Order LT96-02 - LT94009 - Property Appeal - Helen Smith v. Provincial Treasurer (Oct 18, 1996)

IN THE MATTER of an appeal by Helen Smith against a decision by the Provincial Treasurer with respect to the 1994 Assessment of Provincial Property Number 477059, located in Georgetown, P.E.I.

John L. Blakney, Vice-Chair
James Nicholson, Commissioner
Anne McPhee, Commissioner

This is an appeal under Section 22.(1) of the Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4, by Helen Smith (the Appellant) against a decision by the Provincial Treasurer (the Minister) with respect to the 1994 assessment of Provincial Property Number 477059.

The municipal address of the subject property is 27 West Street, Georgetown, P.E.I. According to the Minister's submission, the property consists of .46 acres and is improved with an angled three bedroom ranch house with attached garage (Exhibit D4).

Jan. 1, 1993	$600	Unimproved lot.
Jun. 1, 1993	$10,600	New construction - nominal value.
Oct. 15, 1993	$70,400	New house at 90% complete.
Jan. 1, 1994	$72,600	3% adjustment factor applied to all residential structures
Jun. 1, 1994	$80,600	New construction 100% complete.
Jun. 1, 1994 Revised	$76,600	Revised due to 5% location factor.
Jan. 1, 1995	$92,800	New info. resulting from referral plus 3% adj. multiplier for 1995.
Jan. 1, 1995	$88,100	5% location factor also applied to 1995 value.

The Appellant filed a Notice of Appeal in connection with the 1994 assessment of the subject property on January 5, 1995 with the Island Regulatory and Appeals Commission (the Commission) (Exhibit A1). The assessment value under appeal is $80,600.

After the appeal hearing, additional submissions were made by the parties, including a copy of the house plan submitted by the Appellant and a copy of the "working document" submitted by the Minister.

At the commencement of the hearing the Commission raised as a preliminary matter, a question as to the assessment year being appealed. The Commission referred to Exhibits A2 and A4 as submitted by the Appellant which refer to appeals for both the 1994 and 1995 assessment years.

On behalf of the Appellant, Mr. Smith submitted that they filed an appeal on the 1994 assessment, however, since filing this appeal their assessment has continued to increase. The Appellant is not satisfied with the 1995 assessment of $92,800 and requests the Commission also revise this assessment.

Officials representing the Minister responded that the Notice of Appeal filed with the Commission pertains to the 1994 assessment only, however they are prepared to provide comment on the 1995 assessment if required.

The Commission notes that as an appellate body it has only the powers given to it by statute and may only hear appeals which are properly before it. The Commission does not have absolute powers and is bound by the law.

In appealing the assessment of real property there are specific provisions which must be adhered to in order to file an appeal. Section 20 of the Act, sets out provisions to require the referral of assessments back to the Minister for reconsideration. After the Minister has considered the assessment and notified the person who referred the assessment, the person can appeal the Minister's decision on the referral to the Commission, to have the assessment vacated or varied (Section 22).

Furthermore, Section 23 sets out the provisions for serving a notice of appeal to the Commission in a form prescribed by the Regulations.

According to the documents submitted for this case, the Commission finds that the Appellant referred the notice of assessment for the 1994 assessment back to the Minister. The Minister reconsidered the assessment and issued a Notice of Disposition of Assessment Referral and confirmed the assessment at $80,600. This assessment was appealed, in accordance with Section 22 by the Appellant by way of a Notice of Appeal filed with the Commission on January 5, 1995.

The Commission finds, based on the information before it, that the appeal of the 1994 assessment has been filed pursuant to the provision of the Act and therefore the Commission has the authority to hear and decide the appeal on the 1994 assessment.

However, with respect to the 1995 assessment the Appellant has not filed a Notice of Appeal with the Commission nor was a referral filed with the Minister in the appropriate time period. Therefore the Commission finds that it has no jurisdiction or authority to hear an appeal by the Appellant for this assessment year.

