Bluffers Park Yacht Club v. Municipal Property Assessment Corporation, Region 09, 2016 CanLII 21209

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

ISSUE DATE: March 14, 2016 FILE NO.: WR 138787A AMENDED DECISION ISSUED ON: April 15, 2016

Assessed Person(s): Conservation Authority Toronto Appellant(s): Bluffers Park Yacht Club Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09 Respondent(s): City of Toronto

Property Location(s): 15 Bluffers Park Road Municipality(ies): City of Toronto Roll Number(s): 1901-071-025-00300-0000 Appeal Number(s): 2023057, 2364946, 2891012, 2709092, 2908420, 2993395, 3017421 and 3077671 Taxation Year(s): 2009, 2010, 2011, 2012, 2013, 2014 and 2015 Hearing Event No.: 609934

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

Heard: January 25, 26 and 27, 2016 in Toronto, Ontario

APPEARANCES:

Parties	Counsel
Bluffers Park Yacht Club	Benjamin Blufarb
MPAC	Karey Lunau and Jennifer Barlow
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY SCOTT McANSH AND SUBUOLA AWOLERI

Amended pursuant to Rule 130 of the Assessment Review Board’s Rules of Practice and Procedure, effective January 4, 2016

INTRODUCTION

1These appeals concern the Bluffers Park Yacht Club (the “Yacht Club”), which is a parcel of land on Lake Ontario below the Scarborough Bluffs, which has been operated by the Appellant Bluffers Park Yacht Club (the “Club”) since at least the early 1980s. The Club is a private sailing club that offers 125 spaces to its members, who can use the Yacht Club for storage of sailboats all year, at a boat slip in the summer and on the grounds of the Yacht Club for winter storage. The legal use of the Yacht Club is very limited, and that fact is at the root of the disagreement between the parties on the correct and equitable current value of the Yacht Club. The Club argues that those restrictions greatly decrease the value of the Yacht Club, while MPAC places more value on the legal use that remains permissible on the site in determining value.

ISSUES

2While the impact of the land use restrictions is an area of disagreement, the parties do agree on a great deal. They agree that the Yacht Club ought to be valued using the cost approach to value and they agree on the value of the improvements on the site, including the appropriate depreciation. The only real dispute is on the value of the land. Even in that disagreement, the parties agree that the value of the water lot should be the same as the uplands area. That is, the only valuation problem for us to address is the value of the land.

3In addition to the value of the land, we must determine if the assessment of the Yacht Club is equitable with that of similar properties in the vicinity.

DECISION

4We find the current value of the Yacht Club to be $4,404,504 for the 2009, 2010, 2011 and 2012 taxation years. We further find the current value of the Yacht Club to be $5,409,422 for the 2013, 2014 and 2015 taxation years. We do not find that the evidence indicates that an adjustment is required to make that value equitable with the assessments of similar properties in the vicinity.

REASONS FOR DECISION

Legislation

5Section 44.(3)(a) of the Assessment Act (“Act”) requires us to “determine the current value of the land.” Current value is defined in s. 1 as “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.” That is, for each taxation year, we must determine what the Yacht Club would have sold for in an arm’s length transaction on the January 1, 2008 valuation day set by the Act for the 2009, 2010, 2011 and 2012 taxation years. We must also determine what the Yacht Club would have sold for in an arm’s length transaction on the January 1, 2012 valuation day set for the 2013, 2014 and 2015 taxation years.

6Section 44.(3)(b) of the Act requires that the Assessment Review Board (“Board”) “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 that of similar lands in the vicinity.”

7The parties presented us with a various case law including a number of American authorities. The Board reviewed these cases and has determined that they have no relevance to the issue under appeal.

Current Value

8The parties agree that there are no comparable sales on which to base a direct sales comparison approach to value. They also agree that they do not have the data on which to base an income approach to value. As with many unique and difficult to value properties, the Yacht Club must be valued using the cost approach to value. The cost approach to value operates on the principle of substitution. It is assumed that the value of a property does not exceed the amount that it would cost to replace that property with a substitute of similar utility. This means that the utility of the property is important in determining its value, especially in the disputed value of the land.

