Spadoni v. Municipal Property Assessment Corporation, 2019 CanLII 14358

l’évaluation foncière

Assessment Review Board

Commission de révision de

ISSUE DATE: February 19, 2019

FILE NO.: WR 157142

Assessed Person(s)/Appellant(s): Patrick Raoul Spadoni and Barbara Gail Spadoni

Respondent(s): Municipal Property Assessment Corporation (“MPAC”), Region 32

Respondent(s): Township of Terrace Bay

Property Location(s): 9 Scott Avenue

Municipality(ies): Township Terrace Bay

Roll Number(s): 5854-000-003-17603-0000

Appeal Number(s): 3260261 and 3315244

Taxation Year(s): 2017 and 2018

Hearing Event No.: 704777

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

Heard: October 19, 2018 in Thunder Bay, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Patrick Raoul Spadoni and Barbara Gail Spadoni

Mark P. Mikulasik⁺

MPAC

Brittany Kee Ed Molcan

Township of Terrace Bay

No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

INTRODUCTION

1Patrick and Barbara Spadoni (the “Appellants”) are the owners of 9 Scott Avenue (the “Subject Property”), which is a seasonal, waterfront property located on Lake Superior in the Township of Terrace Bay (“Terrace Bay”). Terrace Bay is, approximately, a three hour drive east of the City of Thunder Bay and a five hour drive northwest of City Sault Ste. Marie.

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”).

3The Appellants have filed an appeal for 2017 taxation year with the Assessment Review Board (the “Board”), and have been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year pursuant to s. 40(26) of the Act.

4The Subject Property was initially assessed at $471,000 for the January 1, 2016 valuation day. The Municipality of Terrace Bay invited MPAC to review its assessments for the area and the Subject Property’s assessment was reduced to $314,000. The Appellants take the position that their property would not sell for more than $200,000 and that the correct current value falls between $150,000 and $180,000.

5MPAC took the position at the hearing that its assessed value is correct.

6Pursuant to s. 40(11) of the Act, Terrace Bay is a party to this proceeding. Terrace Bay acknowledged the appeals but took no position on the issues raised 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 of the municipal tax burden according to the value of the property possessed by each ratepayer. MPAC took the position that an equitable reduction is not required. The Appellant took the position that an equity adjustment is required.

8At the completion of the hearing, I reserved my decision. For the reasons that follow, I find that for the 2017 and 2018 taxation years, the current value of the Subject Property as of the January 1, 2016 valuation day is $314,000. Accordingly, I am confirming the returned assessment of $314,000. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

Relevant Legislation

9The Act states that:

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 on this appeal are:

1. The correct current value of the Subject Property for the taxation years 2017and 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.

Discussion, Analysis and Findings

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

11The Subject Property has a lot size of 1.34 acres with 130 feet of waterfront and a depth of 449 feet. The property is improved with three buildings, a 1.25 storey residence built in 2008, a workshop built 2003, and a cabin built in 2014. The residence has a total of 1,406 sq. ft., with 1,196 sq. ft. on the first floor and 210 sq. ft. on the second floor. There is a walk-out from the 752 sq. ft. basement. MPAC has allocated a 6 quality of construction to the residence. The workshop measures 222 sq. ft. and has a 2 quality of construction. The cabin measures 294 sq. ft. and has a 4 quality of construction.

MPAC’s Evidence

12The Assessor, Ed Molcan, presented a Valuation Report, dated March 12, 2018, supporting the assessment as returned of $314,000 as of the January 1, 2016 valuation day. He used the direct sales comparison approach to value in support of this amount using six sale properties, describing one as similar and the remaining as inferior to the Subject Property. The range of values, not time adjusted, are $159,900 to $340,000.

13Relying upon a study of 427 sales from January 13, 2012 to December 29, 2016, a period of five years, Mr. Molcan indicated there had been an overall change in the market of 1.0 per cent. The range of time-adjusted values of the sale properties relied upon was $157,924 to $335,123. Because the time-adjusted sale values are very similar to the actual sale values, I will rely on the actual sale values.

14All of the proposed comparable properties are waterfront. Only two are located in Terrace Bay and are on the same street as the Subject Property: 7 Scott Avenue and 13 Scott Avenue. Both have larger waterfronts, at 165 feet each, but smaller lot areas with depths of 227 feet and 220 feet, respectively. Both have smaller residences of 677 sq. ft. each and are older having been built in 1973. MPAC has allocated each with a quality of construction of 4 and neither have secondary structures or basements. 7 Scott Avenue sold for $175,000 in July 2016 and 13 Scott Avenue sold for $159,900 in August, 2015.

