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An analysis of the real property assessments and taxes in British Columbia Tomko, Wayne Leslie 1972

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pa.ejc, Co ctoeft, n o t e^xIsS AN ANALYSIS OF THE REAL PROPERTY ASSESSMENTS AND TAXES IN BRITISH COLUMBIA by Wayne Les l ie Tomko B.Com., Universi ty of B r i t i s h Columbia, 1971 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE i n the Faculty of Commerce and Business Administration We accept th is thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA October, 1972 In p r e s e n t i n g t h i s t h e s i s in p a r t i a l f u l f i l m e n t o f the requirements fo r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e for reference and s tudy. I f u r t h e r agree tha t pe rmiss ion for e x t e n s i v e copying o f t h i s t h e s i s fo r s c h o l a r l y purposes may be granted by the Head of my Department o r by h i s r e p r e s e n t a t i v e s . I t i s understood that copying or p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l ga in s h a l l not be a l lowed wi thout my w r i t t e n p e r m i s s i o n . Department o f £g>W>n£/b—  The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8, Canada Date OcM*A 6 , / ? 7 r ? ABSTRACT The Real Property Tax requires a major outlay of funds by most property and non-property owners. Property owners are d i r ec t l y affected by the tax , in that they pay the taxes to the taxing author-i t i e s , while the non-property owners are i nd i rec t l y affected as the property tax paid by the owners i s re f lec ted in the rents which the non-property owners pay. Because of the magnitude of the property tax as a proportion of the property owners net income or disposable income, the ind iv idua ls r ight or ob l igat ion of an equal port ion of the tax burden should be upheld. The port ion of the to ta l tax burden for which a property taxpayer i s responsib le , is determined by the "actual value" of his real property, subject to l e g i s l a t i v e exemptions and r e l i e f s . To ascerta in the degree of the equal i ty of the tax burden a sample of 1632 propert ies was obtained consis t ing of seven d i f ferent land uses from e igh t -munic ipa l i t ies located within the Greater Vancouver area. For each property in the sample the adjusted s e l l i n g p r i c e , assessed value of land and improvements for municipal and school purposes, and the net taxes payable were obtained. To fur -nish the reader with some ins ight as to the causes of possible tax inequa l i t ies between mun ic ipa l i t i es , land uses, or pr ice categories wi th in mun ic i pa l i t i es , ca lcu la t ions measuring the degree of assessment uniformity and equal i ty were executed. 11 The f indings of th is thesis give evidence that the tax burden between mun ic i pa l i t i es , land uses and pr ice categories wi thin munic ipa l i t ies are not equally d is t r ibu ted as the concept of equal i ty was def ined. Further, i t was discovered that these inequa l i t i es were, in par t , due to the occurrance of unacceptable leve ls of assessment inequal i ty and ununiformity. TABLE OF CONTENTS CHAPTER PAGE I INTRODUCTION A. Proposi t ion 1 B. Scope of Study 1 C. L imitat ions of Study 3 D. Procedure 14 II METHODOLOGY AND THE METHOD OF DETERMINING TAXES 16 A. Methodology 16 B. B r i t i s h Columbias' Real Property Tax System 26 1. Market value or actual value 26 2. Assessed value 27 3. Taxable assessed value 28 4. Taxes 30 III FACETS OF BRITISH COLUMBIAS" REAL PROPERTY TAX SYSTEM 32 A. Exemptions and Rel ie fs 32 . 1. Rationale for exemption 34 2. Methods of granting exemptions 38 3. Magnitude of exemptions 39 B. Uniformity and Equal i ty of Assessments 44 C. Five and Ten Per Centum Rules 46 1. Ef fects of the f i ve per centum rule 47 2. Ef fects of the ten per centum ru le 50 i v CHAPTER PAGE IV EQUALITY OF ASSESSMENTS 53 A. Equal i ty of Assessments Between Mun ic ipa l i t ies 54 B. Equal i ty of Assessments Between Land Uses 56 C. Equal i ty of Assessments Between Di f ferent Market Pr ice Categories 58 D. Summary 63 V ASSESSMENT UNIFORMITY 64 A. Measures of Absolute Dispersion 65 B. Measures of Relat ive Dispersion 66 1. Coef f ic ient of dispersion 66 2. Coef f ic ient of var ia t ion 69 C. Regression Analysis 74 D. Percent From the Median 80 E. Summary 90 VI BURDEN OF TAXATION 93 A. By Pr ice Range 94 B. By Munic ipa l i ty 99 . C. By Land Use 102 VII SUMMARY OF FINDINGS AND RATIONALE FOR THEM 104 A. Summary 104 1. Assessment uniformity 104 2. Assessment equal i ty 104 3. Burden of taxat ion 106 B. Reasons for Assessment Inequal i t ies and Ununiformities 107 1. Five and ten per centum rules 108 V CHAPTER PAGE 2. Appraisal method of assessors 108 3. Lag period in assessments 114 4. Biasness of assessors 115 5. Leg is la t i ve causes 116 C. Reasons for Unequal Tax Burden 116 1. Administered 116 2. Unadministered 117 D. Conclusions 117 E. Area for Further Research 118 BIBLIOGRAPHY 120 APPENDIX A 125 APPENDIX B 138 APPENDIX C 139 i LIST OF TABLES TABLE PAGE I Percent of Municipal Revenue Received Via Real Property Assessments By Munic ipa l i ty for the Years 1962, 1966, 1970. 2 II Sample Size By Mun ic ipa l i t y , By Land Use, By Pr ice Category 24 III Sample of a l l Resident ial Property By Pr ice Category 25 IV Exemptions as a Percent of Total Assessed Value, General, School and Hosptial Purposes, by Mun ic ipa l i t y , Property C l a s s , Assessment C lass , fo r the years 1962, 1966, 1970. 41 V Percent of Total Taxes Each Property Class Pays Without the Five Per Centum Rule 48 VI Percent of Total Taxes Each Property Class Pays With: the Five Per Centum Rule 49 VII Equitable Solut ion When Five and Ten Per Centum Rules are Applied? 51 VIII Means and Medians of the Assessment-Sales Ratio for the Mun ic ipa l i t i es 54 IX Percent Difference Between Surrey's Mean and the Mean of the Other Mun ic ipa l i t ies 55 X Means and Medians of the Assessment-Sales Ratios for the Land Uses 56 XI Percent Var iat ions of the Land Use Means and Medians from the Overall Mean 57 v i i TABLE PAGE XII Means and Medians of Assessment-Sales Ratios for Pr ice Categories of Di f ferent Mun ic ipa l i t i es . 59 XIII Ranked Order of Means of Pr ice Categories for Each Munic ipa l i ty 60 XIV Mean and Median of Assessment-Sales Ratios for Each Pr ice Category 62 XV Coef f ic ient of Dispersion by Mun ic ipa l i t i y , By Land Use (From Lowest to Highest) 67 XVI Mun ic ipa l i t i es and Land Uses In Order From Lowest to Highest Coef f ic ients of Var iat ions 70 XVIII Regression Line and Standard Error of y By Munic ipa l i ty and By Land Use 78 XVII Observed and Expected Frequency of Each Deci le 72 XIX Relat ive Standard Error of y By Mun ic ipa l i t y , By Land Use, From Lowest to Highest 79 XX Proportion of Propert ies Which Lie Between Percentages From the Median, by Munic ipa l i ty (Resident ial Land Uses) 83 XXI Proportion of Propert ies Which L ie ; Between Percentages From the Median, By Land Use 87 XXII Ranked Order of Mun ic ipa l i t i es Under Di f ferent Measures of Assessment Uniformity 91 XXIII Ranked Order of Land Uses Under Di f ferent Measures of Assessment Uniformity 92 XXIV Mean and Median Net Taxes Payable as a Percent of Market Value, By Pr ice Category 95 v i i i TABLE PAGE XXV Mean and Median of the Net Tax Market Pr ice Rat io , By 1/3 Pr ice Categor ies, By Munic ipa l i ty 97 XXVI Ranked Order of Net Tax Market Pr ice Ratio Means By Pr ice Category From the Lowest to the Highest Within Each Munic ipa l i ty and the Percent Difference of the Two Highest Pr ice Categories Means From the Lowest for Each Munic ipa l i ty 98 XXVII Means and Medians of Net Tax Market Pr ice Ratios From the Lowest to the Highest Mean of the Mun ic ipa l i t ies and the Percent Deviation of the Means of the Mun ic ipa l i t i es From Richmonds ". Mean. 100 XXVIII Mean and Median of Net Taxes Market Value Ratio For The Land Uses. 102 XXIX Percent Which the Land Uses Pay in Taxes Above the Land Uses With the Lowest Mean 103 LIST OF ILLUSTRATIONS ILLUSTRATION 1. Corberts' Model 2. Best F i t Line 3. Cumulative Proportion of Propert ies from the Median By Munic ipa l i ty 4. Cumulative Proportion of Propert ies from the Median By Land Use in Vancouver 5. Cumulative Proportion of Propert ies from the Median By Land Use in Surrey and Del ta. ACKNOWLEDGEMENT During the preparation of th is thesis I have become indebted to many people. I thank the Municipal Assessors for the i r co-operation in al lowing me the use of the i r f i l e s during my data co l l ec t i on per iod, and also thank David Lach for his assistance in the s t a t i s t i c a l tabu la t ion. Special thanks I give to my parents who helped support me f i n a n c i a l l y during my un ivers i ty years and during the wr i t ing of th is thes is . F i n a l l y , I am espec ia l l y obl iged to Professor Stanley W. Hamilton for his invaluable guidance and advice throughout the term of the thesis preparat ion. CHAPTER I INTRODUCTION A. PROPOSITION There has been in the past and w i l l continue to be in the fu tu re , widespread discontent of the real property tax system as i t i s presently administered in B r i t i s h Columbia. The scope of the c r i t i c i s m can be i l l u s t r a t e d by quoting Jen Jenson who in 1933 wrote, * ' " i f i t were possible to el iminate a tax by adverse c r i t i c i s m the general property tax should have been el iminated years ago." The c r i t i c i sms have persisted since then with a millennium of reports and a r t i c l e s which suggested e i ther i t s er radicat ion or methods of amel iorat ion. The hypothesis of th is thesis stems from the mu l t i -tude of c r i t i c i sms and can be simply stated as fo l lows: Are there inequi t ies or ununiformity in assessments of real property which cause the tax burden to be d is t r ibu ted unjust ly? B. SCOPE OF STUDY The real property tax i s but one tax of a m u l t i p l i c i t y of taxes, but due to i t s importance as a municipal source of revenue 2 i t i s imperative that the doctr ine of 'equal treatment of equals' is upheld. Table I indicates the importance of the property tax Jenson, Property Taxation in the U.S. (Chicago: Univers i ty of Chicago Press , 1931), P.7. Musgrave. The Theroy of Publ ic Finance. (New York: McGraw H i l l Book Co . , 1959), Chapter 8. 2 by ou t l in ing the percentage of a munic ipa l i t ies revenue which is re-ceived through assessments of real property. Figures are provided for the years 1962, 1966 and 1970 for the munic ipa l i t ies under study and the province as a whole. The-percentage of the munic ipa l i t ies revenue received from property assessments has dropped only s l i g h t l y since 1962 i f the whole province i s considered, however, the munici-p a l i t i e s selected for analysis have varied considerably in the change of th is percentage. West Vancouver has increased the percen-tage of i t s revenue received from real property assessments by 1.65% while Richmond has decreased i t s percent by 17.21%. TABLE I * PERCENT OF MUNICIPAL REVENUE RECEIVED VIA REAL PROPERTY  ASSESSMENTS BY MUNICIPALITY FOR THE YEARS 1962, 1966, 1970 3  YEARS 1962 1966 1970 MUNICIPALITY BURNABY 71. 62 66 .18 63. 18 COQUITLAM 72. 14 67 .23 70. 22 DELTA 60. 30 42 .23 51. 97 RICHMOND 81. 18 80 .87 67. 21 SURREY 66. 73 59 .16 59. 09 NORTH VANCOUVER 73. 01 69 .54 74. 21 WEST VANCOUVER 74. 33 71 .65 65. 54 VANCOUVER 65. 94 68 .16 66. 88 BRITISH COLUMBIA 67. 13 64 .96 64. 58 Department of Municipal A f f a i r s , Municipal S t a t i s t i c s . ( V i c t o r i a : Queens Pr in te r 1962, 1966, 19727) 3 •Cont r ibut ions, grants and subsidies by the Prov inc ia l and Federal governments were not included. Municipal revenue sources which represent the remaining percentage are: business tax , other tax , special assessments and charges (these are co l lec ted as part of the property t ax ) ; l icenses and permits; ren ts , concessions and f ranch ises ; f i n e s , i n te res t , tax pena l t ies , e t c ; serv ice charges; and recreat ion and community serv ices . The doctr ine of 'equal treatment of equals' rests on the foundation that : "the equal i ty of ind iv idua ls before the law, tax treatment being legal treatment in essent ia l respects. Arb i t rary and capr ic ious treatment of ind iv idua ls by legal i ns t i t u t i ons i s prevented by const i tu t iona l protect ion . . . has been extended to apply to the d i s t r i bu t i on of taxes."4 The object ives of th is thesis are as fo l lows: 1. to examine the equal i ty of B r i t i s h Columbia's real property tax burden between mun ic i pa l i t i es , land uses and pr ice categor ies; 2. to examine the equal i ty and uniformity of assessments which govern the tax burden of property owners; 3. to analyze the concept of exempitons and/or grants as they eventuate in lower taxes to some property owners and a greater tax burden to other owners. C. LIMITATIONS OF STUDY The f i r s t l im i ta t ion of th is study is the e l iminat ion of any discussion centering around the form which the burden of taxa-t ion should take. A tax system may be progressive, regress ive, or proportional and based upon ' a b i l i t y to pay' or 'benef i ts received'5 4 James M. Buchanan, The Publ ic Finances. 3rd Edi t ion ( I l l i n o i s : Richard B. I rwin, 1970), P.100. 5 Information on taxing p r inc ip les can be found i n : Musgrave, R.A. Loc. C i t . and Buchanan, James M. Loc. C i t . but the choice var ies for d i f fe rent tax purposes and between ind iv idua ls . Since the property tax system in B r i t i s h Columbia is based upon actual value of property, whereby the assessments and tax should be propor-t iona l to i t , th is thesis w i l l analyze the degree to which the propor-t i o n a l i t y i s upheld and not be concerned with the type of tax system which i s appropriate or des i rab le . The other facets of a tax system which w i l l not be discussed are : adequacy f l e x i b i l i t y e l a s t i c i t y balance cer ta in ty s imp l i c i t y convenience economy of co l l ec t i on and compliance - does the tax system provide enough revenue. - i s i t f l e x i b l e as to the income f low. - does i t respond to the economy -b u i l t in s t a b i l i z e r s . - are the above three balanced. - as to t ime, manner and amount of payment of the tax. - in both administrat ion and c o l l e c t i o n . - t ime, place and manner in which a taxpayer i s ca l led upon to discharge his ob l iga t ions . lowest cost consistant with the guide-l ines set out above and the procedures for appeals by the taxpayer. 6 Ontario Committee on Taxat ion, Report 1967, (Toronto: Queens Pr in te r 1967). Another excel lent source descr ibing some of the above i s : Stanley W. Hamilton and P h i l i p H. White, "The Real Property Tax in B r i t i s h Columbia - An A n a l y s i s " , Research Report prepared for the B.C. School Trustees Assoc ia t ion , (Vancouver: B.C. School Trustees Assoc ia t ion , 1971). A second l im i ta t i on of th is thesis i s a resu l t of the sampling procedure chosen. When judging the uniformity and equal i ty of assess-ments i t i s necessary to determine the market value of the propert ies as th is i s the basis: from which assessments are determined. The usual method of determining the market value of propert ies when assessment uniformity i s being measured i s from sales data. The weakness of th is method becomes apparent when i t i s rea l i zed that the researcher i s automatical ly e l iminat ing a large port ion of the propert ies for his sample (a l l those which did .not s e l l ) thereby biasing his sample s t a t i s t i c s . Les l i e E. Corbert s ta tes : "The sales ra t io method almost cer ta in ly contains s t a t i s t i c a l b i a s , at least in the sampling phase of i t s appl icat ion . . . A port ion of the to ta l assessment universe i s automat ica l ly , excluded from the sales ra t io se lect ion by the simple fact that only a port ion of the to ta l assessment universe i s sold under market condi t ions."7 Corberts 1 model i l l u s t r a t i n g that market a c t i v i t y does not generate a random sample of a l l the propert ies in the assessment r o l l i s summarized below. 7 Les l i e E. Corbert "An Appraisal of Sales Ratio S tud ies" , National Tax Assoc ia t ion . (Proceedings of the 51st Annual Conference, ILLUSTRATION 1 CORBETTS1 MODELS Ratio of Assessed Value to Market Value (in %) 50% E I A • / / / / / / /*>_ \ A 7///////A C \ . D . r Number of Sales L H : Market Value - '{.--ii "II -: .'jp : ; | * Les l i e E. Corbert. op. c i t . pp 107-117 In i l l u s t r a t i o n 1, the assessments would be perfect i f they a l l f e l l upon l i ne AA which represents an assessment sales ra t i o of f i f t y percent. I f , however, l i ne AA represented only the average, then the ra t ios of ind iv idual parcels would l i e above and below th is average l i n e . Assessment uniformity would then be measured by the degree of v a r i a b i l i t y from th is l i n e . It i s not known, however, whether the average l i n e of the population ra t ios i s sloped as in AA or as in BB of f igure 1. I f curve BB represents the average re la t ionsh ip between market values and assessment ra t ios then a weighted average of a l l the ind iv idual assessment ra t ios may y i e l d a point such as R on the f igure . The ve r t i ca l distance LR would then measure the average ra t io of assessed 8 value to market value for a l l the property items in the assessment universe of th is j u r i s d i c t i o n . Curve CC represents the number of property sales which take place wi th in a given period of time (shown on the right-hand ve r t i ca l a x i s ) . The bulk of the sales f a l l s wi thin the pr ice range bounded by De and HI. If the invest igator were using the sales ra t io method of ra t i o determination he would r e s t r i c t his universe to those propert ies for which the assessment ra t ios are r e l a t i v e l y high. Thus, even i f the sample selected i s t ru l y representat ive of those propert ies which l i e wi th in the DH range of market va lues, i t cannot be representative of the ent i re universe of assessment ra t ios because i t automatical ly ex-cludes those high-value propert ies which have low assessment r a t i os . The bias ef fect of the sampling procedure i s to ra ise the average assessment market value to GS. If the correct ra t i o for the universe is LR than GS is overstat ing LR by FS. By making use of sales ra t io study rather than a represen-ta t i ve sample study the invest igator has improved the appearance of the assessor 's performance by moving the ra t io f indings c loser to the l i ne of assessment perfect ion (Line A) . Ratio l i ne B was chosen only to i l l u s t r a t e the ef fects of se lect ing a sample from the propert ies which sold and not from the ent i re universe of proper t ies. In a c t u a l i t y , the ra t io l i ne may be sloping downward or upward or behave e r r a c t i c a l l y as the market value 9 increases. The invest igator knows only that the ra t ios he f inds re late general ly to propert ies with market values f a l l i n g roughly between ve r t i c l es DE and HI. I t can be further proven that the propert ies which sold const i tu te a population unto i t s e l f which has d i f fe rent parameters than the population of unsold proper t ies. Even i f an assessor 's assessments were per fec t , in that a l l assessments were uniform at 50% of market va lue, at the time the assessment r o l l s were pr inted a sampling of the sold propert ies would s t i l l not be representat ive of the to ta l population due to the larger proportion of sold pro-pert ies which have had minor improvements, such as paint ing and repa i r s , to increase the value of the property. The e f fec t of th is can be i l l u s t r a t e d as fo l lows: assume two equivalent propert ies ( A & B ) each with a market value of $25,000. Since the assessment market value ra t ios are unifornv at 50% they are each assessed at $12,500. Owner A wishes to s e l l his property but before doing,so, he paints his home and puts on new :roofing sh ingles. If he s e l l s his property for $26,000 then the assessment-sales ra t io i s calculated to be 12,500/26,000 = 48.08. If th is ra t io was deemed to represent the population ( in th is case propert ies A & B) then the population i s being misrepresented. I f , as was suggested, the sold propert ies are on the average, improved upon before s a l e , more than the unsold proper t ies , then the sample s t a t i s t i c s w i l l not be representat ive of the population parameters. I t becomes unfeasible to re la te accuractely the s o l d , and unsold propert ies on the assessment r o l l because i f a l l the sold propert ies in the sample were examined and the improvements compensated for by adjust ing the s e l l i n g pr ice then th is must also be done fo r a l l the propert ies which have not so ld . Not only does th is process become too labor ious, but i t subjects the researcher to making sub-jec t i ve judgements or assessments as to the extent of the property value added by these new improvements. in terva l (eg. 6 months or 1 yea r ) , then unless pr ices have been con-stant during that time per iod, the s t a t i s t i c s w i l l not be representa-t i ve of the uniformity of assessments. For instance, assume ; three propert ies A, B, & C sold over a period of 1 year ; the market value of a l l three propert ies as of Jan. 1s t , 1971 was $25,000 and the corresponding assessments were $12,500. On Jan. 1s t , 1971 property A sold for $25,000, on June 31st, 1972 property B sold for $26,2-50, on Dec. 31st , 1971 property C sold for $27,500. During th is year period a l l three propert ies increased in value by 10%. If assessment sales ra t ios were calculated the fo l lowing resu l ts would p r e v a i l . I f the sales pr ices employed in the sample are over a time S.P. A.V. A.V./S.P. A 25,000 12,500 .50 B 26,250 12,500 .476 C 27,500 12,500 .455 11 The ununiformity in the assessment/sales ra t ios i s due so le ly to the increase in market pr ice over the time per iod. If a l l the sales had occurred at the same t ime, then the assessment-sales ra t ios would have been uniform. Adjusting the sales f igures by the average increase of property value over the time period would not improve matters be-cause of the deviat ion from the average. If the date of each sale were known and the sale pr ice adjusted by the average property value increase up to that t ime, in the time s e r i e s , the resu l ts w i l l s t i l l be inaccurate, because the ind iv idual property being adjusted may not be represented by the average. A second method of determining the market value of pro-perty would be through'rigorous appraisal techniques. This method a l lev fa tes the researcher from being res t r i c ted in his choice of a sample, as he may choose not only those propert ies which s o l d , but a lso propert ies which did not s e l l . I f , however, as Corbert suggests, sold and unsold propert ies const i tu te two separate populat ions, then the sample i s being chosen from two populations and inferences cannot be made of the to ta l assessment r o l l . Further problems ar ise in that assessments to determine market value i s to some degree dependant upon subject ive judgements by the appraisers. Two appraisers w i l l often predict two d i f fe rent market values for the same property, of which both may be wrong. I f th is method was chosen, then the r e l i a b i l i t y of the researchers' 1/ 12 s t a t i s t i c s i s based on the fact that his appraisals are more accurate then the c i t y appra ise rs ' . The researchers' appraisals must not only be more accurate than the c i t y appraisers but they must also be the market value. F i n a l l y , th is method of determining market value becomes much more time consuming then does the se lect ion of s e l l i n g p r i ce . The market value ind icator chosen for th is study i s an ad-o justed sales p r i ce . Reasons for e l iminat ing or adjust ing sales pr ices are discussed in the fo l lowing chapter. The s t a t i s t i c a l analys is presented w i l l be subject to the l im i ta t ions as stated above. 8 Sales during the 9 mo. period between Jan. 1 and Sept. 31st , 1971 were considered in the sampling. The change in market pr ice during th is period was an average of 3.98%. This average was determined in the fo l lowing manner; Gross Sales in Jan. 1971 recorded' by the Mul t ip le L i s t i ng Service of the Real Estate Board of Greater Vancouver was divided by the number of propert ies sold during that month. gross sales 23,399,080 no. of propert ies sold 860 average pr ice per property $26,049 The cumulative gross sales f igure from Jan. 1st to Sept. 31st , 1971 was divided by the cumulative property sold f igures to obtain an average sales pr ice o f : cumulative gross sales 203,511,374 no. of propert ies sold 7,813 average pr ice per property $26,047 This represented an average pr ice increase over the 9 month period of 26,047 - 25,049 = 998 or 3.98%. The fo l lowing table summarizes the pr ice changes during the 9 month per iod. 13 8 Month average pr ice % increase or cumulative av. av. increase or per property decrease from pr ice per pro- decrease from for the month the previous mo. perty. January Jan. 25,049 25,049 Feb. 23,861 (D) 4.74% 24,321 (D) 2.90 Mar. 25,006 (I) 4.80 24,609 (D) 1.76 Apr. 26,747 (I) 6.96 25,222 (I) .69 May 26,745 0 25,568 (I) 2.07 June 25,597 (D) 4.29 25,574 (I) 2.09 Ju ly 26,771 (I) 4.59 25,770 (I) 2.87 Aug. 26,556 (D) .80 25,875 (I) 3.30 Sept. 27,440 (I) 3.33 26,047 (I) 3.98 (I) = (D) = Increase Decrease Because market pr ices of property f luctuated during th is period the assess-ment/market value ra t io would vary according to the sample of propert ies taken from any par t i cu la r month. It should be stressed again at th is point that because these pr ice increases and decreases are averages, changing the s e l l i n g pr ices by the average w i l l not necessar i ly resu l t in more accurate s t a t i s t i c a l tabulat ions. The pr ice per property i s the average of a l l the propert ies in a l l the d i f fe rent land uses, therefore, there may be no re la t ionsh ip between the pr ice change of a par t i cu la r property in a land use category to the average change of a l l the propert ies in a l l the land use categor ies. 14 D. PROCEDURE IN DEVELOPEMENT OF THESIS Chapter II discusses the data co l l ec t i on procedure and the assessors method of determining market va lue, assessed value, taxable assessed value, and gross taxes. Chapter III invest igates the rat ional for property exemptions as well as ident i fy ing the magnitude of i t s r e l i e f . Also presented in th is chapter i s an explanation and examples of the consequence of the Prov inc ia l Governments' imposed f i v e , and ten per:centum rules as stated in the g Assessment Equal izat ion Act . Chapter IV compares the assessment equal i ty between municipal-i t i e s , land use categories and pr ice categories of res ident ia l property. The measures employed in the ascerta in ing of the degree of assessment equal i ty are the mean and median. Chapter V determines the degree of assessment uniformity wi thin munic ipa l i t ies and land uses. The primary measures employed for th is determination are ; coe f f i c ien t of d ispers ion , coe f f i c ien t of var-i a t i o n , regression analysis and the proportion of propert ies wi th in a + percentage from the median assessment-sales r a t i os . Chapter VI describes the burden of taxation upon property owners and discusses the equal i ty between Mun i c i pa l i t i e s , land uses and pr ice categor ies. The measures employed are the mean and median. 