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of assessment in Ontario 


Published by 

Ministry Assessment Assessment 

of Division Standards 

Revenue Branch 


Arthur K. Meen 

D. A. Crosbie 
Deputy Minister 


H. C. Fletcher 
Ottawa-Carleton Regional Office 
1729 Bank Street 
Ottawa, Ontario 613-731-2620 

J. A. Smith 
Eastern Ontario Assessment Area 
Hastings-Prince Edward Assessment Office 

80 Division Street 
Box 520 

Trenton, Ontario 613-392-2501 

W. S.Jackson 
Central Ontario Assessment Area 
Central Ontario Area Office 
2450 Victoria Park Avenue 
Scarborough, Ontario 416-491-0836 

M. Lumsden 
Central Ontario Assessment Area 
Barrie Regional Office 
109 Ferris Lane 
Barrie, Ontario 705-728-2270 


Jeanne MacDonald 

Associate Eds 

Barbara Pleva 
William S. Wu 

L. Stanshall 

Brant-Flaldimand-Norfolk Regional Office 

63 Charing Cross 
Box 1176 

Brantford, Ontario 519-759-6310 

W. C. Gamier 
Western Ontario Assessment Area 
London Office 
Treasure Island Shopping Center 

R.R. 4 

London, Ontario 519-681-0050 


P. G. Gillis 
A. N. MacKay 
W. J. Lettner 

C. A. Wilson 
Northern Ontario Assessment Area 
Northern Ontario Area Office 
1349 Lasalle Boulevard 
Sudbury, Ontario 705-560-1450 

All opinions expressed in Aspects are those 
of the authors. These opinions do not necessarily 
reflect or represent those of the Ministry 

Ontario. Ministry of Revenue. 7 

May 1975 1975 

htkx c.1 BAS 



Cl Q 

An apology would seem to be the first 
order of business, because the article we 
promised you on revisions to The Land 
Speculation Tax Act is not to be found in 
this issue. This is due partly to space con¬ 
siderations and mainly to confusion among 
the editorial staff regarding the subject 
matter itself. We are now making a valiant 
attempt to straighten ourselves out, and 
hopefully we will be able to write a lucid 
article for Aspects #18. 

Despite our own confusion, we have been 
able to collect a number of excellent articles 
by various authors for this issue of Aspects. 
Among the highlights are an introduction to 
the subject of quality control and its role in 
the assessment function; Part II of an article 
on the effects of zoning by-laws on market 
value; and a discussion of the rationale for 
the decision to assess at market value. 

We have several out-of-province contribu¬ 
tions as well, including a summary of the 
recent proposals for provincial takeover of 
assessment in Nova Scotia, and a general 
overview of the introduction of computer 
techniques into assessment in San Mateo 
County, California. The latter article will be 
followed by a more detailed analysis in 
Aspects #18 of that County's computeriza¬ 
tion of multi-residential properties. We are 
also reprinting a speech presented last 
summer in Ottawa by Mr. Ir. J.L.G. Henssen, 
on the topic of cadastres and land registry 

As promised, we have again submitted the 
queries received from assessors to Mr. P. G. 
Gillis, who responds to them in our regular 
Question and Answer column. We would like 
to thank those assessors who have sent 
questions to us, and to urge anyone with a 
concern to let us know. 


no. 1 7 , May, 1975 

• Assessment Practice 

Everything you ever wanted to .know about 
quality control 

P. Smith. 2 

® An Overview of Data Management in 

Property Assessment 

F. L. Jung. 11 

® Appraisal Study 

Socio-economic impacts of zoning by-laws 

W. C. Muger. 7 

• Comparative Assessment 

Proposals for assessment reform in Nova Scotia 

J. R. Cameron . . 23 

The background to assessment reform 

J. S. Purdon. 20 

® Special Topic 

CADASTRES and their relationship with real 
property assessment 

I R.J.L.G. Henssen . 28 

• Case Law 

Liability to assessment — tenant-occupied crown 

lands. 17 

• Question and Answer Column 

Mr. P. G. Gillis speaks on licensing, relationship 

with IMA and the Valuation File . . . . . 26 

® Communications 

Ontario shares its Valuation File. 18 

Advisory Committee. ISC 

Regional Delegates. 10 

• Cover Design/Photo w. s. wu 

Tech info: upper: Leicaflex SL 
400/6.8 Telyt-R, TX film rated 
at 3,200 ASA, 1/2000 sec. F8, in 
Diafine. lower: Leica M4 135/4.5 
Hektor, PX film rated at 125 ASA, 
in-camera montage. 



JUL 1 9 2013 ' 


Ministry of Fiaanc® 

aspects, no. 17 (May, 1975) 

page 1 

Everything you ever wanted to know about 


(But were afraid to ask!) 

Quality Control! A name designed to strike terror into 
the hearts of production managers. The scourge of machine 
shops, assembly plants, and assessment offices around the 

Perhaps a slight exaggeration has been permitted to enter 
here, but this is a common impression of quality control 
among the misinformed. It is, nevertheless, a mistaken 
impression — one nurtured by countless organizations with 
groups in their ranks masquerading under the title "Quality 
Control Department." This paper will outline some of the 
basic principles, history, and organization of quality control 
in general, and then will discuss the role of quality control 
in the assessment function in Ontario. 

But before launching into the specifics of this frequently 
misunderstood and oft-maligned discipline, let us take the 
time to clear up some misconceptions. 

Quality Control is not: a sophisticated name for mere 
inspection, in either a manufacturing or a service environ¬ 

It is not: one individual department or section upon 
which falls complete responsibility for the quality of goods 
or services produced. 1 

It is not: a body of statistics or data fed into a 
computer, followed by frantic efforts to correlate the out¬ 
put to whatever is being produced. 

And finally, it is not: a spy network, viz CIA, KGB, 
SMERSH, etc., instituted by management to patrol an 
organization or its employees. 

What is it then? 

The meaning of quality 

Lord Kings Norton said, "Quality is a jewel with many 
facets. There is a quality in the sense of a high degree of 
freedom from error. There is a quality in the sense of 
having ingredients of guaranteed excellence. 

"Products must look good and be good. 

"Management needs the tool we call Quality Control to 
achieve the second aim." 2 

What a simple description! Yet, that is precisely what 
quality control is: a management tool to assist in meeting 
the company's quality objectives. There are many other 
definitions, some quite a bit lengthier and more technical 
than Norton's, but the same basic principles come through: 
a management tool — a philosophy — an attitude of mind. 

In more practical terms, quality control is that part of a 
production operation that is concerned with ensuring that 
the finished product achieves certain established standards 
of quality within the context of meeting the organization's 
total production objectives. 

An attitude of mind 

It is the philosophical aspect which is perhaps the most 
important in the long run, for a quality control program can 
never be totally effective or successful unless every individ¬ 
ual within an organization accepts his share of the responsi¬ 
bility for the quality of a product or service. Ultimately, 
the goal of Quality must be pursued from beginning to end 
of the production cycle; in the long run, it is self-defeating 
— and expensive — merely to "catch" defective products 
once they are finished. To be properly understood, then, 
quality control must be seen as an integral part of an 
organization's overall operation. 

Therefore, familiar quality control techniques in 
industry and government should be geared specifically 
toward creating an attitude of mind conducive to meeting 
the quality objectives of the organization. A primary goal is 
to encourage and foster participation among employees at 
all levels in the pursuit of the set quality standards. A major 
responsibility of the actual Quality Control Department is 
to provide "a channel of communication for product- 
quality information amongst all concerned." 3 The Quality 
Control Department of an organization is fundamentally a 
vehicle for organizing, maintaining, and publicizing the 
quality program. But the responsibility for achieving 
quality belongs to every employee. 

page 2 

aspects, no. 17 (May, 1975) 

Quality Control Section 
Field Services Branch 

From medieval guilds to mass production 

Quality Control has undoubtedly been with us, in one 
form or another, for a lot longer than we might imagine. In 
its broadest sense, quality control can be traced back at 
least to the Middle Ages. The control of quality was a 
primary concern of the medieval craft guilds. Rigid 
standards were established, and every item was closely 
examined by the master craftsman to insure that there were 
no imperfections. Indeed, a guild apprentice could only be¬ 
come a craftsman if and when he reached a certain level of 
quality. Individual success depended upon achievement of 
specific quality standards, and thus quality was a funda¬ 
mental concern for each individual. The approach was 
rudimentary by modern standards, but even so, we can see 
an attempt to instill in every employee a sense of responsi¬ 
bility for product quality — and this is still a primary goal 
of the Quality Control Department today! 

Standardization and inspection 

The tradition of individual responsibility for quality of 
workmanship has been carried on by skilled artisans down 
to the present. But the Industrial Revolution profoundly 
changed the very nature of production, and this meant 
changes in the concept of quality control as well. Mass 
production — perhaps the most important legacy of the 
Industrial Revolution — forced standardization of both 
products and processes. When Eli Whitney contracted to 
supply the United States Army with 10,000 muskets 
around the year 1800, he undoubtedly attempted to 
standardize production in order to meet his deadline. And 
standardization, of course, implies quality control. 

Mass production techniques accelerated and forced a 
continuing effort toward more concretely defined quality 
standards. Tremendous changes occurred in industrial 
structure and organization. Yet, for a long time, quality 
control continued to consist of inspecting each finished 

The birth of modern quality control 

Normal, orderly industrial progress was disrupted by the 
upheavals of World War I, and changes in quality control 
techniques were directed toward fulfilling short-term 
military needs. The real advent of modern statistical quality 
control was hastened by the armament requirements of 
World War II. Production volumes were so tremendous for 
the war effort that the long-tried (but not always true!) 
method of 100% inspection at the end of the line was im¬ 
practical, if not impossible. The statisticians therefore got 
to work, and sampling procedures were developed. 

When normal industrial production resumed after the 
war, the new statistical techniques of quality control were 
retained and improved. Process control soon evolved — that 
is, an examination of the various production operations as 
well as of the actual product. This development arose from 
the growing realization that correct procedures were 
crucial to final product quality — particularly in a complex 
mass production environment. Prevention of initial produc¬ 
tion errors would result in less scrap material and fewer 
rejects at the end. it was at this point that the importance 
of involving every employee in the quality effort became 

Over the past twenty years or so, both the statistical and 
psychological aspects of quality control have been refined 
and improved. More and more production and service 
organizations have instituted quality control programs. The 
list is exhaustive — automobiles, pharmaceuticals, food 
processing, hotels, airlines, schools, banks, and property 
assessment departments, to name just a few. Today, quality 
control is a highly sophisticated management tool, and a 
vital part of any modern organization. 


In many organizations, the quality control function is 
divided into two groups. Quality Engineering and Quality 

Quality Engineering 

Quality Engineering is the group which works with 
management during the initial phases of developing a 
quality control program, helping to set the standards which 
are to be achieved. Quality Engineering has a responsibility 
to liaise with the design, methods and operations research 
groups, assisting to establish standards, define acceptance 
limits, and test product reliability. 

The role of Quality Engineering in defining and setting 
realistic standards is perhaps one of the most critical parts 
of the quality control operation. If there is a failure to 
communicate at this stage, subsequent quality control 
procedures will be ineffective. Proper and achievable 
quality standards must be defined and clarified from the 
beginning. We may speak glibly about acceptance sampling 
and other inspection procedures, but these techniques can 
never compensate for the often catastrophic effects of ill- 
defined and unfeasible standards. 

The job of creating the environment within which a 
Quality Control philosophy will flourish, which could merit 

aspects, no. 17 (May, 1975) 

page 3 


a group or section all to itself, is also generally the responsi¬ 
bility of the Quality Engineering group. 

Establishing a quality control program in industry 

An example of an actual experience in industry will 
perhaps better illustrate the role of Quality Engineering. 
This writer had the experience several years ago of being 
involved in the task of establishing a Quality Control 
Department in the Canadian branch of a large American 
corporation. This company, an established manufacturer of 
forestry equipment, was acquired by the American firm but 
retained its Canadian management team. It had not been 
exposed to the philosophy or principles of Quality Control 
before. The only previous means of assuring quality had 
been shop floor inspection. Design and quality standards 
were loose, to say the least. 

Management's objective in setting up a Quality Control 
Department was to improve quality along with the 
modernization and increase in production made necessary 
in the face of growing competition. Creating an attitude of 
"quality-mindedness" throughout the plant was a major 

A Quality Engineering group was established and began 
to apply the familiar techniques of regular, plant-wide 
quality progress reports, quality-operator-of-the-month 
awards, and quality bulletin boards. A systematic design 
review operation was set up to examine specifications and 
standards. Production management changed the assembly 
line method from the standard multi-station operation 
process, i.e. one specific set of operations performed by 
assemblers at each of several line assembly points, to a total 
assembly technique involving several gangs who build the 
product from start to finish. By adopting this method, 
management hoped to develop pride in workmanship and 
to improve employee morale. After coping with certain 
problems and frustrations, the program eventually led to a 
successful production and quality performance. 

Zero defects 

In recent years, new approaches to various aspects of 
quality control have been tried, with mixed results. One of 
the more interesting psychological steps toward inducing 
"quality-mindedness" in an organization was the introduc¬ 
tion of the "zero defects" concept in the early 1960's. 
Striving for perfection is at best a frustrating task, and 
aiming for absolutely no defects at all in a manufacturing 
environment is practically impossible. But the objective of 
such a program was to motivate the employees to try to 
"do it right the first time," as one of the slogans put it. 

The results were generally unimpressive, and "zero 
defects" all but passed away toward the close of the 1960's. 
The writer recently contacted two organizations that were 
known to have tried the system. It was found that Com¬ 
pany A, a medium-sized manufacturer, still operates a "zero 
defects" program, but in "a low-key way," to quote the 
quality control manager. The system had proven successful 
enough to justify its continuation by the resultant low 
spoilage (scrap and rework) costs as a percentage of sales. 

Company B, on the other hand, has discontinued its 

"zero defects" program. This is a huge corporation in the 
communications field, and according to the quality control 
manager, massive changes were made in the quality control 
program a year ago. It was decided that "zero defects" and 
other approaches were too ineffective to justify the costs. 
So these were eliminated, and today the quality control 
program is geared largely toward "vendor quality" — that 
is, ensuring that the products purchased from outside 
producers meet a specified acceptable quality level. 

These examples serve to illustrate that the task of 
Quality Control, to establish the environment for a success¬ 
ful quality program, is one requiring a great deal of stamina 
and commitment. 

Quality assurance 

The second group is Quality Assurance, which is respon¬ 
sible for conformance appraisal. It must answer the ques¬ 
tion: does the finished product meet the objective quality 

In the early years, shop floor inspection fulfilled the 
requirements of Quality Assurance. The big difference in 
inspection today from that of the 1930's is the advent of 
statistical methods. Control charts, acceptance sampling, 
and other advanced statistical techniques have provided 
inspection with a high degree of sophistication, making it 
more effective and useful to management. 

The emphasis today in Quality Assurance is on process 
evaluation and control, which was explained earlier. Once 
we know how a process is behaving, what it is capable of, 
and where the potential trouble spots lie, we are in a better 
position to deal with quality and production commitments. 

