Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 3, 2015 FILE NO.: WR 132637

Assessed Person(s): Marbar Investments Inc. Appellant(s): Marbar Investments Inc. Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 13 Respondent(s): Town of Whitby

Property Location(s): 407 Crawforth Street, 1530 Dundas Street East, 1536 Dundas Street East and 1530-1536 Dundas Street East Municipality(ies): Town of Whitby Roll Number(s): 1809-040-034-01800-0000, 1809-040-034-17200-0000 and 1809-040-034-17300-0000 Appeal Number(s): 2970882, 2971012, 2970986, 3019305 (and 3080332 deemed appeal) Taxation Year(s): 2013, 2014 and 2015 (deemed appeal) Hearing Event No.: 583542

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: May 21, 2015 in Whitby, Ontario

APPEARANCES:

Parties	Counsel⁺/Representative
Marbar Investments Inc.	Allan Holmes
MPAC	Donald G. Mitchell⁺
Town of Whitby	No one appeared

DECISION OF THE BOARD DELIVERED BY JENNIFER GRIFFITH AND MARK SPRAGGETT

INTRODUCTION

1The appeals before the Assessment Review Board (“Board”) are filed by the Assessed Person, in respect to the returned assessments for the following subject properties in the Town of Whitby:

• $787,000 for the 2013 taxation year for 407 Crawforth Street;
• $9,933,000 for the 2014 taxation year for 1530 1536 Dundas Street East; $9,024,000 for the 2013 taxation year for 1530 Dundas Street East; and
• $638,000 for the 2013 taxation year for 1536 Dundas Street East.

PRELIMINARY ISSUE

2At the commencement of the hearing the parties requested that the above appeals be heard together. The reason being that the roll numbers (1809-040-034-01800-0000; 1809-040-034-17200-0000 and 1809-040-034-17300-0000) for the 2013 appeals were consolidated into a single roll number 1809-040-034-17200-0000.

3For the reason stated above and with the parties consent, the Board agreed to the request; and Counsel’s request to have Paul Leslie qualified as an expert witness for MPAC. Mr. Leslie presented an overview of his credentials and Allan Holmes objected. Mr. Holmes argued that Mr. Leslie’s experience is mostly in dealing with golf courses as opposed to auto dealership.

4In response, Mr. Leslie disagreed and testified that his experiences with MPAC are not limited to golf courses. He testified that he has held several positions with MPAC dating back to 1997 with focus on valuation of commercial and industrial properties over the past 10 years. He testified that he also participated in Provincial appeals dealing with commercial properties.

5Based on Mr. Leslie’s academic training, and work experiences with MPAC dating back to 1997, the Board confirms Mr. Leslie as a Valuation Specialist and the hearing continued.

ISSUE

6Donald Mitchell, counsel for MPAC is of the view based on the Cost Approach that a fair and equitable assessed value for the subject property, Roll Number 1809-040-034-17200-0000 is $9,933,000 for the 2013, 2014 taxation years. Prior to the consolidation of the roll numbers, the total returned assessment value is $10,449,000 for the 2013 and $9,933,000 for the 2014 taxation years.

7Mr. Holmes, representative for the Assessed Person/Appellant is of the view that the subject property is assessed too high, because MPAC failed to recognize the negative impact of the following;

• functional obsolescence – incurable and economic depreciation;
• narrow frontage for busiest vehicle traffic in Whitby;
• unprofitable and non-productive café;
• unused boardroom and file room that is used for storage;
• Building facility that is eight feet higher than operationally required; and
• Vacancies of nearby parcels of property

8Based on the above stated issues, Mr. Holmes is of the view that a fair and equitable value should be $1,700,000 off the returned assessment values (total returned value $10,449,000 for 2013 taxation year and $9,933,000 for the 2014 taxation year).

9The Town of Whitby was not in attendance at the hearing.