9 Assessment Equal izat ion Act . Revised Statutes of B. C. ( V i c t o r i a : Queens P r i n t e r , 1960) (5% rule was introduced in 1953 and the 10% rule in 1971) 15 Chapter VII summarizes the f indings and presents hypotheses descr ibing why the conclusions were as found. CHAPTER II METHODOLOGY AND THE METHOD OF DETERMINING TAXES A. METHODOLOGY The basic premise employed in the sampling procedure was to obtain propert ies which had sold during the per iod, January 1st - September 31st , 1971, in 8 munic ipa l i t ies located in the greater Vancouver region. The munic ipa l i t ies were as fo l lows: North Vancouver D i s t r i c t , Vancouver, Burnaby, Coquitlam, Richmond, De l ta , West Vancouver and Surrey. The sampling was i n i t i a t e d by obtaining the sales of res iden t ia l property which had sold through the Vancouver Mul t ip le L is t ings Serv ice. Only transfers:; involv ing downpayments of 25% or greater were considered and the s e l l i n g pr ice was deemed to be the cash value price. ' ' ' This procedure was followed for the fol lowing reason: In theory, the s e l l i n g pr ice of a property w i l l be greater than the cash value pr ice whenever the purchaser assumes or obtains a mortgage which contains a lower than market value in terest ra te . The d ivar ica t ion between the two values can be i l l u s t r a t e d with the fo l lowing examples: Case I Amount Mo. Pymt. Equity 5,000 1st mortgage (vendor) 15,000 105.0624 25 years @ 7% Se l l i ng Pr ice 20,000 Current Interest rate for an equivalent mortgage = 9h%. 1 It i s rea l i zed that th is would produce a biased sample but i t was regarded as being more representat ive of the population then had I a r b i t r a r i l y assigned in terest rates to obtain a cash va lue. 17 I f the holder of the agreement for sale wished to s e l l his paper he would receive only $12,201.92 (present value of 105.0624 per month for 25 years discounted at 9 1/2%). Therefore, the cash value of the sale i s construed to be: Amount Mo. Pymt. Equity 5000.00 Present value of agreement for sale 12201.92 105.06241 Cash Value of Sale 17201.92 Case II Equity Standard 1st Mortgage ( Ins t i tu t iona l Lender) 25 years @ 9 1/2% 2nd mortgage (vendor) 15 years @ 9 1/2% Se l l i ng Pr ice Amount 1000.00 15000.00 4000.00 20000.00 Mo. Pymt. 129.15 If the second mortgage was sold to an i ns t i t u t i ona l lender, the vendor would receive $2,883.37 (present value of $41.33 per month for 15 years discounted at 16%). The cash value of the transact ions becomes $1000 + $15000 + $2,883.37 = $18,883.37. There may be a mortgage against the property which the purchase must assume. This mortgage could have an in teres t rate which i s e i ther advantages or disadvantages to the purchaser. Let us f i r s t look at a s i tu ta t ion which would be advantageous to the purchaser. 18 Case III Amount Mo. Pymt. Equity 6,000 Assumed Standard 1st mortgage 14,000 114.30 23 y r s . remaining @ 8 1/2% outstanding balance Purchased Pr ice 20,000 If the purchaser could not obtain a loan with an in terest rate under 9 1/2% he i s saving 8.98 per month. 14,000 in 23 years @ 9 1/2% = 123.28/mo. 14,000 in 23 years @ 8 1/2% = 114.30/mo. saving 8.98/mo. The cash value of the transact ion becomes: 6,000 + 12,979.85 (present value of 114.30) month for 23 years @ 9 1/2% = 18,979.85 2  Case IV Purchaser assumes unfavourable f inancing Amount Mo. Pymt. Equity 6,000 Assumed 1st mortgage 14,000 127.86 23 y r s . remaining @ 10% Purchased Pr ice 20,000 2 The cash value w i l l be larger i f there i s a 5 y r . c a l l clause in the mortgage as the purchaser benefi ts for the lower in terest rate for only 3 yrs. . . Present value of 114.30/mo. at 9 1/2% for 3 y r s . equals 3,577.73. Outstanding balance at the end of the 3 y r s . equals 13,440. Present value of 13,440 discounted at 9 1/2% is 10,173.61. The present worth of the mortgage i s 10,173.61 + 3,577.73 = 13,751.34 and the cash value becomes 6,000 + 13,751.34 = 19,751.34 19 The 14,000 mortgage i f bonused at 9 1/2% has a present value of $14,519.73. The cash value of the transact ion becomes 6,000 + 14,519.73 = 20,519.73. 3 The f igure required in th is thesis to evaluate assessment uniformity and equal i ty i s the market value which i s defined as the pr ice paid by a w i l l i n g buyer to a w i l l i n g s e l l e r at arms length transact ion with neither party being under any duress and the t ransfer being financed under normal market condi t ions. In actual p rac t i ce , when the downpayment of the t ransfer i s less than 25% the purchaser w i l l pay more for the property i f he has received benef ic ia l f inancing thereby equating cash value and market value and when the downpayment i s greater than 25% the purchaser w i l l not usual ly pay the higher pr ice thereby equating s e l l i n g pr ice and market value. If t ransfers with downpayments of less than 25% were considered, then the cash value pr ice would have to be determined by the ascer tat ion of a su i tab le in terest rate which should be charged for the mortgage. Ascertain ing the correct in terest rate becomes too laborious as i t i s a funct ion of not only the loan-to-value r a t i o , but other factors such as the age of the improvements, the gross and net income generating a b i l i t y of improvements, the type of improvements, the locat ion of the property, the c red i t ra t ing and income of the borrower and the amortization per iod. Without phys ica l l y examining every property and knowing the circumstance of every borrowing transact ion the assignment of a market in terest rate to 3 This f igure would be lower i f there i s a f i ve year c a l l clause in the mortgage.. 20 each transact ion becomes a highly subject ive matter. The Ju ly issue of the appraisal b r ie fs s ta tes : "obtaining a cash value accurately in every instance i s near impossible be-cause so many of these transactions involve income tax considerat ions, trades and i n t r i ca te negotiations only known to the p r i n c i p l e s " . 4 Once having obtained the s e l l i n g pr ice or market value of a par t i cu la r property, the congruent assessments and taxes were obtained from the appropriate munic ipa l i ty . Vacant land sales were co l lec ted from the munic ipa l i t ies of 5 Surrey and Del ta. These sales were obtained from A.C. 3 forms and t ransfers which involved downpayments of less than 25% were el iminated as well as those noted in the footnote. 4 Appraisal b r i e f s , Weekly Newsletter of the Society of Real  Estate Appraisers. (Chicago: Ju ly 5, 1972) P. 1. 5 A .C. 3 forms are prepared by the Prov inc ia l Assessment Commissions-and contain the fol lowing information: legal descr ip t ion of property, land use, date of s a l e , and s e l l i n g p r i ce . The o f f i ce of the Assessment Commissioner edi ts out the fo l lowing types of t rans fe rs , those "a) agreed upon some time pr io r to the year in which they were re-corded; b) involv ing unusal f i nanc ia l p rov is ions ; c) of p a r t i a l l y f in ished improvements; d) those including personal property, the value of which can-not be separated from the tota l considerat ion; e) involv ing t rades; f ) be-tween re la t i ves or associated corporat ions; g) under f i nanc ia l duress; h) to any church, lodge, school or cha r i t ab le , benevolent, f ra ternal or gov-ernment organ izat ion ; i ) on which the value stated i s an opinion rather than an actual exchange p r i c e ; j ) the circumstances of which are unusual and as a resu l t render the transact ion useless for sales ana l ys i s . " Appraisal Manual. Province of B.C. ( V i c t o r i a : Queens P r i n t e r , 1953) pp. A-4 and A-7. 21 The congruent assessments and taxes were then obtained for the vacant land proper t ies. The I ndus t r i a l , Commercial and Income property sales were obtained from an unpublished essay wr i t ten at U.B.C.^ The sales pr ices g for I .C. I , were abstracted from Teela at what was deemed to be a 50% sample of the I .C. I , property which had sold between Janauary 1 to September 31, 1970. Only sales in Vancouver were recorded as a to ta l of other mun ic ipa l i t ies would not have generated a s i g n i f i c a n t l y large enough sample. Once reg is ter ing the sales prices i t was necessary to determine, by physical examination, the land use c l a s s i f i c a t i o n a t t r i -butable to each property. 6 Herein referred to as I .C. I . 7 Tyke Babalos, Greg Carros, Daniel Doran, David Greenwood, David Lack, Wayne Tomko. "Empiracel Study of Mortgage Financing in the Ci ty of Vancouver." (U.B.C. Faculty of Commerce and Business Administrat ion Apr i l 1972) 8 Teela i s a publ icat ion prepared by Teela Market Surveys l i s t i n g a l l the rea l ty sales transact ions in a l o c a l i t y . The information provided i s as fo l lows : date of s a l e ; addresses and names of purchaser and vender; s e l l i n g p r i c e ; legal and c i v i c address of the sold property; mortgage amount, terms, in terest r a te , date, and monthly payment; and mortgagee and mortgagor. The land use c l a s s i f i c a t i o n s of I .C. I , property were as fo l lows: 9 conversions; apartment; r e t a i l ; o f f i ce and i ndua t r i a l . Due to the l imi ted number of I .C. I , sales t ransact ions, t ransfers involv ing down-payments of 25% or less were not el iminated from the sample. The f inancing of the transfers was obtained from the land reg is t ry o f f i ce and any f inancing arrangements which deviated from the normal method was invest igated and transformed to a cash value deemed to be 10 appropriate from the ava i lab le information. 9 The de f in i t i ons of land uses as employed herein are as fo l lows : " r e s i d e n t i a l " - to include those uses of improvements which house one or two family un i t s ; "vacant land" - to include land which i s void of improvements; "apartment" - to include improvements housing mul t ip le family uni ts (greater than 10 u n i t s ) ; "conversions" - im-provements which have been converted from a s ingle family dwell ing uni t to a mul t ip le- fami ly dwell ing uni t (containing between 6 - 1 5 f a m i l i e s ) ; " r e t a i l " - to include improvements used for the provis ion of consumer goods such as baker ies, department s to res , grocery s to res , m i l l i n e r s , and the l i k e together with service uses not included in the de f i n i t i on of o f f i ces such as dry c leaners, ha i rdressers , and service s ta t ions ; " o f f i ce " - to include improvements used for c l e r i c a l , p ro fess iona l , consu l ta t i ve , data processing, f inanc ia l and s imi la r a c t i v i t i e s not included in r e t i a l ; " i n d u s t r i a l " - to include improvements used for a manufacturing, warehousing, repa i r i ng , e tc . nature. Where mul t ip le uses were prevalent the property was c l a s s i f i e d under the category which was i t s primary use. 10 From the 338 samples obtained of I .C. I , property, 220 were not invest igated because of the 25% ru le . Of the remaining 118, 47 were a l l o t t ed a cash value which was.>a more appropriate value f igure than the s e l l i n g p r i ce . 23 Once having determined the market values of the propert ies the i r respect ive assessments and taxes were recorded from the Vancouver Ci ty H a l l s ' records. A l i s t of the sample s ize obtained is out l ined in Table I I . TABLE II SAMPLE SIZE BY-MUNICIPALITY, BY LAND USE, BY PRICE CATEGORY MUNICIPALITY LAND USE PRICE CATEGORY * Number LOW Price Below which 1/3 of sample f e l l MEDIUM Number HIGH Number Pr ice Above which 1/3 of sample f e l l TOTAI Numbi Burnaby res ident ia l 41 ($23,400) 42 42 ($28,900) 125 Coquitlam res ident ia l 40 ($25,500) 48 45 ($31,500) 133 Delta res ident ia l vacant land 32 ($22,900) 35 33 ($27,933) 100 107 Surrey res ident ia l vacant land 42 ($16,900) 44 46 ($20,500) 132 123 Vancouver res ident ia l o f f i ce apartment indust r ia l r e t a i l conversions 65 ($19,067) 65 65 ($23,767) 195 32 93 49 142 22 Richmond res ident ia l 21 ($21,900) 19 25 ($26,000) 65 West Vancouver res ident ia l 51 ($35,500) 52 54 ($45,000) 157 North Vane. res ident ia l 49 ($30,767) 49 49 ($35,467) 147 * The sample of res ident ia l property was divided into 1/3 1 s by pr ice for each munic ipa l i ty . The pr ice in the low column is the f igure below which 1/3 of the properties were pr iced. The pr ice in the high column i s the f igure above which 1/3 of the properties were pr iced. The remaining 1/3 were priced e i ther a t , or between those values. 25 Tabulations were a lso performed for the res ident ia l property uses of a l l the mun ic ipa l i t i es . The sample s izes of a l l the res iden t ia l property of a l l the munic ipa l i t ies by pr ice range, is i l l u s t r a t e d in Table III TABLE III SAMPLE OF ALL RESIDENTIAL PROPERTY BY PRICE CATEGORY 20,000 25,000 30,000 greater than Pr ice Category - 0-19,999 24,999, 29,999, 34,999, 34,999, Total Sample Number 226 241 205 159 223 1054 When co l l ec t i ng the tax information, i t was necessary to make a d i s t i nc t i on between gross and net taxes. Gross taxes included charges for general municipal purposes, school and hospital purposes, pavement, water se rv i ce , municipal finance author i ty levy , s t reet l i gh t i n s t a l l a t i o n and community bu i ld ing . Net taxes were determined by the taxes ac tua l l y pay-able by the owner. Where the owner i s also the resident of the property 11 a $170 maximum grant i s given to the owner by the prov inc ia l government which is; deducted from the Gross Taxes payable. Since the purpose of the purchase of a res iden t ia l home could not be determined (eg. whether i t was for owner-occupancy or rental ) the $170 grant was deducted from a l l r e s i -dent ia l land-uses. 11 In ear ly 1972 th is grant was increased from $170 to $185 and where the owner-occupier i s over the age of 65 another $50 grant i s given. 26 If the land use was other than res ident ia l and the previous owner received the $170 homeowners grant, because he was l i v i n g on the premises, i t was deemed that the new owner would also l i v e on the pre-mises and therefore receive the grant. I f the land use was such that no homeowners grant was appl icable the net and gross taxes were equivalent. B. BRITISH COLUMBIAS' REAL PROPERTY TAX SYSTEM Relevant features of B r i t i s h Columbias1 present real property tax system are: the determination of market value or equivalent actual va lue, assessed value, taxable assessed value, exemptions and taxes. 1. Market Value or Actual Value The Assessment Equal izat ion Ac t , Municipal Ac t , Publ ic Schools Act , and Taxation Act prescribe the assessor to determine the actual value of land and improvements. "In determining the actual va lue, the Assessor may give considerat ion to present use, l oca t i on , o r ig ina l cos t , cost of replacement, revenue or rental value, and the pr ice that such land and improvements might reasonably be expected to bring i f offered for sale in the open market by a solvent owner and any other circumstances a f fec t ing the value. Municipal assessors are provided with an assessment manual which they may use when determining the value of improvements. If the assessment manual i s used in determining the market value of an improve-ment the fo l lowing procedure is fo l lowed: a) The assessor refers to the spec i f i c land use category of the improvements. 12 Assessment Equal izat ion Ac t , Province of B r i t i s h Columbia ( V i c t o r i a : Queens P r i n t e r , 1953), Chapter 18, Part IX, Section 37, Subsection 1. b) Within the land use category the improvement': i s then c l a s s i f i e d into i t s arch i tectura l group. c) The improvement is then further c l a s s i f i e d into the number of s t o r i e s . d) The f i na l c l a s s i f i c a t i o n of the improvement i s into a pa r t i cu la r c l a s s . Once the assessor narrows the c l a s s i f i c a t i o n of his subject 13 improvement to a spec i f i c c l a s s , a base value i s assigned to i t . Addit ions t o , or subtractions from, th is base value may ar ise due to such contigencies as the type of masonary, the e l e c t r i c a l w i r i ng , the insu la t ion used; the amount of physical and funct ional deprec ia t ion; 14 and the s ize and qua l i ty of the basement rooms. The assessor usual ly determines the value of the land by the market approach. A l im i t i ng factor in the set t ing of these values how-ever, are the f i ve and ten per centum rules which are defined and ex-plained in Chapter I I I . 2. Assessed Value From the determined market value of land and improvements the assessor assigns an assessed value f igure . The assessed value for school 15 and hospital purposes must be 50% of the calculated market value. 13 A per square foot value i s predetermined every year which is a function of the cost of labor and mater ia l . Since th is i s a prov-c i a l average, local assessors may adjust these costs to correspond with the i r own l o c a l i t y . 14 Examples of c lasses in land use categories are provided in Appendix A. 15 Assessment Equal izat ion Act. op. c i t . Chap. 18 Part IX, Sec. 37, Subsec. 3 states "the assessed value of land & improvements for the purpose of real-property taxation under the Publ ic Schools Act sha l l be 50 per centum of the value of land and 50 per centum of the value of improvements." 28 The assessed value for municipal purposes may be e i ther 50% or 100% of 16 the calculated market value. Mun ic ipa l i t i es adopting the assessed value for school purposes as the assessed value for municipal purposes are said to operate on a s ingle r o l l bas i s , while munic ipa l i t ies having d i f fe rent assessed values for the two purposes operate on a duel r o l l bas is . 3. Taxable Assessed Value The f i na l step of the assessor i s the ca lcu la t ion of the taxable assessed value for both land and improvements. Forschool purposes taxable assessed value is 100% of the assessed value of land and 75% of the assessed value of improvements.^ 16 Municipal ac t . Province of B r i t i s h Columbia; (V i c t o r i a : Queens P r i n t e r , consolidated 1971), Chap. 255, Part IX, Div. 1, Section 330, Subsection 1. "Land and improvements sha l l be assessed at the i r actual value" and Chap. 255, Part IX, Div. 1, Sec. 332, subsection 2. "P r i o r to the th i r teenth day of Nov. in any year , the counci l may by by-law provide that for the purposes of th is act the assessed values of land and improvements sha l l be determined pursuant to the Assessment Equal izat ion Ac t , 1953." 17 Publ ic Schools Ac t , Province of B r i t i s h Columbia, ( V i c t o r i a : Queens P r i n t e r , consolidated 1971), Chap. 319, Part 1, Div. 3 , Sec. 198, Subsec. 2 , " . .and every.person shal l be taxed on the assessed value of his taxable land and 75 per centum of the assessed value of his taxable improvements. 29 For general purposes taxable assessed value of land is also 100% of i t s assessed value, but in the case of improvements i t may be up to a maximum 18 75% of the assessed value. A summary of the above rules are elucidated below. a. Dual Rol l - Burnaby, Vancouver and West Vancouver Assessed Value (A.V.) Taxable Assessed Value General Purposes land 100% of market value (M.V.) 100% of A.V. & M.V. improvements 100% of M.V. max. 75% of A.V. & M.V. School and Hospital  Purposes land 50% of M.V. 100% of A.V. = 50% of M.V. improvements 50% of M.V. 75% of A.V. = 37^% of M.V. b. Single Rol l - Richmond, De l ta , Surrey, Coquitlam.and North Vancouver 19 D i s t r i c t . 18 Municipal Act . Op. c i t , Chapter 255, Part IX, Section 206, Subsection 3 paragraph (a) "The rates authorized by th is s e c t i o n . . . s h a l l be lev ied upon the f u l l assessed value of land and not more than seventy-f ive per centum of the assessed value of improvements. 19 North Vancouver D i s t r i c t converted to a dual r o l l system for the 1972 assessment year. 30 Assessed Value (A.V.) Taxable Assessed Value General, School & Hospital  Purposes land 50% of M.V. 100% of A.V. = 50% of M.V. improvements 50% of M.V. 100% of A.V. = 50% of M.V. 4. Taxes Once having determined the taxable assessed values the munici-p a l i t i e s then apply m i l l rates to these to determine a substant ial port ion 20 of the Gross taxes. The m i l l rates are ascertained in the fo l lowing fash ion : 1. General Purposes: the munic ipal i ty forecasts i t s revenue require-ments for the oncoming year and sets i t s m i l l rate at a f igure which when mul t ip l ied by the to ta l taxable assessed value of non-ex;empt property w i l l generate enough income to equal ize th is revenue requirement. The munici-p a l i t i e s being studied are , however, res t r i c ted to a m i l l rate which does not 21 exceed f i f ty . . 20 Usual ly accounts for between 85 - 95% of the Gross taxes. 21 Municipal Ac t , op. c i t . , Chap. 255, Part IV, Sec. 206, Subsection 2. "Except with the approval of the Lieutenant-Governor in Council in respect of a munic ipal i ty no rate in excess of the l i m i t prescribed herein for each of the classes of munic ipa l i t ies spec i f ied sha l l be lev ied (a) in a c i t y or d i s t r i c t , not exceeding f i f t y m i l l s (b) in a town, not exceeding for ty m i l l s (c) in a v i l l age not exceeding t h i r t y m i l l s . " A l l the municip-a l i t i e s being studied f a l l under paragraph (a) c l a s s i f i c a t i o n . 31 2. School and Hospital Purposes: The prov inc ia l government imposes . a levy each year ( in 1971 i t was 24.1 m i l l s ) on the taxable assessed value for School Purposes, which i t red is t r ibu tes to the school d i s t r i c t s . The munic ipa l i t ies are able to add a l imi ted levy onto th is m i l l rate to aid in the amortization of i t s borrowing debts. CHAPTER III FACETS OF BRITISH COLUMBIAS' REAL PROPERTY TAX SYSTEM This chapter purports to analyze some of the factors which inf luence the determination of the tax burden upon property owners as well as set forth the need for both assessment uniformity wi thin a munic ipal i ty and assessment equal i ty between mun ic ipa l i t i es . The concepts to be discussed which af fect the d i s t r i bu t ion of the tax burden are exemptions and r e l i e f s and the leg is la ted f i ve and ten per centum ru les . A. EXEMPTIONS AND RELIEFS It i s necessary to include a sect ion on exemptions and r e l i e f s as they grossly a l t e r the d i s t r i bu t i on of the tax burden. Rel ie fs are the reduction of taxes payable to an amount greater than zero , whereas exemptions are the reduction of taxes payable to zero.?" Exemptions or r e l i e f s from taxes are granted to land owners for the fol lowing reasons: administrat ive convenience; char i tab le considerat ions; equity po l i c y ; or to inf luence a par t i cu la r land use. In B r i t i s h Columbia, exemptions or r e l i e f s are e i ther mandatory or at the d isc re t ion of the munic ipa l i ty . The p r inc ip le exemptions or r e l i e f s have been adequately summarized in a Research Report published by the B.C. School Trustees Associat ion from which the fo l lowing excerpt has been extracted: 1 Stanley W. Hamilton and P h i l i p H. White, "The Real Property Tax in B.C. - An A n a l y s i s " , Research Report, (Vancouver: B.C. School Trustees Assoc ia t ion , 1972), Page 21. 33 "Mandatory Exemptions and Re l ie fs Char i tab le : Exemption of land and improvements of : publ ic l i b r a r i e s ; places of re l ig ious worship; publ ic hosp i ta l s ; cer ta in pr ivate schools of "incorporated i ns t i t u t i ons of l ea rn ing" ; e lder ly c i t i zens homes belonging to non-prof i t making corporat ions; publ ic cemeteries and, in Vancouver, char i tab le i n s t i t u t i o n s . Admin is t ra t ive: Exemption of land and improvements of : school boards; the taxing mun ic ipa l i t y ' s own property; the Crown (both federal and p rov inc ia l ) . Equity & Po l i c y : Exempitons of : farm f i x tu res and machinery; f r u i t - t r e e s ; except in Vancouver. R e l i e f s : f i r s t $1,500 of assessed value ofotrade f i x tu res of commercial or indus t r ia l undertaking for school purposes; the f i r s t $1,000 of assessed value of farm land for school purposes; f i r s t $5,000 of assessed value of farm improve-ments (other than dwell ing and trade f i x tu res) except in Vancouver; farm land, tree-farm land and res ident ia l land as noted prev ious ly ; not less than 25% of assessed value of a l l improvements; the homeowners grant (of $170 in 1971) Permissive Exemptions & Re l ie fs (Except Vancouver which has i t s own charter) Char i tab le : Exemptions of land and improvements o f : cer ta in char i tab le organizat ions used for the r e l i e f of the poor, the aged, the i n f i rm , the d isab led , or as a ch i l d ren 's home and a th l e t i c c lubs. Admin is t ra t ive: Exemption of land and improvements o f : the park or recreat ion ground o f another mun ic ipa l i t y ; another mun ic ipa l i t y ' s a i rpor t or property used for water purposes. Equity & P o l i c y : Exemption of land and improvements of h i s t o r i ca l bu i ld ings. R e l i e f s : reduction of the assessed value of the land of gold courses and cer ta in cemeteries (general rate on ly ) . N.B. Permissive exemptions and r e l i e f s are at the d isc re -t ion of the munic ipa l i ty . They may grant complete exemption or r e l i e f of some part of the taxable assessed value."2 2 i b i d . , pp 19 - 20 34 1. Rationale for Exemption Taxpayers who are subsid iz ing others have a r ight to know the extent of the i r subsidy. The amount of the subsidy should be made publ ic in order that the taxpayer has an opportunity to guage the cost against the benef i ts . J u s t i f i c a t i o n for exemption for char i tab le consideration rests on the foundation that these ins t i t u t i ons provide services which merit publ ic support and as such i f not provided by pr ivate i ns t i t u t i ons wouldbe 3 provided and paid for by the governing body. It has been argued, and the author agrees, that d i rec t grant assistance i s more log ica l then assessment exemptions because the cost of the service can be more read i l y ascertained. In Canada, the r igh t of exemption of a l l Federal and Prov inc ia l land i s guaranteed in the B.N.A. ac t . There i s no log ica l reason for exempting Crown owned land, however, because the ownership of property by the Crown i s not d is t r ibu ted evenly between taxing j u r i s d i c t i o n s . For th is reason residents in one taxing j u r i s d i c t i o n are required to pay for the services of Crown property which i s being used in the in terests of the national or prov inc ia l populat ion. This unjust consequence has been somewhat remedied in recent years , when the Municipal Grants Act was establ ished in 1951, author iz ing the Federal Government to issue grants in l i eu of property taxes on some types of propert ies. This requirement 3 Ontario Committee On Taxation, op. c i t . , Page 125. 