| Property assessments are completed on a bulk basis, with
each assessor being asked to put values on large numbers of properties.
As such, there is ample room for error, with mistakes being as simple
as a miscalculation, or having a wrong size. As well, due to the heavy
workload, the assessor must often cut corners where possible, often
keeping the same value on a property year after year despite changing
market conditions. The tax assessor's job description is to protect
the aggregate tax base and he will very rarely go out of his way to
give someone a break. His office maintains and stores data on each parcel
it assesses. Even when he sees or knows of inequity, he/she will not
always rock the boat and create more work for himself. He is not Robin
Hood!
The assessors have a daunting task, trying to put values on thousands
of properties. Commercial projects pose particular difficulty, as
it has been determined by previous board decisions that the Income
Approach is the most viable method of valuation for these types of
properties. This consists of calculating the net income being generated
by a project and capitalizing it to arrive at an estimate of value,
with the capitalization rate being derived from sales of similar properties
in the market place. As such, the lease rate being applied to a property
for assessment purposes may be too high, or the capitalization rate
may be too low. The latter in particular is suspect, as it requires
the assessor to make subjective adjustments. For example, a property
having excellent exposure would have a lower capitalization rate than
a similar property with poor exposure. The amount of the adjustment,
however, is largely at the discretion of the person completing the
report, and as such, subject to debate. Recent Precedent Setting Case Studies There have been several important decisions in the past year or so. Chief amongst these would relate to the Rowbotham Decision (Calgary), and the Einar and Maureen Hilton decision (British Columbia). The latter is of importance, as it clearly indicates the assessor’s obligation to consider equity when determining actual value for assessment purposes. In this case, both the assessor and the agent for the taxpayer (Parkes and Company), agreed that the value on the roll was reflective of market value, and in fact may have been somewhat low based on market evidence. The agent for the taxpayer, however, suggested that the cap rate used was low based on those used by the assessor for other similar properties in the community. In their decision, the panel indicated that: “The Board has accepted the appraisal analysis as supportive of the assessed value, so the particulars of the assessment valuation are now to be considered by it in determining whether the property is valued equitably.” The board further indicated that: “The Board finds that fair and consistent assessments means that the assessments of similar properties should be made on similar considerations. This does not mean the same rates must be applied in determining the assessment, but should mean that any dissimilarity between them can be adequately accounted for.” In other words, the capitalization and lease rates used by the assessor
to arrive at values for other properties in the community must be
adjusted to arrive at applicable rates for the subject. For example,
if the assessor utilized a 10% capitalization rate for every similar
property in the community, they must also use a 10% capitalization
rate for the subject, even though the subject would likely sell for
a 7% capitalization rate on the open market. For a review of your assessment, please feel free to contact me (Graeme
Parkes) directly at (780) 707-2666. |