Control charts are another tool in the overall effort to 
control the production process in a manufacturing environ¬ 
ment. Establishing control charts at the different stages of a 
production operation serves two purposes. First, by measur¬ 
ing and plotting the variability which exists in every opera¬ 
tion, control measures can be implemented before errors 
are made, before unacceptable results are produced. 
Secondly, the machine operator usually learns to read the 
charts faster than anyone else and will take any action re¬ 
quired to correct a process, should it be necessary. It also 
provides him, the operator, with an involvement in the total 
quality objective. The operator is ultimately the key to 

Statistical sampling techniques have relieved Quality 
Assurance of the need to do 100% inspection. The laws of 
probability and statistics are utilized to cover a multitude 
of confidence and precision limits by which products may 
be accepted or rejected. 

Documentation and communication 

Of course, a very necessary part of any quality control 
program is the documentation and reporting required for 
analysis, for initiation of remedial action and, most 
important, for keeping management informed of progress 
toward their objectives. Much of the responsibility for pre¬ 
paring and transmitting information to management falls on 
the Quality Assurance group, since it collects and analyzes 
actual production data. However, it should be pointed out 
that Quality Engineering must also maintain an effective 

page 4 

aspects, no. 17 (May, 1975) 


communication network with both management and 
employees, so that the quality standards are properly 
defined and clearly understood. 

The speed and accuracy of this flow of information is 
vital to its effectiveness. “Information must be developed in 
systematic fashion if it is to merit a confidence level 
warranting immediate credence and use. Credibility is at the 
heart of communication, and the speed with which 
information is communicated determines its worth." 4 

In spite of a semi-frivolous comment at the beginning of 
this article, the computer can be indispensable in facilitat¬ 
ing this flow of information. Quality standards can never be 
ensured by the computer, of course. But because of its 
ability to produce data quickly, the computer can and does 
play a useful role in quality control operations. Com¬ 
plicated statistical computations, such as multiple regres¬ 
sion, frequency distribution, and analysis of variance are 
performed much faster by the computer than by the 
human. Delegating this sort of task to the computer not 
only speeds up the information flow — thus keeping the 
quality control effort up to date with existing conditions — 
but also frees the human resources for the other aspects of 
the program. 

Quality Audit 

Another function often incorporated with the Quality 
Assurance group, but also quite capable of standing as an 
independent unit, is Quality Audit. Its responsibility is to 
provide management with unbiased reports on quality 
performance within the organization. 

In a sense Quality Audit is the "police" operation of the 
Quality Control Department, and to be effective, the higher 
the level to which it reports, the better. To the Quality 
Auditor nothing is sacrosanct. His job is to check the in¬ 
spection procedures, the design standards, the receiving in¬ 
spection sampling plans, etc. In fact, anything throughout 
the organization to which quality control may apply is a 
possible target for the Quality Auditors. 

Unfortunately, management does not always utilize the 
Quality Audit function as effectively as it might in its 
efforts to meet quality objectives. 

The foregoing describes a typical organization for a 
quality control operation. It is by no means the only type. 
Even the name itself may be a misnomer. A. F. Cowan, in 
his book Quality Control for the Manager, proposes that a 
more appropriate title would be Quality Measurement, 
quality being the amount of imperfection in a product. 5 

But names are unimportant in the final context. What is 
important is the degree to which management is prepared 
to commit itself to the pursuit of quality. There are certain 
industries and services where management has little or no 
say in the matter. For example, in the food processing, 
pharmaceutical, and automobile industries, government 
regulations and consumer pressures dictate quality require¬ 

The cost of quality 

But in most instances, management does determine the 
quality standards. And in establishing those standards, 

several factors must be considered. First, there is the whole 
issue of reality. Quality is an important goal; and precisely 
because it is so important, care must be exercised to ensure 
that the quality level is realistic within the context of 
production commitments and organizational limitations. A 
quality standard is irrelevant and useless if it is unattainable. 

A second consideration, closely related to the first, is 
that of cost. Like everything else, quality has a price. And it 
follows that the cost of quality must vary according to the 
precision requirements in the quality standards. There can 
be too much just as well as too little quality. Consider the 
buildup of relative costs: 

Prevention costs include — Quality Engineering 
personnel; planning of the overall quality control program; 
design and reliability review; training of personnel. 

Appraisal costs include — Quality Assurance personnel; 
inspection; receiving inspection (inspection of the com¬ 
ponent materials that are purchased from outside by a 
manufacturing operation); audit costs. 

Failure costs include — scrap labour and material costs; 
rework labour costs; expenses incurred by field failures. 

The budget for quality is therefore a decision to be 
weighed carefully by management insofar as what it expects 
from its quality control program. 

What the management of an organization will un¬ 
doubtedly get from a properly established and efficiently 
administered quality control program is: improved product 
or service quality; a reduction in overall costs; and an im¬ 
provement in employee morale. 

Quality control and assessment 

Anyone who has managed to read this far must be 
wondering where and how assessment fits into the quality 
control picture. 

The Assessment Division is a manufacturing organization 
with a difference. The product? Over 2/4 million individual 
and/or collective assessments of real property spread across 
the Province of Ontario. The methods of production? Cost. 
Income. Comparative Sales. Negotiation. Each of these 
methods is subject to what we in the quality control field 
call "assignable causes." (An assignable cause is an occur¬ 
rence which falls outside a normal distribution pattern, the 
reason for which can usually be explained after investiga¬ 
tion and analysis.) 

The quality standards — market value and equity 

Quality control of assessment poses many unique 
problems. This is because the quality standards of the 
product are neither readily definable nor precisely measur¬ 
able. In simple terms, the standards are market value and 
equity. Market value has been defined in The Assessment 
Act; but what is the exact market value of a specific 
property? The volume of assessment appeals is convincing 
evidence that market value is hardly a cut-and-dried 
standard. Providing a fair and equitable tax base for local 
governments across the province is a plain enough goal, but 
how does one quantify the degree of fairness and equity? 

Nevertheless, the goals of market value and equity must 
be pursued because, like the automobile industry, the 

aspects, no. 17 (May, 1975) 

page 5 


Assessment Division is not entirely free to set its own 
quality standards. These are the requirements set out in 
legislation, and thus they are the quality standards. The 
approach of the Division's quality control section to these 
problems so far has been to specify limits of acceptability, 
albeit arbitrary ones, simply in order to provide us with a 
yardstick. For example, the current conversion of assess¬ 
ment data to a computerized Valuation File has neces¬ 
sitated certain quality control procedures as a means of 
assuring province-wide consistency and quality. An accept¬ 
able quality level (AQL) was selected by management, and 
a correlating sampling plan was drawn up and coordinated 
with the data conversion (coding) operation. 

Follow-up audits were then necessary to ensure that the 
correct procedures were being followed, and to give us an 
indication of the quality level relative to the set standard. 

Reassessed values are also being measured by the quality 
control section as to their "degree of imperfection." This is 
done by frequency distribution analysis of assessment-to- 
sales ratios and by regression analysis of specific variables. 

Standardization of assessment procedures 

However, as has been observed earlier, measuring the 
results of production is no substitute for well-planned and 
lucidly defined procedures. Quality cannot be injected into 
the product at final inspection. It has to be built in at the 
various stages of operation. In other words, inadequate 
methodology and processing generate inadequate quality. It 
was with this point in mind that one of the first projects in 
which the quality control section became involved was the 
creation of a province-wide audit plan, aimed at 
standardization of assessment procedures. 

The amalgamation of over 200 separate assessment 
authorities under a centralized administration has created 
problems. A major one has been getting everyone across the 
province to do things the same way. Standardization of 
procedures is, under these circumstances, a time-consuming 
venture at best. Much progress has certainly been made, but 
much also remains to be done. 

A variety of approaches to assessment 

In general, quality control within the Assessment 
Division in Ontario operates under the same fundamental 
assumptions, goals, and methodology as quality control in 
any other organization. The organization of the quality 
control function is far less formally structured than the 
typical model that was outlined earlier. And certainly many 

of the problems posed are difficult and unique. But the 
basic purpose of quality control is the same: the goal is to 
establish and maintain assessments at a certain quality level, 
given the legislative requirements of market value and 
equity, and given also the necessity of producing a viable 
tax base for Ontario's municipalities. 

To this end, the quality control section is involved in a 
variety of projects. Some are aimed at standardization of 
procedures, others are concerned with measuring the 
quality level of assessment data in all forms — from codes 
on conversion sheets to property classifications to final 
assessed values. And at present, these efforts have met with 
varying degrees of success. No doubt new programs and 
more sophisticated measurement techniques will be 
introduced in the future. But, in the end, the quality of 
assessment in Ontario will depend upon the assessors of 
Ontario and upon their commitment to the goals of quality 
which have been set. 


It is hoped that the reader may have gained some useful 
insights from this paper. It was not the writer's intention to 
provide an in-depth technical treatise on quality control, 
but rather to offer a general discussion of a highly complex 
and often misunderstood field of endeavour. A proper 
understanding of the quality control function will perhaps 
remove some of the aura of mystery which has often 
surrounded it — and may even allay the fears of those who 
have been afraid of it. 

At its best, quality control is a useful and very necessary 
discipline in a world of mass production and standardiza¬ 
tion. Its value ultimately rests with management. □ 


1 It should be made clear at the outset that quality control techni¬ 
ques can be applied to both products — such as automobiles — and 
services — such as assessments. Whenever the author uses the word 
"product” in this paper, it should be taken by the reader to include 
a service as well. 

2 Lord Kings Norton, in A. F. Cowan, Quality Control for the Man¬ 
ager, revised edition (Oxford: Pergamon Press, 1966), foreword. 

3 J. M. Juran, ed., Quality Control Handbook (New York: McGraw- 
Hill, c. 1962), S. 6-42. 

4 T. Hanold, "An Executive View of MIS," Datamation (November, 

5 Cowan, p. 31. 

page 6 

aspects, no. 17 (May, 1975) 

Socio-economic impacts of zoning by-laws 

Part II of 


A graduate in Economics from Waterloo University and the 
University of Toronto, Mr. Muger joined the Assessment Division in 
1971 after serving as a Field Officer for the Municipality of Metro¬ 
politan Toronto. For three years he assisted in implementing the 
Valuation Manual for exempt and special properties. He currently 
works in the Multi-Commercial High Rise section at the City of 
Toronto office. Part I of Mr. Muger’s paper appeared in Aspects #10 
(Winter, 1973). [Ed.] 


Zoning by-laws are of modern origin. They were intro¬ 
duced in North America a little over half a century ago. 
Until recent years urban life was comparatively simple, but 
with the great increase in and concentration of population, 
problems have developed which require, and will continue 
to require, additional restrictions in respect of the use and 
occupation of private lands in urban communities. 

Zoning, which is a method of regulation of land use, is 
essentially an attempt to improve, as well as to prevent 
deterioration of, the urban community. Private developers 
have been compelled by zoning regulations to start provid¬ 
ing features that improve the quality of new buildings and 
the environment. 

The premise upon which zoning rests is that the private 
market for land use, in a mature urban society, cannot be 
permitted to make uncontrolled land allocations, because 
this would create severe diseconomies in the urban develop¬ 
ment pattern. Since land pricing mechanisms do not take 
account of externalities occurring outside the site, zoning is 
required to curb and, where necessary, prohibit land 
development decisions that produce externalities con¬ 
sidered undesirable. 

City of Toronto Assessment Office 

In a stable economic system, and in the absence of 
excessive speculation in the real estate market, zoning 
regulations in certain areas could bring about stabilization 
of land values. In spite of the many advantages and the 
great desirability of exclusive zones, zoning by-laws as such 
have not yet accomplished the maximum benefits in urban 
land use planning and control. 

Zoning regulations have generally been based on the 
theory of highest and best use of urban land. High-density 
coverage of commercial sites in urban areas has been over¬ 
emphasized, which has led to high pricing of urban land. In 
the case of residential areas with high-density coverage, 
over-crowding and lack of outdoor recreational facilities 
have resulted. Under these conditions, zoning regulations 
have overlooked the social aspects such as human values, 
sociometrics and social structure in an urban community. 

Some economic effects of zoning by-laws 

Land is one of the major factors of production. Urban 
land in particular is considered to have value because of its 
potential to produce income in the future. Labour and 
capital are components of production which are applied to 

aspects, no. 17 (May, 1975) 

page 7 

the development of the land in order to generate the 
anticipated income. Although the aggregate physical supply 
of land is fixed, its economic supply is constantly shifting 
due to competition that sets preferences as to which 
alternative uses a particular real property will be subjected. 
Furthermore, competition among potential users and 
locational attributes of land are some of the key factors 
which determine the value of land. 

Viewed in terms of economic theory, the effective use of 
a parcel of land is determined in the imperfect urban real 
estate market. Consequently, price becomes a function 
both of the costs of improving land and of the net income 
or return realizable by the development of the land in 

Value and income potential of property 

Because of its potential to produce income in the future, 
urban land is considered to have value. This value is based 
on an assumed plan which‘is the sum of all the net land 
incomes that will accrue in perpetuity, discounted for the 
period of time that will elapse before they are realized by 
the would-be investors. 

Under the circumstances, value is relative and cannot be 
considered in connection with one factor alone, but must 
relate the various factors as exchangeable items. It must 
also relate to human utility and scarcity of services as well 
as to effective demand. However, value must be related to 
the highest and best use of the real property not only on 
the market, but also to the individual owner in question. A 
frequently-made assumption is that the permissible use for 
a given property under existing zoning by-laws and building 
codes is necessarily the highest and best use. 

Optimal use depends on the economic supply of, and the 
effective demand for, property suited for various uses as 
well as the economic value of situs (physical location). 1 In 
situations where there is no reasonable equilibrium of these 
factors, the highest permitted use will not be the highest 
actual use realized. For example, an owner may choose a 
permissible non-conforming usage for his property under 
the existing zoning regulations. Consequently, the highest 
and best use of that property may differ from that of the 
neighbouring properties which do not benefit from such 
legal exemption from conformity. Under such conditions, 
the value to the owner should relate to properties being 
similarly used or which are zoned to permit the type of use 
to which the owner is subjecting his property. 

If the highest and best use of urban land is to be 
achieved by zoning ordinances permitting high density use 
in similar properties, and if we assume that the site is zoned 
for, say, commercial use, and that the structures erected 
thereupon will be income-producing, then over-improve¬ 
ment of the site is imminent. Subsequent to this, over¬ 
crowding is likely to occur, generated by the desire of the 
developers and entrepreneurs to realize faster returns on 
their investments. This ultimately leads to operation 
beyond optimal level, culminating in rising operating costs 
with a consequent increase in diminishing returns on the 
property — subject to certain constraints such as economic 
supply of land, financial outlay and the level of aggregate 
economic activity. Clearly, the concept of highest and best 
use of land is of paramount significance in any valuation 
process, and should therefore be given due consideration by 
the appraiser and the assessor, both of whom should 
complete their final valuation analysis with a correlation 
and interpretation of how various site characteristics affect 
the value of a particular property. 

Zoning by-laws regulate the extent of use of land and 
type of structure erected thereupon. However, where 
changes in zoning by-laws increase the scope of use of land 
and structures upon it, the developers are willing to invest 
in such lots with the anticipation of greater returns on their 
investments. The typical model, which is familiar to both 
the appraiser and the assessor, states that the value of land 
is the expected aggregate net annual return on the land, 
expressed as a percentage of the annual rate at which the 
total investment is estimated to be amortized annually. 2 If 
the expected net annual return is the difference between 

gross revenue and expected costs, and assuming that there is 
no recapture rate, then 

Land Value (Gross Revenue) — (Total Expected Costs) 

(est. Market Value) Capitalization Rate 

It can be readily deduced from the model that income 
(given by gross revenue and total expected cost differential) 
is a function of the capitalization rate, given a particular 
estimated market value. That is, the greater the capitaliza¬ 
tion rate, the greater the income. Conversely, the relation¬ 
ship between capitalization rate and estimated present 
market value is an inverse one. That is, the greater the 
capitalization rate, the smaller the estimated market value. 
On the other hand, if the gross revenue is much greater than 
the total expected cost, and if the capitalization rate does 
not increase rapidly over time, then the estimated market 
value is likely to appreciate. The estimated market value is, 
therefore, inversely proportional to capitalization rate and 
directly proportional to income. 

