Methods of Assessment
The methodology for calculating assessed value differs according to different types of properties. Listed below are the different ways this methodology is adapted.
There are two valuation standards set out in provincial legislation:
- Market Valuation Standard; and
- Regulated Property Assessment Valuation Standard.
Residential and commercial properties fall under the Market Valuation Standard. Provincial legislation deems these properties to have a “non-regulated property assessment” that is achieved when the assessed value of property:
- is prepared using mass appraisal;
- is an estimate of the market value of the estate in fee simple in the property;
- reflects typical market conditions for similar properties; and
- meets quality assurance standards established by order of the agency.
Agricultural land, heavy industrial property, resource production equipment, railway roadway and pipelines fall under the Regulated Property Assessment Valuation Standard. Legislation deems these properties to have a “regulated property assessment”.
Regulated property assessments are determined with the application of SAMA’s regulated Saskatchewan Assessment Manual. The 2015 Base Year Manual is used for the assessment years 2017-20. The 2019 Base Year Manual will be used for the assessment years 2021-24.
When preparing an assessment for a property under either valuation standard, provincial legislation provides additional direction to the municipality’s assessor and the assessment appraiser. Key notable points include:
- The municipality is required to prepare a new assessment roll every year.
- The assessment base date needs to be considered.
- Land and improvements can be assessed together or separately.
- Property attributes (facts, conditions and circumstances) considered are as of January 1 of each year.
- The dominant and controlling factor in an assessment is equity.
SPECIAL NOTE: These descriptions are a short-form overview. The full process involves other factors, such as tax policy application, exemptions and special situations. The complete process for the valuation of regulated properties is provided for in the Saskatchewan Assessment Manual. For full information of valuation procedures for all property groups, contact SAMA directly.
Assessment methods by major property group:
- Residential, Resort, and Commercial Property
Residential and commercial property are subject to the market valuation standard set out in provincial legislation The market valuation standard definition considers:
- Mass appraisal: the process of preparing assessments for a group of properties as of the base date using standard appraisal methods, employing common data and allowing for statistical testing.
- All rights that accrue to the real property (estate in fee simple).
- Typical market conditions for similar property.
- Quality assurance standards set by SAMA.
The market valuation standard, as it applies to residential and resort property, provides flexibility in determining the assessed value of property by allowing the use of any of three currently accepted approaches to value employed in the industry: the sales comparison approach, the cost approach and the property income (rental) approach. The sales comparison approach will be used for areas and property types with active sales markets. If there are few comparable sales the cost approach will be used. The income approach is not used for residential and resort property because rental income is not the main driver in determining residential property values. See information sheets #2 Residential Property and #4 Resort Property.
The market valuation standard, as it applies to commercial property, provides flexibility in determining the assessed value of property by allowing the use of any of three accepted approaches to value employed in the industry: the property income (rental) approach, the cost approach and the sales comparison approach. The income approach will be used for properties that have active lease or rental markets. If there are few comparable sales the cost approach will be used. The sales comparison approach has limited application for commercial property as there are generally not enough sales to support its use. See information sheet #3 Commercial Property.
- Agricultural Land
Agricultural land is subject to the regulated property assessment valuation standard.
Potential productivity of the land is the primary basis of comparison for the valuation of arable (cultivated) agricultural land. The productive capacity of arable land is determined using a soil classification system that has been correlated with long-term wheat yields. The actual yields are not of primary importance; it is the comparison of yields between different soil quality types that is important for a productivity model. In addition, there are economic adjustments for cost of production factors, and finally a provincial factor (PF), which reflects the provincial average sale price for agricultural use land. See information sheet #6 Agricultural Land (Arable).
The general valuation formula is as follows:
The productive capacity of pasture land is determined based on its potential carrying capacity, which is measured in terms of animal unit months (AUM), where an animal unit is a 1,000 pound cow with or without calf. The methodology for rating the potential carrying capacity of a pasture was developed by the Saskatchewan Research Council, and takes into consideration:
- range site characteristics
- amount of native versus seeded grass species, and
- amount of tree cover.
Once the carrying capacity is estimated, a land rating (productivity index) is assigned. In addition there is also a pasture specific provincial factor (PF), which reflects the provincial average sale price for pasture land. See information sheet #7 Agricultural Land (Pasture).
- Heavy Industrial Property
Heavy industrial property is subject to the regulated property assessment valuation standard. The Saskatchewan Assessment Manual defines heavy industrial property to include properties used for:
- Extracting, producing, processing or refining a mineral resource.
- Producing, upgrading, refining or transmitting petroleum.
- Producing ethanol and has a design capacity greater than 25 million litres per year.
- Manufacturing of plywood, particleboard, wafer board, fertilizer, malt, paper, pulp, steel or steel pipe
- Generating power.
- Manufacturing lumber and other wood products from raw logs in a sawmill and have a design capacity greater than 15 million fbm per year based on 480 shifts a year of 8 hours each shift.
The assessment of land associated with a heavy industrial property is valued using a schedule of rates set out in the Saskatchewan Assessment Manual.
The assessment for heavy industrial improvements is based upon the cost approach to value. However, there is no recognition of economic obsolescence. This valuation method is a generally accepted practice of the mass appraisal industry. See information sheet #8 Heavy Industrial Property.
- Oil and Gas, and Mine Resource Production Equipment
Oil and gas, and mine resource production equipment are subject to the regulated property assessment valuation standard. Provincial legislation and Saskatchewan Assessment Manual define what is an assessable resource production equipment. The assessment of resource production equipment is based upon the cost approach to value. See information sheet #9 Oil and Gas Equipment.
- Railway Roadway
Railway roadway is subject to the regulated property assessment valuation standard. Provincial legislation and Saskatchewan Assessment Manual define what is an assessable railway roadway. The Manual contains a schedule of rates for assessing railway roadway based upon the “net ton miles” of traffic the railway subdivision has experienced over a three year period. Rates are developed using the cost approach to value. Mainline railways typically fall into the “Class 1” category while grain dependent branch lines typically fall into the “Class 5” category.
Pipelines are subject to the regulated property assessment valuation standard. Provincial legislation and Saskatchewan Assessment Manual define what is an assessable pipeline. The Manual contains a schedule of rates for assessing pipeline based upon the pipeline diameter and type of product carried (oil vs gas). Rates are developed using the cost approach to value with a lifetime physical depreciation rate of 50% applied. An adjustment is provided when there is more than one pipeline with a specific pipeline right of way. An adjustment is provided for when product volumes are below a specified amount using a three year averaging period.