Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 14, 2018

FILE NO.: WR 154592

Assessed Person(s): Stephen Roedde

Appellant(s): Stephen Roedde

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

Respondent(s): Township of St. Joseph

Property Location(s): 2218 D Line Rd

Municipality(ies): Township of St. Joseph

Roll Number(s): 5708-020-000-36300-0000

Appeal Number(s): 3281159 and 3314807

Taxation Year(s): 2017 and 2018

Hearing Event No.: 700568

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

Heard: July 12, 2018 in Richards Landing, Ontario

APPEARANCES:

Parties Representative

Stephen Roedde Self-represented

MPAC Pierre Lefebvre

Township of St. Joseph No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT AND JEAN-PAUL PILON

INTRODUCTION

1Stephen Roedde (the “Appellant”) is the owner of 2218 D Line Rd (the “Subject Property”) which is a farm with a residence located in the Township of St. Joseph.

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 $465,000.

4The Appellant filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), and has been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year pursuant to s. 40 of the Act. It was the Appellant’s position that MPAC’s assessment of current value is too high and that the correct current value is between $364,000 and $394,638. MPAC took the position at the hearing that its assessed value is correct.

5There was no dispute among the parties with respect to the classification of the Subject Property. The parties agreed that it should be assessed in the Farm property class and the Residential property class. The Parties also agreed that the Subject Property is farm land used for farm purposes.

6Pursuant to s. 40(11) of the Act, the Township of St. Joseph was a party to the proceeding. However, it did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on its behalf.

7Section 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 the municipal tax burden according to the value possessed by each ratepayer. MPAC took the position that an equitable reduction was not required. The Appellant asserted that an equitable reduction of an unspecified amount was required.

8At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the for the 2017 and 2018 taxation years, the current value of the Subject Property as of the valuation date, January 1, 2016, is $390,308, and that there should be no adjustment for the purposes of equitable assessment.

RELEVANT LEGISLATION

9The relevant sections of the Act are as follows:

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.

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:

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

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.

ISSUES

10The issues to be determined in this appeal are:

1. What is the correct current value of the Subject Property for the taxation years 2017 and 2018?; and

2. Whether there should be an equitable reduction of the current value of the Subject Property pursuant to s. 44(3)(b) of the Act, and, if so, what the amount of this reduction should be.

DISCUSSIONS, ANALYSIS AND FINDINGS

MPAC’s Evidence

11Pierre Lefebvre appeared for MPAC and relied on MPAC’s valuation report prepared in anticipation of the hearing. It was noted at the hearing that all of the proposed comparable property sale prices in subparagraph 5.2 of MPAC’s report were incorrect and that reference had to instead be made to the correct sale prices in the grid in Appendix E of the report.

12MPAC’s report described the Subject Property as a farm property with a residence, 28 acres of field and 94 acres of bush, including a maple syrup operation. MPAC further described the Subject Property as including a house built in 2016 with a finished basement and two outbuildings. None of this was contested by the Appellant.

13MPAC’s assessment of value attributed $362,700 residential portion and $102,300 to the farm portion using the cost approach, the method MPAC said it used in arriving at the current value of the Subject Property.

14The valuation report listed six proposed comparable properties MPAC alleged were comparable to the Subject Property. MPAC’s representative testified five of these were inferior to the Subject Property and one, the fourth, was superior to the Subject Property. MPAC focused on the third and fourth of these sales in concluding that the current value of the Subject Property should fall between their time adjusted sale prices of $390,308 and $578,927. There was no substantial disagreement as to MPAC’s application of time adjusted factors to sale prices.

15MPAC’s representative testified that the fourth of MPAC’s proposed comparable properties has 1,000 of shoreline but that it would not impact on any sale price because farmers care more about land than additional amenities, features or location.

16MPAC also compiled an Equity Analysis Report listing thirty proposed comparable properties with 13 kilometers of the Subject Property that sold within a ten year period preceding the date of the report. Having arrived at a level of appraisal of 0.975 within MPAC’s acceptable range of 0.95 to 1.05, MPAC took the position that no equitable adjustment was required.

Appellant’s Evidence

17The Appellant testified that the third of MPAC’s six proposed comparable properties is not in poor condition but rather that it is well maintained, has better farmland and is worth more because it is closer to Sault Ste. Marie than the Subject Property. The Appellant’s position was essentially that this property, with a time adjusted sale price of $390,308, was superior to the Subject Property.

18The Appellant further testified that the fourth proposed comparable property was not comparable because the shoreline has value which would have increased the sale price of the property. He testified local farmers around the Subject Property are not full-time farmers and have jobs elsewhere to sustain their farming activities.

19The Appellant produced five proposed comparable properties of his own, all of which he said were inferior to the Subject Property. All of these properties include structures substantially older than those on the Subject Property.

Analysis

Current Value

20MPAC in fact used both the cost approach and the direct comparison approach of valuation, and not just the former as was stated in its valuation report and at the hearing.

21In his evidence relating to the cost approach, MPAC’s representative made reference to the cost of the land and the replacement cost of improvements and depreciation without any explanation as to how MPAC arrived at those amounts. The Board found MPAC relied more heavily on the direct comparison approach in determining the value of the entire Subject Property with reference it its six proposed comparable properties.

