Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
AND
Assessor Of Area #06 - Courtenay
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Appeal No.: |
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Refer to as: |
Wood v. Area 06 (2009 PAABBC 20091617) |
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Date of Decision: |
December 1, 2009 |
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Properties: |
06-72-772-02063.450, Island Highway S, Campbell River Rural 06-72-772-02063.455, 3903 Island Highway S, Campbell River Rural |
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Heard: |
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Submissions: |
From the Appellant dated October 19, 2009 and November 2, 2009 |
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From the Respondent dated October 15, 2009 and October 29, 2009 |
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Board Panel: |
Jack Hall, Panel Chair |
INTRODUCTION
[1] The Appellant, James Wood, is appealing the decision of the Property Assessment Review Panel (the Review Panel) with respect to the 2009 assessment of two contiguous waterfront properties (the Properties) which he owns in the vicinity of Campbell River. The Review Panel established the value of lot 1 at $342,000 (land only) and lot 2 at $371,000 ($346,000 for land and $25,000 for improvements).
[2] Mr. Wood asserts that the values do not adequately reflect factors which would limit the nature and extent of development that could occur on the Properties. He has appealed the assessments in previous years.
[3] Kevin McPhail, Senior Appraiser with BC Assessment (the Assessor), submits that the value established by the Review Panel should be confirmed.
ISSUES
[4] The issues are the determination of the Properties’ actual values for the 2009 assessment roll and whether those values are equitable with the assessed values of other similar properties in the area. For the 2009 roll, actual value is the lesser of market value of the Properties as of July 1, 2007 and July 1, 2008, in their condition on October 1, 2008.
DESCRIPTION OF THE PROPERTIES
[5] Lot 1 is a .305 acre vacant waterfront lot located south of Campbell River just off the Island Highway. It has flooded in the past and would require fill to raise the land to the 100 year flood level before a residence can be built.
[6] Lot 2 is also .305 acres on the waterfront adjacent to the Island Highway and is improved with a residence originally built in 1936 and subsequently expanded to 1558 square feet and modified. The building is non-conforming as it does not meet floodplain and setback requirements. It has been rented for the past 25 years. Access to lot 2 is through adjoining lot 1.
EVIDENCE AND ANALYSIS
[7] The Assessor provides as evidence, the expert witness appraisal submitted in the Board’s previous decision on these properties for the 2008 assessment roll (Wood v. Area #06 2008 PAABBC 20082465) as well as the Board’s decision. In addition, a covering narrative submits that the values of the Properties remain unchanged from the previous decisions and a rebuttal report responds to evidence from third parties submitted by Mr. Wood.
[8] Market evidence is also provided by the Assessor in support of his submission that market values of waterfront properties were rising in 2008 and 2009 and that a valuation date of July 2007 is, therefore, the appropriate valuation date.
[9] Mr. Wood states that Lot 1 is “the main issue“ of his appeal, “but not the only one”, and provides a copy of a consultant’s wastewater evaluation plan submitted as part of his previous appeals. He also provides a copy of an addendum to that plan as well as evidence from 2 realtors and a representative of the Strathcona Regional District Planning Department.
[10] It is not my intention to reconsider the Board’s previous decision but rather to examine current arguments and evidence that will be relevant and helpful in determining the issues I have identified. I will also address the Assessor’s objection about the admissibility of new evidence contained in Mr. Wood’s rebuttal.
Actual Value
[11] Mr. Wood does not appear to contest the valuation date of July 1st, 2007. Based on the market evidence provided by the Assessor which includes a number of sales and resales of both improved and vacant properties in 2007, and 2008 and listings from 2009, I conclude that the 2007 valuation date provides the lower of 2007 and 2008 values and, therefore, is the basis for the 2009 assessment.
[12] In the absence of any information that demonstrates a change in the physical condition of the Properties between October 31st 2007 and 2008, I also accept the Assessor’s submission that the Properties be valued in their condition described in the previous appeal.
Can a House Be Built On Lot 1?
[13] Notwithstanding, the previous Board’s finding that lot 1 can accommodate a residence, Mr. Woods submits that “it is presumptuous....to say that it’s buildable”, and states that it is a holding property until a community sewer system is put in place.
[14] In support of this view, Mr. Wood submits an addendum from H2O, an environmental consulting firm, to its original report submitted with the previous appeal. An excerpt from the original report includes a list of constraints to building including: the size of the site; the ocean on the east boundary; Woods Creek on the west boundary; a potential breakout point on the north boundary; the floodplain designation and required raising of the disposal field and the onsite fill materials.
[15] A sketch of a potential building envelope is included from the original report as “figure 1”. It presents a proposed house with perimeter drains around the foundation. The consultant concludes that scenario is “too small for a house to be constructed within required setbacks.”