35 does not apply to Crown Corporations. The Municipal Grants Act also establ ished the-requirementof the Prov inc ia l Government to pay a "grant in lieuLof the real property tax equal to the product of a rate of 15 4 mi l l s on the estimated taxable assessed value of the property." There seems to be no j u s t i f i c a t i o n in exempting Crown corporations as they are operating in the publ ic in terest of the country or province as a whole. A l s o , i t becomes an advantage to crown corporations in i t s competition with pr ivate enterpr ise. The panel of the Ontario committee on Taxation states that : "Prov inc ia l and Federal Governments should pay grants in l i e u . o f taxes both because they de-r i ve benefi ts from the local j u r i s d i c t i o n in which they are si tuated and because they are engaged in business t ransact ions '^ On the sur face, the process of a Munic ipa l i ty taxing i t s own property seems to engender added paper work for no rat ional ob ject ive. I f , however, the taxing department taxed a l l munic ipal i ty departments, each separate department would then have to consider property taxes as another cost in i t s locat ion a n l y s i s , rather than completely ignoring i t as they presently do. The exemption of municipal property leads to a misuse of land in some areas as the departments make the i r locat ion judgement i r respect ive of taxes. A l s o , since the School Board i s a separate taxing ent i ty from the munic ipal i ty and they provide d i f fe rent 4 Hamilton and White, op. c i t . , page 24. 5 Ontario Committee on Taxat ion, op. c i t . , page 53. 36 services the munic ipal i ty should be required to pay school property taxes and the School Board Municipal taxes. Because any tax system bears i n j us t l y upon some f rac t ion of the populat ion, adjustments are made to compensate for these i n j us t i ces . In some instances these compensatory adjustments seem to be determined on capr ic ious grounds. L i t t l e i s known about the incidence of the tax burden or exemption, in some cases, making them completely erroneous. If an ad-justment in taxes i s deemed necessary, grants should be given to the owners in an e f fo r t to equal ize the burden as the incidence of grants can be more read i l y ascertained than the incidence of exemptions. The exemption on improvements discussed e a r l i e r stems from the Henry George philosophy of a s ingle tax , whereby, land only i s the tax base. The s i t e value tax rests on the proposit ions that ; 1) land value increases are an unearned increment brought into existance not by anything done by the owner, but by the community at l a rge , and a tax on land does not d i s to r t the free market as only the economic rent i s being taxed. Taxing improvements resu l ts in a d is incent ive to develope or maintain property. I t i s said to benef i t slums and bl ighted areas, antiquated bui ldings on valuable land, and vacant land held i d le although there i s a demand. I do not propose to discuss the advantages and disadvantages of the s i t e value tax as there are many books and a r t i c l e s descr ibing 6 Henry George, The Land Question, (New York: Doubleday, Page and Company, 1891). 37 these facets as well as examples of i t s use. ' ' For my purposes i t i s su f f i c i en t to mention that exempting improvements requires assessors to d iv ide the value of the property into two categor ies; an assessed value for land and an assessed value for improvements. This becomes a highly subject problem, and many appraisers acknowledge that the value of a pro-perty cannot be divided between land and improvements. There are many instances when the value of the property i s greater or less than the to ta l of the value of the land and the value of the improvements on i t . The Ontario Committee on Taxation summarized i t s d iscussion on exemptions with the fo l lowing po in ts : " 1 . Exemptionsnarrow the tax base,-thereby i n -creasing the tax load on owners of taxable property. 2. A tax exemption i s an ind i rec t subsidy, the cost of which i s not general ly apparent, and i s subject to less control than a grant, which o rd ina r i l y i s renewable annual ly. * 3. Tax exemption may not d is t r ibu te a government subsidy in the most equitable or desirable manner. 4. The proportion of a l l propert ies in the com-munity that are exempt varies from one mun-i c i p a l i t y to another, thereby creat ing d i s -proportionate burdens among local communities. 5. Exemptions are , for the most par t , l eg is la ted by the Province, but the i r burden f a l l s on mun ic ipa l i t ies or local school boards. 7 For fur ther information regarding s i te -va lue tax re fer to : (A) "The Rating of S i te Values." Report of the Committee of Enquiry, (London:: Her Majesties Stat ionary O f f i ce , 1952). (B) B.H. Cowen, International  Research Committee on Real Estate Taxat ion, "Municipal Improvements & Finance as Affected by the Untaxing of Improvements & the Taxation of Urban Land." Help & Brothers, New York, 1958. (C) Dick Netzer, Economics of the Property  Tax, (Washington: Brookings I ns t i t u t i on , 1966) 6. Exemptions, once es tab l ished, are not read i ly te r -minated, thus they tend to perpetuate community wishes of an e a r l i e r day. In add i t ion , the range and extent of exemptions can grow, well beyond j u s t i f i a b l e l imi ts ' . ' 8 Grants have the fo l lowing advantages: " 1 . Each request for f i nanc ia l assistance c lea r l y establ ishes i t s cost to the community. 2. The assistance made ava i lab le i s f l e x i b l e in amount. 3. The extent of the subsidy i s determined afresh each year by the local counc i l . 4. Municipal aid through grants i s exposed to publ ic view, item by item and in t o t a l . 5. Grant assistance can be adjusted to each changing cond i t ion , including reversals of publ ic a t t i tudes . "9 2. Methods of Granting Exemptions and R e l i e f s . Re l ie f or exemptions may be i n i t i a t e d at any three instances: (1) when determining the taxable assessed values; (2) when applying the m i l l rate or (3) when determining the taxes payable. If r e l i e f is granted at the f i r s t stage, i e . when determining taxable assessed value, there are three ways in which th is can be done: (1) the taxable assessed value can be set at a par t i cu la r amount, (2) taxable assessed value can represent a percentage of the assessed value, 8 Ontario Committee on Taxat ion, op. c i t . , Vo l . II P. 126. 9 i b i d . , Page 163. 39 or (3) a cer ta in do l la r f igure can be subtracted in each case. B r i t i s h Columbia employs a l l three methods in granting r e l i e f s . The second instance which allows the ins t iga t ion of r e l i e f s i s at the time of the appl icat ion of the m i l l ra te . The r e l i e f may take e i ther of two forms: 1) the m i l l rate may be set a some f ixed amount below the rate applied to the non-exempt propert ies or 2) the mi l l rate to be applied to the exempt propert ies may be a f rac t ion of the m i l l rate appl icable to the non-exempt propert ies. When granting r e l i e f at th is stage of the procedure, munic ipa l i t ies in B r i t i s h Columbia general ly resort to the f i r s t method mentioned. The f i na l phase of the assessment-taxing procedure sui tab le for the granting of r e l i e f i s during the determination of taxes ac tua l ly payable by a propertyoowner. Re l ie f appl ied at th is stage may be; 1) a f ixed amount which i s to be subtracted from the gross taxes; 2) a per-centage of the gross taxes or 3) a maximum tax above which taxes payable cannot progress beyond. In B r i t i s h Columbia the primary method of grant-ing r e l i e f at th is stage is v ia the f i r s t one mentioned. 3. Magnitude of Exemptions Table IV presents an estimate of the exemptions as a percent of tota l assessed v a l u e ^ for munic ipa l , school and hospital purposes, by mun ic ipa l i t y , property c lass and assessment c l a s s , for the years 1962, 1966 and 1970. 10 The assessed value of exempt property was included in the to ta l assessed value f igu re . TABLE IV Exemption as a Percent of Total Assessed Value, General , School Burnaby Coquitlam Delta North Van. 1962 1966 1970 62 66 70 62 66 70 62 66 70 Exemption Property Fed. Munic ipa l - .6 .6 .5 .1 3. .0 2. 6 1.5 2 .8 2. 5 3. 5 School .6 . 5 : .4 .1 3. .2 2. 3 1.4 2 .6 2. 4 3. 3 Prov inc ia l M 3 .0 8 .0 6 .3 42. ,3 17 .5 13 .5 6, .7 6. 7 9.0 4 .9 3. 5 4. 7 S 2 .1 3 .1 4 .0 39, .5 14 .4 10 .8 .9 8 1.7 1 .5 1. 3 1. 4 Municipal M 6 .8 7 .0 7 .4 2, .7 7 .0 8 .8 2. .7 3. 4 4.2 7 .5 7. 2 10. 7 S 6 .8 6 .5 6 .7 2, .7 7 .0 8 .7 2. .9 3. 1 3.9 7 .1 6. 8 10. 3 Sub Total M 10 .4 15 .5 14 .2 45. .1 24 .4 22 .3 . 12, .4 12. 8 14.7 15 .2 13. 1 18. 9 S 9 .4 10 .1 11 .2 42. ,3 21 .3 19 .5 6. ,9 6. 1 7.0: 11 .2 10. 6 15. 1 Non-governmnet M 1 .5 3 .9 5 .1 .6 .9 1 .3 1. .6 2. 3 1.3 •;4 ,9 4. 6 6 S 1 .5 3 .9 4 .9 .7 1 .1 1 .3 2. .3 2. 3 1.5 5 .1 4. 6 8 Total M 11 .9 19 .4 20 .3 45! .7 25 .4 23 .5 14. .0 15. 0 15.9 20 .1 17. 7 19. 5 S 11 .0 14 .0 16 .0 43. .0 22 .4 20 .8 9. ,2 8. 7 8.5 16 .3 15. 2 15. 9 Others M 18 .5 13 .6 12 .8 10. .7 15 .2 14 .2 10. .5 14. 6 14.2 33 .9 35. 4 12. 8 S 15 .0 14 .6 13 .8 10. .4 14 .8 14 .3 15. .0 16. 2 15.8 15 .2 15. 5 13. 5 Grand Total M 30 .4 33 .0 32 .1 57, .3 40 .6 37 .7 24. .5 29. 6 30.1 54 .0: .53. 1 32. 2 S 26 .0 28 .6 29 .8 53. .3 37 .2 35 .1 24. .3 24. 9 24.3 31 .5 30. 7 29. 3 Assessment Class Wholly exempt Land M 6 .3 6 .7 7 .9 1. .9 3 .0 4 .1 2. ,0 2. 2 3.6 7 .4 7. 0 10. 3 S 5. .7 5 .7 6 .7 1. .8 2 .9 4 .0 2. ,3 2. 1 3.2 6 .9 6. 5 9. 5 Improvements M 5 .5 12 .6 11 .5 43. .8 22 .4 19 .4 12, .0 12. 8 12.4 12 .7 10. 8 9. 3 S 5 .3 8 .3 9 .4 41. .2 19 .5 16 .9 6. .9 6. 6 5.3 9 .4 8. 7 6. 3 Other Exemptions Improvements M 18 .5 13 .6 12 .8 10. .7 15 .2 14 .2 10. .5 14. 6 14.2 33 .9 35. 4 12. 8 S 15 .0 14 .6 13 .8 10. .4 14 .8 14 .3 15. .1 16. 2 15.8 15 .2 15. 5 13. 5 Total M 30 .4 33 .0 32 .1 57, .3 40 .6 37 .7 24, .5 29. 6 30.1 54 .0 53. 1 32. 3 S 26 .0 28 .6 29 .8 53, .3 37 .2 35 .1 24, .3 24. 9 24.4 31 .5 30. 7 29. 3 Municipal S t a t i s t i c s . Province of B r i t i s h Columbia, Queens P r in te r . and Hospital Purposes, by Mun ic ipa l i t y , Property Class and Assessment Class. 1962, 1966, 1970 Richmond Surrey Vancouver West Van. Prov inc ia l 62 66 70 62 66 70 62 66 70 62 66 70 62 66 70 2.8 3.4 6.3 .9 .9 1.1 3.6 3.3 2.9 2 .0 1.2 1.1 3.2 3.0 2.5 2.5 3.1 5.8 .9 .9 1.2 2.1 3.2 2.7 2 .0 1.2 1.2 3.1 2.8 2.4 4.5 3.8 3.4 11.5 11.5 10.2 1.7 4.3 2.8 3 .8 3.7 2.1 4.9 6.2 4.7 .4 .4 .3 1.6 1.7 1.2 2.6 .9 .9 1 .8 1.4 1.4 2.3 1.8 1.8 4.8 9.3 7.6 4.5 6.8 6.8 7.3 6.0 6.9 5 .8 6.0 6.3 7.2 7.4 7.8 4.4 8.5 7.0 4.4 6.5 6=.6 12.2 5.7 6.4 5 .8 6.1 6.6 6.9 6.8 7.3 11.9 16.5 17.3 16.9 19.1 18.1 12.6 13.6 12.5 11 .5 10.9 9.6 15.3 16.6 15.0 7.3 11.9 13.1. 6.9 9.1 9.0 16.9 9.8 10.0 8 .9 9.7 9.2 12.3 11.3 11.5 1.2 1.5 1.1 2.1 2.6 2.9 3.8 6.1 '.6.0 .7 .7 .7 3.8 3.9 4.2 1.7 1.8 1.4 2.8 3.5 3.5 2.5 6.1 5.8 .8 .7 .8 3.2 4.0 3.8 13.2 18.0 18.4 19.0 21.7 21.1 16.4 19.7 18.4 12 .3 11.5 10.3 19.2 20.5 19.2 9.0 13.7 14.5 9.7 12.6 12.5 19.4 15.9 15.8 9 .7 9.4 9.9 15.5 15.3 15.3 16.1 15.4 15.4 14.4 14.5 15.6 31.5 26.7 12.2 13 .8 14.9 14.0 24.4 21.8 14.1 16.5 16.1 15.6 15.7 16.7 16.2 16.7 14.0 12.9 13 .4 14.5 14.4 15.8 15.7 15.3 29.3 33.4 33.8 33.4 36.2 36.6 47.9 46.4 30.6 26 .0 25.4 24.3 42.5 42.3 33.9 25.5 29.8 30.2 24.4 28.2 28.7 36.1 29.9 28.7 23 .2 23.9 24.4 31.3 31.1 30.6 2. 9 4.3 5. 5 2.7 2.4 2.3 5. 1 5. 7 7.2 5.7 4.6 5.0 4.1 4.4 5.9 2. 9 4.1 5. 0 2.3 2.4 2.3 2. 2 5. 3 6.4 5.7 4.6 5.2 3.9 4.1 4.8 10. 3 13.7 12. 9 16.3 19.3 18.8 11. 3 14. 0 11.3 6.6 6.9 5.3 15.1 16.1-=13.3 6. 1 9.6 9. 5 7.4 10.1 10.3 17. 3 10. 7 9.3 4.1 4.9 4.7 11.6 11.3 10.5 16. 1 15.4 15. 4 14.4 14.5 15.6 31. 5 26. 7 12.1 13.8 14.9 14.0 24.4 21.8 14.7 16. 4 16.1 15. 6 15.7 15.7 16.2 16. 7 14. 0 12.9 13.4 14.5 14.4 15.8 15.7 15.3 29. 2 33.4 33. 8 33.4 36.2 36.6 48. 0 46. 4 30.6 26.0 26.5 24.3 42.'5 42.3 33.9 25. 6 29.8 30. 2 24.5 28.2 28.8 36. 1 30. 0 28.7 23.2 23.9 24.4 31.3 31.1 30.6 V i c t o r i a , 1962, 1966, 1970. 41 It should be mentioned that these percentages are for exemptions and as such do not include grants provided v ia r e l i e f s . Figures of grants pro-vided v ia r e l i e f s were not obtained, but they do represent a substant ia l percentage of tota l assessed value. The major forms of r e l i e f a re ; 1) twenty-f ive percent reduction of the assessed value of improvements when determining the taxable assessed value for school and hospital purposes and a minimum twenty-f ive percent reduction when determining the taxable assessed value for general purposes; 2) the home owners grant of $170 which was appl icable in 1971 and 3) special assessments on farms and res idents . Under the Assessment Equal izat ion Act and the Municipal Act farm land is to be assessed at a value which i s equal to i t s value as farm land rather than a value which may be determinable from another use. 11 Municipal Ac t , op. c i t . , Chapter 255, Part IX, Div. 1, Sec. 332, Subsection 4. " Land c l a s s i f i e d by the Assessor as fa rmland while so c l a s s i f i e d sha l l be assessed at the value which the same has for such purpose without regard to i t s value for other purposes." Assessment Equal izat ion Ac t , op. c i t . , Chapter 18, Part IX, Section 37, Subsection 5 , Clause D. "Lands c l a s s i f i e d as 'farm land' in a muncipal corporation or rural area s h a l l , while so c l a s s i f i e d , be assessed at the value which the same have for such purposes without regard to the i r value for any other purpose or purposes " 42 Farm land may have a market value considerably above i t s value as farm land because of i t s potent ial as a development s i t e for commercial or res ident ia l use. Owners of res ident ia l property may receive r e l i e f i f they were owner-occupiers a minimum of f i ve years previous to 1964, for the Assessment Equal izat ion Act states that such propert ies sha l l be valued with considerat ion given only to i t s persent res ident ia l land 12 use. The market value of the res ident ia l property may exceed i t s value as determined by res ident ia l property or land use because of the potent ial use of the s i t e as a commercial, indus t r ia l or apartment loca t ion . The special assessments to res ident ia l property appl ies only to school purposes while the special assessments to farm land appl ies to both school and municipal purposes. 12 Assessment Equal izat ion Ac t , op. c i t . , Chapter 18, Part IX, Section 37, Subsection 6, Clause C. "Where the assessor received on or before the f i r s t day of November from the owner and occupier of land and improvements, not ice in such form as the Assessment Commissioner sha l l prescribe that the land and improvements thereon were owned and occupied by the appl icant as his p r inc ip le place of residence for not less than f i ve consecutive years pr io r to the f i r s t day of January, 1964, then actual value of the res iden t ia l land s h a l l , for the purpose of the assessment ro le for the succeeding year , be determined with considerat ion given only to the present res iden t ia l use of the land and without any consideration that the res ident ia l land may have a higher actual value for an a l te rnat ive use or uses or i s zoned for an a l te rnat ive use." 43 In examining Table IV i t can be noticed that the to ta l ex-emptions as a percent of assessments for the province in 1970 was 33.93% for municipal purposes and 30.63% for school and hospital purposes. The percentage for school and hospital was re l a t i ve l y consistent with the 1962 and 1966 percentages, but for municipal purposes the percentage dropped by 20.20% from the 1962 f igure . This decl ine was a resu l t of the drop by 39.23% in the other property c l a s s i f i c a t i o n and 39.23% drop in the improvement other exemption assessment c l a s s i f i c a t i o n s . The remaining percentages are r e l a t i v e l y consistent between 1962 and 1970. Again, re fer r ing to Table IV we f ind that the percentage for the ind iv idual munic ipa l i t ies vary widely between themselves and from the prov inc ia l f igures . Exemptions for municipal purposes of federal property as a percent of tota l assessed value amounts to 6.33 in Richmond and .00 in Coquitlam, while exemptions for municipal purposes of prov inc ia l property ranges from 13.47% in Coquitlam to 2.12% in West Vancouver. Unless grants by these governments in l i eu of taxes reasonably approxT imate the taxes, then undue burdens are f a l l i n g upon the taxpayers of the munic ipa l i t ies which have a higher percentage of government property re la t i ve to to ta l assessments than the prov inc ia l percentage while those munic ipa l i t ies with a lower percent than the province have taxpayers which benef i t . B. UNIFORMITY AND EQUALITY OF ASSESSMENTS Uniformity of assessments implies that the assessments of propert ies wi th in a muncipal j u r i s d i c t i o n are a uniform percentage of the i r market value. This i s an essent ia l requ is i te i f the burden of taxat ion is to be propor t ional ly d is t r ibu ted as i s l a i d down in the Municipal and Publ ic School Ac ts . Equal izat ion of assessments implies that the average assessment-market value ra t ios of munic ipal i tes be equal. This requirement would not be necessary i f school d i s t r i c t s did not over-13 lap munic ipa l i t ies and subsides to munic ipa l i t ies and school boards did not e x i s t . Revenue for the school d i s t r i c t s i s obtained by applying a uniform mi l l rate (24.1) to a l l the propert ies wi thin i t s area. Suppose a school d i s t r i c t contained three munic ipa l i t ies (A,B,C) with average assessed value market value ra t ios of 50,47 and 45% respect ive ly . Because the average ra t ios are not equal while the same mi l l rate i s appl ied to a l l the mun i c i pa l i t i es , munic ipal i ty A i s , on the average, contr ibut ing a greater share to the school d i s t r i c t than e i ther muncipali ty B or C. 13 A map of school d i s t r i c t i s provided in Appendix B. 45 It i s evident then, tha t , i f m i l l rates are applied equa l ly , equal i ty of assessments must also be maintained to ensure an equal d i s t r i bu t i on 14 of the taxat ion burden. If the assessments wi thin munic ipa l i t ies are uniform and the average assessment-sales ra t ios of the munic ipa l i t ies are the same then i t i s axiomatic that equal i ty between munic ipa l i t ies e x i s t s . Equal i ty of assessments betwen munic ipal i tes does not insure uniformity of assessments wi th in mun ic i pa l i t i es , however, as the equal i ty of assessments i s measured only by the average assessment market value ra t ios from which ind iv idual assessments may vary considerably. 14 Equal assessments does not in i t s e l f ensure an equal burden of the taxation between munic ipa l i t ies because of the l eg i s l a t i on r e s t r i c t i n g the taxable assessed value of improvements to 75% of i t s assessed value. A munic ipal i ty which assigns a d i f fe ren t land improvement ra t io to i t s property than other munic ipa l i t ies w i l l also have a d i f fe ren t tax burden than the others. For example, suppose there are two munic ipa l i t ies (A & B) each with a to ta l assessed value for property of 25mil l ion and an assess-, ment sales ra t io of 50%. If a m i l l rate of 25 was appl ied at th is stage then each would have an equal tax burden of $625,000. Also assume that the 25 m i l l i o n assessed value was divided between land and improvements in the fo l lowing proport ions, munic ipal i ty A, land = 5M, improvements = 20M. Munic ipa l i ty B land = 20M, improvements = 5M. The taxable assessed value for the munic ipa l i t ies becomes: Munic ipa l i ty A 5 X 100% = 5M 20 X 75% = 15M 20M Munic ipa l i ty B 20 X 100% = 20M 5 X 75% = 3.75M 23.75M When a mi l l rate of 25 i s applied to the taxable assessed va lues,Munic ipa l i ty A pays (20 X 25) $500,000 and Munic ipa l i ty B pays $593,750. 46 C. FIVE AND TEN PER CENTUM RULES 15 The ' f i v e per centum ru l e ' was i n i t i a t e d by the B r i t i s h Columbia Government in the amendment of 1968 to the Assessment Equal izat ion Act of 1953 for the purpose of equal iz ing assessments ( for school and hospital purposes) between munic ipa l i t ies located within the same school d i s t r i c t . The 'ten per centum ru l e ' was leg is la ted by the B r i t i s h Columbia Government in an act passed in 1971 15 Assessment Equal izat ion Act , op. c i t . , Chapter 18, part I I I , Section 8 (a ) , Subsection (1). "The to ta l assessed value of a l l land and improvements in a school d i s t r i c t shal l not be increased in any year by more than 5% of the tota l assessed value of a l l land and improvements in that school d i s t r i c t in the preceding year , but, in determining the ex-tent of any such increase, there sha l l be excluded any increase in ass-essed value which i s a t t r ibu tab le .to. a change in the physical character-i s t i c s of land or improvements or to new construct ion or development thereon." 16 B i l l #22. B r i t i s h Columbia Government, ( V i c t o r i a : Queens P r i n t e r , 1971. An act to amend the Assessment Equal izat ion Ac t ) . Chap. 18, Part T i l , Section 37A, Subsection 1. "the assessed value of land or improvements sha l l not be increased in any one year by more than ten per centum of the assessed value of land or improvements in the pre-ceeding year unless the increase i s a t t r ibu tab le to a change in the physical charac te r i s t i cs of the land or the improvements, or to new construct ion or development thereto, thereon, or the re in , or resul ts from a reassessment ordered by the Commissioner under Subsection (2) of Section 9. 47 to amend the Assessment Equal izat ion Act " for the purpose of being able to forecast more accurately the revenue proceeds to be d is t r ibu ted to the school b o a r d s . " 1 7 1. Ef fects of the Five Per Centum Rule The 5% rule has led to a s i tua t ion whereby the assessment market value ra t io of propert ies i s below the leg is la ted 50% r a t i o . Uniformity of assessments can s t i l l be maintained, however, but the process becomes supererogatory. The fol lowing example w i l l i l l u s t r a t e the procedure to ensure uniformity and i t s ramif icat ions i f not fol lowed. Suppose that in munic ipal i ty X the 1970 to ta l taxable assessed value of property equalled 25 m i l l i on and the mi l l rate for school and hospital purposes was 30, producing a revenue of $750,000. (25M x 30 m i l l s ) . By 1971, property values and revenue requirements have both increased by 10%. The 5% ru le would r e s t r i c t the assessment r o l l increase to 1.25 m i l l i on instead of the 2.5 m i l l i on increase which ac tua l ly occurred. In order to ra ise the required revenue of $825,000 (750,00 + 75,000) the m i l l rate must be increased to 31.429 from i t s 1970 leve l !of 30. (26.25 M x 31.429 = 825.000). Complicating factors a r i s e , however, when property values i n -crease at discrepant ra tes . To s impl i fy th is phenomenon I shal l consider only two land use c lass i f i ca t i ons ( A & B ) which have d i f f e r i ng value increases. Referr ing back to munic ipal i ty X, suppose the to ta l taxable 17 Discussion session with the Prov inc ia l Assessment Commissioner. 48 assessed value was divided between land uses c lass A and c lass B in the fo l lowing fash ion: c lass A = 15,000 m i l l i on c lass B = 10,000 m i l l i on Taxes paid by c lass A equals 450,000 ( 15.M x 30 ) which re-presents 60% of the tota l (450,000/750,000) and taxes paid by c lass B equals 300,000 ( 10M x 30 ) which represents 40% of the to ta l (300,000/ 750,000). If the 10% increase i n l t o t a l taxable assessments for 1972 was due to a 2.5 m i l l i on increase in c lass A (representing a 16.67% increase) and a 0 increase in c lass B, then the assessments and taxes without the 5% rule would be as i l l u s t r a t e d in Table V. TABLE V PERCENT OF TOTAL TAXES EACH PROPERTY CLASS PAYS WITHOUT  THE FIVE PER CENTUM RULE Class A Class B Total Taxable Assessed Value 17.50 m i l l i on 10 m i l l i on 27.50 m i l l i on m i l l rate 30 30 30 revenue 525,000 300,000 825,000 Percent of Total 63.64 36.36 100 Since the 5% rule prohib i ts the increase of to ta l assessment by 10%, the fo l lowing ca lcu la t ions must be executed to ensure equity between the two c lasses : 1) the percentage of the tota l taxes for which each c lass would be re-sponsible had the 5% rule not been in force must be determined. (Class A = 63.64%; Class B = 36.36%) 49 2) increase the tota l assessed value by the 5% maximum ( 25M + 1.25M = 26.25M0. 3) to ta l revenue required is $825,000 of which c lass A i s responsible for 63.64% or $525,000 and c lass B i s responsible for 36.36% or $300.00. The m i l l rate which when mul t ip l ied by the taxable assessed value of 26.26 m i l l i on y ie lds a product of 825,000 i s 31.429. 4) the assessed value of c lass A becomes 525,000/31.429 = 16.704Mand the assessed value of c lass B becomes 300,000/31.429 = 9.545M. The complexit ies and prohibi t iveness of the ca lcu la t ions becomes apparent when i t i s rea l i zed that in r e a l i t y there i s amult i -tude of land uses each with subclasses and ind iv idual propert ies wi th in the subclasses which have varying degrees of value increase. I f the above ca lcu la t ions were not performed then ununiformity such as those i l l u s t r a t e d below would p r e v a i l . TABLE VI PERCENT OF TOTAL TAXES EACH PROPERTY CLASS PAYS WITH THE FIVE PER CENTUM RULE Class A Class B Total Taxable Assessed Value 16.25M 10M 26.25M m i l l rate 31.429 31.429 31.429 revenue 510,710 314,290 825,000 Percent of to ta l 61.90 38.10 100 50 In Table VI the 1971 tota l taxable assessed value has been i n -creased by the 5% maximum. The increase of 1.25 m i l l i on was at t r ibuted to c lass A ( i t ac tua l ly increased 2.5 M) and i t represents an 8.33% increase in c lass A 's assessments. Because of the incongruence between the actual increase, c lass A pays only 61.90% of the to ta l taxes instead of i t s equitable port ion of 63.64%. Class B becomes r iddled with an extra burden amounting to 4.785% (1.74/36.36). The 5% r u l e : (1) resu l ts in ununiformity of assessments; (2) increases administrat ive cos ts ; (3) confuses the taxpayer in his e f for ts to determine what his share of the tax burden should be and (4) causes unequal average assessment-market value ra t ios between mun ic ipa l i t i es . 2. Effects of the "Ten Per Centum Rule" The "10% r u l e , " which was introduced in 1971, w i l l add compli-cations to the f ind ing of a seemingly already insoluable solut ion to the manifestatious resu l ts of the " f i ve per centum r u l e " . I f we refer back to the prescribed solut ion obtained under the " f i ve per centum'rule" i t i s discovered that the increase in assessed value c lass A equals 11.135% (1.25/15.00).' Since the "ten per centum ru le " prohib i ts such an increase, a new solut ion must be found. Table VII summarizes and equitable solut ion when both the f i ve and ten per centum rules are observed. 