Calgary Hoteliers Inc v Calgary (City), 2016 ABQB 388

Court of Queen ’ s Bench of Alberta Citation: Calgary Hoteliers Inc v Calgary (City), 2016 ABQB 388 Date: 20160711 Docket: 1501 09120 Registry: Calgary Between: Calgary Hoteliers Inc. also known as the "Ramada Inn" Applicant - and - City of Calgary and Assessment Review Board for the City of Calgary Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice S.L.

Hunt McDonald _______________________________________________________ [ 1 ] The issue raised in this appeal is whether Calgary Hoteliers Inc., also known as the Ramada Inn (the “Applicant”), meets the test to obtain leave to appeal the decision dated July 17, 2015 of the Calgary Assessment Review Board (“CARB”). The decision confirmed the assessment value found by the City of Calgary which was based on a bare land approach to determine value rather than employing an income approach. [ 2 ] The basis for this court to grant leave to appeal is provided by the statutory provision of s 470(1) of the Municipal

Government Act (the “MGA”), RSA 200, c M-26. [3] The test for permission to appeal specified in s 470 of the MGA consists of three requirements; that the appeal involves aquestion of law or jurisdiction, that the question of law or jurisdiction is of sufficient importance to merit an appeal; and that the appealhas a reasonable chance of success. [4] In 2015 the City of Calgary assessed the Applicant for taxation purposes at a market value of $21,040,000.00.

The value wasupheld by the CARB and the Applicant has filed an application for leave to appeal and judicial review of the decision. [5] The Applicant says that the CARB failed to engage the correct legal process required to determine the market value of theproperty. The valuation approach used by the City of Calgary assessed the property as if it were vacant land. The Applicant argues theCity’s approach contravenes s 289(1) of the MGA which requires the City to take into account the characteristics and physical conditionof the property as of December 31, 2014.

The Applicant argues the property was improved, not vacant land. It submits that the Cityfailed to assess the land in a fair and equitable manner which is required by s 293 and s 467(3) of the MGA. [6] In this case, the Ramada Inn submits that the CARB committed an error of law by failing to correctly identify or misapplyapplicable statutory considerations establishing the valuation standard for land and improvements for the subject properties as set out inss 467(3), 284, 289, 293 and 1(

n) of the MGA and ss 4, 5 and 6 of the Matters Relating to Assessment and Taxation Regulation AR220/2014 (“MRAT”), which is a regulation under the MGA.

These are the sections to be considered to determine whether the assessmentwas “fair and equitable” in the circumstances. [7] The Applicant submits the standard of review to be applied by the court when reviewing the decision relating to valuation ofland that the CARB established in this case is subject to a standard of correctness when applying the law, relying on the case ofEdmonton East (Capilano) Shopping Centres Limited v The City of Edmonton, 2015 ABCA 85. [8] Counsel for the Applicant submits that the CARB must be correct, as opposed to reasonable, when interpreting the law andalso submits that it is noteworthy that the Court of Appeal said that the MGA was a taxing statute and therefore subject to specialscrutiny. (It is noted that the Edmonton East case is on appeal to the Supreme Court of Canada.

Leave was granted and reserved onMarch 24, 2016). [9] The Applicant submits that whether the standard is reasonableness or correctness, the error of law made is clearly bothincorrect and unreasonable in this case in that the CARB determined the value of the land based on if it were vacant rather than takinginto consideration that the Applicant’s property is both land and improvements thereon which means, by the Applicant’s submission, thatthe CARB should have taken an income approach rather than a land only approach to determine the valuation of the lands in question. [10] The MGA provides that an appeal to the Court of Queen’s Bench must proceed in two phases.

The applicant must first obtainthe leave of the court by satisfying the court that it meets the requirements set out in s 470(5) of the MGA. Where these requirements aremet, a separate hearing is conducted then to argue the merits of the appeal: GSL Chevrolet Cadillac Ltd v Calgary (City), 2013 AJ 604 atpara 13. [11] Section 470(1) restricts an appeal to a question of law or jurisdiction.

Section 470(5) of the MGA requires an applicantseeking leave to appeal to demonstrate that the question of law or jurisdiction is of sufficient importance to merit an appeal and that theapplicant has a reasonable chance of success on appeal. [12] In the case of St. Albert Housing Society v St.

