Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: December 09, 2019 FILE NO.: WR 162892

Assessed Person(s): Katherine Shelagh Finn Appellant(s): Katherine Shelagh Finn Respondent(s): Adjala-Tosorontio Township Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 16

Property Location(s): 9090 5th Sideroad Municipality(ies): Adjala-Tosorontio Township Roll Number(s): 4301-010-004-01203-0000 Appeal Number(s): 3362441, 3308871 and 3281056 Taxation Year(s): 2017, 2018 and 2019 Hearing Event No.: 726264

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

Heard: October 7, 2019 and November 7, 2019 in Alliston, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Katherine Shelagh Finn	Self-represented
MPAC	Shelby Roper
Adjala-Tosorontio Township	No one appeared

DECISION OF THE BOARD DELIVERED BY VINCENT STABILE

INTRODUCTION

1The subject property comprises 6.69 acres of farmland with improvements consisting of a single-storey detached residential dwelling built in 2001 with a building area of 1,527 square feet. It has a finished basement area of 1,297 square feet. The quality of construction is 6. It has five secondary structures: an attached structure of 408 square feet, also built in 2001; a coverall of 1624 square feet, built in 2010. It also has two uninsulated barns, 457 and 350 square feet respectively, both built in 2011.

2For the January 1, 2017 taxation year, MPAC returned the assessment at $352,000, apportioned: Residential - $286,300; Farm - $65,700.

3For the 2018 and 2019 taxation years, MPAC returned the assessments at $322,000, apportioned: Residential - $277,400; Farm - $44,600.

4The parties agree that the valuation day is January 1, 2016. The assessor has used the cost approach to determine current value,

5Katherine Shelagh Finn (the “Appellant”) agrees that the cost approach to value is the correct approach but argues that the replacement cost new used by the assessor is much too high, the depreciation allowed is too low and the classes used to determine land value are wrong.

ISSUE

6The issue to be determined is the correct current value of the property as of January 1, 2016.

DECISION

7I have determined that the correct current value for the 2017, 2018 and 2019 taxation years is $160,500, apportioned: Residential - $147,200; Farm - $13,300. Accordingly, the assessment for the 2017 taxation year is reduced from $352,000 to $160,500. The assessments for the 2018 and 2019 taxation years are reduced from $322,000 to $160,500.

EVIDENCE

MPAC

8The assessor, Elizabeth A. Walker, filed a Valuation Report proposing an assessment of $318,000 as of January 1, 2016 (Valuation Day) reduced from $352,000 (2017) and $322,000 (2018 and 2019) as returned on the roll.

9The proposed assessment was broken down as follows:

a) Replacement cost new for all structures …………$362,718 b) Less depreciation accrued from all structures…… 71,833 290,885 c) Plus land value………………………………………. 27,156 $318,041

10The proposed assessment was further broken down as follows:

a) Improvements: Residential………………………….272,201 Farm………………………………...18,685

b) Land: Residential………………………….. 6,028 Farm……………………………….. 21,128

11At pages 6 and 8 of her report, the assessor states that she has reviewed the conditions of sale for the subject property which was purchased as vacant land December 1, 2006 for $260,000.

12Further, she states that she reviewed the subject property’s cost valuation having applied any and all of MPAC’s costing programs - Automated Costing System (ACS), MPAC Agricultural Cost Guide and/or the Residential Cost Manual. (page 13, s. 5.3.2.) From those results, she applied a depreciation factor which was not specifically apportioned.

13At page 12 of the report, the assessor states that each farm property has one acre of land assigned to the residential portion and this acre is valued at the highest soil class existing on the land. At page 18 of the report, the assessor states that “a jurisdictional exception has been invoked in this report. Valuation parameters are legislated or regulated under the Assessment Act, R.S.O. 1990, c. A.31, the ("Act”) and may or may not reflect market forces”.

14At page 26 of her report, the assessor outlines a detailed analysis of the soil parcels for the subject property having consideration to soil texture, topography, stoniness, drainage, flooding, erosion and depth to bedrock. Those factors were assigned grade points, as a result of which certain classes of soil were determined.

15This 6.69 acres of farmland has been broken down into six (6) smaller components: 1 acre as ‘residential’; 2.19 acres class 6; 1.46 acres class 5; .56 acres class 6; 1.48 acres as water, therefore no class.

16At page 28 of the report, under the approaches to value section, the assessor states that “the cost approach may be most appropriate when the direct comparison approach and income approach are rendered ineffective due to lack of sales or financial information. In all scenarios it is essential that ample market evidence is available to derive a supportable land value, replacement cost new, and depreciation estimate. Where ample sales and/or financial information is available, the cost approach will be used as a secondary source of guidance for the final estimate of value”.

