Assessment Appeals Committee DETERMINATION OF AN APPEAL UNDER Section 16 of The Municipal Board Act and Section 216 of The Cities Act Appeal Number: AAC 2016-0034 Date and Location: February 16, 2017 Saskatoon, SK Concorde Holdings Ltd. (as represented by Altus Group Limited [Altus]) Appellant - and - City of Saskatoon Respondent APPEARED FOR: The Appellant: The Respondent: Garry Coleman, Director Travis Horne, Assessment Manager Chad Nunweiler, Assessment Appraiser Bryce Trew, Senior Assessment Appraiser HEARD BEFORE: John Eberl, Panel Chair Gord Androsoff, Member Malcolm Eaton, Member
APPEAL AAC 2016-0034 Page 2 INTRODUCTION: [1] The 2016 assessments for the properties under appeal are: Roll Number Legal Description Civic Address Original Assessed Value 425211100 Parcel 118984450 3422 Millar Avenue 425103500 Parcel 119085947 3423 Millar Avenue Board s Assessed Value $ 1,731,500 $ 1,731,500 $ 1,735,200 $ 1,735,200 [2] The properties are non-regulated and classified as commercial. The Assessor used the income approach to value the properties. [3] Altus filed an appeal to the City of Saskatoon s (City) Board of Revision (Board) on behalf of Concorde Holdings Ltd. based on alleged mistakes by the Assessor that have caused warehouse properties on Millar Avenue to be over-assessed when compared to similar properties. [4] The Board did not agree with Altus assertions and upheld the original assessed values. [5] Altus asks the Committee to find the Board made a mistake in finding the subject properties are assessed in a manner that demonstrates fair and just proportion to similar properties not on Millar Avenue and to apply a Capitalization (Cap) Rate adjustment to the Millar Avenue properties to remedy this. ISSUES: [6] a) Did the Board make a mistake when it denied the appeal and confirmed the assessed value for the subject warehouse properties for 2016? b) Did the Board make a mistake by failing to provide sufficient reasons for its decision? DECISION: [7] The Committee finds the Board did not make a mistake when it denied the appeal and confirmed the assessed value for the subject warehouse properties. The Committee finds the Board provided sufficient reasons in its decision.
APPEAL AAC 2016-0034 Page 3 PROCEDURAL MATTERS: Two Properties as One Appeal [8] The parties agreed the documents, evidence and arguments are the same for both properties under appeal. The Panel Chair advised we would issue one decision for both properties. Incomplete SMB Record [9] The Panel Chair informed the parties the Hearing Book did not contain Appendix A3-C from the Appellant s submission to the Board. The missing document is: Parklane Auto & RV Sales Ltd. v. British Columbia, (2015) B.C.J No. 1807, British Columbia Supreme Court. The Panel Chair provided printed copies of this document. PRELIMINARY MATTERS: Late Filing [10] The Panel Chair confirmed with the parties that there was some irregularity with submission deadlines. Both parties agreed they had no issues with submission deadlines and the Panel Chair thanked the parties for their willingness to accommodate. Issue a): Did the Board make a mistake when it denied the appeal and confirmed the assessed value for the subject warehouse properties for 2016? POSITIONS OF THE PARTIES: [11] Altus: a) The Board made a mistake in finding the assessments of the subjects on Millar Avenue bear a fair and just proportion to the market value of similar properties that receive a 6.48% Cap Rate. b) The Board made a mistake in finding Altus did not establish what a fair and just proportion was. Altus role is to establish error, not what the assessed value should be. c) The Board made a mistake in finding the assessed values of warehouses on Millar Avenue, which are assessed at 21% higher than market value, bear a fair and just proportion to the assessment of warehouses on arterial streets, other than Millar Avenue, which are assessed at only 4% higher than market value. d) The Board failed to turn their minds to International Association of Assessing Officers (IAAO) standards, which indicate acceptable Assessment to Sales Ratio (ASR) levels are between 0.90 and 1.10.
