[1] The appeals are from the decision of the 2003 Property Assessment Review Panel.

[2] These appeals are part of a larger number of appeals for properties located on Senanus Drive filed by both the owners and the Assessor. In an effort to find resolution to the major issues, the owners and the Assessor selected this property to go to hearing.

[4] The Assessor accepts that there is a real or apparent problem with the water to the extent that the market recognizes it as a negative factor. In spite of this, the Assessor believes the 2003 assessment is below market value and the assessment is not equitable with other similar properties. Based on detailed appraisal evidence, the Assessor asks the Board to increase the 2003 assessed value. As well, the Assessor asks the Board to determine a formula for resolving the other appeals from Senanus Drive, based on recognition of the water problems, plus higher land values.

[5] The issues the Board must decide are:

• Is the assessed value at market value or is the actual value above or below the assessed value?
• If the actual value is above the assessed value, is the new proposed value equitable?

[6] The Assessment Act says actual value "means the market value of the fee simple interest in land and improvements". Section 57 of the Act sets out the Board’s jurisdiction to find actual value and ensure equity in assessments:

57 (1) In an appeal under this Part, the board

1. may reopen the whole question of the property’s assessment to ensure accuracy and that assessments are at actual value applied in a consistent manner in the municipality or rural area;

[8] Gordon Denford and Peter Berrang gave evidence for the Appellant. Dianne McWilliams, an appraiser with the Capital Assessment Office gave evidence for the Assessor. Ms. McWilliams has experience in valuing waterfront properties, including ones in the subject property’s market area.

[9] Mr. Denford produced as Exhibit No. 1, a binder of 68 pages containing documents relating to the history of the water problems for the residents of Senanus Drive. The Assessor does not dispute there is a problem obtaining adequate quantities of potable water and accepts that the market recognizes this as a negative feature. I find that there is clear evidence that the either the lack of adequate potable water or the perception of chronic problems in obtaining potable water negatively impacts the market value of this property.

[10] Mr. Denford did not provide any evidence of actual value, such as an appraisal or other opinion of value. He stated that given the uncertainty of the water supply and no likelihood of a solution, such as joining the municipal water system, the actual value should be frozen at the 2002 level. I find that the Board lacks the jurisdiction to freeze assessments at any particular level. The Assessment Act directs the Board to determine the actual value for the property for the year under appeal, and there is no legislated provision that gives the Board the jurisdiction for this or future assessment years to freeze the assessment at some value that may not be the actual value.

[11] Mr. Berrang provided his recollections of the purchase of the subject, a comparable used in the Assessor’s valuation analysis. He said he was out of the country when the purchase was consummated, his wife made the decision to buy, and he used a local realtor and lawyer to effect the purchase. He claims he was not an informed purchaser, and the quantity and quality of water was not disclosed. As well, he was not aware of any restrictions in the zoning. This contrasts somewhat with the evidence of the collapsed offer for Mr. Denford’s property, as detailed on pages 35 to 41 of Exhibit No. 1. There, the purchaser exercised due diligence and on the basis of investigations collapsed an offer to purchase based on difficulty in obtaining potable water, plus other factors. I find it odd that in a transaction involving both a realtor and a lawyer that Mr. Berrang can claim he was not sufficiently informed, when he had the same opportunities for disclosure as another potential purchaser for a property on the same street. I find little in Mr. Berrang’s evidence useful in reaching a decision on the 2003 actual value, other than he provides an indication he may have paid at the top of the range of possible purchase prices.

[12] Ms. McWilliams produced as Exhibit No. 2, an appraisal of the property. She concludes the actual value as of July 1, 2002 is $1,476,000 in contrast to the assessed value as of the same date of $1,197,000.

[13] Ms. McWilliams relied on the direct comparison approach, separating her analysis into two segments. She first relied on the sales of four waterfront properties including the sale of the subject, all located on Senanus Drive, and concluded a value of $1,476,000 appropriate for the subject. Next she analyzed four sales of four other waterfront properties located on the west side of the Saanich Peninsula, and concluded a value of $1,723,000. She attributed the difference of $250,000 to the actual problems associated with obtaining potable water, and any stigma in the market arising from this problem. Ms. McWilliams believes this method is superior to applying a cost to cure adjustment of $50,000, a figure found in Exhibit No. 1.

