Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 9, 2015

FILE NO.: WR 129741

Assessed Person(s): Susanna Krista Rajala

Appellant(s): Susanna Krista Rajala

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 32

Respondent(s): City of Thunder Bay

Property Location(s): 2201 Moodie Street East

Municipality(ies): City of Thunder Bay

Roll Number(s): 5804-040-192-08110-0000

Appeal Number(s): 2974055 and 3030471

Taxation Year(s): 2013 and 2014

Hearing Event No. 569875

Legislative Authority: Section 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

ARB Case Name: WR 129741

Heard: October 29, 2014 in Thunder Bay, Ontario

APPEARANCES:

Parties Counsel+/Representative

S. K. Rajala J. Rajala

MPAC G. Higginson

City of Thunder Bay No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property is a single family dwelling constructed in 2012 on an infill lot an established neighborhood in the City of Thunder Bay. The building comprises 2,637 square feet (“sq. ft.”) on two storeys with an unfinished basement of 1,588 sq. ft. in size. The house includes an attached two-car garage of 765 sq. ft. and lies on a corner lot comprising 0.25 acres. The property is full serviced and is at the limit of the existing residential neighborhood. As a result, MPAC has applied a value adjustment to account for its proximity to commercial uses.

2For the 2013 taxation year, MPAC returned an assessed value of $361,000. This value was determined through a correction of error under s. 32 of the Assessment Act (“Act”) to reflect the addition of the dwelling that was added to the lot in 2012. For the 2014 taxation year, MPAC applied a year end update of the features of the property, resulting in an increase to the 2013 returned value of $5,000 to reflect an adjustment in basement area and the addition of central air conditioning. For the 2014 taxation year, the value returned was $366,000.

3The Appellant believes that these values are too high and that the method of valuation used by MPAC is flawed owing to the location and nature of the comparable properties used in MPAC’s valuation. The Appellant believes the correct current value of the subject property is $351,000.

4The Board must determine two things in these appeals. Firstly, the Assessment Review Board (“Board”) must decide what the correct current value of the property is, based on the valuation date stipulated in the Act, of January 1, 2012. Secondly, the Board must determine if, when reference is made to the assessments of similar properties in the vicinity, the assessment determined for the subject property should be reduced further for it to be equitable.

DECISION

5The Board finds that the current value of the subject property is $373,000. The Board also finds that the evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

6The Board notes that the current value as determined above is at a higher level than the assessment as returned on the roll.

7Accordingly, the assessment of the property at 2201 Moodie Street East for the 2013 taxation year is confirmed at $361,000. For the 2014 taxation year, the assessment is confirmed at $366,000.

Legislation

8In making a determination of these appeals, the Board must consider s. 1, s. 19.(1) and s. 44.(3) of the Act.

9Section 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.

10Section 19.(1) of the Act states:

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

11Section 44.(3) of the Act states:

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.

MPAC’s Evidence

12Geoff Higginson is a property valuation analyst and represents MPAC in these appeals. Mr. Higginson testified that he used the direct comparison approach to value, whereby the sale values of comparable properties are used to make a determination of value of the subject property. In his valuation study, Mr. Higginson used six residential properties that had sale dates in proximity to the valuation date of January 1, 2012. He testified that he considered three of these comparable properties to be inferior to the subject property with respect to value. He considers the remaining three properties in his analysis to be relatively comparable to the subject property and that these three serve to indicate a range of value for the subject property. Mr. Higginson further testifies that the comparable properties used in his study were selected owing to their similarity in size and character to the subject property.

13In order to make the necessary comparisons of sale values of the comparable properties to the value of the subject property, Mr. Higginson applied a Time Adjustment Factor (“TAF”) to each. He testified that the TAFs used were derived from the sales of 480 residential properties that sold between January 2009 and December 2012. He added that the time adjusted sales values allow the adjusted prices to be compared to one another as though all of the sales took place at or near the valuation date of January 1, 2012. Table A summarizes the data used by Mr. Higginson for the six properties used in his comparison study.

