Saskatchewan Municipal Board Assessment Appeals Committee

Appeal: 2008-0100

RESPONDENT: Resort Village of Chorney Beach

In the matter of an appeal to the Assessment Appeals Committee, Saskatchewan Municipal Board, by: Milton and Susan Derry 218 Flavelle Crescent Saskatoon, Saskatchewan S7L 6L2 respecting the assessment of:

Lot 16, Block 06, Plan 68H06717 57 Lakeshore Drive Alternate Number: 504504250-01 for the year 2008;

BEFORE: David Wilkin, Chairman Jenny Lai Yu, Member Robert L. Edwards, Member Cynthia J. Schwindt, Secretary

APPEARED FOR THE APPELLANT: Milton Derry, Susan Derry

APPEARED FOR THE RESPONDENT: No one appeared

APPEARED FOR THE SASKATCHEWAN ASSESSMENT MANAGEMENT AGENCY: Michael W. R. Caskey, John Smysniuk

This appeal was heard in Room 10.1, Sturdy Stone Centre, 122 – 3rd Avenue, in Saskatoon, Saskatchewan, on November 12, 2008.

APPEAL 2008-0100 [Page 2]

This appeal is against the decision of the Board of Revision (the Board) for the Resort Village of Chorney Beach, pursuant to section 246 of The Municipalities Act (the Act).

ISSUE:

Did the Board err in its decision by failing to adjust the value of the property due to flooding?

FACTS:

(1) This is a 5,900 square foot parcel improved with a 1,024 square foot two storey summer cottage and decks of 125 and 718 square feet respectively. The improvements are all wood frame, residential type construction built in 2004 and 2005 . The cottage is of average quality (class B) and the decks are of economical quality (class D). The Saskatchewan Assessment Management Agency (SAMA) assigned a 15% unfinished allowance to the summer cottage.

A functional obsolescence of 33% has been applied to all improvements. The land has been reduced by 33% due to flooding.

(2) The property is valued at:

Fair Value Assessed Value

Land $22,600 $15,820 Building $64,300 $45,010

Total $86,900 $60,830

As a seasonal residential property, the assessed value equals 70% of fair value.

(3) Due to high water levels in Fishing Lake, the lot is partially covered with standing water which reached a height almost level with the bottom of the floor joists. The owners have built a retaining wall around the cabin in order to keep the water from damaging the structure.

(4) The grounds of appeal to the Board were twofold.

The first issue appealed related to the influence of the flooding on the value of the property:

“THERE IS NO BURM [sic] IN FRONT OF CABIN, THEREFORE WE STILL ARE SUBJECT TO FLOODING, IROSION [SIC] OF PROPERTY DUE TO WAVE ACTION AND WATER UNDER STRUCTURE APPEAL 2008-0100 [Page 3]

THAT REQUIRES PUMPING. We still have 30% of our property under 3 – 4 ft of water unlike beaches with a burm [sic].”

The second issue relates to the property next door to the subject.

“BECAUSE THE LOT BESIDE OURS WAS FILLED WITH CLAY AND NO PROTECTION FROM EROSION THERE IS CLAY IN THE WATER WHERE SAND WAS (Mucky Mess, we can’t swim in it or use the lake as we usually do)”

(5) The decision of the Board finds the following:

“This is to advise you that the 2008 Board of Revision has denied your appeal of assessment on the above property. The reason for the Board’s decision is that the Assessment Manual is a legislated manual and the Board feels that there was no proof of an error made on the valuation of the property, and that equity in assessment is a very important factor.”

