Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 13, 2018 FILE NO.: WR 149893

Assessed Person(s): J.P.B. Appellant(s): J.P.B. Respondent(s): City of Toronto Property Location(s): Withheld Municipality(ies): Toronto Roll Number(s): Withheld Application Number(s): 3253369 Taxation Year(s): 2016 Hearing Event No.: 688073 & 691170

Legislative Authority: Section 323.(1)(e) of the City of Toronto Act, 2006, S.O. 2006, c.11 Sched. A

Heard: November 21 and December 5, 2017 in Toronto, Ontario

APPEARANCES:

Parties	Counsel⁺/Representative
J.P.B.	Self-represented
City of Toronto	Jennifer Boyczuk⁺ and Melanie Shankar

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

12016 was difficult for J.P.B., (the “Applicant”). During the year he experienced a significant plumbing leak, was forced to make do with Employment Insurance (“EI”) benefits, took in his father at his residence and continued to address an ongoing issue related to child support through Family Court. These conditions had a significant impact on his household finances and combined with losses incurred by a failing business in previous years created the challenging financial position he found himself in during the 2016 taxation year. The Applicant believes his situation in 2016 was one of ‘extreme poverty’ as the term is used in the City of Toronto Act (“Act”).

2Prior to 2016, the Applicant also experienced permanent hearing loss which had an impact on his ability to firstly, maintain his occupation and secondly, to find new employment. In 2016, he was enrolled in a government sponsored retraining program in association with the EI program.

3The Applicant also believes that due to his hearing loss, he also meets the test of ‘sickness’ in the Act. As a result, he submitted an application to the City of Toronto (the “City”) for the reduction, refund or cancellation of taxes because he was unable to pay them due to sickness or extreme poverty. The City has delegated its authority on applications under this section of the Act to the Assessment Review Board (the “Board).

4The City’s position is that the Applicant does not meet either the test of ‘extreme poverty’ or the test for ‘sickness’ in the Act and therefore, the application under s. 323.(1)(e) should be dismissed.

ISSUE

5The issue before the Board is whether or not the Applicant’s 2016 property taxes should be cancelled, reduced or refunded because of the Applicant’s inability to pay for the reason(s) of sickness or extreme poverty. This requires me to determine a number of things. First I must determine, based on the evidence at the hearing, if the Applicant was unable to pay his 2016 property taxes. If I determine he was unable to pay his property taxes, I then must determine if the reason he was unable to pay was either sickness or extreme poverty.

6If I make a determination that the reason he was unable to pay was sickness or extreme poverty, I must then decide on the amount of the taxes levied in 2016 to be cancelled, reduced or refunded.

DECISION

7I find that the Applicant is in a situation of extreme poverty and that his financial resources in 2016 were insufficient to meet his personal and family commitments or his property tax commitments. I further find that the Applicant’s condition of extreme poverty is the reason that he was unable to pay his 2016 property taxes.

8Accordingly, the City of Toronto is directed to refund the property taxes for the 2016 taxation year in the amount of $878.98. The City is further directed to cancel the remaining taxes levied for the 2016 year in the amount of $2,911.75.

REASONS FOR THE DECISION

Extreme Poverty

The Applicant’s Evidence and Submissions

9The Applicant reported a total monthly income for 2016 of $6,793. This amount was made up of EI benefits of $1,928 (of which $444 was paid to Humber College as part of a retraining program administered through EI), $240 employment income (the Applicant gained employment in December 2016), $2,125 as boarding income paid to him by his father who resides with him (this is the total of Ontario Disability support payments received by the Applicant’s father) and $2,500 from family in the form of repayable loans. The Applicant and his father live in the house full time and the Applicant’s two children live there part time.

10Monthly expenses reported by the Applicant totaled approximately $11,276 per month, not including property taxes. These expenses are summarized as follows:

• Mortgage payments - $4,020
• House Insurance - $112
• Groceries - $600
• Utilities (heat, hydro water and sewer) - $878 (includes excess water charges due to leak)
• Car and car expenses - $884
• Transit Expenses - $150
• Plumbing repair to address water leak - $166 ($2,000 / 12 months)
• Cell phone, telephone - $95
• Cable / internet - $135
• Family support payments - $1,979
• Credit card, Line of Credit Interest - $1,682
• Clothing, Child expenses above support payments - $575

11The Applicant reported that he also had several financial liabilities in 2016 that are not reflected in any monthly payment schedule. These additional liabilities include:

• A ‘Division 1’ creditor proposal totaling $250,000 in payments to creditors after an agreed-to discount in the amounts owing; and
• Personal loans totaling $50,000 to his sister and mother combined.

12Finally, the Applicant testified that the first and second mortgages had a total principal balance of approximately $670,000 at the end of 2016. He submitted that this was the most he could get in terms of tapping the equity in the subject property and that he would not be able to access any more equity through mortgages. The total principal represents a house value, based on a maximum mortgage of 85%, of $788,000. By obtaining the two mortgages, the Applicant testified that he was able to pay off some debts and cover other expenses that he deemed to be more important than others, including part of the property taxes levied in 2016. He realized at the time he couldn’t afford to pay the taxes and that the money could have been spent to reduce other debts but that he wanted to keep up with this commitment to the City.