17The assessor did indeed provide evidence of sales of four properties which she proposed were comparable to the subject property. Two were noted as superior, one similar and one inferior.

18During her oral testimony however, the assessor confirmed that she was not relying on the comparable sales.

Appellant

19The Appellant submitted that the value should be $144,664.70, after depreciation, apportioned as follows:

a) Residence…………………………………………………….. $120,229.56 b) Outbuildings…………………………………………………... 7,344.60 c) Land…6.69 acres at Class 6 ($2,554.64 per acre) ………. 17,090.54 $144,664.70

20In support of her position, the Appellant filed a package of documents marked 1 – 49 as well as a five-page summary to which she referred extensively during her oral testimony. She addressed the central issues in determining the current value of the land and structures thereon.

21The Appellant provided a history of her involvement in the purchase, subsequent ownership and use of the subject property:

a) 1998 - property was purchased for $130,000 and registered to 1027803 Ontario Ltd. (1027803). It comprised 6.9 acres vacant land, zoned residential. The Appellant was a majority shareholder. b) 1999 - there was a further transfer for $170,000 – vacant land. c) 2001 – the Appellant built a ranch bungalow with appears to be an attached garage d) 2004 – there was a further transfer for $1.00 e) 2006 – the property was transferred yet again from 1027803 to the Appellant. At that time, it was still classified as ‘residential’. The consideration shown was $260,000, a value set by the corporate accountants. As result the Appellant retained full ownership of the property, the only asset of the corporation.

22From the outset, the Appellant carried on a farming business of breeding, raising and grazing sheep.

Farmland Designation

23In 2008, the Appellant was approved as a farmer by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA). This was significant as the lands would no longer be assessed as residential but rather, as farmlands. As well, thereafter she was required by OMAFRA to provide an isolation area for the animals in case livestock became ill. The ‘garage’ was specifically designated for this required purpose. Thus, the Appellant argues that the attached structure to the house may look like a garage but is in fact a ‘barn’.

24The Appellant referred to Document 1 of her package. This document titled Valuing Farms in Ontario and dated August 22, 2016 was generated by MPAC and signed by Antoni Wisniowski, President and Administrative Officer and Rose McLean, Chief Operating Officer. This document was intended as a guide when assessing farm properties in Ontario commencing with the legislated valuation date of January 1, 2016.

25The document was in response to the Ministry of Finance which made certain recommendations to MPAC following the 2012 assessment cycle. The Ministry made two recommendations relating to farmlands as part of the Special Purpose Business Property Assessment Review:

a) Improve the sales certification process…… b) Strengthen the accuracy and equity of the valuation process….

Cost Approach - 2016 CVA

26The document sets out what has been considered in the valuation process prior to 2012 and goes on to explain the ‘new approach’ after the 2012 Assessment Update and implemented for the 2016 CVA. (p. 13).

27At page 16 of the document is a guide as to the steps taken to derive a value using the cost approach. For farm structures MPAC uses the Agricultural Cost Guide which is expected to contain data that reflects the cost of labour, equipment and materials for each structural element of an improvement, before depreciation. Farmland values are based on the land’s agricultural capability and other factors, such as location. The value of a farm is not based on other potential uses for the land (i.e., development). In determining farmland rates, only sales of land to be used for farm purposes are analyzed. All farms in Ontario are assigned to a farm neighbourhood for purposes of establishing value. (p. 19)

28Relying on various maps from Simcoe County and OMAFRA, being documents 7 – 11, the approved site plan from the municipality (documents 4 & 13, the Appellant submitted that her lands are all within the class 6 description.

29The Appellant stated that the document stimulated great interest for the farming community which led to meetings in Guelph in the fall of 2016. Also, in attendance were representatives of MPAC who evidently assured the farmers that replacement cost increases would be based on the yearly rate of inflation derived from Canada Revenue Agency (CRA). Further, that depreciation for farm structures would be 2.4% per year also set by CRA.

30The Appellant stated that these were important considerations to give farmers certainty when considering new investments for their farming operations.

Land Value

31In document 3, page 1, the Appellant relied upon the conclusion reached by OMAFRA in respect to the land, stating “improvement practices are not feasible. In the lower area the boulders are too close to the surface making cultivation impossible. The rest is too steep making cultivation impractical. Suitable for moderate rotational grazing”.

32Her position therefore, is that the land should be classified as six (6) based on the description and characteristics relied upon by MPAC as well as the Canada Land Inventory (lands that are capable of producing perennial forage crops only). Class 6 lands are valued at $2,554.64 per acre (Document 28, page 3).

Replacement Cost New

33Residence: The Appellant provided two quotes: Wholesale Housing Inc. $212,000 [1,717 s. f. with a basement valued at $10,000] (Document 25) or $123.47 s. f.: Beaver Home: $175,000 (1,523 s. f. or $114.97 s. f., without a basement. Applying those values to the subject property, on a square foot basis, would result in a replacement cost of $185,000 (Beaver) and $188,538.69 (Wholesale).