[16] The consultant’s March 3rd, 2009 addendum further makes reference to a “figure 2” which presents a building envelope with a house that is built with no perimeter drainage. That figure is not included with Mr. Wood’s submission. The consultant notes that he “does not suggest that this is a safe or practical concept in Campbell River where the annual rainfall is approximately 1.45 meters....” He further notes that this type of construction is, however, included in Provincial guidelines. His final statement reiterates his conclusion in the original report that “H20 is not qualified to say whether the resulting building envelope is adequate for a house on an ocean front lot”.
[17] In addition to the evidence described above, Mr. Wood also provides a copy of an October 30th, 2009 letter from the Planning Services Department of the Strathcona Regional District, which outlines the process required to apply for a building permit on lot 1. That letter states in part that “the lot is therefore potentially buildable within the confines of the Residential Two (R-2) zone, but the nature of the development would depend upon the outcomes of the investigative reports”. The author, John Neil, acknowledges that a sewer service would “clearly improve the development options on this site”. From the information submitted, it is not evident that a sewer system is likely to be installed in the near future.
[18] Mr. Wood further makes reference to advice from a local builder, Mr. Rick Couture who advised him that with setbacks, a 1,600 square foot home can’t be built on the site without a sewer system.
[19] The Assessor refers to information and conclusions in the previous appeal as evidence that a residence can be built on lot 1. He also references a conversation with the Building Inspector for the Regional District and the Environmental Health Officer for the Vancouver Island Health Authority, and concludes from both discussions that building a residence on the lot is possible. He acknowledges that constraints exist but that those can be addressed.
[20] The Assessor further notes that Mr. Wood has not provided a written statement from Mr. Couture, nor has information been included to indicate that he was provided with the consultant’s complete report nor discussed the situation with the Building Inspector or Health Officer. I agree with the Assessor’s observation and place little weight on this evidence.
[21] While the H2O consultant provides opinions about limitations on building a residence on lot 1, he has not excluded the possibility. The reference to figure 2, suggests that it in fact shows a house built, albeit without the recommended perimeter drains.
[22] Also, Mr. Neil’s’ letter clearly states that lot 1 is potentially buildable although he concludes that buildability depends on the outcome of various investigations, legislation, by-laws and regulations. From the Assessor’s conversation with Mr. Neil, it is also apparent that building a residence on lot 1 has not been ruled out.
[23] The previous Board’s decision concluded that lot 1 can be developed. The new evidence is consistent with that conclusion. Notwithstanding the further information that would be necessary to clearly establish the location and design details for a house to be built on lot 1, I therefore, conclude that building a house is possible.
Determining a Value for the Properties
[24] In support of establishing a value for lot 1, Mr. Wood makes reference to a recent sale of 3885 Island Highway, a .46 acre lot with 200 feet of beachfront which sold for $650,000. This sale is included as an attachment to a letter of October 17th, 2009 from Realtor Linda Gallagher.
[25] The Assessor provides evidence that the lot sold February 19th, 2009, 21 months after the valuation date. He further states that the sewer system needed to be replaced at an estimated cost between $30,000 and $40,000, and that the roof required replacement at a cost between $10,000 and $20,000.
[26] There is insufficient information to enable me to compare the two properties and I, therefore, give little weight to this sale.
[27] Mr. Wood makes reference to 2 listings close to the Properties, which he states are bigger and better. While it is not clear from Mr. Wood’s submission, I have also assumed that the listings are the same ones provided with the October 17th letter from local Realtor, Linda Gallagher. Lot 4 is .66 acres on the Island Highway with 370 feet of oceanfront and is listed at $599,000. Lot 9 is .35 acres on Shoreline Drive with 70 feet of oceanfront and is listed at $494,000.
[28] This information is provided in support of Ms Gallagher’s opinion that both of Mr. Wood’s properties be listed together for no higher than $525,000 and preferably under $500,000. Ms Gallagher notes that the ocean view is fabulous but the proximity to the highway traffic noise, and the flooding issues are deterrents to sale. She notes that any purchaser would take into account costs involved in dealing with flooding issues.
[29] The Assessor submits that lot 4 narrows dramatically from one end to the other which creates issues with respect to setbacks and septic fields. It is currently assessed at $434,000. He further notes that lot 9 is assessed at $430,000.
[30] Less weight is normally given to listings than to sales as indications of value for comparable properties. In this instance, there is limited information provided about the comparability of the listings and the Properties and no adjustments have been identified to reflect such things as relative size, shape, or condition of improvements. I, therefore, give little weight to this evidence. I do note, however, the Assessor’s opinion that the assessed value of the Properties would be more similar to the listings if costs incurred to bring them to a similar state were applied.