The City’s Evidence and Submissions

13Melanie Shankar is a tax analyst with the City. Ms. Shankar testified that the taxes levied on the subject property of $3,790.73 were partially paid in the amount of $878.98 for the 2016 taxation year. In addition, she provided the Board with the 2016 assessment of the subject property of $551,000.

14Ms. Shankar submitted evidence of a nearby sale of a similar property in 2016. That property sold for $825,000. Ms. Shankar’s resulting opinion is that the subject property is likely worth more than its assessed value and would reasonably be closer to the $825,000 figure attributed to the comparable sale cited.

15Ms. Boyczuk submitted that the evidence shows the Applicant was capable of paying the taxes owing in 2016 because the taxes were at least partially paid, adding that costs reported for car expenses, cell phone charges and internet and cable should be considered discretionary expenses and not necessities.

16When the hearing re-convened on the second day, Ms. Boyczuk also pointed out that new evidence from the Applicant showed that he had filed a motion with the Courts to have his monthly support payments reduced, from $1,970 to $1,241. Ms. Boyczuk suggested this might have an impact of the Board’s decision on the 2016 application, noting that any finding of the Court would be retroactive to 2015 when the Applicant’s income was greatly reduced (2015) because he lost his job, and would reflect a reduced commitment in 2016 of approximately $729 per month.

Was the Applicant able to pay his 2016 property Taxes?

17As the City pointed out, the taxes were partially paid. Ms. Boyczuk submitted that this fact indicates that J.B. was able to pay his 2016 property taxes. In applications under this section of the Act, the determination of ‘ability to pay’ is not that simple. I heard from the Applicant that in order to keep the peace with his mortgagors over the year he borrowed money to pay the taxes (and a number of other household and personal expenses). His situation at the end of 2016 showed that the Applicant had liabilities totalling over $300,000 more than his assets.

18The evidence before me makes it clear that, while the Applicant paid a portion of his 2016 property taxes, he did so under extreme financial duress. He was forced to pay his taxes with borrowed money; money that he had little realistic prospect of repaying, given his employment situation. He also used borrowed money to pay much of his and his family’s ongoing household commitments. His monthly household expenses are $4,483 higher than the monthly income in 2016. Even when costs that could be considered discretionary (car expenses, internet, cable and cell phone services) the expenses exceed income by $3,300 per month. Even if I assume the family support payment reduction contemplated in the Applicants motion to Court, the shortfall still exceeds $2,500 per month. I find that, in the circumstances, the Applicant was not able to pay his property taxes for the 2016 tax year.

Why was the Applicant unable to pay the taxes levied in 2016?

19Having determined that the Applicant was unable to pay his property taxes in 2016, I have to decide if the reason is due to sickness or extreme poverty.

20In order to assess whether or not a person is in a condition of extreme poverty, the Board must consider not only income, but all other financial resources available to the Applicant.

21In addition to the City’s declaration provided at the hearing, the Applicant submitted Exhibit 1 which includes a statement filed with the Courts in connection with his application to have his monthly child support payments reduced, given his change in employment circumstances since that agreement was originally signed. The statement confirms the Applicant’s declaration of net income, and summarizes the full extent of his financial assets and liabilities.

22In 2016, the Applicant’s monthly expenses exceeded his income. The shortfall is made up through an addition to the total mortgage owing and the taking out of personal loans from family members; chiefly his mother and sister. His current balance of liabilities over assets totals over $300,000. This man is in dire financial circumstances. In fact, at the hearing even he was surprised at how far underwater he was.

23I am faced with a decision that impacts an entire family. I am bound by the intention of the legislators that sought to include this section in the Act. In order to make the application, the Applicant had to be a property owner. That implies that the provision for reduction, cancellation or refund of taxes is intended to benefit a property owner, so in that way it would be absurd for the Board to deny the application because the applicant owns the subject property and considers it an asset.

24In any event, the property is highly mortgaged. Compared with its assessed value, there is something like $100,000 in equity still left. Given the Applicant’s overall situation, $100,000 wouldn’t address even 1/3 of the total liabilities he would have after the sale, leaving him and his family homeless and over $200,000 in debt.

25While the dollar values in evidence are large, and there may be an argument that the Applicant’s financial issues are self-inflicted and resulting from bad business decisions, neither of these observations are relevant when I have to determine if the Applicant is in a condition of extreme poverty under this section of the Act. I find that he is. His situation gets worse by the month and, even if he were to sell to re-coup the remainder of the equity on the property, he would still have significant debt to deal with.

CONCLUSION

26I find that the Applicant is in a situation of extreme poverty and that his financial resources in 2016 were insufficient to meet his personal and family commitments or his property tax commitments. I further find that the Applicant’s condition of extreme poverty is the reason that he was unable to pay his 2016 property taxes.

27As I have found that the Applicant is unable to pay his 2016 property taxes due to extreme poverty, it is not necessary to consider whether the Applicant was unable to pay his taxes due to sickness.

28Accordingly, the City of Toronto is directed to refund the property taxes for the 2016 taxation year in the amount of $878.98. The City is further directed to cancel the remaining taxes levied for the 2016 year in the amount of $2,911.75.