Assessment Review Board
Commission de révision de l’évaluation foncière
Region Number: 3
Municipality: City of Ottawa
Roll Number: Not to be disclosed
Hearing Number: 146144
Application Numbers: 2012362 and 2012363
In the matter of Section 357.(1)(d.1) of the Municipal Act, S.O. 2001, c. 25, as amended, and in the matter of applications with respect to taxation years 2006 and 2007 on premises situated within the City of Ottawa.
BETWEEN: G.J.
Applicant/
Appellant
- and -
The City of Ottawa
Respondent
APPEARING: G.J. - for the Applicant/ Appellant
J. Pereira - Counsel for the Municipality
S. Templeton
DECISION OF THE ASSESSMENT REVIEW BOARD delivered by:
R. Levasseur and M. Sharma
These applications came before the Assessment Review Board on December 11, 2008 in the City of Ottawa.
ISSUE
G.J. is one of the owners of a closely held corporation which operates a business on the subject property. Although the corporation owns the property, G.J. is principle operator of this small business, which relies upon G.J.
On December 31, 2004 there was a serious fire on the property, destroying the structure and seriously injuring G.J. such that he was unable to operate the business during 2005 and most of 2006. The business did not reopen until October 23, 2006 after the building was demolished and replaced and G.J. had fully recovered.
Subsection 357.(1)(d.1) of the Municipal Act (Act), S.O. 2001, c. 25, states:
357.(1) Cancellation, reduction, refund of taxes - Upon application to the treasurer of a local municipality made in accordance with this section, the local municipality may cancel, reduce or refund all or part of taxes levied on land in the year in respect of which the application is made if,
(d.1) the applicant is unable to pay taxes because of sickness or extreme poverty;
G.J. has applied for relief under this subsection in respect of the taxes for 2006 and 2007. The City of Ottawa has passed a by-law under subsection 357.(11) of the Act authorizing the Assessment Review Board (Board) to exercise the powers and functions of the council.
DECISION
The Board finds that the applicant has an ability to pay the taxes and declines to cancel, reduce or refund any portion of the taxes for either year.
REASONS FOR DECISION
There are two tests under the Act:
Is there legitimate sickness of the operator of this business?
If so, does this sickness result in an inability to pay taxes?
The City of Ottawa does not contest the sickness of G.J., the principle operator of the business, and the Board is satisfied on the evidence that G.J. was physically incapable of operating the business during his lengthy period of convalescence. As a result, the business remained closed for a period of approximately 21 months during 2005 and 2006. Other provisions of the Act address vacancy rebates and cancellation, reduction or refund of taxes and the Board notes that this relief was applied for with a successful result. The only matter before the Board at present is the application under subsection 357.(1)(d.1); hence, the Board may only consider the tests set out above. The Board finds that there was legitimate sickness.
The Board finds that this sickness does not result in an inability to pay taxes.
Ability to Pay
The City filed Exhibit #7, a copy of the tax information for the subject property, indicating outstanding tax arrears. Taxes owing for 2005, 2006, 2007 and 2008 amount to $68,210.17, including penalty and interest. Taxes owing for 2006 and 2007 (currently before the Board) amount to $38,678.78, being $19,062.39 for 2006 and $19,616.39 for 2007. The Board has considered the applicant’s monthly income and expenses, as well as any assets available to G.J. and is satisfied that there is an ability to pay.
(A) Assets
The subject property is a corporation, owned by G.J. The City presented Exhibit #5 confirming that there are four directors of the corporation. No evidence was presented indicating that these directors share in the ownership of the corporation.
The City presented Exhibit #4, a copy of an Assessment Roll for the year 2007, identifying the current value assessment of the subject property as $380,000. The applicant testified that there is a mortgage of approximately $130,000 against the subject property. This results in an equity of approximately $250,000.
The City also presented Exhibit #3, a copy of an Assessment Roll for the year 2007, identifying a second property owned by G.J., a personal residence, which was assessed at $216,000. The applicant testified that there is a mortgage of approximately $162,000 against this property. This results in an equity of approximately $54,000.
Under cross-examination, G.J. acknowledged that he had recently sold a property in another country for a value greater than $400,000; however, most of this money was required to rebuild the building on the subject property. Although he had insurance on the destroyed property, the insurance claim was still pending. The applicant also acknowledged that he had savings in the amount of approximately $27,000, but he owed more than $28,000 in addition to the tax arrears.