(6) The record of the Board includes:

a) Notice of appeal dated June 30, 2008; b) A notice of hearing dated June 3, 2008; c) Letter dated June 3, 2008 to SAMA from the secretary of the Board with copy of the notice of hearing and notice of appeal to the Board; d) An assessment report from SAMA including Appendices A through E attached; e) A fax to the Board by SAMA dated June 17, 2008 containing a revised recommendation of the assessment signed by Michael Caskey for the subject property; f) Copy of the minutes of the Board dated July 8, 2008; and, g) The decision of the Board, dated July 14, 2008. h) In addition to the above the appellant presented 54 photographs of the subject and comparable properties to the Board which was not part of the record supplied to the Committee by the Board. These photographs are included as part of the record.

(7) The appellant presented a map of Chorney Beach which was identified as Exhibit A-1

(8) The grounds of appeal to the Committee are:

“At this hearing neither was the process fair nor did it seem to be fair. The Resort Village of Chorney Beach Administrator, who was called an observer at the Board of Revision, met with the Board of Revision for at least 15 minutes prior to the start of the meeting. A representative from SAMA and myself were then invited to join the meeting. Then at the end of the meeting the representative and myself were dismissed while the APPEAL 2008-0100 [Page 4]

Board of Revision and the Village Administrator stayed and met for a period of time.

To me this lacks even the appearance of impartial consideration. There was an obvious opportunity and at least the appearance of political and third party influence. The Village Administrator has a stake in the result of that hearing and should not be meeting with the Board of Revision prior to and after the hearing. As an observer, the Village Administrator should have been invited in and dismissed at the same time the SAMA representative and myself were.

...

Specifically properties at Chorney Beach do not have the advantage of protection from a government-financed berm as most other beaches have. The berm provides protection from flooding, erosion, wave action and ice movement. Beaches with berms have access to their entire property. As well there are several properties on Chorney Beach that were basically unaffected or minimally affected by the flood, hence the village council conducted a vote and it was decided not to accept the building of a berm.

Upon discussing the assessment with Michael Caskey, Assessment Appraiser for SAMA, he indicated that the assessment of all properties around the lake had to be equal and fair. It is our belief that in order to be fair that assessment cannot be a simple blanket reduction for all cabin owners.

Since the Board of Revision on July 8, the annual general meeting for the Resort Village of Chorney Beach was held on July 13, 2008. At that meeting one of the councilors [sic] reported that they had met with SAMA and decided how to proceed on the reassessment and had decided that all properties at Chorney Beach would have a 33% reduction in property assessment. Again this is equal, but far from fair or reasonable.

We do not have access to 1/3 of our property, since it is currently underwater. We also continue to struggle with erosion, wave action and remain vulnerable to flooding and possible ice damage. The only protection that we have is a retaining wall that we built to try to protect our property. We are presently pumping water from under our cabin. The lake in front of our cabin has been turned into a mucky mess due to the clay dumped on our neighbours lot with no retaining wall or protection. This clay continues to erode daily into the lake.

It is our position that in this case fair is not equal. Saskatchewan Assessment Management Agency (SAMA) decision to do a blanket recommended assessed value for the cabins a [sic] Fishing Lake, although quick and easy, does not deal with the discrepancies in affect on individual property owners. APPEAL 2008-0100 [Page 5]

At Chorney Beach, some properties had little or no affect; others experienced extensive loss and damage. Some cabin owners lost the part of their beach that was public property, while others have lost as much as ½ of their property under water. To treat everyone the same is simply not fair.”

LEGISLATION:

The Municipalities Act:

“195(1) The assessor shall prepare assessments for all property in the municipality.

(2) All land is to be assessed at its fair value as of the applicable base date separate from any improvements on the land.

(3) Notwithstanding subsection (2), land and improvements may be assessed separately in circumstances where separate values are required.

(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.

(6) The value at which any property is assessed is to bear a fair and just proportion to the value at which all similar property is assessed:

(a) in the municipality; and

(b) in any school division situated wholly or partly in the municipality or in which the municipality is wholly or partly situated.

(7) In determining the value of any property, the assessor shall take into consideration and be guided by:

(a) any applicable formula, rule or principle set out in the assessment manual; and

(b) any facts, conditions and circumstances of the property that may affect its value.

