Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 24, 2018

FILE NO.: WR 151094

Assessed Person(s): Mary Jessie Ciuciura and David Arthur Farago

Appellant(s): David Farago and Mary Jessie Ciuciura

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 31

Respondent(s): Municipality of Wawa

Property Location(s): 128 Government Road

Municipality(ies): Municipality of Wawa

Roll Number(s): 5776-000-003-17500-0000

Appeal Number(s): 3256796 and 3314760 (deemed 2018 appeal)

Taxation Year(s): 2017 and 2018 (deemed appeal)

Hearing Event No.: 691165

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

Heard: February 05, 2017 in Toronto, Ontario

APPEARANCES:

Parties	Representative
David Farago, Mary Jessie Ciuciura	Mary Jessie Ciuciura
MPAC	Tim Wishman
Municipality of Wawa	No one appeared

DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI

INTRODUCTION

1Mary Jessie Ciuciura and David Arthur Farago, (“Appellants”) appealed the assessment of the subject property for the 2017 taxation year. They argued that this assessment is too high. The subject property was assessed at $224,000 for the 2017 taxation year. A Request for Reconsideration (“RFR”) by the Appellants triggered an inspection of the subject property by MPAC, where the returned assessment was reduced by $26,000 due to a reduction in the construction quality of the house from 7.0 to 6.5 and the construction quality of the garage from 4.0 to 3.0. This reduction provides a revised current value assessment (“CVA”) of $198,000. The Appellants request a further reduction of the revised CVA by 25% to $148,500.

ISSUES

2The issues to be determined are:

i.) What is the correct current value of the subject property for the 2017 and deemed 2018 taxation years?

ii.) Is the current value as determined by the Board equitable in reference to the assessments of similar lands in the vicinity?

DECISION

3For the reasons set out below the Board determines that the correct current value of the subject property for the 2017 and deemed 2018 taxation years to be $198,000.

4The Board determines that a further downward adjustment to the determined current value is required to be $186,000 (rounded) to ensure that the assessment of the subject property is equitable with the assessments of similar lands in the vicinity.

5The Board reduces the returned assessment from $224,000 to $186,000 (rounded) for the 2017 and deemed 2018 taxation years.

REASONS FOR DECISION

Legislation

6In accordance with s. 44.(3)(a) the first mandate of the Board is to determine “the current value of the land.” Section 1 of the Assessment Act, (“Act”) defines current value 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, for the 2017 and deemed 2018 taxation years, the Board must determine what the subject property would have sold for in an arm’s length transaction on the January 1, 2016 valuation day set by the Act.

7Section 19.2(1) of the Act prescribes the valuation days, which 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.

8Section 40.(17) of the Act places “the burden of proof as to the correctness of current value on MPAC.”

Current Value

9Ms. Ciuciura submits to the Board that although she does not agree with the revised CVA of $198,000, she requests that the Board reduce the revised CVA by 25%. In her submissions, she identified several factors which she argues MPAC did not consider in the assessment of the subject property. The Board shall provide its findings on these factors as they may have an impact in the determination of the correct current value of the subject property.

Prior Decisions of the Board and Prior Settlements with MPAC

10Ms. Ciuciura referenced past Board decisions and prior MPAC settlements on the subject property, which she testifies considered that there are location factors which degrade the subject property’s value. In Appendix 1 of her evidence, an affidavit of Mr. Frank Fata, MPAC’s representative, sworn August 29, 2001, used at the 2001 taxation year appeal before the Board, where Mr. Fata testified that MPAC made a 25% reduction to the assessment of the subject property based on the sales analysis of the market activity in the area at that time. In that appeal the Board agreed with MPAC. However, the Board further added another 25% reduction for arsenic contamination in the area. At a request for review of that decision, the reviewing panel changed it to only a 25% reduction associated only with the location of the subject property.

