Challenges to property assessments for annual municipal taxes cannot be based on a challenge to the mill rate itself. That rate is set by the various local municipal councils based on budget projections for the respective local municipalities for the coming year. However, two arguments that may arise are when assessments have been based on the inclusion of unlike properties or how properties are classified. Two decisions of Alberta’s Court of Queen’s Bench in late 2021 provide guidance in this regard. They are City of Calgary v BCIMVC Realty Corporation, 2021 ABQB 888 https://canlii.ca/t/jkdjs and Calgary (City) v 801 Seventh Inc., 2021 ABQB 814 https://canlii.ca/t/jjmxv. Both arose on applications for judicial review of decisions of the Calgary Composite Assessment Review Board (CARB).
How a development property was classified by the City of Calgary’s Assessment Services was the issue in City of Calgary v BCIMVC Realty Corporation. BCIMC Realty Corporation owns property in downtown Calgary’s Eau Claire district, a desirable area of luxury condominium buildings, bars and restaurants abutting the city’s Bow River and its network of paths and parks. The property is currently used as a commercial parking lot. However, the City has zoned it and the surrounding area primarily for future residential development and has issued a development permit for the property that provides for the construction of seven buildings containing 1095 units comprising 30% commercial (non-residential) and 70% residential units. The assessed value of the property is $72,140,000, which accounts for the full development potential based on sales of similar development properties; this potential includes the air space above the surface area of the property.
For provincial tax purposes, the City’s Assessment Services assigned a value of $21,642,000 for the non-residential portion (30% of the total assessed value) and $50,498,000 for the residential portion (70% of the total assessed value). However, since the entire property was being used as a commercial parking lot, for the purposes of the municipal property tax assessment, the City classified the property as 100% non-residential. As a result, 100% of the property was subject to the higher commercial mill rate.
Upon receiving the 2019 assessment notice, the property owner filed a complaint with the Composite Assessment Review Board. In its decision in late November of 2019, the CARB decided it was inherently unfair for the City to assess the property’s value based on its development potential as a mixed-use property but then to ignore that mixed residential/non-residential use in the classification of the property for municipal tax purposes. The CARB ruled that the City’s approach was inconsistent with i) the value methodology for the property; ii) the local zoning regulations; and iii) how comparable properties in Calgary were classified. Consequently, the CARB amended the classification from 100% non-residential to a 70% residential and 30% non-residential split.
The City of Calgary sought a judicial review of the CARB decision, asking that the decision be quashed, and the matter remitted to a new panel for reconsideration. The City argued that the CARB: i) failed to address the actual use of the property as a commercial parking lot; ii) conflated classification with valuation based on development potential; and iii) failed to reconcile its decision with facts and relevant legislation. The Honourable Justice D.B. Nixon considered relevant portions of the Municipal Government Act, the City’s zoning bylaws, the fact that the property had been slated for future development on a 70% residential/30% non-residential split, the fact that both parties agree the 70/30 split was justified for assessment purposes for the provincial property tax and consequently upheld the CARB decision as the product of a rational line of analysis.
In Calgary (City) v 801 Seventh Inc., at issue was whether two large government owned buildings in downtown Calgary should have been included for comparison purposes when the City’s Assessment Services had assessed the value of two large multi-unit privately owned commercial properties, known respectively as the Nexen building and Cadillac Fairview building. The Composite Assessment Review Board had reduced the assessed values of both properties based on a change in the typical vacancy rate. Assessments of each property was done on the basis of an income approach to valuation that estimates the market value of properties based on the capitalized income of comparable properties. This is an accepted method for valuation of commercial properties. However, the City’s Assessment Services had included two large government owned buildings – the Calgary Courts Centre and the Calgary Municipal Building – in its sample of comparable properties. It was a classic example of mixing apples and oranges. The CARB accepted the property owners’ argument that the two government owned buildings were not appropriate comparables because they did not compete with commercial high-rises for tenants on the open, private market. In upholding the CARB decision, the Honourable Justice David Gates considered the relevant section of the Municipal Government Act which required an assessor to take into consideration assessments of comparable properties in the same municipality in which a subject property is located. Furthermore, the honourable justice determined it was well within the expertise of the CARB to render decisions of fact and law within its legislated area of jurisdiction and that it had quite properly excluded the two government owned buildings as dissimilar for assessment purposes in this context