Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 3, 2016

FILE NO.: WR 139692

Assessed Person(s): 3SC Pharmaceuticals Inc.

Appellant(s): 3SC Pharmaceuticals Inc.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 13

Respondent(s): Town of Ajax

Property Location(s): 95 Green court

Municipality(ies): Town of Ajax

Roll Number(s): 1805-040-006-14738-0000

Appeal Number(s): 2955507, 3019265, 3080240 and 3150214 (deemed 2016 appeal)

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

Hearing Event No. 622132

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

Heard: April 11, 2016 in Ajax, Ontario

APPEARANCES:

Parties	Representative
3SC Pharmaceuticals Inc.	Paul Grosman
MPAC	William Jon White
Town of Ajax	Susan Hewlett

DECISION OF THE BOARD DELIVERED BY JENNIFER GRIFFITH

INTRODUCTION

1The appeal before the Assessment Review Board (“Board”) is filed by the Assessed Person in respect to the returned assessment of $1,923,000 for the 2013, 2014 and 2015 taxation years for the subject property at 95 Green Court, in the Town of Ajax.

ISSUE

2William Jon White, representative for MPAC, is of the view that a fair and equitable assessment for the subject property is $1,859,000. This value was determined after an inspection of the subject property when the 2012 Current Value Assessment (“CVA”) was appealed. Based on the inspection, minor revisions to the costing of the structure was made and it resulted in the above suggested value of $1,859,000 (Exhibit 1, p. 13). Mr. White further argued that the recommended value of $1,859,000 is also supported by sales of similar lands in the vicinity.

3Paul Grosman, representative for the Assessed Person/Appellant is of the view that the subject property is assessed too high and that a fair and equitable value should be $1,092,000. He argued that this value is supported by sales of similar lands in the vicinity.

4The Town of Ajax was in attendance and observed the hearing.

5The Board has to decide:

• Whether the returned assessment of $1,923,000 for the 2013, 2014, and 2015 taxation years for the subject property is at current value as at the valuation date January 1, 2012.
• Whether the value is equitable with the assessments of similar lands in the vicinity.

DECISION

6The Board, having determined the current value to be $1,793,000 and having found that an equity adjustment is not required, reduces the returned assessment from $1,923,000 to $1,793,000 for the subject property for the 2013, 2014, 2015 and deemed 2016 taxation years.

REASONS FOR DECISION

Background

7The subject property is said to be located on a court of relatively newly built commercial and industrial structures. The subject property is described as a warehouse, with office space on the first and second floor at the front of the structure. It was built in 2008, with a gross floor area of 14,487 square feet (“sq. ft.”), a height of 25 feet (“ft.”), with on-site paved parking and a total site area of 0.84 acres (Exhibit 1, p.11).

The 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 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 19.2 of the Act states:

Valuation days

19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

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.

Exception

(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the Minister prescribes a different day as of which land is valued for that year.

12Section 40.(17) of the Act states:

40.(17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

13Section 40.(19) of the Act states:

40.(19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

14In 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

MPAC’s Position

15In support of his argument, Mr. White called Peter Svistunovs as a witness and he testified to the evidence contained in Exhibit 1, Tab 3 and 4.

16Mr. Svistunovs testified that the returned assessment of $1,923,000 for the subject property as at the valuation date of January 1, 2012 was determined by the Cost Approach. That the returned assessment value was revised to reflect minor changes discovered after an inspection of the subject property when the 2012 CVA was appealed. Based on the revisions, the returned assessment of $1,923,000 was changed to $1,859,000. Mr. Svistunovs also testified that no adjustments to the land value of the subject property were necessary, because a review of the vacant land sales of 11 comparable properties over the period 2012 and 2013 supported the land value used in the Cost Approach (Exhibit 1, p.17, Appendix B).

17Mr. Svistunovs testified that two permits were taken out in 2007 by the owners of the subject property prior to construction of the structure as provided by the Town of Ajax. Permit 05-002447 was taken out to build the structure and was estimated by the Municipality at $1,200,000. Permit 06-107063 was for site servicing and estimated at $108,000. Mr. Svistunovs testified that these values were not time adjusted even though the estimates occurred five years prior to the valuation date of January 1, 2012.

18In support of current value, Mr. Svistunovs presented Exhibit 1, p. 16, Appendix A, a market analysis of six sales identified as Sale 1, sold in 2012, Sale 2, sold in 2013, Sale 3, sold in 2012, Sale 4, sold in 2011, Sale 5, sold in 2013 and Sale 6, sold in 2012. Mr. Svistunovs testified that due to the very limited sales in the immediate homogeneous area in Ajax, he was forced to expand the search for sales in the neighbouring Town of Whitby, and the City of Pickering.

19Mr. Svistunovs testified that the above six sales were adjusted to reflect differences in age, height and lot size to the subject property and that the adjustment reflects a median sale price of $1,845,000, which he testified supports the recommended value stated above.

