Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 13, 2016

FILE NO.: WR 139393

Assessed Person(s): Churchill Estates Inc., 536357 Ontario Limited and C M G Entertainment Inc.

Appellant(s): Aldo Dibattista

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 21

Respondent(s): City of Kitchener

Property Location(s): 123 King Street West 127-129 King Street West 133-145 King Street West

Municipality(ies): City of Kitchener

Roll Number(s): 3012-050-001-01600-0000 3012-050-001-01900-0000 3012-050-001-02100-0000

Appeal Number(s): 2994868, 3025525, 3090367, 2994901, 3025651, 3090258, 2994870, 3025945, 3090081, 3157269, 3157033 and 3156945 (deemed 2016 appeals)

Taxation Year(s): 2013, 2014, 2015 and 2016 (deemed appeals)

Hearing Event Nos.: 603537 and 625236

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

Heard: December 11, 2015 in Kitchener, Ontario and March 30, 2016 by telephone conference call

APPEARANCES:

Parties	Representative
Aldo Dibattista	Sabine Prihoda
MPAC	Lorraine Waddell
City of Kitchener	Terry Grau

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

INTRODUCTION

1The subject properties are three lots located in the downtown core of the City of Kitchener (the “City”).

2The primary points of contention between the parties are whether the properties should be assessed together with other related parcels or separately and whether the assessed values are at the current values and are equitable.

3The Assessment Review Board (“Board”) must determine the current value of the subject properties for the 2013, 2014, 2015 and deemed 2016 taxation years. The Board must also determine whether the assessments are equitable, having reference to the assessments of similar lands in the vicinity.

DECISION

4I find that the current value of the subject properties, as of the January 1, 2012 valuation day are as follows:

a. 123 King Street West $53,000

b. 127-129 King Street West $60,000

c. 133-145 King Street West $201,000

5I find that an adjustment is required for the purpose of equity:

a. 123 King Street West $49,000 (rounded)

b. 127-129 King Street West $56,000 (rounded)

c. 133-145 King Street West $191,000 (rounded)

6Therefore, for the 2013, 2014, 2015 and deemed 2016 taxation years, the assessment is reduced as follows:

a. 123 King Street West: from $53,000 to $49,000 (rounded)

b. 127-129 King Street West: from $60,000 to $56,000 (rounded)

c. 133-145 King Street West: from $201,000 to $191,000 (rounded)

Each parcel is in the Commercial Land taxation class.

REASONS FOR DECISION

Legislation

7In determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Assessment Act (“Act”):

8Section 19.(1) of the Act states:

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

9 Section 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.

10In 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.

Preliminary Matter

11Sabine Prihoda, representing the appellant, presented new information not disclosed in accordance with the Board’s rules. Lorraine Waddell, representing MPAC and Terry Grau, representing the City of Kitchener, were given an opportunity to review it and advised the Board they would proceed with the hearing.

Evidence, Arguments and Analysis

12There are five related lots, of which three are appealed. All five lots front onto King Street West in Kitchener’s downtown core. Four of the lots do not have permanent structures or buildings; they were previously improved with commercial buildings that no longer exist. The fifth lot is improved with a building containing Bobby O’Brien’s Irish Pub and a nightclub called Wax. This fifth lot is shaped like a “T” with the building located at the rear and a long narrow strip running parallel with the other four lots so that all five lots abut King Street West. The three properties under appeal along with the fourth lot are used in conjunction with the businesses as patio space, a sand-filled volleyball court, smoking areas and access to the building.

13MPAC used the Sales Comparison Approach to value in determining the assessed values for all of the five lots. Ms. Prihoda argues for inherent obsolescence which would require a valuation using the Cost Approach to value. She also argues that using the local area’s capitalization rate would reduce the assessed values, which would require a valuation using the Income Approach. However, Ms. Waddell submits that since the buildings were demolished, MPAC has allocated a property code of Vacant Commercial (or 105) to the subject properties but, based on their use, has assessed them in the Commercial Land tax class. Ms. Waddell argues that the acceptable method of valuing vacant commercial land is by the sales comparison method.

14The three subject properties are described in the following paragraphs. The property known as 123 King Street West is 14 feet wide and 90 feet deep with an effective area of 1,260 square feet (“sq. ft.”). Ms. Prihoda argues there is little use for this property. It has a concrete base and is used seasonally for storage. She argues it would not attract a buyer because the narrowness makes it difficult to develop. Mr. Grau takes the position that it was, at one time, improved with a building and can be again. The parties’ photographic evidence shows it is used as a general outdoor space in conjunction with the businesses. Based on the evidence provided, I am satisfied that 123 King Street West is used in conjunction with the pub and nightclub and, therefore should be assessed in the commercial taxation class.

15The second appealed property, 127-129 King Street West, is 16.5 feet wide and 92 feet deep with an effective area of 1,518 sq. ft. Ms. Prihoda argues that its income does not support the taxes produced by the assessment; it has a functional use of only half a year or less.

