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# Friday, 16 November 2018


Happy GIS Week! 

 

We were working recently on an assignment in the Annapolis Valley, the land of orchards and sloping vineyards…and that got us thinking about the impact of elevation on land area.  Ultimately, the question is one of land value: inherent in the value of agricultural land is potential crop yield.  More land area equals more growing potential equals more value.  Where slopes are acceptable or even advantageous, they may serve double duty in that sloped land is larger than it seems.

 

Our Valuation Division’s MO is to maximise your property value…this is an Economic Intelligence Unit blog post, and this is GIS Week, so we’re going to geek out on how to ensure you’re counting all your land, using a GIS, a little high school math, and a fair bit of Pythagoras[i]

 

Pythagoras’ Theorem defines the relationship between the sides of a right triangle with the equation a² + b² = c².  Side “c” is the hypotenuse, and is always the longest of the three sides. 





For illustrative purposes, we created a convenient, perfectly rectangular, parcel.  It measures 500 x 1,150 m, for a total area of 575,000 m² (57.5 hectares).





That is: 

But the land comprising this parcel is sloped.  The contour lines added to the image below demonstrate the degree of the slope; on average, there is an elevation differential between the highest and lowest elevations of 140 m.  




Thus, the 500 m parcel dimension is effectively 519.2 m:



and the effective land area is 597,080 m² (59.7 ha.), a difference of 22,080 m² – over 2 hectares of extra space for crops! 

 

This is a highly simplified example of the impact of slope on land area.  There are many other factors to take into account, such as the tipping point between beneficial slopes and unusable inclines.  But in a world where “land: they’re not making any more of it,” holds true, the most informed decisions are the best ones.  Where a precise figure is required, you’ll need to call in a professional land surveyor.  But when an area scaled from a map is fit for purpose, using a GIS and a little high school math can yield a more useful number than you’d get from a regular map. 

 

P.S. a related fun fact was shared at Wednesday night’s Geomatics on the Town event (part of the 2018 Geomatics Atlantic Conference): tree planters space their seedlings at a certain distance from each other.  For one tree planter, this was the equivalent of 3 steps on flat ground, but on sloped terrain, it was 12 steps in order to leave sufficient room between trees! 



[i] Mainly for defining the relationship between the sides of a right triangle, but a little bit for first floating the idea that the Earth is a sphere...it comes into play in measuring distance.  There are two methods of measurement in a GIS, Cartesian and Spherical.  The Cartesian method calculates distance and areas based on data as projected onto a flat surface (like scaling from a paper map), while the Spherical method accounts for the curved surface of the Earth (like scaling on a globe).  The distances in this example were measured in MapInfo using the Spherical method.   




Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit, and has a high level of expertise and interest in GIS. If you'd like to reach Alex, call 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com 
Friday, 16 November 2018 12:36:31 (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, 22 October 2018

 Why Hire a Commercial Broker? How a Commercial Broker Adds Value in Real Estate Transactions

There are ample online and offline resources available at your fingertips to help you purchase or sell a commercial property on your own – so why hire a broker? If you have the time, negotiating skills, real estate market information, and understand your target market and how to reach them, you don’t!

However, unless you can say yes to all of the above, here is how a commercial Broker adds value to your transaction:

1. Your time is valuable.  Letting a Broker do the heavy lifting and deal with “tire kickers” allows you to focus on your business.

2. Brokers have the contacts and resources to market your listing or find you a suitable property, ensuring all opportunities are uncovered.

3. Brokers understand your target market and how to reach them.

4. Brokers do not have an emotional attachment to the property or transaction.

5. Brokers are often members of local real estate associations, which can provide you with access/exposure to the MLS system in addition to their own websites, social media platforms, and databases.

6. Brokers have the inside track on market data, sales transactions, planning considerations and players in the market who are looking to purchase or sell commercial properties. They can help you determine a reasonable price and can help maximise market exposure.

7. Brokers know how to properly measure a building and collect the property information required, such as any material latent defects that must be disclosed in a transaction, which can avoid future lawsuits.

8. Brokers prepare Purchase & Sale Agreements, Counter Offers, etc. on your behalf, saving you from hiring a lawyer to assist with these items.

So, once you’ve decided to hire a commercial broker, how do you choose which broker/brokerage to represent you? The short answer is to simply hire the broker with whom you feel most comfortable. There are many excellent commercial brokers locally, so meet with a few, ask them questions, and choose the broker you feel will best represent you, and who understands your wants and needs. Each commercial broker has their own strengths; it is up to you to determine which one is the best fit for your organisation. 


As Senior Manager of our Brokerage Division, Ashley Urquhart assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or 1 (800) 567-3033.