51 TABLE V I I ' EQUITABLE SOLUTION WHEN FIVE AND TEN PER CENTUM RULES ARE APPLIED Class A Class B Total Taxable assessed Value* 16.39M 9.36M 25.75 mi l l rate 32.039 32.039 32.039 revenue (nearest ,000) 525,000 300,000 825,000 Percent of Total 63.64 36.36 * Total taxable assessed value i s increased by 3%. The longer these rules are in fo rce , the larger w i l l be the discrepencies caused by them. The " f i ve per centum ru le " does not help engender assessment equal izat ion between munic ipa l i t ies because the mun-i c i p a l i t i e s experiencing the greatest property value increases are res-t r i c t ed the most in the i r assessment increases. The need for assessment equal izat ion was d i la ted upon in the previous sect ion of th is thesis but stated b r i e f l y here, since a 24.1 mi l l rate is uniformity applied to the assessments, for school purposes, on a l l propert ies then the residents of the munic ipa l i t ies with the largest average property value increases over f i ve percent w i l l pay proport ional ly less school taxes then the residents of the other mun ic ipa l i t ies wi th in the same school d i s t r i c t , yet they are receiv ing equal benef i ts . The "ten per centum r u l e " , although i t may enhance the School Boards revenue forecast ing a b i l i t y , resu l ts in two consequences; 1) i t acts as an added ca ta lys t to the " f i ve per centum ru le " in encouraging 52 assessment inequal i ty between munic ipa l i t ies and 2) i t ensures the lack o f , or decreases the degree of assessment uniformity wi thin mun ic ipa l i t i es . The owners of property which value i s increasing the greatest in a munici-pa l i t y w i l l benef i t the most, by paying proport ional ly less taxes, because the same m i l l rate i s applied to the assessments for general purposes to a l l propert ies in the munic ipal i ty yet they receive the same benef i ts . I t i s hoped that the Prov inc ia l Government weighted the benefi ts of the i n -creased revenue forecast ing a b i l i t y of the School Board against the soc ia l i n jus t i ce of the assessment ununiformity and inequal i ty which i t causes. White and Hamilton surmised that the purpose of the " f i ve and ten per centum ru les" may have been: "to provide r e l i e f to cer ta in classes of owner whose property i s increasing rap id ly in value, but whose current income out of which taxes have to be paid i s not increasing to the same extent."18 They continue the above statement with the fol lowing remark: "If th is i s the s i t u t a t i o n , there are a number of less clumsy and more equitable ways (then the " f i ve and ten per centum ru les" ) of achieving the desired resu l ts . "19 18 Hamilton and White, op, c i t . , Page. 9. 19 i b i d . , Page 9. CHAPTER IV EQUALITY OF ASSESSMENTS As was discussed in the previous chapter, one of the requirements of the munic ipa l i t ies and the Prov inc ia l Assessment Commissioner i s to assess propert ies at an equal proportion of the i r market value. This chapter pruports to compare the assessment equal i ty between mun ic ipa l i t i es , land use categories and pr ice categories of res ident ia l property for i f i nequa l i t i es do ex is t between categories and/or mun ic ipa l i t i es , then, because the same mi l l rate i s applied to a l l the propert ies wi th in the same munic ipa l i t ies and to a l l propert ies of d i f fe rent munic ipa l i t ies for school purposes an unequal burden of taxation w i l l resu l t due to these inaccuracte assessments. I t i s necessary to study assessments in the f i r s t instance rather than taxes payable because the inequa l i t ies of the tax burden resu l t ing from inaccurate assessments w i l l not be apparent when studying taxes payable as a percent of market value due to two fac to rs ; 1) the homeowners grant and 2) the extra charges added onto some propert ies for addi t ional services received. The mean and median of the assessment-sales ra t ios for each of the categories studied have been employed as the measures to ascerta in the degree of assessment e q u a l i t y . 1 The mean i s the average of a group of scores while the median i s the middle score of a ranked l i s t i n g . 1 de f in i t i ons and formulas for the measures of central tendency and the dispersion from the central measure have been included in Appendix C. 54 In determining assessment equal i ty between mun ic ipa l i t i es , land use cate-gories and pr ice categories the average score is of greatest relevance, and as such, the resul ts produced by the mean w i l l be deemed the most s i g n i f i c a n t . A. EQUALITY OF ASSESSMENT BETWEEN MUNICIPALITIES Since the Prov inc ia l Government requires that a f ixed mi l l rate be charged, to the assessment for school purposes on a l l proper-t i e s , than those munic ipa l i t ies having the highest average assessment-sales ra t ios are contr ibut ing propor t ional ly more than munic ipa l i t ies 2 with a lower ra t i o and are receiv ing only proportional benef i ts . The means and medians of the assessment-sales ra t ios for the municip-a l i t i e s being studied are recorded in Table VI I I . TABLE VIII MEANS AND MEDIANS OF THE ASSESSMENT-SALES RATIOS FOR THE MUNICIPALITIES* Munic ipa l i ty from lowest Mean Munic ipa l i ty from lowest Median  to highest mean to highest median 1. Surrey 29.69 1. Surrey 29.79 2. Delta 29.84 2. Vancouver 30.59 3. West Vancouver 30.13 3. West Vancouver 30.64 4. Vancouver 30.40 4. Richmond 30.98 5. Richmond 31.08 5. North Vancouver D i s t r i c t 31.95 6. North Vancouver D i s t r i c t 31.84 6. Delta 32.27 7. Coquitlam 32.16 7. Coquitlam 32.36 8. Burnaby 33.00 8. Burnaby 33.09 * f i e l d study - School purpose assessments were employed in the ca lcu la t ions . 2 The co l lec ted revenue i s red is t r ibuted to the school d i s t r i c t s on a per student bas is . 55 If a l l the munic ipa l i t ies above represented one school d i s t r i c t then, on an average, the residents of Surrey would pay propor t ional ly (to market value) less in school taxes than the residents of the other mun ic ipa l i t ies and the residents of Burnaby would be paying propor t ional ly more than the residents of any other munic ipal i ty towards the school d i s -t r i c t , y e t , they would be receiv ing equal benef i ts . TABLE IX PERCENT DIFFERENCE BETWEEN SURREYS' MEAN AND THE MEAN  OF OTHER MUNICIPALITIES  Munic ipa l i ty Percent From Surrey's Mean 1. Surrey 0 (base.) 2. Delta .505% 3. West Vancouver 1.48 4. - Vancouver 2.39 5. Richmond 4.68 6. North Vancouver D i s t r i c t 7.38 7. Coquitlam 8.49 8. Burnaby 11.15 Table IX supplies the percent di f ference between Surrey's mean assessment-sales ra t ios and the means of the other mun ic ipa l i t i es . Due to the assessors in Surrey underassessing res ident ia l property to a greater degree than the assessors in Burnaby, on an average, the r e s i -dents of Burnaby are paying 11.15% higher taxes, for school purposes then the residents of Surrey. B. EQUALITY OF ASSESSMENTS BETWEEN LAND USES This sect ion w i l l describe the equal i ty of assessments be-tween land uses employing the mean and median as measures. The means and medians of the assessment-sales ra t ios for the land uses are i l l u s t r a t e d in Table X. TABLE X MEANS AND MEDIANS OF THE ASSESSMENT-SALES RATIOS FOR THE LAND USES* Munic ipa l i ty Vancouver Land Use in Mean Land use in Median order from order from lowest to lowest to highest mean highest median conversion 25.50 conversion 24.87 res ident ia l 30.40 res ident ia l 30.59 r e t a i l 31.62 r e s t a i l 30.62 indus t r ia l 32.39 indus t r ia l 31.08 o f f i ce 33.00 o f f i ce 34.57 apartment 33.17 apartment 34.82 vacant land 14.48 vacant land 13.67 res ident ia l 29.69 res ident ia l 29.79 vacant land 25.50 vacant land 25.22 res iden t ia l 29.84 res ident ia l 32.27 * f i e l d study - school purpose assessments were Surrey Delta in the ca l cu la t i on . Referr ing to Table X the order of the land uses i s the same under both the mean and median. The land use with the lowest mean or median i s being underassessed re la t i ve to the other land uses while the one with the highest i s being over-assessed. To aid in the descr ipt ion of the amount of under or over assessment, Table XI decribes the mean 57 of the means and medians and presents the percent var ia t ion of the i n d i v i -dual means and medians from the overa l l mean. TABLE XI PERCENT VARIATIONS OF THE LAND USE MEANS AND MEDIANS FROM THE OVERALL MEAN Munic ipa l i ty Land User % of Mean from Land % of Median from Overall Mean Overall Mean Vancouver (mean of means 31.01) (mean of medians 31.09) conversion -17.79 conversion ^20.00 res ident ia l * 1.97 res ident ia l - 1.61 r e t a i l + 1.97 r e t a i l - 1.70 indus t r ia l + 4.45 indus t r ia l - .30 o f f i ce + 6.49 o f f i ce +11.19 apartment + 6.97 apartment +12.00 Surrey (mean of mean 22.08) (mean of median 21.73) vacant land -34.42 vacant land -37.09 res iden t ia l +34.42 res ident ia l +37.09 Delta (mean of mean 27.67) (mean of median 28.75) vacant land - 7.84 vacant land -12.28 res ident ia l + 7.84 res ident ia l +12.28 Although the order of land uses from lowest to highest mean or median i s the same under both measures the extent of the deviat ion of the ind iv idual means or medians varies under the d i f fe rent measures. The con-versions are assessed at 17.79% below the mean of the means assessments and 20.00% below the mean of the median assessments. Under the mean measure two land uses in Vancouver are below the overal l mean but under the median measure four are below the mean of the medians. The order and deviat ions as found under the means should be a l l o t ted more s ign i f i cance , as i t i s the average with which we are concerned and not the mid-point. 58 Employing the mean as the dominate measure we observe from Table XI that the income type propert ies in Vancouver are over-assessed re la t i ve to res ident ia l land use propert ies and vacant land in Surrey and Delta are under-assessed in comparison to res ident ia l land. Those types of pro-pert ies being over-assessed are paying proport ional ly higher taxes to the School D i s t r i c t than i s the i r l eg i s la ted respons ib l i t y . C. EQUALITY OF ASSESSMENTS BETWEEN DIFFERENT MARKET PRICE CATEGORIES The question to be answered in th is sect ion i s ; Are d i f fe ren t pr ice categories assessed at the same or at d i ss im i l a r percentages of market value? Inferences made about the inequal i ty of assessments between pr ice categories cannot be transposed with much v a l i d i t y to conjecture inferences about the assessment treatment of income categor ies. The gen-e ra l i za t i on that an owners' home is representative of his income is i nva l i d often enough to d i sc red i t any assumptions about the owners income derived from the market value of his home. The measuresemployed to determine the degree of equal i ty between d i f fe rent valued res ident ia l propert ies are the mean and median. Due to the sample s izes obtained, .the pr ice categories for each munic ipal i ty were determined such that 1/3 of the propert ies would be in each of three pr ice categor ies. The do l la r f igures for each pr ice category in each muncipali ty i s located in Table I I . The means and medians for each 1/3 pr ice category for each of the munic ipa l i t ies are summarized in Table XI I . 59 TABLE XII MEANS AND MEDIANS OF ASSESSMENT-SALES RATIOS FOR PRICE CATEGORIES OF DIFFERENT MUNICIPALITIES* Munic ipa l i ty Low 1/3 Middle 1/3 High 1/3 Mean Median Mean Median Mean Median Vancouver 30.22 31.01 31.77 29.70 29.23 30.87 Burnaby 32.68 32.34 33.46 33.36 32.86 33.46 Coquitlam 31.48 33:01 33.27 32.78 31.58 31.72 Richmond 32.06 30.05 31.96 31.64 29.59 30.87 Delta 30.14 32.00 27.77 31.53 31.73 32.98 Surrey 28.96 28.45 29.91 29.11 30.16 31.80 North Van. D is t . 31.51 31.36 31.91 32.40 32.11 32.11 West Vancouver 29.01 29.48 31.26 31.46 30.11 30.51 * f i e l d study - school purposes assessments were employed in the ca lcu la t ions . The resu l ts produced by the mean i s of primary concern as i t i s the average, with the median being presented as a matter of in te res t . Table XIII ranks the pr ice ranges for each munic ipal i ty from the lowest mean of the assessment-sales ra t io to the highest. TABLE XIII RANKED ORDER OF MEANS OF PRICE CATEGORIES FOR 60 EACH MUNICIPALITY Munic ipa l i ty Low 1/3 % Var iat ion numercial from the lowest  order of mean of the 1/3 pr ice category priced categories  wi th in the for each  munic ipal i ty munic ipal i ty Middle 1/3 High 1/3 Vancouver Burnaby Coquitlam Richmond Delta Surrey North Van. D is t . West Vancouver 2 (3.39%) 3 3 3 2 1 2 2 _3 19 (8.69%) (2.39%) (5.68%) (8.01%) 1 2 2 1 3 3 3 _2 17 1 1 ( .43%) ( .32%) 3 (8.34%) 2 (9.14%) (14.26%) (4.14%) (1.90%) (3.79%) 1 1 _1 12 (3.28%) (1.27%) (7.76%) The lower priced propert ies have the lowest assessment-sales ra t ios the greatest number of times while the middle 1/3 has the highest ra t ios the greater number of t imes. The d i f fe rent mun ic ipa l i t ies vary in the i r equal i ty of pr ice ranges as well as the i r biasness towards or against a par t i cu la r pr ice category. Table XIII also provides ( in brackets) the-percent di f ference between the mean of the lowest pr ice bracket and the mean of the other two pr ice brackets. Burnaby and North Vancouver D i s t r i c t have the least percentage var ia t ion of the means and therefore, provide the greatest equal i ty between pr ice categor ies. The munic iapl i ty with the greatest degree of inequal i ty between pr ice categories i s Del ta. The remaining munic ipa l i t ies in order from the one which provides the greatest equal i ty to least i s as fo l lows: 61 Surrey, Coquitlam, West Vancouver, Vancouver and Richmond. In Delta there i s a 14.25% di f ference between the mean of the middle 1/3 priced propert ies and the mean of the high 1/3 priced propert ies. The muncipal i t ies which are prejudiced towards the low priced propert ies are Burnaby, Coquitlam, Surrey, North Vancouver D i s t r i c t and West Vancouver. Del ta 's middle 1/3 price.ranged res ident ia l propert ies benef i t by a lower assessment re la t i ve to market value while Vancouver and Richmond bestow the advantage upon the higher pr iced res iden t ia l proper t ies. To obtain a general overview as to whether or not assessments are equal between,.price categories of res ident ia l propert ies a l l the res ident ia l propert ies from a l l the munic ipa l i t ies were grouped together and c l a s s i f i e d into the pr ice ranges; less than 20,000; 20,000-24,999; 25,000-29,999; 30,000-34,999; and greater than 35,000. The mean and median assessment (for school purposes) sales ra t ios were then calculated for each pr ice category. The resu l ts are summarized in Table XIV.. 62 TABLE XIV MEANS AND MEDIAN OF ASSESSMENT-SALES RATIOS FOR EACH PRICE CATEGORY* Pr ice Category Mean Median less than 20,000 30.61 30.35 20,000 - 24,999 30.49 31.06 25,000 - 29,999 31.81 32.11 30,000 - 34,999 31.15 31.60 greater than 35,000 31.07 31.73 * F ie ld study When comparing the equal i ty of assessments between pr ice cat-egories the means should be regarded as the most s ign i f i can t of the two measures as i t i s the average of the pr ice category. U t i l i z i n g the mean as the measure of equa l i t y , the pr ice category $20,000 - 24,999 i s assessed at the lowest percent of market va lue, and the less than $20,000 pr ice category i s assessed at the next lowest percent. The remaining pr ice categories from lowest to highest assessment-sales ra t ios are : greater than 35,000; 30,000-34,999; and 25,000-29,999. The lower pr ice ranges seem to be benef i t t ing s l i g h t l y over the higher pr ice categories as the i r assessment-market pr ice ra t ios are lower. The advantage i s very s l i gh t , : however, as the di f ference between the lowest ra t i o to the highest i s only 4.33%. It must be rea l ized that the obtained f igures in Table XIV do not represent conclusive evidence that one pr ice category has a lower 63 assessment-sales ra t io than another because a l l the res ident ia l sales from a l l the munic ipa l i t ies were grouped together and the munic ipa l i t ies possess d i f fe ren t average ra t ios and d i f fe rent average priced res ident ia l property. D. SUMMARY This sect ion on the equal i ty of assessments i s a prelude to the chapter on the burden of taxat ion. Since property taxes are related to assessments, inequa l i t ies of assessments between mun ic i pa l i t i es , land uses or pr ice categories cause a tax burden d i s t r i bu t ion which i s l e g i s l a t i v e l y unjust. Another factor a f fect ing the tax burden d i s t r i -bution i s the assessment uniformity wi th in munic ipa l i t ies and land uses. The fo l lowing chapter examines the assessment uniformity with the aid of various::,measures. CHAPTER V ASSESSMENT UNIFORMITY As was stated in Chapter II the munic ipa l i t ies are required by law to assess a l l property at f i f t y per centum of i t s actual v a l u e . 1 The purpose of th is chapter i s to measure the degree of assessment uniformity wi thin munic ipa l i t ies and land uses to determine which of the munic ipa l i t ies and lands uses studied exh ib i t the greatest degree of uni formity. The degree of assessment uniformity w i l l be determined from s t a t i s t i c a l analys is as i t allows us to employ measures which have been espec ia l l y designed to ascerta in the dispersion of indiv idual points 2 about the central tendency point . These measures vary in the type of information which they present and, as a consequence of t h i s , the advan-tages and disadvantages of each as they re la te to the needs of th is thesis w i l l be expounded upon. Measures of dispersion from the central tendency have been chosen as determinates of the degree of assessment uniformity rather than the d i s -persion of ind iv idual points from the leg is la ted f i f t y percent level for two reasons; 1( i t i s conceded that assessing at the f i f t y percent level i s a near imposs ib i l i t y and equal i ty of the tax burden within a munic ipal i ty may be maintanined as long as the assessments are uniform at the average assessment-sales ra t io and 2) the consequences of munic ipa l i t ies assessing at d i ss im i l a r average assessment-sales rat ios were discussed in the previous chapter. thesis 1 actual value i s equated to the adjusted s e l l i n g pr ice in th is 2 the measures used herein are defined in Appendix C. 65 A. MEASURES OF ABSOLUTE DISPERSION: MEAN DEVIATION, STANDARD DEVIATION, QUARTILE DEVIATION AND FREQUENCY TABLES The simplest and crudest measures of dispersion from the central tendency are the mean dev ia t ion , standard dev ia t ion , quar t i le deviat ion and frequency tab les . Since the quar t i le deviat ion measures only the central 50% of the cases i t i s a crude estimate of the to ta l d ispers ion. The mean deviat ion and standard deviat ion are affected by every property with the standard deviat ion placing more emphasis on the extreme cases than the mean deviat ion. Although these measures can give some ins ight into the dispersion of ind iv idual assessment r o l l s , they do not lend to the com-parison of mun ic ipa l i t ies in the i r assessment uniformity unless the measures of central tendency (median and mean) are the same for each munic ipal i ty and land use studied and in chapter IV i t was proven that th is s i tu ta t ion does not p reva i l . The need for equal central tendencies can be i l l u s t r a t e d by tc i t ing the fo l lowing example. Munic ipa l i ty A Munic ipa l i ty B A/S ratio-mean .424 .33 Standard deviat ion .082 .065 From the data given i t i s d i f f i c u l t to determine which mun-i c i p a l i t y has the greater uniformity because, although munic ipal i ty A has the greater standard deviat ion in an absolute sense i t s uniformity may be better in a re la t i ve sense ( re la t i ve to the mean). Because ass-essment uniformity in munic ipa l i t ies with d i f fe rent central tendencies are being compared, at tent ion w i l l be immediately focused upon more appropriate 66 measures. B. MEASURES OF RELATIVE DISPERSION Although the standard deviat ion and mean deviat ion are not su i tab le measures themselves, they are stepping stones to more appropriate measures. 1. Coef f ic ient of Dispersion;, The coe f f i c ien t of dispersion i s the average deviat ion of a ser ies divided by the median of the ser ies and in th is instance i t measures the dispersion of the assessment (for school purposes) -sales ra t ios about the mean of the r a t i o . This was chosen as one of the measures because i t i s employed by the Assessment Commissioner of B r i t i s h Columbia when determining the degree of assessment uniformity wi thin a munic ipa l i ty . A l so : "The coe f f i c ien t of dispersion i s the 'index of assessment inequa l i t y ' referred to by the la te Dr. John H. R u s s e l l , former Director of Research V i rg i n i a Department of Taxation. His recommendation was that a coe f f i c ien t of dispersion of "20 should be considered a goal desirable of achievement and rea-sonably a t ta inab le , " and that anything below th is i s to be considered an excel lent degree of equal izat ion of uniformity. Conversely, he stated "an index as high as 45 should be judged caused for gravest convern?"3 3 Bernard I rv in Ghert, "Measures of the Qual i ty of Real Property Assessments: An Examination of Their V a l i d i t y . " (Unpublished M.B.A. Thesis completed at the Univers i ty of B r i t i s h Columbia, 1965), Page 161. 67 Table XV i l l u s t r a t e s the coef f icent of dispersion by land use and by munic ipal i ty from the lowest coef f icent to the highest. TABLE XV COEFFICIENT OF DISPERSION BY MUNICIPALITY, BY  LAND USE. (FROM LOWEST TO HIGHEST)*  Munic ipa l i ty Coef f ic ient of Dispersion 1. North Vancouver D i s t r i c t 7.83 2. Coquitlam - res ident ia l 8.40 3. Burnaby - res ident ia l 9.77 4. West Vancouver - res ident ia l 11.69 5. Vancouver - res iden t ia l 12.13 12.13 conversions 14.54 apartment 16.80 indus t r ia l 23.65 o f f i ce 23.84 r e t a i l 25.86 6. Richmond - res ident ia l 13.62 7. Delta - res ident ia l 14.61 14.61 vacant land 16.22 8. Surrey - res iden t ia l 16.19 16.19 vacant land 29.55 * f i e l d study It should be mentioned at th is time that comparisons between mun-i c i p a l i t i e s can only be made when the same items are being measured, there-fo re , the uniformity of assessments of munic ipa l i t ies can be compared only for the res ident ia l land uses and land uses comparisons can be made only wi th in the munic ipal i ty in which they are found. No information w i l l be gained by comparing the coe f f i c ien t of dispersion of the vacant land use in 68 Surrey to the apartment land use in Vancouver. Real iz ing these l im i ta t ions the fol lowing observations can be not iced. a) If we accept Dr. John H. Russel ls l im i t s of a coe f f i c ien t of dispersion of 20 representing an acceptable f igure and index as high as 45 being " jus t cause for concern," then a l l the munic ipa l i t ies analyzed are wi thin the acceptable region with respect to res ident ia l land use. The munici-p a l i t i e s are not, however, consistent in the i r uni formi ty, with North Vancouver D i s t r i c t reg is ter ing the lowest coe f f i c ien t of d ispersion of 7.83 and Surrey reg is ter ing . the highest at 16.19. b) If the same standard i s applied to the land uses we f ind that in Vancouver the r e s i d e n t i a l , apartment, and conversions are wi th in the acceptable l e v e l , while the r e t a i l , i ndus t r ia l and o f f i ce are outside the acceptable l im i t s but not beyond the 45 mark. There i s considerably more uniformity of assessment within the res ident ia l property than the I ndus t r i a l , o f f i ce or r e t a i l property. This i s to be expected as the appraisers are able to assess res ident ia l property easier due to the greater number of comparables which they may refer to . We also f ind that vacant land assessments in Surrey and Delta are less uniform than the res ident ia l assessments wi th in those mun ic ipa l i t i Since the coe f f i c ien t of var ia t ion u t i l i z e s the average de-v ia t ion as the numerator, l i t t l e i s known about the ind iv idual d isper-sions about the mean. It i s not know how many proper t ies, e i ther nu-mer ica l ly or percentage wise, l i e wi thin the acceptable region of below 20 or unacceptable region above 20. 69 2) Coef f ic ien t of Var ia t ion The coe f f i c ien t of var ia t ion i s the standard deviat ion divided by the ar i thmet ic mean and then mul t ip l ied by 100 to express i t in per-centage terms. This measure was chosen, because with i t the proportion of the sample which i s between par t i cu la r ra t ios can be determined under normal d i s t r i bu t ion conditons. For instance, a munic ipal i ty with an average ass-essment level of 50%, with the ra t ios normally d is t r ibu ted about the mean and a coe f f i c ien t of var ia t ion of 25 then we know that 68.26% of the ra t ios should l i e between the assessment-sales ra t ios of 37.5 and 62.5. The proportion of the ra t ios which l i e between any two ra t ios can be determined by using the standardized normal var ia te . The coe f f i c ien ts of var ia t ion from the means of the assessment-sales ra t ios for the munic ipa l i t ies and land uses studied are presented in Table XVI. 70 TABLE XVI MUNICIPALITIES AND LAND USES IN ORDER FROM LOWEST TO HIGHEST COEFFICIENTS OF VARIATION* Mun ic ipa l i t i es A Land Uses 1. North Vancouver D i s t r i c t - res ident ia l 2. Coquitlam - res ident ia l 3. Burnaby - res ident ia l 4. Vancouver - res ident ia l conversions apartment indus t r ia l o f f i ce retai1 5. West Vancouver - res ident ia l 6. Delta - res ident ia l vaoant land 7. Surrey - res ident ia l vacant land Coef f ic ient of Dispersion 10.31 11.93 14.41 14.50 14.50 20.32 23.39 28.86 30.41 32.12 16.06 22.57 22.81 24.95 22.57 20.87 22.81 35.45 8. Richmond - res ident ia l * f i e l d research The order of the munic ipa l i t ies and land uses produced in Table XV iare s l i g h t l y d i f fe ren t than the order produced in Table XVI. Although, the f i r s t three munic ipa l i t ies have assumed the same order under both the tables the remaining 5 munic ipa l i t ies have assumed d i f fe rent pos i t ions . The land uses in Vancouver have the same order under both tab les . The main advantage of the coe f f i c ien t of var ia t ion over the coef-f i c i e n t of d ispersion is in i t s a b i l i t y to predict the proportion of the 71 population which should l i e between two values. If the scores of the pop-u la t ion are not normally d is t r ibu ted about the mean then th is advantage d i s -appears for the reseacher can no longer predict the proportion of the pop-u la t ion l i e i n g between two values. Before proceeding further in the analysis of the resu l ts produced by th is measure i t should be examined as to whether or not the assessment-sales ra t io f igures obtained are normally d i s t r i bu ted . I t i s necessary to prove that only one of the munic ipa l i t ies and land uses studied has a dispersion of ra t ios which i s not normally d is t r ibu ted be-cause the d i f fe rent munic ipa l i t ies and land uses are being compared in the i r 4 assessment uni formity. The chi-squared test for goodness of f i t was em-ployed in determining whether or not the dispersions were normally d i s -t r ibu ted . The fol lowing procedure was fo l lowed: a) The assessment-sales ra t ios were divided into dec i les thereby y ie ld ing ten d iv is ions each with an equal number of observed frequencies. The f igures for Burnaby w i l l be provided as an example. Mun ic ipa l i t y : Burnaby Number of observations = 125 Median of assessment = 33.09 Standard deviat ion = 4.75 Mean = 33.00 4 defined in Appendix C 72 TABLE XVII OBSERVED AND EXPECTED FREQUENCY  OF EACH DECILE A. SALES RATIO dec i le 28.59 30.40 33.31 32.12 33.09 33.84 34.69 36.29 37.80 observed frequency 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 expected frequency 22.07 14.43 8.62 8.19 10.13 7.83 8.60 14.59 11.02 19.52 Referr ing to Table XVII we f ind that , as an average, 12.5 of the observations had assessment-sales of less than 28.59%, 12.5 had ra t ios between 28.59% and 30.40% etc . b) Having determined the dec i les i t was necessary to ca lcu la te the number of observations which should have fa l l en under each dec i le had the ra t ios been normally d i s t r i bu ted , (expected frequencies are provided in Table XVII) c) From the above information the chi-squared was determined with a 1.9809% confidence l i m i t . The resu l ts were as fo l lows: degrees of freedom = 8 the chi-squared obtained was 18.199 The probab i l i t y of obtaining a chi-squared of 18.199 with a mean of 33.00 and standard deviat ion of 4.75 i f the observed values were normally d i s t r i -buted is 1.9809. 