440 Elizabeth Street Holdings Ltd. v Municipal Property Assessment Corporation Region 15, 2015 OARB minicounsel 20

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: April 24, 2015

FILE NO.: WR 130987

Assessed Person(s): 440 Elizabeth Street Holdings Ltd.

Appellant(s): 440 Elizabeth Street Holdings Ltd.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): City of Burlington

Property Location(s): 446 Elizabeth Street and 455 John Street

Municipality(ies): City of Burlington

Roll Number(s): 2402-060-608-03100-0000 and 2402-060-608-05300-0000

Appeal Number(s): 2944565, 3030839, 2944566, 3033019, 3084615 and 3083784 (deemed 2015)

Taxation Year(s): 2013, 2014 (and deemed 2015)

Hearing Event No. 579030

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

ARB Case Name: WR 130987

Heard: February 12, 2015 in Burlington, Ontario

APPEARANCES:

Parties	Representative
440 Elizabeth Street Holdings Ltd.	Andrew Attard
MPAC	Gary Leung and Raymond Wang
City of Burlington	No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

INTRODUCTION

1The subject properties are two abutting and identically sized parcels of land used as surface parking lots for the adjoining office building located at 440 Elizabeth Street.

2The primary points of contention between the parties are which suggested sales reflect the current value of the subject properties and whether the subject properties are equitably assessed.

3The Assessment Review Board (“Board”) must determine the current value of the subject properties for the 2013 and deemed 2014 taxation years. The Board must also determine whether the assessments are equitable, having reference to the assessments of similar lands in the vicinity.

DECISION

4The Board finds that the current value of each of the subject properties for the 2013 and 2014 taxation years is $1,042,000 in the commercial taxation class, surface parking lot (GT).

5No adjustment is required for the purpose of equity.

6Accordingly, the assessments of the subject properties are reduced as follows:

a. 446 Elizabeth Street is reduced from $1,324,000 to $1,042,000 in the commercial taxation class, surface parking lot (GT) and

b. 455 John Street is reduced from $1,457,000 to $1,042,000. The classification is changed from Vacant Commercial Land to Surface Parking Lot (GT) in the commercial taxation class.

REASONS FOR DECISION

Preliminary Issue

7At the commencement of the hearing Andrew Attard raised the issue of disclosure stating the evidence presented by MPAC appeared unfamiliar. MPAC stated that their evidence was rewritten for the purpose of the hearing but contained the same data that had been disclosed to Mr. Attard. More than once during the course of the hearing Mr. Attard commented on whether complete disclosure had occurred. Each time the Board asked Mr. Attard to specify what was not disclosed and whether he was making a formal motion. However, Mr. Attard did not specify what was not disclosed and did not raise a formal motion.

Legislation

8In determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Assessment Act (“Act”):

9Section 19.(1) of the Act states:

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

10Section 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.

11In 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

12The subject properties are located in Burlington’s downtown core with Elizabeth Street on the east, James Street on the north and John Street on the west. They are located close to Burlington’s City Hall and the Lakeshore area. They abut one another and provide parking for the adjoining office building located at 440 Elizabeth Street.

13Both lots are 8,712 square feet (“sq. ft”.) in size, are paved and are not income producing. While 447 Elizabeth Street is classified as a Surface Parking Lot (GT) in the commercial taxation class, 455 John Street has been classified as Vacant Commercial Land. The parties agree that both parcels of land are paved Surface Parking Lots in the commercial taxation class.

14The assessments as returned are $1,324,000 for 446 Elizabeth Street (“Elizabeth”) and $1,457,000 for 455 John Street (“John”) for the 2013 and 2014 taxation years. The valuation day is January 1, 2012.

15Gary Leung and Raymond Wang represented MPAC. Mr. Leung presented nine sales, five he identified as his own selection and four he identified as the Appellant’s (Exhibits 1, 2, 4 (a and b), 5, 6 and 7 (a and b)). All of the nine sale properties are improved and were chosen for their proximity to the subject properties and Burlington’s downtown core. In reviewing the sales Mr. Leung states that his analysis of the nine sales resulted in a median value per square foot of $136.00 and recommended a reduced assessment of $1,184,000 for Elizabeth and $1,186,000 for John. John has a corner exposure and, therefore, a slightly higher value. The data to calculate this difference was not presented. Mr. Leung states that he utilized the Land Residual Approach to value by deducting the value of the buildings as determined by MPAC’s Automated Costing System (“ACS”) from the time-adjusted sale prices. The resulting value was then divided by the lot size to determine the land residual value per lot size, measured in square feet. He then made further adjustments “using MPAC’s ASMA group formula to arrive at a Land Residual Value per lot size to match the subject lot size”. The value of $136.00 is the resulting “sales indicated land base rate”.

16On cross-examination Mr. Leung and Mr. Wang stated that the “sales indicated land base rate” reflects what the sale prices would be if the suggested comparables were a similar size to the subject properties. However they could not explain the formulation or how the resulting values were achieved, stating there is no formula at hand but the ‘model’ does the calculations and that the adjustments are based on many sales.

17Mr. Attard presented Exhibit 9 which includes background information such as correspondence between MPAC and himself and a number of value analyses. At the hearing, Mr. Attard argued that the current value of each parcel is $986,000 and that an equity adjustment, which is addressed further in these reasons, is required. He addressed the suggested comparables in Exhibit 9, located on pages 12 and 27, as well as 503 John Street located on page 6.