(8) For the purposes of subsection (7), the assessment shall reflect all the facts, conditions and circumstances of the property on January 1 of each year as if they had existed on the applicable base date.

219(1) Subject to subsection (2), the assessor shall make any supplementary assessment that may be necessary to reflect a change if, after assessment notices are sent but on or before December 1 of the taxation year for which taxes are levied on the assessment mentioned in the notices, it is discovered that the assessed value of any property is not the same as the value entered on the assessment roll by reason of: APPEAL 2008-0100 [Page 6]

(a) destruction of or damage to the property;

(b) demolition, alteration or removal of an improvement;

(c) construction of an improvement; or

(d) change in the use of the property.

(2) If a change is made to the roll pursuant to subsection (1), the assessor shall send an assessment notice to the persons affected.

(3) Section 215 applies, with any necessary modification, to an assessment notice sent pursuant to subsection (2).

(4) The rights of appeal and the procedures respecting appeals as set out in this Part apply, with any necessary modification, with respect to an assessment notice sent pursuant to subsection (2).

240(1) After hearing an appeal, a board of revision or, if the appeal is heard by a panel, the panel may, as the circumstances require and as the board or panel considers just and expedient:

(a) confirm the assessment; or

(b) change the assessment and direct a revision of the assessment roll accordingly:

(i) subject to subsection (3), by increasing or decreasing the assessment of the subject property;

(ii) by changing the liability to taxation or the classification of the subject property; or

(iii) by changing both the assessed value of the subject property and its liability to taxation or its classification.

(2) A board of revision or panel shall not exercise a power pursuant to subsection (1) except as the result of an appeal.

(3) Notwithstanding that the value at which any property has been assessed appears to be more or less than its fair value, the amount of the assessment may not be varied on appeal if the value at which it is assessed bears a fair and just proportion to the value at which all similar property is assessed:

(a) in the municipality; and

(b) in any school division situated wholly or partly in the municipality or in which the municipality is wholly or partly situated.

(4) A board of revision shall decide all appeals within 90 days after the date on which the municipality publishes a notice pursuant to section 217, and no appeal may be heard after that date unless allowed pursuant to subsection 219(2) or 243(9) or section 404.

APPEAL 2008-0100 [Page 7]

(5) After a decision is made pursuant to subsection (1), the secretary of the board of revision shall, by registered mail, send to each party:

(a) a copy of the decision together with written reasons for the decision; and

(b) a statement informing the party of the rights of appeal available pursuant to section 246 and the procedure to be followed on appeal.

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.”

The Municipal Board Act:

“16.1(1) Where any person believes that the assessment manual relied on by the Saskatchewan Assessment Management Agency or any municipality pursuant to The Assessment Management Agency Act, or any assessment order or rule of the Saskatchewan Assessment Management Agency, is inconsistent with any Act, he or she may apply to the Court of Queen’s Bench on a judicial review application for a determination of the issue.”

CASE LAW:

Saskatchewan Court of Appeal, Estevan Coal Corporation v. The Rural Municipality of Estevan No. 5, 2000 SKCA 82, 199 Sask. R. 57:

“[20] The fairness of the value is in that it will be equitable. As s. 285(3) of The Rural Municipality Act notes, “the dominant and controlling factor in the assessment of improvements is equity." The equity in “fair value” comes from the process of “applying the directed method of assessment uniformly and fairly throughout the assessment roll.” The judgment in Laing reinforces this. When considering whether the assessments were fair and equitable, Cameron J.A. noted that the method used

[70] ... results in artificial values. But does that really matter as long as they are uniformly artificial? Not really, according to City Savings & Trust Co. and City of Regina [(1974), 52 D.L.R. (3d) 698], for the dominant and controlling factor, after all, is equity. [pp. 44-45]

In Laing, although the appeal was from an assessment that did not account for the last nine years' depreciation, this Court upheld the assessment on the grounds that all assessments were conducted so as to lack an adjustment for recent depreciation. This was done in accordance with the assessment manual. APPEAL 2008-0100 [Page 8]

[21] From the analysis in Laing, it is clear that the assessor is bound by The Rural Municipality Act to conduct all assessments uniformly so as to achieve the concept of equity as is required by the statute. Since the assessor is bound to use “fair value” as the assessed value, and since achieving “fair value” is done through uniform application of assessment manual provisions, the assessor is bound to follow the assessment manual.