73 A s im i la r test for Delta resulted in the fo l low ing : number of observation = 100 mean = 29.84 S.D. = 6.73 df = 8 chi-squared = 43.846 probab i l i t y of d ispersion being normally d is t r ibu ted = .0000% Testing two land uses produced the fol lowing resu l t s : Apartment - Vancouver number of observations = 93.7 S.D. = 7.76 Mean = 33.17 df = 8 chi-squared = 16.499 probab i l i t y of dispersion being normally d is t r ibu ted = 3.56% Industr ia l - Vancouver number of observations = 47 Mean = 31.95 S.D. = 9.38 df = 3 chi-squared = 4.797 probab i l i t y of d ispers ion being normally d is t r ibu ted = 18.55% The tests were also performed for the other munic ipal i tes and land uses, but i t i s necessary only to provide the reader with the above ca lcu la t ions to conclude that i t i s highly improbable that a l l the munici-p a l i t i e s and land uses have observed frequencies which resemble a normal d i s t r i b u t i o n . Because the observed ra t ios do not take on normal d i s t r i -bution charac te r i s t i cs the coe f f i c ien t of var ia t ion i s not an adequate test for comparing assessment uni formity. 74 C. REGRESSION ANALYSIS5 The regression equation y = A & BX is a mathematic model in which var iables are s t a t i s t i c a l l y related so that the value of one var iable can be estimated on the basis of the value of the other var iab le . It i s used in th is t h e s i s , not as a tool of p red ic t ion , but as one which describes the re la t ionsh ip between assessed values and market values. Assumptions of the l inear regression model are as fo l lows: "1) The assumption of l i n e a r i t y . The average of the y ' s in each sub-population is the condit ional expected value of y for that spec i f i c x , that i s , the u y. x. values f a l l on a s t ra ight l i ne defined by u y . x. = A + BX. 2) Each of the sub-populations of x values i s assumed to be normally d i s t r i bu ted . p 3) Each sub-population of y values has a variance of if; -These variance are equal for a l l sub-populations. This means there is uniform scat ter of the points around the regression l i n e . 4) Values of y are assumed to be s t a t i s t i c a l l y independant of x . "6 Propert ies of a l i near regression l i ne - ' 5 defined in Appendix C, 6 Ann Hughes and Dennis Gpawosky, S t a t i s t i c s : A Foundation for  Ana l ys i s , (Don M i l l s : Addison - Wesley Publ ishing C o . , 1971), PP. 311-312. 75 The regression l i ne Yc = a + bx i s the sample regression l i ne which estimates the populations regression l i n e . The regression l ines obtained from the sampling were determined by the least squares method. This method determined the intercept A and the slope B such that the sum of the squared error terms are minimized. The error term is defined as Si - - Uy.x- . Lett ing the symbol SSM represent the sum of the squares of the error terms, we have ss£ -£ (y^ -3-X-XcJ * = minimum. Propert ies of the least squares l i ne are as fo l lows : "1) The sum of the deviat ions of the observed values from the estimated values w i l l be zero. The plus deviat ionsare equal to and cancel out the minus deviat ions leaving £ (y - Vi)-o. 2) The sum of the squares of the deviat ion of the observed values from the estimated values is less than the sum of the squared deviat ion around any other l i ne of th is type drawn through the points . 3) The regression l i ne goes through the overal l mean of the data. 4) When the data represents a random sample, the least squares l i ne i s the l i ne of 'best f i t ' because the estimates a and b are the best unbiased estimate of the parameters A and B."7 If we f ind the standard deviat ion of the di f ference between the observed value of y and the estimated y values (cal led the standard deviat ion of regression of the standard error of estimate y on x) then we have a measure showing the degree of concertrat ion of i t s actual obser-vations around the regression l i n e . Since the standard deviat ion of y y ie lds an abolute f i gu re , i t does not represent a su i tab le measure for comparing the uniformity of 7 i b i d . , P. 322. 76 assessments betwen munic ipa l i t ies or between land uses. A re la t i ve measure of the standard error of y can be obtained by d iv id ing the standard error of y by the mean pr ice to obtain the percentage error from the mean p r i ce . Another re la t i ve measure the coe f f i c ien t of determination (r ) may also be used to compare assessment uni formity. The higher the coe f f i c ien t of deter-2 minat ion, the greater the degree of uni formity. An r of 1 should mean that a l l the items f a l l upon the b e s t - f i t l i n e . This does not necessar-i l y imply that the assessment-sales ra t ios are uniform, however, because the A factor in the equation y = A + BX biases the ra t i os . then the test would be of greater s ign i f i cance because the best f i t l i ne would t ru ly measure the assessment-sales ra t io uniformity. But because the A 's have va lues, then, although the indiv idual propert ies may a l l be located on the best f i t l i ne i t does not necessar i ly imply that uniformity e x i s t s . An example i s i l l u s t r a t e d below. Suppose the best f i t l i ne were as fo l lows: I f the A were 0, that is the best f i t l i ne bisected the o r i g in ILLUSTRATION 2 BEST FIT LINE y X 77 Although a l l the assessments may be located on the best f i t l i ne y = 2,000 + .30X, a l l the assessments are not 30% of market value because of the 2,000 absolute f igure which must be added to determine each y value, therefore, those propert ies in the lower pr ice range are ass-essed at a greater percent than the propert ies in the higher pr ice range. The A f igure also inf luences the standard error of y , therefore ca lcu-la t ions involv ing th is f igure are also biased. This problem may be solved by f inding the least square l i ne for each munic ipal i ty and each land use which produced a value of 0 for A, that i s , a best f i t l i ne which bisects the o r i g i n . This w i l l a l l ev i a te the biasness of the A. Calucal t ions were performed to obtain the regression l i ne and the standard error of y , forc ing the best f i t l i ne through the o r i g i n . Table XVIII exh ib i ts the regression l ines and standard errors of y for the two methods of obtaining the best f i t l i n e . 78 TABLE XVIII REGRESSION LINE AND STANDARD ERROR OF'Y BY MUNICIPALITY AND BY LAND USE* Munic ipa l i ty Regression Line SY.X Regression Line SY.X Vancouver y = 1470 + ,2306x 1087 y 0 + .2938x 1138 Burnaby y = 524 + .3508x 1203 y = 0 + .3324x 1208 Coquitlam y = 6.67 + .3221x 1043 y = 0 .3323x 1039 Richmond y = 2635 + .1986x 1614 y = 0 + .2965x 1761 Delta y = -293 + .3103x 1865 y - 0 + .2005x 1858 Surrey y = 195 + .2862x 1416 y = 0 + .2955x 1412 North Van. D. y = *119 + .3228x 1026 y = 0 + .3194x 1023 West Van. y = 1435 + .2668x 2243 y = 0 + .2977x 2282 Land Use Regression Line SY.X Regression Line A — n SY.X Vancouver - res iden t ia l y = 1740 + .2306x 1087 y = 0 + .2938x 1133 -apartment y = 6667 + .2872x 15710 y - 0 + .3774x 16490 -conversion y = 3452 + .1598x 1811 y 0 + , .2387x 2068 - r e t a i l y =11500 + .3972x 34870 y = 0 + .3868x 36300 - i ndus t r i a l y = 3957 + .3676x 10110 y = 0 + .3495x 10350 -o f f i ce y =15970 + .4502x 25720 y = .0 + .4181x 23240 Delta - res iden t ia l y = -293 + .3103x 1614 y = 0 + .3005x 1858 -vacant land y = 102 + .2423x 471 y = 0 + .2866x 469 Surrey - res iden t ia l y = 195 + .2862x 1416 y = 0 + .3194x 1023 -vacant land y = -89 + .1561x 418 y = 0 + .1530x 418 A f i e l d study Sett ing A = 0 and determining the best f i t l i ne produces an 2 R which i s d i f fe rent from that o r i g i n a l l y def ined, and for th is reason cannot be considered as an appropriate measure. Table XIX provides the reader with the re la t i ve standard error of y as a percent of the mean pr ice by munic ipal i ty and by land use. 79 TABLE XIX RELATIVE STANDARD ERROR OF Y BY MUNICIPALITY  BY LAND USE. (FROM LOWEST TO HIGHEST) Munic ipa l i ty North Vancouver Coquitlam Burnaby Vancouver West Vancouver Delta Richmond Surrey Land Use Vancouver -Delta Surrey res ident ia l conversion apartment indus t r ia l o f f i ce retai1 vacant land res ident ia l vacant land res ident ia l Relat ive Standard Error of Y 3.10 3.64 4.63 5.13 5.47 6.86 7.09 7.25 Relat ive Standard Error of Y 5.13 5.21 6.41 8.43 14.13 19.37 5.40 6.85 6.80 7.25 If the dispersion of items of y for any p ra t i cu la r value of x were normally d is t r ibu ted then the proportion of the items which l i e wi th in a range of the regression l i ne could be determined. For example 68.24% of the observed values should f a l l wi thin a range of >c - S y - x The smaller the standard error of y the c loser the re la t ionsh ip and the higher the standard error the greater i s the scat ter of items. It was proven prev ious ly , however, that the dispersion of items does not assume normal d i s t r i bu t ion cha rac te r i s t i cs . It i s necessary there-fo re , to devise a method of measuring assessment uniformity without having to assume a normal d i s t r i bu t ion of the items. 80 D. PERCENT FROM THE MEDIAN One method of measuring assessment uniformity without having to re ly on the assumption that the dispersion of data points is nor-mally d is t r ibu ted is by ascerta in ing the proportion of the assessment-sales ra t ios between cer ta in percentages of the median. For instance, the assessment uniformity wi th in munic ipa l i t ies could be compared by ascerta in ing the proportion of propert ies within each munic ipa l i t y , which registered an- assessment-sales ra t io within plus or minus ten percent of the median. Suppose munic ipa l i t ies A, B, C had respect ive ly 40, 50 and 60% of the i r assessed propert ies wi thin th is + 10% region. If the munic ipa l i t ies were ranked from best to worst assessment uniformity on th is basis alone the order would be C, B and A. Employing only the one percentage range has two f a u l t s ; 1) i t does not provide information of the d i s t r i bu t i on wi thin the + 10% range. This disadvantage may be corrected by subdividing the + 10% into quar t i les or dec i les and examining them; and 2) i t does not provide information about the qua l i ty of assessment beyond th is + 10% range* For example, suppose that Mun ic ipa l i t ies A, B. and C had the fo l lowing d is t r i bu t ion of ra t ios from the medians. 81 Percent of A/S Munic ipa l i ty ra t ios between A B_ fJ + 10% • 45 50 55 + 20% 90 70 60 + 30% 99 88 65 of the median. I f the munic ipa l i t ies assessment uni formit ies were to be com-pared on the proportion of propert ies with assessment-sales ra t ios be-tween + 10% of the median then the ordering of the munic ipa l i t ies from the best uniformity to the worst would be C, B, A. I f , however, the proportion of property with ra t ios between +_ 20% and + 30% of the median were considered the ranked order would be A, B and C. Munici-pa l i t y A has a considerably greater proportion of propert ies with ra t ios between the + 20% and + 30% from the median range. Also munic ipal i ty B has a better record than munic ipal i ty C in these two ranges. A problem a r i s e s , however, when the proport ion.of propert ies between the percentages from the median for the munic ipa l i t ies do not change rad i ca l l y from one munic ipal i ty to another. For instance, assume three munic ipal i tes ( A, B and C ) have the fol lowing percentages of assessment within the fo l lowing dispersion r a t i o s : % of A/S Ratios Munic ipa l i ty between A B_ £ + 10% 40 50 60 + '20% 70 60 65 + 30% 90 85 75 + 40% 92 95 80 of the median. 62 Munic ipa l i ty C has the greater uniformity i f the proportion of propert ies wi thin the f i r s t + 10% is considered. Munic ipa l i ty A has the least proportion of propert ies betwen + 10% of the median and the greatest proportion between the +_ 20% of the median. If the munic ipa l i t ies were to be ranked considering the proportion of propert ies between + 10% and + 20% of the median a weighting system should be devised as the pro-portion of propert ies between + 10% of the median i s of more importance than the proportion of propert ies between + 20% of the median. Before devis ing such a weighting system l e t us f i r s t review the resu l ts obtained when the proportion of propert ies from the median f a l l ins ide + 10% in te rva l s . Table XX out l ines the percentage of assessments which f a l l wi th in + 10% in terva ls of the median as well as the cummulative pro-portions from the median for each of the mun ic ipa l i t i es . Table XXI exh ib i ts the same information only by land use. TABLE XX PROPORTION OF PROPERTIES WHICH LIE BETWEEN PERCENTAGES FROM  THE MEDIAN, BY MUNICIPALITY (RESIDENTIAL LAND USE) * " 0+10% +10% +20% 0+ 20% +20% 0+ +30% 30% +30% 0+ +40% 40% +40% +50% 0+ 50% Greater than L l c + 50% Greater than + 0% Vancouver 58.47% 28.42 (87.19) 8.72 (95.91) 1.03 (96.94) 0.00 (96.94) 3.07 (100.01) Burnaby 65.80% 24.80 (90.60) 3.20 (93.80) 3.20 (97.00); ; 2.40 (99.40) .80 (100.20) Coquitlam 72.18% 18.79 (90.97) 5.27 (96.24) 3.00 (99.24) .75 (99.99) 0.00 ( 99.99) Richmond 60.00% 26.15 (86.15) 6.16 (92.31) .00 (92.31) 4.62 (96.93) 3.09 (100.01) Delta 56.00% 24.00 (80.00) 5.00 (85.00) 3.00 (88.00) 4.00 (92.00) 8.00 (100.00) Surrey 43.18% 31.06 (74.24) 11.36 (85.60) 7.58 (93.18) 1.52 (94.70) 5.30 (100.00) North Van. D is t . 73.46% 21.76 (95.22) 3.40 (98.62) .68 (99.30) .68 (99.98) .00 ( 99.98) West Vancouver 56.69% 28.03 (84.72) 7.64 (92.36) 4.46 (96.82) 2.55 (99.37) .64 (100.01) * F ie ld study - inaccuracies in cumulative percentage are due to rounding. Land Use Vancouver TABLE XXI PROPORTION OF PROPERTIES WHICH LIE BETWEEN PERCENTAGES FROM THE MEDIAN BY LAND USE* 0+10% +] +20% 0+ 20% +20% +30% 0+ 30% +30% +40% 0+ 40% +40% 0+ Greater Greater +50% 50% than than +50% +50% res ident ia l 58.47% 28.72 (87.19) 8.72 (95.91) 1 03 (96.94) 0. 00 (96.94) 3. 07 (100.01) apartment 43.01% 24.73 (67774) 12.91 (80.65) 9.68 (90.53) 5. 38 (95.91) 4. 31 (100.22) conversion 45.46% 31.82 (77.28) 13.64 (90.92) 4 55 (95.47) 0. 00 (95.47) 4. 55 (100.02) r e t a i l 25.35% 26.76 (52.11) 16.20 (68.31) 10 57 (78.88) 8. 45 (87.33) 12. 67 (100.00) indus t r ia l 28.57% 24.49 (53.06) 10.20 (63.26) 16. 22 (79.48) 12. 24 (91.72) 8. 16 ( 99.98) o f f i ce 28.13% 18.74 (46.87) 18.74 (65-61) 15. 62 (81.23) 12. 50 (93.73) 6. 24 ( 99.97) rrey res ident ia l 43.18% 31.06 (74.24) 11.36 (85.60) 7 58 (93.18) 1. 52 (94.70) 5. 30 (100.00) vacant land 21.96% 21.14 (43.12) 15.44 (58.56) 15. 44 (74.00) 11. 38 (85.38) 14. 63 (100.01) l t a res ident ia l 56.00% 24.00 (80.00) 5.00 (85.00) 3. 00 (88.00) 4. 00 (92.00) 8. 00 (100.00) vacant land 40.19% 28.97 (69.16) 18.69 (87.85) 2. 80 (90.65) 5. 61 (96.26) 3. 74 (100.00) * F ie ld study - inaccuracies in cumulative percentage are due to rounding. : : ; ! • ; : ; ; ; ! ; , : } i | | | j |-|-I I -1 ! 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M- 11 i 1 y i l 1 i i i l l ' - M M • i h -- I 1 I M : M M " i i ; 1 i / 1 i M i ! , : • ! i l l 1 r -r - r h 1 1 hi ' ' : 1 i i ' i l l I j i i ' ! j i i ' 1 * 1 1 1 - » i i . . . i l 1 i ! j i. i 1 ! 1 1 j ji I ! , ' M l / i 1 * ] i j ........ j . p • 1 ! ! 1 *t* / i r 1 ! | 1 1 1 1 1 i_. -j-1 . L i - arr.i— - i | 1 t • ! II ' • : 1 "i r r -1 i r I 1 j C : AifJ? i I 1 — i -•—,— -L_/p» X i ' ! ' i ' j r 1 ".".! 1 I I -1 1 . ! -— r --- M i l . . . . . . . f -.j... -- - ... J H r 1 - - !/•>— • . i . * i . i l i ._; _ X _ i _ . «>* --_ / . . I _LJ_L1 1 . L J _ J . i L L 1 1 : 1 ! i M -. . L . X i . ...UL..: i ' • » * . I i i 1 i • i i j i i * I..;.. • ' i ! " . j , u . - i—, i i - 1 : i I " "7 '"j— 1 . . - i i . l • i 1 ' i M • J - r 1 ..i i - - i i ; I l • — i — i i • 1 1 ! I F * . . . ._ . ! . . . j \ - | i , i X L ... ...j :. ; ; i *v.. . . . V. t. : I ' ----;—:—T—'— 1 i 1 i - - . . . - - ... i 1 M 1 X L L L . _;_!._! .L.X±; i 1 ! .1 I 4 ' : 1 i i 1 l rrrX 1 ! '. i.Xj" ..-_.}_]. i , 1 . % • . I . 1 ... J L '! ft ... i, i. i j . i . to — 1 •matJ 1 I i i ; 1 i I i 1 1i i i n r 44-JH i j - i - i 1 i ! : I i _*4 , ' I I I i _nx_ ! 1 i 1 1 . ' _ L . i L M i l | 1 j 1 i . i _ 1 1 i i M i i J,; 88 The f i r s t column of Table XX indicates the proportion of propert ies in each munic ipal i ty wi th in + 10% of the median. The order of the mun-i c i p a l i t i e s from the one with the greatest to the least proportion i s as fo l lows : Munic ipa l i ty Proportion North Vancouver D i s t r i c t 73.46 Coquitlam 72.18 Burnaby 65.80 Richmond 60.00 Vancouver 58.47 West Vancouver 56.69 Delta 60.00 Surrey 43.18 I l l u s t r a t i on 3 presents a cummulative account of the propor-t ion of propert ies wi thin a cer ta in percent of the median. North Vancouver D i s t r i c t has a consis tent ly higher proportion of i t s assess-ments wi th in a cer ta in percent of the median assessment sales ratiq,.' Coquitlam has the second best assessment uniformity as i t i s consis-tent ly second only to North Vancouver D i s t r i c t . I have rated Burnaby th i rd because they have a higher proportion of propert ies wi thin a cer ta in percent of the median except the + 30% in which Vancouver has a greater proport ion. Vancouver is rated fourth best even though 89 Richmond has a higher proportion wi thin the + 10% range. This was because Richmond's proportion i s only s l i g h t l y higher in th is range and Vancouver has a better record for the remaining percentage-ranges. Richmond was rated f i f t h over West Vancouver because of i t s higher proportion of propert ies in the f i r s t two percentages ranges which represent the major i t iy of the proper t ies. The remaining orders were West Vancouver, Delta and Surrey respect ive ly . A s im i la r analysis was done for the land use categor ies. If + 10% from the median assessment-sales ra t io i s chosen as the ind-cator of the level of assessment uniformity then the order of the land uses from the one with the highest uniformity to the lowest i s as fo l lows: Vancouver - res ident ia l 58.47 conversion 45.46 apartment 43.01 indus t r ia l 28.57 o f f i ce 28.13 r e t a i l 25.35 Surrey res ident ia l 43.18 vacant land 21.96 Delta res ident ia l 56.00 vacant land 40.19 *land uses are compared only wi th in the i r appropriate munic ipa l i ty . If the cummulative proportions for each percentage bracket observed in Table XXI or depicted in i l l u s t r a t i o n s 4 and 5 i s considered in determining assessment uniformity then the same order for the land uses as was out l ined above resu l t s . TABLE XXII RANKED ORDER OF MUNICIPALITIES UNDER DIFFERENT MEASURES OF ASSESSMENT UNIFORMITY Munic ipa l i ty North Vancouver D i s t r i c t Coquitlam Burnaby West Vancouver Vancouver Richmond Delta Surrey Coef f ic ient of Dispersion 1 2 3 4 5 6 7 8 Measure Coef f ic ient Standard Error of Var iat ion 1 2 3 5 4 8 6 7 of Y-j-mean & A = 1 22 3 5 4 7 6 8 Proportion of 0 Propert ies wi thin + 10% of median 1 2 3 6 5 4 7 8 Cumulative Proportion of Propert ies from the median 1 2 3 6 4 5 7 8 TABLE XXIII RANKED ORDER OF LAND USES UNDER DIFFERENT MEASURES OF ASSESSMENT UNIFORMITY Land Use Vancouver res ident ia l conversions apartment indus t r ia l o f f i ce r e t a i l Delta res ident ia l vacant land Surrey res ident ia l vacant land Coef f ic ient of Dispersion 1 2 3 4 5 6 1 2 1 2 Coef f ic ient of Dispersion 1 2 3 4 5 6 2 1 1 2 Standard error of Y-r mean & A 1 2 3 4 5 6 2 1 2 1 Proportion of 0 Propert ies wi th in +10% of the median. 1 2 3 4 5 6 2 1 2 1 Cumulative Proportion of Propert ies from the median, 1 2 3 4 5 6 2 1 2 1 92 Summary The ranked order of the Munic ipal i tes and land uses under each of the measures used i s presented Tables XXII and XXII I . The emphasis should be placed on the l as t column in these tables when determining the order of the qua l i t y of assessments for municipal-i t i e s and land uses because i t is the only measure which~does not assume the normal d i s t r i bu t i on of the d ispers ions. The land uses assume the same order under a l l the measures used. CHAPTER VI BURDEN OF TAXATION The purpose of th is chapter i s to determine the burden of taxat ion upon property owners by muncipal i ty , land use and pr ice categopy. The burden of taxat ion by munic ipal i ty i s being analyzed because the munic ipa l i t ies under study o f fe r approximately the same services to the i r residents and as such they should be paying ap-proximately the same taxes in re la t ion to the market value of the i r property. The burden of taxat ion by land use i s being analyzed in an attempt to discover which land uses are paying proport ional ly higher taxes. The majority of the property taxes are determined by the assessed va lues,* which should be proportional to market va lue, and since the same mi l l rate i s applied to the assessed values of a l l the propert ies wi thin a mun ic ipa l i t y , the burden of taxat ion should be pro-por t iona l . This propor t iona l i ty w i l l become d i s to r ted , however, for two desired reasons: 1) some propert ies are assessed addi t ional charges for extra services received from the munic ipal i ty and 2) the homeowners grant of $170 w i l l reduce the gross taxes for only the res ident ia l land users. 1 The assessed values for a property may account for 75-100% of the gross taxes depending upon the service charges which are added onto the taxes calculated from the assessments. 2 This was increased to $185.00 in ear ly 1972 with an extra $50.00 being granted to owner-occupiers over the age of 65. 94 Since the burden of taxation to a property owner is not re lated to the services received by him, no comparison between the two i s attempted. A c r i t i c i s m of the property tax system which i s often c i ted i s that i t weighs r e l a t i v e l y more heavi ly upon the owners of res iden t ia l property who are in the lower income bracket than the owners in the higher income bracket. Since income data of res iden t ia l property owners i s d i f f i c u l t to obta in , the c r i t i c i s m w i l l be al tered s l i g h t l y to read as fo l lows : the property tax system weighs more heavi ly upon the owners of less expensive homes re la t i ve to the owners of more expensive homes. Property value and income of the owner cannot be related for two reasons; 1) owners who purchased the property in previous years before the i r rese l l may have had incomes which increased or decreased at a f as te r , slower, or opposite rate than did the value of the i r property and 2) purchasers may spend varying amounts on a home depending upon the i r savings, present income and future expected income. The net taxes paid as opposed to the gross tax , w i l l be em-ployed in the ca lcu la t ions with the market value being the standard from which the burden i s determined. The measures employed w i l l be the same as those used to measure assessment equa l i t y , that i s , the mean and median. A. Burden of Taxation by Pr ice Ranges As was done when determining the equal i ty of assessments be-tween d i f fe rent pr ice categories (Table XIV) the res ident ia l land uses of a l l the munic ipa l i t ies have been grouped together then subdivided. 95 into categories depending upon the i r market values. The pr ice cate-gories are the same as those previously used, that i s : less than $20,000; 20,000-24,999, 25,000-29,999, 30,000-34,999, and greater than 35,000. Table XXIV portrays the mean and median net taxes payable as a percent of market value for the f i ve pr ice categories of the res id -ent ia l land use. TABLE XXIV MEAN AND MEDIAN NET TAXES PAYABLE AS A PERCENT OF  MARKET VALUE, BY PRICE CATEGORY* Pr ice Range Mean (Percent Increase over Median Lowest Mean) less than 20,000 1.147 1.075 20,000 - 24,999 1.251 ( 8.31) 1.234 25,000 - 29,999 1.392 (21.36) 1.436 30,000 - 34,999 1.391 (21.23) 1.387 greater than 35,000 1.374 (19.79) 1.372 * F ie ld study The greatest weight should be placed upon the mean when com-paring equal i ty between pr ice ranges as i t i s the average score. Referring to the means of Table XXIV we can assume that the greatest burden of taxat ion re la t i ve to market value of property f a l l s upon the higher priced home (those with market values greater than 25,000). As i s to be expected, due to the $170 homeowners grant, the less expen-s ive homes, those with a market value under $25,000,pay proport ional ly 96 less in property taxes. The three highest pr ice ranges do not pay propor t ional ly higher taxes to each .other because of e i ther added serv ice charges or inaccurate assessments. A l s o , provided in Table XXIV is the percent deviat ion of the indiv idual means from the lowest mean. Owners of res ident ia l property valued at between $25,000 and $29,999 pay on an average 21.36 percent propor t ional ly higher taxes than the owners of property valued at less than $20,000. Measuring the equal i ty between d i f fe rent pr ice ranges when res iden t ia l propert ies from d i f fe ren t mun ic ipa l i t ies are considered does not provide us with an accurate account of the tax burden because each munic ipal i ty has d i f fe ren t assessment-sales ra t ios and d i f fe rent m i l l ra tes . A more accurate and informative picture of the tax burden between; pr ice categories would be to measure the di f ference wi th in the mun ic ipa l i t i es . Table XXV furnishes the reader with the mean and median of the net-taxes to market pr ice ra t ios of three pr ice ranges for each munic ipa l i ty . The pr ice ranges were determined by d iv id ing the number of propert ies into th i rds as was done in Chapter IV. TABLE XXV MEAN AND MEDIAN OF THE NET TAX - MARKET PRICE RATIO BY 1/3 PRICE CATEGORIES, BY MUNICIPALITY* Munic ipa l i ty Low 1/3 Priced Medium 1/3 Priced Hiqh 1/3 Priced Mean Median Mean Median Mean Median Vancouver 1.191 1.155 1.340 1.229 1.318 1.249 Burnaby 1.397 1.375 1.561 1.520 1.542 1.548 Coquitlam 1.373 1.411 1.652 1.606 1.612 1.603 Richmond .951 .944 1.163 1.076 1.162 1.236 Delta 1.022 1.021 1.010 1.222 1.451 1.520 Surrey 1.012 .769 1.161 1.006 1.450 1.475 North Van. D is t . 1.202 1.220 1.360 1.300 1.356 1.360 West Vancouver 1.031 1.026 1.254 1.240 1.335 1.309 * F ie ld study - the pr ice range for each munic ipal i ty i s located in Table II Again, of the two measures used the greatest weight should be afforded to the mean. Table XXVI ranks the 1/3 pr ice categories from the lowest to highest mean for each munic ipal i ty and provides the reader with the percent di f ference between the lowest mean and the remanning means for each munic ipa l i ty . Munic ipa l i ty Vancouver Burnaby Coquitlam Richmond Delta Surrey North Vane. D i s t r i c t West Vancouver TABLE XXVI RANKED ORDER OF NET TAX-MARKET PRICE RATIO MEANS BY PRICE CATEGORY  FROM THE LOWEST TO THE HIGHEST WITHIN EACH MUNICIPALITY AND  THE PERCENT DIFFERENCE OF THE TWO HIGHEST PRICE CATEGORIES MEANS FROM THE LOWEST FOR EACH MUNICIPALITY Low 1/3 Priced Numerical XVariat ion Order # from the Within the lowest mean Municip. within each Municip. 