16The third appealed property, 133-145 King Street West, is irregularly shaped with an effective frontage of 53.46 feet and an effective depth of 93 feet. The effective area is 4,971 sq. ft. Ms. Prihoda submits that its seasonal use, an outdoor, sand filled volleyball court, means that it is used sporadically and the income does not support the assessed value.

17Based on the evidence presented by the parties I find that the appropriate method of valuing the subject properties is based on comparable sales. Ms. Prihoda presented insufficient evidence to allow me to conclude that obsolescence and capitalization rates could be used to value these properties.

18Ms. Waddell explained that MPAC has valued the five lots as one parcel which results in a lower assessment, due to the economy of scale, than if they were valued separately. She submits that if each of the lots were valued separately, the assessed values would be as follows:

a. $122,000 for 123 King Street West

b. $133,000 for 127-129 King Street West

c. $402,000 for 133-145 King Street West

19The assessments as returned are as follows as of the January 1, 2012 valuation day:

a. $53,000 for 123 King Street West

b. $60,000 for 127-129 King Street West

c. $201,000 for 133-145 King Street West

20The assessments were determined by using the total area of the five lots (18,113 sq. ft.) using the total frontage of 104.34 feet, and depth of 173.6 feet. The total area of each lot was used to determine its share of the property. For example, 123 King is 7% of the total area. The assessment of the five lots is $762,118, 7% is $53,348 which MPAC rounded down to $53,000.

21Ms. Prihoda objects to MPAC valuing the lots as one as they are owned, on title, by different companies. The Board notes that the appellant, Aldo Dibattista, owns these companies. Ms. Prihoda argues that this method is unfair to the appellant because if one of the lots was sold, the portion of the total lot would not be realized, and that the assessments should be kept separate for ease of sale. The evidence from the parties is that all of the lots have been used in conjunction with the pub and nightclub businesses for a number of years. I accept Ms. Waddell’s testimony that the individual values of the lots exceed the assessments as returned and I agree with Mr. Grau that there is a possibility that each can be developed again.

22Based on the above, I find it is reasonable to accept Ms. Waddell’s recommendation to assess the lots as one parcel and then divide the assessment among the parcels as this method results in a lower assessment, thus benefitting the appellant. I am not persuaded by Ms. Prihoda’s argument that the properties should be kept separate in case the appellant wishes to sell one of the lots. MPAC has combined the lots for the purpose of valuation only. They remain separate, each with its own roll numbers.

23Ms. Prihoda argues that the subject properties should reflect the increase in values between the 2008 and 2012 valuation dates of neighbouring properties. In response, Ms. Waddell presented two decisions by the Board (Morrison v. Municipal Property Assessment Corp., Region No. 17 [2004] O.A.R.B.D. No. 518 (Board File No. 34881) and Freedman v. Municipal Property Assessment Corp., Region No. 09, [2012] O.A.R.B.D. No. 28 (Board File No. WR113781)) in which both Members found that the difference in assessed values between valuation dates is not relevant in determining the current value of a property. While I am not bound by decisions by other Members of the Board, I concur with the findings in those decisions. The Act provides that property valuations are based on sales that have occurred on or close to the valuation day.

Current Value

24Ms. Waddell presented four sales in support of the current values. Ms. Prihoda presented no sales however she did present a number of suggested comparables with assessments only. I will address Ms. Prihoda’s properties in the equity section of this decision. The four sale properties are commercial lots sold near the valuation day and are located within 1.25 miles from the subject properties. Ms. Waddell adjusted the sale prices to the valuation day and used MPAC’s computerized valuation system to generate further adjustments based on the differences between the combined subject properties and the sales.

25Ms. Prihoda objects to the adjustments for the differences between the comparables and the subject properties, arguing that the use and marketability differ from the subject properties. I agree with Ms. Prihoda that it is unlikely that such adjustments are accurate. Therefore, I will use the time-adjusted values only.

26None of the suggested comparables are similar in size to the individual lots under appeal. Therefore, I will compare the sales to the combined five lots. Two of the properties, Market Lane and 168 Victoria Street South are significantly smaller than the combined subject property at 9,232 and 8,239 sq. ft., respectively. I find that they carry little weight in reflecting the current value of the subject property.

27The two remaining properties, 257 Frederick Street and Charles Street East are closer in size to the combined subject property (which has 18,113 sq. ft. and 104.34 feet of frontage) with 20,038 sq. ft and 24,079 sq. ft., respectively. 257 Frederick Street sold in July 2011 and has an inferior location to the subject property as it is not in the downtown core and only 78.68 feet of frontage. While it is a corner lot, which is considered an advantage for commercial properties, overall, I consider it to be inferior to the subject property. The time adjusted sale price per sq. ft. is $22.79.

