Assessment Appeals

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.

Overall, appealing property taxes requires a great deal of time and effort, with each property being examined on a variety of different levels. In fact, some of the greatest successes have been achieved on properties that appeared, on the surface, to be under assessed. That is why each property must be evaluated on an individual basis, and every effort be made to ensure that the assessment is accurate, fair, and equitable, and that the methodology utilized in arriving at the assessed value is consistent with other properties in the community.

For a review of your assessment, please feel free to contact me (Graeme Parkes) directly at (780) 707-2666.