Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 16, 2018

FILE NO.: WR 153392

Assessed Person(s): Michael Stephen Purcell and Catherine Nye Purcell

Appellant(s): Michael Stephen Purcell and Catherine Nye Purcell

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 05

Respondent(s): City of Kingston

Property Location(s): 300 Wellington Street

Municipality(ies): City of Kingston

Roll Number(s): 1011-030-110-07730-0000

Appeal Number(s): 3276482 and 3292502

Taxation Year(s): 2017 and deemed 2018

Hearing Event No. 697309

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

Heard: May 18, 2018 in Kingston, Ontario

APPEARANCES:

Parties Representative

Michael Stephen Purcell and Catherine Nye Purcell Michael Purcell

MPAC Art Merrill

City of Kingston Jeff Walker

DECISION DELIVERED BY JENNIFER GRIFFITH ON MAY 18, 2018 AND ORDER OF THE BOARD

Background

1Michael Stephen Purcell (the “Appellant”) is the owner of 300 Wellington Street, in the City of Kingston (the “Subject Property”). The Subject Property is a residential dwelling (Property Code 309, Freehold Townhouse/Rowhouse), located at 300 Wellington Street, in the City of Kingston. The Subject Property was built in 2007, has a total site area of 0.01 acres, and a total building area of 1,532 square feet ("sq. ft.”).

2Pursuant to the provisions of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), the assessment of land shall be based on its current value. The Act also provides that, for the 2017 to 2020 taxation years, MPAC is required to assess this value as of the valuation date, January 1, 2016 (“current value”).

3MPAC has assessed the current value of the Subject Property at $492,000 for the 2017 taxation year and $496,000 for the 2018 taxation year.

4The Appellant has filed appeals for taxation years 2017 and deemed 2018 taxation years with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is his position that MPAC’s assessment of current value is too high.

5In discussions between the parties, they advised the Board that they both agree that the correct current value of the subject property for both taxation years should be $483,000. Pursuant to s. 40(11) of the Act, the City of Kingston is a party to this proceeding. Jeff Walker appeared at the hearing on the City’s behalf. However, he confirmed that he was not actively participating and was there to observe.

6Section 44(3)(b) of the Act, directs the Board to reduce the current value 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 of the municipal tax burden according to the value of the property possessed by each ratepayer.

7MPAC takes the position that an equitable reduction is not required.

8The Appellant takes the position that an equity adjustment of 0.79 per cent to the current value is required.

Decision

9At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2017 and 2018 tax years is $483,000. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

Relevant Legislation

10The Act:

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.

19(1) Assessment based on current value. – The assessment of land shall be based on its current value.

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 the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012.

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

Burden of proof

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.

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.

DISCUSSION, ANALYSIS AND FINDINGS

Issue No. 1: What is the correct current value of the Subject Property for the taxation years 2017 and 2018?

MPAC’s Submissions

11Art Merrill represented MPAC. At the start of the hearing, Mr. Merrill provided submissions to the Board that he had discussions with the Appellant prior to the hearing and that they have agreed that the square footage of the Subject Property is 14,065 sq. ft. and that the current value should be $483,000. At this hearing, Mr. Merrill consented to the 14,065 sq. ft. of total building area, and the current value of $483,000.

Appellant’s Submissions

12The Appellant submitted that he concurs with MPAC’s submissions that the Subject Property has 14,065 sq. ft. of total building area, and that the current value should be $483,000. At this hearing, the Appellant consented to the 14,065 sq. ft. of total building area, and the current value of $483,000.

Findings on Issue No. 1

13The Board accepts the consented submissions of MPAC and the Appellant that the total building area of the Subject Property is 14,065 sq. ft. and the current value of $483,000. The Board finds the total building area of the Subject Property to be 14,065 sq. ft. and finds the current value to be $483,000.

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

MPAC’S Evidence

14MPAC presented an Equity Analysis Report, which analyzes the sales of 30 similar type properties (Property Code 309 Freehold Townhouse/Rowhouse) which were sold over the period January 1, 2014 to February 7, 2018 and located within 2 kilometres to the subject property.

15Based on the analysis of these sales, MPAC testified that the Level of Appraisal (“LOA”) is 0.97, and the Coefficient of Dispersion (“COD”) is 10.4, which he stated falls within the International Association of Assessing Officer’s (“IAAO”) standards as stated below. Therefore, MPAC concludes that an equity adjustment is not required to the current value as determined above.

16MPAC’s representative stated that MPAC provides a computer program in which the appropriate equity data (number of sales, sale prices, date of sale, etc.) is entered into and the program and the computer calculates the equity findings. MPAC’s representative stated that he researched the sales; selected the property type, the sale date and the vicinity. This is to ensure that the sales of the properties used are of the same general nature, character and function, close to the valuation date of January 1, 2016 and in close proximity to the Subject Property.