(B) Income
The applicant testified that he lost his income as a result of the closure of the business and had no cash flow. Under cross-examination, G.J. stated that his business had reopened, something that was symbolic and very important to him. He further testified that his brother provided some financial assistance while he was recuperating from his accident.
(C) Expenses
The Board was not provided with actual expenses for the subject property. The applicant merely stated that there had been a lot of expenses in getting to the position of reopening his business.
G.J. provided estimated monthly expenses. These expenses were noted as follows on the appeal form:
Mortgage $2,053.57
Fuel 200.00
Hydro 400.00
Telephone 100.00
Medication 200.00
Food 500.00
Total Monthly Expenses $3,453.57
Municipality’s Position and Recommendations
Ms. Pereira, Counsel for the City of Ottawa, informed the Board that, although the applicant’s appeal is for the taxation years 2006 and 2007, taxes on the subject property have not been paid since 2005 (see Exhibit #7) and the balance owing is $68,210.17.
Ms. Pereira submits that the equity in the subject property and the equity in the residential property are available to G.J. and provide ample funds from which to pay the taxes.
Ms. Pereira presented Exhibit #8, confirming the City’s adjustment of the municipal taxes for 2005 and 2006, given under of sections 357/358 of the Act, reducing taxes and penalties by $3,742.85 because the building was vacant as a result of the fire.
Ms. Pereira encouraged the Board to decline the relief sought because the City had demonstrated an ability to pay.
The Applicant’s Final Comments
G.J. reminded the Board of his financial liabilities for the subject property, including the mortgage and some contamination issues in addition to his lack of income. He submitted that the business was operating at a loss and the building did not provide an income beyond that from his business. Reopening of the business was symbolic for him, a return to the status quo after the fire. He lost income during the forced closure of his business and asks the Board to cancel the municipal taxes for the period of time that the business was closed.
The Board’s Analysis
It was not the intent of the legislators that subsection 357(1)(d.1) would provide relief in circumstances such as those before the Board, when there is clearly an ability to pay. This subsection was intended to be a “last resort” provision available to persons without any ability to pay, but who could demonstrate that, with temporary relief, a property ownership could be salvaged. This subsection was intended to provide relief for someone in extreme need, who has made a valiant effort to honour obligations but can no longer do so due to “extreme” circumstances.
The Board must determine firstly if “sickness” or “extreme poverty” exists, and secondly, if either is present, the applicant must demonstrate an inability to pay some or all of the taxes under appeal.
Based on the uncontested evidence of the applicant, the Board finds that G.J. meets the test of sickness in subsection 357.(1)(d.1) of the Act. This finding alone does not relieve an applicant from the responsibility to pay taxes when an ability to do so is demonstrated; indeed, the Board agrees that the applicant should attempt to mitigate his arrears.
The applicant has significant equity in two properties. The proceeds of the sale of a property in another country provide approximately $400,000 in additional resources. Even if some of this money was spent on the erection of a replacement building, the Board is not satisfied that there is an inability to pay the outstanding tax arrears. This does not even take into consideration the prospect of recovery from the insurance company for the restoration cost. The insurance claim is still pending.
Ms. Pereira made reference to a previous Board decision concluding that a corporation is not eligible to make an application under the “sickness” provision of the Act since this section applies to individuals and not corporations. In arriving at its decision, the Board has considered only the ability to pay the taxes and has concluded that there is an ability to pay. The Board prefers to leave the issue of corporate ownership for future consideration, but it views the legislation as addressing ability to pay rather than ownership issues.
The City has adjusted the municipal taxes under section 357/358 of the Act, to account for a building vacancy. The lot has value even as a vacant lot and it will attract taxes as such.
No evidence of the expenses associated with the subject property was presented and the Board cannot speculate about such expenses. The Board must make its determination on the evidence before it. The Act requires that the Board consider the applicant’s ability to pay. The Board has found that the applicant has an ability to pay his taxes notwithstanding his sickness and injury, with the result that the Board cannot cancel, reduce or refund any portion of the outstanding amount of municipal taxes owing to the City of Ottawa for the taxation years 2006 and 2007.
“R. Levasseur”
R. Levasseur
Member
“M. Sharma”
M. Sharma
Member
/ci
DECISION RELEASED ON: February 27, 2009