Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 14, 2019 FILE NO.: WR 155900

Assessed Person(s)/ Appellant(s): Raymond Joseph McDonald Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 28 Respondent(s): Municipality of West Nipissing

Property Location(s): Kirkpatrick Con 4 Municipality(ies): Municipality of West Nipissing Roll Number(s): 4852-110-001-11501-0000 Appeal Number(s): 3266267 and 3314175 Taxation Year(s): 2017 and 2018 Hearing Event No.: 703689

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

Heard: September 17, 2018 in Sturgeon Falls, Ontario

APPEARANCES:

Parties	Representative
Raymond McDonald	Self-represented
MPAC	Blair Adams
Municipality of West Nipissing	No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

Background

1Raymond McDonald (the “Appellant”) is the owner of Kirkpatrick Con 4 N Pt Lot 9 PCL 13738 NIP (the “Subject Property”), which is a 160-acre farm with outbuildings. According to MPAC, the farm features 141.1 acres of Class 6 farmland, comprised of 126.7 acres of rocky bush land and 14.4 acres of swamp or marsh land, plus 7.9 acres of Class 4 “pasture”, and the remaining 11 acres of good Class 2 soil. The farm is situated in an area formerly known as Kirkpatrick Township in West Nipissing. This property is located on the west border of the West Nipissing District almost in the District of Sudbury.

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. MPAC has assessed the value of the Subject Property, as of January 1, 2016, at $32,000 for January, 2017, and $54,000 for January 1, 2018. The land need not be apportioned, as it is all farm land.

3Consequently, the Board must determine the value of the Subject Property on January 1, 2016, for the 2017 and 2018 taxation years (“current value”).

4The Appellant has filed appeals for taxation years 2017 and 2018 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 and that the correct current value is $11,000. At this hearing, MPAC takes the position that its assessed value should be changed to $52,000.

5Pursuant to s. 40(11) of the Act, the Municipality of West Nipissing (“West Nipissing”) is a party to this proceeding. However, West Nipissing 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.

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. MPAC takes the position that an equitable reduction is not required. The Appellant did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

7At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that MPAC has not met its burden to prove the correctness of the current value and therefore reduces the assessment of the lands for the 2017 and 2018 taxation years to the last uncontested value, which is $11,000. An equitable reduction of this value is not required.

Relevant Legislation

8Current value means, in relation to land, the amount of money the fee simple, if unencumbered, would sell for in an arm’s length transaction between a willing seller and a willing buyer.

9Section 40(17) states “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.”

10The Act contains specific requirements that must be met when valuing farmland, set out in s. 19(5). There are two main requirements. Clause (a) states that “consideration shall be given to the current value of the lands and buildings for farm purposes only.” Clause (b) states that “consideration shall not be given to the sales of lands and buildings to person whose principal occupation is other than farming.” The significance of this clause is that land sold for development potential or recreational potential cannot be assessed as “farmland.” Other, non-farming, uses for the land or buildings cannot be considered. Only the sales of farmland to farmers intent on farming the land can be considered.

Issue

11The issue to be determined on this appeal is the correct current value of the Subject Property for the taxation years 2017 and 2018.

12Discussion, Analysis and Findings

MPAC’S Evidence

13Blair Adams represented MPAC, and gave the evidence on its behalf. He is a Property Valuation Analyst for MPAC. He filed a Valuation Report dated March 21, 2018.

14Mr. Adams described the Subject Property as a farm without a residence located on McDonald Road in West Nipissing. The entire acreage is 160 acres, of which MPAC has designated 141.1 acres of Class 6 soil, which can further be broken down into 126.7 acres of rocky bush land and 14.4 acres of swamp or marsh land. This leaves 7.9 acres of Class 4 “pasture” and 11 acres in what Mr. Adams describes as “good class 2 soil”.

15Mr. Adams testified that he attempted to inspect the property but did not enter the land in the presence of the “No Trespassing” sign. He was able to obtain a satellite photo of the land, and advised that he obtained correct measurements of the pole barn visible from the edge of the property from Mr. McDonald. However, he suggests that there are other structures on the land that appear in the satellite photo and which have not yet been assessed.

16Mr. Adams described the Subject Property as being located on a municipally maintained road, with a driveway onto the Subject Property. There are no improvements like sanitary facilities, running water, or hydro. Mr. McDonald qualifies for the farm tax rate through the Ontario Ministry of Agriculture, Food and Rural Affairs.

