City Auto Brokers Inc. v. Municipal Property Assessment Corporation, 2018 CanLII 37728

Assessment Review Board / Commission de révision de l’évaluation foncière

Issue Date: April 24, 2018 File No.: WR 145992

Assessed Person(s): City Auto Brokers Inc. Appellant(s): City Auto Brokers Inc. Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 15, City of Mississauga

Property Location(s): 379 Dundas Street East Municipality(ies): City of Mississauga Roll Number(s): 2105-040-068-21900-0000 Appeal Number(s): 2994120, 3032540, 3086512 and 3153453 Taxation Year(s): 2013, 2014, 2015 and 2016 Hearing Event No.: 670266

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

Heard: March 09, 2017 in Mississauga, Ontario

Appearances

Parties	Counsel/Representative
City Auto Brokers Inc.	Roman Andrzejewski
MPAC	Jim Rilling and Rosemary Aranha (Witness)
City of Mississauga	No one appeared

Decision of the Board Delivered by Mark Spraggett

Background

1City Auto Brokers Inc. is the owner of 379 Dundas Street East (the "Subject Property"), located in Mississauga, designated as commercial within the CT property class, with a property Code 421. The Subject Property with a frontage of 100 feet ("ft.") and a depth of 172.90 ft., has a land area of 17,424 square feet ("sq. ft.") with a 2,799 sq. ft. vacant auto dealership designated as a commercial services improved area. The building is 1964 year built.

2Pursuant to the Assessment Act ("the Act"), MPAC is required to determine the value of the Subject Property on the valuation date, which, in this case, is January 1, 2012, (the "Current Value Assessment" or "CVA"). For the 2013 through 2016 taxation years under appeal, MPAC assessed the CVA at $1,421,000, notwithstanding that MPAC's analysis using the Cost Approach and comparative sales methods indicate a current value of $1,417,000 and $1,456,000 respectively.

3The Appellant, City Auto Brokers Inc., has appealed the assessments for these taxation years to the Assessment Review Board (the "Board"), pursuant to s. 40 of the Act. It is the Appellant's position that MPAC's CVA is too high and that the correct value for the 2013 to 2016 taxation years is $769,500.

4Section 44.(3)(b) of the Act, directs the Board to reduce the CVA of the Subject Property if similar lands in the vicinity have been assessed at a lower value ("equitable reduction"). The purpose of this provision is to fairly distribute the municipal tax burden according to the value of the property possessed by each rate payer. MPAC's equity analysis concludes that an equity adjustment of the CVA is not required. The Appellant did not provide its own equity analysis, but challenged the reliability of MPAC's equity analysis.

5Pursuant to s. 40(11) of the Act, the Municipality of Mississauga is a party to this proceeding. However, no one from the City of Mississauga appeared at the hearing.

6At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the CVA of the Subject Property is $1,421,000 and that an equity adjustment is not required.

Relevant Statutory Legislation

7Section 1 of the Act states:

1. "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) of the Act states:

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

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.

10Section 40.(17) of the Act states:

40.(17) 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 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

(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.

Issues

12The issues to be determined on this appeal are:

1. What is the correct 2012 CVA of the Subject Property; and
2. Whether there should be an equitable reduction of the CVA pursuant to s. 44.(3) (b) of the Act, and, if so, what the amount of this reduction should be.

Discussion, Analysis and Findings

Issue No. 1: What is the correct CVA of the Subject Property

MPAC'S Evidence

13Jim Rilling represented MPAC, accompanied by Rosemary Aranha, Property Valuation Analyst, as witness.

14Ms. Aranha prepared a Property Valuation Report ("Report") of the Subject Property. In this Report, to arrive at a value, she applied both the Cost Approach to value, referencing MPAC's Automated Cost System ("ACS"), as the primary valuation method, as well as a comparative sales analysis. The result of these two approaches are $1,417,000 using the Cost Approach and $1,456,000 using the comparative sales analysis. As the difference in these two values was considered relatively minor, she indicated that it is reasonable to conclude that correct CVA is $1,421,000.

15Ms. Aranha stated that auto dealerships are typically valued using the Cost Approach and Direct Comparison Approach. In this instance, the Cost Approach relied on the ACS model to determine the value of the land and building components as separate entities. For the Subject Property the values for the building and land are $110,519 and $1,306,454 respectively, resulting in a combined per square foot ("psf") value of $506 (rounded), for a building gross floor area of 2,799 sq. ft. Ms. Aranha expressed her view that most of the value rests in the land and not the building stock. In this instance the land value is determined to be $75 psf, based on a site area of 17,424 sq. ft.