Monday, 22 October 2018 10:44:48 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island
# Tuesday, 09 October 2018

October 7th through 13th is Fire Prevention Week in Canada.  With firefighters in Nova Scotia responding to over 1,400 fire related incidents in 2016/2017, it is important to ensure that you have the resources in place to help tenants safely clear a property in the event of a fire.

The theme of this year’s Fire Prevention Week is “Look. Listen. Learn. Be aware. Fire can happen anywhere.”  The “learn” component of this year’s them refers to the need for everyone to learn two ways out of every room.  We can help.

Our LaserCAD® team is able to assist with “learning” by creating fire escape diagrams for your building.  We can add additional crucial details to your fire escape diagrams by including the locations of fire extinguishers, pull stations, hose cabinets, and emergency lighting, as well as clearly indicating escape routes.  These maps allow tenants to quickly identify an escape route and the location of fire safety equipment in the event of an emergency.  We can also customise the diagrams as needed, showing separate escape routes for each individual tenant space and noting any other relevant details, such as muster locations.

You may not be able to predict when a fire will occur, but you CAN plan for it.

For further information feel free to reach out to any one of our Lasercad® space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033

Tuesday, 09 October 2018 11:24:57 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island
# Tuesday, 02 October 2018

Several blog posts (and a few years) ago, drawing on the experience amassed over my twenty-five year career at Turner Drake, I did some property tax myth-busting.  One bears repeating- particularly at this time of the year:

 

The Best Opportunity to Reduce Your Assessment (and Taxes) is NOT on Appeal

 

In every Province in which we operate, assessing authorities are willing to discuss assessments prior to their values being inserted onto the official assessment roll.  In our experience, such preliminary consultations often produce better results- at lower cost- than waiting to file formal appeals.

 

Nova Scotia’s assessing authority, the Property Valuation Services Corporation- the “PVSC”- and its predecessor, Service Nova Scotia and Municipal Relations, is a pioneer in this regard, and has been pre-publishing its assessments for over twenty years.

 

This year, 2019 pre-roll assessments for commercial property and apartments containing six or more units were pre-published on September 25th.  Proposed values can be accessed on the PVSC’s website at www.pvsc.ca, and the underlying valuations can be obtained by using the AAN and PIN from the top right- hand corner of 2018 assessment notices at:

 

 https://www.pvsc.ca/en/home/findanassessment/multiple-report-tool/default.aspx

 

Owners with concerns with their proposed assessments have about eight weeks to contact the PVSC: assessors have the ability to amend values until the last week in November. The 2019 roll officially closes on December 1st.

 

PVSC’s management embraces the opportunity to discuss assessments (and to make changes, where warranted) at the “pre-roll” stage.  Property owners are encouraged to avail themselves of this opportunity, and PVSC should be commended for publishing its proposed 2019 values.

 

Of course, it’s not always possible to engage in preliminary consultation, as not all values will be available with sufficient “lead time” in advance of the filing of the roll.  But where the opportunity presents itself, my advice is always to be proactive, and to address a problem before it becomes one.  A stitch in time saves nine.


Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division.  Her experience negotiating and appealing property assessments is extensive: it is a wise property owner who follows her advice.  If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com.

Tuesday, 02 October 2018 14:34:17 (Atlantic Daylight Time, UTC-03:00)  #    -
Nova Scotia | Property Tax | Turner Drake
# Tuesday, 28 August 2018

It is a common misconception that a piece of real estate has a single value.  This is simply not true.  Determining which value is appropriate likely has the biggest impact on property value.

 

The Royal Institution of Chartered Surveyors’ Global Valuation Standards, specify six types of real estate value (Market, Rental, Equitable, Investment, Synergistic, and Liquidation). The Appraisal Institute (of America) has identified ten distinct, and valid, property valuation bases in common use in North America. Legislation, case law, and the purpose of the real estate assignment, result in many variations of these property valuation bases. Any conversation about valuing your property has to start therefore with an understanding of the purpose of the valuation assignment or you can end up with a conclusion which is worthless at best, or seriously misleading at worst.

 

Let’s discuss the two most common types of value.

 

Market Value (Highest and Best Use) is typically quoted and understood by many (including appraisers) to be the only type of value.  It is the highest price you would get for your property on a specific date, if it was offered for sale, properly marketed, and exposed for a sufficient period of time to alert and allow all potential purchasers to submit offers.  It assumes that both seller and buyer are knowledgeable of property values, that neither are under pressure to sell or buy, are typically motivated, and are each acting in their best interest. It assumes a cash purchase, or typical mortgage financing, in Canadian dollars. It also anticipates that the purchaser will be able to put the property to its “Highest and Best” use, which may for example, include redevelopment, if this will create a higher value than the existing use of the property.