15Two of the sales, Nicol Island (roll number 5811-690-003-02800-0000) and 711 Lloyd Lane, are located in Rossport, approximately 26 kilometres west of the Subject Property or 40 kilometres by road:

a. Nicol Island’s lot has a waterfront measuring 158 feet and a depth of 316 feet. It has a single storey residence built in 1998 with 960 sq. ft. of building area and 960 sq. ft. of basement area and MPAC allocated it with a 6 quality of construction. It sold in July 2016 for $245,000.

b. 711 Lloyd Lane’s lot has a waterfront measuring 349 feet and a depth of 258 feet. It has a single storey residence built in 1985 with 936 sq. ft. of building area and the same in the basement. MPAC allocated it with a 6 quality of construction. It sold in March 2016 for $212,000.

16The remaining two sales, 11 Mountain Bay Drive and Mountain Bay Drive (roll number 5811-010-001-05000-0000), are located in Mountain Bay, approximately 47 kilometres west of the Subject Property or 100 kilometres by road:

a. 11 Mountain Bay Drive’s lot has a waterfront measuring 125 feet and a depth of 360 feet. It has a single storey residence built in 1997 with 1,107 sq. ft. of building area and no basement. There is a cabana with 117 sq. ft. and a cabin with 280 sq. ft. MPAC allocated the residence with a quality class of 6, the cabana is 1 and the cabin is 3. It sold in July 2015 for $340,000.

b. Mountain Bay Drive’s lot has a waterfront measuring 157 feet and a depth of 349 feet. It has a one and three-quarter storey residence built in 1996 with 1,221 sq. ft. of building area and no basement and MPAC allocated it with a 5 quality of construction.

17Mr. Molcan testified that he relied on Lake Superior waterfront property sales with similar lot sizes where the sales occurred close to the valuation day. He expanded his search until he found six sales. He would have preferred sales that are located closer to the Subject Property but there are very few sales in the area and the two sales on Scott Avenue are the only waterfront property sales in Terrace Bay.

18On cross-examination, the Assessor testified that Rossport has a smaller population than Terrace Bay, that, unlike Terrace Bay, neither Rossport nor Mountain Bay is an organized municipality, and, that Mountain Bay is a planned subdivision of one small neighbourhood.

19Mr. Molcan testified that MPAC assesses waterfront properties differently than non-waterfront properties because each has a different market. Waterfront properties are more desirable, therefore there is more demand which results in higher values. The differences, based on an analysis of sales, include:

• rates for quality class,
• land values,
• frontage and depth values because waterfront is more valuable than non-waterfront,
• the structures are often assessed similarly, however, for seasonal access like the Subject Property, the structure is assessed differently from other Terrace Bay properties that have year-round access,
• the rates per sq. ft. of first and second floor are higher for waterfront, and
• MPAC adds an adjustment factor for neighbourhoods and the Subject Property’s factor is different from non-waterfront properties.

MPAC’s Submissions

20Relying on its evidence, MPAC’s submits that the correct current value for the taxation years 2017 and 2018 is $314,000.

Appellant’s Evidence

21Mr. Spadoni testified that the Subject Property was assessed at $102,000 as of the January 1, 2012 valuation day. Although the initial assessment of $471,000 for the January 1, 2016 valuation day was reduced to $314,000, the Appellants believe it is still too high.

22Mr. Spadoni testified that Terrace Bay is an organized municipality that has approximately 890 residential properties, 50 of which are not occupied, that the population of Terrace Bay has decreased by 35% from 1991 to 2016, and that property owners in non-organized municipalities such as Rossport and Mountain Bay pay 8-10 times less property tax than those in Terrace Bay.

23The Appellants argue that only sales in Terrace Bay are relevant for determining correct and equitable assessment of the Subject Property because they are affected by the same economic forces and have the same tax model. The Appellants chose five sales from MPAC’s Equity Study (66, 93 and 100 Lakeview Drive, 40 and 56 Superior Avenue) describing them as having single storey residences located within 6 kilometres from the Subject Property. None are waterfront properties, none have cabins and none have workshops. Unlike these properties, the Subject Property does not receive municipal services such as road maintenance, lighting, garbage collection or snow clearing. They described each property as having been “fully renovated over the years” and that they are 33 or 34 years older than the Subject Property. In order to make these five sale properties similar to the Subject Property, the Appellants adjusted each of the time-adjusted sale values by adding the Subject Property’s assessed values of three factors: the waterfront ($59,374.33), their cabin ($9,462.32) and their workshop ($4,257.07). The result is a range of values from $132,469 to $177,946.

