Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 15, 2016 FILE NO.: WR 138886

Assessed Person(s): 333 Jarvis Street Limited

Appellant(s): 333 Jarvis Street Limited Dan Raseta

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 18

Respondent(s): Town of Fort Erie

Property Location(s): 333 Jarvis Street

Municipality(ies): Town of Fort Erie

Roll Number(s): 2703-010-051-00600-0000

Appeal Number(s): 3060848 and 3156064 (deemed 2016 appeal)

Taxation Year(s): 2015 and 2016 (deemed appeal)

Hearing Event No.: 613558

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

Heard: February 8, 2016 in Fort Erie, Ontario

APPEARANCES:

Parties Counsel⁺/Representative

333 Jarvis Street Limited E. Richards

Dan Raseta E. Richards

MPAC L. Brown

The Town of Fort Erie G. Corney

DECISION OF THE BOARD DELIVERED BY CRISTINA MARQUES

ISSUE

1The subject property is a 5.38 acre lot improved with a 122,388 square feet (“sq. ft.”) structure built “piecemeal” from 1954 to 2003. The structure was formerly used as a pharmaceutical manufacturing facility that ceased all business operations in June 2012. It is located in the downtown area, in the Town of Fort Erie, and is within close proximity to both the Queen Elizabeth Way and the U.S. border crossing.

2For the 2015 taxation year, the property is classified in the Industrial Property Tax Class (IT) and is assessed at $1,125,000. Lisa Brown, appearing for MPAC, testified that the Automated Cost System (“ACS”) was used to value the subject property, and that it benefits from a 10% obsolescence discount due to piecemeal construction.

3333 Jarvis Street Ltd. and Dan Raseta (the “appellant”), through their representative Ed Richards, submitted that the sale of the subject property in 2014 for $500,000 reflects the piecemeal construction and a contamination issue. Mr. Richards urged the Assessment Review Board (“Board”) to determine the current value of the subject property to be $500,000 for the 2015 taxation year.

DECISION

4The Board must determine the correct current value for the subject property and whether the assessment of the subject property is equitable with the assessments of similar properties in the vicinity of the subject property:

1. As directed by s. 44.(3)(a) of the Assessment Act (“Act”), the Board finds that the current value of the property is $500,000 for the 2015 taxation year.

2. Further, the Board finds that there is no evidence before it to support the conclusion that the assessment of the subject property, as determined above, requires a further adjustment in accordance with s. 44.(3)(b) of the Act.

5Accordingly, the assessment of the subject property for the 2015 taxation year is $500,000 in the Industrial Property Tax Class.

REASONS FOR DECISION

Legislation

6The Board must have regard to s. 1, s. 19.(1), s. 19.2(1), s. 40.(17), s. 40.(19) and s. 44.(3)(a) and (b) of the Act when determining whether or not the assessment under appeal is correct.

7Section 1 of the Act defines current value as follows:

“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.

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.

9Section 19.2(1) of the Act provides:

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.

10Section 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.

11Section 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.

12Section 44.(3)(a) and (b) of the Act state:

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.

Board’s Analysis

Current Value

13The best indicator of current value is an arm’s length and market-tested sale of a property on the valuation date, January 1, 2012, or close to it. In this case the subject property sold in January 2014. The Board will consider the sale of the subject property because the appeal to be considered is for 2015 taxation. The Board will also rely upon the sale of similar properties in the vicinity that sold on or close to the valuation day.

14Ms. Brown, in support of the assessment as returned, presented Exhibit 1 consisting of an MPAC report which included a location and current value study map; photographs of the subject property and of the suggested comparable; a property details report; and a comparable property report with four properties. She testified that MPAC values properties such as the subject property using the ACS. In this methodology an estimate is made for the replacement of the components of the structure based on the current value. The total replacement cost is then adjusted for depreciation, age and obsolescence. This analysis indicates a value of the building and then the value of the land is added to it.

