Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
AND
Assessor Of Area #01 - Capital
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Appeal Nos.: |
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Refer to as: |
McHattie v. Area 01 (2008 PAABBC 20082478) |
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Date of Decision: |
February 18, 2009 |
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Properties: |
01-63-302-31-0183-000, Keating X Rd, District of Central Saanich 01-63-302-34-0446-010, 1720 Keating X Rd, District of Central Saanich |
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Heard: |
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Appearances: |
From the Appellant, dated November 13, 2008 and January 9, 2009 |
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From the Respondent, dated December 15, 2008 (separate submission for each appeal file) |
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Board Panel: |
Kenneth Wm. Thornicroft, Panel Chair
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INTRODUCTION
[1] The Appellant appeals two decisions issued by the 2008 Property Assessment Review Panel (the “Review Panel”) concerning two unimproved lots on Keating Cross Road in the District of Central Saanich (these lots are not contiguous but are very near to each other). I understand that these two lots for part of a larger farm operation known as the “McHattie Farm” that has been in existence since 1938. Historically, both lots were wholly classified as “farm” land. The larger land parcel, Lot A, was initially classified on the 2008 Assessment Roll as a “farm” and assessed at $7,972 (Appeal No. 2008-01-00173). The second property, known as Lot M, was also initially classified on the 2008 roll as a “farm” and was assessed at $17,406 (Appeal No. 2008-01-00174).
[2] The Assessor recommended to the Review Panel that the two lots be reclassified and the Review Panel agreed. The two lots are currently classified and assessed as follows:
Appeal No. Lot Identification Classification Assessed Value (Land)
2008-01-00173 Lot A Class 9 (farm) $ 6,142
Class 1 (residential) $755,000
$761,142
2008-01-00174 Lot M Class 1 (residential) $675,000
[3] In accordance with B.C. Reg. 438/81, Prescribed Classes of Property Regulation (the “Classification Regulation”) all properties in the province are classified into one or more of eight separate classifications. Section 10 of the Classification Regulation states: “Where a property falls into 2 or more prescribed classes, the assessor shall determine the share of the actual value of the property attributable to each class and assess the property according to the proportion to each share constitutes of the total actual value.” Section 10 is commonly known as the “split-class” provision. As will be seen, the Assessor’s position before the Board is that both Lot A and Lot M should be given “split-classifications” as between “farm” and “residential” classifications.
[4] The Appellant says that Lot A and Lot M should both be wholly classified as “farm” land pursuant to the provisions of B.C. Reg. 411/95, Standards for the Classification of Land as a Farm (the “Farm Classification Regulation”). Unlike “residential” land, “farm” land is not assessed at its fair market value but, rather, at values fixed by regulation (see B.C. Reg. 276/84, Land Values for Farm Land Regulation). These latter values are typically much lower than fair market values and, since municipal property taxes are usually based on assessed values, “farm” classification is a very beneficial classification from the property’s owner’s perspective.
[5] The Appellant does not say that the current assessment regarding the overall fair market value of the two lots (as “residential” property) is inaccurate. Of course, if the Appellant is wholly or partially successful, the assessed value of the lots will be decreased consistent with the much lower value attributable to “farm” land.
[6] These reasons for decision only address whether the two lots have been correctly classified. There are other appeal proceedings before the Board concerning whether or not land that is, at least in part, the site of a bona fide farming operation may be “split” as between “farm” and some other (typically, “residential”) classification. The central argument in these other proceedings is that the land component in such cases must, as a matter of law be wholly classified as “farm” land. This issue is not addressed in these reasons for decision. Accordingly, these reasons represent an interim decision that will stand pending the final determination of the “split class” issue. The only issue before me at this juncture is whether the two lots should be wholly classified as “farm” land (in which case, the other proceedings become moot as they relate to this appeal) or, if not, what is the appropriate allocation as between farm and residential classifications.
[7] As I understand the situation, the Assessor has further reconsidered the matter and now proposes that Lot A bet split as follows: Farm = 54%; Residential = 46% and that Lot M be split as follows: Farm = 58%; Residential = 42%. The Appellant, as previously noted, maintains that both lots should be wholly classified as “farm” land.
[8] As ordered by Board Vice Chair Fraser on October 14th, 2008 ,these appeals are being adjudicated based solely on the parties’ written submissions and as I have already indicated, my decision will result in an interim order pending the final determination of the “split class” issue that will be adjudicated separately.