28Charles Street East sold in March 2011, is located near but outside the downtown core and on the city’s Light Rail Transit (“LRT”) route which is currently under construction. It has more frontage than the subject at almost 200 feet. I consider it, overall, to be comparable if not superior to the combined subject property. The time adjusted sale price per sq. ft. is $78.83.

29There was some debate regarding land values for properties that are in close proximity to the LRT system currently under construction in Kitchener’s core. Ms. Prihoda argues that those properties on the LRT route are not comparable to the subject because their values have increased. Both Ms. Waddell and Mr. Grau argue that the subject property is quite close to the LRT as it backs onto the route and Ms. Waddell argues that sale prices in 2012 did not yet reflect any increase in values resulting from, at that time, a proposed LRT. I am not convinced that sales in 2012 do not reflect increased property values in relation to the LRT however I am satisfied that the subject properties are in very close proximity to it and their location on Kitchener’s main street is an asset.

30MPAC has assessed the subject properties at $42.08 per sq. ft. The range in sale values for the two most comparable properties is $22.79 and $78.83 per sq. ft. None of the sales is directly comparable to the subject properties and, therefore, I cannot make a finding of an exact current value. However, the subject properties fall in the middle of this range, indicating to me that the assessed values are likely correct.

Equity

31I find that the subject properties require an adjustment for the purpose of equity.

32Ms. Prihoda presented the assessments of nearby vacant commercial properties for each of the three subject properties. Only one of the properties has a sale which was found in MPAC’s evidence.

33Ms. Prihoda argues that, based on the economy of scale, the smaller properties should be valued higher than the subject properties but are assessed for less, on a sq. ft. basis. Ms. Waddell reviewed each of the suggested comparables and explained that, unlike the subject properties, these lower assessments are because they are exempt, unbuildable, subject to right of ways, etc.

34Of the properties submitted, the most similar in size to any of the subject properties is a vacant lot at Ontario Street South (Roll 3012-050-001-00901-0000) which is assessed at $14.47 per sq. ft. Ms. Waddell explained that the assessment reflects that it is an unbuildable lot and subject to a right of way and, therefore not comparable to the subject properties. The remaining properties are significantly larger or smaller than the subject properties and, therefore, are not directly comparable to the subject properties. Because of the variables for use and because there are no accompanying sales, these properties do not assist the Board in determining either current value or equity.

35Ms. Prihoda presented the assessments of five vacant properties located on or near the new LRT route, all of which are used in conjunction with other properties. She argues that property values along or near the LRT have increased yet, on a sq. ft. basis, each is assessed lower than the subject properties which indicates that the subject properties are inequitably assessed. Ms. Waddell responded that two of the properties, 526 and 530 Charles Street, were valued with four other properties and that the assessments were discounted for irregular shape, development restrictions, cost of clean-up and proximity to industrial land. The third property, 139 Victoria Street South is exempt, there is an environmental study and an application must be made to the Grand River Conservation Authority before any changes can be made. Ms. Waddell did not comment on the fourth property, 101 Victoria Street South which is assessed at $14.95 per sq. ft. and is used as a parking lot. However, the assessments without accompanying sales do not assist me in determining either the current value or whether the assessments are equitable. In order to determine equity, comparing open market sales to the assessments will provide an indication whether the assessment is equitable.

36The fifth property, a parking lot located at 168 Victoria Street North is assessed at $143,000 or $17.36 per sq. ft. This property was included in Ms. Waddell’s Current Value Study (Exhibit 1), proffered as a comparable sale. Ms. Waddell’s evidence is that it sold in April 2012, very near the valuation day, for $570,000 or $69.18 per sq. ft. Ms. Waddell submits that it was valued together with an abutting business and then apportioned, much like the subject properties. This sale supports the appellant’s arguments with an assessment to sale ratio (“ASR”) of 0.25.

37Ms. Waddell presented an Equity Study (Exhibit 1) of 15 sales (13 of which are vacant commercial lots and two are parking lots) showing a median ASR of 0.95. The ASRs range from 0.58 to 1.18 with nine, or the majority, being less than 1.00. Ms. Waddell takes the position that a median ASR falling between 0.95 to 1.05 is acceptable. However, a majority of ASRs at less than 1.00, indicates to me that MPAC’s valuation methodology is tending to under-assess similar lands in the vicinity.

38Adding the ASR for 168 Victoria Street North to the 15 sales in Ms. Waddell’s Equity Study results in a median ASR of 0.94.

39Applying an ASR of 0.94 to the current values results in the following values:

a. 123 King is reduced from $53,000 to $49,416

b. 127-129 King is reduced from $60,000 to $56,475

c. 133-145 King is reduced from $201,000 to $190,604

CONCLUSION

40In conclusion, for the 2013, 2014, 2015 and deemed 2016 taxation years, I find that the current value of the subject properties, as of the January 1, 2012 valuation day are as follows: