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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 L e s l i e Tomko B.Com., University 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 t h i s thesis as conforming to required standard  THE UNIVERSITY OF BRITISH COLUMBIA October, 1972  the  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  fulfilment  o f the  requirements  an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, 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 f o r r e f e r e n c e I further  I agree and  agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s  of  representatives.  It  this thesis for financial  thesis  gain shall  £g>W>n£/b—  The U n i v e r s i t y o f B r i t i s h Vancouver 8, Canada  Date  OcM*A  6 ,  Columbia  /?7r?  or  i s understood that copying or p u b l i c a t i o n  written permission.  Department o f  that  study.  f o r s c h o l a r l y purposes may be g r a n t e d by the Head o f my Department by h i s  for  not be a l l o w e d w i t h o u t my  ABSTRACT  The Real Property Tax requires a major outlay of funds by most property and non-property owners.  Property owners are d i r e c t l y  affected by the t a x , in that they pay the taxes to the taxing authori t i e s , while the non-property owners are i n d i r e c t l y affected as the property tax paid by the owners i s r e f l e c t e d 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 i n d i v i d u a l s r i g h t or o b l i g a t i o n of an equal portion of the tax burden should be upheld.  The portion of the t o t a l tax  burden for which a property taxpayer i s r e s p o n s i b l e , i s 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 a s c e r t a i n the degree of the e q u a l i t y of the tax burden a sample of 1632 properties was obtained c o n s i s t i n g of seven d i f f e r e n t land uses from e i g h t - m u n i c i p a l i t i e s located w i t h i n 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 f u r -  nish the reader with some i n s i g h t as to the causes of possible tax i n e q u a l i t i e s between m u n i c i p a l i t i e s , land uses, or p r i c e categories w i t h i n m u n i c i p a l i t i e s , c a l c u l a t i o n s measuring the degree of assessment uniformity and e q u a l i t y were executed.  11  The findings of t h i s thesis give evidence that the tax burden between m u n i c i p a l i t i e s , land uses and price categories w i t h i n m u n i c i p a l i t i e s are not equally d i s t r i b u t e d as the concept of e q u a l i t y was defined.  Further, i t was discovered that these i n e q u a l i t i e s  were, i n p a r t , due to the occurrance of unacceptable l e v e l s of assessment i n e q u a l i t y and ununiformity.  TABLE OF CONTENTS CHAPTER I  II  III  PAGE INTRODUCTION A.  Proposition  1  B.  Scope of Study  1  C.  Limitations of Study  3  D.  Procedure  14  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  FACETS OF BRITISH COLUMBIAS" REAL PROPERTY TAX SYSTEM  32  A.  Exemptions and R e l i e f s  32  . 1. Rationale f o r exemption  34  2. Methods of granting exemptions  38  3. Magnitude of exemptions  39  B.  Uniformity and Equality of Assessments  44  C.  Five and Ten Per Centum Rules  46  1. Effects of the f i v e per centum rule  47  2. Effects of the ten per centum r u l e  50  iv  CHAPTER IV  PAGE EQUALITY OF ASSESSMENTS  53  A.  Equality of Assessments Between M u n i c i p a l i t i e s  54  B.  Equality of Assessments Between Land Uses  56  C.  Equality of Assessments Between D i f f e r e n t Market P r i c e Categories  58  Summary  63  D. V  VI  ASSESSMENT UNIFORMITY  64  A.  Measures of Absolute Dispersion  65  B.  Measures of Relative Dispersion  66 66  2. C o e f f i c i e n t of v a r i a t i o n  69  C.  Regression Analysis  74  D.  Percent From the Median  80  E.  Summary  90  BURDEN OF TAXATION  93  A.  By P r i c e Range  94  B.  By M u n i c i p a l i t y  99  . C. VII  1. C o e f f i c i e n t of dispersion  By Land Use  102  SUMMARY OF FINDINGS AND RATIONALE FOR THEM  104  A.  104  B.  Summary 1. Assessment uniformity  104  2. Assessment equality  104  3. Burden of taxation  106  Reasons for Assessment I n e q u a l i t i e s and Ununiformities 1. Five and ten per centum rules  107 108  V  CHAPTER  PAGE  C.  2. Appraisal method of assessors  108  3. Lag period in assessments  114  4. Biasness of assessors  115  5. L e g i s l a t i v e causes  116  Reasons for Unequal Tax Burden  116  1. Administered  116  2. Unadministered  117  D.  Conclusions  117  E.  Area f o r Further Research  118  BIBLIOGRAPHY  120  APPENDIX A  125  APPENDIX B  138  APPENDIX C  139  i  LIST OF TABLES TABLE I  PAGE Percent of Municipal Revenue Received Via Real Property Assessments By M u n i c i p a l i t y  II III  Sample S i z e By M u n i c i p a l i t y ,  for the Years 1962, 1966, 1970. By Land Use, By P r i c e Category  Sample of a l l Residential Property By P r i c e Category  IV  54  Percent Difference Between Surrey's Mean and the Mean of the Other M u n i c i p a l i t i e s  55  Means and Medians of the Assessment-Sales Ratios for the Land Uses  XI  51  Means and Medians of the Assessment-Sales Ratio for the M u n i c i p a l i t i e s  X  49  Equitable Solution When Five and Ten Per Centum Rules are Applied?  IX  48  Percent of Total Taxes Each Property Class Pays With: the Five Per Centum Rule  VIII  41  Percent of Total Taxes Each Property Class Pays Without the Five Per Centum Rule  VII  25  Property C l a s s ,  Assessment C l a s s , f o r the years 1962, 1966, 1970.  VI  24  Exemptions as a Percent of Total Assessed Value, General, School and Hosptial Purposes, by M u n i c i p a l i t y ,  V  2  56  Percent Variations of the Land Use Means and Medians from the Overall Mean  57  vii  TABLE XII  PAGE Means and Medians of Assessment-Sales Ratios f o r P r i c e Categories of D i f f e r e n t M u n i c i p a l i t i e s .  XIII XIV  59  Ranked Order of Means of P r i c e Categories f o r Each M u n i c i p a l i t y Mean and Median of Assessment-Sales Ratios f o r Each P r i c e Category  XV  62  C o e f f i c i e n t of Dispersion by M u n i c i p a l i t i y  , By Land Use  (From Lowest to Highest) XVI  67  M u n i c i p a l i t i e s and Land Uses In Order From Lowest to Highest C o e f f i c i e n t s of Variations  XVIII  XIX  78  Observed and Expected Frequency of Each Decile  79  Proportion of Properties Which L i e Between Percentages From the Median, by M u n i c i p a l i t y  XXI  (Residential Land Uses)  91  Ranked Order of Land Uses Under D i f f e r e n t Measures of Assessment Uniformity  XXIV  87  Ranked Order of M u n i c i p a l i t i e s Under D i f f e r e n t Measures of Assessment Uniformity  XXIII  83  Proportion of Properties Which L i e ; Between Percentages From the Median, By Land Use  XXII  72  Relative Standard Error of y By M u n i c i p a l i t y , By Land Use, From Lowest to Highest  XX  70  Regression Line and Standard Error of y By M u n i c i p a l i t y and By Land Use  XVII  60  92  Mean and Median Net Taxes Payable as a Percent of Market Value, By P r i c e Category  95  viii  TABLE XXV  PAGE Mean and Median of the Net Tax Market P r i c e R a t i o , By 1/3 P r i c e Categories, By M u n i c i p a l i t y  XXVI  97  Ranked Order of Net Tax Market P r i c e Ratio Means By P r i c e Category From the Lowest to the Highest Within Each M u n i c i p a l i t y and the Percent Difference of the Two Highest P r i c e Categories Means From the Lowest f o r Each M u n i c i p a l i t y  XXVII  98  Means and Medians of Net Tax Market P r i c e Ratios From the Lowest to the Highest Mean of the M u n i c i p a l i t i e s and the Percent Deviation of the Means of the M u n i c i p a l i t i e s From Richmonds ". Mean.  XXVIII  Mean and Median of Net Taxes Market Value Ratio For The Land Uses.  XXIX  100  102  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 Properties from the Median By M u n i c i p a l i t y  4.  Cumulative Proportion of Properties from the Median By Land Use in Vancouver  5.  Cumulative Proportion of Properties from the Median By Land Use in Surrey and Delta.  ACKNOWLEDGEMENT  During the preparation of t h i s t h e s i s I have become indebted to many people.  I thank the Municipal Assessors for  t h e i r co-operation in allowing me the use of t h e i r f i l e s during my data c o l l e c t i o n p e r i o d , and also thank David Lach f o r his assistance in the s t a t i s t i c a l t a b u l a t i o n .  Special thanks I give  to my parents who helped support me f i n a n c i a l l y during my u n i v e r s i t y years and during the w r i t i n g of t h i s t h e s i s .  F i n a l l y , I am  e s p e c i a l l y obliged to Professor Stanley W. Hamilton for his invaluable guidance and advice throughout the term of the t h e s i s preparation.  CHAPTER I INTRODUCTION A.  PROPOSITION There has been in the past and w i l l continue to be in the  f u t u r e , widespread discontent of the real property tax system as i t i s presently administered i n 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 eliminate a tax by adverse c r i t i c i s m the general property tax should have been eliminated years ago." The c r i t i c i s m s have persisted since then with a millennium of reports and a r t i c l e s which suggested e i t h e r i t s e r r a d i c a t i o n or methods of amelioration.  The hypothesis of t h i s t h e s i s stems from the m u l t i -  tude of c r i t i c i s m s and can be simply stated as f o l l o w s : Are there i n e q u i t i e s or ununiformity  in assessments of  real property which cause the tax burden to be d i s t r i b u t e d B.  unjustly?  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 doctrine of 'equal treatment of equals' i s upheld.  Table I indicates the importance of the property tax  Jenson, Property Taxation i n the U.S. (Chicago: of Chicago P r e s s , 1931), P.7.  University  Musgrave. The Theroy of Public Finance. (New York: H i l l Book C o . , 1959), Chapter 8.  McGraw  2 by o u t l i n i n g the percentage of a m u n i c i p a l i t i e s revenue which i s r e ceived through assessments of real property.  Figures are provided  f o r the years 1962, 1966 and 1970 f o r the m u n i c i p a l i t i e s under study and the province as a whole.  The-percentage of the m u n i c i p a l i t i e s  revenue received from property assessments has dropped only  slightly  since 1962 i f the whole province i s considered, however, the municip a l i t i e s selected f o r a n a l y s i s have varied considerably in the change of t h i s 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 YEARS  3  1962  1966  1970  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  MUNICIPALITY  (Victoria:  Department of Municipal A f f a i r s , Municipal S t a t i s t i c s . Queens P r i n t e r 1962, 1966, 19727)  3 • C o n t r i b u t i o n s , grants and subsidies by the P r o v i n c i a l and Federal governments were not included. Municipal revenue sources which represent the remaining percentage a r e : business t a x , other t a x , s p e c i a l assessments and charges (these are c o l l e c t e d as part of the property t a x ) ; licenses and permits; r e n t s , concessions and f r a n c h i s e s ; f i n e s , i n t e r e s t , tax p e n a l t i e s , e t c ; service charges; and recreation and community s e r v i c e s . The doctrine of 'equal treatment of equals' rests on the foundation t h a t : "the e q u a l i t y of i n d i v i d u a l s before the law, tax treatment being legal treatment i n e s s e n t i a l respects. A r b i t r a r y and capricious treatment of i n d i v i d u a l s by legal i n s t i t u t i o n s i s prevented by c o n s t i t u t i o n a l protection . . . has been extended to apply to the d i s t r i b u t i o n of t a x e s . " 4 The objectives of t h i s t h e s i s are as f o l l o w s : 1. to examine the e q u a l i t y of B r i t i s h Columbia's real property tax burden between m u n i c i p a l i t i e s , land uses and p r i c e c a t e g o r i e s ; 2. to examine the e q u a l i t y 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 i m i t a t i o n of t h i s study i s the e l i m i n a t i o n of  any discussion centering around the form which the burden of taxat i o n should take.  A tax system may be p r o g r e s s i v e , r e g r e s s i v e , or  proportional and based upon ' a b i l i t y to pay' or ' b e n e f i t s r e c e i v e d ' 5  4 James M. Buchanan, The P u b l i c Finances. 3rd E d i t i o n (Illinois:  Richard B. I r w i n , 1970), P.100.  5 Information on taxing p r i n c i p l e s can be found i n : Musgrave, R.A. Loc. C i t . and Buchanan, James M. Loc. C i t .  but the choice varies f o r d i f f e r e n t tax purposes and between i n d i v i d u a l s . Since the property tax system i n B r i t i s h Columbia i s based upon actual value of property, whereby the assessments and tax should be proport i o n a l to i t ,  t h i s 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 d e s i r a b l e .  The other facets of a tax system  which w i l l not be discussed a r e : adequacy  - does the tax system provide enough revenue.  flexibility  - i s i t f l e x i b l e as to the income flow.  elasticity  - does i t respond to the economy b u i l t in s t a b i l i z e r s .  balance  - are the above three balanced.  certainty  - as to time, manner and amount of payment of the tax.  simplicity  - in both administration and collection.  convenience  - time, place and manner in which a taxpayer i s c a l l e d upon to discharge his o b l i g a t i o n s .  economy of c o l l e c t i o n and compliance  6 Ontario Committee on P r i n t e r 1967). Another e x c e l l e n t Stanley W. Hamilton and P h i l i p H. Columbia - An A n a l y s i s " , Research Trustees A s s o c i a t i o n , (Vancouver:  lowest cost consistant with the guidel i n e s set out above and the procedures f o r appeals by the taxpayer.  Taxation, Report 1967, (Toronto: Queens source describing some of the above i s : White, "The Real Property Tax in B r i t i s h Report prepared f o r the B.C. School B.C. School Trustees A s s o c i a t i o n , 1971).  A second l i m i t a t i o n of t h i s thesis i s a r e s u l t of the sampling procedure chosen.  When judging the uniformity and e q u a l i t y of assess-  ments i t i s necessary to determine the market value of the properties as t h i s i s the basis: from which assessments are determined. The usual method of determining the market value of properties when assessment uniformity i s being measured i s from sales data.  The  weakness of t h i s method becomes apparent when i t i s r e a l i z e d that the researcher i s automatically e l i m i n a t i n g a large portion of the properties for his sample ( a l l those which did .not s e l l ) thereby biasing his sample statistics.  L e s l i e E. Corbert s t a t e s : "The sales r a t i o method almost c e r t a i n l y contains s t a t i s t i c a l b i a s , at l e a s t in the sampling phase of i t s a p p l i c a t i o n . . . A portion of the t o t a l assessment universe i s a u t o m a t i c a l l y , excluded from the sales r a t i o s e l e c t i o n by the simple f a c t that only a portion of the t o t a l assessment universe i s sold under market c o n d i t i o n s . " 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 properties in the assessment r o l l i s summarized below.  7 L e s l i e E. Corbert "An Appraisal of Sales Ratio S t u d i e s " , National Tax A s s o c i a t i o n . (Proceedings of the 51st Annual Conference,  ILLUSTRATION 1 CORBETTS MODELS 1  Ratio of Assessed Value to Market Value (in %)  50%  I  E  Number of Sales  A  • / / / / / / /*>_  \  7///////A  A - '{.--ii  "II -  .  \  C  r  .  D  : .'jp :  L :  ;|  H  M a r k e t Value  * L e s 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 all  f e l l upon l i n e AA which represents an assessment sales r a t i o of  f i f t y percent.  I f , however, l i n e AA represented only the average, then  the r a t i o s of i n d i v i d u a l parcels would l i e above and below t h i s average line.  Assessment uniformity would then be measured by the degree of  v a r i a b i l i t y from t h i s l i n e .  I t i s not known, however, whether the  average l i n e of the population r a t i o s i s sloped as i n AA o r as i n BB of f i g u r e 1.  I f curve BB represents the average r e l a t i o n s h i p between  market values and assessment r a t i o s then a weighted average of a l l the i n d i v i d u a l assessment r a t i o s may y i e l d a point such as R on the f i g u r e . The v e r t i c a l distance LR would then measure the average r a t i o of assessed  8  value to market value for a l l the property items in the assessment universe of t h i s  jurisdiction.  Curve CC represents the number of property sales which take place w i t h i n a given period of time (shown on the right-hand v e r t i c a l axis).  The bulk of the sales f a l l s w i t h i n the price range bounded by  De and HI.  If the i n v e s t i g a t o r were using the sales r a t i o method of  r a t i o determination he would r e s t r i c t his universe to those properties f o r which the assessment r a t i o s are r e l a t i v e l y high.  Thus, even i f  the  sample selected i s t r u l y representative of those properties which l i e w i t h i n the DH range of market v a l u e s , i t cannot be representative of the e n t i r e universe of assessment r a t i o s because i t automatically excludes those high-value properties which have low assessment r a t i o s . The bias e f f e c t of the sampling procedure i s to r a i s e the average assessment market value to GS.  If the correct r a t i o for the  universe i s LR than GS i s overstating LR by FS. By making use of sales r a t i o study rather than a represent a t i v e sample study the i n v e s t i g a t o r has improved the appearance of the a s s e s s o r ' s performance by moving the r a t i o findings c l o s e r to the l i n e of assessment p e r f e c t i o n (Line A ) . Ratio l i n e B was chosen only to i l l u s t r a t e the e f f e c t s of s e l e c t i n g a sample from the properties which sold and not from the e n t i r e universe of p r o p e r t i e s .  In a c t u a l i t y , the r a t i o l i n e 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 i n v e s t i g a t o r knows only that the r a t i o s he finds  r e l a t e generally to properties with market values f a l l i n g roughly between v e r t i c l e s DE and HI. It can be f u r t h e r proven that the properties which sold c o n s t i t u t e a population unto i t s e l f which has d i f f e r e n t than the population of unsold p r o p e r t i e s .  parameters  Even i f an a s s e s s o r ' s  assessments were p e r f e c t , in that a l l assessments were uniform at 50% of market v a l u e , at the time the assessment r o l l s were printed a sampling of the sold properties would s t i l l  not be representative  of the t o t a l population due to the larger proportion of sold prop e r t i e s which have had minor improvements, such as painting and r e p a i r s , to increase the value of the property. can be i l l u s t r a t e d as f o l l o w s :  The e f f e c t of t h i s  assume two equivalent properties  ( A & B ) each with a market value of $25,000.  Since the assessment  market value r a t i o s are unifornv at 50% they are each assessed at $12,500.  Owner A wishes to s e l l his property but before d o i n g , s o , he  paints his home and puts on new roofing s h i n g l e s . :  If he s e l l s his  property f o r $26,000 then the assessment-sales r a t i o i s c a l c u l a t e d to be 12,500/26,000 = 48.08.  If t h i s r a t i o was deemed to represent  the population (in t h i s case properties A & B) then the population i s being misrepresented.  If,  as was suggested, the sold properties are  on the average, improved upon before s a l e , more than the unsold p r o p e r t i e s , then the sample s t a t i s t i c s w i l l not be representative of the population parameters.  It becomes unfeasible to r e l a t e accuractely the s o l d , and unsold properties on the assessment r o l l because i f a l l the sold properties i n the sample were examined and the improvements compensated for by adjusting the s e l l i n g p r i c e then t h i s must also be done f o r a l l the properties which have not s o l d .  Not only does t h i s process  become too l a b o r i o u s , but i t subjects the researcher to making subj e c t i v e judgements or assessments as to the extent of the  property  value added by these new improvements. If the sales prices employed in the sample are over a time interval  (eg. 6 months or 1 y e a r ) , then unless prices have been con-  stant during that time p e r i o d , the s t a t i s t i c s w i l l not be representat i v e of the uniformity of assessments.  For instance, assume ;  three properties A , B, & C sold over a period of 1 y e a r ; the market value of a l l three properties as of Jan. 1 s t , 1971 was $25,000 and the corresponding assessments were $12,500.  On Jan. 1 s t ,  1971 property A sold for $25,000, on June 31st, 1972 property B sold f o r $26,2-50, on Dec. 3 1 s t , 1971 property C sold for $27,500.  During  t h i s year period a l l three properties increased i n value by 10%.  If  assessment sales r a t i o s were c a l c u l a t e d the following r e s u l t s would prevail. A.V./S.P.  S.P.  A.V.  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 r a t i o s i s due s o l e l y to the increase i n market price over the time p e r i o d .  If a l l  the  sales had occurred at the same time, then the assessment-sales r a t i o s would have been uniform. Adjusting the sales figures by the average increase of property value over the time period would not improve matters because of the deviation from the average.  If the date of each sale  were known and the sale p r i c e adjusted by the average property value increase up to that time, in the time s e r i e s , the r e s u l t s will s t i l l  be i n a c c u r a t e , because the i n d i v i d u a l property being  adjusted may not be represented by the average. A second method of determining the market value of property would be through'rigorous appraisal techniques.  This method  a l l e v f a t e s the researcher from being r e s t r i c t e d i n his choice of a sample, as he may choose not only those properties which s o l d , but a l s o properties which did not s e l l .  If,  however, as Corbert suggests,  sold and unsold properties c o n s t i t u t e two separate populations, then the sample i s being chosen from two populations and inferences cannot be made of the t o t a l assessment r o l l . Further problems a r i s e in that assessments to determine market value i s to some degree dependant upon subjective judgements by the a p p r a i s e r s .  Two appraisers w i l l often p r e d i c t two  different  market values for the same property, of which both may be wrong.  If  t h i s 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 f a c t that his appraisals are more accurate then the c i t y a p p r a i s e r s ' .  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 , t h i s method of determining market value becomes much more time consuming then does the s e l e c t i o n of s e l l i n g p r i c e . The market value i n d i c a t o r chosen for t h i s study i s an ado  justed sales p r i c e .  Reasons for e l i m i n a t i n g or adjusting sales prices  are discussed in the f o l l o w i n g chapter.  The s t a t i s t i c a l a n a l y s i s  presented w i l l be subject to the l i m i t a t i o n s as stated above. 