10The Board has to decide:

• Whether the returned assessments of $10,449,000 for the 2013 taxation year, and $9,933,000 for the 2014 taxation year for the subject property are at current value as at the valuation date January 1, 2012; and
• Whether the value is equitable with the assessments of similar lands in the vicinity.

DECISION

11The Board determines the current value to be $9,933,000 as of the valuation date of January 1, 2012.

12The Board finds that the evidence does not support the conclusion that an equity adjustment is required under s. 44.(3)(b) of the Assessment Act (“Act”).

13Therefore, the Board:

• Reduces the returned assessment of the subject property, roll 1809-040-034-01800-0000, at 407 Crawforth Street from $787,000 to $0.00 for the taxation year 2013;
• Reduces the returned assessment of the subject property, roll 1809-040-034-17300-0000, at 1536 Dundas Street East from $638,000 to $0.00 for the taxation year 2013;
• Increases the returned assessment of the consolidated subject properties, roll 1809-040-034-17200-0000, at 1530 1536 Dundas Street East from $9,024,000 to $9,933,000 for the taxation year 2013; and
• Confirms the returned assessment for the subject property, Roll 1809-040-034-17200-0000, at 1530 1536 Dundas Street East, at $9,933,000 for the 2014 and deemed 2015 taxation years.

REASONS FOR DECISION

Background

14The subject property is described as an Auto Dealership, located at 1530 1536 Dundas Street East, Whitby. The location is described as an area of auto dealerships and high traffic retail and minutes away from Highway 401. The subject property has a total site area of 5.99 acres, a total gross floor area of approximately 65,187 square feet (sq. ft.) comprising of a café, lounge, showroom, offices, wash bays, rapid lube, service area, lunch room, training room, board rooms, storage areas, body shop and mezzanine areas. The original structure dated back to 1966, with improvements over the years to upgrade and update the overall property, with the most recent renovation in 2010.

The Legislation

15In determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

16Section 1 of the Act states:

“current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.

17Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

18Section 19.2(1)2 of the Act states:

19.2(1) Valuation days. – Subject to subsection (5)¹, the day as of which land is valued for a taxation year is determined as follows:

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

19Section 40.(17) of the Act states:

40.(17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

20Section 40.(19) of the Act states:

40.(19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

21In determining the value at which any land shall be assessed, s. 44.(3)(a) and (b) of the Act requires the Board to do two things:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(a) determine the current value of the land; and

(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

Current Value

MPAC’s position

22In support of his argument Counsel presented Exhibit 1, and called Mr. Leslie, witness for MPAC who testified to the following contained in Exhibit 1:

23That after the consolidation of the three roll numbers into a single roll number in 2013, he looked at all three approaches to value and determined the Cost Approach to be the best approach to value for the subject property. The reason being that the subject property was purpose built, is unique and the Cost Approach allows for depreciation.

24As for the Direct Comparison Approach, he explained that it was not appropriate and would require tremendous amount of adjustments because of the uniqueness of the subject property.

25In regard to the Income Approach, he testified that there is not enough data available to determine value.

26In response to the approach to value, Mr. Holmes raised no objections and agreed that the Cost Approach was the best method of valuation for the subject property.

27Based on the Cost Approach, Mr. Leslie determined the value to be $9,933,000 for the subject property. This value he testified, took into consideration economy of scale which reflects a decrease in value of both total land and building. This is compared to the total returned assessment is $10,449,000.

28Mr. Leslie testified that he visited the subject property on two occasions. His first visit was on September 3, 2013 together with his manager Thomas Sullivan and a member of the Municipality. The second time was on June 25, 2014 and during that visit he inspected the subject property and discovered that a paved portion of the site area was missed and not valued. When the data was corrected it resulted in a value of $10,012,000 (Exhibit 1, Tab F). Nevertheless, MPAC is not seeking this value and is only seeking the value of $9,933,000.