14Mr. Higginson considers Sales A, B and C to be inferior to the subject property owing to their being older structures than the subject property, their smaller size and in the case of Sale C, the presence of a carport instead of an attached garage. Mr. Higginson considers Sale A to also be inferior to the subject property as it is a single storey dwelling, whereas the subject property is a two storey dwelling. Mr. Higginson’s opinion is that these inferior properties provide a lower limit to the range of value that should be applied to the subject property. He considers Sales D, E and F to be relatively comparable to the subject property. Mr. Higginson notes that Sale D has a lot of similar size to the subject property and has a slightly smaller building area. Sale E has a higher quality class applied and has a very similar overall building area. Sale F also has a higher quality class and has a smaller building area than the subject property.

15Mr. Higginson indicated that Sales A and B are in the same homogeneous neighborhood as the subject property and that the remaining sales in his study are in different neighborhoods in Thunder Bay. He concludes that the current value of the subject property should be higher than Sale A, the highest valued property that he considers to be inferior, and that the current value of the subject property should be near the values of Sales E and F, the most comparable properties to the subject property in his valuation analysis. He considers the 2013 and 2014 assessed values of $361,000 and $366,000 respectively, to be reasonable and therefore correct as a result.

16Mr. Higginson also completed an equity study to determine whether or not, with reference to the assessments of similar properties in the vicinity, the assessments derived for 2013 and 2014 should be reduced to make it equitable. He compared the sales of 75 residential properties in the vicinity with their January 1, 2012 assessed values to arrive at an Assessment to Sale Ratio (“ASR”) for each. These 75 sales range in date from January 2009 to December 2012. Mr. Higginson’s comparisons used the TAS value of each to equate the sale values to the 2012 valuation date. He testified that according to the International Association of Assessing Officers (“IAAO”), the resultant median ASR of the selected properties should fall within a range of 0.90 and 1.10 to indicate that equity of assessment is being achieved by this method. In addition, he stated that MPAC’s standards for residential properties is more stringent in this regard, indicating a range of 0.95 and 1.05. Mr. Higginson concluded that the median ASR of the 75 properties in 0.97, falling within the range of both MPAC and the IAAO that demonstrates that equity of assessment of residential properties in the vicinity is being achieved.

Appellant’s Evidence

17John Rajala represents Susanna Krista Rajala, the Appellant and Assessed Person in these appeals. Mr. Rajala believes that the comparable properties used in MPAC’s valuation report are, at least in part, unreliable for the purpose of determining the current value of the subject property. He points specifically to Sales D and E which he considers to be too far away geographically from the subject property to provide a meaningful comparison. He indicated that both of these properties lie within dramatically different neighborhoods than that of the subject property. According to Mr. Rajala, Sale D in an upscale neighborhood referred to as River Terrace, where a similar lot to the subject property would cost between $70,000 and $80,000 whereas the purchase price of the subject lot was $29,000. He suggests that even with all other things being equal, difference in land cost in the two neighborhoods would make an improved property in Rover Terrace $41,000 to $51,000 more valuable. When this difference is applied Mr. Rajala submits that the TAS value of Sale D ought to be reduced to $382,000 for direct comparison to the subject property, indicating the disparity in the two properties and the lack of comparability.

18Mr. Rajala further submits that Sale E lies within the Mount Forest neighbourhood where development is considered to be rural residential in nature. According to Mr. Rajala this is demonstrated by the much larger lot area for Sale E which needs to be considered. He did not suggest a specific adjustment amount for land area when comparing the subject property to Sale E.

19In addition to his concerns with respect to the comparable properties used by MPAC, Mr. Rajala believes that sufficient adjustment in value on the subject property was not made owing to:

• The subject property’s proximity to a commercial area although MPAC contends that an adjustment was made;
• The subject property’s proximity to an active railway; and
• The subject property’s location in the ‘West Fort’ neighborhood which is subject to aircraft noise as this area of the City lies along a flight path for aircraft arriving at and departing from the Thunder Bay Airport.

20While he does not apply specific values to the adjustments for these conditions, he believes the location of the subject property ought to be considered to have a lesser value than what was returned by MPAC.