Albert (City), Yungwirth, J stated: It is well settled in the jurisprudence that questions before CARB regarding appropriate valuation method or approach, to determine anassessment of property involve the application of legal principles to a particular set of facts or circumstances established by the evidence.These types of questions are questions of mixed law and fact for which leave to appeal is unavailable under section 470(1). [13] Similarly, Justice Yungirth stated questions concerning how or whether a particular factor or circumstance should implicatethe assessment value of a property is a matter of discretion for the CARB and is thus a question of mixed law and fact for which leave toappeal is unavailable. [14] Both the CARB and the City of Calgary submit that the applicable standard of review for issues such as the one raised in thisproceeding is one of reasonableness.

Alberta Courts have consistently applied this presumption of reasonableness on the basis that theCARB is a specialized tribunal which administers a discrete regime under the MGA and that questions of law before the CARB are notof general importance to the legal system as a whole: 908118 Alberta Ltd v Calgary (City), [2013] AJ No 169 at paras 46 – 49. [15] The CARB submits that whether an assessment is fair and equitable having regard to the evidence of market value, the massappraisal process, and the evidence of comparable assessment falls squarely within the specialization of the CARB under s 467 of theMGA. [16] Further, the City and CARB submit that the issues raised by the Applicant do not fall under any of the enumerated categoriesfor which a standard of review should be correctness.

In the case of Alberta (Information and Privacy Commissioner) v AlbertaTeachers’ Association, 2011 SCC 61 , [2011] SCJ 61, the court ruled that there is a presumption that reasonableness is thestandard of review applicable to questions of law involving statutory

interpretation by an administrative tribunal of its home statute andrelated legislation. This case and the case of Dunsmuir v Brunswick, 2008 SJC 9 stipulate that: The presumption of reasonableness applies unless the question falls into a category for which the standard of review is correctness,namely: a constitutional question; a question of law that is of central importance to the legal system as a whole and outside the expertiseof the tribunal; a question regarding jurisdictional lines between administrative tribunals; a question for which an administrative tribunaland the superior courts share authority to decide in the first instance; or a true question of jurisdiction.

[ 17 ] I accept that reasonableness is the proper standard of review in this case. The CARB found no error in the approach taken by the City’s assessor. This court must show deference to the CARB’s decision. Procedure [ 18 ] The Applicant seeks to argue both for leave to appeal under the MGA provisions and as well judicial review of the CARB’s decision. The Applicant submits it is entitled to judicial review of the decision under

Part 3 of the Alberta Rules of Court , alleging the decision demonstrates the CARB committed errors of fact or mixed fact and law and asks this court for an order setting aside the CARB decision and sending the matter back to be reheard by them. [ 19 ] At the outset of this proceeding, the Court entertained submissions from the parties as to what process was appropriate to embark on for this hearing. [ 20 ] This hearing was set by Consent Order granted by Justice Jeffrey on August 31, 2015 directing that an application for leave be heard by this Court pursuant to s 470 of the MGA .

The Consent Order was approved by the Applicant’s counsel. [ 21 ] There was no provision in the Consent Order that a judicial review be heard at the same proceeding. [ 22 ] It was determined that the Applicant must first exhaust its statutory appeal process provided by s 470 of the MGA . To determine whether there is a question of fact or mixed fact and law, the alternative remedy of judicial review available can be determined subsequently. [ 23 ] It is only in a case where a statutory appeal process does not offer a quick remedy or extraordinary circumstances exist that a court may engage in judicial review.

That is an issue for another day when the entire record is before the court before a court can elect to engage in judicial review if it deems such appropriate. [ 24 ] In para 19 of the case Associated Developers Ltd v Edmonton (City) , [2011] AJ 1033 at paras 17 – 19 , Justice Ross provides that: Judicial review should not be heard until a court determines whether the issues raised by the applicant are questions of law or jurisdiction subject to appeal or questions of fact or mixed fact and law subject to judicial review. [ 25 ] I am satisfied in this case that only a partial record, namely the decision of the CARB, has been produced in this leave application Accordingly it would not be appropriate for this court to judicially review the decision of the CARB.

