Toyota Tsusho Canada Inc. v. Municipal Property Assessment Corporation, 2016 CanLII 63289

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 15, 2016

FILE NO.: WR 139946

Assessed Person(s): Toyota Tsusho Canada Inc.

Appellant(s): Toyota Tsusho Canada Inc.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23

Respondent(s): City of Woodstock

Property Location(s): 224 Beard's Lane

Municipality(ies): City of Woodstock

Roll Number(s): 3242-050-040-03737-0000

Appeal Number(s): 3002021, 3091255 and 3158407 (deemed 2016 appeal)

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

Hearing Event No.: 623530

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

Heard: April 12, 2016 in Woodstock, Ontario

APPEARANCES:

Parties	Representative
Toyota Tsusho Canada Inc.	Adam Yeoman
MPAC	William G. Somerville
City of Woodstock	No one appeared

DECISION OF THE BOARD DELIVERED BY RICK LIMOGES

INTRODUCTION

1The only issue in this appeal is the classification of the property. MPAC have returned the rolls with the subject property in the Industrial Property Class while the Appellants believe that it should be in the Commercial Property Class, similar to other properties in the vicinity used to recycle metal. The onus to demonstrate the change in Property Class rests with the Appellant.

2William Somerville introduced Brian Congdon who produced Exhibit 1, MPAC Report on the property known as 224 Beard's Lane in the City of Woodstock. The property under appeal is a 7.54 acre recycling plant. The Beard's Lane facility includes a 22,700 square foot pre-engineered building with a 45 foot height, a 700 square foot pump house with a 24 foot height along with two 400 square foot offices and a scrap metal pit all built in 2008. Two more attached offices (3,220 and 1,123 square feet) were built in 2011. The value returned as of the valuation date of January 1, 2012 was $2,260,000 with $2,086,000 in the Industrial (New Construction) (“JT”) and $174,000 in the Industrial (New Construction) (Excess Land) (“JU”). These values increased from the 2008 valuation of $2,184,000 and thus the increase was phased in over the four year period from 2013 to 2016. MPAC has been unable to get actual costing for the buildings however the property owners have reportedly spent over $6 million on property acquisition and the buildings. MPAC has not inspected the property, however a copy of the company website in Exhibit 1 states that “All scrap is unloaded, processed and loaded under roof” and thus they feel that the property class as returned is correct. Mr. Congdon states that there are no comparable properties locally and the assessment is about 35% of its cost to build in 2008.

3No questions were asked and no evidence was proffered by MPAC in support of their case. In closing, Mr. Somerville noted that as a recycling plant, materials are dropped off, crushed and shipped thus the Class is consistent with O. Reg. 282/98, Industrial Property Class s. 6 (1)(i). The Industrial Property class consists of the following: 1. Land used for or in connection with, i) Manufacturing, producing or processing anything. In support of his case, Mr. Somerville relies upon previous cases heard by the Board 1) Kimco Steel Sales Ltd. v. Municipal Property Assessment Corp., Region No. 5 [2007] O.A.R.B.D. No. 406 (“Kimco Steel”) released May 18, 2007; 2) Metro Waste Paper Recovery v. Municipal Property Assessment Corp., Region No. 9, [2013] O.A.R.B.D. No. 34 (“Metro Waste”), released on February 07, 2013; and 886381 Ontario Inc. v. Municipal Property Assessment Corp., Region No. 13 [2011] O.A.R.B.D. No. 214, released on May 18, 2011. No passages were highlighted or referred to in any of these cases. Somerville reiterated that the proper Property Class is Industrial and the fact that other similar properties are in the Commercial Property Class does not change the Regulation.

4Mr. Yeoman introduced Robert Patterson who submitted Exhibit 2, his AEC Appeal Report, dated April 8, 2016. The report confirms the salient facts of the property description and assessment figures. Photographs of both interior and exterior of the buildings confirm the description and operations taking place. In Addenda A – Comparable Locations, three London properties are hi-lighted as Steel Recyclers in the Commercial Property Class. These are: 333 Egerton St., London - London Salvage & Trading Company, 2009 Gore Rd., London – Core Industries Inc., and 2025 River Rd., London – Gerdau Ameristeel. According to Mr. Patterson, these suggested comparable properties are also metal recycling plants where like the subject property, metal is brought in, crushed and shipped out with no other processing taking place.