8 Sales during the 9 mo. period between Jan. 1 and Sept. 3 1 s t , 1971 were considered in the sampling. The change i n market p r i c e during t h i s period was an average of 3.98%. This average was determined in the following manner; Gross Sales i n Jan. 1971 recorded' by the M u l t i p l e L i s t i n g Service of the Real Estate Board of Greater Vancouver was divided by the number of properties sold during that month. gross sales no. of properties sold average p r i c e per property  23,399,080 860 $26,049  The cumulative gross sales f i g u r e from Jan. 1st to Sept. 3 1 s t , 1971 was divided by the cumulative property sold figures to obtain an average sales p r i c e o f : cumulative gross sales no. of properties sold average p r i c e per property  203,511,374 7,813 $26,047  This represented an average price increase over the 9 month period of 26,047 - 25,049 = 998 or 3.98%. The following table summarizes the p r i c e changes during the 9 month p e r i o d .  13 8 Month  average price per property for the month  % increase or cumulative av. decrease from p r i c e per prothe previous mo. perty.  Jan.  25,049  Feb.  23,861  (D) 4.74%  Mar.  25,006  (I)  Apr.  av. increase or decrease from January  25,049 24,321  (D) 2.90  4.80  24,609  (D) 1.76  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  July  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) = Increase (D) = Decrease Because market prices of property fluctuated during t h i s period the assessment/market value r a t i o would vary according to the sample of properties taken from any p a r t i c u l a r month. It should be stressed again at t h i s point that because these price increases and decreases are averages, changing the s e l l i n g prices by the average w i l l not n e c e s s a r i l y r e s u l t in more accurate s t a t i s t i c a l t a b u l a t i o n s . The p r i c e per property i s the average of a l l the properties in a l l the d i f f e r e n t land uses, t h e r e f o r e , there may be no r e l a t i o n s h i p between the price change of a p a r t i c u l a r property in a land use category to the average change of a l l the properties i n a l l the land use categories.  14 D.  PROCEDURE IN DEVELOPEMENT OF THESIS Chapter II discusses the data c o l l e c t i o n procedure and the assessors  method of determining market v a l u e , assessed v a l u e , taxable assessed v a l u e , and gross taxes. Chapter III  investigates the r a t i o n a l for property exemptions as  well as i d e n t i f y i n g the magnitude of i t s r e l i e f .  Also presented in t h i s  chapter i s an explanation and examples of the consequence of the P r o v i n c i a l Governments' imposed f i v e , and ten per:centum rules as stated in the g Assessment E q u a l i z a t i o n A c t . Chapter IV compares the assessment e q u a l i t y between municipali t i e s , land use categories and p r i c e categories of r e s i d e n t i a l  property.  The measures employed i n the a s c e r t a i n i n g of the degree of assessment e q u a l i t y are the mean and median. Chapter V determines the degree of assessment uniformity w i t h i n m u n i c i p a l i t i e s and land uses.  The primary measures employed for  t h i s determination a r e ; c o e f f i c i e n t of d i s p e r s i o n , c o e f f i c i e n t of vari a t i o n , regression a n a l y s i s and the proportion of properties w i t h i n a + percentage from the median assessment-sales r a t i o s . Chapter VI describes the burden of taxation upon property owners and discusses the e q u a l i t y between M u n i c i p a l i t i e s , land uses and price categories.  The measures employed are the mean and median.  9 Assessment Equalization A c t . 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% r u l e in 1971)  15  Chapter VII summarizes the findings and presents hypotheses describing 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 properties which had sold during the p e r i o d , January 1st - September 3 1 s t , 1971, in 8 m u n i c i p a l i t i e s located in the greater Vancouver region. The m u n i c i p a l i t i e s were as f o l l o w s : North Vancouver D i s t r i c t , Vancouver, Burnaby, Coquitlam, Richmond, D e l t a , West Vancouver and Surrey. The sampling was i n i t i a t e d by obtaining the sales of r e s i d e n t i a l property which had sold through the Vancouver M u l t i p l e L i s t i n g s S e r v i c e . Only transfers:; involving downpayments of 25% or greater were considered and the s e l l i n g price was deemed to be the cash value price.'''  This  procedure was followed for the following reason: In theory, the s e l l i n g p r i c e of a property w i l l be greater than the cash value price whenever the purchaser assumes or obtains a mortgage which contains a lower than market value i n t e r e s t r a t e .  The  d i v a r i c a t i o n between the two values can be i l l u s t r a t e d with the f o l l o w i n g examples: Case I  Amount  Equity  5,000  1st mortgage (vendor) 25 years @ 7%  15,000  Selling Price  20,000  Mo. Pymt.  105.0624  Current Interest rate f o r an equivalent mortgage = 9h%.  1 It i s r e a l i z e d that t h i s would produce a biased sample but i t was regarded as being more representative of the population then had I a r b i t r a r i l y assigned i n t e r e s t rates to obtain a cash v a l u e .  17 If 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 f o r 25 years discounted at 9 1/2%).  Therefore, the cash value of  the sale i s construed to be: Amount Equity  Mo. Pymt.  5000.00  Present value of agreement f o r sale  12201.92  Cash Value of Sale  17201.92  Case  Amount  II  Equity  105.06241  Mo. Pymt.  1000.00  Standard 1st Mortgage ( I n s t i t u t i o n a l Lender) 25 years @ 9 1/2% 2nd mortgage (vendor) 15 years @ 9 1/2%  15000.00  129.15  4000.00  S e l l i n g Price  20000.00  If the second mortgage was sold to an i n s t i t u t i o n a l  lender,  the vendor would receive $2,883.37 (present value of $41.33 per month f o r 15 years discounted at 16%).  The cash value of the transactions 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 i n t e r e s t rate which i s e i t h e r  advantages or disadvantages to the purchaser.  Let us f i r s t look at a  s i t u t a t i o n which would be advantageous to the purchaser.  18 Case III  Amount  Equity  Mo. Pymt.  6,000  Assumed Standard 1st mortgage 23 y r s . remaining @ 8 1/2% outstanding balance  14,000  Purchased P r i c e  20,000  114.30  If the purchaser could not obtain a loan with an i n t e r e s t rate under 9 1/2% he i s saving 8.98 per month. 14,000 i n 23 years @ 9 1/2%  = 123.28/mo.  14,000 i n 23 years @ 8 1/2%  = 114.30/mo.  saving  8.98/mo. The cash value of the transaction becomes: 6,000 + 12,979.85  (present value of 114.30) month for 23 years @ 9 1/2% = 18,979.85 Case IV  2  Purchaser assumes unfavourable financing Amount  Equity  Mo. Pymt.  6,000  Assumed 1st mortgage 23 y r s . remaining @ 10%  14,000  Purchased P r i c e  20,000  127.86  2 The cash value w i l l be l a r g e r i f there i s a 5 y r . c a l l clause i n the mortgage as the purchaser benefits f o r the lower i n t e r e s t rate f o r only 3 y r s . . . 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% i s 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. = 20,519.73.  The cash value of the transaction becomes 6,000 + 14,519.73  3  The f i g u r e required in t h i s thesis to evaluate assessment uniformity and e q u a l i t y i s the market value which i s defined as the price 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 transaction with neither party being under any duress and the t r a n s f e r being financed under normal market c o n d i t i o n s .  In actual p r a c t i c e , when the downpayment  of the t r a n s f e r i s less than 25% the purchaser w i l l pay more f o r the property i f he has received b e n e f i c i a l f i n a n c i n g thereby equating cash value and market value and when the downpayment i s greater than 25% the purchaser w i l l not usually pay the higher p r i c e thereby equating s e l l i n g p r i c e and market value. If t r a n s f e r s with downpayments of l e s s than 25% were considered, then the cash value p r i c e would have to be determined by the a s c e r t a t i o n of a s u i t a b l e i n t e r e s t rate which should be charged for the mortgage. Ascertaining the c o r r e c t i n t e r e s t rate becomes too laborious as i t i s a function 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 l o c a t i o n of the property, the c r e d i t r a t i n g and income of the borrower and the amortization p e r i o d . Without p h y s i c a l l y examining every property and knowing the circumstance of every borrowing transaction the assignment of a market i n t e r e s t rate to  3 This f i g u r e would be lower i f there i s a f i v e year c a l l clause i n the mortgage..  20 each transaction becomes a highly subjective matter. The J u l y issue of the appraisal b r i e f s s t a t e s : "obtaining a cash value accurately i n every instance i s near impossible because so many of these transactions involve income tax c o n s i d e r a t i o n s , trades and i n t r i c a t e 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 price or market value of a p a r t i c u l a r property, the congruent assessments and taxes were obtained from the appropriate  municipality.  Vacant land sales were c o l l e c t e d from the m u n i c i p a l i t i e s of 5  Surrey and D e l t a .  These sales were obtained from A . C . 3 forms  and  t r a n s f e r s which involved downpayments of less than 25% were eliminated 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: J u l y 5 , 1972) P. 1. 5 A . C . 3 forms are prepared by the P r o v i n c i a l Assessment Commissions-and contain the following information: legal d e s c r i p t i o n of property, land use, date of s a l e , and s e l l i n g p r i c e . The o f f i c e of the Assessment Commissioner e d i t s out the following types of t r a n s f e r s , those "a) agreed upon some time p r i o r to the year i n which they were r e corded; b) i n v o l v i n g unusal f i n a n c i a l p r o v i s i o n s ; c) of p a r t i a l l y f i n i s h e d improvements; d) those including personal property, the value of which cannot be separated from the t o t a l c o n s i d e r a t i o n ; e) i n v o l v i n g t r a d e s ; f ) between r e l a t i v e s or associated c o r p o r a t i o n s ; g) under f i n a n c i a l duress; h) to any church, lodge, school or c h a r i t a b l e , benevolent, f r a t e r n a l or government o r g a n i z a t i o n ; 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 r e s u l t render the transaction useless for sales a n a l y s 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 f o r the vacant land p r o p e r t i e s . The I n d u s t r i a l , Commercial and Income  property sales were  obtained from an unpublished essay w r i t t e n at U.B.C.^  The sales prices  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 3 1 , 1970. Only sales i n Vancouver were recorded as a t o t a l of other m u n i c i p a l i t i e s would not have generated a s i g n i f i c a n t l y large enough sample.  Once r e g i s t e r i n g 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 C a r r o s , Daniel Doran, David Greenwood, David Lack, Wayne Tomko. "Empiracel Study of Mortgage Financing i n the C i t y of Vancouver." (U.B.C. Faculty of Commerce and Business Administration A p r i l 1972) 8 Teela i s a p u b l i c a t i o n prepared by Teela Market Surveys l i s t i n g a l l the r e a l t y sales transactions i n a l o c a l i t y . The information provided i s as f o l l o w s : 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, i n t e r e s t r a t e , d a t e , 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 f o l l o w s : 9  conversions; apartment; r e t a i l ; o f f i c e and i n d u a t r i a l .  Due to the  l i m i t e d number of I . C . I , sales t r a n s a c t i o n s , transfers i n v o l v i n g downpayments of 25% or less were not eliminated from the sample. The financing of the transfers was obtained from the land r e g i s t r y  office  and any financing arrangements which deviated from the normal method was investigated and transformed to a cash value deemed to be 10 appropriate from the a v a i l a b l e information.  9 The d e f i n i t i o n s of land uses as employed herein are as f o l l o w s : " r e s i d e n t i a l " - to include those uses of improvements which house one or two family u n i t s ; "vacant land" - to include land which i s void of improvements; "apartment" - to include improvements housing m u l t i p l e family units (greater than 10 u n i t s ) ; "conversions" - improvements which have been converted from a s i n g l e family dwelling u n i t to a m u l t i p l e - f a m i l y dwelling u n i t (containing between 6 - 1 5 f a m i l i e s ) ; " r e t a i l " - to include improvements used f o r the provision of consumer goods such as b a k e r i e s , department s t o r e s , grocery s t o r e s , m i l l i n e r s , and the l i k e together with service uses not included i n the d e f i n i t i o n of o f f i c e s such as dry c l e a n e r s , h a i r d r e s s e r s , and service s t a t i o n s ; " o f f i c e " - to include improvements used f o r c l e r i c a l , p r o f e s s i o n a l , c o n s u l t a t i v e , data p r o c e s s i n g , f i n a n c i a l and s i m i l a r a c t i v i t i e s not included i n r e t i a l ; " i n d u s t r i a l " - to include improvements used f o r a manufacturing, warehousing, r e p a i r i n g , e t c . nature. Where m u l t i p l e 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 investigated because of the 25% r u l e . Of the remaining 118, 47 were a l l o t t e d a cash value which was.>a more appropriate value f i g u r e than the s e l l i n g p r i c e .  23 Once having determined the market values of the properties t h e i r respective assessments and taxes were recorded from the Vancouver C i t y H a l l s ' records. A l i s t of the sample s i z e obtained i s outlined in Table  II.  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  Number  HIGH P r i c e Above which 1/3 of sample f e l l  TOTAI Numbi  Burnaby  residential  41  ($23,400)  42  42  ($28,900)  125  Coquitlam  residential  40  ($25,500)  48  45  ($31,500)  133  Delta  residential vacant land  32  ($22,900)  35  33  ($27,933)  100 107  Surrey  residential vacant land  42  ($16,900)  44  46  ($20,500)  132 123  Vancouver  residential office apartment industrial retail conversions  65  ($19,067)  65  65  ($23,767)  195 32 93 49 142 22  Richmond  residential  21  ($21,900)  19  25  ($26,000)  65  West Vancouver  residential  51  ($35,500)  52  54  ($45,000)  157  North Vane.  residential  49  ($30,767)  49  49  ($35,467)  147  * The sample of r e s i d e n t i a l property was divided into 1/3 s by price for each m u n i c i p a l i t y . The p r i c e i n the low column i s the f i g u r e below which 1/3 of the properties were p r i c e d . The p r i c e in the high column i s the f i g u r e above which 1/3 of the properties were p r i c e d . The remaining 1/3 were priced e i t h e r a t , or between those values. 1  25 Tabulations were a l s o performed f o r the r e s i d e n t i a l uses of a l l the m u n i c i p a l i t i e s .  property  The sample s i z e s of a l l the r e s i d e n t i a l  property of a l l the m u n i c i p a l i t i e s by price range, i s i l l u s t r a t e d Table  in  III TABLE  III  SAMPLE OF ALL RESIDENTIAL PROPERTY BY PRICE CATEGORY P r i c e Category  - 0-19,999  Sample Number  226  20,000 24,999,  25,000 29,999,  30,000 34,999,  241  205  159  greater than 34,999, Total 223  1054  When c o l l e c t i n g the tax information, i t was necessary to make a d i s t i n c t i o n between gross and net taxes.  Gross taxes included charges f o r  general municipal purposes, school and hospital purposes, pavement, water s e r v i c e , municipal finance a u t h o r i t y levy , s t r e e t l i g h t i n s t a l l a t i o n and community b u i l d i n g . able by the owner.  Net taxes were determined by the taxes a c t u a l l y payWhere the owner i s also the resident of the property  11 a $170  maximum grant i s given to the owner by the p r o v i n c i a l government  which is; deducted from the Gross Taxes payable.  Since the purpose of the  purchase of a r e s i d e n t i a l home could not be determined (eg. whether i t was for owner-occupancy or r e n t a l ) the $170 grant was deducted from a l l  resi-  d e n t i a l land-uses. 11 In e a r l y 1972 t h i s 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 r e s i d e n t i a 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 premises and therefore receive the grant.  If the land use was such that no  homeowners grant was applicable the net and gross taxes were equivalent. B.  BRITISH COLUMBIAS' REAL PROPERTY TAX SYSTEM Relevant features of B r i t i s h Columbias present real 1  tax system a r e :  property  the determination of market value or equivalent actual  v a l u e , assessed v a l u e , taxable assessed value, exemptions and taxes. 1.  Market Value or Actual Value The Assessment Equalization A c t , Municipal A c t , P u b l i c Schools  A c t , and Taxation Act prescribe the assessor to determine the actual value of land and improvements. "In determining the actual v a l u e , the Assessor may give consideration to present use, l o c a t i o n , o r i g i n a l c o s t , cost of replacement, revenue or rental value, and the price 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 f e c t i n g 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 improvement the f o l l o w i n g procedure i s f o l l o w e d : a)  The assessor refers to the s p e c i f i c land use category of  the improvements.  12 Assessment Equalization A c 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 architectural  group.  c)  The improvement i s then further c l a s s i f i e d into the number  d)  The f i n a l c l a s s i f i c a t i o n of the improvement i s into a  of s t o r i e s .  particular class. 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 s p e c i f i c c l a s s , a base value i s assigned to  it.  Additions t o , or subtractions from, t h i s base value may a r i s e due to such contigencies as the type of masonary, the e l e c t r i c a l w i r i n g , the i n s u l a t i o n used; the amount of physical and functional 14  depreciation;  and the s i z e and q u a l i t y of the basement rooms. The assessor usually determines the value of the land by the market approach.  A l i m i t i n g f a c t o r in the s e t t i n g of these values how-  ever, are the f i v e and ten per centum rules which are defined and explained in Chapter 2.  III.  Assessed Value From the determined market value of land and improvements the  assessor assigns an assessed value f i g u r e .  The assessed value f o r 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 i s a function of the cost of labor and m a t e r i a l . Since t h i s i s a provc i a l average, l o c a l assessors may adjust these costs to correspond with t h e i r own l o c a l i t y . 14 Examples of classes i n land use categories are provided i n Appendix A. 15 Assessment Equalization 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 Public Schools Act s h a 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 t h e r 50% or 100% of 16 the c a l c u l a t e d market value.  M u n i c i p a l i t i e s adopting the assessed value  for school purposes as the assessed value f o r municipal purposes are said to operate on a s i n g l e r o l l b a s i s , while m u n i c i p a l i t i e s having d i f f e r e n t assessed values for the two purposes operate on a duel r o l l b a s i s . 3.  Taxable Assessed Value The f i n a l step of the assessor i s the c a l c u l a t i o n of the taxable  assessed value f o r both land and improvements.  Forschool purposes taxable  assessed value i s 100% of the assessed value of land and 75% of the assessed value of  improvements.^  16 Municipal a c 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 s h a l l be assessed at t h e i r actual value" and Chap. 255, Part IX, Div. 1, Sec. 332, subsection 2. " P r i o r to the t h i r t e e n t h day of Nov. i n any y e a r , the council may by by-law provide that for the purposes of t h i s act the assessed values of land and improvements s h a l l be determined pursuant to the Assessment Equalization A c t , 1953." 17 P u b l i c Schools A c 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 , " . . a n d every.person s h a l 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 i s also 100% of  its  assessed v a l u e , but i n 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 Roll -  Burnaby, Vancouver and West Vancouver Assessed Value (A.V.)  Taxable Assessed Value  100% of market value (M.V.) 100% of M.V.  100% of A.V. & M.V. max. 75% of A . V . & M.V.  land improvements  50% of M.V. 50% of M.V.  100% of A.V. = 50% of M.V. 75% of A.V. = 37^% of M.V.  b.  Richmond, D e l t a , Surrey, Coquitlam.and North Vancouver  General Purposes land improvements School and Hospital Purposes  Single Roll 19  District.  18 Municipal Act. Op. c i t , Chapter 255, Part IX, Section 206, Subsection 3 paragraph (a) "The rates authorized by t h i s s e c t i o n . . . s h a l l be l e v i e d upon the f u l l assessed value of land and not more than seventy-five 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 f o r the 1972 assessment year.  30 Assessed Value (A.V.)  Taxable Assessed Value  50% of M.V. 50% of M.V.  100% of A.V. = 50% of M.V. 100% of A.V. = 50% of M.V.  General, School & Hospital Purposes land improvements 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 substantial  portion  20 of the Gross taxes.  The m i l l rates are ascertained in the  following  f a s h i o n : 1. General Purposes: the m u n i c i p a l i t y forecasts i t s revenue requirements f o r the oncoming year and sets i t s m i l l rate at a f i g u r e which when m u l t i p l i e d by the t o t a l taxable assessed value of non-ex;empt property w i l l generate enough income to equalize t h i s revenue requirement.  The munici-  p a l i t i e s being studied a r e , however, r e s t r i c t e d to a m i l l rate which does not 21 exceed f i f t y . .  20  Usually accounts for between 85 - 95% of the Gross taxes.  21 Municipal A c t , op. c i t . , Chap. 255, Part IV, Sec. 206, Subsection 2. "Except with the approval of the Lieutenant-Governor i n Council in respect of a m u n i c i p a l i t y no rate in excess of the l i m i t prescribed herein f o r each of the classes of m u n i c i p a l i t i e s s p e c i f i e d s h a l l be l e v i e d (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 f o r t y m i l l s (c) in a v i l l a g e not exceeding t h i r t y m i l l s . " A l l the municipa 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 p r o v i n c i a l government imposes .  a levy each year (in 1971 i t was 24.1 m i l l s ) on the taxable assessed value f o r School Purposes, which i t r e d i s t r i b u t e s to the school d i s t r i c t s . The m u n i c i p a l i t i e s are able to add a l i m i t e d levy onto t h i s m i l l to aid i n the amortization of i t s borrowing debts.  rate  CHAPTER  III  FACETS OF BRITISH COLUMBIAS' REAL PROPERTY TAX SYSTEM This chapter purports to analyze some of the factors which influence the determination of the tax burden upon property owners as well as set f o r t h the need for both assessment uniformity w i t h i n a m u n i c i p a l i t y and assessment e q u a l i t y between m u n i c i p a l i t i e s .  The concepts  to be discussed which a f f e c t the d i s t r i b u t i o n of the tax burden are exemptions and r e l i e f s and the l e g i s l a t e d f i v e and ten per centum r u l e s . A.  