BACKGROUND FACTS & THE PARTIES’ POSITIONS
Lot A
[9] Lot A is a 16.128-acre rectangular lot located at 1720 Keating Cross Road in the District of Central Saanich. About 54% of the property lies within the provincial Agricultural Land Reserve (“ALR”). In early October 2007 the Assessor wrote the Appellant requesting income information for the production year ending October 31st, 2007. On October 18th, 2007 the Assessor received a “Farm Land Production and Gross Income Statement” signed by the Appellant indicating that total hay production for the 2007 production year was $3,275 (a second Income Statement submitted to the Assessor March 31st, 2008 indicated a revised hay production figure of $5,025). On January 10th,2008 a BC Assessment appraiser decided to reclassify the property as between “farm” (52%) and “residential” (48%). As noted above, the Assessor’s current position is that the “farm” component should be slightly increased to 54% reflecting that portion of the property that lies within the ALR. According to the Assessor, a 3.6-acre section of the northwest portion of the lot is under cultivation with the balance of the property being either wooded or “depleted of vegetation and considered somewhat of a gravel pit” (Assessor’s submission, page 2).
[10] The Appellant acknowledges that the portion of Lot A not devoted to hay production “is wooded and has no present use other than as a natural drainage system and buffer for the remaining portion of the lands” but also asserts that in light of the agricultural zoning, “the owner is restricted from carrying on any use of the land better than that of a farm” and thus this residual land area should be classified “farm” land pursuant to 4(3) of the Farm Classification Regulation (Appellant’s November 13th, 2008 submission, page 5).
Lot M
[11] Lot M is a 9.89-acre rectangular parcel that does not presently have a street address although it is also located on Keating Cross Road. Lot M does not lie within the provincial ALR. The Appellant says that both Lot A and Lot M are utilized within an integrated farming operation. The Assessor says that approximately 5.75 acres (i.e., about 58%) are “used as forage production” but that the balance of the property is not being actively farmed since it is
“wooded and used for other purposes” (Assessor’s submission, page 2). The Assessor says that because Lot M lies wholly outside the ALR only that portion of Lot M actually in production should be classified as “farm” land and that the balance must be classified as “residential” land.
[12] The Appellant says that the portion of the land devoted to hay production is actually 64.2% of the total land area. In addition, The Appellant says that a further 2.5% of the parcel is set aside for an access road that permits farm vehicles and other farm machinery to be brought to and from farm fields on Lot M and on an adjacent lot that is part of the Appellant’s farm operation. The Appellant says that another 2.5% section is set aside for “a composting and fertilizer source within the farm unit” (Appellant’s November 13th, 2008 submission, page 4). The Appellant says that another section comprising about 4.2% of Lot M should be given “farm” classification pursuant to section 4(3.1) of the Farm Classification Regulation:
“…this Area…constitutes land which has no present use to the owner and taxpayer, and, notwithstanding the zoning on the property, does not have a higher or better use that that of a farm due to the restrictions imposed by the statutory right of way.” [in favour of BC Hydro] (Appellant’s November 13th, 2008 submission, page 4)
[13] Finally, the Appellant says that the remaining forested portion (about 26.5%) of Lot M should also be classified as “farm” land since this area serves several beneficial farm purposes including:
“…act[ing] as a natural drain or sump drawing and holding run-off and seepage from the slope above that would otherwise run onto and saturate the farm field on Lot M, making the field too wet to provide for access throughout the year to achieve an adequate growing season to sustain crops or to maintain livestock”;
“…act[ing] as natural buffer, on the south side of the property, to the prevalent southwest and southeast winds, which prevent soil erosion on the fields [and that] it is good farming practice to maintain such wind buffers given the progressive loss due to erosion of arable soil.”
(Appellant’s November 13th, 2008 submission, page 5)
Summary of the Parties’ Positions
[14] The Appellant says that both Lot A and Lot M should be wholly classified as “farm” land. With respect to Lot A, the Appellant submits that the portion not currently being farmed should nonetheless be given “farm” status since it “has no higher or better use than that of a farm under present zoning restrictions and the owner has satisfied the regulations with respect to the filing of declarations” (Appellant’s November 13th, 2008 submission, page 6).
[15] As for Lot M, The Appellant says:
“64.2% of Lot M is being used for primary agricultural production and 5% is being used for roads and composting necessary to agricultural production, 4.2% cannot be used for any other purpose (hydro right of way) and the balance (26.5%) is also necessary, for drainage and soil erosion purposes, to the farming operation.” (Appellant’s November 13th, 2008 submission, page 6)
[16] With respect to Lot A, the Assessor says only 3.6 acres of the entire 16.128-acre parcel are actually under cultivation but nonetheless says that 54% of the parcel should be classified as “farm” land since it “has been certified as being held for future use within the ALR” but that the rest of the property cannot be classified as “farm” land because it is forested and is not being used for primary agricultural production (Assessor’s submission, page 5). The Assessor notes that Lot M is outside the ALR and that only about 5.75 acres of the entire 9.89-acre parcel (approximately 58%) is being used for hay production and that only this portion properly qualifies for “farm” status. The Assessor says that since the balance of the lot is “wooded and used for other [non-farm] purposes’ it cannot be classified as “farm” land. I should note, at this point, that while the Assessor’s position is that 42% balance of Lot M should not be classified as “farm” land, other than with respect to the area of the hay field, the Assessor does not challenge the Appellant’s percentage figures regarding the size of the various other portions of Lot M are in dispute.