[14] For three of the Senanus Drive properties, Ms. McWilliams adjusted the sale prices for time of sale, size of waterfrontage and quality, lot size, and differences in improvements, as appropriate. The time adjustments were 23% for Sales No. 1 and 2, 29% for Sale No. 3, and no time adjustment for Sale No. 4. For the sale of the subject, which occurred in March of 2002, Ms. McWilliams only adjusted for time of sale since there were only minimum changes to the property from the time of sale to the valuation date. Ms. McWilliams said the basis for her time adjustments were monthly Multiple Listing Service (MLS) average sale prices, which included both vacant and improved non-strata waterfront properties. She conceded that there may be a huge variation with the average for each month and, until prompted, appeared uncertain of the derivation of these statistics. Due to the mix of undifferentiated property types, the potential for variability and Ms. McWilliams lack of familiarity with the derivation of the statistics acquired from a third party, I cannot give full weight to the absolute values of her time adjustments.

[15] The adjustments for each sale are significant. For the sale of the subject, the only adjustment was a positive 23% for time of sale. For Sales No. 2, 3, and 4, Ms. McWilliams’ total adjustments’ (which are actually net adjustments) are 99%, 106% and 46% of the sale prices respectively. Based on ‘gross adjustments’, the adjustments for Sales No. 2, 3, and 4 are 118%, 110%, and 50%. Ms. McWilliams gave most weight to the sale of the subject, which required the least adjustments (time only) and produced an estimate of actual value of $1,476,000. I believe that the quantum of the adjustments calls into question the comparability of at least three of the sales comparables.

[16] For the other four sales in her analysis, Ms. McWilliams made adjustments for time of sale, site size, waterfrontage and quality, and for differences in the improvements. The time adjustments were 7% for Sale No. 5, 8% for Sale No. 6, 4% for Sale No. 7 and 0% for Sale No. 8.

[17] Ms. McWilliams calculated the ‘total adjustments’ (net adjustments) as 14%, 32%, 14% and 121% for Sales No. 5,6,7 and 8 respectively. The ‘gross adjustments’ are 54%, 41%, 23% and 121% respectively. Relying on these four sales, Ms. McWilliams estimated the actual value of the subject to be $1,723,000. I believe that the quantum of adjustments indicates at least one if not three of these sales significantly lack comparability with the subject.

[18] The difference of approximately $250,000, Ms. Williams explained, is attributable to the availability of potable water for Sales No. 7, 8, 9, and 10 as compared to the stigma attached to the sales from Senanus Drive. Although I found difficulty accepting that some of the sales are comparable to the subject property due to the necessity for large adjustments, I find that the difference between the two analyses is reliable since Ms. McWilliams used the same process for both. She relied on the direct comparison approach, and used the same comparative techniques for each sample set, indicating to me that her analysis is consistent between the two sets of data. The result of her analysis is the identification of the reason for the difference between the two sets of properties, which she concludes and I agree, is attributed to the difficulties in obtaining potable water. Therefore, I find that the subject suffers from a stigma due to the problems associated with potable water, and the best market evidence before me indicates the quantum of the stigma to be in the range of $250,000.

[19] Mr. Denford raised the problem of fire protection as a further factor that the Assessor ought to consider in determining the actual value. Ms. McWilliams said this may be a factor but she has no specific market evidence. In the absence of any evidence, I find I cannot attribute any value to lack of fire protection without being speculative and arbitrary.

[20] Mr. Denford raised the issue of restrictive zoning. The zoning for the Senanus Drive properties is RE-3, Rural Estate (water). This zoning restricts the site coverage to 5%, with a minimum lot size of 2.0 hectares (4.9 acres). Ms. McWilliams believes the zoning for at least one of her comparables is the same and the others are different, being RE-2, which is probably a neutral valuation factor. I find that even if the zoning is a market factor, neither party produced sufficient evidence permitting me to establish a suitable adjustment. For the minimum lot size, the zoning permits a site coverage of over 10,000 square feet which may not impact a 2.0 hectare lot. However, if a lot is smaller and non-confirming to size, then the impact might be significant, but without evidence any adjustment is simply speculative and arbitrary.

[21] I find that Ms. McWilliams produced the only reliable evidence for actual value, and that she considered as best she could the available market data. I have doubts regarding the accuracy of her absolute final values, since few of the sales used in the analysis are truly comparable because of the magnitude of the adjustments, and that the usefulness of her best comparable is limited due to my concerns regarding the calculation of the time adjustments. However, I am satisfied that the relationship between the two analyses is sound, since she used the direct comparison methodology in both, applying the same analytical process to each set of sales.