EXEMPTIONS AND RELIEFS It i s necessary to include a section 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 b u t i o n of the tax burden.  R e l i e f s are  the reduction of taxes payable to an amount greater than z e r o , 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 following reasons: administrative convenience; c h a r i t a b l e c o n s i d e r a t i o n s ; equity p o l i c y ; or to influence a p a r t i c u l a r land use. In B r i t i s h Columbia, exemptions or r e l i e f s are e i t h e r mandatory or at the d i s c r e t i o n of the m u n i c i p a l i t y .  The p r i n c i p l e exemptions or  r e l i e f s have been adequately summarized i n a Research Report published by the B.C. School Trustees A s s o c i a t i o n from which the following excerpt has been e x t r a c t e d :  1 Stanley W. Hamilton and P h i l i p H. White, "The Real Property Tax i n B.C. - An A n a l y s i s " , Research Report, (Vancouver: B.C. School Trustees A s s o c i a t i o n , 1972), Page 21.  33 "Mandatory Exemptions and R e l i e f s Charitable:  Exemption of land and improvements o f : public l i b r a r i e s ; places of r e l i g i o u s worship; public h o s p i t a l s ; c e r t a i n private schools of "incorporated i n s t i t u t i o n s of l e a r n i n g " ; e l d e r l y c i t i z e n s homes belonging to n o n - p r o f i t making corporations; public cemeteries and, i n Vancouver, charitable institutions.  Administrative:  Exemption of land and improvements o f : school boards; the taxing m u n i c i p a l i t y ' s own property; the Crown (both federal and p r o v i n c i a l ) .  Equity & P o l i c y : Exempitons o f : farm f i x t u r e s and machinery; f r u i t - t r e e s ; except i n Vancouver. R e l i e f s : f i r s t $1,500 of assessed value ofotrade f i x t u r e s of commercial or i n d u s t r i a 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 improvements (other than dwelling and trade f i x t u r e s ) except in Vancouver; farm l a n d , tree-farm land and r e s i d e n t i a l land as noted p r e v i o u s l y ; not less than 25% of assessed value of a l l improvements; the homeowners grant (of $170 i n 1971) Permissive Exemptions & R e l i e f s (Except Vancouver which has i t s own charter) Charitable: Exemptions of land and improvements o f : c e r t a i n c h a r i t a b l e organizations used for the r e l i e f of the poor, the aged, the i n f i r m , the d i s a b l e d , or as a c h i l d r e n ' s home and athletic clubs. Administrative:  Exemption of land and improvements o f : the park or recreation ground o f another m u n i c i p a l i t y ; another m u n i c i p a l i t y ' s a i r p o r 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 c a l b u i l d i n g s . R e l i e f s : reduction of the assessed value of the land of gold courses and c e r t a i n cemeteries (general rate o n l y ) . N.B. Permissive exemptions and r e l i e f s are at the d i s c r e t i o n of the m u n i c i p a l i t y . 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 f o r Exemption Taxpayers who are s u b s i d i z i n g others have a r i g h t to know the  extent of t h e i r subsidy.  The amount of the subsidy should be made public  i n order that the taxpayer has an opportunity to guage the cost against the b e n e f i t s . J u s t i f i c a t i o n for exemption f o r c h a r i t a b l e consideration rests on the foundation that these i n s t i t u t i o n s provide services which merit public support and as such i f not provided by private i n s t i t u t i o n s wouldbe 3  provided and paid f o r by the governing body.  It has been argued,  and  the author agrees, that d i r e c t grant assistance i s more l o g i c a l then assessment exemptions because the cost of the service can be more r e a d i l y ascertained. In Canada, the r i g h t of exemption of a l l Federal and P r o v i n c i a l land i s guaranteed i n the B.N.A. a c t .  There i s no l o g i c a l reason for  exempting Crown owned l a n d , however, because the ownership of property by the Crown i s not d i s t r i b u t e d evenly between taxing j u r i s d i c t i o n s .  For  t h i s reason residents i n one taxing j u r i s d i c t i o n are required to pay f o r the services of Crown property which i s being used i n the i n t e r e s t s of the national or p r o v i n c i a l population.  This unjust consequence has been  somewhat remedied i n recent y e a r s , when the Municipal Grants Act was established i n 1951, authorizing the Federal Government to issue grants in l i e u of property taxes on some types of p r o p e r t i e s . 3  This requirement  Ontario Committee On Taxation, op. c i t . , Page 125.  35 does not apply to Crown Corporations.  The Municipal Grants Act also  established the-requirementof the P r o v i n c i a l Government to pay a "grant in lieuLof the real property tax equal to the product of a rate of 15 4  m i 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  i n exempting Crown  corporations as they are operating in the public i n t e r e s t of the country or province as a whole.  A l s o , i t becomes an advantage to crown corporations  i n i t s competition with private e n t e r p r i s e .  The panel of the Ontario  committee on Taxation states t h a t : " P r o v i n c i a l and Federal Governments should pay grants i n l i e u . o f taxes both because they der i v e benefits from the l o c a l j u r i s d i c t i o n in which they are situated and because they are engaged in business t r a n s a c t i o n s ' ^ On the s u r f a c e , the process of a M u n i c i p a l i t y taxing i t s own property seems to engender added paper work for no r a t i o n a l If,  objective.  however, the taxing department taxed a l l m u n i c i p a l i t y departments,  each separate department would then have to consider property taxes as another cost in i t s l o c a t i o n 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 i n some areas as the departments make t h e i r judgement i r r e s p e c t i v e of taxes.  location  A l s o , since the School Board i s a  separate taxing e n t i t y from the m u n i c i p a l i t y and they provide  different  4  Hamilton and White, op. c i t . , page 24.  5  Ontario Committee on T a x a t i o n , op. c i t . , page 53.  36 services the m u n i c i p a l i t y should be required to pay school property taxes and the School Board Municipal taxes. Because any tax system bears i n j u s t l y upon some f r a c t i o n of the population, adjustments are made to compensate for these i n j u s t i c e s .  In  some instances these compensatory adjustments seem to be determined on capricious grounds.  L i t t l e i s known about the incidence of the tax burden  or exemption, i n some cases, making them completely erroneous.  If an ad-  justment i n taxes i s deemed necessary, grants should be given to the owners i n an e f f o r t to equalize the burden as the incidence of grants can be more r e a d 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 base.  philosophy of a s i n g l e t a x , whereby, land only i s the tax  The s i t e value tax r e s t s on the propositions t h a t ; 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 r g e , and a tax on land does not d i s t o r t the free market as only the economic rent i s being taxed. Taxing improvements r e s u l t s in a d i s i n c e n t i v e to develope or maintain property.  It i s said to benefit slums and blighted a r e a s , antiquated  buildings on valuable l a n d , and vacant land held i d l e 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 describing  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 s u f f i c i e n t to mention that exempting improvements requires assessors to d i v i d e the value of the property into two c a t e g o r i e s ; an assessed value for land and an assessed value f o r improvements.  This becomes a highly  subject problem, and many appraisers acknowledge that the value of a property cannot be divided between land and improvements.  There are many  instances when the value of the property i s greater or less than the t o t a 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 discussion on exemptions with the following "1.  points:  Exemptionsnarrow the tax base,-thereby i n creasing the tax load on owners of taxable property.  2.  A tax exemption i s an i n d i r e c t subsidy, the cost of which i s not generally apparent, and i s subject to less control than a grant, which o r d i n a r i l y i s renewable annually. *  3.  Tax exemption may not d i s t r i b u t e a government subsidy in the most equitable or d e s i r a b l e manner.  4.  The proportion of a l l properties i n the community that are exempt varies from one muni c i p a l i t y to another, thereby creating d i s proportionate burdens among l o c a l communities.  5.  Exemptions a r e , for the most p a r t , l e g i s l a t e d by the Province, but t h e i r burden f a l l s on m u n i c i p a l i t i e s or l o c a l school boards.  7 For f u r t h e r information regarding s i t e - v a l u e tax r e f e r t o : (A) "The Rating of S i t e Values." Report of the Committee of Enquiry, (London:: Her Majesties Stationary O f f i c e , 1952). (B) B.H. Cowen, International Research Committee on Real Estate Taxation, "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 n s t i t u t i o n , 1966)  6.  Exemptions, once e s t a b l i s h e d , are not r e a d i l y t e r minated, thus they tend to perpetuate community wishes of an e a r l i e r day. In a d d i t i o n , the range and extent of exemptions can grow, well beyond j u s t i f i a b l e limits'.' 8  Grants have the following advantages: "1.  2.  Each request f o r f i n a n c i a l assistance c l e a r l y establishes i t s cost to the community.  2.  The assistance made a v a i l a b l e 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 l o c a l c o u n c i l .  4.  Municipal aid through grants i s exposed to public view, item by item and in t o t a l .  5.  Grant assistance can be adjusted to each changing c o n d i t i o n , including reversals of public attitudes."9  Methods of Granting Exemptions and R e l i e f s . R e l i e f or exemptions may be i n i t i a t e d at any three instances:  (1) when determining the taxable assessed v a l u e s ; (2) when applying the m i l l rate or (3) when determining the taxes payable. If r e l i e f i s granted at the f i r s t stage, i e . when determining taxable assessed v a l u e , there are three ways i n which t h i s can be done: (1) the taxable assessed value can be set at a p a r t i c u l a r amount, (2) taxable assessed value can represent a percentage of the assessed v a l u e ,  8  Ontario Committee on T a x a t i o n ,  9  i b i d . , Page 163.  op. c i t . ,  V o l . II P. 126.  39 or (3) a c e r t a i n d o l l a r f i g u r e can be subtracted i n each case.  British  Columbia employs a l l three methods i n granting r e l i e f s . The second instance which allows the i n s t i g a t i o n of r e l i e f s i s at the time of the a p p l i c a t i o n of the m i l l r a t e .  The r e l i e f may take  e i t h e r of two forms: 1) the m i l l rate may be set a some f i x e d amount below the rate applied to the non-exempt properties or 2) the m i l l  rate  to be applied to the exempt properties may be a f r a c t i o n of the m i l l a p p l i c a b l e to the non-exempt p r o p e r t i e s .  rate  When granting r e l i e f at t h i s  stage of the procedure, m u n i c i p a l i t i e s in B r i t i s h Columbia generally r e s o r t to the f i r s t method mentioned. The f i n a l phase of the assessment-taxing procedure s u i t a b l e f o r the granting of r e l i e f i s during the determination of taxes a c t u a l l y payable by a propertyoowner.  R e l i e f applied at t h i s stage may be; 1) a  f i x e d amount which i s to be subtracted from the gross t a x e s ; 2) a percentage 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 t h i s stage i s v i a the f i r s t one mentioned. 3.  Magnitude of Exemptions Table IV presents an estimate of the exemptions as a percent of  t o t a l assessed v a l u e ^ for m u n i c i p a l , school and hospital purposes, by m u n i c i p a l i t y , property c l a s s 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 t o t a l assessed value f i g u r e .  TABLE IV and Hospital Purposes, by M u n i c i p a l i t y , Property Class and Assessment C l a s s .  Exemption as a Percent of Total Assessed Value, General, School  1962, 1966, 1970 Burnaby  Coquitlam  1962 1966 1970  62  66  Delta  Richmond  North Van.  70  62  66  70  13 .5 10 .8 8 .8 8 .7 22 . 3 . 19 .5 1 .3 1 .3 23 .5 20 .8 14 .2 14 .3 37 .7 35 .1  3..0 3..2 6,.7 .9 2..7 2..9 12,.4 6.,9 1..6 2..3 14..0 9.,2 10..5 15..0 24..5 24..3  2. 6 2. 3 6. 7 8 3. 4 3. 1 12. 8 6. 1 2. 3 2. 3 15. 0 8. 7 14. 6 16. 2 29. 6 24. 9  1.5 1.4 9.0 1.7 4.2 3.9 14.7 7.0: 1.3 1.5 15.9 8.5 14.2 15.8 30.1 24.3  62  66  Surrey  Vancouver  West Van.  Provincial  70  62  66  70  62  66  70  62  66  70  62  66  70  62  66  70  3. 5 3. 3 4. 7 1. 4 10. 7 10. 3 18. 9 15. 1 6 8 19. 5 15. 9 12. 8 13. 5 32. 2 29. 3  2.8 2.5 4.5 .4 4.8 4.4 11.9 7.3 1.2 1.7 13.2 9.0 16.1 16.5 29.3 25.5  3.4 3.1 3.8 .4 9.3 8.5 16.5 11.9 1.5 1.8 18.0 13.7 15.4 16.1 33.4 29.8  6.3 5.8 3.4 .3 7.6 7.0 17.3 13.1. 1.1 1.4 18.4 14.5 15.4 15.6 33.8 30.2  .9 .9 11.5 1.6 4.5 4.4 16.9 6.9 2.1 2.8 19.0 9.7 14.4 15.7 33.4 24.4  .9 .9 11.5 1.7 6.8 6.5 19.1 9.1 2.6 3.5 21.7 12.6 14.5 16.7 36.2 28.2  1.1 1.2 10.2 1.2 6.8 6=.6 18.1 9.0 2.9 3.5 21.1 12.5 15.6 16.2 36.6 28.7  3.6 2.1 1.7 2.6 7.3 12.2 12.6 16.9 3.8 2.5 16.4 19.4 31.5 16.7 47.9 36.1  3.3 3.2 4.3 .9 6.0 5.7 13.6 9.8 6.1 6.1 19.7 15.9 26.7 14.0 46.4 29.9  2.9 2.7 2.8 .9 6.9 6.4 12.5 10.0 '.6.0 5.8 18.4 15.8 12.2 12.9 30.6 28.7  2 .0 2 .0 3 .8 1 .8 5 .8 5 .8 11 .5 8 .9 .7 .8 12 .3 9 .7 13 .8 13 .4 26 .0 23 .2  1.2 1.2 3.7 1.4 6.0 6.1 10.9 9.7 .7 .7 11.5 9.4 14.9 14.5 25.4 23.9  1.1 1.2 2.1 1.4 6.3 6.6 9.6 9.2 .7 .8 10.3 9.9 14.0 14.4 24.3 24.4  3.2 3.1 4.9 2.3 7.2 6.9 15.3 12.3 3.8 3.2 19.2 15.5 24.4 15.8 42.5 31.3  3.0 2.8 6.2 1.8 7.4 6.8 16.6 11.3 3.9 4.0 20.5 15.3 21.8 15.7 42.3 31.1  2.5 2.4 4.7 1.8 7.8 7.3 15.0 11.5 4.2 3.8 19.2 15.3 14.1 15.3 33.9 30.6  2. 9 4.3 5. 5 2.7 2.4 2.3 5. 1 5. 7 7.2 2. 9 4.1 5. 0 2.3 2.4 2.3 2. 2 5. 3 6.4 10. 3 13.7 12. 9 16.3 19.3 18.8 11. 3 14. 0 11.3 6. 1 9.6 9. 5 7.4 10.1 10.3 17. 3 10. 7 9.3  5.7 5.7 6.6 4.1  4.6 4.6 6.9 4.9  13.8 13.4 26.0 23.2  14.9 14.5 26.5 23.9  Exemption Property Fed. M u n i c i p a l School Provincial M S Municipal M S Sub Total M S Non-governmnet M S Total M S Others M S Grand Total M S Assessment Class Wholly exempt Land M S M Improvements S Other Exemptions Improvements M S M Total S  .6 .6 3 .0 2 .1 6 .8 6 .8 10 .4 9 .4 1 .5 1 .5 11 .9 11 .0 18 .5 15 .0 30 .4 26 .0  .6 .5:  8 .0 3 .1 7 .0 6 .5 15 .5 10 .1 3 .9 3 .9 19 .4 14 .0 13 .6 14 .6 33 .0 28 .6  .5 .4 6 .3 4 .0 7 .4 6 .7 14 .2 11 .2 5 .1 4 .9 20 .3 16 .0 12 .8 13 .8 32 .1 29 .8  .1 .1 42.,3 39,.5 2,.7 2,.7 45..1 42.,3 .6 .7 45!.7 43..0 10..7 10..4 57,.3 53..3  17 .5 14 .4 7 .0 7 .0 24 .4 21 .3 .9 1 .1 25 .4 22 .4 15 .2 14 .8 40 .6 37 .2  2 .8 2. 5 2 .6 2. 4 4 .9 3. 5 1 .5 1. 3 7 .5 7. 2 7 .1 6. 8 15 .2 13. 1 11 .2 10. 6 •;4 ,9 4. 6 5 .1 4. 6 20 .1 17. 7 16 .3 15. 2 33 .9 35. 4 15 .2 15. 5 54 .0:.53. 1 31 .5 30. 7  6 .3 6 .7 7 .9 1..9 3 .0 4 .1 2.,0 2. 2 3.6 7 .4 7. 0 10. 3 5..7 5 .7 6 .7 1..8 2 .9 4 .0 2.,3 2. 1 3.2 6 .9 6. 5 9. 5 5 .5 12 .6 11 .5 43..8 22 .4 19 .4 12,.0 12. 8 12.4 12 .7 10. 8 9. 3 5 .3 8 .3 9 .4 41..2 19 .5 16 .9 6..9 6. 6 5.3 9 .4 8. 7 6. 3 18 .5 15 .0 30 .4 26 .0  13 .6 14 .6 33 .0 28 .6  12 .8 13 .8 32 .1 29 .8  10..7 10..4 57,.3 53,.3  15 .2 14 .8 40 .6 37 .2  14 .2 14 .3 37 .7 35 .1  10..5 15..1 24,.5 24,.3  14. 6 16. 2 29. 6 24. 9  14.2 15.8 30.1 24.4  33 .9 15 .2 54 .0 31 .5  35. 4 15. 5 53. 1 30. 7  Municipal S t a t i s t i c s . Province of B r i t i s h Columbia, Queens P r i n t e r .  12. 8 13. 5 32. 3 29. 3  16. 1 16. 4 29. 2 25. 6  15.4 16.1 33.4 29.8  15. 4 15. 6 33. 8 30. 2  14.4 15.7 33.4 24.5  14.5 15.7 36.2 28.2  15.6 16.2 36.6 28.8  V i c t o r i a , 1962, 1966, 1970.  31. 5 16. 7 48. 0 36. 1  26. 7 14. 0 46. 4 30. 0  12.1 12.9 30.6 28.7  5.0 4.1 4.4 5.9 5.2 3.9 4.1 4.8 5.3 15.1 16.1-=13.3 4.7 11.6 11.3 10.5 14.0 14.4 24.3 24.4  24.4 15.8 42.'5 31.3  21.8 15.7 42.3 31.1  14.7 15.3 33.9 30.6  41 It should be mentioned that these percentages are f o r exemptions and as such do not include grants provided v i a r e l i e f s .  Figures of grants pro-  vided v i a r e l i e f s were not obtained, but they do represent a substantial percentage of t o t a l assessed value.  The major forms of r e l i e f a r e ; 1)  twenty-five percent reduction of the assessed value of improvements when determining the taxable assessed value f o r school and hospital purposes and a minimum twenty-five percent reduction when determining the taxable assessed value f o r general purposes; 2) the home owners grant of $170 which was a p p l i c a b l e in 1971 and 3) special assessments on farms and residents.  Under the Assessment Equalization Act and the Municipal Act  farm land i s 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 A c 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 f a r m l a n d while so c l a s s i f i e d s h a l l be assessed at the value which the same has f o r such purpose without regard to i t s value for other purposes." Assessment E q u a l i z a t i o n A c 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 l a n d ' i n a muncipal corporation or r u r a l 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 t h e 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 potential as a development s i t e f o r commercial or r e s i d e n t i a l use.  Owners of r e s i d e n t i a l property may receive r e l i e f  if  they were owner-occupiers a minimum of f i v e years previous to 1964, for the Assessment E q u a l i z a t i o n Act states that such properties s h a l l be valued with consideration given only to i t s persent r e s i d e n t i a l  land  12 use.  The market value of the r e s i d e n t i a l property may exceed i t s  value as determined by r e s i d e n t i a l property or land use because of the potential  use of the s i t e as a commercial, i n d u s t r i a l or apartment  location.  The special assessments to r e s i d e n t i a l property applies  only to school purposes while the special assessments to farm land applies to both school and municipal purposes. 12 Assessment E q u a l i z a t i o n A c 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, notice i n such form as the Assessment Commissioner s h a l l prescribe that the land and improvements thereon were owned and occupied by the applicant as his p r i n c i p l e place of residence f o r not l e s s than f i v e consecutive years p r i o r to the f i r s t day of January, 1964, then actual value of the r e s i d e n t i a l land s h a l l , for the purpose of the assessment r o l e for the succeeding y e a r , be determined with consideration given only to the present r e s i d e n t i a l use of the land and without any consideration that the r e s i d e n t i a l land may have a higher actual value for an a l t e r n a t i v e use or uses or i s zoned f o r an a l t e r n a t i v e u s e . "  43 In examining Table IV i t can be noticed that the t o t a l exemptions as a percent of assessments for the province in 1970 was 33.93% for municipal purposes and 30.63% f o r school and hospital purposes.  The  percentage f o r school and hospital was r e l a t i v e l y consistent with the 1962 and 1966 percentages, but f o r municipal purposes the percentage dropped by 20.20% from the 1962 f i g u r e .  This decline was a r e s u l t of  the drop by 39.23% i n the other property c l a s s i f i c a t i o n and 39.23% drop i n 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, r e f e r r i n g to Table IV we f i n d that the percentage for the i n d i v i d u a l m u n i c i p a l i t i e s vary widely between themselves and from the provincial figures.  Exemptions for municipal purposes of federal  property  as a percent of t o t a l assessed value amounts to 6.33 in Richmond and .00 i n Coquitlam, while exemptions for municipal purposes of p r o v i n c i a l property ranges from 13.47% i n Coquitlam to 2.12% in West Vancouver. Unless grants by these governments i n l i e u of taxes reasonably approxT imate the t a x e s , then undue burdens are f a l l i n g upon the taxpayers of the m u n i c i p a l i t i e s which have a higher percentage of government property r e l a t i v e to t o t a l assessments than the p r o v i n c i a l percentage while those m u n i c i p a l i t i e s with a lower percent than the province have taxpayers which benefit.  B. UNIFORMITY AND EQUALITY OF ASSESSMENTS Uniformity of assessments implies that the assessments of properties w i t h i n a muncipal j u r i s d i c t i o n are a uniform percentage of t h e i r market value.  This i s an e s s e n t i a l r e q u i s i t e i f the burden  of taxation i s to be p r o p o r t i o n a l l y d i s t r i b u t e d as i s l a i d down i n the Municipal and P u b l i c School A c t s . E q u a l i z a t i o n of assessments implies that the average assessment-market value r a t i o s of m u n i c i p a l i t e s be equal.  This  requirement would not be necessary i f school d i s t r i c t s did not over13 lap m u n i c i p a l i t i e s  and subsides to m u n i c i p a l i t i e s and school  boards did not e x i s t .  Revenue f o r the school d i s t r i c t s i s obtained  by applying a uniform m i l l rate (24.1) to a l l the properties w i t h i n i t s area.  Suppose a school d i s t r i c t contained three m u n i c i p a l i t i e s  (A,B,C) with average assessed value market value r a t i o s of 50,47 and 45% r e s p e c t i v e l y .  Because the average r a t i o s are not equal while the  same m i l l rate i s applied to a l l the m u n i c i p a l i t i e s , m u n i c i p a l i t y A i s , on the average, c o n t r i b u t i n g a greater share to the school d i s t r i c t e i t h e r muncipality B or C.  13  A map of school d i s t r i c t i s provided in Appendix B.  than  45 It i s evident then, t h a t , i f m i l l rates are applied e q u a l l y , e q u a l i t y of assessments must also be maintained to ensure an equal of the taxation burden.  distribution  14  If the assessments w i t h i n m u n i c i p a l i t i e s are uniform and the average assessment-sales r a t i o s of the m u n i c i p a l i t i e s are the same then i t i s axiomatic that e q u a l i t y between m u n i c i p a l i t i e s e x i s t s . of assessments betwen m u n i c i p a l i t e s does not insure uniformity  Equality of  assessments w i t h i n m u n i c i p a l i t i e s , however, as the e q u a l i t y of assessments i s measured only by the average assessment market value r a t i o s from which i n d i v i d u a l assessments may vary considerably.  14 Equal assessments does not in i t s e l f ensure an equal burden of the taxation between m u n i c i p a l i t i e s because of the l e g i s l a t i o n 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 m u n i c i p a l i t y which assigns a d i f f e r e n t land improvement r a t i o to i t s property than other m u n i c i p a l i t i e s w i l l also have a d i f f e r e n t tax burden than the others. For example, suppose there are two m u n i c i p a l i t i e s (A & B) each with a t o t a l assessed value f o r property of 25million and an assess-, ment sales r a t i o of 50%. If a m i l l rate of 25 was applied at t h i s 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 i n the following p r o p o r t i o n s , m u n i c i p a l i t y A , land = 5M, improvements = 20M. M u n i c i p a l i t y B land = 20M, improvements = 5M. The taxable assessed value for the m u n i c i p a l i t i e s becomes: Municipality A 5 X 100% = 5M 20 X 75% = 15M 20M Municipality B 20 X 100% = 20M 5 X 75% = 3.75M 23.75M When a m i l l rate of 25 i s applied to the taxable assessed v a l u e s , M u n i c i p a l i t y A pays (20 X 25) $500,000 and M u n i c i p a l i t y B pays $593,750.  