ANALYSIS AND CONCLUSIONS
[17] I propose to address the classification issues concerning Lot A and Lot M separately.
Lot A
[18] The Assessor says that only 54% of the Lot A land area (i.e., that portion situated within the ALR) should be classified as a “farm”. The Appellant, on the other hand, says that the entire land area should be given “farm” status and relies on section 4(3) of the Farm Classification Regulation. However, this provision can only apply to that portion of Lot A that lies within the ALR. Section 4(3) contains the following limiting criterion (among others): “…where land is part of a farm that lies within an agricultural land reserve designated under the Land Commission Act…”. Thus, the non-ALR portion of Lot A cannot qualify for “farm” status under section 4(3).
[19] As previously noted, only about 3.6 acres of the 16.128-acre parcel are actually under cultivation (approximately 22.3%), however, the Assessor says that the entire portion of Lot A that lies within the ALR (i.e., 54%) should be classified as a “farm” in light of the Appellant’s certification that it “is being held for the purpose of primary agricultural production” [See Farm Classification Regulation, section 4(3)(b)]. The Appellant, by way of her January 9th, 2009 Reply submission, at paragraph 14, accepts that the portion of Lot A within the ALR “has correctly been classified as farm and there is no dispute”. However, the Appellant further submits that the balance of Lot A outside the ALR can nevertheless be classified as a “farm” under section 4(3) of the Farm Classification Regulation. In my view, the plain meaning of section 4(3) restricts its application to lands that are part of a farm and that lie within the ALR. Thus, as previously indicated, that portion of Lot A lying outside the ALR cannot qualify for farm status under section 4(3) even assuming the other qualifying criteria set out in subsections 4(3)(a), (b) and (c) are satisfied.
[20] The Appellant alternatively submits that the balance of Lot A may be classified as “farm” land under section 4(3.1) of the Farm Classification Regulation:
(3.1) Despite subsections (1), (2) and (3), the assessor must classify land as farm if
(a) the land has no present use,
(b) the land has a highest and best use that is a use not better than that of a farm,
(c) the land is part of a parcel, a portion of which is used for primary agricultural production, and the portion used for the primary agricultural production makes a reasonable contribution to the farm operation, and (d) the portion being used for primary agricultural production meets the other requirements of this regulation.
[21] Subsection 4(3.1) sets out four separate criteria all of which must be satisfied in order for the land to qualify for “farm” status (see Picton et al. v. Area 10, 2006 PAABBC 20051671). As noted above, the non-ALR portion of Lot A is either wooded or, as the Assessor put it, “somewhat of a gravel pit”. It appears that the non-ALR portion of Lot A has no higher and better use than as a farm. In this latter regard, I note that the Lot A zoning (A-1) restricts land use to agricultural purposes (for example, the Appellant could not subdivide, clear the trees and build some condominiums). The Assessor seemingly concedes that the 3.6-acre portion under cultivation makes a reasonable contribution to the Appellant’s integrated farm operation and, so far as I am able to determine based on the material before me, subsection 4(3.1)(d) has been satisfied. However, subsection 4(3.1)(a) states that the land must not have any “present use”.
[22] The Farm Classification Regulation does not contain any specific guidelines regarding the meaning of the phrase “no present use”. In my view, the question of whether land does, or does not, have any present use must be addressed as of the October 31st (of 2007 in this case) “state and condition” date specified in section 18(2) of the Assessment Act. Land, of course, may be used for many purposes (e.g., it may be farmed, it may be a site upon which residential or commercial buildings have been constructed) or land may have no present use whatsoever as when a farmer’s field is left fallow. In my opinion, the notion of present use implies that land has some existing functionality and that this function has utility for the owner or occupier. Thus, for example, an unbuildable rocky outcrop situated on a parcel of land could be classified as “farm” land even though absolutely no farming activity is being (or even could be) undertaken on that portion of the property provided the other section 4(3.1)(b) to (d) criteria were satisfied.
