Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
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Assessor Of Area #26 - Prince George
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Appeal No.: |
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Refer to as: |
Falkenberg v. Area 26 (2009 PAABBC 20091615) |
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Date of Decision: |
January 6, 2010 |
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Property: |
1080 Shovar Road, Prince George Rural |
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Heard: |
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Submissions: |
From the Appellant received September 22 & October 22, 2009 |
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From the Respondent received October 23 & November 6, 2009 |
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Board Panel: |
Donald H. Risk, QC, Panel Chair |
INTRODUCTION AND ISSUES
[1] This appeal involves the proper classification of 29.5 acres, all of which are in the Agricultural Land Reserve. A 2.5 acre corner of the property is leased to a farmer and is classified as Farm. There are horse stables and an outdoor and indoor riding arena on another approximately 4 acre portion which is classified as Business and Other. The balance of the acreage, including the dwelling land and fenced pastures, is all classified as Residential.
[2] The Appellant raises and breeds horses and cattle on the property. She trains and sells horses from time to time, and plans to sell some or all of the calves she breeds. A horse owned by a neighbour was boarded on the property for a time.
[3] The issues in this appeal are whether the horse sale proceeds and unrealized value of the calves are sufficient to bring the whole of the acreage over the minimum required for it all to be classified as Farm and the proper classification of the stables and arena portion of the property.
FACTS
[4] The property is approximately square in shape. It is about 2 km north of the village of McBride about half way between Prince George, BC and Jasper, Alberta. It is bisected by Highway 16 which crosses the south west corner of the property creating the 2.5 acre corner of the property which is classified as Farm. That portion is leased to a farmer who raises cattle on his contiguous land to the west. The rest of the property is to the east and north of Highway 16. The Appellant’s house is near the northern boundary of the property. The stables and arena are in the northeast corner of the property. The balance of about 23 acres, including the dwelling land, is mostly cleared and fenced pastures.
[5] The Appellant and her husband breed and raise both horses and cattle on the property. They bought the property in December 2006 under the impression that it was in Farm class with the previous owner. She closed on the purchase in February 2007, and moved to the property later in 2007. They brought with them 6 horses, (none of which is a stallion) ranging in age from 1 to 20 years old, from their previous farm in Keremeos. None of the mares was bred, and no foals were born on the property in the production year ending October 31, 2008.
[6] The Appellant sold one of these horses, born in 2001, in October 2007 for $4,000. She sold another, born in 2002, and on the property for about a year, in March 2008 for $3,000. She had two of her horses bred in June 2008. Only one breeding was successful, resulting in a foal born in May 2009. In August 2008 another of their horses, born in 1992, was sold for $450. All of the horses, including one born on the Keremeos property in 2006, are advertised for sale. I note there is no evidence of advertising the stables and arena as being available for boarding or any other use.
[7] In 2008 the Appellant started a small cattle breeding operation on the property, purchasing five heifers, one with calf. They bred 4 of the heifers, and 4 more calves were born in 2009. They intend to sell 3 of the calves in 2010, and to keep two to build their herd. The cows were transported in spring 2009 from the property to a farm about 45 km away to be bred again, grazed for the summer, and returned to the property in the fall.
[8] The Appellant uses the stables and arena to exercise and train her horses. A neighbour boarded one of her horses, a gelding, on the property from May 2007 to spring of 2009 and paid the Appellant $150 per month to do so. One other horse was boarded on the property by a different owner for one month in late 2007 for $350.
RELEVANT LAW AND REGULATION
[9] The Assessment Act, RSBC 1996, Ch. 20 (the “Act”) provides as follows:
23 (1) An owner of land who wants all or part of the land classified as a farm must apply to the assessor using the application form, and following the procedure, prescribed by the assessment authority.
(2) Subject to this Act, the assessor must classify as a farm any land, or any part of a parcel of land, that meets the standards prescribed under subsection (3).
(3) The Lieutenant Governor in Council must prescribe standards for classification of land as a farm.
[10] Pursuant to the authority provided in section 23(3) the standards for farm class are prescribed in the Standards for the Classification of Land as a Farm Regulation, BC Reg 411/95 as amended to October 18, 2007, (the “Farm Class Regulation”). Section 4 of the Farm Class Regulation provides that:
The assessor must classify as farm all or part of a parcel of land used for
(a) primary agricultural production,
(b) a farmer's dwelling, or
(c) the training and boarding of horses when operated in conjunction with horse rearing.