9The Yacht Club is a 5.68 acre site, consisting of 2.66 acres of upland and 3.02 acres of water lot. The site is on Lake Ontario and is improved with three buildings and a number yard works. In conducting a cost approach, a reconstruction cost new of any improvements, such and the buildings and yard works, is calculated. From that value all forms of depreciation are removed, including physical depreciation and functional or economic obsolescence. The total value of the site is determined by adding this depreciated replacement cost of the improvements to the value of the land. The parties agree on the depreciated value of the improvements but are far apart on the value of the land.

Improvements

10The buildings consist of a clubhouse, a washroom and a storage building. The clubhouse was built in the early 1980s and is a single-storey with a second floor mezzanine. It contains two general purpose rooms, a kitchen, washroom and shower facilities, an office and some storage space. It also has a large deck that wraps around two sides of the building. The washroom is a smaller structure with shower facilities. Finally, the storage building has lockers for members and a small repair area.

11The parties agree that the total depreciated value of buildings is $338,727 for the 2008 valuation day and $256,065 for the 2012 valuation day. The clubhouse is valued at $193,720 for the 2008 valuation day and $208,164 for the 2012 valuation day. The large deck attached to the clubhouse is valued at $9,780 for the 2008 valuation day and $10,531 for the 2012 valuation day. The storage building is valued at $10,604 for the 2008 valuation day and $11,399 for the 2012 valuation day. The washroom building is valued at $24,623 for the 2008 valuation day and $25,971 for the 2012 valuation day.

12The Yacht Club also has a number of improvements that are not buildings. These yard works primarily consist of the three fixed docks at which sailboats can be stored and a dock wall for visiting sailboats. These structures were constructed in approximately 1980 and the parties agree that they have a depreciated reproduction cost of $165,777 for the 2008 valuation day and $153,375 for the 2012 valuation day.

13The total depreciated replacement cost of all of the improvements to the Yacht Club is agreed to be $404,504 for the 2008 valuation day and $409,422 for the 2012 valuation day. The remaining problem is how to value the land.

Land

14Rick Van Andel appeared as an expert witness for MPAC, while John Glen appeared as an expert witness for the Club. We find that both witnesses are qualified experts and provided independent evidence to assist the Board in reaching a determination in this appeal. Mr. Van Andel relied on sales of parkland sites in the Toronto area to arrive at a land value of $3,360,000 for the 2008 valuation day and $3,465,000 for the 2012 valuation day. Mr. Glen relied on the lease between the Club and the City of Toronto (the “City”) to arrive at a land value of $278,428 for the 2008 valuation day and $412,195 for the 2012 valuation day.

15We find that the direct comparison approach to land value is the best evidence of value in this case. On the evidence before us, we find that the most likely land value of the Yacht Club is $4,000,000 for the 2008 valuation day and $5,000,000 for the 2012 valuation day.

16We do not find the lease between the City and the Club to be a reliable indication of the current value of the Yacht Club. Both parties entered a report to City Council dated September 22-25, 2003, in which City staff recommended that Council adopt the lease framework which currently governs the Club’s lease. The Club relied on that report’s statement that the formula “works well since it is simple, equitable, and the most efficient manner to assign a fair rental value to these facilities.” The Club contends that in asserting that the rate was “fair”, City staff were saying it was a market rate. MPAC argues that the City had other considerations in adopting the formula, including efficiency, and a statement that affordable leases “provide an expanded range of affordable recreation opportunities on the water at no cost the City.” That is, the City was aware that a below market rental rate had political benefits and that was stated explicitly in adopting the formula that applies to the Club. This raises severe doubts that the rate is a market rate. The City report also notes that this formula will avoid disputes with boat clubs, a further indication that the lease rate is below market.