17Mr. Adams then itemized the valuation components of the Subject Property. The various soil types are valued differently, and in properties such as this one, where the economies of scale allow a reduced rate per acre, MPAC will apply that. In this case, MPAC has assessed that there are 11 acres of Class 2 soil, which would usually be valued at a rate of $1,525 per acre. However, there was a 2.87% discount applied in this case with the result that the Class 2 land was assessed at $1,482.60 per acre, or $16,308.60. The Class 4 land, consisting of 7.9 acres, was assessed at $607.62 per acre, or $4,800.20. The remaining land is Class 6, comprising 127.6 acres of rocky bush, assessed at $224.59 per acre for a total of $28,657.68. The Class 6 marsh or swampland, of which there are 14.4 acres, was assessed at a higher rate per acre. Because Mr. McDonald qualifies for a farm forestry exemption, 9 acres were not valued and the remaining 5 acres works out to $3,499. Therefore the total land value works out to $53,064.

18After the evidence was given by the Appellant, Mr. Adams recalculated the land values as a result of accepting a different breakdown of the area of the soil types on the Subject Property. He removed one acre of Class 2 land and added it to the Class 6 land, and then removed 2.6 acres of Class 4 land and added it to the Class 6 land. When he recalculated the land value, it was reduced to $50,876 based on these changes.

19Mr. Adams then performed a check on the values of the farm land by comparing the Subject Property with other vacant and improved lands sold in the vicinity between February 1, 2008 and December, 2016. He was able to obtain the trend in sales and prices from this process, so that sales prices could be adjusted to make them current with January 1, 2016. Mr. Adams selected four farms to use as comparable farm sales. They varied in size from 61.91 acres to 157 acres. They are located in the F009 neighbourhood, which is the same neighbourhood in which the Subject Property is located. He provided a list of the sales and the breakdown of soil types on each property. The four proposed comparable farms are all “Farm Property without Any Buildings/Structures”. The details of these four sales follow:

MPAC’S PROPOSED COMPARABLE FARM SALES

Address	Lot Size Acres	Acres Class 1	Acres Class 2	Acres Class 3	Acres Class 4	Acres Class 6	Sale Price (Time Adjusted)	Sale Date
Kirkpatrick Con 4	160	0	11	0	7.9	141.1
1	683 Piquette Road	157	0	33.67	0	0	123.33	$95,747
2	4852-110-001-19650-0000	61.9	0	0	44.85	17.06	0	$43,026
3	4852-110-001-01700-0000	82.5	37	13	0	0	32.5	$130,256
4	4852-100-001-32600-0000	129.27	67	0	0	0	62.27	$153,776

20The next step in valuing farm property is to assess the value of improvements on the land, which can include structures such as barns, sheds, garages and so on. In this case, the only structure that Mr. Adams was able to view from the perimeter of the farm was the pole barn, and he estimated its value based on the replacement cost new of $9.47 per square foot minus depreciation. The building looked to be 2,000 square feet in size. It was built in 1960, and is a Type III pole barn without insulation. Mr. Adams assessed depreciation at 85%, which leaves 15% good. He also applied 40% external obsolescence. He estimates its depreciated value to be $1,717. To conclude the process, Mr. Adams added together the land value and the value of the improvements: $50,876 + $1,717 = $52,593 or $52,000 rounded down.

MPAC’s Submission

21Relying on its evidence, MPAC’s submits that the correct current value for the taxation years 2017 and 2018 is $52,000. However, due to an error that was made which caused MPAC to leave a deduction in place from an earlier assessment, the current value was returned as $32,000 for 2017. No application was made under the Board’s Rules to increase the amount of the assessment for 2017, and therefore MPAC asks the Board to confirm that amount for the 2017 taxation year.

22Mr. Adams asked the Board to consider the reasoning of this Board in earlier appeal decisions. He referred the Board to these three decisions:

• Morrison v. Municipal Property Assessment Corp., Region No. 17, [2014] O.A.R.B.D. No. 518: This decision stands for the principle that the changes in value from previous cycles are not evidence and the Board should address the current value of the subject property only.

• White v. Municipal Property Assessment Corp., Region No. 24, [2007] O.A.R.B.D. No 218: This decision stands for the principle that each new assessment is a new exercise. All property values do not fluctuate at the same speed; therefore percentage changes in values from previous assessments are not relevant in the current cycle.

• Municipal Property Assessment Corp., Region No. 13 v. Dickie [2007] O.A.R.B.D. No. 791: This decision stands for the principle that percentage increases from previous years are not relevant in the current assessment cycle. Relying on evidence of a percentage increase is not an appropriate method of determining current value.

23In conclusion, Mr. Adams submits that the value of the Subject Property must be assessed based on the current value as of January 1, 2016 and not based on a change from a previous cycle.

Appellant’s Evidence

24Raymond McDonald represented himself, and gave evidence respecting his appeal. He had previously filed the supporting documentation he referred to in his presentation, including a copy of the Report of the Ombudsman of Ontario entitled “Getting it Right” from March 2006. Also included in his documentary evidence was a copy of a previous decision of this Board from July 10, 2014 (Raymond Joseph McDonald v. MPAC, Region 28, (WR 124984), unreported, a decision of member N. Plumstead, dated July 10, 2014.