46 C.  FIVE AND TEN PER CENTUM RULES The ' f i v e per centum r u l e '  15  was i n i t i a t e d by the B r i t i s h  Columbia Government i n the amendment of 1968 to the Assessment Equalization Act of 1953 for the purpose of equalizing assessments (for school and hospital purposes) between m u n i c i p a l i t i e s w i t h i n the same school d i s t r i c t .  located  The 'ten per centum r u l e '  was  l e g i s l a t e d by the B r i t i s h Columbia Government in an act passed in 1971  15 Assessment Equalization A c t , op. c i t . , Chapter 18, part I I I , Section 8 ( a ) , Subsection (1). "The t o t a l assessed value of a l l land and improvements i n a school d i s t r i c t s h a l l not be increased i n any year by more than 5% of the t o t a l assessed value of a l l land and improvements in that school d i s t r i c t i n the preceding y e a r , but, i n determining the extent of any such i n c r e a s e , there s h a l l be excluded any increase in assessed value which i s a t t r i b u t a b l e .to. a change in the physical characteri s t i c s of land or improvements or to new construction 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 Equalization A c t ) . Chap. 18, Part T i l , Section 37A, Subsection 1. "the assessed value of land or improvements s h a l l not be increased in any one year by more than ten per centum of the assessed value of land or improvements i n the preceeding year unless the increase i s a t t r i b u t a b l e to a change in the physical c h a r a c t e r i s t i c s of the land or the improvements, or to new construction or development t h e r e t o , thereon, or t h e r e i n , or r e s u l t s from a reassessment ordered by the Commissioner under Subsection (2) of Section 9.  47 to amend the Assessment Equalization Act " f o r the purpose of being able to forecast more accurately the revenue proceeds to be d i s t r i b u t e d to the school b o a r d s . " 1.  1 7  E f f e c t s of the Five Per Centum Rule The 5% r u l e has led to a s i t u a t i o n whereby the assessment  market value r a t i o of properties i s below the l e g i s l a t e d 50% r a t i o . Uniformity of assessments can s t i l l process becomes supererogatory.  be maintained, however, but the  The following example w i l l  illustrate  the procedure to ensure uniformity and i t s r a m i f i c a t i o n s i f not followed. Suppose that i n m u n i c i p a l i t y X the 1970 t o t a l taxable assessed value of property equalled 25 m i l l i o n and the m i l l rate f o r 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% r u l e would r e s t r i c t the assessment r o l l increase to 1.25 m i l l i o n instead of the 2.5 m i l l i o n increase which a c t u a l l y occurred.  In order  to r a i s e 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 l e v e l !of 30. (26.25 M x 31.429 = 825.000). Complicating f a c t o r s a r i s e , however, when property values i n crease at discrepant r a t e s .  To s i m p l i f y t h i s phenomenon I s h a l l consider  only two land use c l a s s i f i c a t i o n s ( A & B ) which have d i f f e r i n g increases.  value  Referring back to m u n i c i p a l i t y X, suppose the t o t a l taxable  17  Discussion session with the P r o v i n c i a l Assessment Commissioner.  48 assessed value was divided between land uses c l a s s A and c l a s s B i n the following fashion: class A class B  = =  15,000 m i l l i o n 10,000 m i l l i o n  Taxes paid by c l a s s A equals 450,000 ( 15.M x 30 ) which r e presents 60% of the t o t a l (450,000/750,000) and taxes paid by c l a s s B equals 300,000 ( 10M x 30 ) which represents 40% of the t o t a l 750,000).  If the 10% increase i n l t o t a l  (300,000/  taxable assessments for 1972  was due to a 2.5 m i l l i o n increase i n c l a s s A (representing a 16.67% increase) and a 0 increase i n c l a s s B, then the assessments and taxes without the 5% rule would be as i l l u s t r a t e d i n 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 o n  10 m i l l i o n  27.50 m i l l i o n  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% r u l e p r o h i b i t s the increase of t o t a l assessment by 10%, the following c a l c u l a t i o n s must be executed to ensure equity between the two c l a s s e s : 1)  the percentage of the t o t a l taxes for which each c l a s s would be r e -  sponsible had the 5% r u l e not been in force must be determined. (Class A = 63.64%;  Class B = 36.36%)  49 2)  increase the t o t a l assessed value by the 5% maximum ( 25M + 1.25M =  26.25M0. 3)  t o t a l revenue required i s $825,000 of which c l a s s A i s responsible for  63.64% or $525,000 and c l a s s B i s responsible for 36.36% or $300.00. The m i l l rate which when m u l t i p l i e d by the taxable assessed value of 26.26 m i l l i o n y i e l d s a product of 825,000 i s 31.429. 4)  the assessed value of c l a s s A becomes 525,000/31.429 = 16.704Mand  the assessed value of c l a s s B becomes 300,000/31.429 = 9.545M. The complexities and prohibitiveness of the c a l c u l a t i o n s becomes apparent when i t i s r e a l i z e d that in r e a l i t y there i s amultitude of land uses each with subclasses and i n d i v i d u a l properties w i t h i n the subclasses which have varying degrees of value increase. If the above c a l c u l a t i o n s 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  mill  31.429  31.429  31.429  revenue  510,710  314,290  825,000  Percent of t o t a l  61.90  38.10  100  rate  50 In Table VI the 1971 t o t a l taxable assessed value has been i n creased by the 5% maximum.  The increase of 1.25 m i l l i o n was a t t r i b u t e d  to class A ( i t a c t u a l l y increased 2.5 M) and i t represents an 8.33% increase i n class A ' s assessments.  Because of the incongruence between  the actual i n c r e a s e , class A pays only 61.90% of the t o t a l taxes instead of i t s equitable portion of 63.64%.  Class B becomes r i d d l e d with an extra  burden amounting to 4.785% (1.74/36.36). The 5% r u l e :  (1) r e s u l t s i n ununiformity of assessments; (2)  increases administrative c o s t s ; (3) confuses the taxpayer i n his e f f o r t s to determine what his share of the tax burden should be and (4) causes unequal average assessment-market value r a t i o s between m u n i c i p a l i t i e s . 2.  Effects of the "Ten Per Centum Rule" The "10% r u l e , " which was introduced i n 1971, w i l l add compli-  cations to the f i n d i n g of a seemingly already insoluable s o l u t i o n to the manifestatious r e s u l t s of the " f i v e per centum r u l e " .  If we r e f e r back to  the prescribed s o l u t i o n obtained under the " f i v e per centum'rule" i t  is  discovered that the increase i n assessed value class A equals 11.135% (1.25/15.00).'  Since the "ten per centum r u l e " p r o h i b i t s such an i n c r e a s e ,  a new s o l u t i o n must be found.  Table VII summarizes and equitable s o l u t i o n  when both the f i v e 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  mill  32.039  32.039  32.039  revenue (nearest ,000)  525,000  300,000  825,000  Percent of Total  63.64  36.36  rate  * Total taxable assessed value i s increased by 3%. The longer these rules are in f o r c e , the l a r g e r w i l l be the discrepencies caused by them.  The " f i v e per centum r u l e " does not help  engender assessment e q u a l i z a t i o n between m u n i c i p a l i t i e s because the muni c i p a l i t i e s experiencing the greatest property value increases are r e s t r i c t e d the most i n t h e i r assessment increases.  The need f o r assessment  e q u a l i z a t i o n was d i l a t e d upon i n the previous section of t h i s t h e s i s but stated b r i e f l y here, since a 24.1 m i l l rate i s uniformity applied to the assessments, for school purposes, on a l l properties then the residents of the m u n i c i p a l i t i e s with the l a r g e s t average property value increases over five  percent w i l l pay p r o p o r t i o n a l l y less school taxes then the residents  of the other m u n i c i p a l i t i e s w i t h i n the same school d i s t r i c t , yet they are receiving equal b e n e f i t s . The "ten per centum r u l e " , although i t may enhance the School Boards revenue f o r e c a s t i n g a b i l i t y , r e s u l t s in two consequences; 1)  it  acts as an added c a t a l y s t to the " f i v e per centum r u l e " in encouraging  52 assessment i n e q u a l i t y between m u n i c i p a l i t i e s and 2) i t ensures the lack o f , or decreases the degree of assessment uniformity w i t h i n m u n i c i p a l i t i e s . The owners of property which value i s increasing the greatest in a municip a l i t y w i l l benefit the most, by paying p r o p o r t i o n a l l y l e s s t a x e s , because the same m i l l rate i s applied to the assessments for general purposes to a l l properties i n the m u n i c i p a l i t y yet they receive the same b e n e f i t s .  It  i s hoped that the P r o v i n c i a l Government weighted the benefits of the i n creased revenue forecasting a b i l i t y of the School Board against the s o c i a l i n j u s t i c e of the assessment ununiformity and i n e q u a l i t y which i t causes. White and Hamilton surmised that the purpose of the " f i v e and ten per centum r u l e s " may have been: "to provide r e l i e f to c e r t a i n classes of owner whose property i s increasing r a p i d l y i n v a l u e , 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 following remark: "If t h i s 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 v e and ten per centum r u l e s " ) of achieving the desired r e s u l t s . " 1 9  18  Hamilton and White, op, c i t . ,  19  ibid.,  Page 9.  Page. 9.  CHAPTER IV EQUALITY OF ASSESSMENTS As was discussed i n the previous chapter, one of the requirements of the m u n i c i p a l i t i e s and the P r o v i n c i a l Assessment Commissioner i s to assess properties at an equal proportion of t h e i r market value.  This  chapter pruports to compare the assessment e q u a l i t y between m u n i c i p a l i t i e s , land use categories and p r i c e categories of r e s i d e n t i a l property f o r  if  i n e q u a l i t i e s do e x i s t between categories and/or m u n i c i p a l i t i e s , then, because the same m i l l rate i s applied to a l l the properties w i t h i n the same m u n i c i p a l i t i e s and to a l l properties of d i f f e r e n t m u n i c i p a l i t i e s f o r school purposes an unequal burden of taxation w i l l r e s u l t due to these inaccuracte assessments.  It i s necessary to study assessments i n  the f i r s t instance rather than taxes payable because the i n e q u a l i t i e s of the tax burden r e s u l t i n g from inaccurate assessments w i l l not be apparent when studying taxes payable as a percent of market value due to two f a c t o r s ; 1) the homeowners grant and 2) the extra charges added onto some properties for additional services received. The mean and median of the assessment-sales r a t i o s for each of the categories studied have been employed as the measures to a s c e r t a i n 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 d e f i n i t i o n s 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 e q u a l i t y between m u n i c i p a l i t i e s , land use categories and p r i c e categories the average score is of greatest relevance, and as such, the r e s u l t s produced by the mean w i l l be deemed the most significant. A.  EQUALITY OF ASSESSMENT BETWEEN MUNICIPALITIES Since the P r o v i n c i a l Government requires that a f i x e d m i l l  rate be charged, to the assessment for school purposes on a l l  proper-  t i e s , than those m u n i c i p a l i t i e s having the highest average assessmentsales r a t i o s are c o n t r i b u t i n g p r o p o r t i o n a l l y more than m u n i c i p a l i t i e s 2 with a lower r a t i o and are r e c e i v i n g only proportional  benefits.  The means and medians of the assessment-sales r a t i o s for the municipa l i t i e s being studied are recorded in Table V I I I . TABLE VIII MEANS AND MEDIANS OF THE ASSESSMENT-SALES RATIOS FOR THE MUNICIPALITIES* M u n i c i p a l i t y from lowest Mean M u n i c i p a l i t y from lowest to highest mean to highest median 1. 2. 3. 4. 5. 6. 7. 8.  Surrey Delta West Vancouver Vancouver Richmond North Vancouver D i s t r i c t Coquitlam Burnaby  29.69 29.84 30.13 30.40 31.08 31.84 32.16 33.00  1. 2. 3. 4. 5. 6. 7. 8.  Surrey Vancouver West Vancouver Richmond North Vancouver D i s t r i c t Delta Coquitlam Burnaby  Median 29.79 30.59 30.64 30.98 31.95 32.27 32.36 33.09  * f i e l d study - School purpose assessments were employed in the calculations.  2 The c o l l e c t e d revenue i s r e d i s t r i b u t e d to the school d i s t r i c t s on a per student b a s i s .  55 If a l l the m u n i c i p a l i t i e s above represented one school  district  then, on an average, the residents of Surrey would pay p r o p o r t i o n a l l y (to market value) less in school taxes than the residents of the other m u n i c i p a l i t i e s and the residents of Burnaby would be paying  proportionally  more than the residents of any other m u n i c i p a l i t y towards the school d i s t r i c t , y e t , they would be r e c e i v i n g equal b e n e f i t s . TABLE IX PERCENT DIFFERENCE BETWEEN SURREYS' MEAN AND THE MEAN OF OTHER MUNICIPALITIES Municipality  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 difference between Surrey's  mean assessment-sales r a t i o s and the means of the other m u n i c i p a l i t i e s . Due to the assessors in Surrey underassessing r e s i d e n t i a 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 section w i l l describe the e q u a l i t y of assessments be-  tween land uses employing the mean and median as measures.  The means  and medians of the assessment-sales r a t i o s f o r the land uses are i l l u s t r a t e d i n Table X. TABLE X MEANS AND MEDIANS OF THE ASSESSMENT-SALES RATIOS FOR THE LAND USES* Municipality  Land Use in order from lowest to highest mean  Mean  Land use in order from lowest to highest median  Median  Vancouver  conversion residential retail industrial office apartment  25.50 30.40 31.62 32.39 33.00 33.17  conversion residential restail industrial office apartment  24.87 30.59 30.62 31.08 34.57 34.82  Surrey  vacant land residential  14.48 29.69  vacant land residential  13.67 29.79  Delta  vacant land residential  25.50 29.84  vacant land residential  25.22 32.27  * f i e l d study - school purpose assessments were i n the c a l c u l a t i o n . Referring 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 r e l a t i v e to the other land uses while the one with the highest i s being over-assessed. To aid in the d e s c r i p t i o n of the amount of under or over assessment, Table XI decribes the mean  57 of the means and medians and presents the percent v a r i a t i o n of the i n d i v i dual means and medians from the o v e r a l l mean. TABLE XI PERCENT VARIATIONS OF THE LAND USE MEANS AND MEDIANS FROM THE OVERALL MEAN Municipality  Land User  % of Mean from Overall Mean  Land  % of Median from Overall Mean  Vancouver  (mean of means conversion res i d e n t i a l retail industrial office apartment  31.01) -17.79 * 1.97 + 1.97 + 4.45 + 6.49 + 6.97  (mean of medians conversion residential retail industrial office apartment  31.09) ^20.00 - 1.61 - 1.70 - .30 +11.19 +12.00  Surrey  (mean of mean vacant land residential  22.08) -34.42 +34.42  (mean of median vacant land residential  21.73) -37.09 +37.09  Delta  (mean of mean vacant land residential  27.67) - 7.84 + 7.84  (mean of median vacant land residential  28.75) -12.28 +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 deviation of the i n d i v i d u a l means or medians varies under the d i f f e r e n t 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 i n Vancouver are below the o v e r a l l mean but under the median measure four are below the mean of the medians. The order and deviations as found under the means should be a l l o t t e d more s i g n i f i c a n c e , 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 properties i n Vancouver are over-assessed r e l a t i v e to r e s i d e n t i a l land use properties and vacant land i n Surrey and Delta are under-assessed i n comparison to r e s i d e n t i a l land.  Those types of pro-  perties being over-assessed are paying p r o p o r t i o n a l l y higher taxes to the School D i s t r i c t than i s t h e i r l e g i s l a t e d r e s p o n s i b l i t y . C.  EQUALITY OF ASSESSMENTS BETWEEN DIFFERENT MARKET PRICE CATEGORIES The question to be answered i n t h i s section i s ;  Are d i f f e r e n t  price categories assessed at the same or at d i s s i m i l a r percentages of market value?  Inferences made about the i n e q u a l i t y of assessments between  p r i c e categories cannot be transposed with much v a l i d i t y to conjecture inferences about the assessment treatment of income categories.  The gen-  e r a l i z a t i o n that an owners' home i s representative of his income i s i n v a l i d often enough to d i s c r e d i t any assumptions about the owners income derived from the market value of his home. The measuresemployed to determine the degree of e q u a l i t y between d i f f e r e n t valued r e s i d e n t i a l properties are the mean and median. Due to the sample s i z e s obtained, .the price categories for each m u n i c i p a l i t y were determined such that 1/3 of the properties would be in each of three p r i c e categories.  The d o l l a r figures for each price category in each  muncipality i s located in Table  II.  The means and medians for each 1/3 price category for each of the m u n i c i p a l i t i e s are summarized in Table X I I .  59 TABLE XII MEANS AND MEDIANS OF ASSESSMENT-SALES RATIOS FOR PRICE CATEGORIES OF DIFFERENT MUNICIPALITIES* Municipality  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 i s 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 c a l c u l a t i o n s . The r e s u l t s 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  interest.  Table XIII ranks the p r i c e ranges f o r each m u n i c i p a l i t y from the lowest mean of the assessment-sales r a t i o to the highest.  60 TABLE XIII RANKED ORDER OF MEANS OF PRICE CATEGORIES FOR EACH MUNICIPALITY Municipality  Vancouver Burnaby Coquitlam Richmond Delta Surrey North Van. D i s t . West Vancouver  Low 1/3 numercial order of price category w i t h i n the municipality  % Variation from the lowest mean of the 1/3 priced categories f o r each municipality  2 1 1 3 2 1 1 _1 12  (3.39%) (8.34%) (9.14%)  Middle 1/3  3 3 3 2 1 2 2 _3 19  (8.69%) (2.39%) (5.68%) (8.01%) (3.28%) (1.27%) (7.76%)  High 1/3  1 2 2 1 3 3 3 _2 17  ( .43%) ( .32%) (14.26%) (4.14%) (1.90%) (3.79%)  The lower priced properties have the lowest assessment-sales r a t i o s the greatest number of times while the middle 1/3 has the highest r a t i o s the greater number of times. The d i f f e r e n t m u n i c i p a l i t i e s vary i n t h e i r e q u a l i t y of p r i c e ranges as well as t h e i r biasness towards or against a p a r t i c u l a r p r i c e category. Table XIII also provides ( i n brackets) the-percent difference between the mean of the lowest p r i c e bracket and the mean of the other two p r i c e brackets.  Burnaby and North Vancouver D i s t r i c t have the l e a s t percentage  v a r i a t i o n of the means and t h e r e f o r e , provide the greatest e q u a l i t y between price categories.  The m u n i c i a p l i t y with the greatest degree of i n e q u a l i t y  between p r i c e categories i s D e l t a .  The remaining m u n i c i p a l i t i e s i n order  from the one which provides the greatest e q u a l i t y to l e a s t i s as f o l l o w s :  61 Surrey, Coquitlam, West Vancouver, Vancouver and Richmond.  In Delta  there i s a 14.25% difference between the mean of the middle 1/3 priced properties and the mean of the high 1/3 priced p r o p e r t i e s . The m u n c i p a l i t i e s which are prejudiced towards the low priced properties are Burnaby, Coquitlam, Surrey, North Vancouver D i s t r i c t and West Vancouver.  D e l t a ' s middle 1/3 price.ranged r e s i d e n t i a l  properties  benefit by a lower assessment r e l a t i v e to market value while Vancouver and Richmond bestow the advantage upon the higher priced r e s i d e n t i a l properties. To obtain a general overview as to whether or not assessments are equal between,.price categories of r e s i d e n t i a l properties a l l  the  r e s i d e n t i a l properties from a l l the m u n i c i p a l i t i e s were grouped together and c l a s s i f i e d i n t o the p r i c e 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 r a t i o s were then c a l c u l a t e d f o r each p r i c e category. The r e s u l t s are summarized in Table XIV..  62 TABLE XIV MEANS AND MEDIAN OF ASSESSMENT-SALES RATIOS FOR EACH PRICE CATEGORY* P r i c e Category  Mean  Median  l e s s 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 i e l d study When comparing the e q u a l i t y of assessments between p r i c e c a t egories the means should be regarded as the most s i g n i f i c a n t of the two measures as i t i s the average of the p r i c e category.  U t i l i z i n g the mean as  the measure of e q u a l i t y , the p r i c e category $20,000 - 24,999 i s assessed at the lowest percent of market v a l u e , and the less than $20,000 p r i c e category i s assessed at the next lowest percent.  The remaining p r i c e  categories from lowest to highest assessment-sales r a t i o s a r e :  greater  than 35,000; 30,000-34,999; and 25,000-29,999. The lower p r i c e ranges seem to be b e n e f i t t i n g s l i g h t l y over the higher p r i c e categories as t h e i r assessment-market p r i c e r a t i o s are lower.  The advantage i s very s l i g h t , : however, as the d i f f e r e n c e between  the lowest r a t i o to the highest i s only 4.33%. It must be r e a l i z e d that the obtained figures in Table XIV do not represent conclusive evidence that one price category has a lower  63  assessment-sales r a t i o than another because a l l the r e s i d e n t i a l sales from a l l the m u n i c i p a l i t i e s were grouped together and the m u n i c i p a l i t i e s possess d i f f e r e n t average r a t i o s and d i f f e r e n t average priced r e s i d e n t i a l property. D.  SUMMARY This section on the e q u a l i t y of assessments i s a prelude to  the chapter on the burden of t a x a t i o n .  Since property taxes are related  to assessments, i n e q u a l i t i e s of assessments between m u n i c i p a l i t i e s , land uses or p r i c e categories cause a tax burden d i s t r i b u t i o n which i s l e g i s l a t i v e l y unjust.  Another f a c t o r a f f e c t i n g the tax burden d i s t r i -  bution i s the assessment uniformity w i t h i n m u n i c i p a l i t i e s and land uses. The following chapter examines the assessment uniformity with the aid of various::,measures.  CHAPTER V ASSESSMENT UNIFORMITY As was stated in Chapter II the m u n i c i p a l i t i e s 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 t h i s chapter i s to measure the degree of assessment uniformity w i t h i n m u n i c i p a l i t i e s and land uses to determine which of the m u n i c i p a l i t i e s and lands uses studied e x h i b i t the greatest degree of  uniformity.  