29The issue of functional obsolescence – incurable and economic depreciation. Mr. Leslie referenced Exhibit 1, Tab F to show that in areas where depreciation adjustments are necessary because of time, age, and wear and tear, the costing values of specific structural areas were reduced to reflect the percent that was good. The value of the structural areas determined to be good ranged from 35% to 98%. In regard to functional obsolescence, Mr. Leslie testified that no functional obsolescence was found at the time of his inspection on June 25, 2014. Therefore, no adjustment was made for functional obsolescence.

30The issue of narrow frontage (30% of the site) for busiest vehicle traffic in Whitby. Mr. Leslie testified that although the subject property is located in a highly developed area with high traffic retail businesses (banks, car dealership, LCBO, restaurants etc.), the subject property is quite visible and accessible. Mr. Leslie testified that the intersection is controlled by traffic lights; there are four entrances from which the subject property could be accessed; and it is located on an elevated site area that can be seen distances away.

31The issue of unprofitable and non-productive café. Mr. Leslie testified that he observed during the June 25, 2014 inspection that the café was in use. He presented photographs (Exhibit 1, p. 7) taken during his inspection to show that there were individuals sitting and standing in the café and that it was definitely in use. Mr. Leslie testified that the operation of the café has no impact on the assessed value of the subject property, because only the structural area of the café is assessed. Items such as fixtures, sales, furnishings, wages etc. are not assessed and contribute no added value to the assessed value.

32The issue of unused boardroom and file room that is used for storage. Mr. Leslie presented photographs (Exhibit 1, p. 8 and12) to show that the boardroom is furnished with boardroom table, chairs, waste paper basket and phone. He also testified that he was told during the inspection that the boardroom is used occasionally. In regard to the file room, a photograph taken during the inspection (Exhibit 1, p. 12) shows that the file room is in use, albeit for storage.

33The issue that the building facility is 8 feet higher than operationally required. Mr. Leslie is of the view that the building facilities were purpose built to meet the needs of the company and that the height of service areas does not negatively impact its use. In support of his argument Mr. Leslie presented:

• Photographs (Exhibit 1, p. 9, 10 and 11) taken during the inspection on June 25, 2014, to show that vehicles were clearly being worked on and were hoisted and parked in the service areas;
• A Comparative Height Study of Auto Dealership in Durham Region (Exhibit 1, Tab B) of six comparable properties to show that the height of the subject property is not unusual. The average height area of these six comparable properties is 21.6 feet, as compared to the subject property with a height of 22 feet;
• Copy of a Work Permit taken out in 2005 by the previous owners with an estimated value of $2.5 million for new construction and addition to existing building (Exhibit 1, Tab D); and
• Copy of a Work Permit in 2009 taken out by the current owner with an estimated value of $3 million for addition and replacement of existing service and repair areas, including drive through, additional customer areas and demolition (Exhibit 1, Tab D).

34In support of land value, Mr. Leslie presented six sales of commercial land which occurred in the Durham Region (Exhibit 1, Tab A, p. 20) over the period August 2011 to March 2013. Mr. Leslie testified that these comparable properties are not similar to the subject property. However, they are presented to show that significantly smaller land parcels in the vicinity sold higher at a median sale price of $550,656 per acre, than the subject property at $532,991 per acre. The above sales reflect an average Assessment to Sales Ratio (“ASR”) of 0.99, indicating that properties are selling in the open market at values very close to the assessed values.

35Mr. Leslie also highlighted the fact that the sale at 1550 Dundas Street East (comparable property 3 on Exhibit 1, Tab A, p. 20) , on the same street as the subject property, with similar zoning and two blocks away sold at a cost of $1,170,732 per acre, significantly higher than the subject property at $532,991 per acre.

36In support of the total building area, Mr. Leslie presented three sales of auto dealership properties in the Durham Region sold in 2009, 2010 and 2012, to demonstrate that significantly smaller comparable properties sold at a median sale price of $244 per sq. ft., higher than the subject property at $152 per sq. ft. The sales reflect an average ASR of 0.99, indicating that properties are selling in the open market at values very close to the assessed values.

