Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 2, 2015

FILE NO.: ID 133436

Assessed Person(s): Timberland Equipment Limited

Appellant(s): Timberland Equipment Limited

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23, City of Woodstock

Property Location(s): 459 Industrial Avenue

Municipality(ies): City of Woodstock

Roll Number(s): 3242-020-070-20700-0000

Appeal Number(s): 2967855, 2991367, 2991368, 2991369, 2991370, 2991371, 2991372, 3027389 and 3091261

Taxation Year(s): 2013, 2014 and 2015

Hearing Event No.: 586029

Legislative Authority: Sections 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: July 9, 2015 in Ingersoll, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Timberland Equipment Limited	Loryn Lux and Paul J. Smith
MPAC	William Somerville and Brian Congdon
City of Woodstock	No one appeared

MEMORANDUM OF ORAL INTERIM DECISION DELIVERED BY DAN WEAGANT ON JULY 9, 2015

INTRODUCTION

1The subject property lies in an industrial area in the City of Woodstock and comprises several buildings of varying sizes on a lot of 16.67 acres. At the beginning of 2013, the building area of the property totaled 55,523 square feet (“sq. ft.”). Effective May 1, 2013, additions were made to the property that included an addition of a 42 foot high, 24,000 sq. ft. manufacturing facility and a 6,000 sq. ft. attached office. The property has undergone several additions, upgrades and physical changes over the years since its original construction in 1965.

2The Appellant has filed a total of nine appeals. Six of these appeals pertain to supplementary assessments placed on the subject property by MPAC to reflect changes on the property that had not been reflected in the assessment. The commencement date of these six supplementary assessments is May 1, 2013 and there is no dispute among the parties on that point. The remaining three appeals relate to the current value of the subject property for the 2013, 2014 and 2015 taxation years.

3At the outset of the hearing, the parties jointly submitted that the issues for the Assessment Review Board (“Board”) to determine are the current values for the 2013, 2014 and 2015 taxation years. They also submitted that given these current value findings, the parties would be in a position to agree on the value of the supplementary assessments to conform to the current value as determined by the Board for the 2014 and 2015 taxation years. The purpose of determining the current value for the 2013 taxation year is to establish the starting value upon which the supplementary values will be added.

4Complicating matters is the fact that the six s. 34 appeals apply to four different tax classes. The parties agree that the specific values of each of the supplementary assessments and the resultant apportionments after the supplementary assessments are applied can be agreed to by them, once the current values are determined.

5MPAC has returned an assessment for the 2013 taxation year of $2,199,000, apportioned as follows:

• Industrial Tax Class - $1,817,000
• Industrial Tax Class (Excess Land) - $327,000
• Commercial Tax Class - $55,000

6The Appellant believes that the value recommended by MPAC is too high, indicating that the returned value includes the value of a derelict building which exists on the site that is over-assessed and submitted that the correct current value for the 2013 taxation year should be approximately $37,000 less than returned as a result.

7MPAC has returned an assessment for the 2014 taxation year of $4,164,000, apportioned as follows:

• Industrial Tax Class - $3,888,300
• Industrial Tax Class (Excess Land) - $164,000
• Commercial Tax Class - $58,400
• Exempt - $53,300

These same values apply to the 2015 deemed s. 40 appeal that is also before the Board.

8The Appellant believes this value is also too high and that the correct current value should be $3,598,000, based on the comparison of the assessment of the subject property to the assessments of similar properties in the vicinity.

9The parties met at the subject property on June 5, 2015 to discuss their continued areas of disagreement. The result was that MPAC considers its data to be complete and up to date and that there was no reason to amend its findings with regard to the current value of the property.

10The Board must determine a number of issues in these appeals. Firstly, the Board must determine the current value of the subject property as of January 1, 2012, the valuation day stipulated in the Assessment Act (“Act”) for the 2013, 2014 and 2015 taxation years. Secondly, the Board must determine if, when reference is made to the assessments of similar lands in the vicinity, the assessment of the subject property should be reduced to make it equitable.

