1

An Impact Study - High Voltage Transmission Lines (HVTL) and

Injurious Affection

Presentation to the Valuing Diversity ConferenceParksville, BC – May 7,2016Daniel Doucet, AACI, P. App

2Purpose of the Impact Study

To provide Altus Group practitioners with the tools

necessary to estimate Injurious Affection on properties

being acquired for the Bruce to Milton HVTL

3Components of an Impact Study

Literature review

Tribunal case law review

Consultation with stakeholders (owners, buyers, sellers, appraisers and real estate agents)

Time trending resale analysis of impacted properties

Paired Sales analysis of on-line vs. off-line sales

4Valuation Issues

Severance damages

Interference with operations on the remaining property

Owner entitled to compensation for rights taken and loss in value to the remainder (Injurious affection)

Difficult to estimate the loss attributable to IA due to the lack of quantifiable valuation methods and procedures.

5The Bruce-Milton HVTL Corridor

The Bruce Power Nuclear Facility in Kincardine, Ontario

The project is lead by Hydro One, a Crown Corporation of the Government of Ontario, Canada

Project was announced on March 23, 2007

6The Bruce-Milton HVTL Corridor

350 parcels of predominantly agricultural land

benchmark appraisals, negotiation appraisals, section 25 expropriation appraisals, IA arbitrations

The projected operational date was December 1, 2012

Expropriation and arbitration process completed by late 2015

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11The Altus Group HVTL Impact Study

Examined the issue of potential loss in property value arising from proximity to High Voltage Transmission Lines (“HVTL”).

Study was prepared by senior practitioners in the Altus Group for Hydro One

The authors examined the issue of IA by reference to:

12The Altus Group Technical Paper

Prior work performed by RVA Right of Way and Expropriation Group (Altus Group Limited.)

Case Studies: Paired Sales Analysis and Time Trending Resale Analysis of On-Line properties

Surveying published literature on HVTL and corridor development of other public utilities

Tribunal Case Review

Consultation with landowners, appraisers and real estate agents.

13Hypothesis

The HVTL path through the property may impact the land’s utility

The placement of HVTL infrastructure can interfere with farm operations

Public perception is that the proximity to HVTL per se, is detrimental to property values

HVTL infrastructure can be a visual intrusion with potential to negatively impact property values

The impacts associated with HVTLs, however, are subject to empirical paired sales analysis, and such analyses indicate that the impacts are often less than common perceptions would suggest

14Literature Review

The published studies generally rely on:

– Statistical Analysis (Regression)

– Paired Sales Analysis

– Interviews with owners and other parties

Primary Factors influencing Property Value:

– The specific path of the HVTL corridor

– Visual Impairment

– Proximity of HVTL infrastructure to site improvements

Literature shows that there is no quantifiable health risk

The perceived risk can have an effect on property values according to market participants.