MPAC’s Submissions

17MPAC’s relies on its Equity Analysis Report in support of its submission that an equitable reduction of the current value is not required.

18MPAC submits that an equity analysis measures the overall or typical ratio at which a group of properties is assessed by determining the median Assessment to Sales Ratio (“ASR”).

19MPAC also submits that the median is a measure of central tendency and is the mid-point of the ratios, and that the median ASR is the preferred measure to determine the Level of Appraisal (“LOA”) because it is not affected by very low or high ratios.

20MPAC notes that appraisal uniformity among the properties is measured by determining the average percentage deviation from the median ASR (commonly known as Coefficient of Dispersion (“COD”). MPAC states that the International Association of Assessing Officers (“IAAO) standards state that the LOA for all property types should fall between 0.90 – 1.10. MPAC adopts a higher standard where requiring that the median ASR should fall between 0.95 – 1.05.

21MPAC states that the IAAO’s standards require CODs of not more than 15 percent for residential properties, not more than 20 percent for income producing properties, not more than 25 percent for vacant land and not more than 20 percent for rural and recreational waterfront.

22MPAC submits that prices of homes in the open market increased from 2007 and that was agreed to by the Appellant.

23MPAC’s representative also submits that he is not a statistician and did not conduct a vertical equity study. He offered no submissions on a vertical equity study.

Appellant’s Evidence

24The Appellant presented Data Set Ratio Studies and Graphs to demonstrate the findings of the ASR and COD, based on Horizontal and Vertical equity analyses. The studies are based on 39 sales of similar property type as the Subject Property (Property Code 309 Freehold Townhouse/Rowhouse) and in the same homogeneous area of the Subject Property. The Appellant testified that these sales occurred over the period 2007 through 2017.

25The Appellant presented documented evidence (from MPAC’s Methodology Guide, 2016) which stated that Horizontal equity measures the equity of values among individual properties, using the COD; and Vertical equity measures equity among value ranges and implies that lower-valued properties and higher-valued properties are valued at similar level of appraisal. More specifically, the methodology in vertical equity is to determine the median ASR for properties sales values that are less than the subject property, and to do the same for properties whose sales values are higher than the subject property. These two median ASR’s are then averaged to arrive an ASR which is to be considered in determining whether an equitable reduction is required.

26The Appellant testified that the 39 sale prices are adjusted for inflation and that he adjusted the sales by 1 percent, 2 per cent, 3 percent and 4 percent to see what the impact would be on the sale prices. The Appellant testified that the inflation percentages are based on his assumptions and in the end, the Appellant testified that he chose to rely on 2.75 percent.

27The Appellant testified that the Data Set Ratio Study shows that these 39 sales have a LOA of 0.85, a horizontal Equity (COD) of 19.6 and vertical equity of 0.03. Based on 20 sales (sale price >$370,000) the LOA is 0.81, the COD 14.7 and vertical equity is 0.72 and based on 19 sales (sales <$370,000) the LOA is 0.95, the COD is 23.0 and the vertical equity is 0.28.

28Based on this study, the Appellant believes that the equity adjustment should be 0.79 per cent (an average of the Horizontal LOA 0.85 and Vertical equity of 0.72 based on sale price >$370,000) of the current value for a value of $381,000 ($483,000 x 0.79).

Appellant’s Submissions

29The Appellant submits that he agrees that house prices in the open market increased since 2007. He submits that the Subject Property was listed on the open market for approximately one week, and that bids were taken from a couple of potential buyers. In the end he purchased the Subject Property for $396,000 in 2007 and believes that he overpaid for the Subject Property.

30The Appellant submits that, MPAC failed to perform a vertical equity test.

Board’s Analysis and Findings

31Based on all of the above evidence, the Board finds that MPAC presented the best evidence in support of equity, with the analysis of sales of 30 similar type properties (Property Code 309 Freehold Townhouse/Rowhouse) as the Subject Property, located within 2 kilometres of the Subject Property, and sold over the period January 1, 2014 to February 7, 2018. The analysis shows that these sales have a median ASR of 0.97 and COD of 10.4 percent, which falls within the acceptable standards of the IAAO.

32The Appellant presented a study based on 39 sales which occurred over the period 2007 to 2017. The Board did not rely on the Appellant’s equity studies, because most of the sales were too far removed from the valuation date of January 1, 2016 to provide any meaningful test of equity. Also, the Appellant used inflationary adjustment percentages that were based on his own assumptions and he presented no evidence to support a finding that his assumptions are correct.

Conclusion

33Based on all the evidence, the Board finds that an equity adjustment to the current value is not required. Therefore, the Board reduces the returned assessment from $492,000 to $483,000 for the 2017 taxation year and reduces the returned assessment from $496,000 to $483,000 for the 2018 taxation year.

2018 DEEMED APPEAL

34An appeal for the 2017 taxation year is presently before the Board. Section 40.(26) of the 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.