Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 27, 2016

FILE NO.: WR 140042

Assessed Person(s): Carmelo Restivo and Luisa Rosina Restivo

Appellant(s): Carmelo Restivo and Luisa Rosina Restivo

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 26

Respondent(s): City of Sarnia

Property Location(s): 1754 London Line

Municipality(ies): City of Sarnia

Roll Number(s): 3829-300-036-18700-0000

Appeal Number(s): 2985626, 3028542, 3092479 and 3159508

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

Hearing Event No.: 621531

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

Heard: April 27, 2016 in Sarnia, Ontario

APPEARANCES:

Parties	Representative
Carmelo Restivo and Luisa Rosina Restivo	Self-represented
MPAC	John Taraborrelli
City of Sarnia	No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property is a first floor restaurant with a residential unit above. The building measures a total of 8,519 square feet (sq. ft.), including the main floor restaurant of 5,443 sq. ft. and a second floor residential unit of 3,076 sq. ft. The building was purpose-built as a restaurant/residence in 1990 and occupies a lot of 71,980 sq. ft.; 50 per cent of which is considered to be excess land. The site includes a paved parking lot and an area comprised of 9,000 sq. ft. that is considered to be excess land. The property also includes a detached garage of 526 sq. ft.

2The zoning of the property is somewhat unique in that the regulation of the by-law stipulates that the owner/operator of the restaurant is the only permitted tenant in the residential unit.

3MPAC returned a value of $743,000 for the 2013 taxation year, apportioned as follows:

• Commercial Property Class - $502,000
• Residential Property Class - $186,000
• Commercial Excess Land Property Class - $ 55,000

4For the 2014, 2015 and 2016 taxation years, MPAC returned a value of $743,000, apportioned as follows:

• Commercial Property Class - $480,700
• Residential Property Class - $178,900
• Commercial Excess Land Property Class - $ 83,400

5MPAC believes that this valuation is accurate, and that the method used to determine the assessed value, the cost approach, is the most appropriate approach in the circumstances. In preparation for the hearing, Mr. Taraborrelli considered some minor adjustments to the building areas and provided a resulting recommendation to the Assessment Review Board (“Board”) of $730,000, apportioned as follows:

• Commercial Property Class - $451,170
• Residential Property - $175,400
• Commercial Excess Land Property Class - $103,430

6The Appellants believe the returned value is too high and that, in comparison to at least one other, similar property in Sarnia, the subject property is over-assessed. The Appellants believe the over assessment also follows from an inaccurate valuation by MPAC in their costing method.

7The Board must determine two things in this appeal. Firstly, the Board must decide the correct current value of the subject property. Secondly, the Board must determine if, when reference is made to the assessments of similar properties in the vicinity, the current value determined should be reduced to make the subject property’s assessment equitable.

DECISION

8The Board finds that the current value of the property at 1754 London Line is $716,000. The Board also finds that there is no evidence to suggest a reduction in this value is necessary for the assessment of the subject property to be equitable.

9Accordingly, the Board finds that the assessment of the subject property is reduced, from $743,000 to $716,000, for the 2013, 2014, 2015 and 2016 taxation years apportioned as follows:

• Commercial Property Class - $437,170
• Residential Property Class - $175,400
• Commercial Excess Land Property Class - $103,430

Legislation

10In making its determination of these appeals, the Board must consider the Assessment Act (“Act”), and in particular, the following sections.

11Section 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.

12Section 19.(1) of the Act states:

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

13Section 40 of the Act states:

40.(1) Appeal to Assessment Review Board. – Any person, including a municipality, a school board or, in the case of land in non-municipal territory, the Minister, may appeal in writing to the Assessment Review Board,

(a) on the basis that,

(i) the current value of the person’s land or another person’s land is incorrect,

(ii) the person or another person was wrongly placed on or omitted from the assessment roll,

(iii) the person or another person was wrongly placed on or omitted from the roll in respect of school support,

(iv) the classification of the person’s land or another person’s land is incorrect, or

(v) for land, portions of which are in different classes or real property, the determination of the share of the value of the land that is attributable to each class is incorrect; or

(b) on such other basis as the Minister may prescribe.

14Section 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 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.

MPAC’s Evidence

15Mr. Taraborrelli testified that in order to determine the value of the building, he undertook a cost approach to value. The cost approach involves the application of costs associated with a wide range of building methods and materials as they apply to the subject property. He testified that these various costs are then adjusted for such things as age, depreciation, economic obsolescence, location and indirect costs associated with the building. Once all of the adjustments are made, the value of the land portion of the property is added to the adjusted building value to arrive at the total property value.

16In his original valuation using the cost approach, Mr. Taraborrelli testified that he arrived at a total building value based on January 1, 2012 costs of $903,522. Owing to the age of the structure he applied a depreciation amount of $309,480 which is derived from depreciation tables that are developed by MPAC for various regions in the Province. This depreciation resulted in a net building value of $594,042. Mr. Taraborrelli also applied an economic obsolescence factor to the building of $59,404, further reducing the total net building value to $534,638. Subsequent to this calculation, Mr. Taraborrelli adjusted the building value downward, to reflect findings he made when he made corrections to building areas, thus arriving at a building value of $521,538.

17When the land value of $208,425 was then added, consistent with the cost approach to value, the total property value determined by Mr. Taraborrelli was $730,000 (rounded).

Appellant’s Evidence

18Luisa Rosina Restivo believes the assessment of the subject property is too high. This assertion is derived from her comparison of the subject property, to a similar property located at 1679 London Line which is more or less across the street from the subject property.