11In addition, the Board must determine, after the current values are arrived at, the effective date, the value and the apportionment resulting from the six supplementary assessments applied by MPAC for the 2013 taxation year.

DECISION

12The Board finds that the current value of 459 Industrial Avenue for the 2013 taxation year is $2,162,000. Further, the Board finds that the evidence before it does not support a reduction in the assessment below the current value as determined above.

13Accordingly, the Board finds that the assessment of the subject property for the 2013 taxation year is reduced from $2,199,000 to $2,162,000, apportioned as follows:

• Industrial Tax Class - $1,780,000
• Industrial Excess Land - $327,000
• Commercial - $55,000.

14The Board finds that the current value of the subject property, for the 2014 and 2015 taxation years is $4,127,000. ($4,164,000 reduced by $37,000 for the difference found in regard to Building 8). The Board further finds that when reference is made to the assessments of similar properties in the vicinity the assessment of the subject property should be reduced from the current value determined. Accordingly, the assessment of the subject property is reduced from $4,127,000 to $3,598,000 for the 2014 and 2015 taxation years.

15The Board finds that the commencement date of the six s. 34 appeals is May 1, 2013, and that the total value of these supplementary assessments is $1,436,000, being the difference between the assessments for the 2013 taxation year and the 2014 / 2015 taxation years determined above. The parties are directed as follows with respect to the specific values of these supplementary assessments:

• Within 45 days of the release of this decision, MPAC shall provide the Appellant, with a copy to the Board, its determination of the specific values of each of the six supplementary assessments and their respective tax classes.
• Within 30 days of receipt of MPAC’s determination, the Appellant is to provide its acceptance of the figures in MPAC’s determination, with a copy to the Board.
• In the event that the parties are not able to agree on the values of the supplementary assessments, they shall jointly give notice to the Board, within 75 days of the release of this decision, requesting that the Board reconvene the hearing for the purpose of determining the value and apportionment of the supplementary assessments.

Legislation

16In making its determination on these appeals, the Board must consider s. 1, s. 19.(1), s. 19.2(1), s. 34 and s. 44.(3) of the Act R.S.O. 1990, c. A.31.

17Section 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.

18Section 19.(1) of the Act states:

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

19Section 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.

20Section 34 of the Act states:

34(1) Supplementary assessments to be added to collector’s roll. – If, after notices of assessment have been given under section 31 and before the last day of the taxation year for which taxes are levied on the assessment referred to in the notices,

(a) an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose;

(b) land or a portion of land ceases,

(i) to be exempt from taxation,

(ii) to be farm lands the current value of which is determined in accordance with subsection 19 (5),

(iii) to be conservation land or managed forests land the current value of which is based on current use under subsection 19 (5.2),

(iii.1) to be land in the managed forests property class the current value of which is determined under subsection 19(5.2) or (5.2.1),

(iv) to be land the current value of which is based on current use under regulations made under subsection 19 (2), or

(v) to be classified in a subclass of real property;

(c) Repealed: 1997, c. 5, s. 22 (1).

(d) a pipeline increases in value because it ceases to be entitled to the reduction provided for in subsection 25(9),

the assessor may make the further assessment that may be necessary to reflect the change, and the clerk of the municipality upon notification thereof shall enter a supplementary assessment on the tax roll and the amount of taxes to be levied thereon shall be the amount of taxes that would have been levied for the portion of the taxation year left remaining after the change occurred if the assessment had been made in the usual way.

21Section 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.

Current Value – 2013 Taxation Year

MPAC’S Evidence

22The sole area of dispute from the Appellant’s perspective is the assessment attached to one of the structures on the property known at the hearing as “Building 8.” Mr. Congdon considers Building 8 to be a storage building, physically separated from the manufacturing part of the operation. Mr. Congdon testified that he personally inspected the property and applied a 30% obsolescence reduction on all of the buildings that existed prior to the May 1 supplementary assessments that reflected new buildings on the property, including Building 8.

23The Board heard that Building 8 was constructed in 1980 and had been used as a sandblasting building until 2007 when it was replaced by a new building for the same purpose.