18Mr. Attard objected to MPAC’s time adjustment calculations because they were not supported in evidence. He also argued that properties that are not similar in size to the subject properties should not be used to determine the current value due to economy of scale, i.e. that smaller properties tend to fetch a higher sale price per square foot while the larger properties tend to fetch a lower sale price per square foot.

19MPAC argued that properties located outside of the downtown core reflect different markets and should not be used to determine the current value of the subject properties.

The Board’s Analysis for Current Value

20The best test of current value is an arm's length and market-tested sale of the subject properties on the valuation day, January 1, 2012 or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm's length and market tested sales of comparable properties in the same vicinity and market on or close to the valuation day.

21In order to use the sales of suggested comparable properties to determine the current value of the subject properties, the suggested comparable properties must be sufficiently similar to the subject properties to allow for comparison.

22In reviewing the parties suggested comparables I disregarded certain sales. Due to the economy of scale, I have disregarded those properties that are too dissimilar in size to the subject properties. The lot size adjustments made by MPAC to their suggested comparables were not substantiated in their written or oral evidence and have not been used in this analysis.

23I agree with Mr. Leung and Mr. Wang that properties in the downtown core are not comparable with properties located beyond the core. Therefore, I have disregarded those properties that are located at such a distance from the downtown core that they are likely in a different market.

24Both parties made time adjustments to their suggested comparables. However, neither party produced sufficient data which supported the calculations. Therefore, I have disregarded those sales that occurred beyond the shoulder years of the valuation day (i.e. not in 2011 or 2012) and for the remaining sales I have used the actual sale values rather than the time adjusted sale values.

25Therefore, I find the following properties are not comparable to the subject properties for the purpose of determining current value:

• 401 Brant (2,614 sq. ft.)
• 383 Pearl (3,049 sq. ft.)
• 385 Pearl (3,049 sq. ft.)
• 448-450 John (1,743 sq. ft.)
• 570 Brant, 527 Brant and 2090 James Street are all located too far from downtown core
• 452/454 Locust’s sale date of December 2013, 425 Locust Street’s sale of December 2010 and 503 John Street’s sale date of August 2010 are too far from the valuation day.

26The best comparables for determining current value are:

• 462-464 Locust Street has a similar lot size (9,148 sq. ft.) and is located steps from City Hall and the subject properties (Exhibits 4 and 7). It sold in September 2012 for $1,505,000. Deducting MPAC’s uncontested ACS building value of $250,185 results in a land value of $137.17 per sq. ft.
• 2031 James Street also has a similar lot size (6,534 sq. ft.), and is located steps from the subject properties. It sold in July 2012 for $850,000. Deducting MPAC’s uncontested ACS building value of $208,576 results in a land value of $98.17 per sq. ft.
• 441 Elizabeth has a similar lot size (5,115 sq. ft.) and is located steps from the subject properties. It sold in May 2012 for $685,000. Deducting MPAC’s uncontested ACS building value of $53,758 results in a land value of $123.41 per sq. ft.

27The average sale price per sq. ft. of land is $119.58. Applying this value to the subject properties results in a value of $1,041,781 for each parcel ($119.58 x 8712 sq. ft.). I have used the average rather than the median because the sample is small. No adjustment was made for the corner lot on John because the Board received no evidence as to how this difference is measured.

Equity

28Mr. Leung presented an equity analysis of 34 sales of commercial properties in Burlington with a median assessment to sale ratio is 1.04. On cross-examination MPAC took the position that while an ASR of 1.04 indicates that the model is over-assessing similar properties, a 5% variance is acceptable. The ASRs range from 0.04 to 1.91. Although the median may fall at 1.04, only seven (or 20%) of the 34 ASRs are within 5% of 1.00. This data does not assist the Board in determining whether equity has been achieved.

29Mr. Attard presented more than one equity analysis in his Exhibit 9. However, in his arguments, he focused on an average ASR of 0.66 which is derived from only three sales (527 Brant Street, 462-464 Locust Street and 2029 Lakeshore Road). In my opinion, such a small sampling of ASRs when the Board was presented with a wealth of commercial sales is not a reliable indicator of equity.

30In my analysis, I have also reviewed a subset of the ASRs presented, those located in C47 and C48 which, from the evidence received (Exhibits 4 and 7), contain Burlington’s downtown core. There are 12 sales in C47 and C48 with ASRs ranging from 0.56 to 1.50. The median ASR is 1.04.

31An ASR of 1.04 indicates that MPAC’s model is tending to assess similar lands above their current value, not below their current value. Based upon the evidence presented, no adjustment is required for the purpose of equity.

CONCLUSION

32In conclusion, the current value of each of the subject properties is $1,042,000 (rounded) for the 2013 and 2014 taxation years. Both parcels are in the commercial taxation class, parking lot (GT). No adjustment is required for the purpose of equity.

33Accordingly:

• the assessment of 446 Elizabeth Street is reduced from $1,324,000 to $1,042,000 in the commercial taxation class, surface parking lot (GT) and
• the assessment of 455 John Street is reduced from $1,457,000 to $1,042,000. The classification is changed from Vacant Commercial to Surface Parking Lot (GT) in the commercial taxation class.

2015 DEEMED APPEAL

34An 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.

35Section 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.