It should be recognized that although changes in zoning 
by-laws permitting high density, especially in commercial 
properties, tend to appreciate real property market values, 
the anticipated income therefrom is affected by factors 
such as the magnitude of vacancy rate for competitive 
commercial space, supply and demand, rental rates, 
collection losses, and most important, location of and 
accessibility to the property. 

Social and political implications 

Man's use of land is based on the physical, economic and 
political characteristics of the property. Social implications 
are found in the institutional relations which dictate 
acceptable types and degrees of land use. 

For changes in zoning by-laws to be effective, they must 
take into consideration not only the economic aspects of 
the urban population, but also the social structure in the 
municipality, with due concern for human values, 
behaviour and interaction. 

Indiscriminate zoning of an area for a particular use 
tends to bring about a controlling social or economic 

"All business purely local — all which 
locality — should devolve upon the local 
Power may be localized, but knowledge 

page 8 

aspects, no. 17 (May, 1975) 

position in relation to other areas. This kind of control is 
referred to as dominance , 3 which is usually manifested 
either vertically or horizontally, applying to like uses and 
multiple use areas respectively. Furthermore, indiscriminate 
zoning of land for a particular use is likely to encourage 
segregation 4 — a process related to clustering. It is a selec¬ 
tion process by which homogeneous units become grouped 
together to form clusters — a process which is readily 
effected by zoning by-laws since the latter tend to group 
homogeneous land use together. Zoning by-laws can be, and 
are, used to effect centralization and decentralization 5 of 

population in the urban area. With this comes invasion — an 
interpenetration of one population group or use area by 
another, the difference between the new and old being 
economic, social or cultural. 6 Also incorporated in this is 
succession, where the new population groups or usage types 
finally displace the former occupants or uses of the area. 7 

Effects of invasion and succession 

The "invasion — succession effect" is exemplified in 
various parts of the City of Toronto. In 1966 a Toronto 
developer purchased most of the single-family dwellings on 
the east side of Duplex Avenue and the south side of 
Orchard View Boulevard. At that time, approval was 
expected in 1968 for changes in the zoning by-laws, which 
would permit high-rise commercial and residential uses at 
the northwest corner of Yonge Street and Eglinton Avenue 
— now known as the Yonge-Eglinton Centre. The same 
process took place for the present High Park residential 
complex whereby most single-family units were purchased 
by developers to make way for high-rise residential use. 

Currently, there is imminent invasion and succession 
taking place in a particular area of the City of Toronto. 
This area is bounded by Wellesley, Parliament, Sherbourne 
and Gerrard Streets. It is alleged that this property has been 
bought by a developer for an extension of the St. James¬ 
town high-rise residential and commercial complex. If the 
allegation is in order, then the present occupants will be 
forced to vacate the area to make way for new occupants. 

Another case of gradual invasion and succession here in 
Toronto can be observed taking place in the so-called 
Chinatown area — located in the vicinity of Dundas Street, 
Bay Street, University Avenue, and parts of Elizabeth and 
Elm Streets. 

The zoning by-laws which permitted erection of the 
Downtown Holiday Inn, the expansion of the Gray Coach 
Bus Terminal to Elizabeth Street, and the construction of 
high rise office buildings on University Avenue and Elm 
Street are obviously exogeneous forces of invasion to the 
area, which in time are bound to lead to succession. An 
even greater impact of invasion and succession is likely to 
be felt by Chinatown if and when the construction of the 
$250 million T. Eaton Shopping Centre by the Fairview 

Corporation is completed; this will attract other similar 
business enterprises to the area. An expansion of such an 
undertaking is bound to invade Chinatown, ultimately driv¬ 
ing out its present occupants. 

From a political standpoint, changes in zoning by-laws 
tend to be beneficial to those elements in the community 
that wield influence and make decisions. In one sense, they 
relate to what is acceptable to the citizenry in general; in 
another, to what is acceptable to influential individuals and 
organized groups in the community; and in still another, 
to what is acceptable to the formal local governmental 
structure. All three elements may be in harmony or com¬ 
pletely at odds with one another. However, where there is 
full harmony, it is tantamount to effective acceptance of a 
control measure; but where there is disagreement, the 
effective degree of acceptance is at the mercy of the 
dominant element in the community. 

In spite of this, it must be conceded, however, that 
zoning can be used in many ways to promote socio¬ 
economic goals. At any rate, like many other public 
powers, it can be and sometimes is abused. The legal institu¬ 
tions have endorsed a broad concept of zoning as long as it 
involves reasonable regulations that protect or promote the 
public health, safety, welfare and convenience. Zoning 
ordinances tend to be relatively inflexible, and at times 
overly restrictive. 8 Some of the ways in which zoning by¬ 
laws can be restrictive are the following: restricting land 
area to uses for which they are definitely suited; creating 
small island districts that are more restricted than the 
properties around them; excluding uses that are incidental 
to permitted uses of the zoning plan; and promoting 
directly or indirectly unfair or discriminatory administra¬ 
tive practices. Zoning, as a legal device, has often been 
employed for selfish ends. That is, it has been put into 
practice with a view to enhancing the interests of a 
particular individual or group of individuals! 

Furthermore, contractual obligations seem to play a very 
insignificant role in zoning plans. To be effective, zoning 
ordinances must be coercive to a certain extent, since they 
are a form of regulation for community welfare. Therefore, 
contracts between property owners or between a 
municipality and a property owner should not enter into 
enforcement of zoning regulations. 

Again, enforcement of zoning ordinances should be 
justified by environmental concerns rather than by private 
restrictions. 9 There appears to be no necessary connection 
between zoning regulations and private restrictions, since 
one is based on coercion and the other on contract. Clearly, 
to accord legal justification, no mention of private restric¬ 
tions should be made in a zoning ordinance. It must not be 
inferred here that zoning ordinances are necessarily hostile 
to private restrictions. The latter can, and usually do, make 
desirable requirements for development of land that zoning 
by-laws may not be able to effect. 

It seems certain, however, that a number of communal 
organizations have tended to regard zoning as a negative or 
defensive measure, which they have utilized primarily to 
prevent undesirable developments. In spite of the short¬ 
comings that seem to be inherent in the zoning process, 
more emphasis should be given in the future to zoning as a 
vital part of a larger, more positive and more dynamic plan 
for attaining better land-resource use. 


Suffice it to say that although zoning is a powerful tool 
for land use control, it is by no means the only tool 

concerns only single 
authorities. . . 
must be centralized." 

John Stuart Mill 
Representative Government 

aspects, no. 17 (May, 1975) 

page 9 

available to the planner in the guidance of urban land use 
and development. Zoning in itself has not yet been applied 
successfully in designing an efficient circulation system in 
an urban society, nor has it alone succeeded in program¬ 
ming capital movements and resource allocation. 

Furthermore, zoning as a device for land use control 
may not completely prevent new developments from dis¬ 
placing other desired uses. Changes in zoning ordinances 
which permit destruction of old historic buildings of all 
types, tend to destroy the character of a city. Moreover, 
where the vacancy rate in housing is at an extremely low 
level, every unit of housing torn down due to changes in 
zoning regulations has an impact on people in the 
neighbourhood thus affected. 

Some local authorities, developers and members of the 
populace at large are still uncertain about the effectiveness 
of zoning as a regulatory device for urban land use control. 
This has brought to the fore certain questions regarding 
zoning regulations. For example, one is apt to ask: how 
much impact can zoning regulations have on the future 
development of the city? Are zoning regulations suf¬ 
ficiently influential in determining construction trends, 
design and the use of land in ways that serve the best 
interest of the population, both present and future? Is 
zoning the most flexible and the most efficient instrument 
for creating a desirable urban environment? What are some 
of the consequences and implications of an expanded use of 

zoning regulations? While the effects of some of the 
answers to these questions have been witnessed in most 
urban communities, others still remain to be seen. 

Needless to say, for effective and viable results, changes 
in zoning by-laws must not only appeal to the developers. 
They should also, for social and political reasons, reflect the 
interests and immediate needs of the populace, who, due to 
oversight and lack of full consideration on the part of local 
authorities, are sometimes adversely affected by such 
changes. In other words, zoning regulations should not be 
considered as a panacea that can correct all economic, 
social and political problems. □ 


'Ronald R. Renne, Land Economics, revised edition (New York: 

Harper & Brothers, 1958), p. 49. 

2 Annual Real Estate Market Survey (1972), p. 34. 

^Noel P. Gist and Sylvia F. Fava, Urban Society, fifth edition (New 
York: Crowell Company, 1964), pp. 250-255. 

4 Ibid., pp. 118-146. 

5 Ibid., pp. 105, 202. 

6 Ibid., pp. 1 55-175. 

1 Ibid. 

®S. J. Makielski, Jr., The Politics of Zoning (New York & London: 

Columbia University Press, 1966), p. 92. 

9 Ibid. 




Eastern Ontario Assessment Area 

1. Prescott & Russell-Stormont 
Dundas & Glengarry — Mr. H. Morris 

2. Lanark-Leeds & Grenville — Mr. G. Grey 

3. Ottawa-Carleton — Mr. H. Hafenbrack 

4. Renfrew — Mr. H. R. Barkell 

5. Frontenac-Lennox & Addington — Mr. K. Froats 

6. Hastings-Prince Edward — Mr. J. A. Smith 

7. Haliburton-Peterborough-Victoria — Mr. J. Guerin 

Central Ontario Assessment Area 

8. City of Toronto — Mr. L. Shimbart 

9. North York — Mr. A. W. Wilson 

10. Scarborough-East York — Mr. D. Struke 
1 1. Etobicoke-York — Mr. J. Kirk 

12. Ontario — Mr. Bill Robinson 

13. York — To be nominated 

14. Halton-Peel — Mrs. Barbara Trotter 

15. Simcoe — Mr. M. Lumsden 

16. Muskoka — Mr. R. McCann 

Western Ontario Assessment Area 

17. Niagara — J. Harriman 

18. Wentworth — Mr. L. B. Charlton 

19. Brant-Haldimand-Norfolk — Mr. J. Huff 

20. Waterloo — Mr. C. Meadows 

21. Dufferin-Wellington — Mr. I. Dunlop 

22. Elgin-Middlesex-Oxford — R. Scott 

23. Huron-Perth — Mr. L. Harloff 

24. Bruce-Grey — Mr. R. Robertson 

25. Kent-Lambton — Mr. A. Smith 

26. Essex — Mr. J. Storey 

Northern Assessment Area 

27. Nipissing-Parry Sound — Mr. L. Warner 

28. Cochrane-Timiskaming — Mr. A. Young 

29. Manitoulin-Sudbury — Mr. I. McJannet 

30. Algoma — Mr. F. St. Jules 

31. Kenora-Rainy River-Thunder Bay — Mr. I. Zhiha 

page 10 

aspects, no. 17 (May, 1975) 

An overview of 

Data management in 
property assessment 

Real Property Appraiser 
Office of the Assessor 
San Mateo County, California 

Fred L. Jung has been working as an appraiser with the San 
Mateo County Assessor's office since 1972. He is currently assisting 
in writing programs for a computer-assisted appraisal system for 
apartments. Prior to joining the Assessor's staff he worked for a 
major computer manufacturer. Mr. Jung has an M.A. in education. 

Data management, in one form or another, has been in 
existence as long as governments and businesses have kept 
records. As with the proverbial chicken-egg question, it is 
difficult to ascertain if equipment changes led to changing 
concepts of data handling or if it was vice versa. Whichever 
way, the end result is greater production in less time. 

The aim of this article is to follow the growth of data 
management in the San Mateo County Assessor's office in 
the post-World War II era as it changed to meet a growing 
population and ever-increasing legislative changes. At 
various points, we will touch on the data processing equip¬ 
ment, the concept changes, and their implications. For 
those organizations contemplating automation, perhaps San 
Mateo County's experience will suggest shortcuts or 
alternative paths. 

EDP in general in the last 30 years 

From the post-World War II era to the 1970's, electronic 
data processing changed dramatically. Although the 
punched card is still the primary input to the computer, 
also available today are key-to-tape or key-to-disc systems, 
optical readers, and magnetic ink character readers. These 
devices speed up the data going into the computer, so that 
the input will be available sooner. 

Storage of data changed from that available in an 80 or 
90-column card to a magnetic tape record, and to a random 
access disc or drum. It is faster to pass several feet of tape 
than it is to handle cards electromechanically. It is faster 
still to find the desired record by random access than to 
search many feet of tape in a sequential manner. 

Vacuum tubes replaced electromechanical relays and 
were in turn replaced by transistors. Printed circuit boards 
measuring 5" x 7" were replaced by micro-circuitry on 
chips so small that microscopes are necessary in assembling 
them. These electronic components allowed several million 
instructions, rather than hundreds of thousands as before, 
to be executed in a second. 

Programs of instructions changed from heavy panels 
covered with a spaghetti-like mass of wires to internally- 
stored programs that were capable of being altered much 
more easily and in less time. 

The ramifications of all these changes are increased 
production, new and different reports that were not 
feasible before, the possibility of management by exception 
while the routine is handled by the computer, and new 
areas that are now possibilities for automation. 

aspects, no. 17 (May, 1975) 

page 11 

Implications for assessors 

To the uninitiated assessor, the end result of electronic 
data processing might seem miraculous. As with so many 
human endeavors, it is not quite that way. 

There is usually a logical point at which to enter auto¬ 
mation. Most analysts would look for a highly visible 
clerical or accounting function that is being done manually. 
Applying computerization to the manual and repetitive 
tasks is a good starting point because the increase in 
production is dramatic and large savings can be realized, 
thus justifying the cost of automation. 

By the late 1940's, with increasing numbers of people 
moving to California, San Mateo County was receiving its 
share of the new population, with a consequent rise in new 
home construction. In the San Mateo County Assessor's 
office, the automation effort began with changing the 
secured master record from manual methods to punched 
cards processed by tabulation equipment. The secured 
master is the source of information for the legal assessment 
roll, which is the public document showing all the property 
that will be collateral for the property taxes. By this means, 
the Assessor's office was able to maintain production, 
efficiency, and accuracy in coping with the greater volume 
of work. 

In the 1950's, the Assessor's office used a master 
property record card, to be updated by an accounting 
machine. On this one card, the Assessor was able to print in 
one location all historical information pertaining to that 
property, including assessed values, sales , deed numbers, 
and buyers' names. A by-product of this updating by 
accounting machine was a paper tape which was used to 
update the secured master on magnetic tape. 

Paralleling this, the in-house data processing staff wrote 
programs for the secured master to edit the data coming in, 
not only checking for its absence, but also testing for the 
correct type of data to be in the correct location. They also 
wrote programs to allow daily and monthly updates of the 
information and to control the batches of input. This 
further increased the accuracy of the data. 