24Mr. Congdon testified that Building 8 clearly exists and as a result, it has value as a component of the overall value of the subject property. Further, Mr. Somerville submitted that when the value of Building 8 is being considered, the guiding factor should be its use as a storage structure and not its condition.

Appellant’s Evidence

25Mr. Smith provided the Board with recent photographs of Building 8 in support of the Appellant’s position that the structure adds no value to the property and, hence should have no assessed value. He concurred with Mr. Congdon with respect to the history of Building 8.

26Mr. Smith testified that Building 8 is derelict, has no function in the operation of the property and lies within an area now used for the storage of refuse and other obsolete materials related to the operation of the owner.

27Ms. Lux called Lisa Disalle to provide further detail with respect to Building 8. Ms. Disalle has been with the Appellant, Timberland Equipment Limited (the “Company”) since 2012 and is currently the Company’s Chief Financial Officer; a post she has held since 2013.

28Ms. Disalle submitted that Building 8 is not used by the operation for any purpose owing to its dilapidated state, and that it is a left over structure from 2007 when its purpose was transferred to a new building. Under examination in chief, cross-examination and in response to questions from the Board directly, Ms. Disalle was unable to clearly articulate the use of the building. She acknowledged that some materials (of unknown origin to her) are inside the building, and that the building itself lies within an area of the subject property where the Company regularly drops articles of no value for future disposal, presumably to some licensed recycling or disposal facility. In effect, Ms. Disalle considers Building 8 to be part of the refuse from the operation on the property.

29Ms. Disalle characterizes Building 8 as having no value to the Company and stated that she believed the cost of removing it is too costly for the Company to consider, seeing at it poses no concern to them with respect to their operations; which is to say, while it is considered a liability, it isn’t in the way.

Analysis

30The only issue with respect to the 2013 current value of the subject property is the value of approximately $37,000 applied to Building 8 by MPAC. MPAC believes this is an appropriate valuation given the condition of Building 8, considering a 30% obsolescence adjustment has been applied, and the fact it is being used for storage on the property.

31The Appellant believes Building 8 has no value, owing to its condition and the fact that it provides no function to the operation of the Company in its manufacturing process.

32The Board must determine if Building 8, in its current condition, has any value at all and if so, how much.

33The Board recognizes that for many, value is highly subjective. A homeowner could say, “While that detached garage is on my property, I don’t use it, so it has no value to me and hence should not be assessed.” This argument has little merit in terms of assessment. The test of current value is what a property would sell for between a willing buyer and willing seller without encumbrances, on the open market.

34The Board also recognizes that context is important when arriving at findings of value. A derelict building of 2,400 sq. ft. in one instance might very well be more or less valuable if it existed in a different setting. The photographs submitted by Mr. Smith are very compelling with respect to context. Building 8 is clearly set away from the rest of the manufacturing function taking place on the subject property. It lies in an area that can be fairly described as unkempt, derelict, neglected and in all likelihood, dangerous to anyone who ventures into it unawares. The building itself has a good portion of the siding removed, either for use elsewhere or through general deterioration. There are no working doors to the building. One overhead door is completely missing, while the other is obviously not functional. Much of the framing is exposed to the weather.

35The Board agrees with Ms. Disalle’s view of the building as essentially being part of the refuse that surrounds it and that its condition represents a liability to the overall value of the property as opposed to an asset. Accordingly, the Board finds that the current value of Building 8 is $0, and that the current value of the subject property for the 2013 taxation year is reduced by $37,000, representing the value attributed to Building 8 by MPAC.

Current Value – 2014 Taxation Year (Deemed for 2015)

MPAC’S Evidence

36Mr. Congdon testified that he developed the current value assessment for the 2014 and 2015 taxation years in two different ways. Firstly, the buildings were valued using the Automated Cost approach, whereby MPAC uses established costs for various components of the building, called the Automated Cost System (“ACS”) and adjusts those costs for various factors like age and obsolescence and then adds the value of the land to arrive at the total assessment value. In this case, Mr. Congdon took the assessment value for the 2013 taxation year and added the values of six different supplementary assessments to the property for improvements in 2013 to arrive at a value of $4,164,000.

37After arriving at the value from the ACS, Mr. Congdon conducted an analysis of sales of six comparable properties that were sold in Oxford County between July 2010 and July 2013. The purpose of his analysis was to determine the Assessment to Sale Ratio (“ASR”) for each of the properties sold. The ASR for the properties in Mr. Congdon’s sales analysis range from 0.86 to 1.11 with an average ASR of 1.00 and a median ASR of 1.01. Mr. Congdon’s opinion is that this analysis indicates that the ACS method used for valuation of the subject property and which was used to determine the assessment of those properties in his analysis, is fair and equitable as the Median ASR is at or near 1.00. He testified this means that assessments in the vicinity are being determined in a fair and equitable way. He concludes that no adjustment should be made to the assessment returned for the 2014 taxation year as a result.

38To further support his opinion of the value of the subject property, Mr. Congdon also compared the per sq. ft. current value assessment of the subject property to those of five other properties in Oxford County. These five properties have building sizes ranging from 46,565 sq. ft. to 248,926 sq. ft. with a median size of 67,968 sq. ft. These comparable properties have land areas ranging from 4 acres to 8.79 acres. Mr. Congdon determined that the median per sq. ft. Current Value Assessment (“CVA”) of his selected properties is $49.41, with an average of $47.28. He notes that the CVA for the subject property by comparison is $48.92, lying very near the median and average values determined in his analysis of the five properties in his study.

Appellant’s Evidence

39Mr. Smith’s analysis took a similar approach to that made by MPAC. To support his opinion of current value, Mr. Smith prepared a comparison of the assessments of seven properties in Woodstock. These seven properties have a CVA, per sq. ft. of building area ranging from $20.91 to $53.50 with a median of $30.00 and an average of $33.56. Mr. Smith points out that the per sq. ft. assessment of the subject property is $48.92 and as such is at the upper end of the properties in his sample and higher than both the average and median of these CVAs.

40The seven properties in Mr. Smith’s study have building areas ranging from 56,700 sq. ft. to 158,256 sq. ft., with a median size of 86,485 sq. ft. Land areas attributed to these seven properties ranged from 5.76 acres to 22.13 acres, with a median land area of 16.98 acres.

41Secondly, Mr. Smith added three of the properties cited by Mr. Congdon to his list of seven properties. Mr. Smith’s opinion is that these three properties are the most comparable of those cited by MPAC and as they are all properties within the City of Woodstock, they should be included in his overall value study. When these three properties are added to the seven previously used, Mr. Smith arrives at a median CVA per sq. ft. of $37.23 and an average of $37.12.

42Lastly, Mr. Smith provided a summary of properties used to make a comparison of ASRs of properties sold in Woodstock. Mr. Smith started with 15 sales and eliminated nine of these owing to irregularities in the sale process or the date of the sales being too far removed from the valuation date. Mr. Smith concluded that there are six remaining properties that sold between July 2010 and September 2011 that can be used for the purpose of determining an ASR that can be applied to the subject property to determine whether or not the assessment returned is equitable with that of similar properties in the vicinity.

43His findings are that the median ASR for the six sales in his analysis is 0.875 and the average is 0.853, meaning that the assessment of similar properties in the vicinity (the vicinity in this case being the City of Woodstock) are regularly lower than the sales of those same properties with sale dates in proximity to the valuation date of January 1, 2012. To further address any irregularities in his median and average findings, Mr. Smith selected the mean between his median and average ASRs and used the resultant 0.864 as his opinion of the best indication of the multiplier to be used to indicate equitable assessment of the subject property. In doing so, Mr. Smith arrived at a reduced assessment value of $3,598,000 which he believes represents the correct assessment when s. 44.3(b) of the Act is applied.

Analysis

Current Value

44The value of an analysis that seeks to make a determination of current value by comparison of the subject properties to other properties is dependent in a large way by the comparability of those properties. The Board has before it two very similar approaches to determining the current value of the subject property. What distinguishes these two approaches are the properties selected for the purpose of comparison.