11Ms. Ciuciura further presented a chart which shows the series of reductions on the subject property for various taxation years. In the 1999 taxation year, at a hearing before the Board, there was a 15% reduction in the assessed value. For the 2000, 2002, 2006 taxation years the following reductions were applied upon settlement with MPAC, 9%, 25% and 23% respectively. She stated that in the 2008 taxation year, there was a 41% increase in the assessment of the subject property, which was after they had purchased additional land from the municipality to build a garage and they believed it was fair. In 2012, she testified that they did not appeal the assessment, which they should have and in the 2016 base year, they realized that MPAC had not applied the 25% reduction to the assessment, which they had done in the past.

12While Ms. Ciuciura urged the Board to apply a 25% reduction to the revised CVA for this current appeal, she could not provide the Board with evidence to support this reduction. Under-cross examination she admitted that she assumed this reduction was made by MPAC due to the location of the subject property and that there was no evidence on how the 25% was calculated in previous years and she could not specifically state if this reduction was based on market evidence or location. The Appellants just assumed it was for location.

13In paragraph 10(c) of Mr. Fata’s affidavit for MPAC, he states “… the market analysis did not indicate that an adjustment beyond the location allowance was warranted for any of the Government Road Properties…” This indicates that the 25% reduction was based on the market analysis at the time. Mr. Wishman further testified that a study was carried out at the time to justify the 25% reduction. In this appeal, the Appellants did not provide the Board with market evidence to justify a 25% reduction. In the 2002 taxation year, for settlement purposes, MPAC applied another 25% reduction. The Appellant could not furnish the Board with the basis of this reduction. For settlement purposes several other percentage reductions was applied by MPAC. The details and the reasons for these reductions are protected by settlement privilege. MPAC has applied various percentage reductions in their discretion for settlement purposes. The Board can only make a determination based on current market evidence, which the Appellants have not presented before the Board. Consequently, the 25% reduction cannot be applied to the determined correct current value.

Location: Sewage Disposal System, Road Conditions & Condition of Surrounding Properties

14The Appellants submitted that factors related to the location of the subject property including sewage disposal system, local road conditions, and the poor condition of surrounding properties should be considered. Ms. Ciuciura testified that these neighbourhood factors negatively affect the value of the subject property and should be considered in its assessment. The subject property uses a septic tank system which is usually pumped out and fails frequently. Special laundry pumps are installed to remove wash water from the laundry area. Pumping out the septic tanks results in damage to the subject property’s lawn. Furthermore, she testified that the road on the western portion of the street in which the subject property is located does not have sidewalks, it is unpaved, has potholes and the conditions are muddy or dusty depending on the weather. She also stated that the surrounding properties are unkept, poorly maintained and that most of the properties are vacant, in ruins, and this dilapidated appearance reduces the value of properties in this area. During cross examination, Ms. Ciuciura admitted that the Township paid for the regular pumping out of the sewage. The Appellants did not have any evidence to show that properties on the western side of Government Road sell for less due to lack of sales in the area. The evidence they presented in this regard was the sale of the strip of land to Appellants by the Township. A real estate agent provided the quote of a corresponding sale at a much higher price if sold in the main Town of Wawa. This person was not available for cross examination by MPAC. Furthermore, the Appellant did not provide the Board with any evidence to quantify the impact of these neighbourhood factors on the value of the subject property. The Board cannot determine the impact of these factors on its findings on the correct current value as it cannot arbitrarily assign a negative or positive adjustment to value without quantitative evidence.