[22] In Exhibit No. 3, Ms. McWilliams relied on two approaches to determine her opinion of the equitable value of the property. In her primary approach, she relies calculates the median Assessment to Sales Ratio (ASR) and the Coefficient of Dispersion for sales of improved Central Saanich waterfront properties for the quarter before and the quarter after the valuation date of July 1, 2002 (February 2002 to September 2002). In her analysis, Ms. McWilliams attempts to compare only properties that are in a similar class, and restricts her analysis to jurisdiction 302, which includes the Senanus area. Based on a total of seven sales, including one from Senanus Drive, she finds the median ASR to be 95% with a COD of 8.63%. She says these measures exceed the standards set by the International Association of Assessing Officers (IAAO), and "illustrates that the Residential waterfront assessment in the District of Central Saanich are at ‘actual value’ and are uniform in their application".

[23] Ms. McWilliams said it is difficult to compare waterfront with waterfront, but since they compose a class of expensive properties, it was reasonable to compare them with each other. She said the IAAO did not set any minimum sample sizes when calculating the ASR or COD, and that her sample size would increase if the parameters for time of sale were increased and the median ASR and the COD might change. Since there has been a reassessment of some waterfront properties, the ASRs derived from pre-reassessment sales might not be as accurate as those after, and currently there remain some properties not reassessed.

[24] The sample includes properties as small as 0.21 of an acre to 6.80 acres. Selling prices range from $415,000 to $4,250,000 and ASRs ranging from 76% to 105%. Of these, Ms. McWilliams identified the sale on Lawrence at $2,000,000 (5.62 acres), the sale on West Saanich for $4,250,000 (6.80 acres), and the sales on Senanus for $2,150,000 (1.23 acres) as the best equity comparables. All sales occurred in August of 2002. The ASRs calculated from these sales are 100%, 73% and 95% respectively. Since these sales occurred significantly before the setting of the 2003 assessments, and the same holds true for the other four sales, one would predict that if the Assessor gives any weight to sales evidence in setting assessments, that the 2003 assessments should reflect the market evidence. Since this market data was likely used in setting the 2003 assessments, the high median ASR and low COD are not remarkable. Since it is exactly the sales data which forms part of the assessment, I would expect such a result, and the only thing noteworthy are the instances of a 73% and 86% ASR, which means that for two sales the assessments are at odds with the market evidence.

[25] Ms. McWilliams relied on a secondary tool to measure equity. As part of a 2002 reassessment (for the 2003 assessment), each property on Senanus Drive was visited and a base rate per front foot and for acreage derived after considering such factors as the cost to cure the water problem, beach quality, beach access, exposure and easements. This rate was compared with the rate derived from the other waterfront properties in Central Saanich. Her results for Senanus Drive are a front foot rate of $3,255 based on the PARP’s decision and $3,472 based on her proposed increase. The rate for the other residential waterfront properties is $4,286 per front foot. Based on this, Ms. McWilliams finds that the difference between PARP’s decision and the rest of the waterfront properties is 24%, and between her proposed increased value is 19%. This means that the proposed values for Senanus Drive are 19% lower than that derived from other Central Saanich waterfront properties, and are less than the 15% difference between Senanus properties and other nearby waterfront properties determined from the direct comparison analysis.

[26] I find this a very crude measure of differences, particularly since Ms. McWilliams said that not all waterfront properties in the municipality have been reassessed. Also, reducing all of the factors influencing value to one measure, value per front foot, introduces a degree of uncertainty, although reflecting one of the most valuable attributes of waterfront property. I find this technique at least points to a regional difference, but is not sufficient to establish an inequity.

[27] Content that her estimated value for the subject from the market analysis of $1,476,000 is equitable, Ms. McWilliams then adjusts her result by the median ASR of 95% to arrive at a value of $1,402,200 as the equitable value of the subject.

[28] In closing, Mr. Denford complained that the owner did not have time to get their own appraisal, and was not afforded time to provide an appraisal. During Appeal Management, the appeal manager issued an order on July 18, 2003 for the production of evidence the parties intend to rely on at the hearing. In the same order, the appeal manager set a date for the production of rebuttal evidence, noting that rebuttal is not an opportunity to introduce new evidence. I find the owner had ample time to have commissioned an independent appraisal report, given the time lapse between the date of the order and the date of the hearing. If Mr. Denford is complaining that he did not have time to commission an expert rebuttal report, that is a different matter. However, there was time between the production of evidence and rebuttal to allow for the preparation and production of rebuttal reports, and if that was not adequate time, it was open to either party to apply to the Board for an amendment to the date or the adjournment of the hearing. In the circumstances, I find the owner had the opportunity to produce expert rebuttal evidence. Therefore, I find there is no substance to Mr. Denford’s complaint.