 

But beware, Market Value is not the price you could expect to get if the purchaser (1) was an adjoining owner, (2) was undertaking a land assembly, (3) was a relative or business associate, (4) knew something that the vendor should have known but did not, (5) did not know something known to the vendor of which the purchaser should have been aware, (6) wanted a “vendor take back” mortgage, (7) intended to lease back the property to the vendor, (8) enjoyed a negotiating advantage because, for example, the vendor was in dire financial straits, … and so on.

 

I was recently contacted by an existing client looking to secure financing for their property located on the Halifax Peninsula.  Their property was improved with an older, single storey commercial building.  The underlying land was worth considerably more than the building and property under its current use.  After discussing the purpose of the assignment with the client and their bank, it became clear that the bank was interested in more than just the Market Value (Highest and Best Use) of the property in this instance.  The bank’s goal was to determine if the income generated by the property, under its current use, was sufficient to keep the lights on and pay the existing mortgage.  However, the bank also wanted to know what they could expect to sell the property for if they ended up taking possession of it and selling it on the open market. Effectively, the bank had two different goals which gave rise to two different values.

 

We completed a thorough analysis of the property and provided the owner, and their bank with two values (1) Market Value (Highest and Best Use), which in this case was for redevelopment of the property, and (2) Market Value (Value in Use) as it currently exists without regard to redevelopment potential.  Market Value (Value in Use) is similar to Market Value (Highest and Best Use) but is based on the assumption that your property could only be utilised for its existing purpose.   

 

Difference in Value

 

In this instance the difference in value was significant: $1.5 million (Market Value - Value in Use) versus $2.3 million (Market Value – Highest and Best Use).  Both values were included and supported in the report, allowing the bank to make an informed decision on lending.

 

 

Looking for explanations on the different types of values listed above?  Visit our Valuation and Advisory Services site https://www.turnerdrake.org/WhichValue for more information on the various types of values.
 

Nigel Turner, Vice President of our Valuation Division, can be reached at nigelturner@turnerdrake.com
Tuesday, 28 August 2018 17:06:03 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake  | Valuation
# Wednesday, 25 July 2018

The Halifax Regional Municipality is in the throes of moving its long awaited Centre Plan from draft to reality.  With the first package of draft policy and regulation released in late February, it’s come a long way from the high-level guiding document that Turner Drake assisted with in 2016. However, there is still a ways to go. As one might imagine, when replacing multiple planning policy and development regulation documents for the most dynamic and complex urban environment in Atlantic Canada, the devil is truly in the details.

One of the biggest details being grappled with is the deployment of density bonusing, which is principally designed as an affordable housing tool. Depending on what you read, the current framework may actually backfire by delivering no affordable housing and even drive up market-rate housing prices by suppressing supply, or it may be perfectly fine and a good replacement for present ad hoc negotiations which are falling short of the Centre Plan’s achievable outcomes. Either way it provides an opportunity to highlight the perks and pitfalls of this increasingly common strategy.

What is Density Bonusing?

Density bonusing is a planning policy tool whereby new development projects can access higher regulatory limits on built area in return for provision of some public benefit. In other words, trade height for amenities. It is sound in concept. The value of urban land (but not the buildings on it) is primarily driven by where it is located, and what can be done on it. Thus, it is value created by our collective society through the infrastructure and services provided to it, the legal framework that governs it, and the surrounding public and private activities which would make one desire a particular location over another. When local governments “add density” by increasing regulatory limits over what is currently anticipated by the market (i.e. already reflected in its price), they literally create additional land value out of thin air. In requiring a developer to provide public benefits for this added density, local governments are recapturing the value they created in the first place.

There is an obvious tension here in terms of why this ‘bonus’ density was not permitted in the first place, but in the messy world of city-building, ideological purity will always lose to practicality. Density bonusing thus becomes something akin to racketeering: nice development application you’ve got there… what say you give us some art and affordable housing, and maybe that shadow ain’t so bad anymore.

How Does it Work?

While it’s a clear win-win in concept, it can be complex in practice. There are four important factors that determine whether or not density bonusing works on a given site:

·         the value of the property as it exists today

·         the value of the land if purchased for redevelopment

·         the value created by adding bonus density

·         the value captured through required public benefits

It is important to note that all but the last factor on this list are determined by the real estate market. The value captured is set by the municipality, and is typically based on an estimation of the value of the bonus density. In HRM, the tradeoff of density for benefits is structured under a predefined framework. Other municipalities negotiate these arrangements on a case-specific basis, but this approach it generally used in far larger centres due to the complexity and sophistication involved.

Roughly speaking, development projects are feasible in areas where the market price for land exceeds the value of properties as currently developed.  Adding a density bonusing program to the mix will increase the redevelopment value, but also add a new cost in the form of requisite public benefits. On net, this is usually a positive value; these programs are designed to recapture only a portion of the value they create.