16MPAC submitted two suggested comparables, (86 and 19 Dundas Street East), from the same neighbourhood as the Subject Property, described in the Table below. Both properties are recent sales that sold in the year prior to the January 1, 2012 valuation date, as well as the valuation year, so they required minimal time adjustments to sale amounts. These properties have building sizes between 480 sq. ft. and 7,008 sq. ft., and lot sizes of 26,572 sq. ft. and 12,632 sq. ft. respectively.

17Ms. Aranah indicated that the use 86 Dundas Street East is identical to the Subject Property. Although larger than the Subject Property, adjustments were made to allow for a psf comparison. Improvements were smaller, however given its use, Ms. Aranha stated that this factor likely had minimal impact on the sale price. While similar to the Subject Property in terms of zoning, location, current use, age and lot shape, she indicated that this property was deemed inferior in terms of location, because it is not located on a corner lot.

18Ms. Aranha stated that the second suggested comparable, 19 Dundas Street East, was considered highly comparable in terms of location but it was inferior in terms of lot size and, therefore, required a downward adjustment in psf price to better reflect the Subject Property.

19Adjustments for differing sale timelines (Time Adjusted Sale – "TAS") were made to ensure consistency in establishing sales amounts at a specific point in time, namely January 1, 2012. Ms. Aranha concluded from the Direct Comparison approach that the median price psf for land is $77, thereby supporting her analysis using the Cost Approach as being reasonable. The Table below illustrates the values for building and land separated into two components to illustrate MPAC's conclusion.

Table

Address	Lot Size (sq. ft.)	Floor Area (sq. ft.)	ACS Bldg Value ($)	ACS Land Value ($)	Land Sale Value ($)	T.A.Sale Price	Land Value/Lot Size ($/sq. ft.)
Subject Property 379 Dundas Street East	17,424	2,799	114,546	1,306,454			75
86 Dundas Street East	26,572	480	7,335	1,697,270	1,704,605		64
19 Dundas Street East	12,632	7,008	301,020	1,140,467	1,441,487		90
Median							77
Average							77

MPAC's Submissions

20Relying on Ms. Aranha analysis and conclusions, MPAC submits that the correct CVA is $1,421,000.

Appellant's Evidence

21Roman Andrzejewski, a paralegal associated with After Tax Paralegal Services Professional Corporation, represented the Appellant and testified on behalf of the Appellant.

22Mr. Andrzejewski provided a Statement of Issues document, which outlines the Appellant's evidence. The Appellant offers an analysis of four additional properties, three of which were not included in the MPAC's Report, namely, 274 Lakeshore Road, 713 Indian Road and 2183 Davebrook Road. Based on his analysis of these properties using the Direct Sales approach, he concluded that the median psf price is $272, in contrast to MPAC's determination that the psf price is $506. Using a psf price of $272, he calculated that the Subject Property's current value should be $769,500. The Appellant's evidence did not separate the assessment of land value from building value, as only property sales evidence was provided.

23The Appellant's evidence, includes a preliminary disclosure report prepared in 2016 by another MPAC analyst, citing five suggested comparables to arrive at a value for the Subject Property, in contrast to the two suggested comparables in the current Report by MPAC. These five comparables are in addition to the four comparable properties referenced earlier by the Appellant.

24The Appellant questioned why MPAC's current Report did not contain all the comparables found in the earlier MPAC report.

25The following two tables summarize the relevant information related to the properties referenced by the Appellant.

Address	Lot Size sf	Floor Area (sq. ft.)	ACS Bldg Value ($)	ACS Land Value ($)	Land Sale Value ($)	T.A.Sale Price	Land Value/Lot Size ($/sq. ft.)
Subject Property 379 Dundas Street East	17,424	2,799	114,546	1,306,454			75
274 Lakeshore Road	14,668	2,350	90,037	1,100,000	1,076,000		67
713 Indian Road	12,197	3,736	212,672	1,259,000	1,273,000		87
2183 Davebrook Road	17,860	6,871	126,658	759,500	754,000		35
19 Dundas Street East	12,632	7,008	301,020	1,140,467	1,441,487		90
Median							77
Average							70

Address	Lot Size (sq. ft.)	Floor Area (sq. ft.)	T.A.Sale Price	Use
Subject Property 379 Dundas Street East	17,424	2,799		Auto Dealership
86 Dundas Street	26,572	480	1,740,000	Auto Dealership
5 Alpha Mills Road	18,700	3,430	972,000	Auto Shop
971 Burnhamthorpe Road	33,105	1,664	1,400,000	Auto Shop
15 James Street East	30,490	6,620	682,500	Auto Shop
19 Dundas Street East	12,632	7,008	1,400,000	Office

Appellants' Submissions

26The Appellant argues that MPAC's CVA as returned is too high and submits that the correct CVA for the taxation years under appeal is $769,500.