Particularly in the circumstance where it is provided in s 470(5) of the MGA that for matters of question of fact or mixed fact and law, leave to appeal is not available. Analysis [ 26 ] I am satisfied that the reasons given by the CARB in reviewing the process the City took in setting the assessment for taxation purposes of the Applicant on the vacant land basis are certainly sufficient for this court to allow it to understand the rationale for the impugned decision. [ 27 ] The Applicant submits that the City should have used an income approach rather than a vacant land approach to determine valuation.

I find that adequate reasons were given as to why the CARB confirmed the vacant land market value as the valuation standard, whether it be for a parcel of land, for improvements or for a parcel of land and improvements.

The City determined that the income approach would not reflect the Applicant’s property market value as they found that employing the income approach indicates a value lower than the bare land value for the Applicant’s property. [ 28 ] As set out in the MGA and its regulations, the CARB has the expertise to examine, in each case, whether the valuation approach and calculation used by the City arrives at a fair and equitable market value assessment for the property.

The decision in this case clearly engages an analysis of a question of mixed fact and law for determination. [ 29 ] As cited in para 7 of the City’s brief, it is common for the CARB to review different approaches to valuation and decide, amongst them, which one best reflects market value for a particular property. At some point in the lifespan of an income earning property, especially where land values are increasing, there may come a point where the land value approach is more reflective of market value than the income potential of the property.

Whether that point has been reached in any given year is a question of fact, not law. That fact was the central issue in the decision made by the City of Calgary in this case to set the assessment. That assessment was later confirmed by the CARB. [ 30 ] In this case, the City assessed the Applicant’s taxes in the amount of $21,040,000.00 based on a land value approach. The applicant filed a complaint and the CARB engaged in a hearing over two days on June 22 and 23, 2015. Following the hearing, the CARB issued its decision confirming the assessment.

In the hearing, the CARB identified the two issues to be addressed: (

i) whether the assessment exceeded market value of the property and (ii) whether the assessment was not equitable with that of other similar properties. [ 31 ] Secondly, the Applicant argued before the CARB that the assessment was inequitable on the basis of the comparisons with other downtown Calgary hotel properties and argued that equity required that the same valuation approach be used to value the Ramada as was used to determine the value of the other downtown hotel properties. [ 32 ] The City’s assessment for the Applicant’s 2015 taxes was based on a land value approach, calculated based on sales.

The City argued at the CARB hearing that the use of land value instead of income value was based on the reality that the Applicant’s modest

income stream could not match the increasing land values in downtown Calgary in that assessment year. [ 33 ] The City provided evidence to the CARB that both the income approach and the land value approach were initially calculated for the taxation year in this case (as it was with all downtown hotels). The land value was chosen to base the 2015 assessment on as it was the higher value.

The City explained its reason for using the land value approach was based on the common proposition that the market value of an improved property would never be less than the base value of the parcel as though vacant, excluding demolition cost. This is because the definition of market value under the MGA requires examining what a willing buyer would pay for a property.

The City submitted a willing buyer is not limited to the property’s current use. [ 34 ] In its decision, the CARB confirmed the 2015 assessment of the property by the City and held that the applicant had failed to lead sufficient evidence to establish that it warranted a reduction. The CARB rejected the Applicant’s argument that s 289(1) of the MGA provided for a mandated valuation approach predicated on the income approach, especially when the estimate suggests a lower market value than that of vacant market land alone.

The assessor did in fact give consideration to the characteristics and physical condition of the Applicant’s property and determined that the characteristics and physical condition were such that the Applicant was not capable of generating a capitalized income stream sufficient to match the higher land value.

The CARB also compared the per room assessment value with other hotels and found that the Applicant’s property was equitably assessed. [ 35 ] It is obvious that the Applicant’s true concern and focus deals with the CARB’s actions in confirming the City’s findings of fact on which the City then based its analysis and decision. The Applicant still questions whether the valuation approach chosen by the City led to an assessment that exceeded the market value of the property or was inequitable. The CARB confirmed the City’s valuation analysis and decision.

It is within the assessor’s decision to use whatever methodology it thought best suited to the circumstances with which it was dealing.

This is a question of mixed fact and law: Canada Safeway Ltd v The City of Calgary , 2015 ABQB 2000 para 83 . [ 36 ] Accordingly, the question of law identified by the Applicant as to whether the MGA requires all properties with improvements be assessed using only the income approach has no reasonable chance of success. [ 37 ] Clearly the provisions of the MGA give the CARB discretion in determining which valuation methodology to employ to determine the market value of the property. [ 38 ] The issue of valuation approach for market value falls squarely within the CARB’s area of expertise.