It should be apparent that density bonusing is not, in principle, a drag on development. In fact, a properly designed program should improve the feasibility of existing projects and even increase the total pool of viable projects where the net positive addition of value (bonus density minus benefit cost) actually tips the balance of feasibility. For all intents and purposes, this is indistinguishable from a basic upzoning.

Where Can It Go Wrong?

There are plenty of opportunities for density bonusing programs to go awry, but most are the usual pitfalls of any public policy. There needs to be a logical and efficient administration process. The program needs to be supported by accurate data so that its function lives up to its intent. Appropriate buffers needs to be left to account for secondary costs and added overhead created by the program itself. There needs to be additional mechanisms in place to deal with the outputs (this is an important topic of conversation in the Centre Plan context, in which the majority of benefit is supposed to be in the form of affordable housing while the municipality has no formal jurisdiction or established programming).

However, the fundamental issue of whether a density bonusing program works is the value relationship between what is proposed, and what exists today. Most of the debate and discussion in HRM has been focussed on aspects of the former: what is the best value capture rate to use, what is the right threshold for triggering the bonus requirements, what are the correct value assumptions? Important questions, but their answers are all derived from the latter issue, not determined in a vacuum.

At the scale of a city, form follows finance. Whether density bonusing is implemented or ignored by the private sector will ultimately depend on whether the total value of entitled and bonus density, less the cost of delivering it (development costs plus public benefit), is a sweeter deal than exists today. If a profit incentive exists, a badly designed program will still deliver. If a perfectly designed program equates to a downzoning, don’t count on anything happening until prices rise, or losses are written off.

How to Get it Right?

As municipal planning increasingly makes use of economic and market-based tools (and it should) it also needs to expand its understanding of the principles and systems that underpin them. Weight does need to be placed on the market conditions of the present given their influence on the future (to say nothing of the municipality’s complicity in forming them).

The traditional approach would state planning policies cannot be captive to past practices and existing conditions, otherwise change would never be possible. While this is true, it is not justification for being willfully ignorant either. Understanding the basic value relationship between today's conditions and those proposed under new policy is the key to understanding whether density bonusing, or any planning policy for that matter, will deliver on its promise.

Neil Lovitt, our Senior Manager of Planning & Economic Intelligence can be reached at 429-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.

Wednesday, 25 July 2018 15:00:58 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island
# Thursday, 07 June 2018

The Building Owners and Managers Association (BOMA) publishes measurement standards for office, industrial, retail, and mixed use spaces.  These measurement standards provide guidelines for measuring the area occupied by each tenant within a building and, when appropriate, allocating common spaces.

BOMA states that if a building contains a single occupancy type comprising 51% or more of the total building area, the corresponding standard should be used.  In other words, the building owner does not have the right to simply choose the standard that best serves their interests. Given the ubiquity of commercial buildings that can be used for both office and retail uses, particularly in suburban and rural areas, it is critical to understand the differences between these standards.

Boundary Condition

Where does my measure line extend to? One of the most important differences between the Retail and Office Standards is how the measure line differs for exterior enclosures.  The Gross Leasable Area of a retail building is measured to the outside face of the exterior walls.  Under the Office Standard the measure line for the exterior enclosure is the dominant portion of the inside finished surface. The dominant portion is the finished surface that comprises over 50% of the vertical height, measured from floor to ceiling (not exceeding 8 ft.).  This difference can be significant.  The illustration below shows how a unit measured to the Retail Standard (right) captures more area than a unit measured to the Office Standard (left) based on this condition:


Allocation of Common Area

Under the Office Standard, building owners can allocate to each tenant their proportionate share of common area. This process of “grossing-up” the tenant’s space means each unit has two areas: a Tenant Area (the space physically occupied by the tenant), as well as a Rentable Area (the Tenant Area plus a proportionate share of common space).  In a retail building this is not the case, as this Standard does not allow for the grossing up of common areas. Under the Retail Standard, Gross Leasable Area is simply the area designed for the exclusive use of an occupant with no share of common area.

Consider a hypothetical office unit with a Tenant Area of 1,250 ft.2 located within a building that contains three additional units of the same size and 200 ft.2 of common area.  Each unit comprises ¼ of the total Tenant Area, and is allocated 25% of the common area (25% x 200 ft.2 = 50 ft.2) making the Rentable Area of the unit 1,300 ft.2 (blue overlay on left side graphic below). If this were a retail building the Gross Leasable Area would be 1,322 ft.2 as this unit would simply be measured to the exterior face of all exterior walls, while excluding any allocation of building common areas (green overlay on right side graphic below).


These are just two of the many differences between the Retail and Office Standards. With a total of six BOMA Measurement Standards it is critical to verify that the correct standard has been applied to your building, and that your space has been certified to verify its accuracy.  