[11] Section 5 requires that a minimum gross annual volume measured in dollars of primary agricultural products must be produced on the property. The parties agree that the minimum dollar amount of production in this case is $2,800.
SUBMISSIONS OF THE PARTIES
Do Sale Proceeds and/or Unrealized value meet the minimum required?
[12] The Appellant submits that the proceeds of $3,000 from the sale of her horse in March 2008 satisfy the minimum production requirement. In the alternative, she submits that sale proceeds of $450 in August 2008 plus the unrealized value of the cows of $6,000 satisfies the minimum production requirement. She argues, therefore, that the whole of the property should be in Farm class.
[13] The Assessor argues that the horse that was sold in March 2008 was born and raised on another property and, therefore, its sale proceeds cannot be considered as meeting the minimum production requirement. The Assessor submits that the unrealized value of the heifers cannot be considered as they are not held for sale or for human consumption but rather for breeding.
[14] The Appellant notes that “horse rearing” qualifies as primary agricultural production under the Farm Class Regulation. “Rearing” is defined as “breeding or raising of animals for sale.” The Appellant submits, therefore, that sale proceeds from a horse born or raised on a property can satisfy the minimum production requirement for that property. The Appellant suggests that horse “raising” involves breeding, feeding, training and exercising from birth or purchase until the horse is sold or dies. “Raising” is continuous over a number of years. The Appellant notes that the Farm Class Regulation does not define an age of maturity for horses or other animals, or a minimum amount of time that an animal has to be raised on a property before its sale proceeds can be considered to qualify that property for farm class.
[15] The Appellant argues in the alternative that the purchase of the cows in 2008 should qualify the property as a developing farm for the 2009 Assessment roll. The Appellant argues that Section 8(1)(b) of the Farm Class Regulation requires the property to be classed as a developing farm if the necessary infrastructure and animals are present, and the property will satisfy the requirement for farm class by October 31 of the next year, 2009, in this case. She submits that the unrealized value of the 3 calves born on the property and intended to be sold, will satisfy the minimum production requirement.
[16] The Assessor suggests that the last time a horse was born on the Appellant’s farm was in 2006 in Keremeos. The Assessor notes that there is not a stud horse on the property and that the breeding done in June 2008 was not done on the property but elsewhere. The Assessor, therefore, argues that the Appellant ceased being a bona fide horse breeder. The Assessor submits that sale proceeds for a horse neither bred nor raised on the property, by an owner who has ceased to be a horse breeder, does not qualify as minimum primary agricultural production.
[17] The Assessor suggests in the alternative that the sale proceeds of $3,000 for the horse sold in March 2008 must be prorated over the life of the horse based on the time the horse spent on the two farms, Keremeos and McBride. The Assessor submits that only 1/6 or $500 of the proceeds qualifies toward the minimum and, therefore, the property does not qualify for farm class. The Appellant counters this argument by noting that there is no authority in the legislation or the Farm Class Regulation for prorating sale proceeds, and that this approach, characterized by the Assessor as a practical one, is in fact impractical.
Classification of stables and arena
[18] The Appellant submits that the stable and arena should be Farm class as well (not Business and Other) as those facilities are used for exercising and training her horses in the breeding operation in which she is engaged.
[19] Both the Appellant and the Assessor cite the decision of this Board in Trudie Northcott v. Assessor of Area #15 (May 29, 1980) for the proposition that boarding horses can be a separate business independent of a breeding operation on the same property. The Appellant argues the gelding boarded by a neighbour at the stable is used by the Appellant to assist her in determining when her mares are in heat, and otherwise the stables and arena are used only by her own horses as part of her breeding operation. The Appellant says this is not sufficient evidence of a separate “business,” and the stable and arena should be classified as farm along with the rest of the property as part of the breeding operation.
[20] The Assessor also relies on the Trudie Northcott decision cited above. The Assessor also refers to the decision of this board in Carhoun v. Assessor of Area #9 (May 1991), in which the Trudie Northcott decision is also cited, for the proposition that land used to produce revenues from the boarding of horses can be classed as a commercial activity, and as a business for property tax assessment purposes, whether or not it is profitable. The Assessor, therefore, submits that the boarding income of $150 per month from May 2007 to April 2009 received by the Appellant in this case, is sufficient to properly classify the stable and arena portion of the property as Business and Other.
