How Assessment Works
Assessment is the process of assigning a dollar value to a property for taxation purposes. It is the cornerstone of municipal financing as it represents the base upon which budgets are built. A tax rate is applied to a property’s assessed value to determine taxes payable. Although assessment and taxation impact each other, each is a distinct and independent process. All activities associated with assessment and taxation are governed by the Municipal Government Act.
Assessors are professionally certified and receive training in property valuation techniques, legislation and quality assurance. Every municipality must appoint, by bylaw, a designated assessor. An assessor must hold one of the following designations:
- AMAA (Accredited Municipal Assessor of Alberta)
- CAE (Certified Assessment Evaluator)
- AACI (Accredited Appraiser Canadian Institute)
Data Collection and Maintenance
Accurate property value assessments are made through the collection of data such as blueprint information, field inspections, phone calls and Request for Information mailouts. The type of information collected depends on the type of property. For residential properties, assessors look at photos of the property, lot size, location, house size, quality of construction, age, quality of maintenance and other features such as number of bathrooms, number of fireplaces, basement finishes,etc.., garages and other outbuildings. For income producing properties, datum on rental rates, vacancies, expenses and capitalization rates is collected.All data is maintained on a CAMA (computer assisted mass appraisal) system. Land title transactions (sales) are recorded in the database. Contracts require 20% rotational cycle each year with daily data backups performed.
Assessment Classes
Class 1 – ResidentialClass 2 – Non-Residential
Class 3 – Farmland
Class 4 – Machinery and Equipment
What is Assessed
- Parcels of land
- Lots, blocks, or plans shown on a plan of subdivision and registered at land titles
- Quarter sections of land or any other area of land described on a certificate of title
- Improvement
- Structures
- Designated manufactured homes
- Machinery and equipment
- Parcels of land and the improvements to it
What is not Assessed
- Personal possessions
- Publicly owned infrastructure
- Minerals
- Property in Indian reserves and Metis settlements
- Growing crops
- Fences
- Garden sheds (small)
- etc...
Market Value
In Alberta, most property is assessed on the basis of ‘market value', which is considered to be the most fair and equitable way to assess property. Market value is defined as “price a property might reasonably be expected to sell for if sold by a willing buyer after appropriate time and exposure in an open market.Three approaches are used to determine a property's market value:
- compare sales prices of similar properties to the property being assessed
- market value of land + cost of improvements less depreciation = value of property
- estimate what a potential purchaser would pay for a property given its expected rate of return (income producing potential)
Direct Sales Comparison
Cost Approach
Income Approach
Regulated Assessment
Regulated property is not assessed on market value and instead uses rates and procedures prescribed by Municipal Affairs to calculate assessed values.- Farmland
- Linear Property
(oil and gas pipelines, cable television systems, electric power systems, telecommunication systems, etc.) - Machinery and Equipment (used in processing and manufacturing)
- Railway
Regulated property includes:
Mass Appraisal
Mass appraisal is the process of estimating the value of a group of properties as of a given date using common data, mathematical models, and statistical tests. Mass appraisal focuses on an entire class of properties, not on an individual property. This allows assessors to accurately value a large number of properties in a short period of time.
Assessment Audit
Once all assessments are completed, the assessment information is uploaded to provincial database (ASSET). Preliminary audit tests are conducted to ensure assessments meet requirements in regulations. Once a passing grade is achieved, assessments can be sent to the municipality.Municipal Government Act requires an assessment roll, which is a listing of all assessable properties in a municipality and their assessed values, to be produced by February 28 of each year. The assessment roll is open year round for inspection by any taxpayer of the municipality
Assessment notices are sent to property owners to tell them about the assessment of their property. Every property listed on the assessment roll receives an assessment notice, even if it is exempt. The municipality must publish notification in one issue of a local newspaper that notices have been mailed.
Corrections
Property owners have a right to voice concerns about their assessment and municipalities should encourage property owners to contact their assessor first to discuss the assessment. The Municipal Government Act, section 305, allows the assessor to correct an error in the assessment for the current year only. Upon correction, an amended assessment notice must be sent to the property owner.A ratepayer may file a complaint with the Assessment Review Board if they are unable to come to an agreement with their assessor. Created, empowered and staffed according to the Municipal Government Act, Assessment Review Boards hear complaints for all types of property assessments except Linear properties. LARB (Local Assessment Review Board) deals with residential and farmland, while CARB (Composite Assessment Review Board) deals with non-residential, multi-family property. Like a Court, these Boards can order something to be done, such as changing an assessment on a property. Member municipalities have the option to administer assessment complaints on their own, or participate in the CRASC joint ARB initiative.