After reviewing the sales analysis, the Committee asked the respondent if an adjustment for time was applied to the sales as the sales column was only labelled sale price. [19] The respondent stated there would have been a test for a time adjustment but it was not required. [20] The Committee notes there are a number of re-sales in the analysis and that a number of these sale prices are dropping from the first sale to the second sale. This indicates to the Committee further investigation may be required in order to determine whether an adjustment for time is or is not required. [21] The Committee finds that an analysis for an adjustment for time be completed using the re-sales in the MAF analysis along with an ASR summary of both the existing analysis and the new analysis if any changes to the MAF are necessary. In a letter dated November 16, 2009 the Committee requested the assessor to provide this information with a copy to the appellant, by December
APPEAL 2009-0039 [Page 15] 17, 2009. The appellant was advised should he wish to provide comment on the results of this undertaking a response must be provided by December 31, 2009. [22] The assessor provided the analysis asked for by the Committee on December 9, 2009. The Committee received no comments on this analysis from the appellant. [23] The provided analysis satisfied the Committee that there was no need to adjust the sales used to establish the MAF for time. Using these unadjusted sale prices the median ASR is 1.00 and the coefficient of dispersion (COD) is 16.1%. [24] Under the legislation for this reassessment, the only requirement is that unregulated properties must be assessed at market value as of the base date using a mass appraisal technique. In the case of residential properties, the two techniques would be either the cost or the sales comparison method. Either way the onus is on the appellant to prove the assessor had not arrived at an estimate of the market value for the property as of the base date. [25] The Committee realizes that for a taxpayer without any appraisal education or training this is an ominous task, nevertheless, this is the only test under this system. Unless the appellant can prove to the Board that by using his method as opposed to the assessor s or by modifying the information used by the assessor he improves the ASR and the COD then the appeal will fail. [26] In this appeal the appellant did not provide an alternative method to the cost approach used by the assessor nor did he successfully modify the evidence presented resulting in a better ASR or COD than that offered by the assessor. DECISION: This appeal is dismissed. For 2009, the assessed value shall be:
APPEAL 2009-0039 [Page 16] Assessed Value Taxable Assessment Land $ 7,700 $ 5,390 Improvements $28,400 $19,880 Total $36,100 $25,270 The filing fee shall be retained. DATED AT REGINA, Saskatchewan this 3 rd day of February, 2010. SASKATCHEWAN MUNICIPAL BOARD Assessment Appeals Committee - original signed by - Per: David Wilkin, Chairman - original signed by - Per: Cynthia J. Schwindt, Secretary - original signed by - Robert L. Edwards, for the Committee I concur: - original signed by - Jenny Lai Yu, Member