25Mr. McDonald started by explaining that Ontario soil charts, which are used by MPAC, are not as accurate as the Canadian equivalent. He pointed out that the federal charts have a seventh classification: non-arable land even less valuable than Class 6 land. He filed a copy of the applicable federal soil map for the area in which the Subject Property is located. He marked out the boundaries of his land, and this shows that his soils are Class 5 and Class 7.

26Class 5 is described as follows:

Soils in this class have very severe limitations that restrict their capability to producing [sic] perennial forage crops, and improvement practices are feasible. The limitations are so severe that the soils are not capable of use for sustained production of annual field crops. The soils are capable of producing native or tame species of perennial forage plants, and may be improved by use of farm machinery. The improvements practices may include clearing of brush, cultivation, seeding, fertilizing or water control

27Class 7 Soils are described as follows:

Soils in this class have no capability for arable culture or permanent pasture. This class also includes rockland, other non-soil areas and bodies of water too small to show on the maps.

28Mr. McDonald stated that his property has a high percentage of this lower quality soil, and some sections of his Class 4 land more appropriately belong in the Class 6 category. Of his160 acres, he maintains that close to 150 acres are non-arable lands. About 5 acres of his Class 2 land is subject to flooding and marshy conditions and not useful for growing hay in some years. For that reason, he asserts that the comparable properties recommended by MPAC are not comparable with his much poorer soils.

29Mr. McDonald describes the unassessed structures that appear on the satellite photographs of his land as basically roof structures to protect his hay from the elements. They lack walls. He didn’t mention whether or not they had floors. His opinion is that they do not add value. He primarily grows hay, in contrast, he notes, to two of MPAC’s proposed comparable land sales have a number of acres producing oats.

30In addition to objecting to MPAC’s mischaracterization of almost 4 acres of his land, Mr. McDonald gave the opinion that the pole barn has no value. In his opinion, the entire property with the structures on it would not sell for more than $11,000 as of the valuation day.

31Mr. McDonald was also unhappy about the number of Property Assessment Notices he received, each with different increases. He produced them in evidence, showing how much his assessment was going up. He testified that there was no reason for the increases and that the structures on his property are almost without value. The original assessment notice indicated that the Subject Property assessment was $11,000 for 2016, and Mr. McDonald argues that this indeed is what the property would have sold for at that time. It would not sell for much more now, he submits.

Appellant’s Submission

32Relying on his evidence, the Appellant submits that the correct current value for taxation years 2017 and 2018 is $11,000.

Findings

33The very best way of gauging the current value is by assessing the amount that the Subject Property sold for on the open market at or near the valuation day. This applies to all types of real property, and farmland is no exception. In this case, however, there was no sale at or near January 1, 2016, which means that the assessor has to look at another method of estimating value. As is usual in the assessment of farm properties, the cost method is used to ascertain the value of the improvements, and the value of the land is added to that. In this case, MPAC used the cost method to determine the value of the improvements, and then determined the value of the land from the sales of similar lands in the same neighbourhood or vicinity. The Appellant objected on several grounds: (1) the improvements had no value; (2) his land was less valuable with proportionally less arable soil than the proposed comparable farms selected by MPAC.

34The Board is restricted to making a decision based on the evidence presented. While Mr. McDonald did some research and presented cogent evidence about the poor quality of his land for farming, using the federal soil chart for his area as proof of this, he did not tie his evidence into market values. For example, while the Canada soil chart indicates that the bulk of the Subject Property lies in the “Class 7” area, with small bits identified as “Class 5 soils”, the Appellant did not tie these facts in to a valuation. The Board does not know what lands identified as Class 7 lands under the federal system sell for on the open market in this neighbourhood.

35MPAC provided some evidence of value, applying the cost approach to valuing the pole barn structure visible from outside the boundary of the land, and adding it to the per-acre value of the land based on soil types. MPAC found three of its four proposed comparable farm land sales to be “superior”, and demonstrated that the superior lands had higher percentages of Class 1, 2 and 3 soils. The Board finds that all four of MPAC’s proposed comparable properties suggest that the Subject Property has been underassessed. However, they fail to assist in determining a current value.

36Sale 1, 683 Piquette Road, is the closest in size to the Subject Property, but with three times as much land in Class 2 soils as the Subject Property and 18 fewer acres in Class 6 lands. It sold at the end of 2016 for the time-adjusted price of $95,747. Using the acreage values applied to the Subject Property by MPAC, this property would be assessed for $53,750. Because it sold for almost twice this amount, it is clear that the per acre values applied by MPAC are lower than the market suggests. The Piquette Road sale suggests a value of the Subject Property in the range of $80,000 to $90,000.