The degree of assessment uniformity w i l l be determined from s t a t i s t i c a l a n a l y s i s as i t allows us to employ measures which have been e s p e c i a l l y designed to a s c e r t a i n the dispersion of i n d i v i d u a l 2 about the central tendency point.  points  These measures vary in the type of  information which they present and, as a consequence of t h i s , the advantages and disadvantages of each as they r e l a t e to the needs of t h i s 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 i n d i v i d u a l points from the l e g i s l a t e d f i f t y percent l e v e l for two reasons; 1( i t i s conceded that assessing at the f i f t y percent level i s a near i m p o s s i b i l i t y and e q u a l i t y of the tax burden within a m u n i c i p a l i t y may be maintanined as long as the assessments are uniform at the average assessment-sales r a t i o and 2) the consequences of m u n i c i p a l i t i e s assessing at d i s s i m i l a r average assessment-sales r a t i o s were discussed in the previous chapter.  thesis  1  actual value i s equated to the adjusted s e l l i n g price in t h i s  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 d e v i a t i o n , standard d e v i a t i o n , q u a r t i l e deviation and frequency t a b l e s .  Since the q u a r t i l e deviation measures only the central  50% of the cases i t i s a crude estimate of the t o t a l d i s p e r s i o n .  The mean  deviation and standard deviation are affected by every property with the standard deviation placing more emphasis on the extreme cases than the mean d e v i a t i o n .  Although these measures can give some i n s i g h t into the  dispersion of i n d i v i d u a l assessment r o l l s , they do not lend to the comparison of m u n i c i p a l i t i e s in t h e i r assessment  uniformity unless the  measures of central tendency (median and mean) are the same for each m u n i c i p a l i t y and land use studied and in chapter IV i t was proven that t h i s s i t u t a t i o n does not p r e v a i l .  The need f o r equal central tendencies  can be i l l u s t r a t e d b y t c i t i n g the f o l l o w i n g example. Municipality A  Municipality B  A/S ratio-mean  .424  .33  Standard deviation  .082  .065  From the data given i t i s d i f f i c u l t to determine which muni c i p a l i t y has the greater uniformity because, although m u n i c i p a l i t y A has the greater standard deviation in an absolute sense i t s may be better i n a r e l a t i v e sense ( r e l a t i v e to the mean).  uniformity Because ass-  essment uniformity i n m u n i c i p a l i t i e s with d i f f e r e n t central tendencies are being compared, a t t e n t i o n w i l l be immediately focused upon more appropriate  66 measures. B.  MEASURES OF RELATIVE DISPERSION Although the standard deviation and mean deviation are not  s u i t a b l e measures themselves, they are stepping stones to more appropriate measures. 1.  C o e f f i c i e n t of Dispersion;, The c o e f f i c i e n t of dispersion i s the average deviation of a  s e r i e s divided by the median of the s e r i e s and in t h i s instance  it  measures the dispersion of the assessment (for school purposes) sales r a t i o s 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 within a municipality.  Also:  "The c o e f f i c i e n t of dispersion i s the 'index of assessment i n e q u a l i t y ' referred to by the l a t e Dr. John H. R u s s e l l , former Director of Research V i r g i n i a Department of Taxation. His recommendation was that a c o e f f i c i e n t of dispersion of "20 should be considered a goal desirable of achievement and r e a sonably a t t a i n a b l e , " and that anything below t h i s i s to be considered an e x c e l l e n t degree of e q u a l i z a t i o n of uniformity. Conversely, he stated "an index as high as 45 should be judged caused for gravest convern?"3  3 Bernard I r v i n Ghert, "Measures of the Quality of Real Property Assessments: An Examination of Their V a l i d i t y . " (Unpublished M.B.A. Thesis completed at the U n i v e r s i t y 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 c o e f f i c e n t of dispersion by land use and by m u n i c i p a l i t y from the lowest c o e f f i c e n t to the highest. TABLE XV COEFFICIENT OF DISPERSION BY MUNICIPALITY, BY LAND USE.  (FROM LOWEST TO HIGHEST)*  Municipality  C o e f f i c i e n t of Dispersion  1.  North Vancouver D i s t r i c t  7.83  2.  Coquitlam - r e s i d e n t i a l  8.40  3.  Burnaby - r e s i d e n t i a l  9.77  4.  West Vancouver - r e s i d e n t i a l  11.69  5.  Vancouver - r e s i d e n t i a l conversions apartment industrial office retail  12.13  6.  Richmond - r e s i d e n t i a l  13.62  7.  Delta - r e s i d e n t i a l vacant land  14.61  14.61 16.22  8.  Surrey - r e s i d e n t i a l  16.19  16.19  vacant land  12.13 14.54 16.80 23.65 23.84 25.86  29.55  * f i e l d study It should be mentioned at t h i s time that comparisons between muni c i p a l i t i e s can only be made when the same items are being measured, theref o r e , the uniformity of assessments of m u n i c i p a l i t i e s can be compared only f o r the r e s i d e n t i a l land uses and land uses comparisons can be made only w i t h i n the m u n i c i p a l i t y i n which they are found.  No information w i l l be  gained by comparing the c o e f f i c i e n t of dispersion of the vacant land use in  68 Surrey to the apartment land use in Vancouver.  R e a l i z i n g these  limitations  the following observations can be n o t i c e d . a)  If we accept Dr. John H. Russells l i m i t s of a c o e f f i c i e n t of dispersion  of 20 representing an acceptable f i g u r e and index as high as 45 being " j u s t cause for concern," then a l l the m u n i c i p a l i t i e s analyzed are w i t h i n the acceptable region with respect to r e s i d e n t i a l land use.  The munici-  p a l i t i e s are not, however, consistent i n t h e i r u n i f o r m i t y , with North Vancouver D i s t r i c t r e g i s t e r i n g the lowest c o e f f i c i e n t of dispersion of 7.83 and Surrey r e g i s t e r i n g . t h e highest at 16.19. b)  If the same standard i s applied to the land uses we f i n d that in  Vancouver the r e s i d e n t i a l , apartment, and conversions are w i t h i n the acceptable l e v e l , while the r e t a i l , i n d u s t r i a l and o f f i c e are outside the acceptable l i m i t s but not beyond the 45 mark. There i s considerably more uniformity of assessment within the r e s i d e n t i a l property than the I n d u s t r i a l , o f f i c e or r e t a i l  property.  This i s to be expected as the appraisers are able to assess r e s i d e n t i a l property e a s i e r due to the greater number of comparables which they may refer to.  We also f i n d that vacant land assessments in Surrey and Delta  are less uniform than the r e s i d e n t i a l assessments w i t h i n those m u n i c i p a l i t i Since the c o e f f i c i e n t of v a r i a t i o n u t i l i z e s the average dev i a t i o n as the numerator, l i t t l e i s known about the i n d i v i d u a l sions about the mean.  disper-  It i s not know how many p r o p e r t i e s , e i t h e r nu-  m e r i c a l l y or percentage w i s e , l i e w i t h i n the acceptable region of below 20 or unacceptable region above 20.  69 2)  C o e f f i c i e n t of V a r i a t i o n The c o e f f i c i e n t of v a r i a t i o n i s the standard deviation divided  by the arithmetic mean and then m u l t i p l i e d by 100 to express i t i n percentage terms.  This measure was chosen, because with i t the proportion of  the sample which i s between p a r t i c u l a r r a t i o s can be determined under normal d i s t r i b u t i o n conditons.  For i n s t a n c e , a m u n i c i p a l i t y with an average a s s -  essment l e v e l of 50%, with the r a t i o s normally d i s t r i b u t e d about the mean and a c o e f f i c i e n t of v a r i a t i o n of 25 then we know that 68.26% of the r a t i o s should l i e between the assessment-sales r a t i o s of 37.5 and 62.5.  The proportion of the r a t i o s which l i e between any two r a t i o s can  be determined by using the standardized normal v a r i a t e . The c o e f f i c i e n t s of v a r i a t i o n from the means of the assessmentsales r a t i o s f o r the m u n i c i p a l i t i e s 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* M u n i c i p a l i t i e s A Land Uses  C o e f f i c i e n t of Dispersion  1.  North Vancouver D i s t r i c t - r e s i d e n t i a l  10.31  2.  Coquitlam - r e s i d e n t i a l  11.93  3.  Burnaby - r e s i d e n t i a l  14.41  4.  Vancouver - r e s i d e n t i a l conversions apartment industrial office retai1  14.50  5.  West Vancouver - r e s i d e n t i a l  16.06  6.  Delta - r e s i d e n t i a l vaoant land  22.57  22.57 20.87  7.  Surrey - r e s i d e n t i a l vacant land  22.81  22.81 35.45  8.  Richmond - r e s i d e n t i a l  24.95  14.50 20.32 23.39 28.86 30.41 32.12  * f i e l d research The order of the m u n i c i p a l i t i e s and land uses produced i n Table XV  iare s l i g h t l y d i f f e r e n t than the order produced in Table XVI.  Although,  the f i r s t three m u n i c i p a l i t i e s have assumed the same order under both the tables the remaining 5 m u n i c i p a l i t i e s have assumed d i f f e r e n t p o s i t i o n s .  The  land uses i n Vancouver have the same order under both t a b l e s . The main advantage of the c o e f f i c i e n t of v a r i a t i o n over the coeff i c i e n t of dispersion i s 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 l a t i o n are not normally d i s t r i b u t e d about the mean then t h i s advantage d i s appears f o r the reseacher can no longer predict the proportion of the popu l a t i o n l i e i n g between two values.  Before proceeding f u r t h e r in the analysis  of the r e s u l t s produced by t h i s measure i t should be examined as to whether or not the assessment-sales r a t i o figures obtained are normally d i s t r i b u t e d . It i s necessary to prove that only one of the m u n i c i p a l i t i e s and land uses studied has a dispersion of r a t i o s which i s not normally d i s t r i b u t e d because the d i f f e r e n t m u n i c i p a l i t i e s and land uses are being compared in t h e i r 4  assessment uniformity.  The chi-squared t e s t  for goodness of f i t was em-  ployed in determining whether or not the dispersions were normally d i s tributed.  The following procedure was f o l l o w e d : a) The assessment-sales r a t i o s were divided into d e c i l e s thereby  y i e l d i n g ten d i v i s i o n s each with an equal number of observed frequencies. The figures for Burnaby w i l l be provided as an example. Municipality:  Burnaby  Number of observations  =  125  Median of assessment  =  33.09  Standard deviation  =  4.75  Mean  =  33.00  4  defined in Appendix C  72 TABLE XVII OBSERVED AND EXPECTED FREQUENCY OF EACH DECILE A.  SALES RATIO  decile  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  14.59  11.02  19.52  expected frequency 22.07 14.43  8.62  8.19  10.13  7.83  8.60  Referring to Table XVII we f i n d t h a t , as an average, 12.5 of the observations had assessment-sales of less than 28.59%, 12.5 had r a t i o s between 28.59% and 30.40% e t c . b)  Having determined the d e c i l e s i t was necessary to c a l c u l a t e  the number of observations which should have f a l l e n under each d e c i l e had the r a t i o s been normally d i s t r i b u t e d , (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 r e s u l t s were as f o l l o w s :  degrees of freedom = 8 the chi-squared obtained was 18.199 The p r o b a b i l i t y of obtaining a chi-squared of 18.199 with a mean of 33.00 and standard deviation of 4.75 i f the observed values were normally d i s t r i buted i s 1.9809.  73 A s i m i l a r t e s t f o r Delta resulted in the f o l l o w i n g : number of observation mean S.D. df chi-squared p r o b a b i l i t y of dispersion being normally distributed  = 100 = 29.84 = 6.73 = 8 = 43.846 =  .0000%  Testing two land uses produced the following r e s u l t s : Apartment - Vancouver number of observations S.D. Mean df chi-squared p r o b a b i l i t y of dispersion being normally distributed I n d u s t r i a l - Vancouver number of observations Mean S.D. df chi-squared p r o b a b i l i t y of d i s p e r s i o n being normally distributed  = 93.7 = 7.76 = 33.17 = 8 = 16.499 =  3.56%  = 47 = 31.95 = 9.38 = 3 = 4.797 = 18.55%  The tests were also performed for the other municipalites and land uses, but i t i s necessary only to provide the reader with the above c a l c u l a t i o n s to conclude that i t i s highly improbable that a l l the municip a l i t i e s and land uses have observed frequencies which resemble a normal distribution.  Because the observed r a t i o s do not take on normal  distri-  bution c h a r a c t e r i s t i c s the c o e f f i c i e n t of v a r i a t i o n i s not an adequate t e s t f o r comparing assessment u n i f o r m i t y .  74 C.  REGRESSION ANALYSIS  5  The regression equation y = A & BX i s a mathematic model in which variables are s t a t i s t i c a l l y related so that the value of one v a r i a b l e can be estimated on the basis of the value of the other v a r i a b l e .  It  is  used i n t h i s t h e s i s , not as a tool of p r e d i c t i o n , but as one which describes the r e l a t i o n s h i p between assessed values and market values.  Assumptions of  the l i n e a r regression model are as f o l l o w s : "1)  2) 3)  4)  The assumption of l i n e a r i t y . The average of the y ' s in each sub-population i s the conditional expected value of y f o r that s p e c i f i c x , that i s , t h e u y . x. values f a l l on a s t r a i g h t l i n e defined by u y . x. = A + BX. Each of the sub-populations of x values i s assumed to be normally d i s t r i b u t e d . Each sub-population of y values has a variance of if; These variance are equal f o r a l l sub-populations. This means there i s uniform s c a t t e r of the points around the regression l i n e . Values of y are assumed to be s t a t i s t i c a l l y independant of x . " 6 p  Properties of a l i n e a r regression l i n e -  5  '  defined i n Appendix C,  6 Ann Hughes and Dennis Gpawosky, S t a t i s t i c s : A Foundation for A n a l y s i s , (Don M i l l s : Addison - Wesley Publishing C o . , 1971), PP. 311-312.  75 The regression l i n e Yc = a + bx i s the sample regression l i n e which estimates the populations regression l i n e .  The regression l i n e s  obtained from the sampling were determined by the l e a s t squares method. This method determined the i n t e r c e p t A and the slope B such that the sum of the squared error terms are minimized. as  Si  -  - Uy.x-  .  The error term i s defined  Letting the symbol SSM represent the sum  of the squares of the e r r o r terms, we have  ss£ -£ (y^ -3-X-XcJ  *  =  minimum.  Properties of the l e a s t squares l i n e are as f o l l o w s : "1)  The sum of the deviations of the observed values from the estimated values w i l l be zero. The plus deviationsare equal to and cancel out the minus deviations leaving £ ( y - Vi)-o.  2)  The sum of the squares of the deviation of the observed values from the estimated values i s less than the sum of the squared deviation around any other l i n e of t h i s type drawn through the p o i n t s .  3)  The regression l i n e goes through the o v e r a l l mean of the data.  4)  When the data represents a random sample, the l e a s t squares l i n e i s the l i n e 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 i n d  the standard deviation of the d i f f e r e n c e between  the observed value of y and the estimated y values ( c a l l e d the standard deviation of regression of the standard error of estimate y on x) then we have a measure showing the degree of concertration of i t s actual observations around the regression l i n e . Since the standard deviation of y y i e l d s an abolute f i g u r e , does not represent a s u i t a b l e measure f o r comparing the uniformity of  7  i b i d . , P. 322.  it  76  assessments betwen m u n i c i p a l i t i e s or between land uses.  A r e l a t i v e measure  of the standard error of y can be obtained by d i v i d i n g the standard error of y by the mean p r i c e to obtain the percentage error from the mean p r i c e . Another r e l a t i v e measure the c o e f f i c i e n t of determination (r ) may also be used to compare assessment uniformity.  The higher the c o e f f i c i e n t of deter2  mination, the greater the degree of uniformity.  An r  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-  ily  of 1 should mean  imply that the assessment-sales r a t i o s are uniform, however, because  the A f a c t o r in the equation y = A + BX biases the r a t i o s . If the A were 0 , that i s the best f i t l i n e bisected the o r i g i n then the t e s t would be of greater s i g n i f i c a n c e because the best f i t would t r u l y measure the assessment-sales r a t i o uniformity.  line  But because  the A ' s have v a l u e s , then, although the i n d i v i d u a l properties may a l l be located on the best f i t uniformity e x i s t s . fit  l i n e i t does not n e c e s s a r i l y imply that  An example i s i l l u s t r a t e d below.  l i n e were as f o l l o w s : ILLUSTRATION 2 BEST FIT LINE  y  X  Suppose the best  77 Although a l l the assessments may be located on the best f i t  line  y = 2,000 + .30X, a l l the assessments are not 30% of market value because of the 2,000 absolute f i g u r e which must be added to determine each y value,  t h e r e f o r e , those properties in the lower p r i c e range are ass-  essed at a greater percent than the properties i n the higher price range. The A f i g u r e also influences the standard error of y , therefore c a l c u l a t i o n s i n v o l v i n g t h i s f i g u r e are also biased. This problem may be solved by f i n d i n g the l e a s t square l i n e for each m u n i c i p a l i t y and each land use which produced a value of 0 for A , that i s , a best f i t  l i n e which b i s e c t s the o r i g i n .  This w i l l  alleviate  the biasness of the A. Calucaltions were performed to obtain the regression l i n e and the standard error of y , f o r c i n g the best f i t  l i n e through the o r i g i n .  Table XVIII e x h i b i t s the regression l i n e s and standard errors of y for the two methods of obtaining the best f i t  line.  78 TABLE XVIII REGRESSION LINE AND STANDARD ERROR OF'Y BY MUNICIPALITY AND BY LAND USE* Municipality  Regression Line  SY.X  Regression Line  Vancouver Burnaby Coquitlam Richmond Delta Surrey North Van. D. West Van.  y y y y y y y y  1087 1203 1043 1614 1865 1416 1026 2243  y y y y y y y y  Land Use  Regression Line  SY.X  Regression Line  = = = = = = = =  1470 524 6.67 2635 -293 195 *119 1435  + + + + + + + +  ,2306x .3508x .3221x .1986x .3103x .2862x .3228x .2668x  0 + .2938x  = 0 + = 0 = 0 +  - 0 = 0 = 0 = 0  —  A  Vancouver -residential -apartment -conversion -retail -industrial -office  y y y y y y  .2306x .2872x .1598x .3972x .3676x .4502x  1087 15710 1811 34870 10110 25720  Delta -residential -vacant land  y = -293 + .3103x y = 102 + .2423x  Surrey -residential -vacant land  y = y =  = 1740 = 6667 = 3452 =11500 = 3957 =15970  Afield  + + + + + +  195 + .2862x -89 + .1561x  + + + +  .3324x .3323x .2965x .2005x .2955x .3194x .2977x  SY.X 1138 1208 1039 1761 1858 1412 1023 2282 SY.X  n  + .2938x + .3774x + , .2387x + .3868x + .3495x + .4181x  1133 16490 2068 36300 10350 23240  1614 471  y = 0 + .3005x y = 0 + .2866x  1858 469  1416 418  y = 0 + .3194x y = 0 + .1530x  1023 418  y y y y y y  = 0 - 0 0 = 0 = 0 = .0  study  Setting A = 0 and determining the best f i t  l i n e produces an  2 R  which i s d i f f e r e n t from that o r i g i n a l l y d e f i n e d , and for t h i s reason  cannot be considered as an appropriate measure.  Table XIX provides the  reader with the r e l a t i v e standard error of y as a percent of the mean price by m u n i c i p a l i t y and by land use.  79 TABLE XIX RELATIVE STANDARD ERROR OF Y BY MUNICIPALITY BY LAND USE. (FROM LOWEST TO HIGHEST) Municipality  Relative Standard Error of Y  North Vancouver Coquitlam Burnaby Vancouver West Vancouver Delta Richmond Surrey  3.10 3.64 4.63 5.13 5.47 6.86 7.09 7.25 Relative Standard Error of Y  Land Use Vancouver - r e s i d e n t i a l conversion apartment industrial office retai1 Delta vacant land residential Surrey vacant land residential  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 f o r any p r a t i c u l a r value of x were normally d i s t r i b u t e d then the proportion of the items which l i e w i t h i n a range of the regression l i n e could be determined.  For example  68.24% of the observed values should f a l l within a range of  >c -  Sy-x  The smaller the standard error of y the closer the r e l a t i o n s h i p and the higher the standard e r r o r the greater i s the s c a t t e r of items. It was proven p r e v i o u s l y , however, that the dispersion of items does not assume normal d i s t r i b u t i o n  characteristics.  It i s necessary there-  f o r e , to devise a method of measuring assessment uniformity without having to assume a normal d i s t r i b u t i o n of the items.  80 D.  PERCENT FROM THE MEDIAN One method of measuring assessment uniformity without having  to r e l y on the assumption that the dispersion of data points i s normally d i s t r i b u t e d i s by ascertaining the proportion of the assessmentsales r a t i o s between c e r t a i n percentages of the median.  For i n s t a n c e ,  the assessment uniformity w i t h i n m u n i c i p a l i t i e s could be compared by ascertaining the proportion of properties within each m u n i c i p a l i t y , which r e g i s t e r e d an- assessment-sales r a t i o within plus or minus ten percent of the median. Suppose m u n i c i p a l i t i e s A , B, C had r e s p e c t i v e l y 40, 50 and 60% of t h e i r assessed properties w i t h i n t h i s + 10% region.  If  the  m u n i c i p a l i t i e s were ranked from best to worst assessment uniformity on t h i s 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 of the d i s t r i b u t i o n w i t h i n the + 10% range.  information  This disadvantage may be  corrected by subdividing the + 10% into q u a r t i l e s or d e c i l e s and examining them; and 2) i t does not provide information about the q u a l i t y of assessment beyond t h i s + 10% range*  For example, suppose that  M u n i c i p a l i t i e s A , B. and C had the f o l l o w i n g d i s t r i b u t i o n of r a t i o s from the medians.  81 Percent of A/S r a t i o s between + 10%  Municipality B_ fJ  A •  45  50  55  + 20%  90  70  60  + 30%  99  88  65  of the median. If the m u n i c i p a l i t i e s assessment u n i f o r m i t i e s were to be compared on the proportion of properties with assessment-sales r a t i o s between + 10% of the median then the ordering of the m u n i c i p a l i t i e s from the best uniformity to the worst would be C, B, A.  If,  however, the  proportion of property with r a t i o s between +_ 20% and + 30% of the median were considered the ranked order would be A , B and C.  Munici-  p a l i t y A has a considerably greater proportion of properties with r a t i o s between the + 20% and + 30% from the median range.  