The Appellant takes the position that the Minister has assessed the residence beyond market value. In a submission from the Appellant, identified as Exhibit A4, the Appellant states at p.1:

Upon review of the Minister's evidence, identified as Exhibit D4, Mr. Smith identified what the Appellant thinks are a number of discrepancies in the assessment which have resulted in the assessment being higher than what the Appellant considers to be the actual value. The Appellant believes the assessors did not take into account that the mud room is 23.8 square feet and not 150 square feet and the space for the stairway should not be added to the total square footage of the residence. In addition there is no whirlpool tub or porch as reported by the Minister. The Appellant claims the actual size of the residence is 1,561 square feet and not 1,657 square feet, as calculated by the Minister. The Appellant believes that if these discrepancies are accounted for, the assessed value of the property should be decreased.

The Appellant further argues that the cost approach used by the Minister to determine the assessed value of the subject property is not a valid approach and refers to Basic of Real Estate Appraisal by the Appraisal Institute of Canada and states "costs [sic] does not create value and cost is not value" (Exhibit A4).

The Appellant also submits that the three percent (3%) adjustment factor applied by the Minister is excessive - "when the cost of living index is approximately half of that figure" (Exhibit A4).

The Appellant presented a list of ten properties and the 1995 assessment for each to support the claim that the value of the subject residence is beyond other assessments in the area and "they are in a tax bracket all by themselves". The Appellant contends that the assessment of the subject unit is not uniform to other assessments in the area.

The Minister contends the subject property has been assessed in accordance with the provisions of the Act. As stated by the Minister in Exhibit D1, pursuant to the provisions of Section 3.(2) of the Act, all real property must be assessed at its market value. Pursuant to Section 1.(f) of the Act, market value means the most probable sale price indicated by consideration of the cost of reproduction, the sale price of comparable properties and the value indicated by rentals or anticipated net income. The Minister submits that the method of valuation used to determine the 1994 assessed value of the subject property is the cost approach with market factor adjustments.

Using the cost approach, the Minister determined the value of the subject property as follows:

LAND	Lot	$ 600

STRUCTURE	House	69,707
	Garage	7,941
	Patio Decking	2,302
TOTAL		$80,600

In addition, a five percent (5%) location factor was applied to the property to account for excessive truck traffic which reduced the 1994 assessed value of the unit to $76,600.

The Minister also conducted an analysis using comparable building assessments to support their contention that there are other homes in the Georgetown area in the assessed value range of $70,200 to $114,200.

The Minister submits that the subject property is not over-assessed and is uniform with other assessments.

The Minister recommends the Commission affirm the 1994 non-commercial assessment of $76,600.

The Commission has given full consideration to the evidence as submitted by both parties and has decided to deny the appeal. The reasons for this decision are as follows:

The Minister states that the value of the unit is calculated by applying the 1979 base cost per square foot to the area of the structure. By using the cost approach, this value is then adjusted for the various forms of depreciation to account for quality and condition. This depreciated value is then adjusted by use of an adjustment multiplier to determine current market value. These adjustments are made in accordance with the Department's Assessment Manual.

The Appellant however disagrees with this approach and argues "cost does not create value".

The Appellant also disagrees with the Minister's calculation of the size of the structure and certain components included in the Ministers calculation of the assessed value.

On the matter of using the cost approach to valuation, the Commission finds that pursuant to Section 1.(f) of the Act, the consideration of the cost of reproduction of the unit is an appropriate methodology to determine market value.

The Commission has reviewed the house plans as submitted by the Appellant and finds the structure is approximately 1,659 square feet as determined by the Minister.

As to the Appellant's contention that there is no whirlpool tub or patio - the Commission is of the opinion that this argument is based merely on definition. The Commission finds that these components are appropriately accounted for in the Minister's calculation of the building costs.

Our review of the calculations made by the Minister indicates the standard values were fairly applied to the building components to arrive at the overall assessment. These values have been applied consistent with the Department's Assessment Manual. The Appellant has provided no substantive evidence to support the argument that the application of the standard calculations would be invalid in this case.

Therefore the Commission finds that the Minister's application of the cost approach to determine market value is appropriate in this case.

The cost approach requires the Minister to apply a component grade to account for the quantity and quality of building components in individual units. Each unit is graded based on 10 components, including: foundation and basement, windows and doors, exterior, roof, frame, floors, interior, heating, plumbing and electrical. In 1994 the subject property was graded at 4.40 using a standardized grading approach.

In support of the application of the component grade of 4.40, the Minister presented in Exhibit D5, an analysis of five (5) comparable property sales and submitted that all of the comparable properties are "inferior to the subject" in terms of the component grade.

Mr. Smith presented information on what the Appellant believes to be the "ten nicest houses in Georgetown" and argued the subject residence is in a class by itself (Exhibit A4).

With respect to the Appellant's submission, the Minister presented an analysis, including the grade factor for each of these ten units and argued that all have inferior grading except for comparable 9 which is similar in quality to the subject (Exhibit D11).

The Commission has considered the arguments presented by the parties and finds the Minister has demonstrated that the component grade of the subject property was derived in a manner consistent with the procedures and factors contained in the Department's Assessment Manual. The Appellant has presented no substantive evidence to convince the Commission that the grade is not correct or that the procedure is unreasonable.

Therefore the Commission affirms the component grade of 4.40 for the 1994 assessment year.

The Minister also submitted that the 1994 assessment was based in part, on the application of an adjustment multiplier. An adjustment multiplier of 3% was applied to the subject property similar to all other properties in this work unit.

The Appellant contends that the 3% adjustment multiplier is excessive when one considers that the cost of living index is half this figure (Exhibit A4).

From hearing previous real property assessment appeals, the Commission understands the adjustment multiplier is intended to reflect different rates at which market value is increasing in specific areas of the province and is based on a compilation of the previous years sales information.

As we have noted in appeals where the application of an adjustment multiplier is contested, the use of adjustment multipliers is accepted as part of the mass appraisal process. In this case, the Appellant has provided no substantive evidence to support the argument that the application of the adjustment multiplier would be invalid. The Commission finds that according to the 1995 Land Valuation Guide, a 3% adjustment multiplier has been applied for all residential properties in the work unit. The Commission believes that the Appellant's argument pertaining to the "cost of living index" has very little direct bearing on the derivation of the adjustment multiplier. As a result, the Commission affirms the use of a three percent 3% adjustment multiplier applied the subject property.

According to the evidence, the Minister has adjusted the assessed value of the property by an additional 5% to reflect the amount of truck traffic traveling in front of the unit. The Minister contends this is the maximum amount that they apply to compensate for this problem.

The Appellant presented information contending that the truck traffic amounts to approximately 12,880 extra trips (Exhibit A4 at p.10) and that an even greater allowance should be made to account for this problem.

Although the Appellant may disagree with the amount of the adjustment applied, the Commission is satisfied that the Minister has adequately considered the impact of the truck traffic and applied an appropriate adjustment factor accordingly. Therefore the Commission affirms the Ministers application of a 5% adjustment factor.

In reviewing the calculations, methodology, Real Property Assessment Manual and Land Valuation Guide relied upon by the Minister, the Commission finds the approach used is valid and appropriate to determine market value.

Overall the Commission finds that the assessment is not too high and that the Minister has demonstrated the uniformity of assessment in relation to other assessments, pursuant to Section 28.(1) of the Act.

IN THE MATTER of an appeal by Helen Smith against a decision by the Provincial Treasurer with respect to the 1994 Assessment of Provincial Property Number 477059, located in Georgetown, P.E.I.

WHEREAS the Appellant, Helen Smith has appealed the 1994 assessment of Provincial Property Number 477059;

AND WHEREAS the Commission heard the appeal at a public hearing conducted in Charlottetown on August 23, 1996;

AND WHEREAS the Commission has issued its findings in this matter in accordance with the Reasons for Order issued with this Order;

NOW THEREFORE, pursuant to the Island Regulatory and Appeals Commission Act and the Real Property Assessment Act,

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.