24The Appellants also made the same adjustments to assessments of other properties. However, I received no evidence that any of these properties have sold. Assessments, rather than open market sales, do not assist me in determining the Subject Property’s current value. However, I will review the assessment evidence in the equity portion of this decision.

Appellants’ Submissions

25Relying on their evidence, the Appellants submit that the correct current value for taxation years 2017 and 2018 is $150,000 to $180,000.

26In response to MPAC’s four sale properties located in Rossport and Mountain Bay, the Appellants take the position that they are superior to the Subject Property because they are in more desirable locations and pay less property tax and, therefore, command higher sale values. The Appellants argue that:

a. The four properties are located closer to the nearest large city, Thunder Bay.

b. They are located in unorganized municipalities so their property taxes are eight to ten times less than Terrace Bay, which is an organized municipality.

c. It is warmer in these locations than in Terrace Bay.

d. The roads are often closed in winter and the terrain is rougher between these properties and Terrace Bay than between these properties and Thunder Bay.

27The Appellants take the position that the Subject Property is only comparable to properties in Terrace Bay. There are very few single family detached waterfront properties in Terrace Bay and only two have recently sold; both sales are included in MPAC’s Valuation Report. The Appellants submitted assessments of waterfront properties in Terrace Bay which I will address in the equity portion of this decision.

28On cross examination, the Appellants submit the Subject Property has not been improved since 2014, that the economy of the area has fallen over the years, that residents have stopped improving their properties because they don’t want to pay the increased taxes, and that any increase in value would be lost in the taxes levied. The Appellants acknowledge that taxes are not relevant in determining current value but the amount of taxes levied on a property is relevant to purchasers and owners in that the taxes will impact the market value of a property.

Findings on Current Value

29In determining current value, the best evidence is an open market sale of the Subject Property on or near the valuation day. The valuation day for these appeals is January 1, 2016. Where there is no such sale, the next best evidence is sales of similar properties on or near the valuation day. Whether these sales occurred before or after the valuation day is not important because, in determining current value, I am not comparing the sales to the assessed values.

30Both parties presented photographs of the Subject Property, showing that the buildings are very attractive and well maintained. Neither party submitted photographs of any of their suggested comparable properties.

31There is some merit in adjusting the sale values of non-similar properties by the value of their differences to a property for which a current value is sought. However, such adjustments should be minor. The adjustments the Appellants made to the time adjusted sale prices of their five non-waterfront sale properties range from 70% to 223%. This indicates to me that none of these properties are similar to the Subject Property. In addition, all of these properties are significantly older than the Subject Property, yet none of the adjustments addressed the age differences. The evidence is that they were all ‘fully renovated over the years’ but the dates and scope of the renovations were not provided. Based on the above, I find that none of the Appellants’ five sale properties are comparable to the Subject Property and, therefore, they are unreliable in determining its current value.

32The Appellants argued that assessments of other properties should be used to determine the Subject Property’s current value. The assessments of properties do not assist me in determining current value when they have not been tested in the open market with sales.

33The Appellants also argued that the percentage increase in their assessment, between the 2012 and 2016 valuation days, exceeds the percentage increase for other properties. The assessments on a valuation day reflect the market at it existed at that point in time. Each valuation day stands alone and is not related to other valuation days. Each re-assessment is a completely new exercise based on new sales information gathered for the new valuation day. Therefore, the percentage change between valuation days does not assist me in determining the current value of the Subject Property or whether it is equitably assessed.

34MPAC presented six waterfront sale properties. Two of the sales, 7 Scott Avenue and 13 Scott Avenue are located in the same municipality and on the same street as the Subject Property. The Subject Property is superior to both of these properties in age, quality of construction, outbuildings and building size, including having a walk-out basement. They both have larger waterfronts than the Subject Property but their overall lot sizes are smaller. On balance, I find that these two properties are inferior to the Subject Property and, therefore, the Subject Property would likely sell for more than $175,000.