Arsenic Contamination

15Ms. Ciuciura noted the inaccuracy on page 12 of MPAC’s valuation report, which provides: “no site contamination exists”. She testified that there has been severe arsenic contamination in the Town of Wawa, due to an iron ore sintering operation. That studies were carried out by the Ministry of the Environment and Climate Change which reveals that the western portion of Government Road, where the subject property is located contains the greatest levels of arsenic contamination. In Appendix 2 of her evidence she included maps showing the areas that are affected by this contamination, a Letter dated July 20, 2000 from the Town of Michipicoten with a map attached which reveals three contamination zones in the area and the subject property is located in one of the zones. Further included in Appendix 2 is a Letter dated December 13, 2000 from the Ontario Ministry of the Environment, which provided an analytical result of the arsenic contamination from soil sample taken from the subject property, which revealed that it contains 86 PPM arsenic which is about 716% of the Canadian maximum guideline. Ms. Ciuciura further stated that this is a stigma as they have a moral and presumably a legal obligation to disclose this fact to potential buyers. She concluded that the cost to cure this would be at least $30,000, excluding labour.

16The Appellants have presented various documents regarding the arsenic contamination; they did not present the authors of these documents for cross examination. No expert testimony was presented in this regard. MPAC further testified that there has been no adjustment for arsenic contamination on any of the properties in the area. This is an issue that will affect all properties located near the subject property. MPAC and the Town should be afforded an opportunity to present evidence and cross-examine on this issue in accordance with the rules of procedural fairness. Furthermore, the Appellant’s have not provided a cost to cure if it is determined that arsenic contamination exits. Their opinion on the cost to cure is speculative and subjective. The Board cannot speculate or arbitrarily calculate an impact of this to the determined assessed value. In the 2001 appeal before the Board, MPAC was successful in appealing the decision of the Board that attributed a further 25% reduction for arsenic contamination in the area as the Appellants led no evidence that a 25% reduction was appropriate. For these reasons the Board cannot make a determination in this regard.

17Ms. Ciuciura testified that MPAC’s methods in its valuation report have resulted in an unfair assessment of the subject property. The properties in the location of the subject property sell for less than others in the Town of Wawa. The Appellants could not produce any market evidence in this regard but testified that the lot in which the subject property was built is less expensive than the lots of MPAC’s comparable properties, which she argues are located in more desirable areas in Wawa. She based this submission on the fact that the strip of land purchased from the Township in 2006 was $0.40 per sq. ft. as revealed in a Letter dated April 13, 2006 from the Township of Michipicoten included as Appendix 3 of her evidence. She testified that they paid $4,055 including: legal fees and cost of the survey. She submits that to buy the same parcel of land in the main part of the Town of Wawa would have cost approximately $3.91 per sq.ft. and this was a quote provided by a real estate agent. She concluded that MPAC made no adjustment for this. Neither party provided the Board with any adjustment made to properties on Government Road. The Board can only make a determination on the correct current value of the subject property based on market evidence.

18Ms. Ciuciura further questioned MPAC’s Sales Ratio Trend Analysis (SRTA) based on 71 sales from the subject property’s neighbourhood and adjacent areas from January 2015 to December 2016, which MPAC used for the price change over time. MPAC used a graph to show an upward trend line which MPAC state indicates inflation. Ms. Ciuciura testified that there are only 22 points on the graph which means that MPAC eliminated 49 properties out of the 71 sales used and by eliminating these 49 properties they incorrectly assumed there was inflation. Ms. Ciuciura did not question the sales but rather questioned MPAC’s model. Mr. Wishman testified that the 22 points on the graph represented monthly sales and not individual sales. The Board determines that the sales are intrinsic to methodology employed by MPAC and MPAC’s model is not on appeal.

Current Value Analysis

19The legislative mandate of the Board is to determine the correct current value of the subject property. The best evidence of current value is the sale of the subject property on or near the valuation date of January 1, 2016. When no such sale occurs, as in this appeal, the Board looks to the recent sale of other similar properties in the vicinity to determine current value. The Board prefers sales of comparable properties within 12 months on either side of the valuation date of January 1, 2016, although the Board can also go as far back as 18 months on either side of the valuation date of January 1, 2016. The caution being that the further a sale is from the valuation date, the less likely it reflects the market on the valuation date.

