SAMA Responds To Our Questions
MJ Independent sent over some questions to SAMA and the response is below.
By Robert Thomas
Just how long it will take the Saskatchewan Assessment Management Agency (SAMA) to respond to Monday's motion by Council to conduct a preliminary investigation into alleged problems with commercial property assessments remains a mystery.
In response to questions by MJ Independent to SAMA about the timeline and process we were provided with a recently prepared fact sheet dealing with concerns raised in Moose Jaw.
The two page information fact sheet - the full text and screenshots are provided below - stresses that SAMA conducts assessments in accordance with applicable privincial legislation.
The fact sheet also explains SAMA's quality controls and when and how they are used.
SAMA's fact sheet also explains why there are multiple - 17 - categories and subcategories for commercial propery taxes.
“In Moose Jaw, the local commercial sales leading up to the base date indicated different markets for different types of commercial property. The sales did not support a single capitalization rate (cap rate) model,” SAMA's fact sheet states.
“Cap rates reflect the sales that have occurred in the local market and are used to determine property assessments. The cap rates that are applied to different property types reflect the market for those property types,” the document additionally states.
The question has been asked by members of Council why other larger centres in the province (Regina) - who do not use SAMA's services
The document additionally states SAMA is unconcerned by the type of business when setting the commercial tax categories.
SAMA's multiple Cap Rates model can be mitigated by a municipal council through the use of tax tools provided by the Province.
“One tax tool available only for cities was designed to phase in large assessment changes and mitigate large taxation shifts,” SAMA's fact sheet states.
According to the Province's web-site “Tax tools are a mechanism allowing council to redistribute the cost of public services within its tax base. Tax tools may only be applied to municipal property taxes. Municipalities have three tax tools that can be used individually or in combinations: mill rate factors, minimum tax and base tax.”
Why The City has to request a preliminary investigation and then perhaps triggering a Secondary Audit is because the legislation does not allow them to do so.
Only SAMA's board can.
“There is no process for a municipality to request a secondary audit directly. If concerns are brought forward to the Managing Director of Quality Assurance, or the SAMA Board, and those concerns warrant a further investigation, the SAMA Board at the request of the Managing Director of Quality Assurance would instigate a preliminary investigation that would determine if a secondary audit is required,” the fact sheet states.
In order for our readers to better understand SAMA's position we have posted the entire text (for easier reading) and screenshots of thevtwo page information sheet below.
January 11, 2023 - Assessments in Moose Jaw
• Assessments in Saskatchewan are retrospective. In other words, the date of valuation for a property is in the past.
For 2021 to 2024, property values are reflective of the market conditions as of a base date of January 1st, 2019.
• In using mass appraisal, property assessment service providers are concerned with valuing the property itself, not the business. SAMA is trying to capture what is happening in the market as of the base date.
• The property income (rental) approach used for these types of commercial properties provides the most fair, reliable, and accurate assessed values for commercial properties and rental apartments in areas where there are active lease and rental markets.
• The income approach looks at a property’s annual rental income and compares it to the selling price. The technical term for this comparison is called a capitalization rate (or cap rate). The cap rate is the relationship between a property’s rental income and the overall property value.
• Similar properties are grouped together for assessment purposes. The individual capitalization rates that come from the sales are used to establish a capitalization rate that is applied to all properties in that grouping. Capitalization rates are solely determined by the analysis of market data.
• In Moose Jaw, the local commercial sales In Moose Jaw, the local commercial sales leading up to the base date indicated different markets for different types of commercial property. The sales did not support a single capitalization rate (cap rate) model. Cap rates reflect the sales that have occurred in the local market and are used to determine property assessments. The cap rates that are applied to different property types reflect the market for those property types. up to the base date indicated different markets for different types of commercial property. The sales did not support a single capitalization rate (cap rate) model. Cap rates reflect the sales that have occurred in the local market and are used to determine property assessments. The cap rates that are applied to different property types reflect the market for those property types.
• SAMA successfully supported our assessment valuation models in Moose Jaw at the Saskatchewan Municipal Board in 2021 and with the Moose Jaw Board of Revision in 2022.