35I accept the Appellants’ arguments that properties in Mountain Bay and Rossport will likely have higher sale values than similar properties in Terrace Bay. Of the four remaining sale properties, I find that 11 Mountain Bay Road is the most similar to the Subject Property. It has a similar waterfront and total lot area, the residence has the same quality of construction and there are two outbuildings. It is inferior in that the residence is smaller, slightly older, and does not have a basement. Although it has an inferior residence, its location is superior to the subject property. Based on this sale, I find that the Subject property would likely sell for less than $340,000.

36I find that the Subject Property would likely sell for more than $175,000 but less than $340,000. I also find that the Subject Property’s current value likely falls closer to the most comparable property’s value, 11 Mountain Bay Road. Accordingly, I find that the Subject Property’s current value is likely no lower than the returned assessment of $314,000. This is the current value.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)(b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what the amount of this reduction should be.

Appellant’s Evidence

37The Appellants presented the assessments of five waterfront properties: one is a vacant parcel, one is improved with six built-on sub-parcels or ‘camps’, and three are improved with single owners. On cross-examination, MPAC’s Assessor explained that the six unit parcel, known as the Hydro Bay Camper property, is assessed as one property under one roll number although the individual buildings are assessed separately. The Appellants compared the assessed values of these five waterfront properties for the 2012 and 2016 valuation days. They argue that, on average, the assessments of these five properties, when calculated as though they are 10 separate properties, increased by $84,520 between valuation days. They argue that the Subject Property has been unfairly assessed because its assessment increased by $209,000 during this same period.

38The Appellants presented a single assessment of a waterfront property, 502 Isbester Drive, Schreiber. The Appellants argued it is likely more comparable to the Subject Property than properties in Rossport or Mountain Bay because a) Schreiber is an incorporated township so the taxes will be similar and b) it is closer to the Subject Property as Schreiber is 15 kilometres from the Terrace Bay. This property has a lager lot with 980 feet of waterfront and an effective depth of 1,609 feet for an effective total lot size of 36 acres. It is improved with a 784 sq. ft. residence built in 2005 with a 4.5 quality of construction. It was assessed at $110,000.

39The Appellants presented the assessments of four non-waterfront properties located in Terrace Bay: 50 Superior Avenue at $115,000, 83 Lakeview Drive at $89,000, 34 Southridge Drive at $101,000 and 36 Southridge Drive at $102,000. They proposed that by adding MPAC’s waterfront factor of $59,374.33 to the assessed values, these properties should be used to determine an equitable value of the Subject Property.

40In particular, they described 50 Superior Avenue as a corner lot of 18 acres. The residence has 1,284 sq. ft. of building area with 2,247 sq. ft. of finished area, built in 1976, and a 6 quality of construction. They submit that it was completely renovated within the last 10 years. It was assessed at $115,000. Adding MPAC’s assessed values of the Subject Property’s waterfront, cabin and workshop results in a value of $188,000.

Appellants’ Submissions

41The Appellants argue that the Subject Property’s assessment should not be more than $189,520 which is the total of their previous assessment plus the average increase of the other waterfront properties, “all else being equal”.

42The Appellants argue that the Subject Property’s assessment of $314,000 is too high in relation to 502 Isbester Drive, Schreiber.

43They argue that the assessments of their suggested comparable properties with the addition of MPAC’s values for waterfront, cabin and workshop indicate that the Subject Property’s correct assessment is much less than $314,000.

44In response to MPAC’s Equity Report, the Appellants argue that a coefficient of dispersion (“COD”) of 22 indicates that an equity adjustment is required.

MPAC’s Evidence

45The Assessor presented an Equity Report which included an Assessment to Sales Ratio (“ASR”) study of 30 properties which sold in the Terrace Bay area between January 1, 2012 and December 31, 2016. The Assessor submits he searched MPAC’s data base for single family detached properties on water, not on water, and seasonal/recreational dwellings that are first tier on water. The median ASR is 1.008 and the COD is 22. MPAC’s report sets out that the International Association of Assessing Officers’ (“IAAO”) standards require a COD of not more than 20 for recreational waterfront properties and not more than 15 for residential properties, emphasis added. The Assessor testified that in Northern Ontario there are fewer sales spread over long distances which results in a COD is that is usually higher than the standards.

46The Assessor submits that the sales used in the equity report are the closest sales of residential properties rather than directly comparable properties.

MPAC’s Submissions

47Relying on its evidence, MPAC’s submits that an equitable reduction of the current value for the 2017 and 2018 taxation years is not required.

Findings on Equity

48Once I have determined the current value of the properties I am required, pursuant to clause 44(3)(b) of the Act, to “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 the adjustment lowers the assessment.