Also  m u n i c i p a l i t y B has a better record than m u n i c i p a l i t y C in these two ranges. A problem a r i s e s , however, when the proportion.of  properties  between the percentages from the median f o r the m u n i c i p a l i t i e s do not change r a d i c a l l y from one m u n i c i p a l i t y to another. For i n s t a n c e , assume three m u n i c i p a l i t e s ( A , B and C ) have the following percentages of assessment within the following dispersion ratios: % of A/S Ratios between  A  + 10% + '20% + 30% + 40%  40 70 90 92  of the median.  Municipality B_ 50 60 85 95  £ 60 65 75 80  62 M u n i c i p a l i t y C has the greater uniformity i f the proportion of properties w i t h i n the f i r s t + 10% i s considered.  M u n i c i p a l i t y A has the  l e a s t proportion of properties betwen + 10% of the median and the greatest proportion between the +_ 20% of the median.  If the m u n i c i p a l i t i e s  were to be ranked considering the proportion of properties between + 10% and + 20% of the median a weighting system should be devised as the proportion of properties between + 10% of the median i s of more importance than the proportion of properties between + 20% of the median.  Before  devising such a weighting system l e t us f i r s t review the r e s u l t s obtained when the proportion of properties from the median f a l l i n s i d e + 10% intervals. Table XX o u t l i n e s the percentage of assessments which f a l l w i t h i n + 10% i n t e r v a l s of the median as well as the cummulative proportions from the median for each of the m u n i c i p a l i t i e s . e x h i b i t s the same information only by land use.  Table XXI  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 + 50%  c  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 i s 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 i e l d study - inaccuracies in cumulative percentage are due to rounding.  TABLE XXI PROPORTION OF PROPERTIES WHICH LIE BETWEEN PERCENTAGES FROM THE MEDIAN BY LAND USE* Land Use  0+10%  +] +20%  0+ 20%  +20% +30%  0+ 30%  +30% +40%  Vancouver residential  58.47%  28.72  (87.19)  8.72  (95.91)  1 03  (96.94)  0. 00  apartment  43.01%  24.73  (67774)  12.91  (80.65)  9.68  (90.53)  conversion  45.46%  31.82  (77.28)  13.64  (90.92)  4 55  retail  25.35%  26.76  (52.11)  16.20  (68.31)  industrial  28.57%  24.49  (53.06)  10.20  office  28.13%  18.74  (46.87)  rrey residential  43.18%  31.06  vacant land  21.96%  lta residential vacant land  0+ 40%  Greater than +50%  Greater than +50%  (96.94)  3. 07  (100.01)  5. 38  (95.91)  4. 31  (100.22)  (95.47)  0. 00  (95.47)  4. 55  (100.02)  10 57  (78.88)  8. 45  (87.33)  12. 67  (100.00)  (63.26)  16. 22  (79.48)  12. 24  (91.72)  8. 16  ( 99.98)  18.74  (65-61)  15. 62  (81.23)  12. 50  (93.73)  6. 24  ( 99.97)  (74.24)  11.36  (85.60)  7 58  (93.18)  1. 52  (94.70)  5. 30  (100.00)  21.14  (43.12)  15.44  (58.56)  15. 44  (74.00)  11. 38  (85.38)  14. 63  (100.01)  56.00%  24.00  (80.00)  5.00  (85.00)  3. 00  (88.00)  4. 00  (92.00)  8. 00  (100.00)  40.19%  28.97  (69.16)  18.69  (87.85)  2. 80  (90.65)  5. 61  (96.26)  3. 74  (100.00)  * F i e l d study - inaccuracies in cumulative percentage are due to rounding.  +40% +50%  0+ 50%  : '  | | | j |-|I -1 ! 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L M- 11 ««£S.  -rh  /  -/•/  1 :  " i  ...  -  1  1  1  i l l  r  --  i  i  i  I  M M -X-f-H*M M ,  ...  ~'\"~  !  />•.  i • \  %  !  ill! — 1 ' '' r  ^ ;  •  1t  --  n  p / /  1  1  i  i  •jo  !x~v  : . .:Xr r :  -  -  "l —\  -- - * >  • i  /«  A  -j...  <T 1 " ? <  -  .1  _  M L  i  I  L  /  ...  --  '"'i"T ' ~ \ ! | ! U L I > t • • •••  If  -  -  -  - -  1  F  IE u  -  - --  - -- -  I  r  " T"~t~_p  V  - -  !'" ~\~~  i : . H . - : ! ; H - ........ }Jf 1 i 1 1 •i i  i ;  j  •  M  -  1 is  — -  -  .... . . — t-  I  -  ... . . .  ...  -  -P R0-  --  -  i!  -  i. 4-i..|_L 1  -  -r-ji • -r _j. .  :H  . , .1—;-...  i  (-  -  n-r-:-  I  41 i A N j_  •I : .....  rr> ; | [OO  ...  -  \ i  -  -  1 1  i  I —• - * i  - - - -- - . . . - -  -  •  j  :{-!|!: j M  —  •  •"',;',<•<1 i i1 -- < • ] \; ; i H 4 ! ; ' ! M 1 ; ' i JtilMl a i. ' .  !  1  I1  j I ..i  M  -  1  1  i • ii " "7 '"j— i  i i• 1 1 i , i ;—:—T—'— 1 M i 1 1X L L L . 1 4  XL  rrrX I i i ; Ii 1. !' : _L. . i M i  1  _*4  i  1 ! I i ,  i' I I I L i J,;  88 The f i r s t column of Table XX indicates the proportion of properties i n each m u n i c i p a l i t y w i t h i n + 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 l e a s t proportion i s as f o l l o w s : Municipality  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 o n 3 presents a cummulative account of the propor-  t i o n of properties w i t h i n a c e r t a i n percent of the median.  North  Vancouver D i s t r i c t has a c o n s i s t e n t l y higher proportion of i t s assessments w i t h i n a c e r t a i n percent of the median assessment sales ratiq,.' Coquitlam has the second best assessment uniformity as i t i s c o n s i s t e n t l y second only to North Vancouver D i s t r i c t .  I have rated Burnaby  t h i r d because they have a higher proportion of properties w i t h i n a c e r t a i n percent of the median except the + 30% i n which Vancouver has a greater proportion.  Vancouver i s rated fourth best even though  89 Richmond has a higher proportion w i t h i n the + 10% range.  This was  because Richmond's proportion i s only s l i g h t l y higher in t h i s 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 properties in the f i r s t two percentages ranges which represent the m a j o r i t i y of the p r o p e r t i e s .  The remaining orders were  West Vancouver, Delta and Surrey r e s p e c t i v e l y . A s i m i l a r analysis was done f o r the land use c a t e g o r i e s .  If  + 10% from the median assessment-sales r a t i o i s chosen as the i n d cator of the l e v e l of assessment uniformity  then the order of the  land uses from the one with the highest uniformity  to the lowest i s  as f o l l o w s : Vancouver - r e s i d e n t i a l conversion apartment industrial office retail Surrey residential vacant land Delta residential vacant land  58.47 45.46 43.01 28.57 28.13 25.35 43.18 21.96 56.00 40.19  *land uses are compared only w i t h i n t h e i r municipality.  appropriate  If the cummulative proportions f o r each percentage bracket observed i n Table XXI or depicted i n i l l u s t r a t i o n s 4 and 5 i s considered in determining assessment uniformity as was outlined above r e s u l t s .  then the same order f o r the land uses  TABLE XXII RANKED ORDER OF MUNICIPALITIES UNDER DIFFERENT MEASURES OF ASSESSMENT UNIFORMITY  Municipality  Measure Standard Error of Y-j-mean & A = 0  Proportion of Properties w i t h i n + 10% of median  Cumulative Proportion of Properties from the median  Coefficient of Dispersion  Coefficient of Variation  North Vancouver District  1  1  1  1  1  Coquitlam  2  2  22  2  2  Burnaby  3  3  3  3  3  West Vancouver  4  5  5  6  6  Vancouver  5  4  4  5  4  Richmond  6  8  7  4  5  Delta  7  6  6  7  7  Surrey  8  7  8  8  8  TABLE XXIII RANKED ORDER OF LAND USES UNDER DIFFERENT MEASURES OF ASSESSMENT UNIFORMITY Land Use Coefficient of Dispersion  Coefficient of Dispersion  Standard error of Y-r mean & A  0  Proportion of Properties w i t h i n +10% of the median.  Cumulative Proportion of Properties from the median,  Vancouver residential  1  1  1  1  1  conversions  2  2  2  2  2  apartment  3  3  3  3  3  industrial  4  4  4  4  4  office  5  5  5  5  5  retail  6  6  6  6  6  1  2  2  2  2  2  1  1  1  1  1  1  2  2  2  2  2  1  1  1  Delta residential vacant land Surrey residential vacant land  92 Summary The ranked order of the M u n i c i p a l i t e s and land uses under each of the measures used i s presented Tables XXII and XXIII. The emphasis should be placed on the l a s t column in these tables when determining the order of the q u a l i t y of assessments f o r municipali t i e s and land uses because i t i s the only measure which~does not assume the normal d i s t r i b u t i o n of the d i s p e r s i o n s . same order under a l l the measures used.  The land uses assume the  CHAPTER VI BURDEN OF TAXATION The purpose of t h i s chapter i s to determine the burden of taxation upon property owners by m u n c i p a l i t y , land use and p r i c e categopy.  The burden of taxation by m u n i c i p a l i t y i s being analyzed  because the m u n i c i p a l i t i e s under study o f f e r approximately the same services to t h e i r residents and as such they should be paying approximately the same taxes in r e l a t i o n to the market value of t h e i r property. The burden of taxation by land use i s being analyzed i n an attempt to discover which land uses are paying p r o p o r t i o n a l l y taxes.  higher  The majority of the property taxes are determined by the  assessed v a l u e s , * which should be proportional to market v a l u e , and since the same m i l l rate i s applied to the assessed values of a l l the properties w i t h i n a m u n i c i p a l i t y , the burden of taxation should be proportional.  This p r o p o r t i o n a l i t y w i l l become d i s t o r t e d , however, for  two desired reasons:  1) some properties are assessed a d d i t i o n a l charges  f o r extra services received from the m u n i c i p a l i t y and 2) the homeowners grant of $170  w i l l reduce the gross taxes f o r only the r e s i d e n t i a l land  users.  1 The assessed values for a property may account f o r 75-100% of the gross taxes depending upon the s e r v i c e charges which are added onto the taxes c a l c u l a t e d from the assessments. 2 This was increased to $185.00 in e a r l y 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 i s not r e l a t e d 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 t e d i s that i t weighs r e l a t i v e l y more heavily upon the owners of r e s i d e n t i a l property who are i n the lower income bracket than the owners in the higher income bracket.  Since income data of r e s i d e n t i a l property owners  i s d i f f i c u l t to o b t a i n , the c r i t i c i s m w i l l be a l t e r e d s l i g h t l y to read as f o l l o w s : the property tax system weighs more heavily upon the owners of less expensive homes r e l a t i v e 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 i n previous years before t h e i r r e s e l l may have had incomes which increased or decreased at a f a s t e r , slower, or opposite rate than did the value of t h e i r property and 2) purchasers may spend varying amounts on a home depending upon t h e i r savings, present income and future expected income. The net taxes paid as opposed to the gross t a x , w i l l be employed i n the c a l c u l a t i o n s 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 e q u a l i t y , that i s , the mean and median. A.  Burden of Taxation by P r i c e Ranges As was done when determining the e q u a l i t y of assessments be-  tween d i f f e r e n t p r i c e categories (Table XIV) the r e s i d e n t i a l land uses of a l l the m u n i c i p a l i t i e s have been grouped together then subdivided.  95 into categories depending upon t h e i r market values.  The price 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 v e p r i c e categories of the r e s i d e n t i a l land use. TABLE XXIV MEAN AND MEDIAN NET TAXES PAYABLE AS A PERCENT OF MARKET VALUE, BY PRICE CATEGORY* P r i c e Range  Mean  (Percent Increase over  Median  Lowest Mean) l e s s 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 i e l d study The greatest weight should be placed upon the mean when comparing e q u a l i t y between p r i c e ranges as i t i s the average score. Referring to the means of Table XXIV we can assume that the greatest burden of taxation r e l a t i v e to market value of property  falls  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 expens i v e homes, those with a market value under $25,000,pay  proportionally  96 less i n property taxes.  The three highest price ranges do not pay  p r o p o r t i o n a l l y higher taxes to each .other because of e i t h e r added s e r v i c e charges or inaccurate assessments. A l s o , provided in Table XXIV i s the percent deviation of the i n d i v i d u a l means from the lowest mean.  Owners of r e s i d e n t i a l  property  valued at between $25,000 and $29,999 pay on an average 21.36 percent p r o p o r t i o n a l l y higher taxes than the owners of property valued at less than $20,000. Measuring the e q u a l i t y between d i f f e r e n t p r i c e ranges when r e s i d e n t i a l properties from d i f f e r e n t m u n i c i p a l i t i e s are considered does not provide us with an accurate account of the tax burden because each m u n i c i p a l i t y has d i f f e r e n t assessment-sales r a t i o s and d i f f e r e n t mill rates.  A more accurate and informative picture  of the tax  burden between; p r i c e categories would be to measure the difference w i t h i n the m u n i c i p a l i t i e s .  Table XXV furnishes the reader with the  mean and median of the net-taxes to market price r a t i o s of three p r i c e ranges f o r each m u n i c i p a l i t y .  The price ranges were determined by  d i v i d i n g the number of properties into t h i r d s 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* Municipality  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  .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 i s t . 1.202  1.220  1.360  1.300  1.356  1.360  West Vancouver  1.026  1.254  1.240  1.335  1.309  Richmond  1.031  * F i e l d study - the p r i c e range f o r each m u n i c i p a l i t y located i n Table II  is  Again, of the two measures used the greatest weight should be afforded to the mean.  Table XXVI ranks the 1/3 p r i c e categories from  the lowest to highest mean for each m u n i c i p a l i t y and provides the reader with the percent difference between the lowest mean and the remanning means f o r each m u n i c i p a l i t y .  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 XVariation Order # from the Within the lowest mean Municip. within each Municip.  Mid. 1/3 Priced Numercial %Variation Order # from the Within the lowest mean Municip. w i t h i n each Municip.  High 1/3 Numerical Order # Within the Municip.  Priced ^Variation from the lowest Mean w i t h i n each Municip.  Municipality Vancouver  1  3  12.51  2  10.66  Burnaby  1  3  12.51  2  10.66  Coquitlam  1  3  11.74  2  10.38  Richmond  1  3  20.32  2  17.41  Delta  2  3  43.66  Surrey  1  2  14.72  3  43.28  1  3  13/14  2  12.81  1  2  21.62  3  29.49  North Vane.  District  West Vancouver  1.19  1  ID 00  99 Referring to Table XXVI the low priced 1/3 properties pay p r o p o r t i o n a l l y less taxes i n a l l the m u n i c i p a l i t i e s except D e l t a ,  The  middle 1/3 priced properties pay p o r p o r t i o n a l l y higher taxes than the other priced categories in 5 out of the 8 m u n i c i p a l i t i e s . Table XXVI a l s o provides information which allows us to compare the m u n i c i p a l i t i e s on t h e i r e q u a l i t y of taxes between p r i c e categories.  The m u n i c i p a l i t i e s with the l e a s t percentage deviation of the  means of the p r i c e categories have the greatest degree of e q u a l i t y between the p r i c e categories being s t u d i e d . Burnaby r e g i s t e r s the greatest degree of e q u a l i t y with the two highest means of the p r i c e categories deviating from the lowest mean by 10.38% and 11.74%.  The greatest degree of i n e q u a l i t y i s in Surrey where  the highest 1/3 and middle 1/3 priced properties pay r e s p e c t i v e l y 43.29% and 14.72% higher taxes than the low 1/3 p r i c e d .  The remaining  m u n i c i p a l i t i e s i n order of e q u a l i t y of taxation by p r i c e ranges a r e : Vancouver, D i s t r i c t of North Vancouver, Coquitlam, Richmond, West Vancouver and D e l t a . B.  Burden of Taxation i n D i f f e r e n t M u n i c i p a l i t i e s One m u n i c i p a l i t y has, on the average, residents which pay pro-  p o r t i o n a l l y higher taxes than residents of another m u n i c i p a l i t y . means and medians of the net-taxes - market value r a t i o s of a l l  The the  r e s i d e n t i a l properties in each m u n i c i p a l i t y i s outlined 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 Municipality  Mean  % Deviation of Means from Richmond Mean  Median  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 i n d t h a t , on the average, the residence of Richmond pay p r o p o r t i o n a l l y less taxes as a percent of market value than the residents of the other m u n i c i p a l i t i e s , and are in e f f e c t 3 equal b e n e f i t s .  receiving  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 t h a t , on the average, the owner of property which i s located i n 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 f e r e n t m u n i c i p a l i t i e s 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 t h i s i s only the average  when a l l the properties are considered, for as was shown i n Table XXVI there are d i f f e r e n t tax burdens f o r d i f f e r e n t price categories in each of the m u n i c i p a l i t i e s . This point i s best shown by an example.  Referring to the mean  net-tax market-value r a t i o s in Table XXVII we f i n d t h a t , when a l l  the  r e s i d e n t i a l properties i n each m u n i c i p a l i t y are considered, the r e s i dents of Delta pay 5.94% p r o p o r t i o n a l l y higher taxes than the residents of Richmond.  If,  however, we consider a s p e c i f i c a l l y priced r e s i -  d e n t i a l property, eg. $22,000, and r e f e r to Table XXV and I I , following r e s u l t s occur:  then the  A $22,000 property located in Richmond i s in  the middle 1/3 priced category of the properties considered, while a $22,000 property located i n Delta i s in the low 1/3 priced categroy. The mean of the net-taxes market-value r a t i o f o r Richmond w i t h i n the middle 1/3 priced properties i s 1.163 while the mean of D e l t a ' s 1/3 low priced properties i s 1.022 (Table XXV).  Therefore, the owner of  the $22,000 r e s i d e n t i a l property in Delta pays less property taxes than the owner of a $22,000 r e s i d e n t i a l property in Richmond.  Further  comparisons of the taxes payable between equivalent priced properties located in d i f f e r e n t m u n i c i p a l i t i e s can be made but one must refer to the appropriate 1/3 category in each m u n i c i p a l i t y and obtain the mean f o r the p r i c e category.  It must also be r e a l i z e d that i t i s only  the mean of the p r i c e category which the reader i s r e f e r r i n g to and there are deviations from the mean for d i f f e r e n t market priced properties and  even for p a r t i c u l a r priced p r o p e r t i e s .  A difference in taxes paid  by the owners of two equivalent priced properties located in the same m u n i c i p a l i t y may r e s u l t because of d i f f e r e n t assessed values or due to extra charges for additional services a l l o t t e d to one and not the other. C.  BURDEN OF TAXATION BY LAND USE This section purports to; examine the property tax c r i t i c i s m  that an undue burden of taxation f a l l s upon some land uses r e l a t i v e other land uses.  The mean and median of the net taxes-market value  r a t i o s w i l l be employed to measure the e q u a l i t y 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. TABLE XXIII MEAN AND MEDIAN OF NET TAXES-MARKET VALUE RATIOS FOR THE LAND USES* Municipality  Land Use  Mean  Land Use  Median  Vancouver  conversion residential apartment retail office industrial  1.095 1.283 1.806 1.856 1.901 2.142  conversion residential retail apartment office industrial  1.036 1.251 1.915 1.878 1.911 1.953  Surrey  r e s i d e n t i a l 1.214 vacant land 1.439  residential vacant land  1.067 1.354  Delta  r e s i d e n t i a l 1.159 vacant land 2.752  residential vacant land  1.235 2.798  * F i e l d study  to  103 Of the land uses in Vancouver the conversion, on an average, pay p r o p o r t i o n a l l y less taxes than the other land uses and r e s i d e n t i a l properties pay the next l e a s t proportional  taxes.  The i n d u s t r i a l and  o f f i c e land uses pay the highest taxes p r o p o r t i o n a l l y to the market value of the property.  In Surrey and Delta the owners of vacant land pay  p r o p o r t i o n a l l y higher taxes then the r e s i d e n t i a l owners. o u t l i n e s the average percentage  Table XXIX  which the land uses with the higher  means pay p r o p o r t i o n a l l y 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 Municipality  Land Use  Percent above the land use with the lowest  Vancouver  conversion residential apartment retail office industrial  >• (base) 14.63% 64.93% 69.50% 74.52% 95.62%  Surrey  residential vacant land  18.53  Delta  residential  (base)  "  (base)  vacant land  137.45  Comparing the land uses i n Vancouver we f i n d that the owners of i n d u s t r i a l  property are paying 95.62% p r o p o r t i o n a l l y higher taxes  than the owners of conversions, while the owners of vacant land i n Delta are paying 137.45% p r o p o r t i o n a l l y higher taxes than t h e i r erpart owners of r e s i d e n t i a l  property.  count-  CHAPTER VII SUMMARY OF FINDINGS AND RATIONAL FOR THEM A.  SUMMARY 1.  Assessment Uniformity - The degree of assessment uniformity  w i t h i n m u n i c i p a l i t i e s and land uses varied depending upon the measure,, which was engaged.  Since the d i s t r i b u t i o n of assessment-sales r a t i o s 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 deviation from the median method.  The con-  clusions presented here are those determined by that method. a)  Ranking the m u n i c i p a l i t i e s in order from the most uniform  to the l e a s t uniform assessments was as f o l l o w s :  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 l e a s t  uniform assessments produced the f o l l o w i n g order:  In Vancouver; residen-  t i a l , conversion, apartment, i n d u s t r i a l , o f f i c e and r e t a i l ;  in Surrey:  r e s i d e n t i a l and vacant l a n d ; and in D e l t a : r e s i d e n t i a l and vacant land. 2.  Assessment Equality -  a)  Assessment e q u a l i t y between m u n i c i p a l i t i e s does not e x i s t  as the percent variance between the m u n i c i p a l i t y with the highest mean (Burnaby) of the assessment-sales r a t i o s and the m u n i c i p a l i t y with the lowest mean (Surrey) was 11.15%.  The ranking of the M u n i c i p a l i t i e s from  the one with the lowest mean to the one with the highest mean i s as f o l l o w s : Surrey, D e l t a , West Vancouver, Vancouver, Richmond, North Vancouver D i s t r i c t , Coquitlam and Burnaby.  105 b)  Equality of Assessments between land uses i s also a  non-existent phenonoma.  The v a r i a t i o n of the land use means from the  o v e r a l l mean ranged from - 17.79% f o r conversions to +6.97% f o r i n Vancouver.  apartments  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 following 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 c e and apartment; Surrey:  vacant land and r e s i d e n t i a l ; in D e l t a :  in  vacant land and r e -  sidential . c)  P r i c e categories i n each m u n i c i p a l i t y are also assessed  at non-equal percentages of market value.  The lower priced properties  are generally assessed at p r o p o r t i o n a l l y lower rates than the higher priced p r o p e r t i e s .  There are d i f f e r e n c e s , however, in the p a r t i c u l a r  price  category of r e s i d e n t i a l property which the m u n i c i p a l i t i e s are prejudiced for or against.  