    
Mitchell Jones splits his time between Turner Drake's Lasercad® and Valuation Divisions.  For further information feel free to reach out to him, or any one of our space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033
Thursday, 07 June 2018 14:33:58 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Friday, 09 February 2018

On February 5th, Scott Armour McCrea, CEO of The Armour Group, took to the airwaves to ridicule Alexandra Baird Allen, the Manager of our Economic Intelligence Unit … the cause of his angst, an earlier CBC radio interview with Alex on the results of a Halifax Central Business District (CBD) survey which revealed an office vacancy rate of 17.3%. Labelling her conclusions “manufactured hysteria” Mr. McCrea disparaged the survey results, questioned the competence of Alex, her survey team and Turner Drake … and ignited a gender war: “Mansplainer” was perhaps the most polite invective hurled in Mr. McCrea’s direction (we are keeping a list… it’s not pretty but quite informative… we might publish it). So what was it all about?

Scott Armour McCrea is a developer and a very important man, as he so informed the CBC, the largest private office landlord in the city. In sonorous tone and displaying gravitas befitting a man with gaze firmly fixed on his own navel, Mr. McCrea revealed that “no other real estate professional uses the Turner Drake data”.  In fact, he confided, no actual practitioner agrees with them!  He then proceeded to reveal why … the full Monty so to speak.

Turner Drake, Mr. McCrea intoned, is a minor player in the leasing field completing only 2% of leasing transactions while actual practitioners such as brokers CBRE, do 30% to 40% and publish their own survey. CBRE pegged market absorption at “about 300,000 ft.2 a year” stated Mr. McCrea, “not the 25,000 ft.2” calculated by Ms. Baird Allen. The Armour Group, Mr. McCrea’s company, did their own survey as well and estimated the vacancy rate at 13% to 14%. … and most vacancies were in buildings most people would “never, ever want to work in”. And the problem was exacerbated by the Province who were so concerned about saving taxpayers’ money, they insisted on consigning their employees to space that only the private sector would tolerate. But that, he confided, was about to change. The real reason though for the problem: “if there is a problem in Halifax and I am not suggesting there is”, was that the City was “under-demolished”.

So what are the (non-hysterical) facts?

Alex has been a valued colleague for twelve years, is a Chartered Surveyor and has a degree from the University of New Brunswick, a Diploma in Urban Land Economics from the University of British Columbia and an Advanced Diploma in Geographic Information Systems from the Centre of Geographic Sciences at Lawrencetown, one of the top three GIS institutes in Canada. She combines her work as Manager of our research group with her role as a mother of twins. We have never known her to engage in hysteria, manufactured or otherwise. The office surveys are, we believe, the most comprehensive conducted in Halifax and cover all rental buildings 5,000 ft.2 or larger. They are a structured survey using purpose designed survey instruments and software, deployed by a team of trained researchers. The survey to which Alex alluded in her CBC interview had a response rate of 89% (previously we have achieved 98% but this time a large landlord, The Armour Group, refused to participate). We do have human and programmatic error traps in place for quality control purposes but recognise that they are not yet infallible so seek to have as many eyes on the results as possible and offer the full survey to any participant who would like a copy. 40% take advantage. One such recipient, was kind enough to point out not one, but two errors, in our December 2016 Halifax office survey. We are not perfect, but we are transparent. We corrected the errors, reissued the survey, changed our software to catch similar human errors and published a correction, apology and thanks in our Spring 2017 Newsletter to the gentleman who had so diligently scrutinised the survey, Mr. McCrea.

Our Market Surveys are undertaken by a research team independent of our Brokerage Division. The volume of their lease transactions is therefore unrelated to the amount of research undertaken for the Market Survey.  In any event we cannot utilise data gathered by our Brokerage Division for the Market Surveys because that would be a breach of confidentiality.

The CBC interviews were focused on the Halifax CBD. Ms. Baird Allen’s data referred to the Halifax CBD. Mr. McCrea’s interview focused on the Halifax CBD… unfortunately the CBRE data he referred to did not. It pertained to the wider HRM metropolitan market. CBRE’s estimate of the vacancy rate for the Halifax CBD is very similar to our own (18.5% versus our 17.3%). A world away from the 13% to 14% cited by Mr. McCrea. CBRE’s vacancy rate for the entire HRM office market was 15.5% (we place it at 14.97%)… probably the source of Mr. McCrea’s confusion.  There will always be some differences between the Turner Drake and CBRE survey results, an important factor being that our survey does not just focus on larger buildings but covers some as small as 5,000 ft.2. Mr. McCrea’s comment that the “annual market demand was 300,000 ft.2  not the 25,000 ft.2 quoted by Turner Drake” was similarly erroneous. Alex’s figure of 25,000 ft.2 referred to the CBD, which, after all, was the subject of the CBC interview to which Mr. McCrea was responding. It was based on the average market absorption over the past five years. CBRE’s estimate of annual market absorption of 308,944 ft.2, referenced by Mr. McCrea, referred to the entire HRM market.