• SAMA has no authority when it comes to taxation or the implementation of mill rates. This is solely the responsibility of the municipality and allows municipalities in Saskatchewan to maintain fiscal autonomy by deciding on their own budgets and mill rates.
• When the province introduced the revaluation cycle in 1997, they recognized that there could be cycle-to-cycle shifts. To mitigate this, tax tools for municipalities were introduced. One tax tool available only for cities was designed to phase in large assessment changes and mitigate large taxation shifts.
• SAMA has no authority to organize, or advise, local Boards of Revision (BoR) or the Saskatchewan Municipal Board (SMB). SAMA’s main concern when it comes to appeals is to have an assessment system that is stable and supportable. The appeal process is designed to catch errors in assessment, and in this capacity, is an effective way to address issues of assessment.
SAMA’s Quality Assurance Division and the Audit Process
• SAMA's independent Quality Assurance Division is responsible for the assessment roll confirmation process, undertaking assessment audits (annual confirmation and primary audits on all municipalities) to ensure that municipalities’ assessments are prepared and administered in accordance with the requirements set out in applicable legislation.
• Quality Assurance Division is independent from the rest of the Agency. It has no involvement in property assessment valuation or setting of policy respecting property assessment valuation. Quality Assurance is accountable directly to the SAMA Board of Directors through the Managing Director of Quality Assurance.
• There are three types of audits Quality Assurance Division can carry out, the Confirmation, Primary and Secondary Audits.
The Confirmation and Primary Audits are done yearly, while the Secondary Audit is an issue-based audit performed as needed.
The Confirmation Audit
This audit reviews for accuracy and statutory compliance of a municipality’s assessment roll. The confirmation audit is initiated once a municipality submits an assessment return to Quality Assurance.
The Primary Audit
This audit reviews the compliance of appraisal level for improved residential and commercial properties that have sold.
Legislation requires these two property types to be valued using the “market valuation standard.”
The appraisal level audit reviews the median ratio of assessment to adjusted sale price for the two property types at the municipal level to ensure there is compliance with the statutory median assessment to sale ratio range of 0.98 to 1.02.
When the median assessment to sale ratio is 1.00, that indicates that on average, these property types are assessed at the same level as the sale prices.
Both the confirmation and primary audits must successfully pass in order for Quality Assurance to recommend the municipality’s assessment roll for confirmation by the SAMA Board of Directors.
The Secondary Audit
This audit is a detailed or comprehensive audit concerning matters of property assessment statutory compliance. Secondary audits would typically focus on matters of egregious statutory non-compliance.
Issues that are likely to trigger a secondary audit are systematic issues of accuracy and compliance.
Compliance meaning that assessments are carried out in accordance with legislation, regulations, the assessment manual, and other materials published by SAMA. Accuracy refers to defined standards in legislation.
If there are errors on an individual assessment, or an owner disagrees with the value placed on their property, the avenue to handle that is the provincially established appeal process.
There is no process for a municipality to request a secondary audit directly. If concerns are brought forward to the Managing Director of Quality Assurance, or the SAMA Board, and those concerns warrant a further investigation, the SAMA Board at the request of the Managing Director of Quality Assurance would instigate a preliminary investigation that would determine if a secondary audit is required.
• Quality Assurance maintains and publishes information related to property assessment audits and assessment roll confirmations on the SAMA website (www.sama.sk.ca/municipality-government-services/roll-confirmations).
One issue brought up at Council and from the group fighting for a Secondary Audit, Property Assessment Watchdogs, has been the issue of bias and whether a SAMA review of SAMA will be fair.
We asked SAMA questions about what could - depending on an individual's personal interpretation - be construed as bias from their employees in some of their online activities.
Our questions concerned an on-line posting and series of likes by a SAMA Quality Control Manager regarding the issues and concerns raised about potential bias in any review.
In response to our questions about the appropriateness of a SAMA manager commenting the email response was the employee was not part of the independent preliminary investigation.
“…the SAMA employee you referenced in your email, has no connection with SAMA’s independent Quality Assurance Division that is responsible for Secondary Audits. He is a quality control manager in a separate division that monitors quality controls.”