[21] In rebuttal, the Assessor makes a number of arguments to support the submission that the Appellant ceased to be a bona fide horse breeder. Those arguments note that the breeding in 2008 took place off the property; and that there was no breeding at all between 2005 and 2008. The Assessor cites Epp v. Area 26 (2005 PAABBC 20050675) and notes that only one foal resulted from the breeding in 2008. Based on Epp, the Assessor argues that the successful breeding of one foal cannot qualify the owner of the mare as a horse breeder. The Appellant responds to the Assessor’s arguments about ceasing to be a horse breeder by submitting that she breeds only every couple of years, and did not breed during the move year of 2007, because it is too hard on the mares and she was busy with the move. The Appellant also notes that there are no criteria in the Farm Class Regulation defining who might or might not be a “bona fide” horse breeder, or how often horses must be bred to qualify their owner as a horse breeder.
Other Issues
[22] Both parties make a number of other arguments in the balance of their respective rebuttal submissions about what constitutes horse breeding and raising, unrealized value, and developing farm status, which are essentially the same as, or expand on, those mentioned above. I will deal with those in my discussion and analysis below.
DISCUSSION AND ANALYSIS
Is the minimum income requirement met?
[23] The issue of entitlement to farm classification is interesting in this case because the Appellant physically moved her operations and horses from one farm property in Keremeos to another in McBride and the breeding of her horses was interrupted by that move, and because recent breeding probably took place on neither property.
[24] The Farm Class Regulation defines horse rearing as the breeding and raising of horses for sale. There is no dispute as to whether these horses were sold or were held for sale. They were so advertised. The Regulation does not define breeding or raising. Breeding includes more than mating, as I note that both parties refer to the calves or foals in this case as having been ”bred” on the property; although in some cases the mating took place elsewhere. The dictionary defines to breed as to propagate, to produce offspring, to raise, to develop. Breeding ordinarily, as applied to horses, would be understood to include copulation, covering or mating, caring for the mare during the gestation period, and birthing. Raising would ordinarily be understood to include feeding, sheltering, exercising, developing, and training. Each activity arguably includes the other.
[25] Did the Appellant cease to be engaged in horse rearing, that is: breeding and raising horses for sale, when she moved her operation and horses from one property to another? Or when she went for three years instead of two between mating her mares? Or because she had her mares mated on someone else’s property?
[26] I do not accept the Assessor’s arguments in this regard. I find that the Appellant was continuously engaged in horse rearing, breeding and raising, as those activities are ordinarily understood, and which are included in the Farm Class Regulation as constituting primary agricultural production, throughout the time that is involved in this appeal. I find this is so notwithstanding she moved her horses from one location to another, or that she deferred her ordinary mating schedule for one year, or that the latest matings took place off her property. I note in passing that one reason she deferred mating her mares was because it was hard on them; that is: because she cared for their well being, an appropriate motivation for one engaged in horse rearing.
[27] In March of 2008, the Appellant, who at the time engaged in horse rearing, sold a horse for $3,000. I find that the horse was raised on and sold from the McBride property which is the subject of this appeal.
[28] I reject the arguments of the Assessor as to pro rating the sale proceeds for at least two reasons. As suggested by the Appellant, I do not think that approach is practical, as it leaves unanswered questions about how to deal with the other portion of the proceeds. But more importantly, I find no authority in the legislation, the Farm Class Regulation, or among the cases cited for prorating. In my view the idea of proration of sale proceeds, especially in the context of breeding and raising animals, is counter to the spirit and scheme for the assessment of farm properties. The scheme contemplates an annual roll based on a value at one annual date in respect of a use at another annual date and in the case of a farm, based on an annual application. I note that in the case of continuing operations production in each year is required, and in the case of a developing farm, production in the next year must be reasonably anticipated. So despite the continuing and long term nature of the activities of breeding and raising animals, that activity is assessed in snapshots, so to speak, on one or more dates in each year in order to determine eligibility for farm class for a particular property. I find as well that the snapshots contemplated by the scheme can be applied consistently in this appeal in order to determine whether horse sale proceeds satisfy the minimum dollar value required. I find that the whole of the proceeds of the sale that occurred in March 2008 are properly attributed to the property in this appeal and satisfy the dollar production requirement.