[22] Furthermore, the assessor is bound to strictly apply the assessment manual, at least so far as the “applicable formula[s], rule[s] or principle[s]” are concerned. On this point, s. 285(6) is important. It states:

285(6) In determining the fair value of any improvement, the assessor shall take into consideration and be guided by any applicable formula, rule or principle set out in the assessment manual prepared for assessors and approved by the agency and any circumstances that may affect its value. [emphasis added]

[23] The equivalent of this section was analyzed extensively in Laing. It is implicit that despite the soft wording of the section (“take into consideration” and “be guided by”), assessors must follow the formulas, rules and principles in the assessment manual. Outside of those three provisions, however, the assessment manual gives way to the assessor's discretion:

[28] ... This is what the Manual suggests, saying that while the systematic application of the principles, rules, and formulas found in the manual is necessary to achieve the ends of tax equalization, its use “cannot replace the personal judgment of the valuator in his work. He is the backbone of local tax administration.” [emphasis added]

The Court went on to state that:

[29] ... Unless [the personal judgment of the assessor] be founded on material error of fact, of law, or of assessment principles and practice as laid down in the Manual, it should not be interfered with. [emphasis added]

In fact, the final decision in Laing - that the assessor was correct in not deducting the last nine years worth of depreciation - was entirely premised on the fact that the assessment manual had been followed.

[73] ... [T]he City Assessor, who having made his determination in the light of the relevant circumstances and the formulas, rules, and principles found in the Manual, must be taken to have determined the “fair value” of the building, . . . and cannot therefore be said to have erred. [emphasis added]

APPEAL 2008-0100 [Page 9]

In sum, the judgment in Laing means that assessors, and thus the Assessment Appeals Committee on a redetermination, must follow the formulas set out in the assessment manual.”

THE SASKATCHEWAN ASSESSMENT MANUAL (THE MANUAL):

Volume 1, Chapter 2, Document Number 2.2.1, page 1 (Date: 06/05/26) Volume 1, Chapter 2, Document Number 2.2.8, page 1 (Date: 06/05/26) Volume 1, Chapter 4, Document Number 4.1.9, page 1 (Date: 03/01/22) Volume 1, Chapter 4, Document Number 4.1.10, page 1 (Date: 03/01/22) Volume 1, Chapter 4, Document Number 4.1.11, page 1 (Date: 05/11/03)

CONCLUSIONS AND REASONS:

[1] This Committee has received an appeal against a decision of the Resort Village of Chorney Beach 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.

Committee’s Jurisdiction

[2] At the commencement of the hearing for this appeal, the appellant was advised that pursuant to the Act, the Committee’s jurisdiction in hearing assessment appeals was restricted to reviewing the record of the Board to determine whether it erred in its finding relating to the valuation or classification placed on the subject property or to the contents of the assessment roll. The Committee advised that it had no jurisdiction to review the perception of fairness during the Board hearing.

APPEAL 2008-0100 [Page 10]

[3] The appellant was advised by the Committee that all submissions must point the Committee to, where in his view the Board erred in its acceptance of SAMA’s recommended obsolescence adjustment of 33% for both the land and building fair value. With agreement of the appellant, the hearing continued on this basis.

Incorrect Valuation resulting from Flooding

[4] The appellant outlined the issues related to the high water levels and the effect this has had on the subject property. While the water level on his lot is below the level of the joists, he has still employed the use of a pump in order to ensure that no damage to the structure takes place.