The m u n i c i p a l i t i e s of Burnaby, Coquitlam, Surrey,  North Vancouver D i s t r i c t and West Vancouver underassess the lower 1/3 priced properties r e l a t i v e to the other properties ewhi.le Vancouver and Richmond underassess the higher 1/3 priced p r o p e r t i e s . the middle 1/3 priced p r o p e r t i e s .  Delta underassess  Vancouver, Burnaby, Coquitlam and  West Vancouver 'overassess the middle 1/3 priced p r o p e r t i e s .  Only the  m u n i c i p a l i t y of Richmond overassess the lower priced p r o p e r t i e s . The order of the m u n i c i p a l i t i e s from the one with the greatest degree of assessment uniformity between p r i c e categories to the one with  106 the l e a s t i s : Burnaby, North Vancouver D i s t r i c t , Surrey, Coquitlam, West Vancouver, Vancouver, Richmond and Delta. 3.  Burden of Taxation -  a)  The lower priced properties generally pay p r o p o r t i o n a l l y  less taxes than the higher priced p r o p e r t i e s .  The degree of the equal-  i t y of the tax burden for price categories varies f o r each of the muni c i p a l i t i e s studied.  In a l l the m u n i c i p a l i t i e s studied except Delta  the residents of the lower 1/3 priced properties pay p r o p o r t i o n a l l y less taxes than the residents of the other two price categories.  The  residents of the middle 1/3 priced properties in the m u n i c i p a l i t i e s of Vancouver, Burnaby, Coquitlam, Richmond and North Vancouver D i s t r i c t pay p r o p o r t i o n a l l y higher taxes than the residents of the other two p r i c e categories while in the m u n i c i p a l i t i e s of D e l t a , Surrey and West Vancouver i t i s the residents of the higher 1/3 priced properties who pay the p r o p o r t i o n a l l y higher taxes. L i s t i n g the m u n i c i p a l i t i e s from the one e x h i b i t i n g the greatest e q u a l i t y of the tax burden to the l e a s t produces the f o l l o w i n g 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 c e r t a i n degree of proportional tax i n e q u a l i t y i s d e s i r e d , (eg. due to extra service charges and the homeowners g r a n t ) . However, a portion of the tax i n e q u a l i t y i s a r e s u l t of inaccurate assessments. The proportions of the tax i n e q u a l i t y which are due to desired and undesired causes were not c a l c u l a t e d .  107 b)  On an average, the tax burden of r e s i d e n t i a l  owners varies from one m u n i c i p a l i t y to another.  property  The highest taxes are  paid i n Coquitlam which i s 42.05% p r o p o r t i o n a l l y higher than the taxes paid i n Richmond.  L i s t i n g the m u n i c i p a l i t i e s from the one in which the  residents pay the p r o p o r t i o n a l l y lowest taxes to the highest produces the following o r d e r :  Richmond, D e l t a , West Vancouver, Surrey, Vancouver,  North Vancouver D i s t r i c t , Burnaby and Coquitlam. c)  The burden of taxation varies s u b s t a n t i a l l y from one  land use to another.  In Vancouver, the owners of i n d u s t r i a l property pay  95.62% p r o p o r t i o n a l l y higher taxes than the owners of conversions and in Delta the discrepancy between r e s i d e n t i a 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 p r o p o r t i o n a l l y lowest taxes to the highest i s as f o l l o w s :  Vancouver; conversions, r e s i d e n t i a l , apartment, r e t a i l ,  o f f i c e and i n d u s t r i a l ; Surrey; r e s i d e n t i a l and vacant land and D e l t a ; r e s i d e n t i a l and vacant l a n d . B.  REASONS FOR ASSESSMENT INEQUALITIES AND UNUNIFORMITIES Factors causing assessment i n e q u a l i t y and ununiformity are  numerous and at times may operate i n opposite d i r e c t i o n s thereby diminishing the t o t a l of an unjust tax burden upon a p a r t i c u l a r owner.  property  However, i t i s very u n l i k e l y that the error in one d i r e c t i o n w i l l  be o f f s e t by an equal error in another d i r e c t i o n to produce a j u s t d i s t r i b u t i o n of the tax burden.  The e f f e c t s of one error against another  were not measured as they vary f o r every property in every m u n i c i p a l i t y and the c a l c u l a t i o n s would be impossible to make.  108 Some of the reasons causing i n e q u a l i t i e s 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 t h i s 1.  time.  Five and Ten Per Centum Rule's As discussed i n Chapter III  as f o l l o w s :  the e f f e c t s of these rules are  1) ununiformity and i n e q u a l i t y of assessments; 2) i n -  creases administrative costs and 3) confuses the taxpayer.  It i s r e -  commended that these rules should be abolished. 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 d e p r e c i a t i o n ' approach and i s one of the three most commonly used appraisal methods.  In 1932 Babcock quoted the Appraisal  P r a c t i c e of the National Association of Real Estate Boards as s a y i n g , "such summation appraisals are condemned as unsound, inaccurate and misleading because t h i s method bases the opinion of value on the addition of values which may not be simultaneously obtained, and ignores the e f f e c t of o v e r - , under-, and misplace improvements, and d i s r e g a r d s ' t h e i n t e r r e l a t i o n 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 improvements have been recently constructed upon the land and they represent the lands highest and best use but, when the method i s used to appraise older improvements many subjective judgements must be made which r e s u l t s in appraisers obtaining d i f f e r e n t values for the same property.  109  The v a l i d i t y of the cost approach may be questioned when one r e a l i z e s that i t does not take into consideration the value which may be added to the t o t a l value of the property when a p a r t i c u l a r improvement i s placed upon a p a r t i c u l a r parcel of l a n d .  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 valuation 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 valuation of l a n d .  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 i m i l a r unimproved sold l o t s in order to determine i t s market value.  This procedure w i l l lead to inaccuracies in ass-  essments because improved and unimproved l o t s are two d i f f e r e n t commodit i e s which should be treated as such. The price which i s paid f o r parcel of vacant land w i l l depend upon i t s potential 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 f o r the land.  110 R. U. R a t c l i f f e defines 'highest and best use' of land a s : "a structure which i s p e r f e c t l y appropriate to the s i t e and which suffers from no d e f e c t s , neither physical d e t e r i o r a t i o n , functional obsolescence, nor economic obsolescence."3 The number of improved properties 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 , t h e r e f o r e , 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, c o s t - l e s s d e p r e c i a t i o n , for determining market value i s also subject to many d e f e c t s .  The appraiser  f i r s t detemines what i t would cost to b u i l d a r e p l i c a of the improvements at todays p r i c e s .  The f i r s t discrepancy between cost and  market p r i c e a r i s e s at t h i s p o i n t :  The structure may contain  improvements which add a greater or a l e s s e r amount to i t s market value then the cost of the improvement.  For i n s t a n c e , the cost of painting  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 i c e .  An often c i t e d c l i c h e used to present  the s i t u t a t i o n whereby the cost of an improvement may not equal i t s market value i s 'the construction of a hotel in the Sahara Desert?" From the cost f i g u r e , which may not represent market v a l u e , the assessor i s required to subtract a value equal to i t s d e p r e c i a t i o n .  3 Richard U. R a t c l i f f , "Appraisal Theory" (Unpublished Course M a t e r i a l , Vancouver, U . B . C , 1970), Chapter V, P. 17  Ill This depreciation may be due to physical d e t e r i o r a t i o n , functional obsolescence or economic obsolescence.  Since the buyers and s e l l e r s in the  market do not u s u a l l y perform these i n t r i c a t e cost estimates the value which the assessor a t t r i b u t e s to these phenonoma becomes highly suspect. The buyer usually considers the o v e r a l l appearance and condition of the improvements and does not categorize the costs of i n d i v i d u a l items.  For  t h i s reason adding the $800 cost of painting the home mentioned above may increase the f i n a l s e l l i n g p r i c e by $1000. Functional depreciation may r e s u l t over time as s t y l e s and needs change.  A home b u i l t 20 years ago which r e f l e c t e d the s t y l e and  needs of that time may be completely d i f f e r e n t from a house b u i l t in the current times r e f l e c t i n g the changed s t y l e and needs.  The cost of  converting the older home may be economically unfeasible yet the assessor i s asked to subtract an appropriate figure from the cost p r i c e which w i l l r e f l e c t i t s market value. The main defect of the cost approach i s that i t i s very unl i k e l y that the market value of the property w i l l equal or approximate the summed values of the i n d i v i d u a l sectors of the whole.  R. U. R a t c l i f f e  states: "any complex product or enterprise generates an u n d i f f e r e n t i a l stream of p r o d u c t i v i t y through the i n t e r a c t i o n s of i t s components. It i s impossible to assign to any s i n g l e component the measure of i t s c o n t r i b u t i o n to the composite p r o d u c t i v i t y and thus impossible to assign to any component a meaningful c a p i t a l value which measures i t s contribution."4  4  i b i d . , Chapter 5 , Page 28.  112 The municipal appraiser i s provided with an assessment manual which i s to act as a guide to the assessor when carrying out his assessment by the cost-approach.  Finnis has the following comment to make  about the use of the manual: "  for each i n d i v i d u a l property he (the assessor) must decide among other t h i n g s , i n which c l a s s i f i c a t i o n to put the b u i l d i n g , what cost schedule to a p p l y , 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 exactly the same value for a given property even though they may s t a r t with the same f a c t s . " 5  The i n e q u i t i e s and ununiformities of assessments caused by the use of the c o s t - l e s s depreciation method of assessing may be e l i m inated by reducing the assessor's dependants upon t h i s method and focusing t h e i r attention upon the c a p i t a l i z a t i o n and market approach methods.  These methods w i l l not be a panacea for they too have t h e i r  f a u l t s but i f used properly they should prove to be more accurate measures of market value.  Paul Rollo quoted P h i l l i p White as f o l l o w s :  "The data must be o b j e c t , 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 f o r most kinds of property, and i t can be used at w i l l . No such evidence i s a v a i l a b l e f o r 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 R o l l o , "Valuation Theory Assessment", (Unpublished paper, Vancouver, U n i v e r s i t y 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 i n Canada", (Unpublished paper, Vancouver: U n i v e r s i t y of B r i t i s h Columbia, 1969), Page 5.  113  b)  Market Value Approach - the P r o v i n c i a l Assessment Commiss-  ioner also provides the municipal assessor with bonafied sales transactions which he may use as c o n c i l i a t o r y evidence as to the market-value of a p a r t i c u l a r parcel of property.  But when determining the current assess-  ments the assessor i s asked to compare the subject property with the sales price of property which sold 1 or 2 years p r e v i o u s l y .  The purpose of t h i s  p o l i c y i s to ensure that a definable market trend has occurred in r e l a t i o n to the subject property.  The P r o v i n c i a l Assessment Commissioner wishes to  avoid a s i t u a t i o n whereby the municipal assessors are assessing properties by r e l y i n g upon market transactions which may be only a short run phenonoma. Of t h i s point Finnis s t a t e s : "At b e s t , assessments of properties en masse can only r e f l e c t established trends w i t h i n each c l a s s i f i c a t i o n of property with modifications made for i n d i v i d u a l properties at the d i s c r e t i o n of the assessor. A change of values that seem to be appearing in one year should not be r e f l e c t e d in revised assessments u n t i l the assessor can be sure that the change i s r e a l l y an established trend."7 If t h i s p o l i c y i s 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 f o r market values very seldom remain constant over a one or two year p e r i o d . Property values may i n c r e a s e , decrease, or remain constant but most assuredly they w i l l not f l u c t u a t e at exactly the same rate as the properties which were deemed comparable to them 2 years p r e v i o u s l y . Further study should be conducted comparing the i n e q u i t i e s or ununiformities of assessments which may r e s u l t from the use of current sales against the r e s u l t s which occur using sales data which i s one or two years o l d in order to determine which procedure r e s u l t s in the l e a s t d i s t o r t i o n s .  7  Finnis, loc.  cit.  114  3.  Lag Period in Assessments A t h i r d c h a r a c t e r i s t i c of the assessment procedure which has  led to the ununiformity of assessments i s 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 y e a r s .  They must, t h e r e f o r e , provide estimates of assessed  value each year for 75-80% of the properties w i t h i n t h e i r  jurisdiction.  These estimates a r e , to a c e r t a i n degree, a r e f l e c t i o n of the assessmentsales r a t i o s which are c o l l e c t e d and determined by the P r o v i n c i a l Assessment Commissioner.  A mean of the assessment-sales r a t i o i s deter-  mined for each"land use.  If a p a r t i c u l a r land use i s low r e l a t i v e 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 properties w i t h i n that category a greater extent than the value of properties i n other land use c a t e g o r i e s .  The assessment-sales  r a t i o s determined by the Assessment Commissioner u t i l i z e s the current assessments and the sales from two years p r e v i o u s l y .  The current market  assessments obtained by t h i s method may have no d i r e c t r e l a t i o n s h i p to the current market values.  It i s suggested that the sales data i n the  r a t i o s be as recent as p o s s i b l e , thereby, r e g i s t e r i n g a truer  picture  of the current assessment-sales r a t i o s . 4.  Biasness of Assessors Mary Rawson suggests the ununiformity of assessments may r e s u l t  due to the tendency to underassess the more valuable property.  Her reasons  f o r s t a t i n g t h i s a r e : 1) there are a smaller number of large s i z e properties to compare and i t i s more l i k e l y that the assessor w i l l underassess  115 these properties in order that he won't have to substantiate his figures in c o u r t ; and 2) holders of smaller or l e s s valuable properties seek r e g  dress l e s s frequently.  From the data which was c o l l e c t e d and analyzed  (Tables #18 & 19) the reverse seems to be t r u e , that i s , that the less valuable properties are under-assessed. 5.  L e g i s l a t i v e Causes R e l i e f s in the form of special assessments, for example, to  farm land and r e s i d e n t i a l l a n d , also cause assessment ununiformities and inequalities.  Ununiformities and i n e q u a l i t i e s of assessments caused by  these special assessments are deemed to be e s s e n t i a l to avoid a s i t u a t i o n 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 p r i c e for the c a p i t a l gains go to him.  it,all  During the period of his special assessments  a portion of his tax burden i s s h i f t e d upon o t h e r s , y e t , when he s e l l s the property the other t a x p a y e r s do not benefit from i t s increased market value.  Instead of the taxing a u t h o r i t i e s providing the property owner with  a non-recapturable r e l i e f a more equitable s o l u t i o n would be the deferment of a portion of the t a x , 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 I n s t i t u t e of Realtors J o u r n a l , 1962)  116 C.  REASONS FOR UNEQUAL TAX BURDEN Unequal proportional tax burdens r e s u l t due to e i t h e r administered  or unadministered consequences. 1.  Administered i n e q u a l i t i e s 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 r e s i d e n t i a l property the burden of t a x a t i o n ' i s reduced for t h i s type of land use.  A l s o , w i t h i n the r e s i d e n t i a l land use i t s e l f ,  i n e q u a l i t i e s w i l l r e s u l t because the grant i s a fixed amount and, as such, i t reduces the burden of taxation of lower priced homes p r o p o r t i o n a l l y greater than that of higher priced homes. A second cause of administered i n e q u a l i t y i s that taxes are apportioned to d i f f e r e n t properties depending upon the extra services which the m u n i c i p a l i t y supplies to them.  Although the value of the property w i l l  be increased as additional services are provided, the a u t h o r i t i e s reason that the increased t a x e s , as a r e s u l t of the increased market value, are not i n themselves s u f f i c i e n t to pay for the s e r v i c e s , so additional charges at?e assessed the property owner.  Perhaps a study should be i n s t i g a t e d  which r e l a t e s the increased tax burden of a property owner to the benefits he received from the services or the cost of the s e r v i c e s .  Unknowingly,  the property owner may be paying f o r the servicesufcwice, once when the market value of the property i s i n c r e a s e d , increasing t h e i r taxes and again when the property-owners are assessed additonal service charges.  117 Administered i n e q u a l i t i e s of the tax burden are also a r e s u l t of exemptions and r e l i e f s which were discussed i n Chapter III.  Exemptions  of taxes or assessments bestowed upon some property owners or property types r e d i s t r i b u t e d the burden of taxation onto the remaining property owners.  The incidence of an exemption or r e l i e f i s usually not know be-  cause the a u t h o r i t i e s granting the r e l i e f s do not look beyond i t s effects.  initial  It i s recommended thattthe exemption p o l i c i e s should be reviewed  and where possible s u b s t i t u t e these forms of benefit for grants which are more c l o s e l y s c r u t i n i z e d . 2.  Unadministered i n e q u a l i t i e s of the tax burden are the by-products of  poor assessments. The i n e q u a l i t i e s due to t h i s facet cannot be removed u n t i l the assessment i n e q u a l i t i e s and ununiformities themselves are obl i t e r a t e d or reduced. D.  CONCLUSION The hypothesis of the t h e s i s was:  Are there i n e q u a l i t i e s or  ununiformity in assessments;or real property which cause the tax burden to g be d i s t r i b u t e d unjustly? arate  were:  This ••Statement was broken down into three sep-  subdivisions which were e m p i r i c a l l y t e s t e d .  These subdivisions  assessment u n i f o r m i t y , assessments e q u a l i t y and tax burden e q u a l i t y .  It was proven beyond a reasonable doubt  that assessment uniformity does not  e x i s t w i t h i n the m u n i c i p a l i t e s s t u d i d d , and the degree of varied with the d i f f e r e n t m u n i c i p a l i t i e s .  ununiformity  Also proven w i t h i n the t h e s i s  was that not only did assessment uniformity vary between the m u n i c i p a l i t i e s 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 e q u a l i t y .  Equality of assessments  betwen m u n i c i p a l i t i e s 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 e q u a l i t y of assessments between p r i c e  ranges of r e s i d e n t i a l property was also tested r e s u l t i n g in the supposi t i o n that lower priced properties were generally underassessed r e l a t i v e to the medium and higher price p r o p e r t i e s . The t h i r d and f i n a l section of the hypothesis, that of a j u s t d i s t r i b u t i o n of the tax burden, was also proven to be i n v a l i d .  This i s a  natural consequence when e i t h e r assessment uniformity or e q u a l i t y does not exist.  The exact extent of the i n j u s t i c e of the tax burden cannot be  measured because a portion of the i n e q u a l i t i e s of taxes i s the r e s u l t of l e g i s l a t e d or administrative p o l i c i e s which are deemed to be of j u s 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 cies should be reviewed to determine whether or not the p o l i c i e s are i n f a c t r e s u l t i n g i n the e f f e c t s for which they were intended.  Also a  revamping of the appraisal methods should be made to decrease the undesired portion of the unequal tax burden. E.  AREA FOR FURTHER RESEARCH Measuring assessment uniformity and e q u l i t y may be useful tool  in a i d i n g the assesor in his assessments.  If the sample s i z e i s increased  119 thereby enabling the researcher to increase the number and types of c a t e g o r i e s , then he can pinpoint the types of properties most ununiform of unequal and c o r r e c t the assessments of those p r o p e r t i e s .  The assessor may  group the properties into sections depending upon such f a c t o r s a s :  land  use, p r i c e , a r c h i t e c t u r a l design and age of improvements, number of s t o r i e s , and i t s l o c a t i o n .  The number of categories w i l l depend upon the  number of properties which f a l l into them-for there must be enough categories that meaningful information can be gainedcbut not an over-abundance such that c a l c u l a t i o n s become to burdensome and confusing. To provide useful information the appropriate measures must be applied to the categories depending upon the type of information sought. The r e s u l t s obtained w i l l apply to the categories as a whole and i t must be remembered that i n d i v i d u a l differences may e x i s t within the categories themselves';  G e n e r a l l y , however, the categories which e x h i b i t the greatest  divergencies should be reassessed f i r s t . Other areas which deserve f u r t h e r research and were mentioned throughout the thesis a r e : 1.  The r e l a t i o n s h i p between net taxes and the benefits received  by the p r o p e r t y owner. 2.  A study to determine the extent of the d i s t o r t i o n of assess-  ments caused by employing sales data which i s two years o l d . 3.  Increased tax burden of homeowners  in r e l a t i o n to benefits  or costs when extra services are provided by the m u n i c i p a l i t y .  120 BIBLIOGRAPHY A. BOOKS  Babcock, Frederick M. The Valuation of Real Estate. H i l l Book Company, I n c . , 1932 Becker, ARthur P. Land and B u i l d i n g Taxes. Wisconsin P r e s s , 1969.  New York: McGraw  Madision:  Benson, W. J . The Property Tax and the Special Patterns of Growth Within Urban Area. Washington: Urban Land I n s t i t u t e , 1968. Cochran, William G. Sampling Techniques. Second Editon New York: John Wiley and Sons I n c . , 1963 E l z e y , 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 Publishing Co. I n c . , 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 f o r A n a l y s i s . Don M i l l s : Addison-Wesley Publishing C o . , 1971. F i s h e r , Ronald A. S t a t i s t i c a l Methods f o r Research'Workers. Fourteenth e d i t i o n , Edinburgh: O l i v e r and Boyd, 1970. Hickman, E.P. and H i l t o n , J . G. P r o b a b i l i t y and S t a t i s t i c a l A n a l y s i s . Toronto: Intext Educational P u b l i s h e r s , 1971. Jensen, J . P. Government Finance. New York: Lomas, Y. Crowell Company, 1937. Property Taxation in the U.S. Chicago: U n i v e r s i t y Chicago P r e s s , 1931.  