By the late 1960's, with the rapid increase in population 
in San Mateo County and new laws requiring assessment of 
property at 25% of market value, the automation of 
property reappraisal became more pressing. Supply and 
demand for residential housing were pushing the market 
values of homes up at a very fast rate. A time lapse of only 
three or four years between reappraisals of a home could 
lead to an unconscionable increase in assessment. The time 
was ripe for automating mass appraisal techniques. 

Mass appraisal with help from EDP 

Consultations were held with statisticians from the State 
Board of Equilization 1 on newer, more sophisticated 
statistical and mathematical models, like multiple linear 
regression analysis. From the data processing viewpoint, 
there were arguments both pro and con for having the new 
programs written either in-house or by an outside vendor. 
The in-house programmers were already working at full 
capacity. The outside vendors would be more likely to have 
mathematical specialists. A time limit on the vendors would 
be an incentive to produce. Maintenance and followup on 
the vendor's programs by the in-house group might be a 
problem unless liaison had been close during development 
and good documentation were available later. In order to 

save time, the decision was made to buy the service from 
General Electric's TEMPO, a Centre for Advanced Studies, 
for the development of a multiple linear regression system. 

After further consultation with the State Board of 
Equalization statisticians and extensive examinations of 
assessment practices, the TEMPO systems analysts began 
writing computer programs. For input to this system, a new 
appraisal record card was designed. (See Exhibits A and B.) 
The transfer of data from the older land and building 
records to the new appraisal card, referred to as the "hard- 
card", was begun. 

These computer programs were contained in a package 
with the acronym of REVEAL, for Real Estate Valuation. 
All of the programs were written in COBOL except the 
regression program, which was written in FORTRAN. 2 
Before the regression program could be run to produce its 
formula, several other programs had to be run to set up the 
data. Among these were the cost update, sales analysis, and 
sales time adjust computer programs, for example. (See 
Exhibit C.) 

A reappraisal cycle 

The appraisal cycle begins by extracting the desired 
neighbourhoods from the master data file. The neighbour¬ 
hoods are chosen because the ratio of appraised value to 
sale price is too low, or the dispersion too great. Two 
temporary files are created; one with all parcels of the 
selected neighbourhoods, the other with all the parcels of 
the selected neighbourhoods that had sold at least once 
during the specified "time slice”. Eventually, the sales 
sample is used to predict the Estimated Selling Price (ESP) 
of all the parcels in that neighbourhood. (See Exhibit C for 
a list of steps. Exhibit D for a "picture" of the regression 

The next step is to update all the costs to be sure that 
the records of new parcels created since the annual update 
are up to the current level. Following the cost updating, all 
the sales are time-adjusted to the current date by another 
program to the same point in time for comparison 
purposes. From this new list of sales, an analysis can be 
made of sales to be dropped, such as unconfirmed sales, 
multiparcel sales, and invalid sales. Another output of the 
appraisal cycle is a "profile” of 106 property characteristics 
of which 88 may be used during the regression program. 
Examples of these variables are the area of first, second and 
third floors; finished and unfinished basement area; acreage 
or usable square feet of land; cost of appliances, etc. 

Using the selected sales and variables, the step-wise 
regression program computes the first regression formula. 
Each step in the run is printed so that an observer can see 
when a variable was entered or deleted by the regression 
routine. At the end of the steps, the coefficients of the 
variables and the regression constant are printed. 

A decision is made at this point to accept the regression 
formula or try again for another formula. The first formula 
produced by the regression program may be the best 
mathematically, but it may not be the best equation from 
an appraisal viewpoint. Some of the criteria used for 
acceptance are the reasonableness of the variables in the 
formula, the strength of the statistics, the number of 
variables in the formula, and acceptance of the formula by 
the appraisers working in that neighbourhood. If the 
decision is made to try for another formula, some of the 
questionable variables are suppressed by not allowing the 
formula to access them. 

page 12 

aspects, no. 17 (May, 1975) 



Sample of Side 1 Unit Appraisal Record (UAR). Historical 
data to left; land data for machine storage to right. 

Sample of Side 2, Unit Appraisal Record (UAR). Historical 
data to left; building data for machine storage to right. 









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aspects, no. 17 (May, 1975) 

page 13 

A regression can be made with the shortened list of 
variables, taking less time because information from the 
first regression can be saved. Again, the program will choose 
the variables to include in the regression equation in order 
to compute a formula. The new formula will be analyzed 
and eventually, a satisfactory regression formula will be 

The next step produces an ESP "exception list" of those 
parcels having a new ESP (from regression analysis) which is 
greater than a given percentage over the old ESP. After 
analysis of this printed list the worksheets are printed. 

The worksheets are the principal tools used by the field 
appraiser. For example, ^on the preprinted form are listed 
the parcel number and the building description with respect 
to number of floors, area of each floor, cost of building, 
cost of pools, if any, and cost less depreciation. Also listed 
is information about the land — its topography and usable 
area — and information about corners, cul-de-sacs, excess 
traffic and the like. Sales, if any, are printed in a special 

Also printed on the worksheet are the last value (roll or 
otherwise) put in for the parcel, the ESP, and the summa¬ 
tion value. If the appraiser feels that one of these is the best 
indicator of market value, he checks it. If he feels that 
another value is best, he writes it in, for later entry by the 

The final step of a regression cycle (see Exhibit C) is 
recombination of the selected neighbourhoods' parcels with 
the full tape of all the county's residential parcels. 

Melding old and new programs 

Auxiliary to the package of programs written by the 
TEMPO group were old and new programs written in-house 
by the county data processing department's programmers. 
These had grown from card formats on punched card equip¬ 
ment to paper tape formats translatable to magnetic tape 
formats. The programs grew from these old bases to new 
combinations of programs. 

Among the older programs was an edit to check for the 
presence of incoming data in certain required fields. 
Absence of data in these fields, or the wrong type of data, 
would be "fatal" to that record and it would be rejected 
with a printed error message. In other fields, data outside of 
certain limits might be valid, so only a warning message 
would be printed, to be checked by the appraiser. 

Introduction of a key-to-disk unit with four data entry 
stations was a valuable new addition. This machine has 
several programs stored internally which control advance¬ 
ment to the correct location and which check to some 
extent the type and quantity of data in some fields. It also 
has a video screen where the operator can see the data being 
entered, giving a visual check, if necessary. Once the records 
are captured on the disk they can be copied onto a small 
reel of tape for delivery to the computer center and further 
processing. This "encoding" is a vital link between the unit 
appraisal record — the source document — and the magnetic 
tape records of the appraisal file. 

Other programs allow the entry of new sales to be 
matched with existing parcel numbers; create new records; 
delete old records, and check totals of value fields to see if 
a batch is ready for acceptance. 


Chart of the steps in a regression cycle 

1. "Pull" neighbourhood, update costs, list sales, show 
histograms from Appraisal File. 

2. Time adjust sales, profile of attributes. 

3. Regression equation, leading to a formula. 

4. If desired, select out variable(s) and rerun for another 
formula (this step may be repeated)! 

5. ESP update. 

6. Worksheets, proof list. 

7. Recombine neighbourhoods with Appraisal File. 

Need for standardization and documentation 

Documentation is an important facet of all this process¬ 
ing. It makes for easier explanations of what is happening 
and may give a clue as to how and where a program went 
wrong. It makes writing the appraiser's manual easier, too, 
for maximum and minimum limits of all types. 

The documentation is quite complete for the regression 
programs. The TEMPO group wrote a loose-leaf book 
describing each program twice. The first description is a 
synopsis giving an overall view of what the program does; 
the second is more detailed and has flow diagrams labeled 
with various entry points actually used in the program so 
that one can follow the logic. The next step in degree of 
detail would be the reading of the COBOL or FORTRAN 
instructions in the program itself, which should not be 

The appraiser's manual is an important part of the 
standardization process. Failure to define what belongs 
where in certain fields could lead to disasters in later data 
processing by the computer. An example, with respect to 
commercial zoning, is: Town A used Cl; City B used C; City 
C used CI-1. Since they all referred to light commercial, the 
prefix CL was used, followed by the actual zoning. In a 
field allowing six characters but not specifying sequence, 
the county code could be written as CLC100 or CLOOCI or 
00CLC1 or 001 CL, leaving the possibility of all four 
arrangements being encoded. One of these permutations 
might be handier for sorting than the others, but none 
would work well unless the arrangement were definitely 

Need for error management 

"It is absolutely impossible — and logically indefensible 
— to ask for a business computerization project to be 
perfect.. .So errors will occur in any computerized project. 
They occur because we cannot foresee everything and 
because we are not budgeted to foresee everything. . ," 3 

page 14 

aspects, no. 17 (May, 1975) 


A Schematic of the Reappraisal of a IMeighborhood(s) 

aspects, no. 17 (May, 1975) 

page 15 

Managing two files (secured master file and appraisal 
file) where there is data common to both (e.g. land and 
building values) can be a problem. Discrepancies can occur 
within one file. This might happen if the data were in¬ 
correctly encoded from the source document, or if two 
digits were transposed in the manual processing, or if some¬ 
thing were illegible. Discrepancies can also occur between 
two files. This might happen if there were two source docu¬ 
ments, one for each file. It might happen if certain calcula¬ 
tions were made in one file but not the other. 

To control these problems, which must be expected to 
occur, it might be necessary to compare the important 
fields from each file after the property key numbers have 
been comp .ed and matched. This could be done either 
annually or on demand. Special programs might be neces¬ 
sary to print out the contents of certain fields for com¬ 
parison with other source documents. Almost always in 
production programs, standard error messages would be 
printed for certain kinds‘of bad data. Sometimes logical 
errors appear only when some special, unanticipated cir¬ 
cumstances occur. A certain amount of time must be 
budgeted in any computerization program to trace, inter¬ 
pret, and solve errors. 

Future implications 

During mid-1972, the master property record card, with 
its historical data for each property, was superseded by the 
use of microfiche. Data from the secured master file was 
rearranged electronically and photographed in reduced 
form. Information on more than 180,000 parcels was re¬ 
duced and put on sheet film, making a “deck" of film 
measuring four inches by six inches and with a 5/8-inch 
thickness. Each month a new, updated microfiche is pro¬ 
duced. There are implications for the future applications of 

It would no longer be necessary to carry the one 
permanent record, the unit appraisal record (Exhibits A and 
B) to the field, thus denying its use to others at the office. 
Several copies of the set of appraisal file microfiche could 
be made, some to be used with portable viewers in the field, 
others to be used at various locations in the office. Viewers 
could produce a paper copy of portions of the fiche. 

The use of microfiche might lead to the retirement of 
the unit appraisal record by the production of newer, up¬ 
dated versions every month as additions and alterations 
were made to the buildings. This would reduce paper 
records of all sorts. Possibly the type of data on these 
appraisal records on microfiche would lead to data sharing 
by other governmental agencies. 

Also, it is anticipated that the statistical methods now 
used on the single-family residential system will soon be 
used on apartments, commercial, and industrial properties. 
This will require new computer programs but most of them 
will be very similar to those already written. □ 


* San Mateo County appreciates the help and advice it has received 
from Robert H. Gustafson and other members of the State Board 
of Equalization. 

^COBOL is an acronym for COmmon Business Oriented Language. 
FORTRAN is an acronym for FORmula TRANslation. COBOL is 
a set of computer instructions that read somewhat like English 
language statements rather than "computerese". COBOL has 
computing capability and had, as one of its design specifications, 
the ability to handle records and fields within records with ease. 
FORTRAN was designed primarily for computing, so it is more 
appropriate than COBOL for mathematical routines. 

3"Can Five Points in Four Hours Start Error Control?" The Taylor 
Report, Alan Taylor, CDP, Computerworld 10/23/74. 

page 16 

aspects, no. 17 (May, 1975) 


Liability to Assessment - 
Tenant-Occupied Crown Lands 

Crown lands are normally exempt 
from taxation. These exemptions are 
guaranteed under Section 125 of the 
British North America Act and Section 
3 of The Assessment Act. There are, 
however, many incidences where 
private corporations or individuals 
occupy crown land for the purposes of 
profit or personal enjoyment. It is 
only equitable that persons in this 
position should shoulder their fair 
portion of the real property tax, and 
for this purpose Section 26 of The 
Assessment Act provides: 

26(1) Notwithstanding paragraph 1 of 
section 3, the tenant of land 
owned by the Crown where rent 
or any valuable consideration is 
paid in respect of such land and 
the owner of land in which the 
Crown has an interest and the 
tenant of such land where rent 
or any valuable consideration is 
paid in respect of such land shall 
be assessed in respect of the land 
in the same way as if the land 
was owned or the interest of the 
Crown was held by any other 

Recreational or cottage properties 
present little problem in that this type 
of property requires a lease, and the 
tenant has similar rights to those who 
enter into agreements with private 
landlords. Most businesses on crown 
lands are assessable and taxable; how¬ 
ever, there are instances where 
difficulties have arisen. The main 
questions seem to arise over the 
control over the occupancy of the land 
and profits. Two cases will suffice to 
illustrate the problems involved. 

The questions in Delta Parking 
Systems Ltd. and the Township of 

Toronto, O.R. 1965, 1 380 centered 
around whether or not the business 
(Delta Parking), which operated a 
parking service at Toronto Inter¬ 
national Airport and received a 
management fee for its services, was 
liable to the property tax under S. 26, 
and secondly, whether it was carrying 
on its own business within the context 
of The Assessment Act and therefore 
liable to business tax. 

The argument put forth by Delta 
was that the company had been 
appointed by the Crown to manage 
and operate the parking structure. The 
Crown provided certain parking equip¬ 
ment and the applicant provided all 
labour, certain equipment, supplies 
and other services. In return for this 
the Crown paid a fixed sum to Delta 
to cover the expenses incurred plus a 
stipulated management fee. The 
Crown retained the right to increase or 
decrease the schedule of parking fees. 
All monies received by way of parking 
fees were to be deposited daily by 
Delta to the account of the Receiver 
General. In addition to these strict 
stipulations, the services of Delta were 
under and subject to the control and 
supervision of the airport manager. 

The Court held that the parking 
company was under the full control of 
the Crown and as such did not occupy 
the premises. The applicant was there¬ 
fore not a tenant of Crown lands and, 
as a consequence, not subject to the 
real property tax under S. 26. As 
regards to the business tax it was 
found that Delta was not carrying on a 
business but was rather performing as 
an agent or servant of the Crown and 
therefore not liable to business assess¬ 

A similar case but with important 
differences is Lome Murphy Foods 
Ltd. and John A. Mowat, Regional 
Assessment Commissioner, Region #3, 
O.R. 1972, 1 559. The appellant is a 
catering firm which operates canteens 
in specific federal buildings. In light of 
the Delta Parking decision, the 
appellant held that the controls 
imposed on it by the government were 
so strict that it was no more than an 
agent of the government and operated 
under its direction. Under the terms of 
the agreement, the caterers were 
allowed a profit of up to 5% of gross 
sales for any one year. 

The Assessment Commissioner 
maintained that although controls 
were strict, the catering firm was, in 
fact, a tenant of the government and 
therefore liable to business assessment. 