45MPAC submits that the current value of the subject property is best determined by the Automated Cost approach with all the necessary adjustments made to arrive at a value of $4,164,000. The properties used to test this approach in the market number five, all of which are in the County of Oxford, resulting in a median value per sq. ft. of building area of $49.41, which lies very near to the value per sq. ft. determined by the ACS of $48.92.

46Mr. Smith contends that using properties outside of the City of Woodstock to determine the value of the subject property is not appropriate, given the number of properties available for comparison within the City limits, where the subject property lies. He selected the seven properties in his study and also used three properties used by Mr. Congdon for the same purpose to assemble a total of 10 properties for comparison. Mr. Smith arrived at a median per sq. ft. value of building area of $37.23.

47While both parties had reservations with respect to each-other’s comparable sales, the Board heard no conclusive argument against using any or all of the comparable properties in the corresponding analyses. In considering the comparable properties and their sale values, the Board notes that there is a wide variation of property types, locations, building sizes and land area represented by the entire sample generated by the parties.

48The Board finds that the analysis used by Mr. Congdon is most compelling as it considers a wider variety of variables of the subject site as compared to the properties in his current value assessment analysis in Exhibit 2. Mr. Congdon considered the age, effective height, building area and site area in this analysis and the Board finds that these variables can reasonably be applied to the properties in the analysis to make a direct comparison to the value of the subject property.

Equity

49With respect to equitable assessment of the subject property, the Board finds that the most compelling evidence is that of Mr. Smith. The Board finds his ASR study to meet the test of “vicinity” as prescribed in the Act as all seven properties in his analysis lie within the City of Woodstock. The Board also notes that the seven properties cited by Mr. Smith are in the same property code (Code 540) as the subject property and finds that this similarity meets the requirement of that test in the Act.

50Mr. Congdon made a similar comparison with six properties in Oxford County, with three of these in Woodstock, two in Tillsonburg and the last in Ingersoll. Mr. Condon’s analysis includes sale dates in 2010 and 2013 (three in each).

51Given the disparity in location of the properties used by Mr. Congdon as well as the disparity in sale dates in that study, the Board finds that the equity analysis of the Appellant is more indicative of the equitable assessment of similar properties in the vicinity.

DECISION

52The Board finds that the current value of 459 Industrial Avenue for the 2013 taxation year is $2,162,000. Further, the Board finds that the evidence before it does not support a reduction in the assessment below the current value as determined above.

53Accordingly, the Board finds that the assessment of the subject property for the 2013 taxation year is reduced from $2,199,000 to $2,162,000, apportioned as follows:

• Industrial Tax Class - $1,780,000
• Industrial Excess Land - $327,000
• Commercial -$55,000.

54The Board also finds that the current value of the subject property, for the 2014 and 2015 taxation years is $4,127,000. The Board further finds that when reference is made to the assessments of similar properties in the vicinity the assessment of the subject property should be reduced from the current value determined. Accordingly, the assessment of the subject property is reduced from $ 4,164,000 to $3,598,000 for the 2014 and 2015 taxation years.

55The Board finds that the commencement date of the six s. 34 appeals is May 1, 2013, and that the total value of these supplementary assessments is $ 1,436,000, being the difference between the assessments for the 2013 taxation year and the 2014 / 2015 taxation years determined above. The parties are directed as follows with respect to the specific values of these supplementary assessments:

• Within 45 days of the release of this decision, MPAC shall provide the Appellant, with a copy to the Board, its determination of the specific values of each of the six supplementary assessments and their respective tax classes.
• Within 30 days of receipt of MPAC’s determination, the Appellant is to provide its acceptance of the figures in MPAC’s determination, with a copy to the Board.
• In the event that the parties are not able to agree on the values of the supplementary assessments, they shall jointly give notice to the Board, within 75 days of the release of this decision, requesting that the Board reconvene the hearing for the purpose of determining the value and apportionment of the supplementary assessments.

56This member is seized.

Footnotes

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