17As we do not find the lease rate to be a reliable indication of the land value, we do not need to address the appropriate capitalization rate.

18While Mr. Glen relied primarily on the lease held by the Club, he also provided eight comparable sales as an alternative means of valuing the Yacht Club. Mr. Glen relied on purchases made by the Toronto and Region Conservation Authority in the general Toronto area. The sales he presented range in size from 40 acres to 172 acres and none of them are on Lake Ontario. The Yacht Club is 5.68 acres. These large parcels of land in remote geographic areas are not useful in determining the value of the Yacht Club. The size of the parcels alone would result in a significantly lower value per acre due to the principle of economy of scale. That is, the price per unit of a parcel decreases as the size of the parcel increases.

19Further, Mr. Glen only looked at sites that he referred to as “Hazard Lands.” That is land that is subject to restrictions pursuant to the Toronto and Region Conservation Authority: Regulation of Development, Interference with Wetlands and Alterations to Shorelines and Watercourses, O. Reg. 166/06, enacted pursuant to s. 28 of the Conservation Authorities Act, RSO 1990, c. C-27. Those restrictions prohibit nearly all uses of land and are very difficult to alter. Mr. Glen noted that the Yacht Club is land that would be subject to the regulation and that is the basis on which he made the comparison. However, the Club can continue to use the Yacht Club notwithstanding that status. Any potential purchaser of the Yacht Club would also be able to continue that use of that land. Thus, any comparison to land that is effectively unusable is not helpful in determining the value of the land at the Yacht Club.

20Mr. Van Andel provided seven comparable sales and applied five subjective adjustments to those properties to make the value more reflective of the Yacht Club. Those adjustments were location, property size, land use regulations, improvements and water lot. While we accept that Mr. Van Andel is an expert who can provide those opinions, we do not find those adjustments to be determinative. The result of Mr. Van Andel’s adjustments failed to demonstrate any consistency in bringing the seven comparable sales values to a clear indicated value for the Yacht Club. That is, the overall consistency of those adjustments is questionable.

21We also note that Mr. Van Andel did not put weight on the overall adjustments to the properties presented. In determining the value of the land at the Yacht Club, Mr. Van Andel relied on only two sales: 55 Ashbury Boulevard in Ajax and Antioch Drive in Etobicoke. Neither sale is an ideal indication of the value of the land at the Yacht Club.

2255 Ashbury is a 4.26 acre site purchased by the City of Ajax in February 2005 for $2,400,000. The Club contended that the site was dedicated as a school site and that this demanded a higher value. We were provided no evidence to support that contention and do not think much turns on that point. We do not accept this as the best evidence of value due primarily to its location. It is not directly on Lake Ontario and it is much further east of central Toronto than the Yacht Club.

Amended pursuant to Rule 130 of the Assessment Review Board’s Rules of Practice and Procedure, effective January 4, 2016

23Antioch Drive is a 5.89 acre site that was purchased by the Toronto and Region Conservation Authority from the Toronto District School Board for $3,300,000 in July 2010. The Club oddly argued that a sale by a School Board is not valid as the Board is required by statute to obtain the highest value possible. We view that as a reasonable market position and would not discount the site on that basis. However, this site is very far removed from Lake Ontario and in a residential neighbourhood. That is a far different situation than that of the Yacht Club. We do not find that this parcel is the best evidence of the value of the land at the Yacht Club.

24Both parties put forward sales on Chesterton Shores in Scarborough. 149, 151 and 167 Chesterton Shores were all small-single family homes on Lake Ontario that were purchased by the Toronto and Region Conservation Authority to construct a linear park along the lake. 151 was 0.2 acres and sold for $600,000 in March 2007, while 149 and 167 have a combined area of 0.54 acres and sold for $1,415,000 in July 2007. While the size of these parcels makes them difficult to compare, they are ideal in other respects. They are hazard land that had a limited, grandfathered, use on Lake Ontario. That is the status of the Yacht Club. While the use is different, we do not see how the low density collective recreational use the Club enjoys at the Yacht Club differs a great deal in value.