Mr. McCrea’s comment that most of the vacancies were in buildings that most people would “never, ever want to work in” does not accord with the facts. Class A buildings have an average vacancy of 21.8%.

We concur with Mr. McCrea that many office buildings will have to be demolished or repurposed, Alex pointed this out in her CBC interview. However 625,750 ft.2 of the 879,665 ft.2 of currently vacant space would have to be taken out of service to restore equilibrium to the downtown office market… the aggregate of the former Bank of Montreal tower, the former Royal Bank tower, Founders Square and … volunteers anyone? Oh but Mr. McCrea is adding another 125,000 ft.2 at Queen’s Marque… let’s see, what else for the wrecking ball…?

We politely pointed out to Mr. McCrea his confusion with the CBRE survey statistics and gave him the opportunity to rectify the error. He did not respond. As for the mansplainer moniker… nothing we can do about that... we trust he is not consigned to the couch. Probably have to make his own coffee from now on though.

For more information on mansplainer consult Wikipedia. For information on the office market in the Halifax CBD and lots of other areas in Atlantic Canada, contact Alex Baird Allen the (very calm) Manager of our Economic Intelligence Unit at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or ABairdAllen@turnerdrake.com

Friday, 09 February 2018 13:58:02 (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Brokerage | Economic Intelligence Unit | Nova Scotia | Turner Drake
# Wednesday, 29 November 2017

Another few years passed, another resurgence of attention and debate on Nova Scotia’s Capped Assessment Program. Municipalities are once again beating their drum against it, reiterating well-worn criticisms and receiving well-worn rebuttals. The public is largely disinterested, unfortunately, and the Province is loath to make the necessary changes without a strong call to action. The issues are not intuitive, and the impacts are largely invisible, and thus the CAP has immense political inertia.

With governments thankfully enacting open data policies, making publicly funded data publicly accessible, Turner Drake & Partners has now been able to crunch the numbers for more than 140,000 taxable residential assessment accounts in the Halifax Regional Municipality (HRM) to show just how ineffective this public policy has become.

What is the Capped Assessment Program?
The mechanics of the CAP, and the basics of its problems, have been explained many times over. Sources abound, but our own Property Tax professionals have previously covered the topic in our blog, as well as our recent company newsletter.

Normally, assessments are free to track market trends, but in Nova Scotia the CAP limits annual growth in a property’s assessment to inflation. Nova Scotia’s CAP is not like other taxpayer protection measures, such as California’s famous Proposition 13 which limits growth in assessment and total revenue collected. In Nova Scotia, if the total assessment base is reduced because of the CAP, tax rates are simply increased. Based on our analysis for HRM, we see no evidence of an impact on municipal spending. Operating Budgets have grown consistently since 2000:



Therein lies the problem. It is a program that only redistributes the tax burden. Some pay less, but the taxman gets his due, and so others pay more to make up the difference.

What is the Problem?
The problem arises in how the CAP decides who is to pay more. An assessment-based property tax system is not perfect, but one of its strengths is that property values generally correlate well with a household’s ability to pay. Of course this is not always true, and in fact the original purpose of the CAP was to alleviate situations where rural families were being priced off their land because Ethan Hawke bought the island next door. This is a valid issue that deserves a policy response, and we know that the CAP has helped people in this regard. However, by taking a broad based approach to solving a very acute issue, the program has created far more inequity than it was ever able to solve.

The CAP introduces distortion to the assessment system, reallocating tax burden based on occupancy length and tenure type. Most critics frame this issue as being arbitrarily unfair and use maps like the one below to illustrate the random nature of its distortions; houses in the same neighbourhood, with the same services, but carrying different tax burdens.


(Tax Distortion in a Halifax neighbourhood: red overpays, green underpays, sized by magnitude)

The sad truth is that its unfairness is less random, and its benefit more misallocated than most assume. As our Economic Intelligence Unit knows, people tend to sort themselves into similar locations and types of housing depending on their backgrounds, economic status, and life-stage. Thus, the CAP doesn’t just discriminate against certain properties on the basis of eligibility and program mechanics; it by extension discriminates against certain locations and people. This becomes apparent as the map zooms out:


(Tax Distortion in South End Halifax: red overpays, green underpays, sized by magnitude)

Today the CAP is championed as the way to bring “stability, predictability and affordability” to the taxpayers writ-large. In reality, the CAP generally fails to deliver these supposed benefits, while systemically giving the greatest assistance to those that least need it, by taking from those who can least afford it.