The Justices concurred with the 
Assessment Commissioner. Murphy 
Foods Limited was not an agent of the 
Crown but was in fact subject to 
Section 7(1) of The Assessment Act 
(R.S.O. 1970). It was clearly a 

business which was conducted for 
profit. Although the catering company 
was under stringent management and 
merchandising controls exercisable by 
government authorities, those controls 
were directed to the manner of 
conducting the business rather than to 
the nature and degree of the use and 
occupation of the premises. The 
company was ruled liable to business 

As we can see, there can be a fine 
line between what constitutes an 
agency of the Crown as opposed to a 
tenant of the Crown. Questions of this 
nature often must be answered by the 
courts. □ 

aspects, no. 17 (May, 1975) 

page 17 

Ontario shares its Valuation File 

Provincial and territorial directors of assessment across the nation gathered in Toronto on January 21st 
this year for a three-day meeting to preview Ontario’s Valuation File, a computer-based assessment system. 
The meeting, which was generally considered the first of its kind, made significant inroads in promoting 
closer inter-provincial exchanges of assessment technology. 

Among those welcomed by Mr. P. G. Gillis, Executive Director of Ontario Assessment Division, were: 
Mr. Rene Gagne of Alberta, Mr. W.H. Snowdon of British Columbia, Mr. J. Reimer of Manitoba, Mr. E.A. 
Cronk of New Brunswick, Mr. Robert A. Joudrey of Nova Scotia, Mr. C. M. Davis of Prince Edward Island, 
Mr. Robert Fournier of Quebec, Messrs. W. A. Ewert and H. E. Gullett of Saskatchewan, Mr. M. S. Smith of 
Northwest Territories and Mr. J. W. Chaney of Yukon. 

The preview was offered in six computer-aided demonstrations. The first of these was addressed to 
illustrate a sorting technique which has been developed for the selection of comparable properties. Three 
applications of this comparable select program were shown on on-line terminals: 

— listing of properties by block, sale price, sale date, style; 

—listing of comparable properties by block, sale price, age, assessment, number of bedrooms; 

— listing of comparable properties by sale price, assessment, floor area, building age, number of bed¬ 

A “valuation model” which has been developed to estimate the market value of residential properties in 
the City of Oshawa was offered to illustrate the comparative sales method to value. This statistically derived 
model generates “base” value estimates for several property groups and, in use, yields market value esti¬ 
mates after adjustments are made for certain physical property characteristics. 

The third part of the preview program was devoted to the Valuation Review Sheet which correlates the 
roll number, property address, value estimates, sale price, sale date, floor area, year built, style, class, 
presence or absence of garage and type, and the number of bedrooms. Aside from other more sophisticated 
potential uses, the VRS promises to provide the assessor with a potent tool to standardize his value 
estimates at a glance. 

The following part of the preview dwelt on the File’s built-in quality control features. To begin with, it 
is programmed to generate regular assessment/sale ratio reports which are both in list and histogram forms. 
Within this, the File will respond to commands to list suspect ratios by class. Finally, the File will produce 
quality control reports as part of its ultimate MIS objective. 

The fifth demonstration illustrated the File’s ability to compare value estimates between 1971 and 1972, 
and on the basis of observed differences, assists the assessor in generating an appropriate update factor. 

The preview was concluded with two demonstrations of the File’s analytical capability. One of these was 
the File’s ability to produce scatter diagrams such as plotting building residential against RCN. Beyond 
scatter grams, the File will also respond to commands to cross-tabulate selected data elements such as 
generating local modifier ratios for analysis. 

The preview was organized by Mr. A. N. Mackay, Director of Assessment Standards Branch. 

page 18 

aspects, no. 17 (May, 1975) 

A Who’s who in Canadian assessment? 

Back row (left to right): H. E. Gullett (Sask.), ). W. Chaney (Yukon), W. H. Snowdon (Van. B.C.), R. A. loudrey (N.S.), 

R. Gagne (Alta.), R. Fournier (P.Q.). 

Front row (left to right): M. S. Smith (N.W.T.), P. G. Gillis (Ont.), C. M. Davies (P.E.I.), ). Reimer (Man.), E. A. Cronk (N.B.), 
W. A. Ewert (Sask.). 

aspects, no. 17 (May, 1975) 

page 19 



The following is a reprint of a speech presented by Mr. Purdon at 
a workshop on site value taxation on October 26, 1974. The work¬ 
shop was part of the Institute of Municipal Assessors' annual con¬ 
ference in Toronto. [Ed.] 


When I was asked to sit on this panel, I was requested to 
provide some insight into the policy decision made in 1968 
to adopt market value assessment and why the Ontario 
Government rejected other alternatives. I should therefore 
like to address my remarks to the topic, "The Background 
to Assessment Reform." 

We have all heard of the Smith Report, and some of us 
have even read parts of it. The Smith Committee said many 
things, but in terms of my topic, three points must be 
singled out: 

1. The Smith Report noted that for a variety of reasons, 
local and municipal expenditures had risen and would go on 
rising, and that provincial grants to local authorities would 
increase. Indeed, provincial support to municipalities today 
amounts to over 50 per cent of municipal expenditures, and 
school support amounts to close to 65 per cent. 

2. The Report commented at some length on the state 
of local assessment and noted that it was being poorly 
administered. It was found that 64 per cent of 
municipalities had made no significant adjustment in values 
since 1956. In a comparison of 1956 values, the report 
showed that only fourteen municipalities out of some 900 
(1.5 per cent) were showing assessed values on their rolls at 
over 50 per cent of market value. Most serious of all was 
the discovery that properties were being left off the roll, 
some properties were being undervalued, and different 
classes of property were being assessed at different propor¬ 
tions of market value within one municipality. 

3. Finally, the third point noted in the Report was that 
on the one hand, municipalities needed more cash and the 

Assessment Standards Branch 

province was having to bail them out, and on the other 
hand, the tax base was in such a mess that municipalities 
were not able to take full advantage of the opportunities 
they had to raise cash themselves. And yet it was this very 
same tax base which was used to share out the provincial 

The options for reform 

This situation was clearly intolerable, and following the 
report there was a period of analysis and discussion of what 
policy the then Assessment Branch should adopt to solve 
the problem. 

The major issues were: 

I. Administration 

Could the problem of the tax base identified by the 
Smith Report be solved using the existing machinery of 
advice and assistance from the Department of Municipal 
Affairs, or should some more radical policy be proposed; 
and if so, what policy should this be? Put very simply, who 
should run the assessment programme? 

II. Valuation 

Was the problem solely administrative, or was it a case 
not so much of a good system badly run, but of an in¬ 
herently bad or unsuitable system? Put very simply, what 
system of valuation do we use? 

The first question was answered when the Government 
decided to take over the assessment function. 

page 20 

aspects, no. 17 (May, 1975) 

The second question then remained. From a survey of 
assessment systems in use in the world, the following 
emerged as the alternatives: 

1. Assessment of property using an annual rental value, 
i.e. the British system. 

2. Assessment of real property using capital value but 
assessing land at a different proportion from improvements, 
i.e. Site Value and its derivatives. 

3. Composite property assessment, using some objec¬ 
tive value criterion such as market value. 

4. Abolition of real property assessment and its replace¬ 
ment by some other revenue source, such as an income tax. 

Evaluation of the options 

Time does not permit the discussion of all these alter¬ 
natives, except to say that the British system was ruled out 
as being unsuitable to the Ontario situation; and while the 
abolition of the property tax was an attractive option to 
certain academic economists, on a practical level it was not 
deemed feasible to raise an extra $2 billion from an income 
tax. This left the present system or site taxation. 

These systems were then carefully examined using the 
following criteria: administration, equity and tax effort. 


Of the three criteria, the first two of administration and 
equity are difficult to separate. This is so because they 
often represent a trade-off. One can get more of one and 
less of the other or vice versa. In a way, that was what the 
Smith Committee was complaining about. Prior to 1970, in 
exchange for relative administrative simplicity and high 
administrative savings, the result was a low level of equity. 

An examination of how site value taxation was 
administered around the world showed several systems. At 
one extreme, five or six classes of land were defined and all 
land placed into one of them. This was extremely easy to 
administer but had limitations from an equity point of 
view. At the other extreme, in South Africa, very sophisti¬ 
cated methods of land valuation were used. The South 
Africans were very enthusiastic about their system, which 
they claimed had clear administrative advantages because it 
was unnecessary to assess buildings; and buildings caused all 
the problems. They used a development approach and 
asked themselves what value a developer would place upon 
a piece of land. The answer to this question was based on 
feasibility studies of capitalized anticipated income of a 
potential development, less development costs. Local 
adjustment factors were also prepared to reflect local condi¬ 
tions. The result produced a value for that plot of land 
which was then used as a benchmark, and the value was 
applied to all other similar land. In this system, the South 
Africans were considerably assisted by the fact that all lots 
are of a standard size, the only difference being the number 
of standard lots one used. 

In a comparison between the South African system and 
the alternative of market value, it did not seem to the 
Assessment Branch that there was much advantage to be 
gained by change. Admittedly, one does not value the 
buildings on a site value system, but there was the 
potentially equally, or possibly more, difficult task of 
assessing the capitalized income stream for a building which 
did not exist at all! 

This issue aside, however, there was an additional 
administrative factor. This was that the Assessment Branch 
knew the government was committed to taking over the 
assessment function from the existing two hundred or so 

local assessment authorities. This meant very considerable 
problems of setting up an organization to get on with the 
job. On the asset side, the Branch would inherit some 1,800 
trained and experienced assessors who knew the system and 
who knew what they were doing with that system. To 
adopt site value taxation, even of a very simple type, meant 
abandoning that asset almost completely and creating a 
liability in terms of training and experience. Frankly, the 
advantages to be derived from instituting a new system did 
not seem worthwhile. 

So from this viewpoint, it seemed that there were 
problems enough without adding to them. Market value 
seemed the best alternative in terms of administration. 


Turning now to equity, we come to an issue which is 
difficult in the extreme to define. The Smith Report had 
said that like properties should be assessed and taxed in a 
like manner. To this one must add some qualifications 
about areas or regions, since Algoma is not Toronto. 

Equity in site value taxation does, however, have a some¬ 
what precise definition. Whoever originated the idea of site 
taxation, Henry George was its great disciple; and he was 
concerned about monopoly profits being obtained from the 
accident of ownership of a particular piece of land. 
George's concern was all the greater because he saw that 
much of the extra monopoly value was socially created. 
The city builds a highway and immediately the value of my 
100 acres goes up ten times because access has improved. 
So to apply site taxation equitably, we have to determine 
two values — 

1. the actual productive value of the land, excluding any 
monopoly price or any socially-created value, and 

2. the actual market value of the land (which would 
theoretically include the monopoly or socially-created 
value), and then tax away the difference between the two. 
The problem is that (2) is difficult to measure and (1) is 
impossible! The value of (2) is the potential value of the 
land according to its highest and best use, as is done in the 
South African system. The value of (1) implies the applica¬ 
tion of some basic philosophic “value in production". 

The concept of value in production made sense in 1790 
when David Ricardo (from whom Karl Marx learned his 
economics) defined the value of land in terms of its basic 
productivity for grain food production. But what yardstick 
do we use now? So if we are not using site value taxation to 
tax away the monopoly profits of land ownership above its 
productive ability, what are we taxing? I do not know, and 
I have not met a proponent of site taxation who does. 

Property taxation does not get involved in such moral 
and philosophical conundrums. Property taxation merely 
says that property equals wealth and the greater the wealth, 
the greater the tax. For site value taxation to be a better 
concept in 1967, and possibly since, it must prove that it 
measures wealth better than the property tax. The question 
is, does it? 

First, if we could apply the true Henry George principle 
of taxing the surplus, or monopoly profits, then site value 
taxation is not concerned with wealth, only surplus or 
monopoly profit. If, on the other hand, we adopt the South 
African approach, we only value the highest and best use. 
This would result in placing a value on the Toronto- 
Dominion Centre equal to the shoe store next door. It is 
doubtful if the Smith Committee would consider this to be 
an advantage in terms of improving the ability of Toronto 
to raise the revenue it needs. In neither case would the 

aspects, no. 17 (May, 1975) 

page 21 

system be of much use for the purpose of distributing 
grants from the Province to the local authorities. 

I return to this issue of grant apportionment again, since 
it is a key issue, and one which the Assessment Branch 
together with Treasury felt was not understood by 
advocates of site value taxation in proposing their system. 
Even assuming that the most lavish claims made by site 
value taxation supporters are valid, their criteria are solely 
concerned with taxation, together with certain planning 
and land use issues. But the local tax base is becoming more 
important as a vehicle for grant apportionment than for 
raising taxes, and this trend will continue. As I indicated 
earlier, on the average, fifty cents of every dollar spent by 
local authorities on municipal expenditures come from the 
Province, and in education it is as high as sixty-five cents. 

Thus, from an equity viewpoint, it was decided that the 
equity principles of site value taxation, while highly 
laudable, were impossible to achieve, and as such this 
blunted much of the argument in favour of site value taxa¬ 
tion. More importantly, it was felt that since the property 
tax base was being increasingly used for the apportionment 
of grants to local authorities, as well as between members 
of an apportionment region, the equity principle of the 
existing property tax based on market value was more suit¬ 
able than the site value. 

Tax effort 

This issue refers to the ultimate objective of any tax 
system: its ability to raise revenues. At the time that the 
question was under discussion in the Department of 
Municipal Affairs, both the Municipal Finance Branch of 
Municipal Affairs and the then Department of Treasury and 
Economics took part. Also included in the definition of tax 
effort was the issue of the use of the municipal tax base as a 
means of apportioning grants and local taxes within 
apportioning regions, to which I have just referred. 

The issue of most concern to both the Finance Branch 
and Treasury, however, was the question of broadening or 
narrowing the tax base. One of the chief problems with the 
property tax in general is its tendency to be insensitive to 
changes in the level of general economic activity. This is 
due largely to the fact that there is an inevitable lag 
between a change in the value of a piece of real property 
and its reassessment. Even at best, this lag would be twelve 
months, and a more realistic estimate would be two to 
three years. To support any change in the system, the 
Treasury people had to be convinced that the new system 
would improve the ability of that system to adjust to 
economic change. The feeling was, first, that since much of 
the lag was administrative, no improvement would be 
likely. Secondly, it was felt that the possible impact of the 
system might be to make the municipal tax less sensitive to 
economic change, rather than more so. Certainly, one of 
the advantages claimed for site value taxation was that it 
would reduce speculation, and hence speculative price 
changes. Yet in terms of increased tax effort at times of 
rising prices, it was felt that this might not be altogether a 
good thing. 

Unfortunately, none of these issues were clear then, nor 
are they now. With the possible exception of Sydney, New 
South Wales, site value taxation has not been adopted in an 
industrial urbanized society similar to Ontario. Examina¬ 
tion of the Australian experience is interesting, however. 
They have site value taxation, and yet property and land 
speculation still exist. Proponents of site value taxation 
often argue that slums will disappear, and yet rundown 

urban property still exists in Sydney. Market value assess¬ 
ment is criticized because it discourages people from fixing 
up their homes, and yet peeling paint, broken windows and 
dilapidated houses are not unknown in Australia. 

To take the South African case, we must remember that 
while that country shares some of our cultural heritage, it is 
a two-class society of poor blacks and rich whites. While the 
South African system does an excellent job of valuing land 
at its highest and best potential use, this is also done in the 
context of what we might consider to be an overly rigid 
system of zoning bylaws — as indeed it must. 

In the final analysis, while no one could deny the 
enthusiasm of the Australians and the South Africans for 
their system, it appeared to the Assessment and Treasury 
personnel that the advantages claimed for the system came 
more from the fact that it was excellently administered 
than that the system was inherently superior. Thus the 
evidence to support a change was not convincing, and it was 
felt that it would be better to improve the system we had 
than to venture into unknown territory on the evidence 
that was available. 