25There is the difficult issue of how to use the sale value of such small parcels to determine the value of the land at the Yacht Club. The sale price per acre of the Chesterton Shores sales is $2,620,370 to $3,000,000 or an average value per acre of approximately $2,800,000. We are mindful that there are significant drops in the value per acre as the size of a site increases. As such, we do not feel it is appropriate to apply this rate per acre to the 5.06 acres at the Yacht Club.

26Mr. Van Andel applied 50% as a size adjustment for 151 Chesterton Shores and applied a 40% size adjustment for 149 and 167 Chesterton Shores. With no other basis or evidence on which to adjust for size, we accept that opinion as a reasonable guide for a size adjustment. We view both sales collectively as the best evidence of value and view the average value per acre as the best method of normalizing those sales. Applying the low end of 40% of Mr. Van Andel’s opinion to the average rate per acre of the Chesterton Shores sales, which is $2,800,000, leads to an indicated value of $3,920,000. We acknowledge that this not an ideal assessment method, but it is the best evidence we have of the value of the land. We prefer adjustments for size on parcels in similar locations with similar use limitations to utilizing parcels in greatly different locations and use situations. We find that the evidence before us supports a land value of approximately $4,000,000 for the 2008 valuation day, as the Chesterton Shores sales took place close to that day. We accept Mr. Van Andel’s evidence that there would be approximately a 25% increase in land value between 2008 and 2012. We therefore find that the most likely value of the land to be $5,000,000 on the 2012 valuation day.

27Adding the agreed value of the improvements to these land values leads to a current value of $4,404,504 for the 2008 valuation day and $5,409,422 for the 2012 valuation day.

Amended pursuant to Rule 130 of the Assessment Review Board’s Rules of Practice and Procedure, effective January 4, 2016

28We note that these values are in line with the context provided by Mr. Van Andel. He provided marina sales from across Ontario which showed values ranging from $3,000 to $36,000 per slip. The parties agreed that a per slip comparison method is preferred when comparing marinas. We note here that Mr. Glen wrote as much in his report, while he did not use that method in his evidence. The current values we have determined above amount to approximately $35,000 per slip for the 2008 valuation day and $43,000 for the 2012 valuation day. We would expect that a parcel on Lake Ontario in Toronto would have a higher value than marinas in more rural area of Ontario. Thus, that context amply supports the current values we have determined.

Equity

29Mr. Glen suggested that conservation land was assessed far below its sale price and that this supported an adjustment for equity. However, conservation land has assessment limitations, set out in s. 19.(5.2) of the Act. Those cannot be said to be “similar lands in the vicinity.” We were presented with no other evidence that would indicate that an adjustment is made to the current value to make the assessment equitable with similar property in the vicinity.

CONCLUSION

30We find the current value of the Yacht Club to be $4,404,504 for the 2009, 2010, 2011 and 2012 taxation years. We further find the current value of the Yacht Club to be $5,409,422 for the 2013, 2014 and 2015 taxation years. We do not find that the evidence indicates that an adjustment is required to make that value equitable with the assessments of similar properties in the vicinity.

Amended pursuant to Rule 130 of the Assessment Review Board’s Rules of Practice and Procedure, effective January 4, 2016

31MPAC did not file a notice of intention to seek a higher assessment, as required by Rule 30(1) of the Board’s Rules of Practice and Procedure. As a result we confirm any assessments that are below the current values we have determined. We reduce the assessment for the 2009 and 2010 taxation years from $4,554,000 to $4,404,504. We confirm the assessment for the 2011 and 2012 taxation years at $2,932,170. We confirm the assessment for the 2013 taxation year at $5,192,000. Finally, we confirm the assessment for the 2014 and 2015 taxation year at $1,185,000.