37On cross-examination, Mr. Holmes argued that the above stated issues negatively impact the assessed value of the subject property. In response, Mr. Leslie disagreed and offered the above stated rationale for each issue in support of his position.

38Mr. Holmes raised the issue of the land value for the newly consolidated land parcels, arguing that the value does not reflect economy of scale. Mr. Leslie disagreed and in response to Counsel, Mr. Leslie testified that prior to the amalgamation, the three parcels of land identified as roll number 1809-040-034-01800-0000 was assessed at $465,000 per acre for a total of 1.69 acres; roll number 1809-040-034-17300-0000 was assessed at $1,450,000 per acre for a total of 0.44 acres; and roll number 1809-040-034-17200-0000 was assessed at $588,000 per acre for a total of 4.03 acres. The average assessed value per acre of these three parcels is $834,000 (rounded) which is significantly higher when compared to the consolidated 5.99 acres of land at a value of $532,000 per acre.

39Mr. Holmes argued that the above comparable properties presented by MPAC are not similar and should not be compared to the subject property. Mr. Leslie agrees that these comparable properties are not similar in size. However, he reiterated that the above sales analyses were done to test whether the assessed value determined by the Cost Approach for the subject property is reasonable, when compared to similar type comparable properties in the vicinity.

40Mr. Leslie again reiterated that the above analyses were presented to demonstrate that significantly smaller parcels of land in the vicinity sold in the open market at a median sale price per acre higher than the assessed value of the subject property; and that the above average ASRs of the sales are indicating that comparable properties in the vicinity are assessed correctly.

Appellant’s Position

41In support of his argument, Mr. Holmes presented Exhibit 2 and Exhibit 3 and called Jerry Johnston, Director of Finance, Nurse Chevrolet Cadillac Ltd., Marbar Inc. as a witness because of his knowledge of the facilities’ renovation and operations. No objections were raised by MPAC and Mr. Johnston testified to the issues contained in Exhibit 2 and Exhibit 3:

42Issue of functional obsolescence - incurable and economic depreciation (Exhibit 2, p. 3). Mr. Johnston testified that MPAC failed to recognize this issue and is of the view that a reasonable adjustment should be a negative $850,000.

43The issue of unprofitable and non-productive café (Exhibit 2, p. 3, 28 and 29). Mr. Johnston testified that the capitalized café cash input is $545,000. Referring to Exhibit 3) Mr. Johnston testified that the café is not profitable and subsidies in the amount of $21,600 were paid to Mancini’s for the period June 2013 to June 2014 to operate the café. Prior to that a person by the name of “Gwen” was paid $1,600 per month to provide coffee to guests and lunch to staff. Mr. Johnson testified that Nurse Chevrolet Cadillac Ltd. (Marbar Investments Inc.) provides the facility, equipment and furniture and that the curator keeps all revenues and pays no rent. Mr. Johnston testified that Nurse Chevrolet Cadillac Ltd guarantees a yearly subsidy for $21,600 to the custodian as motivation to provide the service to their customers. He testified that the annual operating cost is $5,395.

44The issue of building facility that is 8 feet higher than operationally required (Exhibit 2, p. 3 and 5). Mr. Johnston testified that the total area involved is 43,800 sq. ft. (29,600 sq. ft. for the entire service department plus 14,200 sq. ft. for the body shop). Based on an estimated cost to cure of $15.00 per sq. ft. from Neil A Smith, Winvalley Contracting, on August 19, 2014 (Exhibit 3), Mr. Johnston is of the view that the total cost to cure would be $657,000.

45Mr. Johnston also argued that due to the extra height, of the building facility, utility costs increased by $174,425, because of air enhancement needed to heat and cool the facilities (Exhibit 2, p. 3 and Exhibit 3). It is important to note that Exhibit 1, page 5, stated that the decision to expand and renovate was for two reasons. First to accommodate any increase sales or service growth; and second, to adhere to new regulations to comply with image standards prescribed in franchise agreement.