[5] The appellant submitted that approximately one third of the lot is under four feet of water and a wooden/earth barrier was built around the cottage to protect the building from being damaged by wave action.

[6] He acknowledged that SAMA has applied a 33% obsolescence on the improvements as well as a 33% flood adjustment reduction to the land, but he argued that this obsolescence and the reduction in assessed value that results is not adequate to reflect the level of loss here. The assessment system should respond to disasters such as this and reflect a more realistic value based on a valuation of individual properties.

[7] SAMA argued that the appealed property has been reviewed and treated in the same manner as all similar properties on Chorney Beach. The flooding reductions and obsolescence were put in place by SAMA after consultation with the Resort Village of Chorney Beach.

[8] SAMA submitted that Corrections and Public Safety had reviewed the flooded properties around Fishing Lake, and rated the properties based on the severity of damages as follows: APPEAL 2008-0100 [Page 11]

C1 - Building to be demolished as it is not suitable to re-inhabit or for material salvage. These buildings have structural damage, water in or above the floor assembly, and evidence of mould.

C3 - The building has been saved from significant flood damage due to; sandbagging, construction of a water break, pumping operations, and a floor system above the water level. The floor systems are above the water level and have suffered no apparent structural damage, no evidence of mould was discovered in the living space. The buildings may need repairs to the crawl space walls, mechanical system, and the electrical system.

C4 - The buildings were not damaged by the flooding. These buildings are on higher ground above the water level and suffered no effect from wave action, floating debris, and had no evidence of water in the foundation.

[9] According to SAMA, the subject property falls in the C3 category and as such receives 33% obsolescence on the buildings and a flooding reduction of 33% on the land.

[10] The Committee respects the difficult position that this property owner and others are facing. SAMA, the Board and this Committee are required to view the situation in the context of the laws and the assessment manuals in place. If the avenues for some relief are not available, then it is not for this Committee to create new solutions. As noted in the reference to The Municipal Board Act, cited above, the power for new solutions is left to the Court of Queen’s Bench. As is also noted, the Saskatchewan Court of Appeal has found that SAMA and the respective appeal Boards are required to follow the provisions of the Manual when calculating fair values.

[11] The appeal is based on the premise that while the system has treated all properties the same, it is flawed in not recognizing the circumstances that are faced by individual properties. If the Committee agrees this not to be the case, then there is no jurisdiction in this theatre to resolve the matter. If, on the other hand, the APPEAL 2008-0100 [Page 12]

Committee finds that the system does not restrict SAMA, then a decision may be made to direct that the valuation is revised accordingly.

[12] At this point, there is little evidence of structural damage caused by the forces of nature, although the appellant has and is currently undertaking measures to prevent that from occurring.

[13] In considering obsolescence, the Committee notes that functional obsolescence is defined in Document Number 4.1.10, page 1 of the Manual as follows:

“Functional obsolescence is the loss in value from replacement cost new less physical deterioration due to the inability of the building or structure to adequately perform the function for which it is used.

Functional obsolescence is caused by changes in demand, design and technology which result in a loss in the utility of the building or structure.”

It is clear to the Committee in reading this definition that functional obsolescence is intended to respond to problems within the building, and that is not the case here.

[14] Economic obsolescence is defined in Document Number 4.1.11, page 1 of the Manual as follows:

“Economic obsolescence is the loss in value from replacement cost new less physical deterioration and functional obsolescence due to the impairment in utility and desirability caused by factors external to the land on which the building or structure is located.

Economic obsolescence can be caused by a variety of factors such as location, zoning, neighbourhood decline, lack of property demand, and provincial economic conditions. No allowance shall be made for economic obsolescence caused by changes in the highest and best use of the land and improvements.” (Emphasis added)

APPEAL 2008-0100 [Page 13]

It is evident from this definition that economic obsolescence is intended to reflect changes due to outside influences on the property. Inflowing water might be included in this, and SAMA has arbitrarily applied 33% obsolescence to the buildings.