15Ms. Brown indicated that the subject property sold under distress, and that the Board should not consider the sale an arm’s length transaction. She stated that the seller was highly motivated, which is why the price was low, and that the 2014 sale of the subject property is too far removed from valuation day of January 1, 2012 to be considered a valid sale. She submitted that MPAC has no evidence to suggest that the property is contaminated other than the evidence presented by the appellant, that the contamination did not impede the property from being used and tenanted in January 2012. She further submitted that a medical marijuana facility is presently negotiating the tenancy of the subject property.

16The assessor identified four sales of properties which were presented to demonstrate the accuracy of MPAC’s method of valuation through the cost approach. As the suggested comparables have considerably larger lots than the subject property, as adjustments were made to their values. Ms. Brown testified that the variables that have greatest impact on value are location, lot size, building quality and character of construction, as well as building age. She stated that their sale prices have not been time adjusted because they occurred in close proximity to the valuation day of January 1, 2012.

17Details of each property proposed by MPAC are summarized in Table 1 below:

Table 1

Address	Building Size (sq. ft.)	Lot Size (acres)	Year Built	Land Value	Adj. Land Value	Sale Date	Sale Price /sq. ft.	Adj. sale Price /sq. ft. ($)	Assessment /sq. ft.	Status
Subject Property
333 Jarvis Street	122,388	5.38	1954-2003	88,596	n/a	n/a	n/a	n/a	1,125,000/ 9.19	vacant
Sale 1
40 Dunlop Street	103,762	13.62	1915-1984	147,970	(59,372)	June 2012	300,00/ 2.89	2.32	N/A	vacant
Sale 2
995 Elm Street	76,872	8.51	1980-2012	123,897	(35,299)	Feb. 2012	1,990,000/ 25.89	25.43	N/A	occupied
Sale 3
300 Ross Street	313,609	17	1935-1991	156,502	(67,904)	April 2012	1,125,000/ 3.59	3.37	N/A	vacant
Sale 4
100 Hays Road	440,533	168.21	1967-1995	1,612,033	(1,523,435)	May 2012	4,750,000/ 13.05	9.59	N/A	vacant

18Ms. Brown stated that the suggested comparable sales are all in the south Niagara Region. The sales adjusted for land value range from $2 to $25 per sq. ft. with an average of $10.18, resulting in a value for the subject property of ($10.18 x of 122,388) $1,245,909.84. She submits that this evidence supports the returned value of $1,125,000.

19Mr. Richards submitted Exhibit 2 consisting of a subject property profile with photographs, opinion of value statement, an agreement of purchase and sale for the subject property, an Multiple Listing Service (MLS^®) listing of the subject property, an analysis of MPAC’s sales, and a summarised phase II environmental site assessment. In his view the January 2014 sale of the subject property is the best evidence of current value. He argued that the lease with the medical marijuana facility is not a foregone conclusion because the licenses to operate are not yet in place, and it should not be used to impose a higher value on the subject property.

20Mr. Roberts called Dan Raseta, a principal of the firm that owns the subject property, whom Ms. Brown agreed is qualified to express opinions in regards to the subject property.

21Mr. Raseta testified that the subject property was a speculative purchase, and that contamination was the major factor in the price reduction. He stated that the original asking price was $2,100,000 and that within one year the asking price was reduced to $1,000,000. When negotiations commenced the first offer was $800,000, and through due diligence, contamination was found, as such the final purchase price was for $500,000. The property sale was arm’s length, although it was a bankruptcy sale. The receiver was under the obligation to sell the property at market value. Mr. Raseta testified that the property was commercially listed between 2012 and 2014, and was subject to a substantial price reduction during that marketing period due to a lack of prospective buyer interest. He stated that the subject property is unique in its building envelope as well as in the fact that it is contaminated, and that the Board should accept the 2014 sale as best evidence.

