Assessment Review Board

Commission de révision de l’évaluation foncière

File No: WR 66308 Region Number: 9 Municipality: City of Toronto Roll Number: 1904-103-010-00500-0000 Hearing Number: 138250 Application Number: 1783910

In the matter of Section 356.(1)(b) of the Municipal Act, S.O. 2001, c. 25, as amended, and in the matter of an application with respect to taxation year 2000 on premises known municipally as 35 Merton Street.

BETWEEN: City of Toronto

Applicant

• and -

Heather Downs Developments

Respondent

APPEARING: A. MacKay - Counsel for the Applicant W. Khullar - Representative for the Applicant K.H. Cho - for the Respondent S. Somerville S. Brooke T. Racioppo - for the Municipal Property Assessment Corporation

DECISION OF THE ASSESSMENT REVIEW BOARD delivered by: J. Wyger and J. Walker

This application came before the Assessment Review Board on January 17, 2008 in the City of Toronto.

ISSUE

An application under subsection 356.(1)(b) of the Municipal Act, was filed by the City of Toronto, seeking to apportion $18,970.87 in unpaid taxes that was outstanding on the “parent” roll number, among 144 condominium “child” roll numbers. The City sought to apportion the unpaid taxes on the basis of calculations provided by the condominium developer, rather than in accordance with a statement of the relative value of the condominium units prepared by the Municipal Property Assessment Corporation (MPAC). The issue for the Board to decide is whether the manner of apportionment requested is available pursuant to subsection 356(1)(b)(ii), or is a statement of relative value a necessary pre-condition for the operation of that provision.

DECISION

The Board concludes that before it can apportion on a basis other than a statement of relative value, it must first determine that an apportionment based on relative values is “not appropriate due to special circumstances”. The Board is unable to find “special circumstances” on the evidence presented, and in the absence of a statement of relative value, is unable to make any apportionment of the unpaid taxes.

REASONS FOR DECISION

Facts

The subject property is a 144 unit residential condominium building constructed by Heather Downs Developments. All of the units were sold and occupied by July 1999. Taxes on the omitted assessments were billed to the “parent roll number” of Heather Downs for the 1999 and 2000 taxation years. Heather Downs paid the full 1999 taxes and most of the 2000 taxes, leaving $18,970.87 unpaid for the year 2000.

Legislation

In forming its decision, the Board is governed by the following provisions of the Municipal Act.

Section 356 of the Municipal Act provides:

356.(1) – Division into parcels. Upon application by the treasurer of a local municipality or to the treasurer by an owner of land, the local municipality may,

(a) divide, for the purposes of this section, land which is assessed in one block into two or more parcels if each parcel is one that can be legally conveyed under the Planning Act;

(b) apportion the unpaid taxes on the land for the year in which the application is made and the two preceding years among the parcels,

(i) in proportion to their relative value at the time the assessment roll for the year in which the application is made was returned, or

(ii) if council is of the opinion that an apportionment under subclause (i) is not appropriate due to special circumstances, any other manner; and

(c) direct what proportion of any part payment of taxes on the land is to be applied to each of the parcels.

(2) – Statement. Upon the request of the local municipality, the assessment corporation shall provide a statement of the relative value of the parcels and the statement is conclusive.

The City’s Position

The City’s evidence is that the tax calculation provided by the developer reflects the actual state of the tax accounts between Heather Downs and the individual unit purchasers in the year 2000. Its Statement of Issues states:

Due to the special circumstances that specific amounts that were owing by the individual children at closing, MPAC’s relative values were not used to apportion the outstanding taxes.

The argument advanced is that using the developer’s breakdown is a better method for apportioning the taxes than using the relative values of the units.

The Homeowner’s Position

The unit owners did not receive the Statement of Issues from the City, and were given no information in advance of the hearing on the Heather Downs calculations of taxes owing. They argue that the City has accepted those numbers without ensuring their reliability. They further submit that it is unfair to pursue subsequent unit owners for taxes owing by the original purchasers of their units.

The Evidence

Mr. Angus MacKay, counsel for the City of Toronto, called three witnesses. Mr. Wazir Khullar, the City’s Tax Billing Supervisor, gave evidence outlining the assessment and tax history leading to the outstanding amount of $18,674.74. The Board accepts his testimony regarding the quantum of unpaid taxes. He conceded that with respect to the apportionment of those taxes, he accepted the breakdown provided to the City by Heather Downs, showing what it considered its share, and the portion it maintains was still owed by the individual unit owners. Only after the City accepted the breakdown, Heather Downs paid its share of outstanding taxes. The Board notes that certain elements of this process display the appearance of a negotiated settlement with Heather Downs.

Ms. Lucy DeBlasis is a Certified General Accountant, and the controller for Heather Downs’ parent company, and was involved in the creation of Heather Downs’ calculations. She testified that following full occupancy, the company was anxious to settle its tax account with the City expeditiously, and provided the impetus for moving the apportionment process along. She took the Board through a spreadsheet and sample statement of adjustments from two units, detailing the complex calculations leading to the taxes owing by each unit. One of the unit owners, Ms. Somerville, questioned the accuracy of these figures, pointing out the inclusion of a storage locker in the valuation of her unit, that was not included with the unit at the relevant time. Ms. DeBlasis also conceded that some of the figures comprising occupancy fees were estimated values. She left the Board with the impression that Heather Downs is a good corporate citizen, prepared to pay its fair share of the tax burden. While Ms. DeBlasis has made a good faith effort to ensure accuracy in furtherance of that goal, the Board is left with some doubts as to the reliability of the figures.