DECISION

5The current value of the subject property as of the valuation date of January 1, 2012 for the 2014, 2015 and 2016 taxation years is confirmed at $2,260,000 with $2,086,000 in the Industrial (New Construction) Property Class and $174,000 in the Industrial (New Construction) (Excess Land) Property Class. No adjustment is required pursuant to s. 44.(3)(b) of the Assessment Act (“Act”).

REASONS FOR DECISION

Legislation

6Section 44.(3)(a) of the 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, we must determine what the subject property would have sold for in an arm’s length transaction on the January 1, 2012 valuation day set for the 2014, 2015 and 2016 taxation years.

7Section 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 with that of similar lands in the vicinity.”

8Sections 5 and 6 of Ontario Regulation 282/98 state:

Commercial Property Class

5. (1) The commercial property class consists of the following:

6. Land and vacant land that is not included in any other property class.

7. A care home, as defined in the Residential Tenancies Act, 2006, to which that Act does not apply, that is operated with the intention of generating a profit and that does not have seven or more self-contained units.

8. If a portion of land is in the office building property class, any other portion of the land that is not included in any other property class.

9. If a portion of land is in the shopping centre property class, any other portion of the land that is not included in any other property class. O. Reg. 282/98, s. 5; O. Reg. 68/14, s. 2.

(1.1) Revoked: O. Reg. 575/06, s. 2.

(2) For the 2000 and subsequent taxation years, a building that is used exclusively for storage purposes at the site where manufacturing, production or processing takes place is included in the commercial property class if the building is,

(a) not attached to a building or structure or portion of a building or structure that is included in the industrial property class; or

(b) linked to a building or structure or portion of a building or structure that is included in the industrial property class by means of a minimal connection or corridor constructed only for the purpose of moving material or goods between the buildings. O. Reg. 356/00, s. 2.

Industrial Property Class

6. (1) The industrial property class consists of the following:

7. Land used for or in connection with,

i. manufacturing, producing or processing anything,

ii. research or development in connection with manufacturing, producing or processing anything,

iii. storage, by a manufacturer, producer or processor, of anything used or produced in such manufacturing, production or processing if the storage is at the site where the manufacturing, production or processing takes place, or

iv. retail sales by a manufacturer, producer or processor of anything produced in manufacturing, production or processing, if the retail sales are at the site where the manufacturing, production or processing takes place but are not on land to which section 44 applies.

2. Vacant land principally zoned for industrial development. O. Reg. 282/98, s. 6 (1); O. Reg. 536/05, s. 2.

(2) The following are included in the industrial property class:

1. Land used to manufacture or transform electricity.

2. For the 1998 and 1999 taxation years, land used for mining, quarrying, producing oil or gas or extracting anything from the earth.

2.1 For the 2000 and subsequent taxation years, land used for mining, producing oil or gas or extracting anything from the earth. This paragraph does not apply to,

i. land that is licensed or required to be licensed under Part II of the Aggregate Resources Act, or

ii. land that would be required to be licensed under Part II the Aggregate Resources Act if the land were in a part of Ontario designated under section 5 of that Act.

2.2 For the 2000 and subsequent taxation years, the portion of,

i. land that is licensed or required to be licensed under Part II of the Aggregate Resources Act, or

ii. land that would be required to be licensed under Part II of the Aggregate Resources Act if the land were in a part of Ontario designated under section 5 of that Act,

that is used for,

iii. extracting anything from the earth,

iv. excavating,

v. processing extracted or excavated material,

vi. stockpiling extracted or excavated material, or

vii. stockpiling overburden.

2.3 For the 2000 and subsequent taxation years, roadways and structures on a portion of land that is licensed or required to be licensed under Part II of the Aggregate Resources Act if the roadway or structure is used in connection with an activity listed in paragraph 2.2.

3. Shipyards and dry docks.

4. Revoked: O. Reg. 257/14, s. 1.

5. A sewage or water treatment plant other than a plant owned by a commission as defined in subsection 27 (1) of the Act. O. Reg. 282/98, s. 6 (2); O. Reg. 351/99, s. 2; O. Reg. 257/14, s. 1.

(3) A building used exclusively for office or administrative purposes is not included in the industrial property class unless it is attached to a building or structure included in the industrial property class. O. Reg. 282/98, s. 6 (3).