[29] In closing, the Assessor argued Ms. McWilliams produced the only reliable evidence for actual value and equity. Based on her findings that the market recognizes a difference of approximately 15% between the actual value of improved waterfront properties in the Senanus area as compared with other similar properties, and her finding that the land is assessed at 19% per front foot than all other residential waterfront lands in Central Saanich, the Assessor asks the Board to increase the 2003 assessment to $1,402,200.

[30] This is not a typical residential appeal, where both sides have opinions of value, and there is a reasonable pool of good comparative market evidence that supports one side or the other. In this case, the Assessor has produced the only evidence for value and equity, and the owner has crafted their case to minimize and discredit that evidence. My decision, then, turns largely on the credibility of Ms. McWilliams, the Assessor’s witness, the extent of evidence she produced, and the quality of the analysis she performed. I believe that Ms. McWilliams has done a good job, but the evidence available limited the quality of her analysis.

[31] The owner produced no opinion of market value. Rather, the approach adopted by the owner (and the other owners in the area) was to ask for the 2003 and presumably later years assessments to be frozen at the 2002 assessment levels. I rejected this solution, as the Board is required to find the actual value for the property under appeal, the Board lacks the jurisdiction to place values on assessments not yet under appeal, and it is wrong in law for the Board to make arbitrary and speculative decisions (Pacific Logging Company Limited. The Assessor for the Province of British Columbia BCSC 1974,Stated Case 99). Therefore, I cannot find the actual value for the property to be less than the value determined by the 2003 Property Assessment Review Panel, as I have no evidence to support a lower value.

[32] I have two possible alternatives for deciding the actual value. Either the Assessor has substantiated a value higher than the current assessed value, or in the absence of any better evidence, the current assessed value is the actual value.

[33] I appreciate that waterfront properties are some of the most difficult residential properties to appraise. The improvements tend to be unique and waterfront lands frequently differ in topography, quality of waterfrontage, direction of exposure, quality of beach, nearness to public beach access, and other intangibles that make these very special properties. This accounts for the difficulty in finding good comparables, and for the size and subjectivity of the adjustments. It also makes it difficult to accept as absolute any adjustment for a feature where the element of subjectivity is high.

[34] I am troubled that the large adjustments applied to the sales by Ms McWilliams in the direct comparison approach. Given the magnitude of the adjustments, I conclude that the majority of the sales used differ so significantly from the subject that they lack comparability. However, they make up the available pool of sales near the relevant valuation date and although I cannot give them great weight, they deserve more weight than the other evidence of value. Therefore, I have no choice but to rely on them as the best available evidence.

[35] For the Senanus sales, Ms. McWilliams gives most weight to the sale of the subject itself, which only required an adjustment for time of sale. Because I have doubts about the reliability of the time adjustment, I give less weight to the accuracy of her result. However, I do give some weight to Mr. Berrang’s evidence, which indicates to me that he paid at the high end of the range of purchase prices. Therefore, I believe this sale sets the upper possible limit for the actual value of the subject. This is supported by the values found for the other three sales, which all produce estimated of value lower than that suggested by the sale of the subject, although I give them little weight due to their lack of similarity other than location

[36] For the other set, Sale No. 7 stands out as being most similar based on the size of the adjustments, supported by sales 5 and 6 that require larger adjustments. I give more credence to these sales as value indicators because the magnitude of the adjustments is less than those for the Senanus sales, and I accept that if potable water were not an issue, they are the best evidence before me to indicate an actual value for the subject higher than the current assessment.

[37] I find the actual value of the subject to be in the range of $1,700,000, if the supply of potable water, and the stigma attached to this issue, were not factors in the market place. I find that the actual value of the subject, accounting for the stigma, is less than $1,476,000 as found in Ms. McWilliams analysis because I cannot accept the accuracy of her conclusion.

[38] Ms. McWilliams analyzed each set of waterfront sales independently from each other, and concluded that there is an approximately 15% or approximately $250,000 difference attributable to nothing other than the stigma attached to the subject due to the water problem. This amount is the difference between her two conclusions of value. I accept that this is likely a conservative estimate, since I believe her conclusion of $1,476,000 to be at the high end of the possible range, but reasonable based on the available market evidence. However, there is nothing in Ms. McWilliams evidence to suggest that the participants in the market attribute this value difference to the land only. The direct comparison approach is typically the preferred approach when analyzing residential properties because it best reflects the actions and motivations of the participants in the market. There is no evidence, and it runs counter to common sense, that purchasers tend to separate out the individual cost of the land and the improvements, and then calculate a discount to the land to reflect the problem with the water. Rather it is more likely that the market recognizes that there is a problem with properties on Senanus Drive, since this has been a very public issue over the years, and make a deduction to the total value of these properties in comparison to those on the waterfront with secure supplies of potable water. We don’t know whether this amount would have been greater or lesser if another property were analyzed. What Ms. McWilliams did was establish is that a stigma exists and for the subject it equates to approximately 15% of the total value. Based on this evidence, I find it reasonable that the market would make the same proportional discount to the market value of every property so affected. Said another way, the market would adjust downwards by the same proportion any waterfront acreage on Senanus drive, improved or not, by the same amount and not by some percentage of the assessed land value.