[15] The Committee considered the provisions of section 219 of the Act, set out above. This section contemplates a change of assessment to reflect damage in any tax year. As the Act is the superior legislation to the Manual, it could be argued that its principles could be applied in spite of the directions in the Manual. In considering this, in light of the fact that neither party to the appeal has identified the application of the 33% obsolescence to the building as an issue for this appeal, the Committee must maintain the application of this obsolescence to the buildings.

[16] After a review of the Manual and the directions of the Saskatchewan Court of Appeal, the Committee finds that the Board did not err when it decided to uphold SAMA’s application of obsolescence for the improvements.

[17] The Committee cannot accept SAMA’s argument and the Board’s acceptance of the position that because all of the properties were treated in the same manner the assessment is fair and equitable. The record shows that the reduction applied to the land was based on damage that has occurred to the buildings. Nowhere in the record is there support for a finding that SAMA has allowed for the reduction in the utility of said land. The record clearly shows that in this case there is 33% of the land which continues to be covered by four feet of water and cannot be used by the appellant. It is therefore fact that he has lost the utility of a third of his lot. It is not unreasonable to accept the appellant’s arguments and expect that the legal requirement for a comparative value has not been met here. The question is whether there is any provision in the Manual for calculation of an adjustment to reflect this lack of utility.

APPEAL 2008-0100 [Page 14]

[18] Adjustments to the land value may be made as a site adjustment and the principle of this adjustment is set out in Volume 1, Document Number 2.2.1, page 1 of the Manual as follows:

“Site adjustments shall be used to account for variations in the value of individual land parcels that are attributable to characteristics specific to the individual parcel.”

[19] However, in Document Number 2.2.8 of the Manual, the direction requires the valuator to rely on sales to calibrate the adjustment. This approach appears to the Committee to be incongruous with the initial premise that site adjustments are for a specific situation of an individual parcel. With this incongruity in mind, the Committee must defer to the position of the appellant. Thirty-three percent of this land is flooded and unusable for this year and therefore the value should be reflective of this fact.

[20] The Committee finds that the Board erred when it did not decide to adjust the land value. It also finds that the remaining portion of the land that is not under water be valued and that land be allowed a 33% flood allowance in comparison with other land in the same condition.

[21] To understand the outcome resulting from this finding, in a letter dated December 22, 2008, the Committee asked the assessor to provide a recalculation of the subject lot assessment reflecting a size of 50 feet x 79.06 feet (3,900 square feet). The assessor was requested to provide this information with a copy to the appellants, by January 5, 2009. The appellants were advised that should they wish to provide comment on the results of this undertaking, same must be provided by January 29, 2009.

[22] The assessor responded to this request by letter received by the Committee on December 31, 2008. The revised field sheet which was attached to this letter identified a land fair value of $15,680. As of January 30, 2009, no response was received from the appellants. APPEAL 2008-0100 [Page 15]

[23] The Committee finds that for improvements the Manual does not contemplate a short term response to situations such as excessive high water level in a seasonal residential neighbourhood. The Board did not err in its decision as it relates to the improvement fair value.

DECISION:

This appeal is sustained. For 2008, the improvement value shall remain as $64,300 fair value and $45,010 assessed value. The land value shall be reduced to $15,680 fair value and $10,980 assessed value resulting in a total fair value of $79,980 and a total assessment of $55,990.

The filing fee shall be refunded.

APPEAL 2008-0100 [Page 16]

DATED AT REGINA, Saskatchewan this

13th day of February, 2009.

SASKATCHEWAN MUNICIPAL BOARD Assessment Appeals Committee

Per: ______David Wilkin, Chairman

Per: ______Cynthia J. Schwindt, Secretary

Robert L. Edwards, for the Committee

______

I concur:

______Jenny Lai Yu, Member