27The Appellant submits that MPAC incorrectly assessed the Subject Property without any valid justification at $1,421,000 as of January 1, 2012, by increasing the assessment over the January 1, 2008 value of $895,000 by $526,000, or 58.8%. The Appellant maintains that, between January 1, 2008 and January 1, 2012, there were no improvements to this property. The Appellant, therefore, submits that there is no valid reason for the increase of assessed value.

28The Appellant disputes the choice of MPAC's two suggested comparables, in light of an earlier MPAC preliminary disclosure report, which refers to five comparable properties. The Appellant further asserts that the four comparables on which the Appellant relies, were identified by MPAC's assessors and should be considered when assessing the value of the subject property.

29The Appellant asserts that based on MPAC's own comparables, the Subject Property should be assessed at $768,000 or the average of $769,500.

30The Appellant stated that MPAC's evidence "has a lot of problems", noting in particular the disparity in the number of comparables referred to in two separate MPAC Valuation Reports.

31The Appellant also submits that all three valuation methods (Income, Cost, and Direct Comparison) are suitable for determining the current value for the Subject Property. He submits that the Board should use the Direct Sales approach and argues that the Board should not consider the approach using land residual values. In support of this submission, he asserts that MPAC had no vacant land comparables and had to remove buildings from lands when conducting its valuation analysis. The Appellant also argued that the value of land, as determined by MPAC, is not market force driven, but model driven, suggesting the Direct Sales approach would be the best method. The Appellant maintains that he only had sales evidence to work with, as MPAC gave no other type of evidence on which to apply an alternate valuation method, i.e. land residual approach. Therefore, the Appellant submits that the Board should rely on the Direct Sales approach when making its determination of current value.

32The Appellant submits that the Board should not rely on MPAC's use of its ACS model, arguing that MPAC did not completely use the model in this instance, making convenient assumptions for the ACS model to produce a proper value for the property. The Appellant submits that MPAC did not properly scrutinize the results of the ACS model for the subject property.

Findings on Issue 1

33With respect to the Appellant's submission referring to the absence of improvements to the Subject Property between assessment cycles, the Board notes that previous assessment cycles have no bearing on subsequent assessment cycles in determining current value. Each cycle has its own unique series of events that form the basis for making a determination of current value in that cycle. In this instance, the Appellant is attempting to establish a relationship between two completely separate assessment cycles, based on property improvements as the unit of measure. The Board finds that there is no persuasive evidence to support the Appellant's position, as the determination of current value in the present assessment cycle is independent of events that occurred in the previous cycle.

34The Board has reviewed all the comparable properties, and notes that there are only eight, as 19 Dundas Street East is cited twice. Furthermore, two properties are cited in MPAC's current Report, namely 86 and 19 Dundas Street East.

35With respect to the three properties the Appellant stated were used by MPAC, namely 274 Lakeshore Road; 713 Indian Road; 2183 Davebrook Road; the Board finds no reference to these properties in any analysis in the current MPAC Report, nor the preliminary disclosure report. The only evidence of this is two pages referenced in the Appellant's submissions, which do not provide any context. These pages show considerable hand written editing which alters the content of the original information. The Board finds there is no evidence clarifying the type of properties being considered, the quality of the building structures and their uses and why they are of a similar property type to the subject property. The Board also finds that there is no evidence of MPAC's assessment values for these properties, as referenced by the Appellant, except as shown as hand-written notes on the Report pages. Therefore, the Board finds that this evidence is not reliable.

36The Board notes that the Appellant has analyzed the price/sq. ft. values without making any adjustments for building size variations, thereby arriving at lower values for larger properties and higher values for smaller properties. The Appellant bases his recommendation for a reduced CVA of $769,500 using this approach. The Board is not persuaded by the Appellant's method, as the Board questions the reliability of the data used and the lack of clarity of the property types and condition of building structures in particular. The Appellant stated that the Income Method could be applied for this property. However, the Board finds that there is insufficient financial information available to apply this method.

37On review of the evidence provided by the Appellant, specifically the preliminary disclosure report, the Board finds the analysis provided tends to support the current position of MPAC's recommendation for current value. Using the Cost Approach the lowest rounded estimate of value is $1,410,000. The sales analysis using the Direct Sales approach, based on three of the five properties that are most comparable to the Subject Property, indicates a value of $1,480,000. The disclosure report indicates that the Subject's Property value is in the range of $1,410,000 to $1,480,000. The Board finds the evidence provided by the Appellant in terms of these five comparables, does not support the Appellant's submission that the correct value of the Subject Property is $769,500. The Board finds that there is no evidence from the preliminary disclosure report to support this value.

38The Board also finds that both MPAC Reports consistently applies a method that isolates the building component from the land component, when determining the current value. The Board notes that the current MPAC Report determined a median price/sq. ft. of land value for 2012 at $77/sq. ft. The preliminary disclosure report estimates the land value at $71.69/sq. ft. Lastly, the Board finds the median land value for the additional comparables provided by the Appellant is $75/sq. ft.