1 1 1 1 2 1.19 1 1 1 Mid. 1/3 Priced Numercial %Variation Order # from the Within the lowest mean Municip. wi th in each Municip. 3 3 3 3 1 2 3 2 12.51 12.51 11.74 20.32 14.72 13/14 21.62 High 1/3 Priced Numerical ^Var iat ion Order # from the Within the lowest Mean Municip. wi th in each Municip. 2 2 2 2 3 3 2 3 10.66 10.66 10.38 17.41 43.66 43.28 12.81 29.49 ID 00 99 Referr ing to Table XXVI the low priced 1/3 propert ies pay propor t ional ly less taxes in a l l the munic ipa l i t ies except De l ta , The middle 1/3 priced propert ies pay porport ional ly higher taxes than the other pr iced categories in 5 out of the 8 mun ic ipa l i t i es . Table XXVI a lso provides information which allows us to com-pare the munic ipa l i t ies on the i r equal i ty of taxes between pr ice cate-gor ies. The munic ipa l i t ies with the least percentage deviat ion of the means of the pr ice categories have the greatest degree of equal i ty between the pr ice categories being studied. Burnaby reg is ters the greatest degree of equal i ty with the two highest means of the pr ice categories deviat ing from the lowest mean by 10.38% and 11.74%. The greatest degree of inequal i ty is in Surrey where the highest 1/3 and middle 1/3 priced propert ies pay respect ive ly 43.29% and 14.72% higher taxes than the low 1/3 pr iced. The remaining munic ipa l i t ies in order of equal i ty of taxat ion by pr ice ranges are: Vancouver, D i s t r i c t of North Vancouver, Coquitlam, Richmond, West Vancouver and Del ta. B. Burden of Taxation in Di f ferent Mun ic ipa l i t ies One munic ipal i ty has, on the average, residents which pay pro-por t iona l ly higher taxes than residents of another munic ipa l i ty . The means and medians of the net-taxes - market value ra t ios of a l l the res ident ia l propert ies in each munic ipal i ty is out l ined in Table XXVII. 100 TABLE XXVII MEANS AND MEDIANS OF NET TAX MARKET PRICE RATIOS FROM THE LOWEST TO THE HIGHEST MEAN OF THE MUNICIPALITIES AND THE PERCENT DEVIATION OF THE MEANS OF THE MUNICIPALITIES FROM RICHMOND'S MEAN Munic ipa l i ty Mean % Deviation of Median Means from  Richmond Mean Richmond 1.094 5.94 1.134 Delta 1.159 :.5.94 -1.235 West Vancouver 1.209 10.51 1.239 Surrey 1.214 10.97 1.067 Vancouver 1.283 17.28 1.251 North Vane. D i s t r i c t 1.306 19.39 1.300 Burnaby 1.501 31.16 1.513 Coquitlam 1.554 42.05 1.575 * F i e l d study From Table XXVII we f ind that , on the average, the residence of Richmond pay propor t ional ly less taxes as a percent of market value than the residents of the other mun ic i pa l i t i es , and are in ef fect receiv ing 3 equal benef i ts . The residents of Coquitlam pay the highest tax proportional to the market value of property being 42.05% higher than that of Richmond. This implies that , on the average, the owner of property which i s located in Coquitlam and valued at $20,000 w i l l pay 42.05% 3 This*, statement i s a conjecture by the author as the service provided by the d i f fe rent mun ic ipa l i t ies was not studied in great d e t a i l . 101 higher taxes than the owner of an equivalent $20,000 property located in Richmond. The point should be made that th is is only the average when a l l the propert ies are considered, for as was shown in Table XXVI there are d i f fe ren t tax burdens for d i f fe rent pr ice categories in each of the mun ic ipa l i t i es . This point i s best shown by an example. Referr ing to the mean net-tax market-value ra t ios in Table XXVII we f ind tha t , when a l l the res ident ia l propert ies in each munic ipal i ty are considered, the r e s i -dents of Delta pay 5.94% propor t ional ly higher taxes than the residents of Richmond. I f , however, we consider a s p e c i f i c a l l y priced r e s i -dent ia l property, eg. $22,000, and re fer to Table XXV and I I , then the fol lowing resu l ts occur: A $22,000 property located in Richmond i s in the middle 1/3 priced category of the propert ies considered, while a $22,000 property located in Delta i s in the low 1/3 priced categroy. The mean of the net-taxes market-value ra t io for Richmond within the middle 1/3 priced propert ies is 1.163 while the mean of Del ta 's 1/3 low priced propert ies i s 1.022 (Table XXV). Therefore, the owner of the $22,000 res iden t ia l property in Delta pays less property taxes than the owner of a $22,000 res ident ia l property in Richmond. Further comparisons of the taxes payable between equivalent pr iced propert ies located in d i f fe rent munic ipa l i t ies can be made but one must refer to the appropriate 1/3 category in each munic ipal i ty and obtain the mean for the pr ice category. I t must also be rea l ized that i t i s only the mean of the pr ice category which the reader i s re fe r r ing to and there are deviat ions from the mean for d i f fe rent market priced propert ies and even for pa r t i cu la r priced propert ies. A di f ference in taxes paid by the owners of two equivalent pr iced propert ies located in the same munic ipal i ty may resu l t because of d i f fe rent assessed values or due to extra charges for addi t ional services a l l o t ted to one and not the other. C. BURDEN OF TAXATION BY LAND USE that an undue burden of taxat ion f a l l s upon some land uses re la t i ve to other land uses. The mean and median of the net taxes-market value ra t ios w i l l be employed to measure the equal i ty of the tax burden. Table XXIX i l l u s t r a t e s the mean and median for the land uses. This sect ion purports to; examine the property tax c r i t i c i s m TABLE XXIII MEAN AND MEDIAN OF NET TAXES-MARKET VALUE RATIOS FOR THE LAND USES* Munic ipa l i ty Land Use Mean Land Use Median Vancouver conversion 1.095 res iden t ia l 1.283 apartment 1.806 r e t a i l 1.856 o f f i ce 1.901 indus t r ia l 2.142 conversion 1.036 res ident ia l 1.251 r e t a i l 1.915 apartment 1.878 o f f i ce 1.911 indus t r ia l 1.953 Surrey res ident ia l 1.214 vacant land 1.439 res ident ia l 1.067 vacant land 1.354 Delta res ident ia l 1.159 vacant land 2.752 res ident ia l 1.235 vacant land 2.798 * F ie ld study 103 Of the land uses in Vancouver the conversion, on an average, pay propor t ional ly less taxes than the other land uses and res ident ia l propert ies pay the next least proportional taxes. The indus t r ia l and o f f i ce land uses pay the highest taxes proport ional ly to the market value of the property. In Surrey and Delta the owners of vacant land pay propor t ional ly higher taxes then the res ident ia l owners. Table XXIX out l ines the average percentage which the land uses with the higher means pay propor t ional ly above the land use with the lowest mean. TABLE XXIX PERCENT WHICH THE LAND USES PAY IN TAXES ABOVE THE LAND USE WITH THE. LOWEST MEAN Munic ipa l i ty Land Use Percent above the land use with the lowest Vancouver conversion >• (base) res iden t ia l 14.63% apartment 64.93% r e t a i l 69.50% o f f i ce 74.52% indus t r ia l 95.62% Surrey res ident ia l (base) " vacant land 18.53 Delta res ident ia l (base) vacant land 137.45 Comparing the land uses in Vancouver we f ind that the owners of indus t r ia l property are paying 95.62% proport ional ly higher taxes than the owners of conversions, while the owners of vacant land in Delta are paying 137.45% proport ional ly higher taxes than the i r count-erpart owners of res ident ia l property. CHAPTER VII SUMMARY OF FINDINGS AND RATIONAL FOR THEM A. SUMMARY 1. Assessment Uniformity - The degree of assessment uniformity wi thin munic ipa l i t ies and land uses varied depending upon the measure,, which was engaged. Since the d i s t r i bu t ion of assessment-sales ra t ios was not normal the most appropriate s t a t i s t i c s which measured the degree of uniformity was the percent deviat ion from the median method. The con-clusions presented here are those determined by that method. a) Ranking the munic ipa l i t ies in order from the most uniform to the least uniform assessments was as fo l lows: North Vancouver D i s t r i c t , Coquitlam, Burnaby, Vancouver, Richmond, West Vancouver, Delta and Surrey. b) Ranking the land uses from the most uniform to the least uniform assessments produced the fo l lowing order: In Vancouver; residen-t i a l , conversion, apartment, i n d u s t r i a l , o f f i ce and r e t a i l ; in Surrey: res ident ia l and vacant land; and in De l ta : res ident ia l and vacant land. 2. Assessment Equal i ty -a) Assessment equal i ty between munic ipa l i t ies does not ex is t as the percent variance between the munic ipal i ty with the highest mean (Burnaby) of the assessment-sales ra t ios and the munic ipal i ty with the lowest mean (Surrey) was 11.15%. The ranking of the Mun ic ipa l i t i es from the one with the lowest mean to the one with the highest mean i s as fo l lows: Surrey, De l ta , West Vancouver, Vancouver, Richmond, North Vancouver D i s t r i c t , Coquitlam and Burnaby. 105 b) Equal i ty of Assessments between land uses i s also a non-existent phenonoma. The var ia t ion of the land use means from the overal l mean ranged from - 17.79% for conversions to +6.97% for apartments in Vancouver. In Surrey the vacant land use was 34.42% below the mean of the means of the two land uses studied. Ranking the land uses from the lowest to the highest mean produced the fo l lowing order: In Vancouver; conversions, r e s i d e n t i a l , r e t a i l , i n d u s t r i a l , o f f i ce and apartment; in Surrey: vacant land and r e s i d e n t i a l ; in Del ta : vacant land and re-s iden t ia l . c) Pr ice categories in each munic ipal i ty are also assessed at non-equal percentages of market value. The lower priced propert ies are general ly assessed at proport ional ly lower rates than the higher priced propert ies. There are d i f fe rences , however, in the par t i cu la r pr ice category of res ident ia l property which the munic ipa l i t ies are prejudiced for or against . The munic ipa l i t ies of Burnaby, Coquitlam, Surrey, North Vancouver D i s t r i c t and West Vancouver underassess the lower 1/3 priced propert ies re la t i ve to the other propert ies ewhi.le Vancouver and Richmond underassess the higher 1/3 priced propert ies. Delta underassess the middle 1/3 priced proper t ies. Vancouver, Burnaby, Coquitlam and West Vancouver 'overassess the middle 1/3 priced propert ies. Only the munic ipal i ty of Richmond overassess the lower priced propert ies. The order of the munic ipa l i t ies from the one with the greatest degree of assessment uniformity between pr ice categories to the one with 106 the least i s : Burnaby, North Vancouver D i s t r i c t , Surrey, Coquitlam, West Vancouver, Vancouver, Richmond and Del ta. 3. Burden of Taxation -a) The lower priced propert ies general ly pay proport ional ly less taxes than the higher priced propert ies. The degree of the equal-i t y of the tax burden for pr ice categories varies for each of the mun-i c i p a l i t i e s studied. In a l l the munic ipa l i t ies studied except Delta the residents of the lower 1/3 priced propert ies pay propor t ional ly less taxes than the residents of the other two pr ice categor ies. The residents of the middle 1/3 priced propert ies in the munic ipa l i t ies of Vancouver, Burnaby, Coquitlam, Richmond and North Vancouver D i s t r i c t pay proport ional ly higher taxes than the residents of the other two pr ice categories while in the munic ipa l i t ies of De l ta , Surrey and West Vancouver i t i s the residents of the higher 1/3 priced propert ies who pay the propor t ional ly higher taxes. L i s t i ng the munic ipa l i t ies from the one exh ib i t ing the greatest equal i ty of the tax burden to the least produces the fo l lowing order; Burnaby, Vancouver, D i s t r i c t of North Vancouver, Coquitlam, Richmond, West Vancouver and D e l t a . 1 1 It should be noted that a cer ta in degree of proportional tax inequal i ty i s des i red, (eg. due to extra service charges and the homeowners grant) . However, a port ion of the tax inequal i ty i s a resu l t of inaccurate assessments. The proportions of the tax inequal i ty which are due to desired and undesired causes were not ca lcu la ted. 107 b) On an average, the tax burden of res ident ia l property owners var ies from one munic ipal i ty to another. The highest taxes are paid in Coquitlam which i s 42.05% proport ional ly higher than the taxes paid in Richmond. L i s t i ng the munic ipa l i t ies from the one in which the residents pay the propor t ional ly lowest taxes to the highest produces the fo l lowing order : Richmond, De l ta , West Vancouver, Surrey, Vancouver, North Vancouver D i s t r i c t , Burnaby and Coquitlam. c) The burden of taxat ion varies substant ia l l y from one land use to another. In Vancouver, the owners of indus t r ia l property pay 95.62% proport ional ly higher taxes than the owners of conversions and in Delta the discrepancy between res ident ia l and vacant land i s 137.45%. The order of the land uses from the one in which the owner on an average, pays the propor t ional ly lowest taxes to the highest i s as fo l lows: Vancouver; conversions, r e s i d e n t i a l , apartment, r e t a i l , o f f i ce and i n d u s t r i a l ; Surrey; res ident ia l and vacant land and Del ta ; res ident ia l and vacant land. B. REASONS FOR ASSESSMENT INEQUALITIES AND UNUNIFORMITIES Factors causing assessment inequal i ty and ununiformity are numerous and at times may operate in opposite d i rect ions thereby diminishing the tota l of an unjust tax burden upon a par t i cu la r property owner. However, i t i s very un l i ke ly that the error in one d i rec t ion w i l l be o f fset by an equal error in another d i rec t ion to produce a jus t d i s -t r ibu t ion of the tax burden. The ef fects of one error against another were not measured as they vary for every property in every munic ipal i ty and the ca lcu la t ions would be impossible to make. 108 Some of the reasons causing inequa l i t ies or ununiformity of assessments have been mentioned and studied e a r l i e r , so in these cases they w i l l be mentioned only b r i e f l y at th is time. 1. Five and Ten Per Centum Rule's As discussed in Chapter III the ef fects of these rules are as fo l lows: 1) ununiformity and inequal i ty of assessments; 2) i n -creases administrat ive costs and 3) confuses the taxpayer. It i s re-commended that these rules should be abol ished. 2. Appraisal Methods of Assessors a) Cost Approach - The appraisal methods of the c i t y ass-essors were described in Chapter I I I . B a s i c a l l y , i t i s the 'cost-new-less accrued deprec iat ion ' approach and i s one of the three most com-monly used appraisal methods. In 1932 Babcock quoted the Appraisal Pract ice of the National Associat ion of Real Estate Boards as saying, "such summation appraisals are condemned as unsound, inaccurate and misleading because th is method bases the opinion of value on the addit ion of values which may not be simultaneously obtained, and ignores the ef fect of over - , under-, and misplace improvements, and d isregards ' the in te r re la t i on between land value and the value of improvements."2 Granted, the cost approach may have v a l i d i t y when the im-provements have been recent ly constructed upon the land and they re-present the lands highest and best use but, when the method i s used to appraise older improvements many subject ive judgements must be made which resul ts in appraisers obtaining d i f fe rent values for the same property. 109 The v a l i d i t y of the cost approach may be questioned when one rea l i zes that i t does not take into consideration the value which may be added to the to ta l value of the property when a par t i cu la r improvement i s placed upon a par t i cu la r parcel of land. The value of the property may be greater than the value of the land and the value of the improvements added together. The flaws in the cost approach method of valuat ion becomes over-whelming when i t i s employed for valuing property with older type improvements. The f i r s t dimension of the cost approach method to be ex-amined i s the valuat ion of land. A market value for the land must be de-termined under the assumption tht i t i s void of improvements. The im-proved l o t i s compared to s im i la r unimproved sold lo ts in order to deter-mine i t s market value. This procedure w i l l lead to inaccuracies in ass-essments because improved and unimproved lo ts are two d i f fe ren t commodi-t ies which should be treated as such. The pr ice which is paid for parcel of vacant land w i l l depend upon i t s potent ial u t i l i z a t i o n and the purchaser who w i l l u t i l i z e the land to i t s highest and best use w i l l be able to bid the highest for the land. 110 R. U. R a t c l i f f e defines 'highest and best use' of land as : "a structure which i s per fect ly appropriate to the s i t e and which suffers from no defec ts , neither physical de te r io ra t ion , funct ional obsolescence, nor economic obsolescence."3 The number of improved propert ies where the improvements represent the highest and best use becomes negligable under the above d e f i n i t i o n . The assessor i s , therefore, comparing the value of a vacant parcel of land which has a value derived from i t s highest and best use to the value of land where the improvements no longer represent i t s highest and best use. The second part of the equation, cos t - less deprec iat ion, for determining market value is also subject to many defects. The appraiser f i r s t detemines what i t would cost to bu i ld a rep l i ca of the improve-ments at todays p r i ces . The f i r s t discrepancy between cost and market pr ice ar ises at th is point : The structure may contain improvements which add a greater or a lesser amount to i t s market value then the cost of the improvement. For instance, the cost of paint ing the structure may equal $800 but when the property i s sold i t may have added $1000 to i t s market p r ice . An often c i ted c l i che used to present the s i tu ta t ion whereby the cost of an improvement may not equal i t s market value i s ' the construct ion of a hotel in the Sahara Desert?" From the cost f i gu re , which may not represent market va lue, the assessor is required to subtract a value equal to i t s depreciat ion. 3 Richard U. R a t c l i f f , "Appraisal Theory" (Unpublished Course Mate r ia l , Vancouver, U . B . C , 1970), Chapter V, P. 17 I l l This depreciat ion may be due to physical de te r io ra t ion , funct ional obso-lescence or economic obsolescence. Since the buyers and se l l e r s in the market do not usual ly perform these i n t r i ca te cost estimates the value which the assessor a t t r ibutes to these phenonoma becomes highly suspect. The buyer usual ly considers the overal l appearance and condit ion of the improvements and does not categorize the costs of indiv idual items. For th is reason adding the $800 cost of paint ing the home mentioned above may increase the f ina l s e l l i n g pr ice by $1000. Functional depreciat ion may resu l t over time as s ty les and needs change. A home b u i l t 20 years ago which re f lec ted the s ty le and needs of that time may be completely d i f fe rent from a house b u i l t in the current times re f l ec t i ng the changed s ty le and needs. The cost of converting the older home may be economically unfeasible yet the assess-or i s asked to subtract an appropriate f igure from the cost pr ice which w i l l r e f l ec t i t s market value. The main defect of the cost approach is that i t i s very un-l i k e l y that the market value of the property w i l l equal or approximate the summed values of the indiv idual sectors of the whole. R. U. Ra t c l i f f e s ta tes : "any complex product or enterpr ise generates an undi f ferent ia l stream of product iv i ty through the in teract ions of i t s components. It i s impossible to assign to any s ing le component the measure of i t s contr ibut ion to the composite product iv i ty and thus impossible to assign to any component a meaningful capi ta l value which measures i t s cont r ibut ion."4 4 i b i d . , Chapter 5, Page 28. 112 The municipal appraiser is provided with an assessment manual which i s to act as a guide to the assessor when carrying out his assess-ment by the cost-approach. Finnis has the fol lowing comment to make about the use of the manual: " for each ind iv idual property he (the assessor) must decide among other th ings , in which c l a s s i f i c a t i o n to put the bu i l d i ng , what cost schedule to apply, what environmental or i n t r i n s i c features cause loss in value and to what extent. A l l these matters require the exercise of judgement, with one assessor being influenced one way and another assessor in another way. Accordingly no two assessors are l i k e l y to come up with exact ly the same value for a given property even though they may s ta r t with the same fac ts . "5 The inequi t ies and ununiformit ies of assessments caused by the use of the cos t - less depreciat ion method of assessing may be el im-inated by reducing the assessor 's dependants upon th is method and focusing the i r at tent ion upon the cap i t a l i za t i on and market approach methods. These methods w i l l not be a panacea for they too have the i r fau l ts but i f used properly they should prove to be more accurate measures of market value. Paul Rol lo quoted P h i l l i p White as fo l lows: "The data must be ob ject , and the only basis of assessment that w i l l meet his requirement i s current market value. Market transactions w i l l supply a continuous stream of evidence of value for most kinds of property, and i t can be used at w i l l . No such evidence i s ava i lab le for any other basis of assessment."6 5 F i n n i s , Property Assessment in Canada, op. c i t . , P. 70 6 Paul Ro l l o , "Valuation Theory Assessment", (Unpublished paper, Vancouver, Univers i ty of B r i t i s h Columbia, 1971), Page 26. (excerpt taken from P h i l l i p H. White, "Land Taxation in Canada", (Unpublished paper, Vancouver: Univers i ty of B r i t i s h Columbia, 1969), Page 5. 113 b) Market Value Approach - the Prov inc ia l Assessment Commiss-ioner also provides the municipal assessor with bonafied sales transactions which he may use as conc i l i a to ry evidence as to the market-value of a par t i cu la r parcel of property. But when determining the current assess-ments the assessor i s asked to compare the subject property with the sales pr ice of property which sold 1 or 2 years previously. The purpose of th is po l icy i s to ensure that a def inable market trend has occurred in re la t ion to the subject property. The Prov inc ia l Assessment Commissioner wishes to avoid a s i tua t ion whereby the municipal assessors are assessing propert ies by re ly ing upon market transactions which may be only a short run phenonoma. Of th is point Finnis s ta tes : "At best , assessments of propert ies en masse can only re f l ec t establ ished trends within each c l a s s i f i c a t i o n of property with modif icat ions made for ind iv idual propert ies at the d iscre t ion of the assessor. A change of values that seem to be appearing in one year should not be re f lec ted in revised assessments un t i l the assessor can be sure that the change i s r ea l l y an establ ished trend."7 I f th is po l icy is well adheared to,the assessor has very l i t t l e chance of ever determining the current market value of the property under study for market values very seldom remain constant over a one or two year per iod. Property values may increase, decrease, or remain constant but most assur-edly they w i l l not f luctuate at exact ly the same rate as the propert ies which were deemed comparable to them 2 years previously. Further study should be conducted comparing the inequi t ies or ununiformit ies of assessments which may resu l t from the use of current sales against the resu l ts which occur using sales data which i s one or two years o ld in order to determine which procedure resul ts in the least d i s to r t i ons . 7 F i n n i s , l oc . c i t . 114 3. Lag Period in Assessments A th i rd charac te r i s t i c of the assessment procedure which has led to the ununiformity of assessments is the lag period in assessments of property. Due to the magnitude of the assessment r e s p o n s i b i l i t y , municipal assessors are able to perform re-assessments of property every 4 or 5 years. They must, therefore, provide estimates of assessed value each year for 75-80% of the propert ies wi th in the i r j u r i s d i c t i o n . These estimates are , to a cer ta in degree, a re f l ec t i on of the assessment-sales ra t ios which are co l lec ted and determined by the Prov inc ia l Assessment Commissioner. A mean of the assessment-sales ra t io is deter-mined for each"land use. I f a par t i cu la r land use i s low re la t i ve to other land uses then the municipal assessor w i l l a r b i t r a r i l y increase the values of propert ies wi thin that category a greater extent than the value of propert ies in other land use categor ies. The assessment-sales rat ios determined by the Assessment Commissioner u t i l i z e s the current assessments and the sales from two years previously. The current market assessments obtained by th is method may have no d i rec t re la t ionsh ip to the current market values. It is suggested that the sales data in the ra t ios be as recent as poss ib le , thereby, reg is ter ing a truer picture of the current assessment-sales ra t i os . 4. Biasness of Assessors Mary Rawson suggests the ununiformity of assessments may resu l t due to the tendency to underassess the more valuable property. Her reasons for s ta t ing th is are: 1) there are a smaller number of large s ize propert ies to compare and i t is more l i k e l y that the assessor w i l l underassess 115 these propert ies in order that he won't have to substantiate his f igures in court ; and 2) holders of smaller or less valuable propert ies seek re-g dress less f requent ly. From the data which was co l lec ted and analyzed (Tables #18 & 19) the reverse seems to be t rue , that i s , that the less valuable propert ies are under-assessed. 5. Leg is la t i ve Causes Rel ie fs in the form of special assessments, for example, to farm land and res ident ia l land, also cause assessment ununiformit ies and i nequa l i t i es . Ununiformities and inequa l i t ies of assessments caused by these special assessments are deemed to be essent ia l to avoid a s i tua t ion whereby a property;,owner i s forced to s e l l because he cannot pay the i n -creasing property tax. However, under the present system, when the property owner does f i n a l l y s e l l and he obtains the market value pr ice for i t , a l l the cap i ta l gains go to him. During the period of his special assessments a port ion of his tax burden is sh i f ted upon others, ye t , when he s e l l s the property the other taxpayers do not benef i t from i t s increased market value. Instead of the taxing author i t ies providing the property owner with a non-recapturable r e l i e f a more equitable solut ion would be the deferment of a port ion of the tax, payable at the time of a change of ownership or a change of land use. 8 Mary Rawson, "Taxation Assessments and the C i t y " , (Canadian Inst i tu te of Realtors Journa l , 1962) 116 C. REASONS FOR UNEQUAL TAX BURDEN Unequal proportional tax burdens resu l t due to e i ther administered or unadministered consequences. 