34Garage: Document 17………….. Feb. 4, 2017 ………$6,849.99.

35Coverall (agricultural building for feed & storage (1568 sq. ft.) @ $3.00 per sq. ft. - $4,702.55 (Document 21).

36There was no clear evidence as to the replacement cost of the other two uninsulated structures. They were described as simple three-sided structures as seen in photographs 44 - 47 used to shelter feed and the sheep.

37On cross examination, the Appellant did proffer an overall estimate to replace all structures new of $200,000 - 225,000, arguing that she built the first house using the stick build method and therefore would build any replacement structure in like fashion.

LEGISLATION

38When dealing with farm lands, the Board is directed to apply the provisions of s. 19(5) and 19(5.0.1) of the Act which state:

19(5) Farm lands and buildings

19(5) For the purposes of determining the current value of farm lands used only for farm purposes by the owner or used only for farm purposes by a tenant of the owner and buildings thereon used solely for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and their families on the farm lands,

(a) consideration shall be given to the current value of the lands and buildings for farm purposes only;

(b) consideration shall not be given to sales of lands and buildings to persons whose principal occupation is other than farming; and

(c) the Minister may, by regulation, define “farm lands” and “farm purposes”. 2000, c. 25, s. 5 (1).

19(5.01) Land and buildings to be valued as farms

19(5.0.1) Land or buildings or both, as prescribed by the Minister, shall be valued as described under subsection (5). 2000, c. 25, s. 5 (2).

39Once the current value has been determined, s. 44.(3)(b) requires that the Board “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” but only if that adjustment would result in a reduction of the assessment.

LAW

40MPAC filed four decisions for consideration:

a) Simmatis v. Municipal Property Assessment Corp, Region 2, [2019] O.A.R.B.D. No. 248. This is a case dealing with 4.77 acres of vacant waterfront land improved with a residential home. The issues were the actual usable/accessable water frontage and the cost of construction. The property is not farmland and the owner is not a farmer. This decision is not helpful to the present hearing.

b) MacWilliam v Municipal Property Assessment Corporation, Region 31, 2019 CanLII 42126 (ON ARB) This case deals with a farm comprising 63.53 acres with a residence. Only 12 acres were workable. At the time of the hearing, the property was classified and valued as a farm. It is not clear if the owner was a farmer, which would affect the valuation process of the residence. This decision is not helpful to the present hearing.

c) Payne v. Municipal Property Assessment Corp, Region No 13, [2013] O.A.R.B.D. No. 196. This decision deals with three separate parcels of land. All three parcels were part of a farm. The land was owned by a non-farmer with a non-farm residence, with a portion being farmed. This decision is of no assistance in this hearing.

d) Finn v Municipal Property Assessment Corporation, Region 16, 2017 CanLII 46020 (ON ARB) This a prior decision issued by me involving the same owner and subject property for the 2016 taxation year with a valuation date of January 1, 2012. Two significant aspects of this decision distinguish it from the present hearing. The Appellant did not file probative material to support her appeal. Further, the valuation process pre-dated the ‘new approach’ articulated by MPAC in its document dated August 22, 2016 to the industry and its employees, intended to take effect for the 2016 CVA. The findings I made in that decision have no application to the present hearing.

41No case law was filed by the Appellant.

ANALYSIS

42This hearing is in respect of appeals for the 2017, 2018 and 2019 taxation years. The valuation date is January 1, 2016. The subject property is classified as farm lands and the Appellant/Owner has been approved as a farmer by OMAFRA, the Ministry which has sole jurisdiction to make such designations. In the process it also evaluates the lands being the subject of the application.

43On the evidence received, I am satisfied that the subject lands have been and continue to be used for breeding, raising and grazing sheep. There was no evidence that the lands were used for different purposes prior to 1998, when the lands were purchased by the Appellant, via a corporate entity.

44The assessor suggests that about 3.5 acres of the lands be classified at better than Class 6. That represents more than 50% of the total area. Further, the assessor has designated 1 acre as residence.

45Designating 1 acre under the residence as residential land may have been a convention accepted and applied over time. In my view however it is not supported on a plain reading of the legislation. There is no such exception in the legislation. Had the legislators intended differently they would have so provided.

46The legislation seems to emphasize the ‘use’ of the lands and not the ‘potential use’ either for better, more profitable farm use or development.

47Although the assessor went to great lengths in determining different classifications of the land based on her inspection in 2011, I am not satisfied that such an analysis is either required or useful for such a small parcel of farm land, with acknowledged steep slopes in topography, poor soil conditions and partially under water.