20On cross-examination, Mr. Grosman argued that the commercial land sales reviewed by MPAC (Exhibit 1, p. 17, Appendix B) to test whether the assessed land value for the subject property is correct are not similar, because the subject property is assessed as an industrial property. In response, Mr. Svistunovs testified that commercial vacant land is assessed at a lower value than industrial land like the subject property, and if anything, the subject property is assessed lower than if it was compared to the value of industrial vacant land. He also testified that these sales were not used to defend the returned assessment of $1,923,000, but merely to check if the land value determined by the Cost Approach is correct.

21Mr. Grosman argued that the six sales presented by MPAC were not time-adjusted to the valuation date of January 1, 2012. In response, Mr. Svistunovs testified that a review of the time-adjustment factor showed that the change was insignificant (2%) and in his view time-adjustment was not necessary.

22Mr. Grosman also argued that MPAC provided no details of how the sales of comparable properties were adjusted for height, age and site area. In response, Mr. Svistunovs testified that the adjustments were done using the Automated Cost System (“ACS”) which is used consistently by MPAC for the purpose of valuation. Mr. Svistunovs presented Exhibit 2, a copy of the ACS Property Details – Property Valuation report for the subject property to demonstrate the change in value when the data was changed after the inspection as stated above, and copies of the ACS Property Details – Property Valuation report, Exhibit 3, for the comparable property at 205 MacKenzie Avenue to show the change in value when the data (age, height, land) was adjusted to make this comparable property similar to the subject property. Mr. Svistunovs testified, that based on this principle, the same methodology was applied to the other sales presented by MPAC.

23Although Exhibits 2 and 3, were not disclosed 21 days prior to the hearing, the Board stated that the documents would be allowed if it would assist the Board in its determination. The Board allowed extra time for Mr. Grosman to review the documents. Upon review of the documents Mr. Grosman did not oppose the documents being entered into evidence, and he was allowed time for cross-examination of Exhibits 2 and 3.

24In reviewing the above evidence presented by MPAC, the Board accepts the adjustment methodology employed by MPAC, because MPAC testified that the ACS methodology is consistently used for assessment valuation purposes. Therefore, the Board finds that the subject property is not unduly prejudiced by the use of the ACS methodology.

25The Board also finds that the subject property is not prejudiced in any way by MPAC’s review of the sales of vacant commercial land for comparison to the subject property. The Board is required by the Act, under s. 19.(1) and s. 1, as stated above to determine whether the returned assessment of $1,923,000 for the subject property is at current value as of the valuation date January 1, 2012, based on sales evidence. The Board is not required to determine what the value of each component (land, structure, etc.) should be. Therefore, all relevant sales will be reviewed by the Board in making its determination.

26In reviewing the above six sales presented by MPAC (Exhibit 1, p. 16, the Board did not rely on Sale 2 and Sale 5, because these two sales occurred in 2013, which is too far removed from the valuation date of January 1, 2012 to provide any meaningful test of current value. The remaining four sales have a median adjusted sale price of $1,793,500 which is lower than MPAC’s recommended value of $1,859,000 for the subject property.

Appellant’s Position

27At the onset Mr. Grosman presented his professional qualifications, to which no objections were raised by MPAC (Exhibit 3).

28In support of current value, Mr. Grosman presented nine sales which occurred in 2011, 2012 and 2013 (Exhibit 5). The three sales which occurred in 2013 were not relied on by the Board, because they were too far removed from the valuation date of January 1, 2012 to provide any meaningful test of current value.

29The remaining six sales have on average a lot size of 1.78 acres, a total building area of 21,517 sq. ft., a year build of 1985, a height of 20 ft., and sold at $95.08 per sq. ft. based on total building area. This is compared to the subject property with a lot size of 0.84 acres, a total building area of 14,487 sq. ft., built in 2008 and assessed at a recommended rate of $128.32 per sq. ft. based on total building area.

30On cross-examination and in response to Mr. White, Mr. Grosman agreed that due to limited sales of similar properties in the subject property’s homogeneous neighbourhood the search was expanded to the neighbouring Town of Whitby. He also agreed that the sales prices of the comparable properties (Exhibit 5) that he presented into evidence are not adjusted for differences (size, age, height etc.) to the subject property.

31Mr. White argued that adjustments are necessary because economy of scale significantly impact the sales price per sq. ft. He argued that the comparable properties presented by Mr. Grosman have significant differences in terms of age, size and height when compared to the subject property.

32In reviewing the above evidence, the Board finds that on average the sales presented by Mr. Grosman are significantly larger and older than the subject property and therefore, not similar. The Board agrees with Mr. White that economies of scale do impact the sale price per sq. ft. and that the sales of comparable properties presented by Mr. Grosman would require some level of adjustment in order to make them similar to the subject property. This decision is support by Member J. Wyger’s decision in Neto v. Municipal Property Assessment Corp., Region No. 15 [2010] O.A.R.B.D. No. 136, in which he stated that:

The Board echoes the assessor’s contention that a more direct comparison based on CVA per square foot, requires that the comparable properties be roughly similar in structure size in order to make a meaningful comparison, due to the well known appraisal principle of economies of scale.