The impetus for change 

Finally, having discussed the history of why the govern¬ 
ment adopted the policy it did, I would like to attempt to 
bring my remarks into the present by commenting on why, 
in my opinion, the issue of site value taxation emerges as it 
does from time to time. 

First, the conditions referred to by the Smith Report in 
1967 are still in existence today. Much has been done in the 
interim to make the present property tax base more equit¬ 
able, such as the Farm Property Tax Rebate Programme 
and the whole GAINS programme; but the basic issues still 
remain. So the critics of the local property tax base still 
have a good deal to work with. What we, as assessors, must 
remember to point out is that we are in the process of 
reforming the tax base and that some (though unques¬ 
tionably not all) of the faults of the present system will be 
removed in 1976/77. A good example of this is vacant land 
assessment. Some vacant land is currently under-assessed. 
The Smith Report said so, and nobody would disagree. But 
before saying that market value taxation is no good and 
that we should adopt site value taxation, we must wait and 
see what market value taxation will do with vacant land. I 
think if you examine the reassessed properties in Muskoka 
and Bruce-Grey, you will find that vacant land is no longer 

Secondly, in the press articles which appear from time to 
time on site value taxation, a frequent theme is the serious 
problems faced by local governments in funding their ser¬ 
vices. I agree they do have fiscal problems — everyone does 
except millionaires, and even some millionaires occasionally 
have cause for thought. But I get the distinct feeling that 
the viewpoint of the press is heavily coloured by the situa¬ 
tion south of the border. Whatever difficulties we may have 
in Ontario and across Canada in local government finance, 
they are very different from those in the United States. The 
problems are different partly because, due to different 
social and, in particular, political conditions, we can apply 
solutions which they cannot. Thus, we know that Detroit 
has a decayed central core, but we can point to no similar 
case in Ontario. Moreover, Detroit does not have a metro¬ 
politan regional government like Toronto, and Michigan 
does not have a statewide reassessment programme, a 
system of comprehensive grants to support local services, 
nor a property tax rebate system. It was precisely these 

page 22 

aspects, no. 17 (May, 1975) 

types of problems which prompted the Ontario Govern¬ 
ment to take the active role it did in local fiscal support and 
to develop programmes to deal with them. Fortunately for 
Ontario, we have a constitution which makes such action 
possible. The British North America Act is not all bad! 

Thirdly, we live in times of rapid change. This produces 
uncertainty. The problems which surround us, such as 
speculation, inflation and urban decline, are difficult to 
solve. Site value taxation appears to be a solution to some 
and perhaps even to all these problems. I believe that as a 
solution, it is more apparent than real. I believe that 
speculation — or the entrepreneurial risk taken by some 
individuals to buy land cheaply, consolidate it into large 
parcels, and then develop it — is not bad but good, provided 
the rate of profit is not excessive and the objectives of that 
development meet with society's approval. I believe the 
best way of keeping the baby (the development) and only 
throwing away the bath water (excessive profits and anti¬ 
social development) is by income and profits taxes and by 
planning by-laws and not by rather utopian property tax 


So to sum up, when the question as to what local assess¬ 
ment practices should be instituted was considered, market 
value assessment seemed in the end to offer the most hope 
of achieving the fundamental goals of the reformers, 

1. an easily administered assessment system that could 
respond to changing conditions in Ontario in the coming 

2. an equitable tax base; 

3. a tax base which provides an adequate basis for 
apportioning taxes and grants; and 

4. a tax levy which would reflect changes in economic 

Site value taxation, on the other hand, did not seem to 
offer acceptable standards of equity, and it would be more 
difficult to administer. The resultant tax base could not be 
used for apportionment, and the ultimate impact on tax 
levies was unclear. Thus, in the end, market value was the 
direction chosen for property assessment and taxation in 
Ontario. □ 

Proposals for assessment reform 

in Nova Scotia 

Mr. Cameron is currently Director of Research for the Nova 
Scotia Department of Municipal Affairs. A graduate of Dalhousie 
University in Economics and Law, he has written articles on univer¬ 
sity finance and municipal government. He was a research associate 
with the Graham Commission, specializing in provincial and munic¬ 
ipal finance, including assessment. [Ed.] 

The Report of the Nova Scotia Royal Commission on 
Education, Public Services and Provincial-Municipal Rela¬ 
tions represents the results of one of the most extensive 
investigations of municipal government ever undertaken in 

Referred to as the Graham Report, after the Chairman 
of the Commission, Dr. John F. Graham, a Dalhousie 
University economist, the Commission's Report contains 
nearly 7,000 pages and over 1,400 recommendations. 

The Commission recommends generally that the 
provincial government should assume all of the present 
municipal responsibilities for education, health, welfare, 
housing, and the administration of justice. It recommends a 
municipal structure of eleven geographically extensive one- 
tier municipal governments to replace Nova Scotia's present 
65 cities, towns and rural municipalities. The provincial 
government would also perform the assessment, tax billing 
and collection, borrowing and pensions administration 
functions for these municipalities. 

Director of Research 
Department of Municipal Affairs 
Halifax, Nova Scotia 

The Report recommends, as the most important 
addition to provincial revenues to pay for its other recom¬ 
mendations, provincial taxation of all property other than 
residential property. Essentially this tax would apply to 
commercial and industrial property. The Report recom¬ 
mends that the rate be uniform across the province, at 
$4.00 per $100 of assessed value, with a special $2.00 rate 
for farms, forestlands, and property used as the base for 
commercial fishing. 

The reasoning behind the Report's recommendations 
concerning the form of provincial property tax recom¬ 
mended is illuminating: 

. . . Rather than have the province tax all property, so 
that the province and the municipalities share the same 
tax base, we considered it preferable to divide the 
property tax base into residential and non-residential 
. . . Municipal autonomy is better protected, since the 
municipalities would have full control of the tax on an 

aspects, no. 17 (May, 1975) 

page 23 

The Graham Report recommends, among others, that the provincial 
government should perform the assessment, tax billing and collection, 
function for municipalities. . .it favours splitting provincial-municipal 
tax bases. . .and a uniform commercial-industrial tax rate. . . 

identifiably separate tax base, rather than having to 
share their tax base with the province . . . 

A significant proportion of taxes on non-residential 
property is paid by persons not resident in a munici¬ 
pality, through the prices paid for goods sold by 
industries and commercial establishments . . .it is there¬ 
fore appropriate that the province use the revenues from 
the taxation of non-residential property . . .to finance 
general provincial services . . . 

Provincial taxation of business ensures that munici¬ 
palities will make decisions about industrial location and 
commercial development unbiased by considerations of 
the taxation revenues to be gained. One of the principal 
advantages of a uniform tax on commercial and 
industrial property is its neutrality. Business would be 
free to locate in its most economically advantageous 
location rather than being influenced by the capricious 
effect of differences in property tax burdens among 
municipalities. A further benefit would be the stability 
of the tax rate, which is a typical feature of provincial 
property taxes. 1 

The Report recommends the elimination of property tax 
concessions to industry, residential and business occupancy 
taxes, the deed transfer tax, and personal property taxes. 
The sales information provided at present by the deed 
transfer tax would be provided by mandatory affidavits of 
purchase price. 

The Commission also proposes a new definition of 
assessable property. A new definition appeared to be neces¬ 
sary in order to precisely define the tax base, given that the 
Commission recommends the elimination of personal 
property taxes. If this recommendation were to be adopted, 
it would no longer be true that all property, both real and 
personal, would be taxed, and the problem of defining the 
line between real and personal property would arise. 

The Commission recommends that assessable property 
should include real property with some extensions: mobile 
homes or trailers used for residential or commercial pur¬ 
poses, and rafts, floats, houseboats, boats used as a 
residence, docks and any other device anchored or secured 
to assessable property. Only machinery and equipment that 
is affixed to a building and services it, that "would, without 
special mention, be transferred by a conveyance of the 
land," would be assessable. The Commission also recom¬ 
mends that any structure affixed in some way to land 
should be assessable. The exclusions from the definition 
cover such subjects as public rights-of-way, including high¬ 
ways; minerals; personal property; and crops. 

Having come to a definition of assessable property, the 
Commission turned its attention to the problem of defining 
assessment value. The problem was adopting a new defini¬ 
tion of assessment value to replace s. 38 of the present 
Assessment Act, which reads: 

All property shall be assessed at its actual cash value, 
such value being the amount which in the opinion of the 

assessor it would realize in cash if offered at auction 
after reasonable notice, but in forming his opinion the 
assessor shall have regard to the assessment of other 
properties in the town or municipality so as to ensure 
that taxation shall fall in a uniform manner upon all real 
property in the town or municipality. 

This has been pretty clearly interpreted by the courts to 
mean market value, providing only that the uniformity 
criterion is dominant.' 

The recommended definition retains the primacy of the 
uniformity criterion, with only the changes in wording re¬ 
quired to provide for province-wide uniformity. The term 
"assessment value" replaces "actual cash value," but is 
defined to mean market value unless there is insufficient 
market value data available, in which case economic value 
(capitalized rental value) or depreciated replacement value 
are permitted. The intent is to preclude the courts coming 
to an unreasonable result where the market is thin or, 
practically speaking, non-existent. 

Special assessment provisions are recommended for 
farms and fishing properties. Essentially, the Report recom¬ 
mends a dual assessment system, based on a market value 
assessment and a value-in-use assessment. This latter assess¬ 
ment would be based on a restricted market for the 
property, in which it would be considered to be sold only 
for the use to which it is presently being put. Taxation 
would apply to the value-in-use assessment. When the use of 
the land is changed, the owner making the change becomes 
responsible for the difference between the value-in-use and 
the market value taxes for the previous ten years. The 
Report provides that tax bills should include a running total 
of the potential tax liability should the use of the land be 
changed, and that this potential liability should also be 
recorded on the tax certificate granted at the time of sale. 

No value-in-use protection is recommended for forest 
properties. If forestry is the highest value use of the land, 
the Commission recommends that the assessment value be 
based on the capitalized current stumpage value of the 
sustained yield maximum annual cut. The Commission 
recognized the probable difficulties of such an approach, 
but considered that with special training, assistance from 
foresters and a degree of self-assessment, acceptably 
accurate assessments could be achieved reasonably easily. 

The Commission also recommends taxation of construc¬ 
tion completed during a year and partial remission of taxes 
with respect to property destroyed or substantially altered 
in value during a year. 

The Report comments that "Nova Scotia is fortunate to 
enjoy the high level of assessment quality prevailing in the 
province, but there is still considerable room for improve¬ 
ment." 3 

Our principal recommendation concerning assessment is 
that the province should assume the full cost of, and 
administrative responsibility for, property assessment. 
Regional assessment has in fact left very little autonomy 
at the local level. Assessment practices are set out in the 

page 24 

aspects, no. 17 (May, 1975) 

statute and the Minister must approve hirings and dis¬ 
missals of assessors. Our recommendations for the 
improvement of assessing practices would lead to even 
more provincial control. Retention of the regional assess¬ 
ment committees would give no more than an 
appearance of autonomy at a fairly substantial cost to 
the municipalities. Most important, provincial assess¬ 
ment will ensure province-wide uniformity on an 
individual as well as on a municipal unit basis. Moreover, 
the proposed provincial tax on non-residential property 
would virtually make it necessary, in any case, for the 
provincial government to assume responsibility for 
assessment of this property to ensure that it was assessed 
on a uniform basis throughout the province. 4 

In order to implement its principal recommendation, the 
Commission recommended the establishment of a 
Provincial Assessment Service, independent of the Depart¬ 
ment of Municipal Affairs but reporting to that Minister. 
The Service would operate from eleven regional offices, one 
in each of the proposed counties, though the Report 
indicates that it may prove to be appropriate to combine 
offices in some areas. At present, there are 15 assessment 
jurisdictions in the province. 

Of equal significance is the Report's recommendation 
that the whole province be reassessed at full market value in 
the same year. Reassessments of the whole province would 
then be carried out every three years. If the provincial 
government were to adopt this recommendation by, say, 
the end of 1975, the goal could probably be achieved for 
taxation in 1977. 

Generally speaking, the Report found the quality of 
assessment in Nova Scotia to be quite high, particularly in 
the urban areas. Assessment-to-sales ratio studies indicated 
that there was an acceptable coefficient of dispersion (less 
than 15) in most of the towns surveyed, and in the two 
largest cities the coefficient was good (less than 10). 

In most of the rural areas the coefficients of dispersion 
were considerably higher. The Report considers this the 
natural outcome of a greater variation in property types, 
relatively little sales information and the erratically high 
prices being paid for waterfront and other recreational 
properties in rural areas. 

Nevertheless, the Report contains a number of recom¬ 
mendations designed to further upgrade the quality of 
assessment. These include the preparation of a provincial 
assessment manual; further emphasis on drafting and using 
property maps; continuous review and updating of the 
assessors' training programme, with emphasis on appraisal; 
annual, published assessment-to-sales ratio studies; com¬ 
puterization of assessment records; and the employment of 
assessors with special training to assess properties that 
present difficult valuation problems. 

To improve assessors' qualifications, the Report recom¬ 
mends up-dating and revision of the correspondence course, 
with special emphasis on appraisal training. To some extent 
this recommendation has been implemented in advance by 
recent revisions to the course. The Report also recommends 
an independent review of the course periodically to prevent 
it from becoming too ingrown, and to take advantage of the 
fresh perspective an outsider is likely to have. 

In the matter of quality control, the Report recom¬ 
mends that stratified assessment-to-sales ratio studies 
should be conducted for every municipality and then 

Closely related to the quality of assessment are an 
assessor's sources of information. The Report recommends: 

(1) purchasers of real property should be required to 
file an affidavit of purchase price as a condition of registra¬ 
tion of the transaction; 

(2) the provincial director of assessment should prepare 
an assessment manual for the guidance of assessors; and 

(3) priority should be given to assessment mapping. 
Again the Report has been anticipated to an extent, in this 
case by recent special grants to encourage assessment 

The Report recommends the continuation of revaluation 
for the intervals between reassessments. The main reason is 
to provide a basis for the recommended equalization grants 
that changes gradually, not suddenly every three years. The 
Report suggests that revaluation will also serve as a useful 
check on the accuracy of past assessments and provide 
valuable data for the next assessment. It would be con¬ 
ducted by the assessment service, not by a separately 
constituted revaluation commission as is done at present. 
The Report also makes recommendations concerning a new 
appeal procedure for revaluation assessments (which is un¬ 
likely to be often used), the information content of the 
revaluation report, and the timing of publication of the 
revaluation report. 

The Commission recommends the retention of specialist 
assessors to assist in valuing properties that present difficult 
valuation problems. Probably the most difficult properties 
to value are industrial, but there are several other types of 
property that are of infrequent occurrence within a region 
but are sufficiently frequent in the province to justify a 
specialist. The specialist assessor would also help to achieve 
the primary goal of uniformity. 

Most of the Graham Commission's recommendations 
concerning assessment appeals are of a fairly technical 
nature governing such matters as time limits, grounds of an 
appeal, and standing in court. The Report provides for a 
provincial assessment appeal court system with uniform 
procedures administering a uniform Act. 

More significant is the provision that an assessor should 
be required to explain his assessment first in any appeal, 
but the onus would not amount to having to put up a prima 
facie case. This is in effect putting into legislation a 
common practice. Secondly, to reduce the number of 
nuisance appeals, an appeal should be allowed only if it 
results in a change that is more than the lesser of $1,000 
and 10 per cent of the original assessment. 