1. Administered inequa l i t ies of a proportional tax burden w i l l be a con-sequence of the homeowners grant. Since the grant i s received only by owner-occupiers of res ident ia l property the burden of taxat ion' is reduced for th is type of land use. A lso , wi th in the res ident ia l land use i t s e l f , i nequa l i t ies w i l l resu l t because the grant is a f ixed amount and, as such, i t reduces the burden of taxat ion of lower priced homes propor t ional ly greater than that of higher pr iced homes. A second cause of administered inequal i ty is that taxes are app-ort ioned to d i f fe rent propert ies depending upon the extra services which the munic ipal i ty supplies to them. Although the value of the property w i l l be increased as addi t ional services are provided, the author i t ies reason that the increased taxes, as a resu l t of the increased market value, are not in themselves su f f i c i en t to pay for the se rv i ces , so addi t ional charges at?e assessed the property owner. Perhaps a study should be inst igated which re lates the increased tax burden of a property owner to the benefi ts he received from the services or the cost of the serv ices . Unknowingly, the property owner may be paying for the servicesufcwice, once when the market value of the property i s increased, increasing the i r taxes and again when the property-owners are assessed additonal service charges. 117 Administered inequa l i t ies of the tax burden are also a resu l t of exemptions and r e l i e f s which were discussed in Chapter I I I . Exemptions of taxes or assessments bestowed upon some property owners or property types red is t r ibuted the burden of taxation onto the remaining property owners. The incidence of an exemption or r e l i e f i s usual ly not know be-cause the author i t ies granting the r e l i e f s do not look beyond i t s i n i t i a l e f fec ts . It i s recommended thattthe exemption po l i c i es should be reviewed and where possible subst i tute these forms of benef i t for grants which are more c lose ly sc ru t in i zed . 2. Unadministered inequa l i t ies of the tax burden are the by-products of poor assessments. The inequa l i t ies due to th is facet cannot be removed un t i l the assessment inequa l i t ies and ununiformit ies themselves are ob-l i t e ra ted or reduced. D. CONCLUSION The hypothesis of the thesis was: Are there inequa l i t ies or ununiformity in assessments;or real property which cause the tax burden to g be d is t r ibu ted unjust ly? This ••Statement was broken down into three sep-a r a t e subdivis ions which were empi r ica l ly tested. These subdivis ions were: assessment uni formi ty, assessments equal i ty and tax burden equal i ty . I t was proven beyond a reasonable doubt that assessment uniformity does not ex is t wi th in the munic ipal i tes s tudidd, and the degree of ununiformity varied with the d i f fe ren t mun ic ipa l i t i es . Also proven wi th in the thesis was that not only did assessment uniformity vary between the munic ipa l i t ies 9 Supra, P . l 118 but i t also varied in degree by the land use c l a s s i f i c a t i o n s . The same conclusions were observed about the second part of the hypothesis, that of assessment equal i ty . Equal i ty of assessments betwen munic ipa l i t ies and land uses are not t r a i t s of the property Tax System in B r i t i s h Columbia. The equal i ty of assessments between pr ice ranges of res ident ia l property was also tested resu l t ing in the suppos-i t i o n that lower priced propert ies were general ly underassessed re la t i ve to the medium and higher pr ice proper t ies. The th i rd and f ina l sect ion of the hypothesis, that of a jus t d i s t r i bu t i on of the tax burden, was also proven to be i n v a l i d . This is a natural consequence when ei ther assessment uniformity or equal i ty does not ex i s t . The exact extent of the i n j us t i ce of the tax burden cannot be measured because a port ion of the inequa l i t ies of taxes is the resu l t of l eg is la ted or administrat ive po l i c i es which are deemed to be of jus t consequence. It was recommended e a r l i e r that some of the l e g i s l a t i v e p o l i -c ies should be reviewed to determine whether or not the po l i c i es are in fact resu l t ing in the ef fects for which they were intended. Also a revamping of the appraisal methods should be made to decrease the undesired port ion of the unequal tax burden. E. AREA FOR FURTHER RESEARCH Measuring assessment uniformity and equ l i ty may be useful tool in a id ing the assesor in his assessments. If the sample s ize i s increased 119 thereby enabling the researcher to increase the number and types of categor ies , then he can pinpoint the types of propert ies most ununiform of unequal and correct the assessments of those propert ies. The assessor may group the propert ies into sections depending upon such factors as : land use, p r i c e , arch i tec tura l design and age of improvements, number of s t o r i e s , and i t s loca t ion . The number of categories w i l l depend upon the number of propert ies which f a l l into them-for there must be enough cate-gories that meaningful information can be gainedcbut not an over-abundance such that ca lcu la t ions become to burdensome and confusing. To provide useful information the appropriate measures must be appl ied to the categories depending upon the type of information sought. The resu l ts obtained w i l l apply to the categories as a whole and i t must be remembered that ind iv idual di f ferences may ex is t within the categories themselves'; General ly , however, the categories which exh ib i t the greatest divergencies should be reassessed f i r s t . Other areas which deserve further research and were mentioned throughout the thesis are: 1. The re la t ionsh ip between net taxes and the benefi ts received by the proper ty owner. 2. A study to determine the extent of the d is to r t i on of assess-ments caused by employing sales data which i s two years o ld . 3. Increased tax burden of homeowners in re la t ion to benef i ts or costs when extra services are provided by the munic ipa l i ty . 120 BIBLIOGRAPHY A. BOOKS Babcock, Frederick M. The Valuation of Real Estate. New York: McGraw H i l l Book Company, Inc . , 1932 Becker, ARthur P. Land and Bui ld ing Taxes. Madision: Wisconsin Press , 1969. Benson, W. J . The Property Tax and the Special Patterns of Growth Within  Urban Area. Washington: Urban Land Ins t i t u te , 1968. Cochran, Wil l iam G. Sampling Techniques. Second Editon New York: John Wiley and Sons Inc . , 1963 E lzey , Freeman F. A Programmed Introduction to S t a t i s t i c s . C a l i f o r n i a : Wadsworth Publ ishing Co. Inc . , 1965. George, Henry, The Land Question. New York: Doubleday Page and Company, 1891. Grawosky, Dennis and Hughes Ann, S t a t i s t i c s : A Foundation for Ana lys is . Don M i l l s : Addison-Wesley Publ ishing Co . , 1971. F isher , Ronald A. S t a t i s t i c a l Methods for Research'Workers. Fourteenth e d i t i o n , Edinburgh: Ol iver and Boyd, 1970. Hickman, E.P. and H i l t o n , J . G. Probab i l i t y and S t a t i s t i c a l Ana lys is . Toronto: Intext Educational Pub l ishers , 1971. Jensen, J . P. Government Finance. New York: Lomas, Y. Crowell Company, 1937. Property Taxation in the U.S. Chicago: Univers i ty of Chicago Press , 1931. Lindholm, R. W. Property Taxation U.S.A. Madison: Univers i ty of Wisconsin Press , 1967. Mace, Ruth L. and Wicker, Warren. Do Single Family Homes Pay the i r Way? Washington: Urban Land Ins t i tu te . Marsha l l , A l f r ed . Pr inc ip les of Economics. Eighth ed i t i on . London: Macmillan and Co. L t d . , 1962. M i l l s , Frederick C. S t a t i s t i c a l Methods. Th i rd .ed i t i on . New York: Henry Holt and Company, 1955. Morton, Walter. Housing Taxation. Madision: Univers i ty of Wisonsin Press, 1955. Musgrave, R. A. The Theory of Publ ic Finance. New York: McGraw H i l l Book Co. 1959. Ost te , Bernard. S t a t i s t i c s in Research. Ames, Iowa: Iowa State College Press , 1954. Peters, W. S. and Summers, G. W. S t a t i s t i c a l Analysis for Business  Decisons. New Jersey: Prent ice-Hal l I nc . , 1968. Seligman, Edwin R. A. Essays in Taxation. Sixth edtion London: Macmillan and Company L t d . , 1909. Sh i f t i ng Incidence of Taxation. F i f t h e d i t i o n , rev ised. New York: Columbia Univers i ty Press, 1926. Turvey, Ralph. The Economics of Real Property. An Analysis  of Property Values and Pattersn of Use. London: George A l len and Unwin, L t d . , 1957. Wendt, Paul F. Real Estate Appra isa l . A C r i t i c a l Analysis  of Theory and Prac t i ce . New York: Henry Holt and Company, 1956. B. MONOGRAPHS Committee on Sales Ratio Data. Guide for Assessment-Sales  Ratio Studies. A Report to the National Associat ion of Tax Administrators. Chicago: Federation of Tax Administ rators, 1954. F i n n i s , Frederic H. Real Property Assessment in Canada. Canada Tax Papers No. 30. Toronto: Canadian Tax Foundation, 1962. Property Assessment in Canada, Canada Tax Papers No. 50. Toronto: Canadian Tax Foundation, 1970. National Associat ion of Tax Administrators. Guide "for Assessment Sales Ratio Studies, A Report of the Committee  on Sales Ratio Data. Chicago: Federation of Tax Administ rators, June 1954. 122 Rawson, Mary. Property Taxation and Urban Developement. Urban Land  Ins t i tu te . Research Monograph #4: Washington, 1961. C. PERIODICALS Byrne, Thomas A. Ful l Value Assessments in P rac t i ce : Reasons for Underassessments, National Tax Assoc ia t ion , Proceedings of the  51st Annual Conference, PP. 421 - 429. 1958 Committee on State Equal izat ion of Property Tax Assessments. National Tax Assoc ia t ion . Proceedings of the 51st Annual Conference, 1958. Corbert , Les l ie E. An Appraisal of Sales Ratio Studies. National Tax Assoc ia t ion , Proceedings of the 51st Annual Conference, 1958. Dupre, J . Stefan. "The Property Tax in Canada", National Tax Assoc ia t ion , Proceedings of the 51st Annual Conference, 1958. F i n n i s , F. H. "Measuring the Local Tax Base", Canadian Tax Journal Vo l . X I I , No. 1 (January-February, 1964). Hamilton, Stanely W. and White, P h i l i p H. "The Real Property Tax in B r i t i s h Columbia - An A n a l y s i s " , Prepared for the B.C. School  Trustees Assoc ia t ion , 1971. Kelmer, Robert F. "Fu l l Value Assessments; The Legal View". National Tax Assoc ia t ion , Proceedings of the 51st Annual Conference, pp. 413 - 421. 1958. Kendrick, Slade N. "Property Tax Exemptions and Exemptions P o l i c i e s " , National Tax Assoc ia t ion , Proceedings of the 51st Annual Conference, 1958. pp. 84 - 98. Macy, C. Ward. "The Property Tax in the F isca l System". National Tax Assoc ia t ion , Proceedings of the 51st Annual Conference, 1958. Massey, F. J . "The Kolmogorov-Smirnov Test for Goodness of F i t . " Journal of the American S t a t i s t i c a l Assoc ia t ion , 1951. Meyer, Harold F. "Market Value --Beacon Light of Appraisal for Taxat ion" , The Appraisal Journa l , Vo l . XXXIII , No. 4 (October, 1965). Murray, Wil l iam A. "Improvements in Real Estate Taxation through Assessment-Sales S tud ies" , National Tax Journal . Vo l . 5 (1952). 123 Oldman, Ol iver and Henry Aaron, "Assessment-Sales Ratios Under the Boston Property Tax", National Tax Journa l , 1965. Rawson, Mary. "Taxation Assessments and the C i t y " , Canadian Inst i tu te  of Realtors Journal . March 1962. Report of the Committee on State Equal izat ion of Local Property Tax Assessments. National Tax Associat ion Proceedings of the 51st Annual Conference, 1958. Rountrey, J . Edward. "Equal izat ion at Market Va lue" , The Appraisal Journa l , Vo l . 24 (1956). Rybeck, Walter, "Property Taxat ion" , Housing and Urban Growth, Urban Ins t i t u te , Washington: 1970 Townsend, Roswell G. " Inequal i t ies of Resident ia l Property Taxation in Metropolitan Boston", National Tax Journal . Vo l . IV (1951) Welch, Ronald B. "State Tax Department Respons ib i l i ty for Local Assessments": Administrat ive Review, National Tax Assoc ia t ion , Proceedings of the 34th National Conferences, 1941 White, P. H. "Prologue to An Analysis of the Resident ial Mortgage Market in Vancouver, Conference of the Associat ion of Canadian Business Schools , " Proceedings, 1965. D. STATUTES AND GOVERNMENT PUBLICATIONS B r i t i s h Columbia. Assessment Equal izat ion Act . V i c t o r i a : Queens P r i n t e r , Amendments and revisons to 1971. Municipal Act . V i c t o r i a : Queens P r i n te r , 1971 consol idat ion. Publ ic Schools Act . V i c t o r i a : Queens P r i n t e r , Amendments to 1971. Taxation Act . V i c t o r i a : Queens P r i n t e r , Amendments to 1971. Appraisal Manual. V i c t o r i a : Queens P r i n t e r , 1954. Municipal S t a t i s t i c s . V i c t o r i a : Queens Pr in te r . Manitoba. Report of the Manitoba Royal Commission on Local Government Organization and Finance. Winnpeg: Queens P r i n t e r , 1964. New Brunswick. Report of the Royal Commissioner on Finance and Municipal Taxation in New Brunswick. Freder ic ton: Queens P r i n t e r , 1963 Ontario. The Ontario Committee on Taxat ion, Report. Toronto: Queens P r i n t e r , 1967. Quebec. Report of the Royal Commission on Taxation (Government of Quebec). Quebec: Queens P r i n t e r , 1965. Great B r i t a i n . The Rating of S i te Values. Report of the Committee of Enquiry, London: Her Majesty's Stat ionary O f f i ce , 1952. E. UNPUBLISHED MATERIAL Babalos, D., Carros, G . , Doran, D., Greenwood, D., Lach, D., Tomko, W., "Empir ical Study of Mortgage Financing in The Ci ty of Vancouver". Unpublished 509 paper, Univers i ty of B r i t i s h Columbia, Vancouver, 1972. Ghert, Bernard. "Measures of the Qual i ty of Real Property Assessments An Examination of Their V a l i d i t y " . Unpublished Master's Thes is , Univers i ty of B r i t i s h Columbia, Vancouver, 1965. R a t c l i f f , Richard U. Appraisal Theory. Unpublished 407 Course Mate r ia l . Vancouver: Faculty of Commerce and Business Admin is t ra t ion, Univers i ty of B r i t i s h Columbia, 1970. R o l l o , Gordon P. "Valuation Theory and Real Property Assessment". Unpublished Masters' Thes is , Univers i ty of B r i t i s h Columbia, Vancouver, 1971. White, P h i l i p H. Land Taxation in Canada. Unpublished paper. Vancouver: Univers i ty of British'-.Columbia, 1969. APPENDIX A EXCERPT FROM THE BRITISH COLUMBIA APPRAISAL MANUAL In the fo l lowing pages, excerpts from the B r i t i s h Columbia Appraisal Manual are provided so that the reader may understand more f u l l y the municipal assessors assessment process. r General The class- has been divided into three types, as follows:— Class 4-1: Two- and three-story apartment—lower grade. Class 4-2: Two- and three-story apartment—average grade. Class 4-3: Two- and three-story apartment—better grade. The types provided cover the more common frame apartments being built throughout the Province and are not adaptable to the less common reinforced-concrete multi-story apartments being built in the Lower Mainland area. In each class, rates have been provided to allow the treatment of apartments with exterior walls of concrete block or brick. The system of developing the basic square-foot rate for an apartment involves two steps; one, of selecting the square-foot rate for the shell of the building, and, two, of selecting the square-foot rate for each floor based on the average-size suite in the building. The average suite area is found by dividing the ground area of the building by the number of suites on one of the typical upper floors. When the lower floor is partially developed into suites and finished corridor, that portion developed should be measured and calculated as a percentage of the total ground area. The remaining lower floor may be service area—that is, laundry, boiler-room, lockers, etc.—and this area shall be valued at 50 per cent of the suite rate applicable to the developed area. Should the remaining lower floor, or some portion of it, be unpartitioned, this area shall be valued at 10 per cent of the suite rate applicable to the developed area to aiiow for nominal heating, lighting, and other Items. By combining the values for the shell and each floor as illustrated by the examples following Class 4-3, a square-foot rate for the apartment will be developed. Additions and Subtractions Each class has a range of adjustments for the more common variations from the basic description. Heating in each class includes the radiation, piping, and boiler, but not the stoker or oil-burner. Where automatic boiler-firing methods are encountered, these must be added as • unit values. In some cases an attached annex, one story in height, is encountered. Square-foot rates have been provided to value this portion of the structure, with an i exterior finish comparable to that of the main structure. Where some form of heating other than specified is en-countered, the subtractions provided must be treated in , the same manner as set out for calculating the suite rates, on a per floor basis. For special interior finishes, carports and garages, etc., see other Manual classes. ; (Depreciation .. The suggested ranges of depreciation for apartments are as follows:— - percent ' Lower quality - 1 \zA—2Vi Average-quality frame - 1 Vi— 3 Average-quality masonry _ 1 Vi — 3 \ Better-quality frame 1 Vi-~S . Better-quality masonry 1 Vi—2Vi The lower limit in each range is recommended where | the structure is well maintained. 126 C L A S S N o . 4 - 2 BASIC DESCRIPTION 1. Gcncr.i l .—Two- or three-story frame apartment building with lower floor either above or below grade. 2. Foundation.—Concrete perimeter wall and footings. 3. Basement.—Alternative: (a) Full basement with 4' concrete end 4' frame wall where lower floor below grade, or (b) none where lower floor above grado (suites over crawl space). 4. Floors.—Alternative: (a) Lower floor concrete covered by wood sleepers and flooring in corridors and suites, service area concrete floors, or (b) lower floor on wood joists in corridors and suites, service area concrete floors usually on level below that of suites. Floors in suites finished in aood-grade hardwood in living, dining, and hall areas, remainder fir; inlaid linoleum in kitchen and bathroom. Corridors have wall-tc-wall carpet or runner with linoleum-tile borders. Intermediate floors have sound-deadening treatment. 5. Exterior Wall.-—2" x 4" and 3" x 4" frame, shiplap and paper sheathed, good-grade shingles, stucco, or equal. Insulated. 6. Interior Wall.—Good-grade plaster; good-grade doors, windows, trim, • and hardware. Imitation fireplace in each suite. Sound-deadening treatment between suites. 7. Ceilings.—Good-grade plaster or equal. 8. Roof.—Flat, wood joists, with either parapet or small overhang, with fifteen-year bonded built-up roof, roof drains. Insulated. 9. Chimney.—Single-flue inside chimney. 10. Entrance.—Medium-size entrance hall. " • ' ' IT. Heating.—Hot-water heating system with C.I. or convector radiators. Hand-fired boiler. See table for stokers, etc. 12. Plumbing.—Good-grade four-fixture bathroom and kitchen sink in each suite, laundry tubs in service area, central domestic hot-water supply. 13. Electrical.—220-volt service; good-grade wiring and fixtures, range wiring. 14. Painting.—Good-grade paint job. 127 BASIC COST OF SHELL PER SQUARE FOOT OF GROUND AREA Ground area (sq. ft.) 1,500 2,000 3,000 4,000 5,000 7,000 Basic 2-story $3.81 $3.60 $3.24 $2.98 $2.82 $2.53 Basic 3-story _ 5.05 4.80 4.35 3.99 3.75 3.42 BASIC COST OF SUITES PER SQUARE FOOT OF FLOOR AREA Average suite area (sq. ft.) 400 600 800 1,000. 1,200 1,400 Basic suite rate (per floor) $3.54 $2.85 $2.50 $2.30 $2.13 $2.10 - , ADDITIONS A N D SUBTRACTIONS ' . • ' : - ; - , * / , ' • • • 1,500 2,000 3,000 4,000 5,000 7,000 Basement—Add for full 8' concrete $0.08 $0.07 $0.06 $0.06 $0.05 $0.05 Floors— • 1 Add for all rooms hardwood, except ! kitchen and bathroom _ .06 per square foot per floor Subtract for asphalt tilo on concrete, • :.. • lower floor —.18 per squaro foot of finished area Add for ceramic tile in bathroom : $30-$45 per suite , Exterior V /a l l— I Add for concrete block stuccoed " • • ' 2- s to ry .38 .33 .27 .23 .21 .17 • 3-story .59 .51 .42 .36 .32 .27 ' Add for face-brick .-._^_2-story .90 .79 .64 .56 .50 .42 3- story 1.55 1.33 1.10 .95 .85 .72 J Add for brick veneer : .60 to .75 per square foot of face area .Roof— Add for medium pitch . . .10 per squaro foot of oround area Chimney— Subtract for no chimney '. . — $150 f o—$ 2 1 0 I Add for brick incinerator .. 300 to 360 Heating— Subtract per finished floor for no heat 2-story —.57 —.53 —.46 —.42 —.39 —.34 3-slory — . 5 5 —.51 —.45 —.41 —.38 —.33 J Add panel electric heat per floor (after making the above subtrac-tion) _ — .4.1 to .48 per squaro foot Arid for individual suite hot-water heat-control $90 to $120 per sulto i Add for coal-stoker _ $315 to $700 ) Add for liqht-oil burner and 500-qal. tank 315 to 510 Add for heavy-oil burner and 1,000-gal. tank 1,125 to 1,320 Plumbing— Subtract for no basin ... . . „ ™ —$ 5 0 per suite , Subtract for no toilet — 65 per suito 0 Subtract for no both „ —100 per suito Add for shower stall _ $45 tn $100 each Add for separate domestic hot-water boiler, oil-fired ~ $225 to $300 Annex—-Add for 1-story boilcr-rcom and laundry on concrele slab, attached to main structuro a (200 to 400 sq. ft. area) $2.05 to $2.55 per squaro foot ' SBNGLE-FAMILY RESIDENTIAL ' v HOUSING General The single-family residential classifications have been divided into three general groups—one-story, one-and-a-half story, and two-story dwellings. These three general groups are again broken down into three age-groups— houses built prior to 1910, houses built in the period of 1910 to 1930, and the modern class of housing built after 1930 to that cf our present-day construction. These three groups are in turn broken down into three or four classes, ranging from poor, to average, to good, giving a total of thirty-two residential classes. Story Grouping In regard to the three general groups of one-, one-and-a-half, and two-story dwellings, the definition of each, as applied to appraisals made with this Manual will be as follows:— . . . ; (a) One-story.—A house with a' single developed floor above grade. It can have a basement and a finished attic, provided the liveable floor space of the attic does 'not exceed 30 per cent of the ground-floor area. . : (b) One-and-a-haif Story.—A house with a single developed floor above grade but with an attic or upper floor of which the liveable floor area is in the range of ;.30 to 70 per cent of the ground-floor area., This house, .also may or may not have a basement. . (c) Two-story.—A house with two developed floors = above grade, one above the other, with the top-floor area not less than 70 per cent of the ground-floor area. This house also may or may not have a basement. , : ",:.J Age Grouping : '';'v.-v.-, "\\\ i_:, The division of residential housing into different age-groups was done for two reasons. The first and obvious reason was that it helped to clarify the classification of certain types of houses. The second reason, and probably the most important, was that a uniform approach can be applied in regard to design or construction obsolescence. ... The term " age grouping " means the architectural age, or period when a particular design was in vogue. This not only applies to the design, but to the materials used and the method by which they were used. Some designs and materials have not lost their desirability to the same degree as others, and it is therefore necessary to define these differences quite clearly. . It might have been more accurate to have called this division the " fashion grouping," as the differences are in design and the age is secondary. The age classification is brought about because the peak of construction of this type of house coincides with a particular age grouping. An assessor should therefore not deliberately rnis-classify a house because its actual age does not agree with its architectural age grouping. It may be that the house was built prior to or after the era in which its style was in vogue. Quality Grouping Within each of the age-groups a further breakdown has been made into three or four quality classes, ranging from poor, to average, to good. There seerns to be no justification to extend this breakdown beyond the three or four classes, as there are only three or four divisions in the cost of the common construction materials. The assessor must not try to make too fine a distinc-tion between one house and another as far as classifica-tion is concerned, but should compensate for the dif-ference by using the additions and subtractions provided in the costing sheets for each class. Should the assessor still feel a house is above or below the average for its class, and the additions and subtrac-tions provided do not adequately measure this difference, then a plus or minus factorof from 2 to 5 per cent may be applied to the basic unit cost. This factor will be called the " workmanship and design factor." . , ; On occasion an assessor may feel that a house lies directly between two classes. This will be an exceptional case. When the assessor feels this condition exists, he should work out the final figure for the house, including the additions and subtractions applicable, for each classi-.. fication, and then only should he take the average be-tween the two figures. . • : i i :' r Tabulation of the Housing Classifications.—The table below.shows the approximate relationship between the, classes in age and quality. ' . • v -v"' AP.CHITECTURAL nor\\ip ppinp Tr\ i p i n s ; : . Stories Very Poor Poor Avcraqe . Good ;• Best One „..:.*.;._'.__L One and a half _. Two—_ : Class 1-1 Class 1-3 Class 1-11 Class 1-22 Class 1-4 Class 1-12 Class 1-23 Class 7Ti Class 1-24 Class 1-25 ' ARCHITECTURAL GROUP, 1910 TO J930 . : ' one _ One and a half Two _. Class 1-1 Class 1-2 Class 1-14 Class 1-26 Class 1-5 Class 1-15 Class 1-27 Class 1-6 Class 1-16 Class 1-28 Class 1-7 Class 1-17 Class 1-29 • ; - ' ; ' ARCHITECTURAL GROUP AFTER 1930 ; One — . ... One and a half....-Two 1 — Class 1-1 Class 1-5 Class 1-18 Class 1-8 Class 1-19 Class 1-30 Class 1-9 Class 1-20 Class 1-31 Class 1-10 Class 1.