APPEAL AAC 2016-0034 Page 4 [12] City: e) The Board made a factual mistake when it found the Appellant did not provide evidence demonstrating or quantifying what a fair and just proportion should be. a) This property has been appealed in the past on slightly different grounds b) There was no evidence the Assessor made a mistake in testing ASR on a city-wide basis as opposed to Millar Avenue. c) There was no evidence the Assessor made a mistake in testing his stratifications. d) Locational and arterial adjustments have been accounted for through the warehouse model/rent model. e) There was no evidence challenging the methodology used in determining the Cap Rate grouping. f) There was no evidence demonstrating what a fair and just proportion should be. It is beyond the scope of the Panel to conduct research to substantiate Altus allegations. g) Evidence/results of ASR testing on arterial access and cap rates proved the assessments are reasonable. Further evidence shows the Group 2 warehouse rent rates are correct. h) Altus has not demonstrated proof of error. i) Case law (2016 SKCA 107 Imperial Oil) and The Cities Act, SS 2002, c C-11.1 [the Act] tell us that if equity is achieved with similar properties, the assessment is reasonable and should not be changed. j) The Coefficient of Dispersion (COD) is a reliable indicator as to whether assessments are uniform within a property class. The COD worsens for the remaining population of properties if the Millar Avenue properties are severed off. k) Altus has misapplied standard appraisal methods in their presentation to the Board. ANALYSIS: Background [13] The Market Valuation Standard (MVS) is 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 [SAMA] [s. 163(f.1), the Act]. [14] The income approach used to value the subject property requires market rental data, market vacancy information, property operating expenses, and improved property sales data. The Assessor applied the same method to all properties in the City. The valuation of similar properties must meet the MVS and be treated the same because property assessment must be equitable [s. 165(3), the Act].
APPEAL AAC 2016-0034 Page 5 [15] Assessments seek to find the middle of the market. This is required for both practical reasons and to achieve equity. Section 165 (5) of the Act [16] The Act states the application of the MVS achieves equity for non-regulated property assessments when assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date [s. 165(5)]. [17] The Board determined the Assessor valued the properties with an appropriate assessment model using mass appraisal principles. The Assessor analyzed warehouse sales on a city-wide basis to determine four Cap Rate stratifications. Although Altus proposed a different stratification that would separate Millar Avenue warehouses into an additional grouping, the Board stated this alone did not demonstrate the Assessor s model was incorrect. [18] The Board recognized the Assessor s argument that arterial rent adjustments have been included in the city-wide warehouse model since the analysis showed location does affect rental rates. No such adjustment was required for Cap Rate grouping because city-wide analysis did not show location affected Cap Rate similarly. The Board further commented that Altus had not provided evidence to challenge the Assessor s methodology for Cap Rate grouping. [19] In addition, the Board noted both it and the Committee (AAC 2013-0140) have already commented on Millar Avenue warehouse properties, finding Millar Avenue warehouses are not a separate market. [20] Altus argues Millar Avenue warehouses are a separate and distinct grouping from other arterial roadway warehouse locations that include Faithfull Avenue and Avenue C. The Assessor has grouped all 10 arterial roadway warehouse sales together because citywide analysis did not show location affected Cap Rate. [21] Altus has broken down these 10 sales further and illustrated the Avenue C and Faithfull Avenue sales have an ASR of 1.04 and the Millar Avenue sales have an ASR of 1.21. This evidence is the basis for Altus assertion that assessments of Millar Avenue warehouse properties are not equitable because they do not bear a fair and just proportion to the market value of similar properties [section 165(5)], i.e., arterial roadway warehouses that receive the same Cap Rate. Altus further suggests a Cap Rate adjustment for Millar Avenue warehouses, that brings the ASR to 1.0, is a reasonable solution to achieve equity.