The Board's Analysis and Decision

33In reviewing all of the evidence presented under current value, the Board finds that MPAC presented the best evidence with the four sales, sold in 2011 and 2012, with a median adjusted sale price of $1,793,500, which is lower than the recommended value of $1,859,000 for the subject property.

34Based on the evidence, the Board determines the current value to be $1,793,000 (rounded).

Equity

35In support of equity, Mr. Svistunovs presented an Equity Analysis (Exhibit 1, p. 27) of 30 comparable properties, sold in 2011, 2012 and 2013. The analysis shows that these sales have a median ASR of 0.98 which Mr. Svistunovs testified falls within the International Association of Assessing Officers (“IAAO”) acceptable standards of an ASR of 0.90 - 1.10 and within MPAC’s acceptable standards of an ASR of 0.95 - 1.05. Based on this analysis, Mr. Svistunovs is of the view that an equity adjustment is not required.

36On cross-examination, Mr. Grosman argued that 16 of the 30 sales should not be included because they are industrial condominiums, Property Code 575, whereas, the subject property is an industrial warehouse with office spaces, Property Code 530.

37Mr. Grosman presented no other evidence in support of equity and testified that he is relying on MPAC’s equity analysis (with the exception of the comparable properties with Property Code 575) with a median ASR of 0.815.

38In reviewing all of the above evidence, the Board did not rely on MPAC’s equity analysis based on 30 sales with the median ASR of 0.98, because the 11 sales which occurred in 2013, are too far removed from the valuation date of January 1, 2012 to provide any meaningful test of equity. With the removal of the 2013 sales from the analysis, the remaining 19 sales which occurred in 2011 and 2012 have a median ASR of 0.975, which falls within the IAAO acceptable standards of an ASR of 0.90 - 1.10 and within MPAC’s acceptable standards of an ASR of 0.95 - 1.05. Therefore, the Board finds that the above median ASR does not support an equity adjustment.

39The Board also finds that the six sales which occurred in 2011 and 2012 and presented by Mr. Grosman under current value also have a median ASR of 0.98, which also falls within the IAAO and MPAC’s acceptable standards and does not warrant an equity adjustment.

40In regards to Mr. Grosman’s argument that the sales of industrial condos (Property Code 575) should be removed from MPAC’s equity analysis because industrial condos are not similar to the subject property, which is an industrial warehouse (Property Code 530). The Board disagrees, because for a finding of Equity, comparable properties need not be similar, but have to be of the same nature, character and function as the subject property, which is the information provided in Mr. Svistunovs’ Equity Analysis (industrial properties). This decision is supported by Member J. Wyger’s decision in Fairbanks v. Municipal Property Assessment Corp., Region No. 9 [2008] O.A.R.B.D. No. 306, in which he stated that:

The ASR measures how well the MPAC valuation model is reflecting sales values for all homes in a particular vicinity. They need not be similar. In fact, the Board takes the view that an ASR value close to 1.00 is even stronger evidence that the valuation model is accurate, where that model closely reflects sale values for homes in the area that are not similar to each other or the subject property. To discern a trend in the relation between sales values and assessed values, and make a supportable finding on the accuracy of the model requires that an average and/or median ASR be derived from many properties.

41The Board’s finding is also supported by Justices Brooke and Blair’s Ontario Court of Appeal decision in David v. Ontario (Reg Assessment Commr Reg 16) 1977 CanLII 1246 (ON CA), [1977] O.J. No. 2166, 15 O.R.(2d) 212, in which they stated that:

The same principle applies to the assessment of farm land as to commercial and other land in a municipality. The differences referred to by the Municipal Board do not relate to the real nature of the lands in question. They are all farm lands and their varying physical characteristics and uses do not alter their basic quality but merely affect their value for assessment and other purposes. There is nothing in the Assessment Act which justifies arbitrary distinctions between different types of farm land any more than for other types of land. All lands in the Township of West Gwillimbury used for agricultural purposes have “the same general nature, character or function”. They do not become dissimilar for the purpose of this section simply because they may differ in appearance or in the uses to which they are put.

42Based on the above evidence, the Board finds that the evidence does not support the conclusion that the current value as determined above requires an equity reduction.

CONCLUSION

43Based on all of the evidence, the Board determines the current value to be $1,793,000, and finds this value to be fair and equitable. Therefore, the Board reduces the returned assessment from $1,923,000 to $1,793,000 for the 2013, 2014, 2015 and deemed 2016 taxation years.

2016 DEEMED APPEAL

44An appeal for the 2013 taxation year is presently before the Board. Section 40.(26) of the Assessment Act 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 2013 appeal before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

45Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

(26) 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.