20In support of the revised assessment, MPAC presented the Board with the sales of six properties, within the same homogenous neighbourhood as the subject property with sale dates from March 2012 to July 2015. The time adjustment sale (“TAS”) prices for the sales that occurred in 2015 range from $128,216 to $227,480. The TAS prices for the sales that occurred from March 2012 to August 2013 were not provided. The building total area of the six properties range from 1,402 sq. ft. to 1,772 sq. ft., with effective year built from 1971 to 1995. Three of the properties have the same construction quality as the subject property and the remaining have construction quality of 6.0. The effective lot areas of these six comparable property sales range from 0.11 to 0.39. Only one of the sales has an unfinished basement area as the subject property.

21Mr. Wishman testified that he characterized property Sales 3, 4, and 6 as inferior to the subject property due to their construction quality of 6.0, the effective year built 11 to 20 years older and their range between 20% – 25% smaller in building size. He characterized the remaining property Sales 1, 2 and 5 as similar to the subject property, due to the construction quality of 6.5, similarity in effective year built of 1988, 1989 and 1995 and are close in building size to the subject property. He submits that based on the sale prices of these similar properties ranging from $124,000 to $130,000 he estimates that the current value of the subject property at $198,000 is reasonable. Consequently, he urged the Board to confirm the revised assessment as returned.

22Ms. Ciuciura presented the Board with 12 comparable properties, out of which she selected five properties to show that the subject property is over-assessed. Three of the five properties have no valid sales since 2012. One sale occurred in August 2013, which is too far removed from the valuation date to be considered reliable. The last sale is the same as MPAC’s Sale 1- 135 Regina Crescent. Ms. Ciuciura testified that this property is superior to the subject property, located in a more desirable location in Wawa, with paved street, storm sewers and sidewalks. She further testified that in 2016 MPAC assessed this property at $173,000 and the subject property is valued 29% above this property Sale.

23Neither party presented sales of properties on Government Road that sold in or around the valuation date, since there were no such sales. The Board looks for sales closest to the subject property and if there are none or not enough, the Board expands to other streets and areas to find similar properties to compare with the subject property. MPAC presented the Board with sales in the same homogenous neighbourhood as the subject property. The Appellant presented no sales for the Board to determine current value. The five properties presented by the Appellants were used to demonstrate that the subject property is over assessed. The Board reviewed the 12 comparable properties the Appellant presented. Two properties on Government Road (42 Government Road and 133 Government Road) sold in August 2017 and November 2017 respectively. Although these sales are too far removed from the valuation date with no TAS prices, the Board reviewed these sales to compare to the subject property. 42 Government Road was built in 1950 with construction quality 5.0, sold at $16,000 with building total area of 834 sq. ft., with 0.13 acre lot size and one bath. 133 Government Road was built in 1968 with construction quality 5.5, one bath, and building size 1190 sq. ft. sold at $108,000. These two sales properties are inferior to the subject property in terms of age, lot and building size and construction quality.

24In determining the CVA for the subject property, the Board reviewed and used Sales 1, 4 and 5 presented by MPAC. MPAC’s Sale 2, 3, and 6 have sale dates of August 2013, March 2012 and February 2013, respectively. These sales are too far removed from the valuation date to reflect the market. The Board reviewed the property characteristics of Sales 1, 4 and 5 and determines that property Sales 4 and 5 are inferior to the subject property in terms of building and lot sizes. Property Sale 4 is 11 years older than the subject property, although it has a finished basement, it does not have secondary structures such as a garage like the subject property, it has 1.5 bath compared to the subject property that has 2.5 baths, its construction quality is 6.0. Property Sale 5 is a one storey building, its lot area of 0.2 acres and building size of 1,402 sq. ft. are significantly smaller than the subject property. The Sale 1 property is considered the most relatively comparable to the subject property. Although it has a finished basement area, which MPAC testified adds a value of $14,336 to its assessment, the subject property is still superior to it in terms of lot size, age and building size. Sale 1 has an effective lot size of 0.39 acres and building size of 1,632 sq. ft. compared to the subject’s lot size of 0.72 and building size of 2,184 sq. ft.