(3.1) Revoked: O. Reg. 356/00, s. 3.

(4) Land in the large industrial property class is not included in the industrial property class. O. Reg. 282/98, s. 6 (4).

Current Value

9No issues were raised by any party to this appeal with regard to the Current Value of the subject property. The only issue in dispute is the determination of the proper Property Class. Further, no issues were raised by any party to this appeal with regard to Section 44.(3)(b) of the Act which requires that the 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 with that of similar lands in the vicinity.” Having reference to the limited evidence of assessed values for similar properties in the vicinity does not give rise to any issue of inequity. The Board confirms that this subsection of the Act relates only to valuation and not classification.

Property Class

10The Board notes that the industrial property class consists of the following land used for or in connection with manufacturing, producing or processing anything and that the commercial property class consists of land and vacant land that is not included in any other property class. It is MPAC's position that as a recycling plant, materials are dropped off, crushed and shipped. They provided a hard copy of the company's website that states “All scrap is unloaded, processed and loaded under roof.” Mr. Paterson has stated that metal is brought in, crushed and shipped out with no other processing taking place. Thus since no party is claiming that either manufacturing or production are taking place in the Beard's Lane facility, we must determine if processing in the sense contemplated in the Regulation is taking place. Since the appellants admit that crushing of the scrap metal is taking place, MPAC has not been allowed to inspect the property and no other evidence of the output of the facility has been provided, we conclude that the loose scraps of metal shown in the picture are crushed into another form, likely bales of steel that are easier to transport and ultimately ship to an industrial facility that uses the output as raw materials in their production. MPAC have relied upon the following cases to support their belief that the facility should be in the Industrial Property Class:

Kimco Steel

11In Kimko Steel, the Board found clear evidence that the scrap material brought into the Kimco facility undergoes a process and that the Regulation requires an Industrial Classification for 'processing anything'. Secondly, the Board addressed the issue of whether it is relevant that other operations with recycling elements are classed as Commercial. The Board also found that whether the classifications of other properties are correct or not is irrelevant to the classification of the subject properties and further that the Board can only examine the actual use of the subject properties at the appropriate time to determine the correct classification. Both of these findings are relevant to the case at hand.

Metro Waste

12In Metro Waste, the Board deliberated extensively on the definition of 'processing anything' while relating the correct interpretation to manufacturing and producing while also referring to other case law. The Board concluded that the connection to manufacturing is clear, as the materials processed are used directly as raw materials in the manufacture of other goods. The Board also relied upon Kimco Steel in this case and concluded that the process undertaken clearly changes the appearance and marketability of the materials from loose piles of junk to compact bales of material having a functional utility in the marketplace and thus the activity constituted processing in the sense intended by the Regulation. Again, the Board finds these conclusions to be relevant to the issues in the Beard's Lane case.

886381 Ontario Inc.

13In 886381 Ontario Inc. the Board found that the property should be classified as Industrial because the operations performed on the site are a form of 'processing'. The Board accepted two criteria established in other case law to determine if processing had occurred: 1) that the treatment must make the goods more marketable and 2) that there must be some change in the appearance or nature of the goods. The processing which takes place at the Beard's Lane facility effectively converts loose pieces of scrap metal into a compact bale or other form of metal that can easily be transported and used as a raw material in other production facilities.

CONCLUSION

14The Board finds that the process undertaken at the Beard's Lane facility clearly changes the appearance and marketability of the materials from loose piles of scrap steel to a material having a functional utility in the marketplace and thus the activity constitutes processing in the sense intended by the Regulation. The Board also finds that whether or not the classifications of other properties are correct is irrelevant to the classification of the subject property since the Board can only examine the actual use of the subject property at the appropriate time to determine the correct classification. The other properties in question and all of their salient facts are not currently before the Board.

2016 DEEMED APPEALS

15Appeals for the 2015 taxation year are 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 appeals before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

16Section 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.

17The current value of the subject property as of the valuation date of January 1, 2012 for the 2014, 2015 and 2016 taxation years is confirmed at $2,260,000 with $2,086,000 in the Industrial (New Construction) Property Class and $174,000 in the Industrial (New Construction) (Excess Land) Property Class. No adjustment is required pursuant to s. 44.(3)(b) of the Act.