[31] Mr. Wood submits that at the Panel hearing, local Realtor Brian Toner provided a comparative market analysis for lots 1 and 2 and suggested a combined price of $540,000. The panel did not agree with him. No further details were provided in Mr. Wood’s submission.
[32] The Assessor submits that Mr. Toner had recommended a combined value of $560,000 for the Properties based on $3,000 per front foot. Based on conversations at the panel hearing, the Assessor advises that Mr. Toner was unaware of the need to value the Properties separately. This would normally result in a higher value for each property. The Assessor also states that Mr. Toner did not quantify adjustments made between the Properties and the comparable sales presented.
[33] In any event, as no direct evidence is provided from Mr. Toner, and as the evidence submitted by both Mr. Wood and the Assessor does not contain sufficient detail to be applied as a reliable indication of current market value of the subjects, I give this information little weight.
[34] Attached to Mr. Wood’s appeal are letters of July 15th 2009 and September 21st, 2006 from Hans Op de Beck, a Realtor. In the recent letter, Mr. Op de Beck states his view that the assessed value of lot 1 should be $186,000. He does not indicate how he has arrived at this value except to note that the property is extremely difficult to evaluate.
[35] The 2006 letter is old and raises comparable sales that were addressed in earlier appeals. There is insufficient information to enable me to apply the information in the letter to this appeal. As there is no information to support Mr. Op de Beck’s opinion of value, I am unable to give it any weight.
[36] I have examined Mr. Wood’s rebuttal evidence that suggests the costs that should be deducted from the market value of adjusted comparable properties in order to bring lot 1 to a comparable condition, i.e. also referenced as the “cost to cure”. Mr. Wood suggests that those costs should include $2,000 for fish habitat assessment, $5,000 for a waste water study, $30,000 for package sewer treatment plant including design construction and certification, $45,000 for fill, $20,000 for containment structures for fill, and $31,000 for potential loss of buildable area.
[37] The Assessor has identified a $15,000 deduction for the sewage treatment package plant, and submits that the $20,000 amount for a containment structure is new information that he has not had an opportunity to consider. The other costs identified by the Assessor are the same as those in Mr. Wood’s submission.
[38] The costs were initially identified based on adjustments from comparable sales listed in BC Assessment’s appraisal report confirmed in the previous Board’s decision. Mr. Wood has not provided supporting information for the additional $15,000 cost for the package treatment plant. Similarly, no supporting information has been provided either for the necessity for the containment structure nor the amount. H20, in its 2008 report considered in the previous appeal, noted that costs to “build any containment structures necessary for the fill...” may be a factor, but they did not clearly confirm the nature of any structure that might be required nor any estimate of cost.
[39] While I accept that it is quite possible that a containment structure may be required, without supporting evidence to support this, any adjustment would be arbitrary. Similarly, I do not have evidence to justify amending the cost for a treatment plant. I, therefore, accept the adjustments originally established. The Assessor’s concern about the admissibility of new evidence is therefore moot.
[40] For the reasons outlined, I have given little weight to most of the new evidence. In determining a value, I have considered the market evidence provided in the November 26th, 2008 appraisal prepared by Mr. Bill Wilson, CRA RI, and submitted by the Assessor as evidence in this appeal.
[41] Using a direct comparison approach to establish value, Mr. Wilson listed four sales of comparable properties for lot 1. The values range from $325,000 to $662,000. As each of the comparables had some features that differ from Mr. Wood’s properties, adjustments were applied for factors such as sale date, location, topography, water frontage, sewage treatment, flood plain, seawall, and access. The resultant adjusted values range was from $389,000 to $419,000.
[42] The most weight was placed on sale number 3, a waterfront property within the floodplain. The lot, like Mr. Wood’s, was initially considered a holding property but became an approved building site when new provincial regulations were established. The property sold on October 19th, 2007 for $600,000. At the time of sale, a sewage disposal design had been prepared, and a seawall was in place. Adjustments were made for superior location, fill, sewage treatment plant, and lack of improvements. The resultant adjusted sales price was established at $419,000 in relation to lot 1. This value is at the high end of the range. Recognizing that most purchasers would be influenced by the higher degree of risk associated with developing lot 1, the appraiser selected a value of $389,000 which is at the low end of the adjusted range.