25The Board agrees with MPAC that the subject property’s current value should be set at $198,000 because this amount is lower than the best comparable Sale 1 property with a TAS price of $227,480, even though the subject property is superior to it in age, lot and building size, Ms. Ciuciura testified that property Sale 1 is located in a more desirable location in the Town of Wawa.

26The Board determines that the correct current value of subject property is $198,000 for the 2017 and deemed 2018 taxation years.

Equity Analysis

27Section 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 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.”

28The Assessment to Sales Ratio (“ASR”) is a tool often used to determine if a reduction in the assessment below current value is required to make an assessment equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the TAS price.

29MPAC’s assessor presented an equity analysis of 30 sales of single family detached (not on Water) from January 2015 to December 2016 within the Town of Wawa, with median ASR of 0.943 and Co-efficient of Dispersion (“COD”) of 18.6. Mr. Wishman submits that the International Association of Assessing Officers (“IAAO”) standards states that the median ratio should fall between 0.90 and 1.10 and the COD should not be more than 20 for rural properties. He further submits that based on his analysis similar real properties in the vicinity have been assessed accurately and uniformly. He submits that if he multiplied his opinion of value by the median ASR of 0.943, the difference between the retuned CVA of $198,000 and the equitable assessment is 5.7%, which is within an acceptable range therefore no equitable adjustment to the CVA is required.

30Ms. Ciuciura submits that MPAC’s equity analysis has resulted in an unfair assessment of the subject property. She stated that the properties used in the equity analysis are not located in the unique area at the Western end of Government Road like the subject property, but in more desirable areas. Furthermore, in Appendix 4, Table 2 of her evidence she calculated the COD for 71 of the sale properties as over 21%, while MPAC provided it as 18.6%.She submits that both these values are high, since the IAAO standards call for COD’s not higher than 15% for residential properties. Furthermore in Appendix 4, Table 4, she calculated the average percentage errors for the 30 properties used by MPAC in its equity analysis as 20%. Ms. Ciuciura noted that she does not dispute the sales for these 30 properties. She concluded that MPAC’s model is not appropriate. Mr. Wishman clarified during cross examination that the subject property is coded by MPAC as rural and not residential, consequently according to IAAO standards its COD cannot be more than 20. Furthermore, Ms. Ciuciura emphasized that she does not dispute the sales, which is the market evidence and for equity analysis, the properties need only be of the same general nature, character or function in relation to the subject property.

31Of the five properties the Appellants used to submit that the subject property is over assessed, three of the properties had no valid sale in the relevant period, therefore the Board cannot determine if they were assessed at their current value. For the remaining two sales: 135 Regina Crescent and 12 Maple Street, the Board cannot use only these two properties to determine equity. It will be difficult for the Board to establish equity based on the ASR of only two properties, as the purpose of s. 44.(3)(b) of the Act is to ensure that the Municipal tax burden is shared fairly and equally among similarly situated taxpayers. The Board cannot determine this based on just two properties.

32The best evidence of equity is the equity analysis presented by MPAC due to its larger sample size. Using MPAC’s equity analysis, the median ASR is 0.943. This shows that at least a little over 5% of these properties are assessed lower than the subject property and in order to achieve equity, in accordance to the Act, the Board applies the median ASR of 0.943 against the determined current value of $198,000, in order to achieve equity with the assessment of similar properties in the vicinity and reduces the CVA to $186,000 (rounded).

CONCLUSION

33The Board finds current value to be $198,000 and determines that this current value be reduced to $186,000 (rounded) to make it fair and equitable. Consequently, the Board reduces the returned assessment of the subject property from $224,000 to $186,000 for the 2017 and deemed 2018 taxation years.

2018 DEEMED APPEAL

34An appeal for the 2017 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 2017 appeal before March 31, 2018. For that reason, this decision also applies to the 2018 taxation year.

35Section 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.