[23] Turning to facts of the case at hand, I note that the Appellant concedes that at least the wooded area has current utility “This area is wooded and has no present use other than as a natural drainage system and buffer for the remaining portion of the lands” (Appellant’s November 13th, 2008 submission, paragraph 16; my underlining). Further, the agrologist’s report appended to the Appellant’s November 13th, 2008 submission also makes the point that the wooded areas of Lot A serve critical purposes (improving groundwater absorption and drainage, buffering) in the context of this particular farm operation; indeed, the agrologist says the wooded areas are essential to the overall health of the Appellant’s farm operation.
[24] On the other hand, the denuded so-called “gravel pit” area (this is not the site of a commercially viable gravel pit operation) appears to have no current use whatsoever and thus could be said to fall within the parameters of section 4(3.1). The parties have not provided me with any details concerning the size of this latter area and whether or not some or all of it already falls within the ALR (and thus has already been given “farm” status). On this latter point, the aerial photographic evidence appears to indicate that virtually all of the gravel pit area is outside the ALR but because I am somewhat uncertain on this point I propose to leave this latter question to the parties for agreement. Even if this “gravel pit” area has no present use, this portion of Lot A can only be given “farm” status if the other section 4(3.1)(b) to (d) criteria are satisfied. I am not in a position to conclude, based on material before me, whether this gravel pit area has a higher and better use than as a farm. It does appear that subsections 4(3.1)(c) and (d) are satisfied. However, given the lack of clarity in the material regarding subsections 4(3.1)(a) and (b), I propose to refer this matter back to the parties with the hope that they might reach agreement regarding whether the gravel pit area may be given “farm” status under section 4(3.1). In the event they cannot agree, I will retain jurisdiction to adjudicate the matter after the parties have provided further submissions on the point. Accordingly, I am of the view that not less that 54% of Lot A must be classified as “farm” land and, possibly, a larger portion reflecting the non-ALR area of the gravel pit. The balance of Lot A must be classified as “residential” land.
Lot M
[25] Lot M is currently classified, in its entirety, as “residential” land (Class 1). Lot M lies wholly outside the ALR and thus subsection 4(3) of the Farm Classification Regulation cannot serve as a springboard for re-classification. As noted above, the Assessor proposes that the Review Panel’s decision be varied so that the 5.75-acre portion under cultivation (about 58% of the entire 9.89-acre parcel) is classified as “farm” land but that the balance remain as “residential” land. The Appellant, on the other hand, submits that all of Lot M is set aside, in one fashion or another, for farm purposes thus the entire parcel should be classified as a “farm”.
[26] The Assessor says, based on a review of aerial photographs, that about 58% of the parcel is being cultivated (a hay field). The Appellant says that Assessor has underestimated the size of the hay field because its outer boundaries are obscured in the aerial photographs by “the canopy and shadow of the trees” (Appellant’s November 13th, 2008 submission, page 4). The Appellant says the hay field occupies about 64.2% of the total land area. I have before me the affidavit of the Appellant’s daughter, Helen Christison, who was raised and has worked on the farm. I consider her estimate as to the outer boundaries of the hay field to be the more persuasive evidence given that there is no evidence before me that the Assessor actually measured the hay field or otherwise had it surveyed “on the ground”. Rather, the Assessor appears to have simply estimated the hay field dimensions from a visual inspection of the aerial photographs.
[27] Although the 2.5% portion of Lot M set aside for a “private access road” may be necessary to the larger farm operation, it is not used in any way, let alone “predominantly”, “for primary agricultural production” (see Farm Classification Regulation, section 4(2)). “Primary agricultural production is defined in section 1 of the Farm Classification Regulation as follows:
“primary agricultural production” means a use of land for agricultural purposes as approved by the assessment authority, following consultation with the Minister of Agriculture, Fisheries and Food, and listed on Schedule A of this regulation;
[28] Schedule A to the farm Classification Regulation sets out various crops (e.g., “fruit and vegetable production”, “herb production”, “medicinal plant culture”), farm animals (e.g., “dairying”, “horse rearing”, “livestock raising”, “poultry and egg production”, “wool, hide, feather or fur production”) and other activities (e.g., “apiculture”, “ turf production”) that may be grown, raised or undertaken in order to secure “farm” classification. In my view, the definition of “primary agricultural production” requires that all or part of a parcel of land is either cultivated with a Schedule A crop or is otherwise directly associated with a Schedule A activity (for example, the land may be where livestock graze or where a chicken coop has been constructed). If the use of the land in question cannot be directly connected to Schedule A, there simply cannot be any “primary agricultural production” attributed to that land area. Subsection 4(3.1) cannot assist the Appellant regarding the access road because this portion of the land clearly has a beneficial present use (i.e., as an access road). That portion of Lot M set aside for the access road cannot be classified as “farm” land.