Moreover, the issues raised by the Applicant are not central to the legal system as a whole or even the taxation system as a whole. [ 39 ] The Applicant stressed that in order for a property to be properly assessed, the assessor must respect and take into account, in accordance with s 289(1) of the MGA : a. The characteristics and physical condition of the property on December 31 st at the year prior to the year in which the taxes imposed under

part 10 in respect of the property, and b. The valuation and other standards set out in the regulations for that property. [ 40 ] The Appellant’s position that the City cannot simply choose to ignore the fact there is both a parcel of land and improvements contained on its property when assessing for taxation purposes. They suggest that in accordance with the provisions of MRAT that s 6(1) is the proper

section that the City and the CARB should have been referring to on page 3 of its decision dated July 17, 2015, rather than referring to s 4(1) to properly value the Applicant’s land. I agree that the CARB should properly have quoted s 6(1) instead of s 4(1) in its decision. However, I find that the CARB did not fall into error as the valuation standard for both sections 4(1) and 6(1) is identical, namely market value. [ 41 ] The Applicant requests this court to provide judicial guidance to the CARB on the application of the equity test.

The basis for this request is that they submit their property was the only downtown hotel property that was valued in 2015 by the City using the vacant land value approach rather than the income approach. The valuation approach used for all the downtown hotels assessed by the City of Calgary for 2015 was the income approach. The test is well known to the CARB as it applies it frequently. [ 42 ] I am satisfied that the assessor gave consideration to the characteristics and physical conditions of the Applicant’s property to determine market value. [ 43 ] “Market value” is a defined term in the MGA in s 1(n).

It is defined as follows: The amount that a property, as defined in section 284(1)(r), might be expected to realize if it is sold on the open market by a willing seller to a willing buyer. [ 44 ] “Property” is defined in section 284(1)(

r) of the MGA as follows: A parcel of land, an improvement, or a parcel of land and the improvements to it. [ 45 ] As confirmed by the definition of property, it includes vacant land as well as a parcel of land and the improvements to it. [ 46 ] There is not a sole methodology that is specified by the MGA for the City to use to determine valuation. There are three, namely: 1. The income approach; 2. The cost approach; and 3. The sales comparison approach.

[ 47 ] It was determined by the CARB that the assessor did in fact give consideration to the characteristics and physical conditions of the Applicant’s property as of December 31 st , 2014. They ultimately determined that the characteristics and physical condition were such that the property was incapable of generating a capitalized income stream sufficient to match the land value which was higher. The CARB found that evidence presented by the City demonstrated that its assessed value was correct, fair and equitable. [ 48 ] The assessment process employed by the City and confirmed by the CARB decision was based on the City applying the correct

interpretation of the law to the facts presented in assessing the Applicant’s property. The City had the discretion to determine the market value of the land by taking into account findings by applying different valuation approach methodologies and comparable assessments to arrive at a fair and equitable market value assessment for the property. The assessment process envisions the appraiser having to apply the law to the facts they have determined, to then determine an assessment based on the three valuation methodologies.

They then determine the value they find to support a correct, fair and equitable assessment. [ 49 ] The case of New Brunswick (Board of Management) v Dunsmuir , 2008 SCC 9 (paras 53 and 54 ), confirms that as a specialized tribunal, a board’s decision is given deference for factual findings, exercise of discretion, questions of policy, and questions of law that call upon its expertise, including the

interpretation of its home statute. I am satisfied that deference is owed to the CARB in these circumstances as they had to determine the factual matrix to support their analysis to then determine the property valuation in order to set the 2015 assessment. I find that such a process is a mixed fact and law exercise. [ 50 ] Accordingly, this application for leave to appeal is dismissed. The Applicant has failed the test for permission to appeal based on s 470(1) of the MGA in that it does not involve a question of law or jurisdiction, but rather is a case of mixed law and fact.

Heard on the 21 st day of April, 2016. Dated at the City of Calgary, Alberta this 11 th day of July, 2016. S.L. Hunt McDonald J.C.Q.B.A. Appearances: Susan Trylinski Davis Trylinski for the Applicant Andrea Cole for the City of Calgary Michael Janke, Janke Law Office for the CARB