Land Value

48Under the circumstances I accept the evidence of the Appellant that the entire parcel, except that portion which lies in the water (1.48 acres), should be assessed as Class 6.

49The parties agreed that Class 6 farm lands are valued at $2,554.64 per acre. This results in a value for the land as $13,309.64 (6.69 – 1.48 = 5.21 X 2,554.64 = $13,309.67).

Value of Structures

50As it relates to the value of the structures, MPAC has outlined a new strategy commencing January 1, 2016 in response to recommendations from the Ministry of Finance. The cost approach is to be used for farm lands and buildings thereon. The new replacement cost is to be determined. That value is depreciated to arrive at the ‘correct current value’.

51I accept the Appellants evidence that the house and attached structure were both built in 2001. That is consistent with MPAC’s profile. The assessor’s assertion in her report that the subject property was transferred on December 1, 2006 for $260,000 as vacant land is simply wrong.

52Both the residence and attached structure were 15 years old as at January 1, 2016, the valuation day.

53The assessor proposed the replacement cost new for all structures at $362,718 ($272,201 for the residence and $18,685 for the other four structures and outbuildings). She applied a depreciation of $71,833.

54The depreciation was not apportioned by the assessor. The total depreciation of $71,833 amounts to slightly less than 20% or 1.33% per year.

55The Appellant provided documents in support of her oral testimony as to the original cost as well as up to date replacement cost quotes for the residence, attached structure and the coverall. The documents are compelling.

56The Agricultural Cost Guide used by MPAC (see paragraph 32 above) was not produced. Therefore, there is no way of assessing the accuracy of the values proposed by the assessor.

57This is not an exercise in determining reliability of the oral evidence received. Where, however, there is such a divergence in opinions as to value, I look for corroborating evidence to support the oral testimony received. Applying the best evidence rule, that process directs me to evaluate and place weight on the corroborating evidence.

58In my view, the best corroborating evidence is ‘written evidence’ from independent third-party sources, absent direct oral testimony from those parties.

59The assessor has no obligation to provide raw notes or other details of the Agricultural Cost Guide used to arrive at her proposed value. The absence of it, however, leaves me in a position of applying little weight on the report.

60The residence is described as a standard builders’ grade without upgraded features, such as granite, marble, high baseboards, high end cabinetry, upgraded floors or upgraded windows. MPAC has given it a quality of construction of 6. I do not accept that the replacement cost for the residence would be $272,201 or that the replacement cost new for all structures would be $362,718 as proposed by MPAC.

61On balance, I find that the replacement cost new for all structures is closer to $225,000 as stated by the Appellant on cross examination. This value is supported by written replacement quotes filed and relied upon by the Appellant.

62As to the depreciation factor to be applied, I prefer the evidence of the Appellant that farm structures should be depreciated at 2.4% per year as opposed 1.33% proposed by the assessor. This would give farm structures approximately 42 years of utility, without consideration for maintenance and improvements. This sounds reasonable considering the Appellant’s evidence that she has already incurred expense in replacing the roof.

63The residence and attached structure are considered 15 years old as at January 1, 2016. The coverall is six years old. The other structures are four years old.

64Having considered the replacement cost documents filed by the Appellant and for purposes of determining the depreciation to be applied, I am apportioning the replacement cost new, as follows:

a) House and attached structure……………………………. $210,000 b) Coverall and other structures…………………………….. 15,000

65I will apply 2.4% depreciation on the $210,000 for 15 years or 36%. That results in $210,000 - 75,600 = $134,000. For the balance of $15,000 I will apply 2.4% depreciation for five years or 12%, the average age of the structures. That results in $15,000 -1,800 = $13,200.

66The total current value of the structures therefor is $147,200. I have found the value of the land to be $13,309.67. In the result, I find the correct current value of the land and structures to be $160,509.64 ($160,500 rounded).

EQUITY

67The assessor filed an Assessment to Sales Ratio (“ASR”) study of thirty (30) properties resulting in a median ASR of 0.992 with a Coefficient of Dispersion (COD) of 17.0 indicating that, on average, the individual ASR’s differ 17% from the median ASR.

68The assessor stated that equity was achieved if the median ASR falls between 0.95 - 1.05.

69The Appellant did not present any evidence on equity and did not challenge the results of the study as proposed by the assessor in any meaningful way.

70Therefore, I find the evidence from the assessor is the best evidence on the issue of equity. No adjustment will be made for equity.

CONCLUSION

71I have determined that the correct current value for the 2017, 2018 and 2019 taxation years is $160,500, apportioned: Residential - $147,200; Farm - $13,300. Further, I find that no reduction for equity is warranted. Accordingly, based on a valuation date of January 1, 2016, the assessment for the 2017 taxation year is reduced from $352,000 to $160,500. The assessments for the taxation years 2018 and 2019 are reduced from $322,000 to $160,500.