[39] I find that it is not necessary to consider the $50,000 cost to cure adjustment. The market indicates a conservative difference of $250,000, and any cost to cure is accounted for in that amount. The cost to cure estimate is simply that, the projected cost to provide water through a process rejected by the Municipality, and it is not market based. Given the stigma adjustment is conservative, the magnitude of the values of the Senanus waterfront properties, and the difficulty in determining their actual value, I find it is not necessary to adjust the stigma amount to account for double counting.

[40] I find there is no evidence to support an adjustment due to the lack of fire protection or due to restrictive zoning. Although these may both be factors in the market place, it is not sufficient to simply name them and expect a downward adjustment to follow. To influence the value, the parties must produce some evidence to establish whether the market actually discounts for these factors, otherwise the Board would be arbitrary in making speculative adjustments, and this would be wrong in law (Pacific Logging supra). Therefore, these factors are given no weight in my final decision.

[41] During appeal management, the parties expressed a hope my findings might result in a formula to resolve the balance of the appeals from Senanus Drive. I believe that the Assessor has established that the conservative market impact of the stigma is approximately 15% of the total value of this property if free from stigma, and this is a reasonable factor to apply to the other waterfront properties on Senanus Drive under appeal.

[42] I have found that the Assessor’s proposed actual value is not supported by the evidence, and that the actual value is lower. It follows that I cannot accept the Assessor’s calculation of an equitable value of $1,402,000, since the starting point was the proposed new value.

[43] I am not satisfied that the Assessor established that the properties on Senanus Drive in general, and the subject in particular, are assessed inequitably when compared to other waterfront properties in Central Saanich. I give little weight to the ASR and COD study, since only three of the sales used approach comparability with the subject, and I am not convinced that the assessments were not a product of the exact sales data they were compared to for establishing the ASRs and COD. As well, a sample size of three is likely too small to accurately use for a median ASR. The secondary approach demonstrates a difference between the assessed land values for Senanus and non-Senanus waterfront properties. The results of this approach support my finding that the stigma adjustment of 15% applied to the subject may be conservative, but I am not convinced that the results lead to a conclusion of inequity.

[44] I conclude from the evidence that for equity purposes, the Senanus properties fall into a class of their own. The test for equity is the comparison of similar properties within the same class. Class, for an equity discussion, is not the prescribed property class, but that group of properties that share common features (Assessor of Area 09-Vancouver v. Bramalea Limited (Trizec Equities Limited) and T. Eaton Company (SC277 1990). The Senanus properties stand out from other waterfront acreages, other waterfront properties, and from all other residential properties in the area, because they suffer from the stigma attached to the provision of potable water. Ms. McWilliams established that the market values the negative attributes of the Senanus properties at a rate some five times greater than the estimated cost to cure, not based on any rational estimate, but on the intangibility of stigma. No other waterfront properties in the area were identified as sharing this stigma, or identified as suffering from any other stigma. I find that the Senanus properties, because of their unique situation, are for equity purposes in a class unto themselves, and equity comparisons outside of this area become unreliable due to the problem of accounting for the water problem.

[45] I find that the evidence does not support an increase in the actual value over that determined by the Property Assessment Review Panel. I find that the evidence suggests the value found by the Review Panel is within the range of market value, since the evidence establishes the difficulty in finding good comparables, and that the analysis of comparable sales requires large adjustments that are difficult to support. Actual value is always a range of values and not an exact or precise number, and in this case, the range for actual values is large because of the difficulty in finding precise evidence.

[46] I find that for purposes of equity, Senanus waterfront properties form a class for comparative purposes. I have no reason to believe that the decision form the 2003 Property Assessment Review Panel is not equitable when compared to the other properties in its class, being those other waterfront properties sharing a similar stigma related to the supply of potable water.

[47] The Board confirms the decision of the Property Assessment Review Panel as follows: