Sears Canada has filed an appeal to try to reduce the assessed value of its Pacific Centre department store. If the application to the Property Assessment Appeal Board succeeds, the company could pay lower property taxes to the City of Vancouver because these levies are based on assessed values.

An intriguing aspect of the case involves Sears Canada’s efforts to highlight how the Bay managed to get its assessment reduced for its nearby department store on Granville Street. In a March 12 preliminary decision posted on the Web site of the Property Assessment Appeal Board, panel chair Rob Fraser and panel member Audrey Suttorp ordered the area assessor for the Vancouver Sea to Sky region to provide Sears Canada with a detailed property-valuation summary—or its equivalent—for a revised assessment of the Bay store.

“We find that it is not necessary for the Board to consult with the Bay before ordering the production of the information found in the Orders,” Fraser and Suttorp ruled. “This is information in the possession of one of the parties to this appeal, and we find it is relevant and necessary for proper adjudication of the Sears hearing.”

According to the decision, Sears Canada must inform the board and the assessor by Friday (March 26) on how it would like to proceed. Sears and the Bay are the only large department stores in Vancouver’s downtown core.

In 2008, the assessor valued the Bay’s land at $90 per square foot buildable. In addition, $55 per square foot buildable was assessed for the value of transferring any density rights at the Bay. This is because the store was considered a “redevelopment site”.

The Bay objected to this characterization. The decision noted that the assessor and the Bay subsequently agreed to amend the Bay’s assessments for 2008, 2009, and 2010. This reduced the assessed value by approximately 18 percent. The change also adjusted the percentage of the assessment connected to improvements (i.e., structures)—increasing it from 1.2 percent to 69 percent.

“This appears to be the result of a change in the valuation methodology from the cost approach to the income approach,” the decision states.

However, the new approach in the assessment of the Bay store differs from the approach that the assessor used in evaluating the Sears store. In the case of Sears, the property was assessed on the basis of its “highest and best use” as opposed to relying on the income approach, which doesn’t consider development potential.

The assessor initially refused Sears Canada’s request for the calculations of value of the Bay store, saying the agreement was confidential and privileged, according to the decision. Sears Canada subsequently filed its application to the Property Assessment Appeal Board, seeking an order forcing the assessor to produce this information. Sears stated that without the property-valuation summary, it is “not in a position to determine how to proceed”.

“We find that Sears was caught by surprise by the resolution of the Bay,” the panel wrote, “and if they had been aware of the potential resolution, they may have crafted their evidence and argument differently. We also note that the resolution occurred after the end of the Sears hearing, so there is also a likelihood that the Assessor’s staff assigned to the Sears hearing may not have been aware of the process in the Bay appeals.”

The city did not responded to the Straight’s request by deadline for the impact of the Bay’s new assessment on the amount of property taxes it must pay.