[43] In the previous appeal decision, a further adjustment was applied to reflect the risk specifically related to the potential size of a dwelling which may be approved for the lot. Based on the information in H20’s report, a potential maximum building size of 1600 square feet was identified for lot 1. This compares with 1883 square feet for comparable number 3. The Board established a price per buildable square foot by dividing the adjusted sale price of $419,000 by the 1883 square feet allowable. The resultant value of $222.50 per square foot was then applied to the notional 1600 square foot building which potentially could be approved on lot 1. This resulted in a value of $356,000 for lot 1. While no specific market evidence was provided in support of this approach, it is not unreasonable to conclude that there is a relationship between market value and the prospective size of buildable area on a lot. In the absence of contradictory evidence, I therefore find that the value of lot 1 is $356,000
[44] For lot 2, the same four comparables were used as in the appraisal for lot 1, with different adjustments applied to reflect the existence of the house. In this appraisal, the most weight was given to comparable number 2, a waterfront property near Mr. Wood’s lot, with improvements of a similar nature. The property sold on March 22, 2007 for $640,000. Adjustments were made for location, retaining wall and access for an adjusted price of $431,000. This is at the low range of value for the adjusted comparables.
[45] The previous Board concluded that an additional $45,000 adjustment was warranted to reflect the cost of fill. This adjustment is referenced above and does not appear to be in dispute by either party. The adjusted value therefore is $431,000 - $45,000 = $386,000. I therefore find that this is the value for lot 2.
Equity
[46] Mr. Wood has submitted 3 Property Assessment Reports (plus his 2 properties) from BC Assessment to support his assertion that the value for his Properties is not equitable.
[47] The Assessor provides additional information about the 3 comparables including the assessments for the current year. The 3 properties are .416 acres, .41 acres, and .32 acres in size and the land components are assessed at $318,000, $474,000, and $446,000. No adjustments for possible differences in such factors as size, location, or shape have been provided, however, the Assessor states that he feels the subject properties are equitably valued in relation to each other.
[48] He further notes that since equity was reviewed in the previous appeal and was found to be within acceptable tolerances, and as the valuation date has not changed, the proof of equity remains valid for the current assessment.
[49] The information provided does not include sufficient details about the properties to indicate what adjustments, if any, might be applied. If however, the costs to cure Mr. Wood’s properties were added to the values established above, the assessed values would be increased by $81,000 for each lot or $437,000 for lot 1 and $467,000 for lot 2. While this is significantly higher than the property assessed at $318,000, it is not out of line line with the other 2 at $474,000 and $446,000. It is reasonable to examine a greater number of comparables in determining equitability. I, therefore, do not find Mr. Wood’s evidence compelling.
[50] The 2008 appraisal report submitted by the Assessor identifies an assessment to sales ratio (ASR) of 96% for the Campbell River rural assessment area, based on 155 improved sales and 34 vacant land sales. The ASR is a standard measure used to determine the equity of assessments. An acceptable range established by the International Association of Assessing Officers is 90% to 110 %. 96% clearly falls within that range and is an indication that assessments are equitable. The appraiser recommended that the assessed values for the Properties be reduced to be consistent with the 96% ASR. That recommendation was supported in the previous Board decision. The resultant values are therefore $356,000 x .96 = $342,000 (rounded) and $386,000 x .96 = $371,000 (rounded). I find that the Properties’ assessed values are equitable.
CONCLUSION
[51] The Board’s previous decision established a value for the 2008 year based on a value as of July 1st, 2007. As that is the effective date for the 2009 assessment as well, I have sought evidence that would justify any different value.
[52] Mr. Wood has suggested a value of $175,000 for the vacant lot 1, and $325,000 for the improved lot 2, and submits that prospective buyers of his Properties would prefer and pay more for lots without the several constraints to development described in this decision. The evidence does not support these values.
[53] I accept that the constraints to development affect the value, and I also accept that the existence of a community sewer system would enhance the marketability of his Properties. Adjustments to value were applied in the previous appeal decision and no new compelling evidence was presented to justify different adjustments or a new value.
[54] Mr. Wood focuses his appeal on lot 1 and references lot 2 tangentially, primarily in the evidence submitted with respect to equity. No new evidence is presented specifically with respect to the existing residence.
[55] Based on my analysis of the evidence presented, I find that the value of lot 1 as of July 1st, 2007 is $342,000 and the value of lot 2 is $371,000 comprised of $346,000 for the land and $25,000 for the improvements.
[56] I find no evidence to conclude that the Properties’ assessed values are inequitable.
ORDER
[57] The Board confirms the decision of the 2009 Property Assessment Review Panel as follows:
Roll No. 06-72-772-02063.450:
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Land: |
$ |
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Total Assessed Value: |
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$ |
Roll No. 06-72-772-02063.455:
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Land: |
Class 1 - Residential |
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346,000 |
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Improvements: |
Class 1 - Residential |
$ |
25,000 |
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Total Assessed Value: |
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$ |
371,000 |