The provincial government has taken no position on the 
Report and is in the process of studying its recommenda¬ 
tions with an eye to both desirability and practicality. 
Assessors in Nova Scotia are awaiting the outcome of this 
study and evaluation process with interest. 5 □ 


1 Report of the Nova Scotia Royal Commission on Education, 
Public Services and Provincial-Municipal Relations, Volume I, p. 
1 25 (pp. 1-23-8 and 1-23-9 in the temporary edition). 

2 The leading case is Mersey Paper Co. Ltd. v. County of Queens 
(1959), 18 D.L.R. (2d) 19, 42 M.P.R. 297, (N.S.S.C. en banc, per 
llsley, C.J.). 

3 Report, pp. 27-67. 

4 Report , Volume I, p. 139 (p. 1-27-1 in the temporary edition). For 
a survey of recent progress in Nova Scotia assessment practices, see 
H. S. MacGlashen, "Progress and Problems in Nova Scotia," 
Aspects, no. 4 (August, 1971), pp. 7-8. 

5 Copies of Volume I of the Report, Summary & Recommendations, 
are available from the Nova Scotia Government Bookstore, 1683 
Barrington Street, P.O. Box 637, Halifax, Nova Scotia, B3J 2T3, at 
$3.00. Copies of Chapter 27, Assessment, are available for $5.25. 

aspects, no. 17 (May, 1975) 

page 25 

O b A number of assessors would like some clarification of 
• the relationship between the Assessment Division and 
the Institute of Municipal Assessors. If an assessor 
chooses not to become a member of the Institute, 
will his employment status be affected in any way? 

m No, his employment status with the Ministry is not 
* conditional on membership in the Institute of 
Municipal Assessors. The workmg relationship is 
simply a professional one in that the Institute is a 
qualifying body whose function is to ensure that an 
assessor achieves and maintains acceptable levels of 
proficiency in his occupation. The I.M.A. also con¬ 
ducts training programmes, organizes meetings, 
publishes various materials, and does a number of 
other things to insure that assessors are well-informed 
and maintain at least some minimal qualifications. 
However, membership is not a condition of employ¬ 
ment in the Assessment Division, and whether or not 
any person becomes a member or retains membership 
will not affect his job. 

Q a Could you comment on the recent attempts to 
® promote legislation which would require appraisers to 
be licensed? 

„ We have seen a copy of a bill which purports to be a 
• piece of legislation whereby the Appraisal Institute of 
Canada will become the licensing body for all persons 
involved in valuation work. We objected very 
strenuously to this proposal, because we do not be¬ 
lieve that the Appraisal Institute of Canada is the only 
such body which should attain this kind of status. 
Certainly, in my opinion, the Appraisal Institute’s 
graduates are no better organized or better trained 
than most of the assessors who are trained by the 
Ministry of Revenue. Granted, to some extent the 
work of assessors and appraisers differs, because of 
the mass volume approach on the one hand and 
individual appraisals on the other. However, the basic 
qualifications that are required to be proficient as a 
valuer of property are equally necessary for the 
assessor and the appraiser. Therefore, we certainly 

would not support any attempt by the Appraisal 
Institute to become the sole licensing body on their 
own, exclusive of the assessment staff of this 

O , The regional offices in Metro Toronto and other 
■ urban areas are finding it increasingly difficult to hire 
and keep assessors because of high living costs. Do 
you foresee any possibility of instituting salary dif¬ 
ferentials for the assessors in these regions in order to 
compensate for this? 

* Well, first and foremost, I’m not sure that they are 
■ finding it increasingly difficult to keep assessors. One 
of our problems over the last four years has been to 
entice assessors to move to better jobs outside 
Toronto from Toronto. Clearly, they haven’t been 
interested in applying for the promotional opportu¬ 
nities in other parts of the Province, which has led us 
to believe that it is almost impossible to get them out 
of the Toronto area. On the other hand, it is probably 
equally difficult to get people to move from the more 
remote regions to Toronto because of the differential 
in the cost of living. I’m not sure if urban offices are 
finding it difficult to hire new people, but it may very 
well be true. However, in answer to the question 
itself, it is the policy of the Civil Service Commission 
of the government of Ontario not to pay salary 
differentials from one region to another for any class 
of employee, and I am sure that assessors are no 
different from any other employees, professional or 
otherwise, in the government service. There are un¬ 
doubtedly other classifications which have some 
people working in Toronto and others doing similar 
jobs in other parts of the Province, with the same pay 
scales in every instance. So if the assessor category 
suffers, then I would imagine that all others suffer 
too, and in the same proportion. At the moment, it is 
the stated policy of the government not to pay 
differentials, and I frankly don’t think that this is 
going to change. There are a lot of problems 
associated with differential salaries. For example, one 
of them came up yesterday, when the recent offer 
made by the Federal Government to a group of its 
employees was found to be unacceptable in certain 

page 26 

aspects, no. 17 (May, 1975) 



parts of Canada simply because there are salary 
differentials, and the percentage increase for the 
lower salaries didn’t provide the same wage increase 
as it did for the higher. So there are a lot of difficul¬ 
ties, and I don’t think the Province will institute a 
system of differentials. 

O m Prior to the Valuation File, the major emphasis has 
m always been on the cost approach to assessment. The 
File, with its rapid retrieval capabilities, will make 
available to the regional offices large amounts of data 
for other valuation methods. Will the existence of the 
Valuation File reduce the reliance on the cost 
approach in favour of the comparative sales and other 
approaches to value? 

B Yes, it will. It will, and it must. I think we are already 
■ moving away from the cost approach as a method of 
valuation. Certainly for a vast number of residential 
properties and properties that are very similar to 
residential, we should rely exclusively on the market 
data approach; and in the case of commercial 
properties, we should move to the income approach 
to produce values, rather than on the cost method. 
This transition may not be completed for several 
years, but clearly by 1977, 1978 or 1979, our 

reliance ought to be on these other methods in the 
Valuation File rather than on the cost manual. 

0 „ How will the Valuation File be updated when assess- 
■ ments begin to lose touch with sale prices? How often 
will updating be done? 

m I don’t think we’re in any position at the moment to 
• state how often the updating will be done. But clearly 
the Valuation File and the development of the up¬ 
dating process include updating the sale prices as they 
change. And clearly this must be done on a regular 
basis, so that we do not lose touch with sale prices; 
otherwise, the File will be useless. 

Q s Regional offices no longer have a copy of the current 
» assessment roll. A number of assessors and clerks feel 
that this hinders the efficiency of their work on 
appeals, apportionments, and severances. Is it possible 
that this policy will be changed, and that the offices 
will once again receive a copy of the returned roll? 
And if not, what was the rationale for this decision in 
the first place? 

e No, the policy will not be changed, and the offices 
® will not receive a copy of the returned roll. lam not 
convinced that this in any way hinders the efficiency 
of their work on appeals, apportionments or anything 
else. They have all the data, either on tape, computer¬ 
ized, or on printout forms and data revision sheets, 
and those can be used to do all of the work that they 
claim they are having trouble with. The major reason 
for getting away from the rolls has been the blind 
reliance on that particular printout as a data base for 
all successive rolls. As a result, corrections that are 
put into the computer, but not necessarily printed in 
that particular roll, tend to get lost. This is because 
people tend to go to the ever-handy roll—which carries 
outdated data — and forget to look at the data revision 
sheets, which are the ones with the latest printouts of 
any changes in the data base. Consequently, the same 
errors are repeated year after year, even though the 
names of the owners and the correct property 
descriptions have been entered into the File and 
printed out in the data revision sheets. Then when the 
field people check all this against the assessment roll, 
they change the corrected information back to the 
incorrect by virtue of this reliance on the assessment 
roll! That is exactly what has been happening, and 
that is why the offices no longer have a copy of the 
ro ll. □ 


aspects, no. 17 (May, 1975) 

page 27 


And their relationship with 
real property assessment 

Mr. Henssen is President of the International Office of Cadastre 
and Land Records. He is also Chief of the Department of Registra 
tion and Juridicial Affairs of the Central Directorate of Cadastre and 
Land Records in the Netherlands. The following is a revised version 
of the speech he presented at the Concepts of a Modern Cadastre 
Conference, in Ottawa, Ontario, October 23 and 24, 1974. [Ed.] 


Land, which is the basis of economic activity and, 
indeed, of the continued existence of human life itself, has 
been regarded throughout history as a valuable commodity. 
Land tenure in any country is closely related to its history, 
its climate, and the characteristics and customs of its 
people, along with their religious beliefs. The result has 
been the development of a system of land tenure and laws 
particular to each country. The ramifications are so com¬ 
plex that they present great difficulties to those who seek 
to amend land laws or to improve the existing land 
administration techniques and land registration systems. 

It is with these systems that the International Federation 
of Surveyors is concerned, insofar as they apply to the 
practice of professional land surveyors. The International 
Federation realized that something more tangible and suit¬ 
able than congresses was required because of the magnitude 
of the problem, if progress was to be made by all interested 
persons or countries. Therefore, shortly after World War II 
it was decided to set up a permanent organization to collect 
under one roof as much documentary evidence and 
information as possible from all sources on the subjects of 
land laws, land records and cadastral survey procedures. 
The tasks of this organization would be: 

— to collect, systematically file and index documents 
relating to existing cadastral and land registration systems; 

— to make and publish comparative studies; and 

— to give information and advice. 

Since 1958 the organization's official title has been 
"Office International du Cadastre et du Regime Fonder", 
but it is also known by the English title of "International 
Office of Cadastre and Land Records". When collecting and 

International Office of Cadastre 
and Land Records 
Apeldoorn, Netherlands 

distributing information and advice, the Bureau in Apel¬ 
doorn, Netherlands, not only resorts to the collection of 
data on file in its library, but also appeals to a network of 
expert correspondents in the field of cadastre and land 
registration in nearly one hundred countries. 

What is a cadastre? 

The term "cadastre" means a methodically arranged 
public inventory of the properties within a certain country 
or district, based on a survey of their boundaries; such 
properties are systematically identified by means of a 
separate designation on a large scaled map which forms a 
unit together with the registers, conveniently showing — for 
each separate property — the legal situation of every parcel 
of real estate, and also other relevant data with regard to 
state, nature and size of the property, etc. 

Cadastres, as a rule, consist of a map of the survey, a 
register arranged according to parcels, a register arranged 
according to proprietors, and auxiliary registers for easier 
handling. The single parcels are systematically numbered on 
the map. The connection between map and registers is 
established by denoting the parcels in the registers by their 
map numbers. In this way, an unbreakable connection is 
created between the diagram of the parcel on the large-scale 
map and information contained in the register. This method 
also gives information on the rightful claimants and on 
certain characteristics such as size, value, etc. 

The basic elements of any cadastre are: 

— an unambiguous definition of parcels, which are 
measured and represented on a map, and 

— a related record giving the required data about 
these parcels. 

page 28 

aspects, no. 17 (May, 1975) 

Historical background 

Seen from an historic point of view, the cradle of 
present-day cadastres stood in Continental Europe, where 
in the beginning of the 19th century fiscal cadastres were 
established everywhere. This development was in accor¬ 
dance with the Physiocrats' economic principles that land is 
the basis of all riches, so that the funds for the maintenance 
of society should be obtained mainly by taxing landed 

During this period and long afterward, the principal part 
of the State revenues was obtained by levying a land tax, 
ultimately based on the taxable revenue of the separate 
ground parcels and buildings, subdivided according to their 
different uses, such as agricultural lands or meadows, 
orchards, woods, houses, factories, workshops, etc. During 
the survey, the area of land as located in the field is 
recorded as a lot, provided it belongs to the same proprietor 
and has the same type of use. 

This delineation of land according to its use is required 
for fiscal reasons because the tax rates are set according to 
land use, in order to simplify the computation of yields. 

Every type of land use had a different taxable base upon 
which, in accordance with the requisite tariffs, a separate 
tax assessment was imposed. As a result, the custom in all 
these countries, having a system based on mensuration of 
parcels, was to split up real estate parcels for reasons of 
taxation systematics. In practical application, these real 
estate parcels were divided into small units, showing a 
different kind of use or cultivation, and were given a 
separate identification number. During the survey, the 
names of property/holders of the surveyed parcels are taken 
down, partly on the basis of a local investigation and partly 
by examination of the available documents relating to the 
parcels involved. 

Cadastres, from the day of their institution on the basis 
of mensuration of boundaries and examination of the legal 
status of the real estate parcels, have been known to consist 
of two parts, namely an administrative part — the registers 
— and a figurative part — the maps and their underlying 
documents. The map clearly shows the parcel boundary in 
connection with its surroundings. In the registers we find 
particulars with regard to the rightful claimants, size, type 
of culture, valuation class of the relating parcel, etc. 

Maps and registers 

Map and registers are closely linked together by means 
of the parcel identification, which is the number that has 
been placed inside the boundaries of the parcel as indicated 
on the large-scale map. In the same way as the name of a 
person distinguishes him from other people, the reference 
number of a parcel represents a specific portion of the 
earth's surface, with its extent and boundaries, and serves 
to connect surveys and registers. 

For reasons of efficiency, these parcel numbers should 
not contain too many figures. Therefore, it is the custom in 
the majority of countries keeping a cadastre to adapt their 
numbering system to the existing units of government, for 
example the municipalities, and to split up these units from 
the administrative and topographic points of view into 
possibly more sharply bounded zones of numbering, so- 
called sections or blocks, each with its proper name, letter 
or number. Such sections or blocks can, if necessary, be 
subdivided into still smaller units of numbering. This 
definite parcel numbering becomes an expression of the 
principle of speciality and is therefore based upon the 
smallest chosen numbering code, for instance from the 

parcel number via block indication and section to the name 
of the municipality and the province or country, or in the 
opposite order. 

The indication of parcel and parcel number on the 
cadastral map is the simplest method of correlating the 
location and size of a particular plot of ground and its 
situation within the national territory as a whole, while the 
cadastral measures, which form the basis of the cadastral 
map, give the correct boundaries of each separate parcel. 

In most countries with a cadastre, the measurements are 
laid down in field sketches or in aerial photographs showing 
particulars on real rights and topographic details pertaining 
to the newly-created property parcels. The sizes of these 
new parcels are calculated either graphically or with the 
help of coordinates of the turning points of their 
boundaries. The numbering of newly created parcels is 
actualized according to various systems, differing from one 
country to another. 

Systems of numbering 

In general, these systems of numbering include three 
groups, namely: 

1. On the basis of the origin, which includes a reference to 
the mother parcel number on the map, in the shape of a 
fraction and serving as an identification number. This 
fraction system can be recognized in the methods of 
renumbering in Germany, Austria, Finland and Bulgaria. 

2. On the basis of the origin, with the mother parcel 
number as the identification number, to which a letter 
or figure index is added. This affiliation system is used in 

3. The so-called free-numbering system, which means that 
the newly-created parcel is given the next unused parcel 
number of the section or block in which it is situated. 
This third system is in vogue in Switzerland, Iran, the 
Netherlands and several North American countries. A 
gradually increasing number of countries are beginning 
to adopt this system in cases of alteration or creation of 
new parcel boundaries. 