191679 London Line has a smaller lot area (1.41 acres) and a slightly smaller building area of 8,090 sq. ft. and an additional basement area of 1,964 sq. ft. The comparable property was formerly used as a restaurant, and like the subject property it includes a residential unit within the building.

201679 London Line sold in July of 2011 for $530,000. It was built in 1973 and has a Current Value Assessment (“CVA”) of $497,000. Ms. Restivo testified that the CVA of this comparable property indicates that the CVA is too high in comparison and as a result, the assessment of the subject property should be reduced.

21Ms. Restivo raised the issue of equity of assessment. She believes that the much lower assessment of her comparable property at 1679 London Line shows that the assessment of the subject property leads to an unfair level of taxation. In her opinion, the two properties were essentially functioning as the same use at the valuation date. She acknowledged that the subject property was in better condition than the comparable property at the time of assessment, but in her view this is not sufficient to result in such a wide range of assessment between the two very similar properties.

22As a result of her investigation, Ms. Restivo believes that the assessment of the subject property should be somewhere in the range of the comparable property, with an upward adjustment for the excess land and the garage structure which she values at $50,000 and $12,000 respectively, totaling approximately $559,000.

Analysis

23The chief dispute in these appeals is the value of the building attributed by MPAC. While evidence was presented by both parties with respect to land value, there was no dissenting evidence from Ms. Restivo to refute MPAC’s findings on the value attributed to the land portion of the property, including the division between land in the Residential/Commercial classifications and the Commercial Excess land sub-class. While Ms. Restivo objected to the value of the excess land by MPAC, she provided no documentary evidence to suggest a different value. Her only point was that the land specified as ‘excess’ is not accessible from the road and its only value would be to someone in the future who may want to assemble a larger holding, together with adjacent properties. Mr. Taraborrelli agreed, adding that the land area is assessed as excess land for the reason that it is excess to the operation of the commercial use. The Board finds that the determination by MPAC on the land value is most compelling.

24Mr. Taraborrelli determined the value of the building using MPACs Automated Cost System (“ACS”). Exhibit 2 included the detailed breakdown of the various components that contributed to MPAC’s valuation on both the subject property and the property located at 1679 London Line, the comparable property cited by Ms. Restivo in the bulk of her submission. It is Ms. Restivo’s contention that the comparison of the value of 1679 London Line to the subject property indicates an unfair assessment for the subject property, owing to their similarity in size and use. Both properties include a residential unit within the commercial classification and both have operated as restaurants of similar size.

25In reviewing the ACS breakdown of both properties, the Board notes that the starting values attributed by MPAC are relatively similar for both properties when expressed as value per square foot. The subject building is valued at $99.89 per sq. ft. before adjustments while 1679 London Line is valued at $98.20 per sq. ft. These two values are remarkably close. The difference in net value of the two properties in evidence results from the obsolescence and depreciation adjustments applied by MPAC. The subject property is 17 years newer than the comparable used by the Appellant, resulting in downward adjustments for the 1679 London Line property that are larger. Total obsolescence and depreciation adjustments on the comparable property total $485,261, while the adjustments on the subject property total $368,884. The Board views this difference as reasonable given the difference in age between the two properties. In addition, the Board heard from both Parties that the residential unit included in 1679 London Road is of significantly inferior condition when compared to the subject property, indicating further that it is reasonable that the comparable property should have a lower assessment.

26The Board also notes that the value attributed to the land portion by MPAC provides a reasonable difference owing to the difference in overall size, and the absence of Excess Land in the valuation of the comparable property.

27The Board finds that the most compelling evidence with respect to current value is that of MPAC and, with one exception, considers MPAC’s valuation to reflect the current value of the subject property. The exception in evidence is the value attributed by MPAC to a walk-in cooler and a walk-in freezer that exist at the subject property. Ms. Restivo submitted that these two features ought to be considered as chattels and not fixed features of the property. She testified that they are in fact portable and are designed to be removed without impact to the structure of the building.

28Mr. Taraborrelli did not argue the point and indicated that if the Board saw fit, the value recommended by MPAC could be reduced by $14,356 to reflect the value attributed to these features in the ACS. The Board finds Ms. Restivo’s submission on this point to be reasonable, and reduces the MPAC’s valuation accordingly. The Board finds that the current value of the subject property is reduced by $14,000 (rounded) as a result.

29In making a determination of equity of the assessment of the subject property, when reference is made to the assessments of similar properties in the vicinity, the Board has only two properties in evidence where a sale can be compared to assessment. This is a meaningful comparison as the sale value can be used to determine with some probability as to how properties are assessed in comparison to their current value, which is defined by the Act as reflecting the market or sale value. The median assessment to sale ratio, the most prevalent method of comparison for determining equity, of the two properties in evidence is 1.27. This would indicate that, the properties in the sample are assessed above their current value, on a balance of probabilities. However, the Board is not satisfied that two properties, in this case, are sufficient to make any decision on equity. Accordingly, the Board finds that it has no evidence before it to indicate a reduction in the current value determined above is necessary for equitable assessment of the subject property.

CONCLUSION

30The Board finds that the current value of the property at 1754 London Line is $716,000. The Board also finds that there is no evidence leading to the conclusion that a reduction in this value is necessary for the assessment of the subject property to be equitable.

31Accordingly, the Board finds that the assessment of the subject property is reduced, from $743,000 to $716,000, for the 2013, 2014, 2015 and 2016 taxation year apportioned as follows:

• Commercial Property Class -$437,170
• Residential Property Class -$175,400
• Commercial – Excess Land Property Class -$103,430