[29] On the other hand, composting in order to produce a natural fertilizer is, in the context of this farm, intimately connected to the production of primary agricultural products and thus, in my view, a further 2.5% portion of the land qualifies for “farm” status.
[30] The 4.2% portion of Lot M that is subject to the BC Hydro right of way is a narrow rectangular strip that runs alongside the eastern property boundary. This portion is clearly not used for farm purposes (for example, to grow a Schedule A crop). In my view, this 4.2% portion has a present use since, consistent with the registered right of way, it is used by BC Hydro for power transmission purposes as specifically detailed in the right of way instrument. This strip of land is not necessary to the farm operation. Accordingly, this portion does not qualify for “farm” classification under any provision contained in section 4(1), (2), or (3.1) of the Farm Classification Regulation.
[31] I now turn to the remaining 26.5% of Lot M that is, essentially, a wooded area that has been left in its natural state. I am prepared to accept, as is asserted by the Appellant, that this wooded area in the context of this particular farm operation probably serves a beneficial purpose in terms of providing a source of natural protective water drainage, a wind buffer and in preventing soil erosion. In this sense, one might conclude that the wooded area is “necessary to the farm” but both subsection 4(1) and 4(2) mandate that, quite apart from any “necessity”, that the land actually be “used for primary agricultural production” (see Farm Classification Regulation, Schedule A). The stubborn fact is that there is not presently and, so far as I can determine, never has been any primary agricultural production on this portion of Lot M. Since this portion of Lot M has not been used (or even set aside for use) for primary agricultural production it cannot be classified as “farm” land under either subsection 4(1) or (2). Lot M lies wholly outside the ALR and thus, as previously noted, section 4(3) does not apply. This portion cannot qualify for “farm” classification under subsection 4(3.1) because, as the Appellant forcefully concedes, it is being used for farm purposes albeit not for primary agricultural production:
…this forested area, in the specific context of this farm, is necessary to the use and function of the farm. The contribution is not “miniscule” but functionally important. Although there are alternative means by which drainage and wind breaks may be addressed, they would be prohibitively expensive… (Appellant’s November 13th, 2008 submission, page 5)
[32] The Appellant referred to the Board’s decision in Cherry Creek Ranches Ltd. v. Area 23 (Appeal No. 1999-23-00064, issued December 30th, 1999), however, I am of the view that the decision tends to undermine rather than support the Appellant’s position. Cherry Creek Ranches concerned several leased lots that were said to form an integrated farm operation. The land classified as “farm” is that case was used for a Schedule A purpose, namely, “livestock raising”, and the one lot that was not so used was not classified as “farm” land. The Board emphasized that land must be actually used for primary agricultural production in order to qualify for “farm” status under sections 4(1) and 4(2); the use need not be the only use but there must nonetheless be an identifiable use closely associated with “primary agricultural production”.
[33] It follows from the foregoing that I would set aside the Review Panel’s classification decision regarding Lot M. On an interim basis (pending resolution of the “split-class issue), the “farm” component should be fixed at 2/3rds of the land area (64.2% + 2.5% = 66.7%) with the 1/3rd balance being classified as “residential” land. The assessed value for the “residential” component is $225,000 (1/3rd of the accepted $675,000 fair market value of the entire lot); the assessed value for the “farm” portion shall be fixed in accordance with the provisions of B.C. Reg. 276/84, Land Values for Farm Land Regulation.
INTERIM ORDER
[34] The Board orders, on an interim basis pending the final outcome of the “split classification” issue, that the Review Panel’s decision be varied as follows:
[35] Lot A: The property classification is split as between Class 1 (“residential”) and Class 9 (“farm”) so that not less than 54% of the land falls within Class 9. The parties shall notify the Board within three weeks after the date of these reasons whether they have reached an agreement regarding the appropriate allocation as between Class 1 and Class 9 and the resulting assessed values. In the event the parties agree, they shall submit a Joint Recommendation to the Board. In the event the parties cannot agree, the Board will issue further directions regarding the adjudication of this matter.
[36] Lot M: The property classification is split as between Class 1 (“residential”) and Class 9 (“farm”). Of the 9.89-acre total land area, the “farm” component is a 6.59 acres (2/3rds) and the “residential” component is 3.30 acres (1/3rd). The assessed value for the “residential” component shall be fixed at $225,000 (1/3rd of $675,000) and the assessed value for the “farm” component shall be fixed in accordance with the provisions of B.C. Reg 276/84, Land Values for Farm Land Regulation.