Perspectives from the Public and Private Sector
By Doug Bennett
Director, Scope Management
A few weeks ago, I had the pleasure of participating in a panel discussion at a conference in Port-of-Spain, Trinidad, on Challenges and Recent Developments in Valuation and Construction: Perspectives from the Public and Private Sector conference. The conference was hosted by the International Property Tax Institute (IPTI) and the Royal Institute of Chartered Surveyors (RICS) Americas.
I sat on this panel with Jim Andrews and Michael McGrath – both Independent Valuers from the Cayman Islands. Jim started the discussion with a presentation on published standards for the valuation industry comparing and contrasting the RICS Red Book and the Uniform Standards of Professional Appraisal Practice (USPAP) from the Appraisal Foundation.
Following Jim’s presentation, I made a presentation focused on the differences between mass appraisal for tax purposes and valuing an individual property. My presentation also highlighted the Standard on Mass Appraisal, Standard on Automated Valuation Models and Standard on Ratio Studies from the International Association of Assessing Officials (IAAO).
Following my presentation, Michael spoke about using technology to assist in maintaining valuation standards.
Finally, after all the presentations, Paul Sanderson, our panel Moderator and the President of IPTI, asked questions of the panel members then opened the floor to questions from the audience. Several members of the audience actively participated asking a wide range of questions, sometimes targeted to a specific panel member, other times to the panel as a whole. As the majority of the audience was individual property valuers, I received a number of questions on the applicability of automated valuation models to their work.
One particular question was posed by a gentleman who is involved in land acquisition for the construction of a highway. His supervisor was suggesting that they base their offer for the acquisition of the individual properties on an AVM. He was interested in my opinion on the applicability of the use of an AVM for this purpose as well as supporting arguments for my opinion. When the gentleman explained the data that was used to make the model, it became readily apparent that this particular model was not developed in a manner to support its intended use. The sales used in building the model were drawn from a wide geographic area that did not closely resemble the area the model was to be applied in. In addition, the sales that were used in building the model where all market based transactions with willing sellers. Since the purpose of the intended valuation was for the taking of property, the gentleman in question was not working with willing sellers and as such the “sellers” of the property are looking for a premium on top of what the market would generally indicate the property was worth.
Another participant had questions on the viability of AVMs used for tax purposes in the Caribbean Islands. They felt that due to the diverse nature of building styles, construction quality and age generally seen within neighborhoods on the islands, that AVM’s could not accurately indicate the value of the property. I was able to explain that many U.S. cities face the same problem and with proper diligence paid to the modeling efforts, it is possible to generate a valuation model that will account for the variances in property within any particular neighborhood.
This conference provided me with the opportunity to reconnect with several old friends from the Valuation Division of the Ministry of Finance and the Economy, Government of Trinidad and Tobago. I had spent the better part of a year traveling to Trinidad during 2009 and 2010 implementing our customCAMA and Aumentum Tax solutions in support of the Property Tax Act of 2009. When the Government experienced some change over during the election of May 2010, the project was shelved. Rick Ali, the Assistant Commissioner of Valuation made a presentation on the history of property tax in Trinidad and highlighted the actions the Valuation Division is proposing in order to set the ground work for the re-implementation of the property tax in Trinidad & Tobago.
The Conference ended with a dinner and cultural presentation hosted by the Valuation Division at the Anchorage Beach Club in Chaguaramas, Trinidad.