Mr. Tony Racioppo is a senior analyst with MPAC, and gave evidence on the values used by Ms. DeBlasis to underpin her calculations. Exhibit #4 is a spreadsheet entitled “2000 Tax Year – Collector’s List Apportionment”. It displays a “total apportioned value” for each of the 144 units. These are the values used in the first column of Ms. DeBlasis’s spreadsheet entitled “Ass. Per Tax Dept.” It is upon these values that Ms. DeBlasis calculated the taxes owing for each unit. Mr. Racioppo was very clear that this apportionment list is not a typical apportionment sheet, and is not a “statement of relative value” as set out in subsection 356(2) of the Municipal Act. Mr. Racioppo was less clear on whether the values represented the full assessed values for each unit. He surmised that they may have been supplementary or omitted values, and were possibly based on the builder sales values. The Board has some concern with the uncertainty surrounding the origin of these values.

The two homeowners who were present at the hearing did not present any evidence, but questioned the methodology behind the apportionment. Ms. Somerville argued that the City should not have accepted Heather Downs’s figures without question, and without giving the owners an opportunity to review and challenge the numbers. She also questioned why the value apportioned to her unit was way out-of-line with the sale price for the unit. The Board shares her concern that using one party’s figures, which are based on values of seemingly unknown origin, is problematic.

The Board accepts Mr. MacKay’s submissions referencing several sections of the Municipal Act, setting out the City’s authority to collect these unpaid taxes from subsequent unit owners. The Board has difficulty, however, with his argument that the Board should apportion the taxes in accordance with Heather Downs’s calculations for several reasons:

1. Reliability: While the Board believes Ms. DeBlasis has made a good faith effort to provide an accurate breakdown of the taxes owing by each purchaser in 2000, the fact remains that each one is a statement of account between two taxpayers who are adverse in interest. The City is relying on one of those parties for the numbers, evidently without much enquiry. The possibility that the liability placed on the unit owners, may have resulted from a negotiation with that other party, further clouds the issue. The Board questions whether, as a matter of principle, this reliance on a third party’s assertion of unpaid taxes as between taxpayers ought to be relied on by the City. In addition, there are some serious concerns as to the origin of the assessed values used by Heather Downs to calculate the taxes.

2. Statutory Interpretation: For the Board to apportion taxes “in any other manner” pursuant to subsection 356.(1)(b)(ii), requires the Board to first make certain findings. There must be “special circumstances” that cause the Board to form an “opinion” that an apportionment under subclause (i) is “not appropriate”. The apportionment under subclause (i) is based on a statement of relative value, provided by MPAC pursuant to subsection 356.(2). In this case, there was no statement of relative value provided to the Board in evidence. Based on the evidence and submissions, the Board finds that the City’s apportionment spreadsheet was not intended and is not in fact, a statement of relative value for the purposes of subsection 356. A plain reading of subsection 356(1)(b)(ii) requires the Board to first consider the merits of an apportionment using the statement of relative values and find it wanting, before it can consider apportioning in any other manner. Relative value is the standard or first option that must be ruled out as “not appropriate” before subsection 356.(1)(b)(ii) can be utilized to apportion taxes differently.

3. Special Circumstances: Mr. MacKay argues that the special circumstances bringing the matter within subsection 356.(1)(b)(ii) is the fact that specific amounts were owing by the “children” at closing. The Board is not sure what is special about this circumstance, and understands that it is quite a common state of affairs. It is certainly not in the same category of special circumstances found by the Board in the case cited by Mr. MacKay, Toronto (City) v. Arcadia Group [2007] O.A.R.B.D. No. 409 (ARB File No. 58396). As well, the special circumstances are supposed to relate to why an apportionment using relative values is “not appropriate”, not whether an alternative method is more appropriate. Further, it is somewhat circuitous logic to suggest that the existence of an apportionment made in another manner, can itself be the reason to make an apportionment in “any other manner”.

4. Appropriate: Using the Heather Downs’ figures may well be a better method to apportion, if indeed they accurately reflect the actual state of accounts in mid-2000. It is arguable that it would be reasonable with respect to the original owners, that they pay exactly the amount outstanding for their unit. It is equally arguable that apportionment based on relative value may be better; if for example, most or all the owners were subsequent owners. This would be based on the grounds that they should all share the tax shortfall equitably in proportion to their assessed values, rather than based on the indebtedness of the previous owner. However, no evidence was provided to determine the number of original owners and the number of subsequent purchaser/owners at this time. In any event, the Board is not directed to determine what method is more appropriate, but to determine whether the relative value method is “not appropriate”. The Board is in no position to make that determination because no evidence was provided for the Board to determine whether the relative value option is or is not appropriate.

The opinion or finding on what constitutes special circumstances, or what is or is not appropriate is a judicial decision to be made by council or in this case, the Assessment Review Board, based on evidence presented on the application. The City’s Statement of Issues states that “MPAC’s relative values were not used to apportion the outstanding taxes”. This demonstrates a misinterpretation of section 356. The determination that relative value is not appropriate, is not an administrative decision to be made by City staff. It is the Board that is given the authority to apportion taxes by section 356. The Board has the discretion to apportion taxes in accordance with subsections 356.(1)(b)(i) or 356.(1)(b)(ii). However, the latter option is clearly conditional on the Board receiving sufficient evidence to reject the first option. Presenting only the second method has the effect of fettering the Board’s discretion, with possible prejudice to the unit owners. The Board’s reading of the section would require the City to present a statement of relative value in all apportionment applications. It is at the hearing of the application, that any party could argue that to apportion on that basis would not be appropriate. If the Board is persuaded by those arguments, it can then consider an alternative method proposed by the parties, or determined by the Board itself. In the absence of any evidence on relative values in the present case, the Board is unable to make an apportionment under either provision.

“J. Wyger” J. Wyger Member

“J. Walker” J. Walker Member

/ci

DECISION RELEASED ON: March 17, 2008