APPEAL AAC 2016-0034 Page 6 [22] The Assessor pointed out to the Board and us the Committee has previously ruled Millar Avenue competes with other arterial warehouse locations in a city-wide market and is not a separate market unto itself (AAC 2013-0140). The Assessor asserts the 2016 grounds to the Committee are very similar to those of the 2013 appeal - ASR s, cap rates and equity. The 2016 grounds have been framed around fair and just proportion rather than typical market conditions for similar properties. In our view, the constant theme remains that Altus strategy is to suggest there is a mistake within the Cap Rate analysis for Group 2 warehouses and create a distinct market for Millar Avenue warehouses. [23] We are reminded when determining similarity between properties, the Courts have deferred to assessor discretion with the premise that a physical difference does not provide proof of a market difference. While other groupings may be said to be comparable, the choice among the possible groupings is clearly left to the discretion of the Assessor (Cadillac Fairview Corp. v. Saskatoon, 2000 SKCA 84 (CanLII) [42]). [24] The Committee previously ruled that seeking a new stratification based on a comparison of ASR s, without supporting market evidence of how it was developed, does not mean it requires a correction and is not a sound basis for creating a new stratification (AAC 2013-0089 et al). [25] We do not find merit in Altus suggestion that ASR should be used to differentiate Millar Avenue warehouse sales from warehouse sales on other arterial roadways. Although Altus argued the difference in ASR demonstrated the subject properties were assessed in a manner that did not bear a fair and just proportion to the market value of similar properties as of the applicable base date [s. 165(5)], we do not agree. [26] Legislation ties equity to the MVS. Equity and the MVS are so closely connected that if it can be demonstrated the MVS has been met and properly applied, equity will have been achieved. The Committee has previously confirmed this (AAC 2012-0053 et al, paragraph [26]). [27] We do not consider jurisdictional evidence regarding assessment from British Columbia (BC) is relevant in the matter before us. The assessment system in BC is sufficiently different from Saskatchewan that legislative references and case law are not applicable. [28] We find there is no evidence to indicate the Assessor made a mistake in preparing the property valuation and that equity has been achieved.
APPEAL AAC 2016-0034 Page 7 Alternative Methodology [29] Altus suggested a different way to determine an assessed value. The assessment is presumed correct unless an assessor makes an error of fact, law or assessment principles [Regina (City) v Laing Property Corp. (1994), 128 Sask R 29 (CanLII 4690) (Sask CA)]. [30] We do not agree with Altus that a comparison of ASR s demonstrates the Assessor made an error of assessment principles. A higher than recommended ASR for a proposed subgrouping is not sufficient proof of assessment error there still has to be evidence of how the subject property s assessment does not meet the MVS. It is not disputed the median group Cap Rate ASR s for warehouse sales fall within the acceptable range of IAAO standards. [31] A city-wide analysis of warehouse sales did not show arterial location affected cap rates; therefore, it is not rational to go back and create an additional Cap Rate grouping within the existing group of arterial locations. [32] As with AAC 2013-0140, both parties agree arterial location is important. An adjustment for arterial location is made within the rent model. Altus has not provided evidence to show the rent model adjustment is not a reasonable approach to recognize the benefit of arterial location. [33] We find Altus did not prove error of assessment principle with the Assessor s model by suggesting an alternative stratification. Issue b): Did the Board make a mistake by failing to provide sufficient reasons for its decision? POSITIONS OF THE PARTIES: [34] Altus: a) The Board did not provide sufficient written reasons for its decision. b) The Board decision is simply a summary transcript of the hearing with no analysis. c) The Board s decision fails to analyse the ASR disparity, IAAO standards, statistical testing, or weigh evidence. [35] City: a) The Board identifies multiple key reasons to dismiss the appeal.
APPEAL AAC 2016-0034 Page 8 ANALYSIS: b) It is not necessary for the Board or Committee to comment on every piece of evidence. [36] Written reasons provide accountability, procedural fairness, and comply with subsection 210(5) of the Act. Written reasons promote transparency and show people how decision makers made their decisions (Baker v Canada (Minister of Citizenship and Immigration), [1999] 2 SCR 817 (CanLII 699) (SCC) at paragraphs 38-40 and Northwestern Utilities Ltd. v City of Edmonton, [1979] 1 SCR 684 (CanLII 17) (SCC) at 706). [37] The Board s decision reflects the Assessor s arguments that the issues had been before them previously within the 2013-2016 assessment cycle. We find the Board s analysis and recognition of the issues and evidence are sufficient to supports its conclusion. A board or committee does not have to examine every piece of evidence or argument before it to address the core issue of the appeal. [38] We find the Board provided sufficient reasons in its decision. CONCLUSION: [39] The Committee dismisses the appeal on the issue of property valuation. The Committee also dismisses the appeal on the issue of insufficient reasons. [40] The Committee upholds the original 2016 property valuations of $1,731,500 (roll number 425211100) and $1,735,200 (roll number 425103500). Dated at REGINA, Saskatchewan this 12 th day of April, 2017. Saskatchewan Municipal Board Assessment Appeals Committee Per: John Eberl, Panel Chair Per: Lise Gareau, Director