39The Board is not bound to apply any specific methodology in the determination of current value. Each party must provide a logical analysis to support their position for the current value of the Subject Property. The Board finds that the Appellant has not provided sufficient evidence of a consistent and verifiable nature to persuade the Board that the correct current value is $769,500. The Board finds that the Appellant's evidence tends to demonstrate a completely different value.

40In arriving at this conclusion, the Board accepts that the Appellant presented valid concerns about the application of the ACS model and the lack of full transparency to this systems' calculated outcomes, which indicates that the land residual approach is not a market determined outcome. However, the goal is to ascertain whether the results are sufficiently 'market like', to persuade the Board that the evidence is worthy of consideration. In this instance, MPAC not only provided a detailed costing of the Subject Property as context for the Cost Approach, but has also applied the Direct Sales Comparison method to market derived sales of suggested comparables to ensure MPAC's conclusion regarding current value is reasonable. It is worth noting that MPAC's Report gave the Cost Approach the primary approach and the Direct Sales Comparison as the secondary approach, whereas the MPAC preliminary disclosure report placed the Direct Sales Comparison as the primary method. Either way, the sales evidence speaks for itself regardless of approach, as pointed out by the Appellant, who stated that any of the three methods could determine the current value. In this instance both reports demonstrate the same outcome regardless of approach taken.

41Based on the above analysis and findings, the Board finds that the correct current value is $1,421,000. The Board therefore confirms the assessed current value as returned for the taxation years in question, based on a January 1, 2012 valuation date, as being $1,421,000.

Issue No. 2: Whether there should be an equitable reduction of the CVA pursuant to s. 44.(3)(b) of the Act, and, if so, what should the amount of this reduction be

42Section 44.(3)(b) of the Act requires that the Board address the issue of whether an equitable reduction of the CVA is required.

43The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., [1968] 2 O.R. 388, 1968 CanLII 183 (ON CA) at page 2:

A prime objective of municipal taxation is the equitable distribution of the burden according to the value of the property possessed by each ratepayer; in the system prevailing in Ontario, the tax levied on the ratepayer is determined by the application of a uniform mill rate upon the assessed value of the ratepayer's taxable property set down in the assessment roll. If equity in taxation is to be achieved, it must result from equity in assessment.

44In addressing equity in assessment, the Court, at page 6, also noted that "an assessment made at the actual value of lands and buildings…would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred [emphasis added]."

45However, the goal of the Act is to determine the correct current value. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support that such a reduction is warranted. In this regard, the burden of proof rests with the Appellant to establish, on a balance of probabilities, that an equitable reduction is required.

The term "vicinity" is not defined in the Act, but refers to the appropriate geographical area that will yield meaningful comparables (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 16 O.R. (3d) 83, 1993 CanLII 8621 (Ont. C.A.) at page 6).

MPAC'S Evidence

46MPAC's Valuation Report presents an Equity Study, which is a one page tabular format. This Study describes a sample size of 24 similar properties within the vicinity of the subject property, confirms the resultant median Assessment to Sale Ratio ("ASR") is 0.99, and concludes that this provides sufficient confidence that no adjustment in equity is required.

MPAC's Submissions

47Relying on its Equity Study MPAC submits that an equitable reduction of the CVA is not required.

48MPAC notes that the Appellant's analysis is unreliable as it is based on only two properties.

Appellant's Evidence

49The Appellant did not conduct its own equity analysis, instead relying on MPAC's submissions and reference to a 2016 preliminary disclosure report by MPAC in response to the Statement of Issues.

Appellants' Submissions

50The Appellant submits that MPAC's equity analysis is unreliable primarily because of the significant variation in sample size. The current equity study references twenty-four (24) similar properties, whereas the earlier 2016 study relied on seventy-three (73) similar properties in its analysis.

51The Appellant submits that the Board should use the ASR values for the two most likely comparables (0.89), which indicates that an equitable reduction of 11% is required.

Findings

52The Board finds the Appellant's analysis of sample size is of no assistance, as both reports support the same conclusion that an equity adjustment is not required.

53The Board also notes that the ASR analysis is a statistical analysis and that the Appellant did not provide any evidence to support the assertion that an equity analysis based on a sample size of two properties is sufficient to arrive at reliable conclusions.

54The only reliable evidence before the Board is MPAC's equity study which does not indicate that an equitable reduction is required.

55Based on the above analysis and findings, the Board finds that there is insufficient evidence on which to conclude that an equitable reduction is required.

Conclusion

56The Board confirms the January 1, 2012 current value assessment as returned of $1,421,000 as correct for the taxation years in question.

57Furthermore, the Board finds there is insufficient evidence on which to conclude that an equitable reduction is required.