Halifax Case Study
To help illustrate the outcomes of the CAP, Turner Drake’s Economic Intelligence Unit compiled data from the Property Valuation Services Corporation’s DataZone for the 2017 assessment year, budget and tax rate data from the Halifax Regional Municipality’s website and Open Data Portal, and socio-economic data from Statistics Canada. Assuming the municipality would uniformly adjust tax rates to offset the 11% increase in assessment under a CAP repeal, our analysis allows us to estimate who is currently paying more and who is paying less, by how much, and whether these outcomes have social or spatial patterns. Every municipality is different, but with HRM comprising the greatest variety of settlement types, 44% of the population, and 55% of the total provincial assessment base, we find the results instructive.

Results
Urban – Spatial patterns in the urban areas are remarkable. Whether your kitchen has a view of the Northwest Arm seems to be the strongest predictor of tax savings, though much of the Peninsula’s west side makes out well. The apartment-heavy downtown and North Dartmouth areas are hit hard, while suburbs (unless recently developed) generally overpay, but just slightly. Aside from a small number of waterfront areas, Bedford and the developing suburbs are not saving much. Sackville and Spryfield are a mixed bag, with recent development in those areas hardest hit.


(Tax Overpay [more red] and Underpay [more blue] – Halifax Peninsula, Central Dartmouth and suburbs)

Rural – Compared to urban areas, rural areas tend to be more random as new construction and sales activity is dispersed while “hot” market areas tend to be highly targeted. The Chebucto Peninsula appears to make out reasonably well overall. The Head of St. Margaret’s Bay area is most favoured, while farther flung locations like Prospect have a more even balance.


(Tax Overpay [more red] and Underpay [more blue] – Head of St. Margaret’s Bay)

Unfortunately for the Eastern Shore, it looks like the shorter the drive to the city, the better your tax relief. Porter’s Lake is a mixed bag, and most communities past Jeddore pay a little bit more. Sheet Harbour is case in point, a very small handful of savers while most overpay mildly. The hardest hit property is a nursing home which pays an additional $5,000 in property taxes under the CAP. In aggregate, the outer rural areas of the municipality pony up an extra $110,000, while the rural areas within city commute distance save nearly $750,000.

Household Median Income – A strong relationship is observed between tax savings and median household income. Thanks to the mechanics of assessments, the more expensive and fast appreciating properties tend to accrue the largest discounts under the CAP. Shockingly, these desirable, expensive areas tend to be occupied by households of higher income. What is truly surprising, however, is the detail and extent to which this relationship holds true. Even within neighbourhoods that generally trail overall median income levels, tax distortions tended to favour the (relatively) higher income areas:


(Tax Distortion and Median Household Income in Fairview: red overpays, green underpays, sized by magnitude, darker grey is higher income, lighter grey is lower)

This relationship varies in strength across the municipality, but only truly breaks down in newly developed areas as new construction starts out uncapped, and tends to attract higher income households due to the premium price of a new home. Spryfield is a case study in getting the worst of both worlds:


(Tax Distortion and Median Household Income in Spryfield: red overpays, green underpays, sized by magnitude, darker grey is higher income, lighter grey is lower)

The level of income detail in rural areas is less fine-grained, but broadly, we see this pattern repeated when comparing the Chebucto Peninsula to the Eastern Shore.

Much Ado About Nothing
Despite the prolific shifting of taxes among tens of thousands of accounts, for most residential rate-payers in HRM the whole program may as well not exist. We estimate 45% of properties have their taxes adjusted (upwards and downward) by less than $200 per year, with the average bill enjoying less than $10 in savings. If we expand our bounds to adjustments of less than $500, we capture approximately 88% of all accounts, though now on average they have to pay $30 extra. Even at the extreme end of this sample, $40 per month is not exactly a significant level of tax relief. For the vast majority of households, the existence of the CAP does little to foster stability, predictability or affordability over an unadulterated assessment system.

Winners and Losers
With the vast middle-ground essentially playing musical chairs with small dollars, the real impacts are felt in the outliers. The maximum overpayment is limited by the artificial inflation of tax rates (roughly 11%), however the maximum discount has no similar limit; it is dependent on local market trends and the length of time a property remains capped. Thus the program tends to siphon tax dollars from a broad base of chronic over-payers and deliver them in considerable amounts to a relatively small number of super-savers.

The 403,000 souls in HRM are organised into just over 173,000 households; groups that occupy a single dwelling unit (usually based on family relations). Most of these pay more under the CAP. About 30% live in apartments that are not eligible for the program, and thus pay rents inflated by higher property taxes. Another 27% occupy eligible residences, but still pay more because the higher tax rate overwhelms their modest assessment discount (or lack of discount if newly purchased). So more than half, 57%, of all households in the municipality are losers, overpaying by an average of $275 per year. The majority of this unfortunate group will always pay more because their residences do not qualify for the program, or their capped assessment will simply not build up a sufficient discount over time. In total, the CAP extracts around $27 million from this bunch – a hefty sum on top of the taxes they fairly pay.