21Given the construction completion date of the subject dwelling of August 31, 2012, the construction value should be a strong indicator of current value of the subject property according to Mr. Rajala. He acted as his own contractor in the completion of the dwelling. In his Exhibit 2, he provides an extensive and detailed summary of the costs incurred in constructing the dwelling and completing site work on the property. This summary indicates a total value of $346,193 plus harmonized sales tax (“HST”) of $29,296.53. He testified that he was able to obtain a HST rebate based on the new home construction value resulting in a total cost of $351,000 (rounded) which he believes represents the correct value of the subject property, including the value of the land purchase of $29,900. Mr. Rajala noted that some of the costs included in his summary, like built-in appliances and legal fees might not necessarily be included in a sale price of a similar property in an open market, but he included them to be sure he captured everything.

22Under cross-examination, Mr. Rajala confirmed that he acted as his own general contractor and that any savings that occurred as a result were spent on upgraded finishes and interior features. Mr. Rajala concluded that the unreliability of the comparable properties used by MPAC to determine current value and the documentary evidence of the cost of the dwelling and land which conclude within eight months of the valuation date combine to show that the current value of the subject property ought to be $351,000 for the 2013 and 2014 taxation years.

23The best indicator of current value of any property is the sale of that property, on the open market, between a willing buyer and a willing seller on or near the valuation date of January 1 2012. In the absence of such a sale, the sales of comparable properties may be used to make this determination. MPAC’s valuation study provides a range of values that can be attributed to the subject property by making comparisons with it to six properties that sold between November 2009 and October 2012.

24In order to be comparable, properties chosen for this purpose need not be identical; they only need to be suitable comparable so that reasonable adjustments can be made to their sale values to account for differences between the comparable properties and the subject property in determining its current value. In considering the sales used by MPAC in their direct comparison study, the Board disregards Sale A as it is a single storey dwelling, whereas the subject property is a two storey dwelling.

25In considering the evidence with respect to the proximity of the comparable properties used in the MPAC comparison, the Board disregards Sales D and E which are of sufficient distance from the subject property to be unreliable for comparison due to their differing neighborhoods, noting that there was no adjustment advanced by MPAC to account for the disparity in neighborhood character between these comparables and the subject property.

26The Board is left with MPAC’s Sales B, C and F and finds that these three to be suitably similar in character and location in determining the current value of the subject property by comparison. When the TAS value is divided by the square footage of each, value per square foot ranges from $112.22 for Sale C, to $192.83 for Sale F, with Sale B, at $141.61 as the median value of the three. By applying this median value to the square footage of the subject property, the result is a current value of $373,426 or $373,000 (rounded). While this value is somewhat higher than the value as determined by MPAC, it demonstrates that the assessed value placed on the subject property by MPAC is reasonably demonstrated by the study prepared by Mr. Higginson.

27By contrast, the Appellant relies on a value that does not depend on adjustments or the value of variables between other properties and the subject property. Instead, Mr. Rajala relies on the value of the subject property as constructed and completed in 2012 as demonstrated in Exhibit 2 by a fulsome accounting of the cost to construct and the land. The result of $351,000 was not time adjusted.

28While Mr. Rajala’s accounting of costs for the construction of the dwelling went into great detail, his submission does not speak to the value that would occur if the property changed hands, between a willing buyer and a willing seller on the open market. Mr. Rajala’s value of $351,000 was not tested on the open market, as the comparable properties in MPAC’s valuation did. Given this fundamental requirement in the Act the Board finds that the best evidence of the current value of the subject property is that of Mr. Higginson, who was able to demonstrate a reasonable current value based on the sales of comparable properties.

29Mr. Higginson testified that adjustments were made to the assessment for the 2014 taxation year to account for changes in the amount of basement area and the addition of central air conditioning. Mr. Rajala did not refute this additional value and the Board finds the increase to be reasonable for the 2014 taxation year.

30With respect to equity of assessment, the Board has only the documentary evidence of Mr. Higginson which indicates that the median ASR derived from the sales of 75 similar properties in the vicinity falls within the accepted industry ranges to indicate that assessments in the vicinity are equitable. Accordingly, the 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

31The Board finds that the current value of the subject property is $373,000. The Board also finds that the evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

32The Board notes that the current value as determined above is at a higher level than the assessment as returned on the roll.

33Accordingly, the assessment of the property at 2201 Moodie Street East for the 2013 taxation year is confirmed at $361,000. For the 2014 taxation year, the assessment is confirmed at $366,000.