-21 Class 1-32 Additions and Subtractions Cases may be found where the cost sheets for a par-ticular classification do not contain the additions and sub-tractions necessary to complete the appraisal of a house. When this occurs the assessor may take the additions or subtractions from a similar class in quality, in one of the other age or story groups. If no addition or subtraction can be found, the assessor may then go to the next class above or below the one in question. It will also be noted that Classes 1-10, 1-21, and 1-32 all have a number of special additions and subtractions. Ordinarily these additions and subtractions apply only to the best-quality homes. However, when these luxury items appear in lower-cost housing, their costing should be taken from the above-mentioned classes. Log Cabins, Prefabricated Houses, etc. This type of housing can exist in such a wide range of styling and quality that no attempt has been made in this Manual to develop an individual cost breakdown for each class. The procedure to follow in making an appraisal of this type of dwelling will be to approximate the age and quality as closely as possible to one of the standard thirty-two classes and then price it accordingly. Mansion-type Residences • . It might make this explanation more understandable to say from the start that the " Best " classifications in this Manual were never intended to cover the so-called mansion-type dwellings. First of all, in the construction of this type of residence, money or cost has not been a consideration. The prime objective has been one of satisfying the whim of owner or architect. Because of the vast variation in planning styles, no standard of sq. ft. costs can be set to any degree of accuracy. On a mansion-type residence where there has been no sale, the problem is one of reproduction costs, with the assessor running into custom-built features, such as special cabinetwork, panelling, art decoration, etc., imported mantels, and chandeliers, that can only be evaiuated by a detailed inventory appraisal. . Having arrived at the reproduction cost, the assessor will then experience great difficulty, particularly in houses of considerable age, as to how much of a factor to apply for obsolescence. This phase in the evaluation procedure cannot be taken too Ijghtly, as the question of obsolescence can become of paramount importance in the calculation of a true value. ... •*•'•;-}'• . It is therefore suggested, since the assessor has little time for a detailed appraisal and no set rules to arrive at proper obsolescence factors for this type of dwelling, that he resort to any one or all three of. the following pro-cedures:— r. v •; (1) Consultation with the owner. , r (2) Sales data on the particular house or a similar one, which may exist locally or be made available by , the office of the Assessment Commissioner. (3) A detailed appraisal by the Assessment Commis-. sioner cr some reputable appraisal firm. Mixed-story Housing , .. , v . . . . If a building is composed of one section of two stories and another section of one story, the one-story part may be broken out as a projection. It will be noted, however, that when unit prices are applied to each section, they should be based on the tot^l area and not the individual areas of each section, otherwise higher unit prices will result than those applicable. That is, a 2,400-square-foot residence, the two-story section being a Class 1-32 and having an area of 1,200 square feet and the singie-story section being a Class 1-10 with an area of 1,200 square feet also, the unit cost for the one-story section would be $5.40 and for the two-story section $7.95. The total basic unit cost would be:— 1,200 square feet @ $5.40-= $6,480 1,200 square feet @ $7 .95= • 9,540 • Total = $16,020 Irregularity Factor Al l buildings in the Single-family Residential section have been costed on the basis that the house frame was rectangular or L-shaped and that the roof was a simple gable or hip type. No bay windows, projections, spires, or towers are included in the basic costing. If a building under consideration has any of these factors or the roof and wall framing is of a more difficult nature than that mentioned above, then the irregularity factor should be used.. "V,. ,-. ; Photographic Illustrations V, The A, B, C, D, and E lettering system which appears under each of the photographic illustrations does not designate a difference in quality between one house and another, but is only used as an indexing system. Should the assessor feel the need to describe a house in more detail, he can indicate which picture most nearly fits the house in question bv inserting ths letter behind the class number. •, • Basements The concrete-wall height as referred to in the costing, sheets of this Manual means the average wall height: In many cases, the nev/er-type homes have a front basement wall equal to a height of 8 feet while the back wall drops off to 4 feet or less. . The average wall height in this case for selecting the basement rate would then be 6 feet. It will be noted that this Manual only considers con-crete and frame walls as the basis for basement costing. No mention has been made in regard to basement walls which are constructed of concrete block, brick, or stone rubble. It has been felt that no useful purpose could be served by a further breakdown into these categories, and that the small error involved, by saying their costs are similar, would not be a serious one.. . Partial Basements In selecting the unit cost rate to apply when costing a partial basement, it must be remembered that this rate should be based on the total house area. The cost of the partial basement is then the product of this rate and the partial basement area. ' That is, a Class 1-8 house with a ground floor equal to 1,000 square feet. It has a partial basement of 600 square feet. The floor is concrete and the average con-crete wall height is equal to 4 feet. What is the cost of the partial basement? From the Manual the rate for a Class 1-8 basement / of 1,000 square feet with 4-foot concrete perimeter wall ! is $0.41 per square foot of ground area. Therefore, the partial basement costing:— (a) Walls, $0.41 x 600 = $246 (b) Floor, $0.22 x 600 = $132 Total = $378 Basement Rooms Because the size and quality of basement rooms can vary to such a degree, regardless of the size and quality of the house, it is felt that three rates, ranging from poor, to average, to good, will suffice in calculation of this nature. It must be remembered in the selection of a rate from the table belcw that as the size of the room, diminishes, the unit cost increases. '-/ j.; BASEMENT ROOMS (PER ROOM) Classification 80 S Q . Ft. 100 S Q . Ft. 120 S Q . Ft. 160 Sa. Ft. 200 Sa. Ft. 300 Sa. Ft. 400 Sa. Ft. 600 Sa. Ft. Poor...-. $0.75 $0.68 50.63 $0.55 $0.50 $0.41 $0.35 $0.30 Average 1.15 1.05 .95 .80 .71 .59 .51 .43 Good _.. 1.70 1.45 1.30 1.10 .95 .76 .65 .56 The above figures do not include flooring and should never be used when... the basement is fully partitioned. (For flooring costs see Class 1-10.) , Basic Specification -' (a) Poor.—2" x 4" studs, cheaper-type waliboard on ceiling and one side of <studs, door, and drop-lights. ' (b) Average.—2" x 4" studs, medium-grade waliboard on ceiling and both • • sides of studs, door, some trim, cupboards, painting, and lighting fixture and .-wall-plug. (c) Good.—2" x 4" studs, nlastpr nr fir plywnnH on '.veils and celling, rvscly ;finished, some cupboards or closet, door, and good lighting fixtures and plugs. Masonry • ';/<•;•. • |-V • ,;V,V'!:'•: ' ] ' • : ! T]'['- ". In the costing ;sheets for the different residential classifications, additions for masonry walls have only been included in the housing classes where this type of con-struction normally appears. However, should the asses-sor encounter masonry walls in some of the other classes where this type of construction is the exception, and no additions are given, he may apply a percentage increase to the basic unit rate, as indicated in the table below, .y s ^ V Incrcaso to : •:[ -I-.:' .-v.*' '• -'' ' • Basic Unit Rate ;• Masonry Type - .'• , . (Per Cent) Concrete block „ „ . .-_ —- 3 to 7. Pumice block .... —•. 4 to 8 Cinder block . 1— 3 to 7 Brick J — „ : „ ™ . 10 to 20 Precast concrete stone — 6 to 12 Random stone, average...: - 15 to 30 Random stone, good...— 20 to 40 Caution must be used in the application of the above percentages, as they are only a rough approximation. . They should never be used in preference to the individual additions appearing in the classification section. It must ":-also be remembered, when using the above table, that the higher quality the house in question, the lower the ' percentage increase, and the lower quality the house the higher the percentage increase. •:, The figures in the above table, as in all the additions for masonry, are based on a masonry-wall height equal to the height of the eaves on one- and two-story houses, and on the one-and-a-half story house to include the stub walls above the upper floor or the gable area. Electrical The term " range and water-heater," as used in the classification sheets, was done as an aid to the assessor in identifying 220-volt service, v/hich has a three-wire lead-in, as opposed to 1 10-volt service with the two-wire lead-in, and is not meant to indicate electric ranges are assessable. -• ' • Insulation "'-: The additions and subtractions for insulation are only shown in three of the classes—1-9, 1-20, and 1-31. As insulation costs are fairly constant, these figures can be used for any class within its story grouping. Courtyards, Patios, Driveways, etc. A normal amount of sidewalks and driveways in relationship to the average for a classification are included with the costing for each individual class of residential housing. Anything in excess of the normal should be inventoried, priced, and included in the total assessed value. './":•.'•'•[:• , : : " ^V, . - - -D e n r e e i a t i o n ( N o r m a l P h y s i c a l ) The accepted range of depreciation for single-family residential housing is 1 YT. to 2]/2 per cent for wood frame, construction, and 1 to 2 per cent for masonry construc-tion. For assessment purposes an average rate of 1 Vi per cent per annum is recommended. This rate has been suggested so as to ensure some form of uniformity of depreciation rates from one assessment jurisdiction to another. • •"' • '. • . Design or Construction Obsolescence :-> SINGLE-FAMILY RESIDENTIAL HOUSING, CONSTRUCTION .i OBSOLESCENCE TABLE . . Class Percentage Obsolescence m u Class Percentage Obsolescence Class Percentage Obsolescence 1- 1 0 o 1-11 0-15 1-22 0-15 £> 1- 2 0 !C 1-12 5-20 8 1-23 . 10-20 O 1- 3 0-10 1-13 10-25 1-24 15-30 v<\ 1- 4 5-15 ' X 1-14 0- 5 1-25 20-35 a 1- 5 . 0 - 5 n 1-15 0-10 1-26 C - 5 c 1- 6 0-10 T3 1-16 5-15 o 1-27 5-15 1- 7 0-15 . c 1-17 10-20 r- 1-28 10-20 1- 8 0 n 1-18 0 1-29 15-35 1- 9 0 o c 1-19 0 1-30 0 1-10 0 . o 1-20 0 1-31 0 1-21 0 1-32 0 1. The above table is based an a survey of the Greater Victoria area and is considered generally applicable to other localities in the Province. Should this not be the case, the assessor should make a study and prepare a revised table based cn his own findings. 2. Caution must be exercised in spplying physical obsolescence factors to buildings which arc converted from single-family residences to multi-family units. In some cases where these conversions have been made, older-type houses, usually because of their size and locality, become very desirable from an income point of view and henco should carry very little or no allowance for design or construction obsolescence. Percentage Adjustments for Unfinished Houses 134 To aid the assessor in calculating partial assessments in the case of unfinished houses, the Percentage Cost Breakdown Table, shown on page 1-14, has been pre-, pared. The table is based on a frame bungalow with basement, in keeping with the basic description of a Class 1-9 house. It should be noted that heating and insulation are not included in the basic 100 per cent and, along with other additions and deductions, must be calculated in the normal manner of completed dwellings, as illustrated in the note following the example. The table is divided into four main groups or stages following the normal progress of a house during its erec-. tion. Considerable variation to this evolution may be encountered, particularly where a house is being owner- ... built or occupied before completion. It must be borne in mind that this table is only a guide, and that the individual percentages may vary con-siderably, depending not only on the floor plan arid area , of the building, but on architectural design and the choice of materials used. The following table summarizes the table on page : 1-14 and also gives corresponding values for the one-and-a-half and two-story equivalent classes. It may be seen from the summary table that at the completion of Stage 1 in the case of the one-story house, approximately 20 per i'cent of the dwelling is completed; Stage 2, 50 per cent; "and Stage 3, 60 per cent. No further grouping of units :.is practical as the order of completion of the interior -''finish'may v?ry considerably. - ' :y" ^ k * ' : " • . . S U M M A R Y OF PERCENTAGE COST BREAKDOWN - / ' Progressive Totals by Stages ^' '.' .'^Stories. ''; Stage 1 Stage 2 Stage 3 Stage 4 One '_: • 2 0 '• 50 ' . 60 ' . 100 ' One and a half... 18 • • • • '•• / 50 , } - . 65 : :.-'. 100 . Two ... '• .' 13"- '•• 55 •' 100 ••-•' Note.—The percentages shown for the one-and-a-half story house do not' include a finished upper floor, which, if encountered, must be added in the normal manner. ... •• • : . . . '•; 't. v Further variations will be encountered when assessing the percentage of completion of both poorer- and better--', grade houses and also one-and-a-half and two-story dwell--,* ings. In the case of poorer-grade houses—i.e., Class 1-8'.. .-^-the ratio varies, with a percentage decrease being made ' in Stage 4, and a resulting increase in Stages 1, 2, and 3; conversely, in the better-class houses—i.e., Class 1-10— the increase is in Stage 4, and resulting decrease in Stages • 1, 2, and 3. Example.—A Class 1-9 house with a ground area of. 1,000 square feet having no basement is under construc-tion. At the time of inspection the foundations, sub-floor, walls including siding, exterior painting, rcof and roofing are completed; all exterior sash and doors in place; wiring and plumbing roughed in. The interior is .' unfinished, but walls and ceilings are insulated and lathed . ready for plastering, with a built-in wall furnace installed • and operating.. ;.. / EXAMPLE FOR A CLASS 1-9 HOUSE 135 . Basic unit when complete=S5.1 Ox 1,000 = 55,100 Stage 3 completed 61.7% (See table, page 1-14.) Additions: Siding 2.4% Exterior painting ... 1.7% 4.1% Pres. value 65.8% x$5.100= 53,355 Sq. ft. additions and subtractions: No basement —.71 Insulation .... +.12 Sq. ft. total-. —.59X1,000= - S 5 9 0 Heating addition S210 Percentage completed 65.8% j • Net totai _„ 52,975 From the above example if will be noted that the per-centage must be applied to the basic unit only and all square-foot additions and subtractions applied to the residual. To use these values with a house having no basement or only partial basement, calculate the base value with a full basement, 4 feet concrete and 4 feet frame; and after determining the dollar-value percentage completed, deduct the basement value originally added. U o 2 2 3 cv :r T I n "D 3 5'5 £" o n o -1 0.0.0.3" m a i § n I a cr;. CI 3-0 o c o cr 3io 3:-V 3 3-3 •< E.' • -nm o x O-c r> . o 3 w Q. < ra c> a, a ' o g 2 s; ~ ,^ o c 3 o o ' 3 3 P 6-1 O 3 Permit and Plans I I i i ! ! i I ! ! Excavation and Back-fil! Concrete Masonry Rough Carpentry Plumbing Wiring Lath and Plaster Millwork—Sash and Doors Finished Carpentry Hardwood Flooring Roofing po, Painting Hardware and Nails Not included in basic rate. Heating Linoleum Sheet Metal Light Fixtures Not included in basic rate. Insulation Sewer Connection Siding (Stucco) sliOivCntdMO O Co fO io 0 — Unit Totals Stage Tola's Progressive Totals Stages 136 ONE-AND-A-HALF-STORY SINGLE-FAMILY RESIDENTIAL HOUSING GENERAL NOTES Definition A one-and-a-half-st'ory house shall be defined as such when the liveable floor area of the upper floor is not less than 30 per cent nor greater than 70 per cent of the ground-floor area. Liveable floor area shall mean an area where the ceiling height is at least 4 feet 6 inches or over. For all practical purposes, the Assessor may use shoulder height. Measurements Measurements should be carried to the nearest half-foot. There are cases in one-and-a-half-story house con-struction where the upper floor extends over the porch area. In these cases, one-half the projecting area may be inckidpH with basic ground area and priced at the basic unit rate. It will be noted that in the one-and-a-half-story group, no additional cost will be made for porches unless the area of the porch involved exceeds 80 square feet. Roofs The cost build-up for all roofing has been made using a roof slope of approximately 45 degrees, or what is com-monly known as a half-pitch. The subtractions for low pitch are based on the pricing for a quarter-pitch, and similarly the additions for high pitch on the pricing for three-quarter pitch. Cost Build-up The cost build-up on the one-and-a-half-story house is based on a completely partitioned and finished ground floor and an unfinished attic or upper floor. The build-up includes the stairway and a cheap board or shiplap upper floor. When the upper floor is partitioned and finished, it is priced separately from the second table, "Attic or Upper Floor," which appears on each class cost-sheet. C L A S S No . 1-13 DASIC DESCRIPTION 1. Foundation.—Wood post and beams on concrete or wood blocks. 2. Basement.—-Nil (crawl space}. 3. Floors.—2" x 10" or 2" x 12" joists, shiplap and paper sub-floor; with good-grade fir finish on ground floor only. 4. Exterior Wall.—Carried to upper floor level only. 2" x 4" frame, shiplap and paper sheathed, with good-grade drop siding, shingles, or equal. 5. Interior Wall.—Ground floor only. Walls and partitions lined with lath and plaster, wall-papered, or painted. Extensive softwood wainscoting. Good-grade doors, windows, tr.m and hardware. 6. Ceiling.—Ceiling height 8' to 10'; lath and plaster, painted or wall-papered. 7. Attic or Upper Story.—30% to 70% of f l o o r a r c a inhabitable. Not parti-tioned or finished. Good-grade stairway. Floor—shiplap or equal. 8. Roof.—Average high-pitched roof (slope, 45° approximately). Hip or gable, few broken lines. No dormers. 2" x 4" rafters, shiplap sheathing, and good-grade shingles. 9. chimney.— Inside single-flue chimney built from ground up. 10. Porches.—Average-size porches for this type of home included. (For porch area in excess of 80 square feet see "Additions and Subtractions.") 11. Heating.—Kitchen stove. Wood and coal space-heater. 12. Plumbing.—Water connection, cheap kitchen sink, and hot-water tank. Complete three-piece bathroom. Septic tank or sewer connection. 13. Lighting.—110-volt service; moderate wiring, good fixtures, and occa-sional wall-plugs. 14. Painting.—Good-grade paint job. BASIC COST PER SQUARE FOOT OF GROUND AREA Ground area (sq. ft.) I 1,000 1,200 1,400 1,600 2,000 Cost (basic unit as described) ...1 $5.10 S4.70 $4.40 S4.20 $4.00 ADDITIONS AND SUBTRACTIONS 1,000 1,200 1,400 1,600 2,000 Foundation—Add for cheap 2' brick, con-crete, or stone perimeter wall (crawl space) $0.10 $0.08 $0.07 $0.07 $0.06 Basement— Add for 2' concrete perimeter wall with A' to 6' frame section above; dirt floor Add for 4' concrete perimeter wall with 2' to 4' frame section above; dirt floor Add for 6' concrete perimeter wall with 0' to 2' frame section above; dirt floor Add for.7' to 8' concrete perimeter wall; dirt floor Add for concrete floor Floors—Add for good-grade hardwood floors.. Exterior Wall— (1) Frame— Add for 2' to 3' stub wall above .39 .33 .29 .25 .21 .44 .38 .33 .30 .25 .52 .45 .39 .36 .31 .63 .57 .52 .49 .44 .18 per square foot of floor area .10 per square foot of floor arca .17 per square foot of floor area .13 .11 .10 .09 .03 .24 .20 .18 .16 .15 .96 .88 .80 .75 .72 1.20 1.10 1.00 .94 .90 1.92 1.76 1.60 1.50 1.44 Add for 4' to 5' stub wall above uppur liour iuvei (2) Masonry— Add for 8" brick wall Add for 12" brick wall _ Add for 12" stone wall (For masonry veneers see Class 1-21.) Roof— Add for very steep pitch or gambrel roof .. .15 .15 .15 .15 .15 Subtract for low pitch —.12 —.12 —.12 —.12 —.12 Add for dormer (Dutch or gable) $55 to $200 Attic or Upper Floor (Partitioned and Finished as First Floor)— I Half-story liveable floor area (sq. ft.) I 300 [ 600 ] 900 I 1,200 i 1,500 j Cost (finished walls, ceiling and floor) | $1.10 ] $1.15 ! $1.05 | $0.95 1 $0.90 Chimney and (or) Fireplace— Subtract if basic chimney built from wall-bracket —$20 to—$30 Add for each additional flue to basic chimney 45 to 80 Add for inside fireplace .". 65 to 100 Add for outside chimney and fireplace 150 to 225 Add for additional single-flue chimney 55 to 100 Porches (per sq. ft. of porch area In excess of 80 sq. ft.)— (al Open type 2.10 to 2.70 (b) Glassed-in type _ 2.70 to 3.30 Heating— (1) Hot-air System (Gravity)— With wood- and coal-fired furnace - 180 to 375' With oil-conversion fired furnace 420 to 650 Wilh aulomatic coal-stoker fired furnace 470 to 700 With automatic oil-fired furnace 480 to 800 Add to above for forced hot air 75 to 105 (2) Hot-water System (Radiators, Convectors, Radiant, etc.)— With wood- and coal-fired boiler ' 720 to 1.000 With oil-conversion fired boiler 990 to 1,200 With automatic coal-stoker fired boiler „ 1,050 to 1,500 Wilh automatic oil-fired boiler 1,080 to 1,600 P lumbing-Add for additional toilet 40 to f-* Add for additional b3sin _ 30 to 45 Add for additional bath _ 45 to 75 Add for shower _ 20 to 90 Add for additional kitchen sink _ to 65 Add tor laundry tubs 35 to 45 Add for additional hot-water tank _ „ 35 to 90 Electrical—Add for 220-volt service (range end water-heater) 60 to 75 Structure— Add for variation from simple perimeter to broken lines (bay windows, projections, etc.) 2% to 5% on basic Add for variation from simple to irregular roof framing (gables, hips, and valleys) 2% to 5% on basic APPENDIX C DEFINITIONS AND FORMULAS 139 To accommodate the i den t i f i ca t i on of symbols used here in , the fo l lowing de f in i t i ons and formulas are provided: M = measure of central tendency = u & mdn. Mdn = the median i s the middle score having an equal number of scores being above th is point as below. Jt where = the lower l im i t s of the c lass in terval which contains the median. N = tota l number in the sample -^c = the frequency of scores within the i c lass interval = the sum of the frequencies below the c lass in terval which contains the median. = the frequency within the c lass in terval which contains the median. u = mean = average of scores 7 1 th where "/-i. = midpoint of the i in terva l d = mean deviat ion - the average amount each score deviates from the mean or median. The greater the dispersion of the scores the greater the mean dev ia t ion. 2 s = variance of the sample f s = standard deviat ion of the sample. The standard measure of the v a r i a b i l i t y of the raw scores. The greater the spread of the s e r i e s , the greater w i l l be the standard dev ia t ion. Formula i f the sample i s normally d is t r ibu ted then the percent of cases f a l l i n g wi thin the standard deviat ion i s as fo l lows: i \ 1(3.60< 11.H>\ -JS -as - , s A X percent of cases f a l l i n g between + 1 S = 68.26% Deciles - div ides the items into 10 equal par ts. Quart i les - d iv ides the items into 4 equal par ts . Quart i le Deviation - i t i is.^eal cul ated by substract ing the 1st quar t i le from the 3rd quar t i l e and d iv id ing by two. = standard normal deviate - describes the deviat ion of a score from the median, in standard deviat ion un i ts . Formula: confidence in terva l - allows the researcher to make a hypothesis about the in terval wi th in which a sample mean w i l l be, and to state the degree of confidence he has that i t i s accurate. In a normal d i s t r i bu t ion the s t a t i s t i c i a n can predict with 95% confidence that the median of the scores w i l l f a l l between + 1.96 standard deviat ions. Researchers general ly w i l l accept an hypothesis as being correct i f the probab i l i t y of i t s being incorrect is only P = .05. If an hypothesis 140 is made that the median i s between one score value and another, and the probab i l i t y of being incorrect i s P = 50, the in terval between the score values represents the 5% confidence i n t e r v a l . y / ——r ' f 1 — -M -H. ts- s The shaded area gives the area def in ing the 5% confidence i n t e r v a l , because the probab i l i t y that u l i e s outside th is in terva l i s .05. Rd = coe f f i c ien t of dispersion - is a measure, in percent, of the average departure of indiv idual scores from the median score. The smaller the percent the greater the degree of uni formity. 100 (d/Mdn) Rs = coe f f i c ien t of var ia t ion - ca lcu la t ion re la t ing the standard deviat ion to the ari thmetic mean and expression i t as a percentage. 100 (S/M) df = degrees of freedom - i l l u s t r a t e s the number of variables free to vary. In a normal d i s t r i bu t ion the sample standard deviat ion and variance i s an es t i of the population standard deviat ion and variance when the degrees of freedom are N-l instead of N. The larger the value of N the less d is to r t i on is caused by subtract ing 1. = Chi-Square test - technique for examining frequency data. eg. whether or not the population is normally 141 d is t r ibu ted .when df i s greater than one. where Ol = observed frequency and Bl = expected frequency V = K-M degrees of freedom K = number of possible outcomes of the experiment M = number of known constant values which are used in the ca lcu la t ions of the expected frequencies. Regression Coef f ic ien t }. - estimating empiracally the re la t ionsh ip between two var iab les . Since the estimates and predict ions are developed from only a sample of observations i t is necessary to construct confidence i n te rva l s . Formula: ( bes t - f i t l i ne ) Sample where a i s the value of y at which the l i ne crosses the x-ax is and b i s the slope of the l i ne or the amount y changes as x increases by 1 un i t . The usual technique for estimating a & b i s the least squares method. Each observation can be wr i t ten y<; * 3 + Jb-i- i where ec i s the th deviat ion from the regression l i ne for the i observation and >Y and * t are the paired values for the i observat ion. The formula can be wr i t ten as: ei - Vc -d- Jr *i . 1 Summary from Edgar P. Hickman and James G. H i l t o n , Probab i l i t y  and S t a t i s t i c a l Ana lys i s , (Columbia: Intext Educational Pub l ishers , 1971. pp. 257 - 262. 142 The sum of the squared deviat ion becomes: It i s th is sum which we wish to minimize with respect to a & b. This i s done by taking the deviat ive with the respect to A and then with respect to B , se t t ing the resu l t ing equation to zero, and then solv ing the two equations simultaneously for a & b: Solving these for a & b y ie lds equations for f ind ing the least squares est imat ions: & =_ N £ X{- y» ~ f ^ SY/X = standard error of y Assuming that the variance of the y values for a given x are constant the standard error of y can be determined. Formula: where is the actual .value of y and yy\s determined by subst i tu t ing each corresponding x into the regression equation y = 3 + Jr X Sb = standard error of b - used to measure the r e l i a b i l i t y of b Formula:-143 Sa = standard error of a - measures of the r e l i a b i l i t y of a Formula: -a -F = ra t io - an F-test i s performed to test the s ign i f icance of the regression coe f f i c ien t b. The F-value i s calculated by the formula: ^ r = coe f f i c ien t of determination - measures the proportion of the tota l var ia t ion in x that is due to x Formula:2 A, This i s derived from the contention that the tota l variance in y or £ (yi~y) can be divided into two par ts : 1) var ia t ion in y due to x or £ (y^^y)"1 a n u 2) var ia t ion in y unexplained by x or *?(yi - y*C 2 2 The r obtained i s always between 0 and 1 and the c loser r is to one, the c loser the data points (x7)>7^ l i e to the regression l i ne y z 3 +Jrx . r - coe f f i c ien t of cor re la t ion - coe f f i c ien ts of cor re la t ion are the square roots of the coe f f i c ien t of determination or better defined since the coe-f f i c i e n t of cor re la t ion may take on values between +1 and -1 the coe f f i c ien t 2 For the mathematical der ivat ion of th is formula re fer to Hickman & H i l t o n , i b i d . , pp. 272 - 275 144 of determination i s the coe f f i c ien t of cor re la t ion squared. The sign of the cor re la t ion coe f f i c ien t t e l l s us whether the re la t ionsh ip between the two var iates is pos i t i ve or negative. A cor re la t ion coe f f i c ien t of +1 i n -dicates a-perfect pos i t i ve cor re la t ion while one of -1 indicates a perfect negative co r re la t i on . The question which r answers i s : What percentage of the deviat ion of y from i t s mean is 

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