Classification of stables and arena
[29] I conclude the land on which the stables and arena are situated should be classified as farm, for the following reasons.
[30] Section 4(1)(c) of the Farm Class Regulation provides that land used for the training and boarding of horses, when operated in conjunction with horse rearing, must be classified as farm. The evidence is and I find that the Appellant uses the stable and arena land for the boarding, exercising and training of her horses in the horse rearing operation in which she is engaged. I find that to be the predominant use of the stable and arena. I find that to be a use in conjunction with the horse rearing in which the Appellant is engaged on the whole of the property.
[31] The evidence also discloses that a neighbour’s horse was boarded and that the Appellant received $150 per month for about 24 months from May 2007 to the spring of 2009. The evidence also discloses that the Appellant received $350 from another owner of a horse that was boarded on the property for the month of December 2007. Clearly there was some revenue from boarding horses owned by others on the property.
[32] I am mindful of the cases cited by the parties in respect of this issue, particularly Northcott and Carhoun. I find them helpful in their analyses of the facts and issues in those cases. They stand for the proposition that a revenue producing boarding of horses, on the same property where a horse breeding operation takes place, can be a separate independent business and a commercial activity, even where it is marginal financially, or does not produce a profit. However, the facts in those cases are not the facts in this appeal. Here, a careful review of the evidence leads me to conclude that the revenue producing boarding of horses on this property is not a separate independent business or commercial activity. I base my conclusion on the following:
(1) The evidence discloses and I find that the Appellant did not advertise her land as available for boarding. The horses that she raised were advertised and offered for sale to the public on the internet. I find no evidence that the Appellant advertised or offered her facilities for the boarding of horses to anyone in any way. I find no evidence of a business or commercial purpose on the part of the Appellant for the boarding of horses of others that took place on the property;
(2) She and her horses are continually the main users of these facilities in conjunction with and as an integral part of her rearing of her own horses;
(3) The neighbour approached the Appellant requesting to self-board her horse through the winter of 2007 - 2008 because the neighbour had bought an adjacent property and had not had time to construct a shelter for her horse. The neighbour continued to self-board her horse on the property the next winter, 2008-2009, because the water system in her new barn, where her horse would have been sheltered on the neighbour’s property, was going to freeze and be unusable. I take it that self-boarding implies that the owner of the horse being boarded attends to feeding, grooming, and exercising her horse and perhaps cleaning the horse’s stall as required. I find that the boarding provided to this neighbour by the Appellant, was a neighbourly act by the Appellant primarily for the convenience of the neighbour. The revenue it produced was incidental and probably amounted to no more than a minimal contribution to the costs of providing the boarding facility. As it turned out, the boarding of a horse that was a gelding provided the Appellant with useful information about the breeding status of her mares, as they would show for the gelding and thus help the Appellant know when her mares were in heat. This mutually convenient outcome supports the conclusion that the boarding was in support of or in conjunction with the horse rearing in which the Appellant is engaged; and
(4) The one month of revenue from a second other horse owner is not, in my view, sufficient evidence of a business or commercial purpose on which to base a finding that the Appellant was actively engaged in a separate independent business of boarding horses owned by others on this property.
Other Issues
[33] Having found that horse sale proceeds are in respect of the property and sufficient to qualify the property for farm class, I will not deal with other issues in this appeal having to do with classification of the property as a developing farm, or unrealized value of the horses, heifers or calves. Further having found that the use of the stables is not as a business but rather in conjunction with the horse breeding operation, and that the land associated with the stable and arena should also be classed as farm, there is no need to deal with any issue of split classification of the property.
CONCLUSION
[34] I find that the use of the property at the relevant times was continually for horse rearing, and that the minimum income requirement has been satisfied for the 2009 roll. I find that the use of the stables and arena is in conjunction with the horse rearing operation. It follows, therefore that the whole of this property should be classified as Farm for the purposes of the 2009 assessment roll. I conclude that all the land should be in Class 9 – Farm and the Appellant’s dwelling, stable, arena and any other outbuildings should be in Class 1 – Residential.
ORDER
[35] The Assessor is ordered to amend the roll to classify all of the land as Class 9 – Farm and value it accordingly. The parties shall provide the Board with a joint recommendation for the valuation of the Class 9 land. If the parties are unable to agree on revised values for the Class 9 land, I retain jurisdiction to receive submissions in that regard.