(Capped Properties That Actually Pay More: plenty of misery to go around)

Around $10 million of this is used to benefit land that is likely vacant but classified as residential, while the remainder is redistributed to the winner households, mostly in small amounts. Yet there are some very lucky recipients of this involuntary largess. Tax discounts in excess of 60% are not uncommon, and there is more than one tony street address that receives a larger tax break than the combined saving of entire mobile home parks.

The top 1% of households are afforded an average tax break of $1,500 per year. In total, this group enjoys more than $2.5 million of tax savings. In other words, it’s likely that the top 1% of beneficiaries are receiving around 15% of the total benefit collected by households, and much of this flows to high-income areas.


(Top 1% of Tax Savers: not quite so widely spread)

The System We Want?
Ultimately, tax policy is public policy, and the most fundamental test of public policy is whether it achieves its ends. It is a good and worthy goal that families not be forced from their homes by sudden tax spikes. It is also good that funding for local government be raised in a way that gives households stability, predictability, and affordability. Does the CAP achieve any of this, and to the extent that it does, is it worth the cost?

Property values and ability to pay are closely aligned, but not perfectly. There are always those who will have difficulty when taxes on the former unexpectedly outstrips the latter. They deserve protection, but the CAP is not a precise tool; for every property owner truly assisted, many others receive unneeded relief, or are undeservedly burdened. Beyond this, most households would experience stability and predictability in their property taxes regardless of the CAP, and the majority would actually have improved affordability without it, if only mildly.

So this is the outcome of the CAP, ten years after full implementation. Are we achieving these feeble results at an acceptable cost? Can we only provide peace of mind in taxation through a system that demands someone else’s sacrifice? Is it acceptable that we systematically target people like rural nursing home residents, low income apartment dwellers, first-time home buyers, and downsizing seniors to make those sacrifices? And is it acceptable that we provide only meagre relief to the residents of mobile home parks and housing co-ops, while systematically directing the greatest savings to neighbourhoods with lowest need? Surely we can do better than this.

©2017 Turner Drake & Partners Ltd. all rights reserved. Contains information licensed under the Open Data & Information Government Licence – PVSC & Participating Municipalities, and the Open Government Licence—Halifax. Analysis and conclusions are the product of Turner Drake & Partners Ltd., and do not necessarily reflect the views or endorsement of Property Valuation Services Corporation, the Halifax Regional Municipality, or any other entity. Whilst every effort has been made to ensure the accuracy and completeness of this document, no liability is assumed by Turner Drake & Partners Ltd. for errors or omissions. This is distributed without charge on the understanding that the contents do not render legal, accounting, appraisal or other professional services.

For more information on this analysis, contact Neil Lovitt, our Senior Manager of Planning & Economic Intelligence at 429-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.

Wednesday, 29 November 2017 17:11:44 (Atlantic Standard Time, UTC-04:00)  #    -
Economic Intelligence Unit | Nova Scotia | Planning | Property Tax | Turner Drake
# Wednesday, 25 October 2017

Nova Scotia’s 2018 Preliminary Property Assessments are available on the Property Valuation Service Corporation (PVSC)’s website, and there is a brief window to discuss assessments with PVSC assessors prior to the assessment roll being finalized on December 1st.

Between now and then, the PVSC is encouraging property owners to discuss any errors or provide additional information which may have an impact on the value of their property. The benefits in taking advantage of this opportunity are:


1)     It provides a higher level of certainty in preparing tax budgets for the 2018 fiscal year (for both the owner, and the municipality).


2)     It provides property owners with an opportunity to address concerns with 2018 assessments outside of the formal appeal process, and before the values are finalized and inserted on the official assessment roll.


3)     Owners who are not satisfied with the results of pre-roll consultations can still file a formal appeal when official assessment notices are received in January.

 

Preliminary consultations are typically less formal and more timely (and thus cost effective) than an appeal.  This is especially so because at the “pre-roll” stage, assessors aren’t in the position of defending an assessment that has already been published.  The best time to address an assessment issue is before the problem becomes one.

 

The link to proposed 2018 assessment data is as follows: https://www.pvsc.ca/en/home/findanassessment/searchbyaan.aspx.  Preliminary 2018 assessments are publicly available; owners will need their Assessment Account Number and PIN Access Code (which can be found at the top-right hand corner of their 2017 Assessment Notice) to access the underlying valuation records.


 

Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division.  Her experience negotiating and appealing property assessments is extensive (don’t be fooled by the photo - her calculator is older than some of her colleagues): it is a wise property owner who follows her advice.  If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com.

Wednesday, 25 October 2017 12:49:18 (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Nova Scotia | Property Tax | Turner Drake