of  Lindholm, R. W. Property Taxation U.S.A. Madison: U n i v e r s i t y of Wisconsin P r e s s , 1967. Mace, Ruth L. and Wicker, Warren. Do Single Family Homes Pay t h e i r Way? Washington: Urban Land I n s t i t u t e . M a r s h a l l , A l f r e d . P r i n c i p l e s of Economics. Eighth e d i t i o n . 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. T h i r d . e d i t i o n . New York: Henry Holt and Company, 1955. Morton, Walter. Housing Taxation. Madision: U n i v e r s i t y of Wisonsin P r e s s , 1955. Musgrave, R. A. The Theory of Public Finance. New York: McGraw H i l l Book Co. 1959. O s t t e , Bernard. S t a t i s t i c s i n Research. Ames, Iowa: Iowa State College P r e s s , 1954. P e t e r s , W. S. and Summers, G. W. S t a t i s t i c a l Analysis for Business Decisons. New J e r s e y : P r e n t i c e - H a l l I n c . , 1968. Seligman, Edwin R. A. Essays i n Taxation. Sixth edtion London: Macmillan and Company L t d . , 1909. S h i f t i n g Incidence of Taxation. F i f t h e d i t i o n , r e v i s e d . New York: Columbia U n i v e r s i t y P r e s s , 1926. Turvey, Ralph. The Economics of Real Property. An Analysis of Property Values and Pattersn of Use. London: George A l l e n and Unwin, L t d . , 1957. Wendt, Paul F. Real Estate A p p r a i s a l . A C r i t i c a l Analysis of Theory and P r a c t i c e . 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 Association of Tax Administrators. Chicago: Federation of Tax Administrators, 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 i n Canada, Canada Tax Papers No. 50. Toronto: Canadian Tax Foundation, 1970. National Association of Tax Administrators. Guide "for Assessment Sales Ratio S t u d i e s , A Report of the Committee on Sales Ratio Data. Chicago: Federation of Tax A d m i n i s t r a t o r s , June 1954.  122 Rawson, Mary. Property Taxation and Urban Developement. Urban Land I n s t i t u t e . Research Monograph #4: Washington, 1961. C. PERIODICALS Byrne, Thomas A. F u l l Value Assessments in P r a c t i c e : Reasons for Underassessments, National Tax A s s o c i a t i o n , Proceedings of the 51st Annual Conference, PP. 421 - 429. 1958 Committee on State Equalization of Property Tax Assessments. National Tax A s s o c i a t i o n . Proceedings of the 51st Annual Conference, 1958. Corbert, L e s l i e E. An Appraisal of Sales Ratio Studies. National Tax A s s o c i a t i o n , Proceedings of the 51st Annual Conference, 1958. Dupre, J . Stefan. "The Property Tax i n Canada", National Tax A s s o c i a t i o n , Proceedings of the 51st Annual Conference, 1958. F i n n i s , F. H. "Measuring the Local Tax Base", Canadian Tax Journal V o 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 A s s o c i a t i o n , 1971. Kelmer, Robert F. " F u l l Value Assessments; The Legal View". National Tax A s s o c i a t i o n , 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 A s s o c i a t i o n , Proceedings of the 51st Annual Conference, 1958. pp. 84 - 98. Macy, C. Ward. "The Property Tax in the F i s c a l System". National Tax A s s o c i a t i o n , 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 A s s o c i a t i o n , 1951. Meyer, Harold F. "Market Value --Beacon Light of Appraisal for T a x a t i o n " , The Appraisal J o u r n a l , V o l . XXXIII, No. 4 (October, 1965). Murray, William A. "Improvements in Real Estate Taxation through Assessment-Sales S t u d i e s " , National Tax J o u r n a l . V o l . 5 (1952).  123 Oldman, O l i v e r and Henry Aaron, "Assessment-Sales Ratios Under the Boston Property Tax", National Tax J o u r n a l , 1965. Rawson, Mary. "Taxation Assessments and the C i t y " , Canadian I n s t i t u t e of Realtors J o u r n a l . March 1962. Report of the Committee on State Equalization of Local Property Tax Assessments. National Tax Association Proceedings of the 51st Annual Conference, 1958. Rountrey, J . Edward. " E q u a l i z a t i o n at Market V a l u e " , The Appraisal J o u r n a l , V o l . 24 (1956). Rybeck, Walter, "Property T a x a t i o n " , Housing and Urban Growth, Urban I n s t i t u t e , Washington: 1970 Townsend, Roswell G. " I n e q u a l i t i e s of Residential Property Taxation in Metropolitan Boston", National Tax J o u r n a l . V o l . IV (1951) Welch, Ronald B. "State Tax Department R e s p o n s i b i l i t y for Local Assessments": Administrative Review, National Tax A s s o c i a t i o n , Proceedings of the 34th National Conferences, 1941 White, P. H. "Prologue to An Analysis of the Residential Mortgage Market in Vancouver, Conference of the Association of Canadian Business S c h o o l s , " Proceedings, 1965. D. STATUTES AND GOVERNMENT PUBLICATIONS B r i t i s h Columbia. Assessment Equalization A c t . V i c t o r i a : Queens P r i n t e r , Amendments and revisons to 1971. Municipal A c t . V i c t o r i a : 1971 c o n s o l i d a t i o n .  Queens P r i n t e r ,  Public Schools A c t . V i c t o r i a : Amendments to 1971. Taxation A c t . V i c t o r i a : Amendments to 1971.  Queens P r i n t e r ,  Queens P r i n t e r ,  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 P r i n t e 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. F r e d e r i c t o n : Queens P r i n t e r , 1963 Ontario. The Ontario Committee on Taxation, Report. Toronto: Queens P r i n t e r , 1967. Quebec. Report of the Royal Commission on Taxation of Quebec). Quebec: Queens P r i n t e r , 1965.  (Government  Great B r i t a i n . The Rating of S i t e Values. Report of the Committee of Enquiry, London: Her Majesty's Stationary O f f i c e , 1952. E. UNPUBLISHED MATERIAL Babalos, D., Carros, G . , Doran, D., Greenwood, D., Lach, D., Tomko, W., "Empirical Study of Mortgage Financing in The C i t y of Vancouver". Unpublished 509 paper, U n i v e r s i t y of B r i t i s h Columbia, Vancouver, 1972. Ghert, Bernard. "Measures of the Quality of Real Property Assessments An Examination of Their V a l i d i t y " . Unpublished Master's T h e s i s , U n i v e r s i t y 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 M a t e r i a l . Vancouver: Faculty of Commerce and Business A d m i n i s t r a t i o n , U n i v e r s i t y 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' T h e s i s , U n i v e r s i t y 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: U n i v e r s i t y of British'-.Columbia, 1969.  APPENDIX A EXCERPT FROM THE BRITISH COLUMBIA APPRAISAL MANUAL In the f o l l o w i n g 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  126  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, boilerroom, 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 boilerfiring 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 encountered, 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 \ A—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 | t h e structure is well maintained. z  C L A S S  N o .  4 - 2  BASIC DESCRIPTION 1. Gcncr.il.—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. R o o f . — F l a t , 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. BASIC COST OF SHELL PER SQUARE FOOT OF GROUND A R E A 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  5.05  4.80  4.35  3.99  3.75  3.42  Basic 3-story  _  BASIC COST OF SUITES PER SQUARE FOOT OF FLOOR A R E A Average suite area (sq. ft.)  400  600  800  Basic suite rate (per floor)  $3.54  $2.85  $2.50  - , '  1,000.  1,200  1,400  $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— • A d d 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 A d d for ceramic tile in bathroom : $30-$45 per suite , Exterior V / a l l — I A d d for concrete block stuccoed " • • ' 2- s t o r y .38 .33 .27 .23 .21 .17 • 3-story .59 .51 .42 .36 .32 .27 ' A d d for face-brick .-._^_2-story .90 .79 .64 .56 .50 .42 3- story 1.55 1.33 1.10 .95 .85 .72 J A d d for brick veneer : .60 to .75 per square foot of face area .Roof— A d d for medium pitch . . .10 per squaro foot of oround area Chimney— Subtract for no chimney '. . — $150 f o — $ 2 1 0 I A d d 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 A d d panel electric heat per floor (after making the above subtraction) _ — .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 ) A d d for liqht-oil burner and 500-qal. tank 315 to 510 A d d 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 A d d 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 1  !  :  127  '  SBNGLE-FAMILY RESIDENTIAL ' v HOUSING  General The single-family residential classifications have been divided into three general groups—one-story, one-and-ahalf 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-, oneand-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 agegroups 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 rnisclassify 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 distinction between one house and another as far as classification is concerned, but should compensate for the difference 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 subtractions 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 between the two figures. . • :i i  '  :  Tabulation of the Housing Classifications.—The table below.shows the approximate relationship between the, classes in age and quality. ' . • -v"' r  v  AP.CHITECTURAL nor\\ip s ;:.  Stories  One „..:.*.;._'.__L One and a half _. Two—_ :  ppinp Tr\  Very Poor  Poor  Avcraqe  Class 1-1  Class 1-3 Class 1-11 Class 1-22  Class 1-4 Class 1-12 Class 1-23  ipin . Good  ;• Best  Class 7Ti Class 1-24  Class 1-25  ' ARCHITECTURAL GROUP, 1910 TO J930 Class 1-1  one _ One and a half Two _.  • ;-'  ;  '  One — . ... One and a half....Two 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  ARCHITECTURAL GROUP AFTER 1930 Class 1-1  Class 1-5 Class 1-18  Class 1-8 Class 1-19 Class 1-30  .  :  '  Class 1-7 Class 1-17 Class 1-29  ;  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 particular classification do not contain the additions and subtractions 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 procedures:— r. •; (1) Consultation with the owner. (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. v  ,  Mixed-story Housing  , .. , v  r  ....  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 twostory section $7.95. The total basic unit cost would be:— 1,200 square feet @ $5.40-= $6,480 1,200 square feet @ $ 7 . 9 5 = • 9,540 • Total = $16,020 Irregularity Factor All 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 concrete 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 concrete 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  Poor...-. Average Good  _..  100  80 SQ.  Ft.  SQ.  $0.75 1.15 1.70  Ft.  $0.68 1.05 1.45  120 SQ.  Ft.  50.63 .95 1.30  160  200  300  400  600  Sa. Ft.  Sa. Ft.  Sa. Ft.  Sa. Ft.  Sa. Ft.  $0.55 .80 1.10  $0.50 .71 .95  $0.41 .59 .76  $0.35 .51 .65  $0.30 .43 .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) G o o d . — 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 construction normally appears. However, should the assessor 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  Masonry Type  -I-.:' .-v.*' •' - .'•  ,  -'' .  Incrcaso to ' • Basic Unit Rate (Per Cent)  Concrete block „ „ . .-_ —- 3 Pumice block .... —•. 4 Cinder block . 1— 3 Brick J — „ : „ ™ . 10 Precast concrete stone — 6 Random stone, average...: - 15 Random stone, good...— 20  to to to to to to to  7. 8 7 20 12 30 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 leadin, 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,.--:  Denreeiation  (Normal  Physical)  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 construction. 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 -> :  .i Class  £>  O  v<\ a c  1- 1 1- 2 1- 3 1- 4 1- 5 1- 6 1- 7 1- 8 1- 9 1-10  SINGLE-FAMILY RESIDENTIAL HOUSING, CONSTRUCTION OBSOLESCENCE TABLE . . Percentage Obsolescence 0 0 0-10 5-15 . 0- 5 0-10 0-15 0 0 0  m u o !C '  X n T3  . c  n o c . o  Class  Percentage Obsolescence  1-11 1-12 1-13 1-14 1-15 1-16 1-17 1-18 1-19 1-20 1-21  0-15 5-20 10-25 0- 5 0-10 5-15 10-20 0 0 0 0  Class  8  o r-  1-22 1-23 1-24 1-25 1-26 1-27 1-28 1-29 1-30 1-31 1-32  Percentage Obsolescence  .  0-15 10-20 15-30 20-35 C- 5 5-15 10-20 15-35 0 0 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 considerably, 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-anda-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*':"•..SUMMARY  OF PERCENTAGE COST BREAKDOWN  / '  Progressive Totals by Stages  ^' '.' .'^Stories. ''; Stage 1 One '_: One and a half... Two ...  -  •20 18 • • • • '• .' 13"- '••  Stage 2 . '• 50 ' '•• / 50 , } -  Stage 3 .  60 ' . 65 : :.-'. 55  Stage 4  •'  100 100 100  ' . ••-  •' 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 construction. At the time of inspection the foundations, subfloor, 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  135  HOUSE  . Basic unit when complete=S5.1 O x 1,000 = 55,100 Stage 3 completed 61.7% Pres. value 65.8% x$5.100= 53,355 Sq. ft. additions and (See table, page 1-14.) Additions: subtractions: Siding 2.4% No basement —.71 Exterior painting ... 1.7% Insulation .... +.12 4.1% Sq. ft. total-. —.59X1,000= - S 5 9 0 Percentage completed 65.8% Heating addition S210 j  • Net totai  _„  52,975  From the above example if will be noted that the percentage 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. T I n "D 3 5'5 £"  3-0 o o cr c 3io 3:-V 3 3-3' o •< E.' a  o n o -1 0.0.0.3"  m  U  2 3 cv :r o 2  ai § n I a cr;. CI  • -nm  o x O-c r> . o 3 w Q. < ra c> a, go 2 s; o' 3 3 P ~ ^, o  6-1  c 3  O 3  Permit and Plans Excavation and Back-fil! Concrete Masonry Rough Carpentry Plumbing  I I i i  Wiring Lath and Plaster Millwork—Sash and Doors Finished Carpentry  ! !i  Hardwood Flooring  I ! !  Roofing Painting  po,  Hardware and Nails Heating  Not included in basic rate.  Linoleum  Sheet Metal Light Fixtures Insulation  Not included in basic rate.  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 Definition  GENERAL NOTES  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 halffoot. There are cases in one-and-a-half-story house construction 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 commonly 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.  CLASS 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. Goodgrade doors, windows, tr.m and hardware. 6. Ceiling.—Ceiling height 8' to 10'; lath and plaster, painted or wall-papered. 7. Attic or Upper S t o r y . — 3 0 % to 70% of inhabitable. Not partitioned 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. c h i m n e y . — 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 occasional wall-plugs. 14. Painting.—Good-grade paint job. f l o o r  a r c a  BASIC COST PER SQUARE FOOT OF GROUND AREA 1,600 1,400 I 1,000 1,200 Ground area (sq. ft.) ...1 $5.10 S4.70 $4.40 S4.20 Cost (basic unit as described) ADDITIONS A N D SUBTRACTIONS 1,000 1,200 1,400 Foundation—Add for cheap 2' brick, concrete, or stone perimeter wall (crawl space) $0.10 $0.08 $0.07 Basement— Add for 2' concrete perimeter wall with A' .29 .39 .33 to 6' frame section above; dirt floor Add for 4' concrete perimeter wall with 2' .44 .33 .38 to 4' frame section above; dirt floor Add for 6' concrete perimeter wall with 0' .52 .39 .45 to 2' frame section above; dirt floor Add for.7' to 8' concrete perimeter wall; .52 .57 dirt floor .63 Add for concrete floor .18 per square foot .10 per square foot .17 per square foot Floors—Add for good-grade hardwood floors.. Exterior Wall— (1) Frame— Add for 2' to 3' stub wall above .10 .13 .11 Add for 4' to 5' stub wall above .18 u p p u r liour iuvei .24 .20 (2) Masonry— .80 Add for 8" brick wall .96 .88 Add for 12" brick wall _ 1.20 1.10 1.00 1.92 1.76 1.60 Add for 12" stone wall (For masonry veneers see Class 1-21.) Roof— Add for very steep pitch or gambrel roof .. .15 .15 .15 Subtract for low pitch —.12 —.12 —.12 Add for dormer (Dutch or gable)  2,000 $4.00  1,600  2,000  $0.07  $0.06  .25  .21  .30  .25  .36  .31  .44 .49 of floor area of floor arca of floor area  .09  .03  .16  .15  .75 .94 1.50  .72 .90 1.44  .15 .15 —.12 —.12 $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 PlumbingAdd 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  139  APPENDIX C DEFINITIONS AND FORMULAS  To accommodate the i d e n t i f i c a t i o n of symbols used h e r e i n , the following d e f i n i t i o n s and formulas are provided: M = Mdn  measure of central tendency = u & mdn. =  the median i s the middle score having an equal number of scores being above t h i s point as below. Jt  where  =  the lower l i m i t s of the class i n t e r v a l which contains the median.  N  =  t o t a l number in the sample  -^c  = =  the frequency of scores within the i class interval the sum of the frequencies below the c l a s s i n t e r v a l which contains the median.  =  the frequency w i t h i n the class i n t e r v a l which contains the median.  u = mean  =  average of scores  7 1  where "/-i. = midpoint of the i  th  interval  d = mean deviation - the average amount each score deviates from the mean or median. The greater the dispersion of the scores the greater the mean d e v i a t i o n .  s  2  =  variance of the sample  f  s =  standard deviation 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 deviation. Formula  i f the sample i s normally d i s t r i b u t e d then the percent of cases f a l l i n g w i t h i n the standard deviation i s as follows:  i\ 1(3.60<  11.H>\  -as - , percent of cases f a l l i n g between + 1 S = 68.26% -JS  A X  s  Deciles  - divides the items i n t o 10 equal p a r t s .  Quartiles  - d i v i d e s the items into 4 equal p a r t s .  Q u a r t i l e Deviation - i t i is.^eal cul ated by substracting the 1st q u a r t i l e from the 3rd q u a r t i l e and d i v i d i n g by two. = standard normal deviate - describes the deviation of a score from the median, i n standard deviation u n i t s . Formula:  confidence i n t e r v a l - allows the researcher to make a hypothesis about the i n t e r v a l w i t h i n 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 b u t i o n the s t a t i s t i c i a n can p r e d i c t with 95% confidence that the median of the scores w i l l f a l l between + 1.96 standard deviations.  Researchers generally w i l l accept an hypothesis as being correct  i f the p r o b a b i l i t y of i t s being i n c o r r e c t i s only P = .05.  If an hypothesis  140 is made that the median i s between one score value and another, and the p r o b a b i l i t y of being i n c o r r e c t i s P = 50, the i n t e r v a l between the score values represents the 5% confidence i n t e r v a l .  y /  ——r  '  f 1 -H.ts- s  -M  —  The shaded area gives the area d e f i n i n g the 5% confidence i n t e r v a l , because the p r o b a b i l i t y that u l i e s outside t h i s i n t e r v a l  is  .05. Rd  = c o e f f i c i e n t of dispersion - i s a measure, in percent, of the average departure of i n d i v i d u a l scores from the median score.  The smaller the  percent the greater the degree of  uniformity.  100 (d/Mdn) Rs  = c o e f f i c i e n t of v a r i a t i o n - c a l c u l a t i o n r e l a t i n g the standard deviation to the arithmetic mean and expression i t as a percentage.  df  100 (S/M)  = degrees of freedom - i l l u s t r a t e s the number of variables free to vary.  In a normal  distribution  the sample standard deviation and variance i s an e s t i of the population standard deviation and variance when the degrees of freedom are N-l instead of N. The larger the value of N the less d i s t o r t i o n  is  caused by subtracting 1. = Chi-Square t e s t - technique for examining frequency data.  eg. whether or not the population i s normally  141 d i s t r i b u t e d .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 c a l c u l a t i o n s of the expected frequencies. Regression C o e f f i c i e n t }.  - estimating empiracally the r e l a t i o n s h i p between two v a r i a b l e s .  Since the estimates  and predictions are developed from only a sample of observations i t i s necessary to construct confidence i n t e r v a l s . Formula:  (best-fit line)  Sample  where a i s the value of y at which the l i n e crosses the x - a x i s and b i s the slope of the l i n e or the amount y changes as x increases by 1 u n i t . The usual technique f o r estimating a & b i s the l e a s t squares method. observation can be w r i t t e n y<; * 3 + Jb-i-  i  where  ec  Each i s the  th deviation from the regression l i n e for the i and * t  are the paired values f o r the i  be w r i t t e n a s :  ei  -  Vc -d-  observation and  observation.  >Y  The formula can  Jr *i .  1 Summary from Edgar P. Hickman and James G. H i l t o n , P r o b a b i l i t y and S t a t i s t i c a l A n a l y s i s , (Columbia: Intext Educational P u b l i s h e r s , 1971. pp. 257 - 262.  142 The sum of the squared deviation becomes:  It i s t h i s sum which we wish to minimize with respect to a & b.  This i s  done by taking the d e v i a t i v e with the respect to A and then with respect to B , s e t t i n g the r e s u l t i n g equation to z e r o , and then s o l v i n g the two equations simultaneously f o r a & b:  Solving these f o r a & b y i e l d s equations f o r f i n d i n g the l e a s t squares estimations:  SY/X  & _ =  N  £ X{  y  » ~ f  ^  = standard e r r o r 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  i s the a c t u a l . v a l u e of y and y \s y  determined by s u b s t i t u t i n g each  corresponding x into the regression equation y  Sb  =  = 3 + Jr X  standard e r r o r of b - used to measure the r e l i a b i l i t y  Formula:-  of b  143 Sa  = standard e r r o r of a - measures of the r e l i a b i l i t y of a  Formula:  -a -  F =  r a t i o - an F-test i s performed to t e s t the s i g n i f i c a n c e of the regression c o e f f i c i e n t b. by the formula:  r  The F-value i s c a l c u l a t e d ^  = c o e f f i c i e n t of determination - measures the proportion of the t o t a l v a r i a t i o n i n x that i s due to x  Formula:2 A,  This i s derived from the contention that the t o t a l variance i n y or £ (yi~y)  can be divided into two p a r t s : 1) v a r i a t i o n i n y due to x  or £ (y^^y)"  1  The r  2  a  n  u  2) v a r i a t i o n i n y unexplained by x or *?(yi - y*C  2 obtained i s always between 0 and 1 and the c l o s e r r i s to one,  the c l o s e r the data points ( x 7 ) > 7 ^ l i e to the regression l i n e r  -  y  z  3 +Jrx .  c o e f f i c i e n t of c o r r e l a t i o n - c o e f f i c i e n t s o f c o r r e l a t i o n are the square  roots of the c o e f f i c i e n t of determination or better defined since the coef f i c i e n t of c o r r e l a t i o n may take on values between +1 and -1 the c o e f f i c i e n t  2 For the mathematical d e r i v a t i o n of t h i s formula r e f e r to Hickman & H i l t o n , i b i d . , pp. 272 - 275  144 of determination i s the c o e f f i c i e n t of c o r r e l a t i o n squared.  The sign of  the c o r r e l a t i o n c o e f f i c i e n t t e l l s us whether the r e l a t i o n s h i p between the two v a r i a t e s i s p o s i t i v e or negative.  A c o r r e l a t i o n c o e f f i c i e n t of +1 i n -  dicates a-perfect p o s i t i v e c o r r e l a t i o n while one of -1 indicates a perfect negative c o r r e l a t i o n . The question which r answers i s : of y from i t s mean i s  What percentage of the deviation  

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