Assessments of Other Lands

49The Appellants put forward a number of arguments for an equitable reduction. They presented a single assessment for a waterfront property, 502 Isbester Drive, Schreiber noting that Schreiber is an incorporated township located near Terrace Bay. I agree with the Appellants that the assessment of this property appears skewed when compared with the subject property. However, because the two properties are not directly comparable and the Schreiber property has no sale, I cannot draw any conclusion regarding equity using this single property.

50The Appellants propose that the average increase in assessed values for five waterfront properties in Terrace Bay between the 2012 and 2016 valuation days should be applied to the Subject Property’s 2012 assessed value to determine the 2016 value. I have addressed this above in my findings for current value. The change in values between valuation days does not assist me in determining whether the Subject Property is equitably assessed.

51The Appellants argued that the assessments of non-waterfront properties should be considered in determining the Subject Property’s equitable value. They argued that adjusting the assessed value of their property or other properties to account for differences will result in the Subject Property’s equitable assessment. However, adjustments were not offered for all differences, only for MPAC’s values attributed to the Subject Property’s waterfront, cabin, and workshop. While there is merit in the use of such an exercise, it would only be used in circumstances where the proposed comparable properties were identical or near identical to the Subject Property. The proposed properties are too dissimilar from the Subject Property to use this method.

Level of Assessment

52MPAC’s equity study of 30 residential properties indicates that MPAC is not accurately assessing residential lands in the vicinity of the Subject Property. The median ASR is 1.008 and I calculated the mean ASR to be 1.072. The COD for the sample is 22. MPAC included non-waterfront residential, the COD of which, based on MPAC’s own evidence, should not exceed 15. The sample also included waterfront residential, the COD of which, again, based on MPAC’s own evidence, should not exceed 20. The IAAO sanctioned COD is a measure of how far from the median value any given ASR is from 1.00.

53The COD does not fall within the IAAO standards, however the question is whether an equitable reduction is warranted. MPAC’s equity study indicates that MPAC is not under-assessing residential properties in the vicinity of the Subject Property but is tending to over-assess properties. As a result, an adjustment for equity is not required. Only where the ASRs fall below 1.00 should an adjustment be made for equity.

54Clause 44(3)(b) requires that I have reference to “similar lands in the vicinity.” The Divisional Court held, in Municipal Property Assessment Corp. v. Loblaw Properties Ltd., 2017 ONSC 1299 at paragraph 25, that the Act requires “that all points of comparison must be considered.” At the hearing, there was some debate about what constitutes similar; however, both parties took the position that waterfront properties are the most comparable to the Subject Property. The problem is that, in the Terrace Bay area, there are few waterfront properties and fewer sales of waterfront properties. MPAC submits that waterfront properties are a separate and distinct market from non-waterfront properties and that they are assessed differently than non-waterfront.

55Based on the above, it is fair to say that properties that are residential, waterfront and located in Terrace Bay will likely provide the best indicator of whether MPAC’s model is assessing similar lands equitably.

56I was presented with only two waterfront sales of residential properties located in Terrace Bay, which is the vicinity of the Subject Property: 13 Scott Avenue and 7 Scott Avenue. The mean ASR of these two sales is 0.80.

57However, a sample of two sales is too small to indicate whether an equity adjustment is warranted. In Municipal Property Assessment Corp. Region No. 9 v. Koifman, [2011] O.A.R.B.D. No 49, at paragraph 42, Member Wyger held that a sample size of three sales is too small to determine equity. Nevertheless, he goes on to say that a sample size of three with an ASR that is 0.85 “might be insufficient by itself to make a finding of inequity, but may be of some use in support, or to corroborate a finding of under-assessment otherwise determined”. The only other ASRs I was given were 1) MPAC’s equity report, outlined above and 2) MPAC’s six waterfront sale properties found it their valuation report. MPAC’s equity report does not support a finding of inequity. With regard to the six waterfront properties, the Appellants made a convincing argument that four of the six sales were in superior markets but there is some merit in comparing waterfront to waterfront properties. The mean ASR of these six sales is 0.98 and the median ASR is 1.00.

58Based on the above analysis, I find that an equitable adjustment to the current value is not warranted.

DECISION

59The correct current value of the Subject Property is $314,000 for the 2017 and 2018 taxation years.

60An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.

61Accordingly, the assessment is confirmed at $314,000 for the 2017 and 2018 taxation years.