15Case Law Review

Province Operator Owner Decision

HVTL and Commercial Farm Operations

1 Ontario Municipal Board (OMB) Ontario Bauer v. Ontario Hydro 03/12/1993 8% 5% 5%

2 Land Compensation Board Ontario Ruddell v. Ontario Hydro 05/31/1983 0% 5% 0%

Impacts to Vacant Land

3 County Court Kootenay BC Hyhill Land Ltd. v BC Hydro and Power Authority 04/11/1983 2.5% 7% 5%

4 Alberta Surface Rights Board Alberta AltaLink Management Ltd. v. Royal West Property Corp. 03/20/2014 0% 10% & 25% 5%

5 Alberta Surface Rights Board Alberta AltaLink Management Ltd. v. Soorya Investments Ltd. 03/21/2014 0% 10% 5%

6 Alberta Surface Rights Board Alberta AltaLink Management Ltd. v. Yaltho 03/20/2014 0% 10% & 25% 5%

HVTL Impact on Rural Residential -Recreational Uses

7 Ontario Municipal Board (OMB) Ontario Lazar v. Hydro One Networks Inc. 06/11/2002 0% 30% to 54%. 30%

8 Ontario Land Compensation Board Ontario Wilson v. Ontario Hydro 04/01/1982 0% 15% 5%

9 Ontario Land Compensation Board & OMB Ontario Toad Hall Farms Inc. v. Ontario Hydro 08/16/1982 0% 20% 3%

10 Alberta Surface Rights Board Alberta ATCO Electric Ltd v. Serink 11/09/2015 N/A* 5% 0%

11 Alberta Surface Rights Board Alberta Montana Alberta Tie Ltd. v. KERCP Farms Incorporated 07/21/2014 0% 20% 14%

* The operators (ATCO) did not state compensation for Injurious Affection.

INJURIOUS AFFECTION PERCENT ON REMAINING LANDS

No. Board Citation Date

Compensation Percentage

16Case Law Review

17Case Law Review

Claimants are usually successful in pursuing compensation for injurious affection before the Board, Court or Tribunal.

There is a potential for efficiency losses on agricultural properties where the lines run across the farmed area.

“Unsightliness” is said to have a damaging effect on the enjoyment of a property.

The claimed loss of value for visual impairment generally lacks the objective test of market data.

Usually based on an owner’s perception of use and value

No cases identified where IA given on commercial/industrial properties

18Stakeholder Interviews

Market Participant Interviews

Perception of IA changes.

Towers as impediment.

Proximity and Changes in HABU

Market Support/Examples.

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Stakeholder Interviews

Appraiser Interviews

Is there impact on farming operations?

Injurious Affection due to Diagonal Crossing ?

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Stakeholder Interviews

Appraiser Interviews

Property type most affected?

Opinion of value loss?

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Stakeholder Interviews

Broker Interviews

Who is least susceptible?

Who is most susceptible?

Is house price a factor?

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Stakeholder Interviews

Broker Interviews

Value Loss Impacts

Marketing Time Impacts

Financing Impacts.

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Stakeholder Interviews - Conclusions

Conclusions

Effect on farming

Diagonal Crossings

Rural Residential

Appraiser’s adjustments

Broker’s adjustments

24Paired Sales Analysis

• Paired Sales Analysis (“PSA”)

– Compares sales of properties with transmission lines (“on line properties”) to similar properties without lines (“off line properties”) .

• Direct Comparison Approach

• Uses current transactions from a functioning market.

• Consistent with Market Value definition.

25Paired Sales Analysis

• MPAC Propertyline was searched for sales of similar type properties using a date range of approximately 18 months before and after the date of the “on line sale”.

• Search refined to a price range +/‐ $200,000 on either side of the subject (on-line)sale price

• Geowarehouse, MPAC Detailed Property Report

• One to six pairings per “on-line” sale

• All properties were inspected (drive by)

26Paired Sales Analysis

• 77 “on line” property sales paired with sales of 210 similar “off line” properties.

• All sales contemporaneous with the BxM Project.

• Timing ensures current market conditions considered.

• No transactions involved HONI.

• Bulk of the data (50 on/150 off) from BxM Corridor; other corridors also considered for trends/validation of results.

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CASE STUDY - PAIRED SALES ANALYSIS VACANT PROPERTY

TOWN OF LAKESHORE ES1-VA-AG Lakeshore Road 105

Index Sale A On Line Sale B Off Line Sale C Off Line Sale D Off Line

Address Lakeshore Road 105, Lakeshore

1076 Lakeshore Road 103,

Lakeshore

6950 9th Concession Road,

Tecumseh

3500 Rochester Townline,

Lakeshore

PIN 750110190 750110075 752300010 750650112

Date of Sale 15-Aug-07 15-Apr-09 15-Jan-08 26-Sep-07Sale Price $600,000 $414,000 $500,000 $425,000Time 'Adjusted Price $600,000 $366,735 $486,667 $421,458Total Parcel Area (ac) 73.07 47.45 50.83 53.51

Cleared 73.07 47.45 50.83 53.51Wooded 0.00 0.00 0.00 0.00

Zoning A A A ASoil Class Class 2 Class 2 Class 2 Class 2Easement

Location Road Crossing None None NoneOrientation perpendicular

AdjustmentsCleared land size adjustment 215,033 $186,664 $164,170Woodland size adjustment $0 $0 $0Land quality adjustment $0 $0 $0Adjusted Price $600,000 $581,768 $673,331 $585,629

Difference -3.1% 10.9% -2.5%

28Comments on Pairing

The crossing was a perpendicular road crossing.