46The issue of narrow frontage for busiest vehicle traffic in Whitby (Exhibit 2, p. 5). Mr. Johnston testified that the subject property’s frontage is only 30% of the total street frontage on Dundas Street. He argued that Dundas Street is the busiest vehicle traffic avenue in Whitby, and that MPAC failed to recognize the impact on the assessed value.

47The issue of unused boardroom (576 sq. ft.) and file room (Exhibit 2, p. 6, and 24 to 27). Mr. Johnston testified that these two areas are obsolete because the file room is used for storage instead of its intended use and the smaller boardroom is used occasionally. Mr. Johnston testified that the file room is replaced with a new and larger file room; and the old boardroom is replaced with a modernized larger boardroom that is fully equipped.

48Vacancies of nearby parcels of property (Exhibit 2, p. 10 to 22). Mr. Johnston presented 3 sales of vacant properties at 1208 Dundas Street East, sold in August 2008, for $1,550,000, property type 413 Restaurant – conventional, national chain; at 1550 Dundas Street East, sold in August 11, 2011 for $960,000, property type 105 Commercial Land; and at 18000 Kingston Road, sold August 24, 2011, for $6,500,000, property type 422 Auto Dealership.

49In reviewing the above three sales, the Board did not rely on the sale at 1208 Dundas Street East , because the sale in 2008 is too far removed from the valuation date of January 1, 2012 to provide any meaningful test of current value. This comparable property is also a property type 413, which is different than the subject property with a property type 422.

50The remaining two sales:

• The sale at 1550 Dundas Street is not similar and is significantly smaller than the subject property. This comparable property has 0.82 acres and sold at a cost of $1,170,732 per acre. This is compared to the subject property with 5.99 acres and assessed at a value of $532,991 per acre. This comparable property is also presented by MPAC; and
• The sale at 18000 Kingston Road is a similar type comparable property, with a total site area of 4 acres and sold at a cost of $1.6 million per acre. This is compared to the subject property with 5.99 acres and assessed at a value of $1.6 million (rounded). This comparable property was sold vacant.

51On cross-examination and in response to Counsel, Mr. Johnston testified:

• That he is the Director of Finance, Nurse Chevrolet Cadillac Ltd., Marbar Inc. and has been with the company for 30 years;
• That the café is not making money and should not be assessed;
• That the frontage is not worth much because it is narrow and only represent 30% of the street frontage;
• That the renovation was paid by Marbar and that construction costs over the years is $5.2 million, and that the old facilities were completely renovated;
• That the small boardroom is used occasionally; and
• That Winvalley contracting indicated in their letter dated August 19, 2014 to Holmes Consulting, that the additional 9 feet ceiling height of the structure cost $15.00 per square foot. Mr. Johnston testified that the affected areas are the entire service department with 29,600 sq. ft. and the body shop with 14,200 sq. ft.

The Board's Analysis And Decision

52In reviewing all of the above evidence, the Board finds the following:

• That the land sales with a median value of $550,656 presented by MPAC supports the land value of $532,000 per acre determined by the Cost Approach for the subject property;
• That the Appellant’s two sales of vacant comparable properties (one of which was presented by MPAC) also supported the land value determined by the Cost Approach. These two comparable properties sold at an average cost of $1.4 million per acre, compared to the subject property with a value of $532,000 per acre;
• That MPAC recognizes that the structural areas of the subject property are a mix of old and new and has factored in depreciation adjustments where it was deemed necessary into the assessed value determined by the Cost Approach (Exhibit 1, Tab F). The depreciation adjustments ranging from 35% to 98% for structural areas determined to be good;
• That the subject property is not prejudiced by the fact that the height of the structure in the service department and body shop areas is more than is operationally required. The reason being, that the subject property when compared to the average height of similar type properties in the vicinity (as demonstrated above by MPAC) is found to be similar; that no evidence was presented to show that these comparable properties receive any negative adjustment for similar height; and despite the height of the structures, vehicles continued to be serviced as demonstrated in the photographs presented by MPAC (Exhibit 2, p. 3 and 5);
• That Mr. Johnston’s cost to cure opinion of value of $15.00 per sq. ft. for the additional structure height is not supported by any detailed costing evidence to show how he arrived at that value. Instead, Mr. Johnston based his opinion on a letter from Mr. Smith, Winvalley Contracting who was not in attendance to be cross-examined. Therefore, the Board did not rely on the cost to cure evidence;
• That air enhancement cost of $174,425 for the additional height of the structure is operational costs that are not a factor in the Cost Approach to value, which the parties in their testimony agreed, is the best approach to value for the subject property. The Board also agrees with MPAC that the air enhancement cost should not be considered because the structure was purpose built. That argument is supported by the fact that a Work Permit in 2009, taken out by the current owner with an estimated value of $3 million was for addition and replacement of existing service and repair areas, including drive through, additional customer areas and demolition (Exhibit 1, Tab D); that the most recent renovation was in 2010, which is fairly close to the valuation date of January 1, 2012; and that Mr. Johnston testified that the renovation was done in order to accommodate any increase sales and service growth; and to adhere to new regulations and franchise agreement (Exhibit 2, p. 5);
• That there is no merit for the café cash input capitalization cost of $545,000 because the café has been operating albeit at a loss as testified by Mr. Johnston. Therefore, the Board finds that no obsolescence exists in the area of the café;
• That there is no merit to the argument of obsolescence for the small filing room and the small boardroom. The reason being that the small filing room is used for storage as shown in the photographs presented by MPAC, and the small boardroom continued to be used occasionally as testified by Mr. Johnston.
• That no evidence has been presented to quantify any negative impact of the narrow frontage of the subject property. The fact that the subject property is situated on an elevated site area of 5.99 acres, at the corner of an intersection controlled by street light, and with four entrances , would suggest that the subject property would be quite visible to drivers and pedestrians alike (walking, standing, stopping and driving). As well, the flow of traffic and pedestrian would be controlled because of the traffic light and individuals would be able to access the subject property at any entrance of their choosing, because of the four entrances; and
• That the best evidence in support of current value is the value of $10,012,000 presented by MPAC and determined by the Cost Approach. However, MPAC has made a recommendation of $9,933,000 which the Board accepts. The reason being that the above current value includes the value of a paved portion of the subject property that was missed when the initial assessment was done for the consolidated properties.

53Based on all of the above evidence, the Board determines the current value to be $9,933,000.

Equity

54MPAC presented no evidence in support of equity.

55No other evidence was presented by the Appellant.

56The Board finds that the evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

CONCLUSION

57Based on all of the evidence, the Board determined the current value to be $9,933,000, and finds this value to be fair and equitable. Therefore, the Board:

• Reduces the returned assessment of the subject property, roll number 1809-040-034-01800-0000, at 407 Crawforth Street from $787,000 to $0.00 for the taxation year 2013;
• Reduces the returned assessment of the subject property, roll number 1809-040-034-17300-0000, at 1536 Dundas Street East from $638,000 to $0.00 for the taxation year 2013;
• Increases the returned assessment of the consolidated subject properties, roll number 1809-040-034-17200-0000, at 1530 1536 Dundas Street East from $9,024,000 to $9,933,000 for the taxation year 2013; and
• Confirms the returned assessment for the subject property, roll number1809-040-034-17200-0000, at 1530 1536 Dundas Street East, at $9,933,000 for the 2014 and deemed 2015 taxation years.

2015 DEEMED APPEAL

58An appeal for the 2014 taxation year is presently before the Board. Section 40.(26) provides that the appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, this decision also applies to the 2015 taxation year.

59Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.

Footnotes

1. 1Subsection 5 permits the Minister to prescribe a different valuation day. A different day has not been prescribed.