Recently a new tendency has arisen with regard to the 
numbering of the individual parcels, namely the tendency 
to identify them also with the aid of coordinates. This 
should be realized either by means of the coordinates of the 
center of gravity of the relating parcel, or by means of the 
coordinates of one of its angular points or of a fixed point 
within the parcel, marked with a stone. 

This new system is being instituted in order to make the 
automation of the cadastral administration more effective, 
so that it can be combined with other administrations 
which include data that relates to the ground, by means of 
an integration key formed by the parcel coordinates. If, in 
this case, the parcels have been identified with the same 
coordinates for computer use, then it will be much easier to 
collect data concerning a vast area, for instance on behalf of 
community planning, than by means of the conventional 
parcel designation. 

Information found in cadastres 

One might say that nearly all the cadastres have been 
made subservient to the identification of property units as 
subjects of legal actions to be registered in the legal registers. 
Beyond this, cadastral data are also used in many countries 
for a variety of other objectives. The manner of describing 
the details of cadastral units in the cadastral registers 
depends on their primary qualities, considered from an 
economic point of view. 

aspects, no. 17 (May, 1975) 

page 29 

The location of the land and the nature of the soil are 
decisive factors, as they determine the extent of land use 
and consequently the yield of landed property and its value. 
Therefore, the cadastres should generally record the follow¬ 
ing particulars: 

1. Proprietors, or underlying rightful claimant; 

2. The parcel, with its number and the names of the rights 
attached to the parcel and with a reference to the legal 

3. Size; 

4. Location, including street, number, field, or other 

5. Type of land use or exploitation; 

6. Nature of soil; 

7. Quality of the soil, within agricultural properties; 

8. Superficial contents; 

9. Value of the parcel; 

10. Revenue per annum, or a fixed revenue of the parcel 
for a longer or shorter period; 

11. Tax rate; and 

12. The name of the taxpayer (proprietor or user). 

As I mentioned before, in many countries it is a matter 
of interest for the Government, on behalf of a property tax, 
to know which subject (proprietor and/or owner of the 
underlying real rights) corresponds to which object 
(property unit). Also, for reasons other than tax levies, an 
increasing number of states have a vested interest in this 

Multi-purpose cadastres 

In the course of the last several decades, there have been 
an explosive increase of the world's population and 
continuous technical expansion and industrialization, and 
consequently, there has been an ever-increasing demand for 
property, coupled with a steady rise in its economic value. 
In a growing number of countries, the governments, as the 
guardians of the common interest, are having to deal with 
space planning problems, which implies that the real state 
of the millions of parcels into which a country is divided is 
at issue. 

With such a multi-purpose cadastre the following 
advantages can be obtained: 

1. Consequent stimulation of the land market and invest¬ 
ment in land, particularly through longer time credit 
secured on land. Most banking institutions insist on 
plans and good title before giving loans or mortgages. 
Development of both rural and urban land often requires 
more means than the owners can produce themselves. 

2. Machinery for assessing and levying land taxes. Histor¬ 
ically, cadastres were often first established for this 

3. Public planning of all kinds; the need for urban planning, 
housing and transport planning is tremendous. The large 
scale cadastral map, with the addition of other essential 
data such as contouring, is a vital tool for public health 
or engineering works, while the related records can 
provide equally essential information on owners, land 
values, buildings, etc. 

4. Agricultural statistics, electoral registers, assessment 
books and statistics concerning enterprises, buildings, 
etc., can be built up in the same way, and grouped by 
reference to the parcels on which the different activities 
take place or the people live. 

Every country needs an impartial institution in charge of 
the administration of land property (Land Registration and 

Cadastre) which, in addition to the legal data, will have to 
include all other information about the land.This is necessary 
in view of legal security and protection, and on behalf of 
many provisions in the fields of social welfare, town and 
country planning, etc., including the levying of land taxes. 
Since this is a question of common interest, this impartial 
institution should be a government service. Any similar 
administration (including registers and maps) will only then 
yield optimal benefits for its users, if it is set up on the 
basis of uniformity, and is kept strictly up-to-date. 

Uniformity of data organization 

In order to facilitate and warrant the above uniformity 
of administration, the Government should lay down 
compulsory rules for the entire country or territory. The 
lack of such rules might easily lead to data processing at 
random. With regard to the insertion of the legal situation 
in this administration, it would be commendable to issue 
imperative rules for the publication of the eventual muta¬ 
tions of that situation. The ideal solution with regard to the 
legal responsibilities to be attached to the data published by 
the administration would be to have no such force attached 
to non-published data. 

Before the establishment or improvement of a system of 
land administration (cadastre), it is important to know 
beforehand to which purpose(s) it will be applied, and the 
time limits for realizing the goals. Furthermore, there will 
have to be discussions among such disciplines as would 
frequently need information relating to data concerning 
ground parcels. In this connection, some attention should 
be focused on the incorporation of data concerning landed 
property (multi-purpose cadastre). 

The introduction of an inventory of landed property by 
means of a cadastral department requires close cooperation 
among legal, administrative and technical experts, who will 
be able to give sound advice regarding the most suitable and 
efficient systems. Because the establishment and main¬ 
tenance of a department of landed property is a problem 
involving the whole country, the competent authorities 
should be aware of the desirability of a training programme 
for the craftsmen who will execute the various tasks. It 
goes without saying that the responsible officers might 
profit greatly from the experiences made already in other 

Political and economic impacts 

If we take the trouble of looking into the history of the 
cadastre, we can see from many examples that its establish¬ 
ment frequently gave rise to political trouble. Land registra¬ 
tion, valuation and tax assessment procedures were always 
suspiciously watched by a certain part of the population. 
However, the political and social importance of the land 
tax, as well as its economic implications, should not by any 
means be underrated. 

It is particularly in its initial phases that the land tax 
may be considered an important source of national income 
and an essential factor contributing towards the infrastruc¬ 
tural development of younger countries. In apportioning 
taxes, however, due regard must be given to social view¬ 
points, so as to avoid over-taxation of small parcels of land, 
for with the increasing rate of industrialization and in view 
of the growing number of other types of taxes such as wage 
tax, business tax, income tax, etc., the share of land tax as 
against total tax revenues is less important than it was in 
former days. 

page 30 

aspects, no. 17 (May, 1975) 

However, land taxes will be always raised in countries 
where private property exists. The assessment of a land tax 
is above all based on the identification of 1) the tax subject, 
2) the tax object, and 3) valuation. The identification of 
the tax subject, or taxpayer, should be always coupled with 
the identification of the landowner or land user. In vacat¬ 
ing the tax, it is not as important to determine the absolute 
value of the tax object as it is to assess its relative value in 
proportion to other tax objects of a similar kind. The tax 
value, which is almost commensurate with the fair market 
value, is assessed according to size of area and value per unit 
area. Since the value per unit area is often determined less 
accurately, i.e. on the basis of estimates rather than the size 
of the parcel, the opinion can be that the measurements 
which are only for the purpose of establishing a mere fiscal 
cadastre need not be too exact. In order to be able to raise 
land tax as quickly as possible, the authorities must con¬ 
sider the possibilities of aerial survey for this one special 
purpose. It will be clear that an estimate of the total costs, 
which are required for the realization of such an operation, 
will also have to be taken into consideration. 

Cadastres and assessment 

The real property tax is an annual levy based on the real 
property assessment. Added to this tax can be a personal 
property tax on items such as furnishings not otherwise 
taxed. These items would also be assessed by the assessor 
while he inspects real property. Valuation of real property 
can be made for various other purposes in addition to real 
property taxation, including sale, purchase, land reform, 
mortgage, insurance, compensation of different kinds, 
damages and death duties. 

An official who evaluates property for purposes of taxa¬ 
tion is generally called an assessor. For property tax 
purposes, the assessor must list all property and all persons 
subject to tax. In most countries he is also the person who 
provides the cadastral bureaus with the taxation data which 
they enter into the cadastral registers. The financial 
authorities are, of course, in charge of levying the taxes. 

Much of the information collected by assessors of real 
property is useful for other governmental departments as 
well. It therefore has often been included in the items 
carried by a cadastre. 

This cadastre can practically always provide all items of 
relevant information regarding the parcel itself, such as 
frontage, depth and area. It should also provide most of the 
items of information regarding buildings, such as the 
number of storeys, dwelling units and rooms, and the floor 
area of the buildings located on a parcel. Land use should 
also be defined in the cadastre and, depending upon the use 
of the land for farming, pasture, or residential or com¬ 
mercial purposes, other items of information may be 
included. The use categories should be coded to a level of 
detail that will satisfy all users of this information. For 
example, for agriculturally used land, items describing the 
soil type such as mineral composition, root zone, rockin¬ 
ess and permeability may be of interest. This can be 
combined into a soil class number which, multiplied with 
the area, can result in a harvest expectance or agricultural 
productivity number upon which the valuation of land can 
be based. 

Area and frontage of a parcel, already mentioned, and 
possibly additional information regarding buildings, will be 
useful in the valuation of land used primarily for residential 
purposes. In addition, information about services provided 

to the parcel, which should also be integrated into the 
cadastral data, will prove valuable. 

Assessment of real property is particularly important in 
view of compensation payable in the case of expropriation. 
In practically all western societies, no one may be deprived 
of his property except for purposes of public utility and 
with adequate compensation. The latter requires that a just 
valuation be made first and that the compensation be paid. 

Cadastres and valuation 

A vital step in property valuation is the definition of the 
value to be estimated. A property can have more than one 
value at the same time. The market value of a property is 
the prediction of its most probable selling price, based on 
the past behaviour of typical purchasers; the value for 
insurance purposes, at the same date, is based on the repro¬ 
duction cost of a building (usually not including its 
foundation or the land) but less depreciation; the value to 
the owner, again at the same date, could involve an item 
such as a large area with a special use structure controlled as 
to humidity, temperature and absence of dust which is 
vitally important for the manufacture of one of the owner's 

Depending on the object pursued, valuation authorities 
can accept, for instance, one of the following five methods 
by which value for different taxation purposes could be 

a) A recent free sale of the property itself, where neither 
the conditions of the property nor of the market have 
since changed; 

b) Recent free sales of identical properties in the same 
neighbourhood and market; 

c) Recent free sales of comparable properties; 

d) The price which the revenue-producing possibilities of 
the property will command; 

e) The depreciated replacement cost, which is determined 
by replacing the structure with a new structure, utilizing 
today's building materials and today's construction 
costs, and then depreciating the structure to its present 

Problems for developing nations today 

When at the beginning of the preceding century many 
West European countries proceeded to administration of 
landed property and of the buildings thereon, the 
authorities had to face some of the same problems in which 
many developing countries are now involved. However, in 
that era of economic stability, the basis chosen for the 
ground tax was the annual rent of the landed properties and 
buildings. For the buildings, the average annual rent over a 
series of years was generally chosen as the basis of taxation; 
land parcels and fragments of parcels were taxed by means 
of an average annual rent over a number of years. Public 
buildings and other properties of common interest were not 
assessed. The idea was to keep the taxations up-to-date and 
to have them periodically renewed. 

This design, however, was in most cases abandoned after 
the first updating because of the high costs involved, and 
replaced by an assessment of the newly created objects 
based on a comparison with similar objects of an earlier 
date. Though the latter system had given rise to an ever- 
increasing number of problems for assessors before World 
War II, many years elapsed before it became obvious that 
the yield of the ground tax, which is indeed one of the 

aspects, no. 17 (May, 1975) 

page 31 

principal sources of revenue for the young countries of our 
time, gradually had dwindled to a rather insignificant 
amount in the budget of countries having a system of long 
standing. This was due, among other things, to the 
enormous rise of prices in every respect (wages, manage¬ 
ment, equipment) and the high costs of revaluation 
activities. Besides, the "established" countries have avail¬ 
able a variety of other sources of revenue, which are 
obtained by taxing such objects as can be developed by the 
younger countries only after they have secured the ground 
tax revenue. Among these other sources are the income tax, 
the sales tax, dividend and partnership taxes, and the 
luxury tax. 

Therefore, to many younger countries, the implementa¬ 
tion of a rational and efficiently working ground tax system 
may be just a matter of to be or not to be. Particularly 
insofar as taxation is concerned, they will be able to profit 
from the experiences of their predecessors, the longer- 
established countries. Meanwhile, it has become clear 
already that the younger countries are fully aware of the 
fact that the basic condition for the attainment of this end 
is the introduction of a stable source of revenue. Hence, a 
choice could be made from among the aforementioned 
systems. The ease and efficiency of the procedure will 
greatly depend on a well-considered establishment of the 
property tax, which means that in introducing the chosen 
system, preference should be given to the most densely 
crowded districts with a predominantly wealthy popula¬ 
tion. This pattern is to be found, among other places, in 
Mexico, where a start was made in the thriving province of 
Toluca with the establishment of a rounded-off, smoothly 
operating and completely automatized system. 

It goes without saying that the choice of every separate 
country depends on its national legislation, the prevailing 
customary rights, its social structure, etc. In comparison 
with the countries that had to face the same problems 
about 150 years ago, the younger countries enjoy the 
privilege not only of being able to profit by their pre¬ 
decessors' mistakes, but of asking for professional advice 
and even assistance, owing to the ever-increasing com¬ 
munications potential and the irresistible demand for co¬ 
operation, which has become manifest also in our field of 


Finally I should like to say a few words about the role of 
the valuer, taxator, assessor, appraiser and other officials 
involved in the valuation of property. 

Considering the fact that the majority of countries with 
an existing cadastre tend toward the development of a 
multi-purpose cadastre as one of the main pillars of a 
complete central data-bank system for immovable property, 
it seems an inevitable conclusion that the final goal should 
be to unite all these different versions of the same profes¬ 
sion. This could be achieved by bringing them under one 
and the same denominator as state officials by the name of 
assessors, who are to receive their training under the super¬ 
vision of experts nominated by the Government. 

It will be obvious that in countries where the profession 
of assessor, appraiser or valuer has, so far, been a private 
affair, a law should be enacted for the purpose of bringing 
the office under state control. This would, of course, imply 
that the government could take in hand the professional 
training, thus promoting the uniformity of systems, rates, 
etc. This is all the more cogent, universally, as the subject 
of amending our methods of valuation is very much under 
consideration in view of the growing need of data banks in 
almost every sector of social life. 

When I spoke about assessment and assessors, it was not 
my intention to claim that this assessment work should be 
the task of the cadastre offices. The cadastre offices can 
only handle the registration of the data which they receive 
from the assessor. But in view of the fact that the cadastres 
can efficiently and systematically register all relevant data 
concerning land, including valuation data, it seems obvious 
that a working relationship between assessor and cadastre 
could prove to be mutually beneficial. □ 


Doblin, Claire (Division of Public Finance and Financial Institution, 
New York). "Land Valuation and Land Taxation (An Experi¬ 
ence)," a paper presented to United Nations Interregional 
Seminar on Cadastral Surveying and Urban Mapping, West 
Berlin, June 24-July 5, 1974. 

Kronk, E. A. (University of New Brunswick, Canada). "Land Valua¬ 
tion and Land Taxation", a paper presented to United Nations 
Interregional Seminar, West Berlin, June 24-July 5, 1974. 

Nittinger, Professor Dr. (Technical University, Hanover, West 
Germany). "Cadastral Surveying as an Instrument of Political, 
Economic and Social Development", a paper presented to 
United Nations Interregional Seminar, West Berlin, June 24-July 
5, 1974. 

page 32 

Ontario. Ministry of Revenue. ?. 

May 1975 1975 

htkx c.l BAS 


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