22In the absence of evidence to substantiate the pure cost analysis in the report, the Board preferred MPAC’s direct comparison analysis as a more reliable and grounded means of determining current value in these circumstances.

23The fourth of MPAC’s proposed comparable properties was, in its view, most comparable to the Subject Property, but that left the question of whether part-time farmers care only about the land they farm and not additional features of a property. The Appellant’s oral evidence as to the nature of farming activities in the area was uncontested and the Board finds on a balance of probabilities that a relatively long shoreline would add value to a property. That feature alone, in the Board’s view, would make the fourth sale at a minimum superior, but more importantly, substantially different from the Subject Property and not comparable. The Board therefore finds MPAC’s fourth proposed comparable property should be excluded from the analysis.

24The Board did not, however, exclude MPAC’s third proposed comparable property from its analysis. The Appellant argued this property was superior to the Subject Property because of its condition, the quality of the farmland and its location, but the Board was not provided with any evidence to suggest to what extent, if any, those things might affect value. In fact, it is possible the Subject Property’s location on scenic St. Joseph Island might have increased its value rather than decreased it.

25It was not disputed that the remaining four of MPAC’s proposed comparable properties were inferior. They were also substantially dissimilar to the Subject Property.

26All of the Appellant’s proposed comparable properties were inferior to the Subject Property, some significantly so. That meant that after the Board excluded MPAC’s fourth proposed comparable property from its analysis, the Board had only inferior sales for comparison. The extent of the inferiority of the Appellant’s sales was underlined in his suggestion that the Board take the average of the time adjusted sales of his five properties and multiply that amount by 50% to arrive at current value of the Subject Property, approximately $364,000. The Board found that approach would yield far too imprecise a conclusion of current value, as it is based on an arbitrary multiplier.

27The Board also disregards the Appellant’s alternate submission that it should take the 2008 valuation of the Subject Property and multiply it by his calculated time adjustment factor to arrive at a current value of $394,638. The Board finds the basis of that valuation, a ten year old assessment of current value, to be too old and potentially too inaccurate to support a fair conclusion of current value.

28The Board finds that the third of MPAC’s proposed comparable properties is the most comparable, where it had a time adjusted sale amount of $390,308. That property has approximately 27% more acreage than the Subject Property and has better quality farmland. It has a slightly better quality building almost twice the size of the one on the Subject Property, but it was built in 1920 where the building on the Subject Property was built in 2006. On the other hand, that property also has many more outbuildings than the barn on the Subject Property: a silo, two milk houses, one more barn, a grain bin and a quonset.

29Once the differences between MPAC’s third proposed comparable property and the Subject Property are considered, the Board finds that the two properties should be similarly assessed. Based on this evidence before the Board, it finds MPAC’s third proposed comparable property to be relatively comparable to the Subject Property, not inferior, nor superior. Because it is the only relatively comparable property and the best evidence before the Board of comparability, the Board finds the correct current value to be the same as that property: $390,308. There was no evidence presented to support an adjustment of any amount up or down.

Equity

30The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commission for Metropolitan Toronto et al., [1968], 1968 CanLII 183:

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.

31In addressing equity in assessment, the court 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.”

32However, 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 such a reduction. The burden of proof rests with the Appellant to establish on a balance of probabilities is required.

33The Appellant argued that the 30 sales used in MPAC’s assessment to sales ratio study included too many outlying proposed comparable properties, ranging from a time adjusted sales ratio (“ASR”) of 0.598 at one extreme (where the ASR is the assessed value divided by time adjusted sales price) to 1.958 at the other extreme. The Appellant instead approached the equity analysis by removing the first ten sales and the last ten sales, resulting in a range of ratios of 0.923 to 1.055.

34The Appellant did not argue that MPAC’s target ASR of between 0.95 to 1.05 was incorrect. Taking the middle ten proposed comparable properties only using the Appellant’s analysis, the median ASR amounted to 0.975, well within the desirable range.

35Another approach would have been to narrow the area considered to sales on St. Joseph Island only since MPAC took into account sales in a significantly larger area, within 13 kilometers of the Subject Property. Normally an area of that size would not have been considered but for a lack of sales closer to the Subject Property. This resulted in thirteen properties on St. Joseph Island, including the first on the list with an ASR of 0.598 which the Appellant argued should not be considered. The median of the remaining twelve property ASRs in the range of 0.67 to 1.341 was 1.006, almost exactly where the ratio should have been to achieve equity.

36The Board therefore finds that no equity adjustment is required in these circumstances where in our analysis equity has been achieved.

DECISION

37The correct current value of the Subject Property is $390,000 for the 2017 and 2018 taxation years.

38Therefore, the Board finds that the assessment of 2218 D Line Road is reduced, from $465,000 to $390,000 for the 2017 and 2018 taxation years. As there was no dispute among the parties with respect to apportionment, the Board uses the same percentage apportionment applied to the returned assessment for the years under appeal. The reduced assessment is apportioned as follows:

• Residential Property Class: $304,200

• Farm Property Class: $85,800

39An equitable reduction of the current value of the Subject Property pursuant to s. 44(3)(b) of the Act is not required.