The intervening land is cultivated therefore there is no screening of the lines.

Land size adjustment is based on market derived land rates adjusted to the date of the “on-line sale”

-3.1%, 10.9% and -2.5%, averaging 1.8%.....A nominal amount!.

29Observations

IA inversely related to separation distance between house and HVTL

Negative perception highest at time of active project

Stigma decreases over time

Vacant agricultural land is least affected

Rural residential small holdings are the most affected due to short separations

30Key Variables

Separation distance

Property type

Crossing type

Location

Physical Features (size, topography, screening)

31Separation Distance

32Separation Distance

33Property Type

Vacant agricultural land is least affected.

34Property Type

Rural Residential most affected

35Crossing Type

Categories included Side or Edge Clipping, Diagonal, Mid, Rear and Side crossings

Only Diagonal and Rear crossings were sufficiently numerous to yield a useful sample.

36Crossing Type

37Sensitivity Analysis

38Paired Sales Analysis Conclusion

Based on the data reviewed we conclude that Injurious Affection ranges between a high of 25% at relatively close quarters down to a nominal range of 3% to 5% at distances beyond about 1,000 feet.

The paired sales analysis has provided a market perspective on HVTL impact on property values.

This is considered the “best” method to determine injurious affection.

The results of the paired sales analysis validate the conclusions, opinions, decisions from the other sources of data presented in this paper.

39Re-Sales Analysis

Object of Research

Approach

Standardized Survey Instrument

Comparison

40Re-Sales Analysis

Object of Research

Approach

Standardized Survey Instrument

Comparison

41Re-Sales Analysis

Off Line Resale Study – 12% per annum

Conclusion

the resale activity of on‐line properties would seem to be in tandem with the market for off‐line properties.

42Conclusions

The specific HVTL path can result in a loss of value

The alignment is the most important variable for farming operations

Residential uses are mainly concerned with visual impairment and proximity issues

Perception of property value loss appears to be mainly qualitative without direct market support

Tribunals and courts generally found some level of compensation for owners claiming loss attributable to injurious affection.

Certain valuation benchmarks can be made from the findings

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44IA Arbitration Conclusion

E

E

45Actual IA Arbitration Conclusion

Baseball style arbitration

We are dealing with a parcel which will now have a 195 ft. wide rear corridor which is exactly that much closer than the existing portion of the 230 kV corridor on the subject and adjacent property, still 1100 ft. + or – from the edge of the woodlot.

Both appraisers agree that there is injurious affection, and agree that the distance of the new corridor from an improvement is key. In this circumstance there is potential for a dwelling in the woodlot.

There is significant screening available for any development in that location.

46IA Arbitration Conclusion

The arbitrator accepted the proximity categories based on the analysis of four corridors over ten years involving separation distances and crossing types.

The local paired sales analysis although giving the lowest average of all analysis, generally is support for a low range.

Overall the combination and broader perspective of analysis involving the initial technical paper, the study of separation distances and types of crossing impacts, a broader overall paired analysis supports the IA% conclusion

4% as proposed by HONI’s expert was awarded.

December 20, 2013

47More Information

Altus Group Limited: www.altusgroup.com

Bruce to Milton Project: http://www.hydroone.com/projects/brucetomilton/Pages/Default.aspx

Expropriations Act: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90e26_e.htm

Ontario Municipal Board Decisions. http://www.omb.gov.on.ca/english/eDecisions/eDecisions.html