22Mr. Raseta testified that negotiations for a rental agreement with Canacure were initiated, but they did not come to fruition because the Ministry of Health and Long-Term Care has not yet approved their application to operate as a medical marijuana facility. To date the procurement of a tenant for the subject property has been unsuccessful. The disjointed layout of the building, the physical issues of the building and the ground contamination are unfavourable for optimal use of the structure. The current status is that the building is vacant with no viable tenants.

23Mr. Richards is of the opinion that in the very least MPAC should consider the removal of Sale 2, 995 Elm Street as it is a newer build and is occupied. For his analysis of current value he revised MPAC’s sales analysis by including the sales of vacant buildings, only,(Sales 1, 3 and 4) resulting in an average sale per sq. ft. of building of $4.84, Exhibit 2. He testified that the final purchase price of the subject property ($500,000 / 122,388 sq. ft.) results in $4.08 per sq. ft.; a value that is relatively close to the values that the market is producing for vacant properties in the area.

24As for the appellant’s argument that the subject property is contaminated and dysfunctional due to the piecemeal construction, the Board is satisfied from the evidence received that the subject property is inferior to the suggested comparable properties. However it cannot speculate on the value to renovate/rebuild and to clean up as it did not receive proper evidence. The Board is unable to use the information presented to support a reduction in assessment because no estimates were presented to the Board as to how much it would cost remediate the property, apart from Mr. Raseta’s opinion. The Board cannot arbitrarily assign a negative or positive value to a variable; a value must be based on evidence.

25For the purpose of a current value analysis the Board rejects as a good comparable Sale 2 because it is a newer construction, and because it is an occupied property, versus the rest of the comparables and the subject property which are all vacant. Evident in the fact that this property located at 995 Elm Street sold for $25.43 per sq. ft.; versus the other, vacant, properties that sold between $2.32 and $9.59 per sq. ft. The average sale price per sq. ft. for Sales 1, 3, and 4 is $4.84 per sq. ft. The Board can adjust the value of the subject property by applying the average value per square foot of the comparables accepted by the Board, that being $4.84. This value per sq. ft. applied to the subject property results in a value of ($4.84 x 122,388 = 592,357.92) or $592,000 (rounded). As for the sale of the subject property in 2014 for $500,000 it is plausible that its slightly lower sale price may be market recognition of a lower quality property that was construed piecemeal and may be contaminated. The final purchase price of the subject property ($500,000 / 122,388 sq. ft.) results in $4.08 per sq. ft., which coincidently is a value that is remarkably close to the values the market is producing for vacant properties for the valuation day of January 1, 2012. The Best evidence of current value for the taxation year of 2015 is the sale of the subject property, and the Board finds that the current value for the 2015 taxation year is $500,000.

Equity

26Section 44.(3)(b) mandates and directs that after determining current value, the Board shall have reference to the value at which similar lands in the vicinity are assessed. The Assessment to Sales Ratio (“ASR”) is a tool often used to determine if an equity adjustment is required. An ASR is determined by dividing the assessment as returned with the time adjusted sale price. An ASR falling below 1.0 is an indication that MPAC’s valuation methodology may be resulting in assessments below values determined in the market place. Conversely, an ASR falling above 1.0 is an indication that MPAC’s valuation methodology may be resulting in assessments above values determined in the market place.

27Although neither party presented equity evidence, the Act requires the Board to consider whether equity has been achieved with the assessments of similar lands in the vicinity. The Board is satisfied that given the reduction made to current value based upon market tested assessments, that no further adjustment is required to achieve equity with the other lands.

CONCLUSION

28The Board finds that the subject property’s value is $500,000. There is not enough evidence to adjust for equity with similar lands in the vicinity. The Board reduces the assessment of the subject property from $1,125,000 to $500,000 for the 2015 taxation year in the industrial property class.

2016 DEEMED APPEAL

29An appeal for the 2015 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 2015 appeal before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

30Section 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.