37MPAC`s Sale 2 comprises 98.09 acres, without any Class 2 or Class 6 soil, but 44.85 acres in Class 3 and 17 acres in Class 4. It sold for a time-adjusted price of $43,026. This property would sell for less than the Subject Property because it is smaller and lacks any soils in Class 2. It is approximately two-thirds the size of the Subject Property, which suggests a current value of the Subject Property in the range of $60,000 to $65,000.

38Sale 3 is 82.5 acres, with 37 acres in Class 1, 13 acres in Class 2, and 32.5 acres in Class 6. Clearly the soil quality is better than the Subject Property’s soil quality; however, this farm is approximately half the size of the Subject Property. Sale 3 sold in January, 2013, for the time-adjusted sale price of $130,256. It suggests that the Subject Property would sell in the range of $60,000 to $70,000.

39The fourth proposed comparable sale is a parcel of 129.27 acres which sold in 2012 for $126,000, which is time-adjusted to $153,776 as of January 1, 2016. This property has 67 acres in Class 1 soils and 62.27 acres in Class 6 This proposed comparable property is only 30 acres smaller than the Subject Property but with a better quality of soil on half of its acreage. This sale would suggest that the Subject Property would sell for $65,000 to $75,000 or approximately half the value of this property.

40The comparable sales provided by MPAC do not support the assessment of land in the amount of $54,000 but rather a larger amount than that in the range of $60,000 to $75,000. The Appellant argued that the percentage increase over previous assessment cycles provided grounds for setting aside the assessment. MPAC provided three previous Board decisions that supported MPAC’s approach that the new assessment cycle is a new process and is not reliant on previous assessments except when there is a decision or discount that has been employed in the previous cycle by MPAC or the municipality and is designated to be carried forward. While the Board is not required to follow decisions by members of the same Board, the decisions reflect a common approach by this Board to appeals.

41In this case, there was no evidence presented of a ruling or adjustment that was to be carried into the current cycle. While the Appellant provided the Board with copies of the decision from his appeal in the last assessment cycle, there was no evidence that the order was intended to continue beyond the 2013 to 2016 assessment cycle. Therefore, as the Board ruled in the cases presented by MPAC, it will not consider evidence of the percentage increase in the lands from the last assessment cycle. The better evidence of current value is evidence of the sales of similar lands.

42In this case, the sales of similar properties presented do not assist in clarifying the value of this particular parcel. The Board must consider whether MPAC has met its statutory burden of proving “the correctness of the current value of the land” as per subsection 40(17) of the Act.

43The considerations are outlined in Jay Patry Enterprises Inc. v Municipal Property Assessment Corporation Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) (“Patry”). Patry stands for the principle that MPAC must not only estimate a current value but must present evidence clarifying how that value was arrived at and why it is right.

44The only way this burden shifts, as we learn from Patry, is by the application of s.40(18) which shifts the burden to the Appellant in the case of non-co-operation: refusing to allow the Assessment Corporation to inspect the Subject Property, or failing to comply with a request to provide information or documentation under section 11. Section 40(19) gives the Board the authority to make a determination after hearing evidence and submissions from the parties.

45Despite having referred to his inability to inspect the property due to “No Trespassing” signs, the MPAC representative gave no evidence of having made a request to inspect the lands which was denied. Because no formal request was made by either party in respect of the shifting burden under s. 40(18), and no submissions were made, the burden of proof remains with MPAC.

46The difficulty with the evidence provided, and MPAC’s end result, is that there is no clear path from the four selected comparable farm properties and the value given the Subject Property. Evidence of this became more apparent when all three appeals were heard consecutively. Conflicting evidence was given by MPAC, and while the evidence may have an explanation, that explanation was not forthcoming either in the verbal testimony or the written submissions. There were different values given for different types of farmland, which is to be expected, but not when those values are inconsistent within the same soil classification without explanation.

47The chart below sets out the various values given for the types of farmland owned by the Appellant in West Nipissing. The farms are all in the same township, and not very far apart. Yet the values for the various types of soil differed, leading to different current values.

Table of Land Values from MPAC for Three Properties in West Nipissing

Soil Class	WR 155900 Con 4 Kirkpatrick Value per acre	WR 155901 109 North and South Road Value per acre	WR 155902 McDonald Road West Value per acre
2	$1,482.60 (usually $1,525 but 2.87% discount in this case)	No Class 2	No Class 2
4	$607.62	$717.60	$441.27 (special exemption as “wooded area” – Farm Forestry Exception)
6	$224.58 – rocky land $242.56 – swamp	$257.53 (all wooded)	$242.56 – rocky bush $242.56 - swamp

48Where the current value is at issue, the appropriate procedure to follow is to look first at MPAC’s evidence on its own and to make a determination whether it can prove the suggested current value on a balance of probabilities. However, where MPAC has not met its burden, the Board must next analyze the evidence provided by the taxpayer to see if it is capable of proving a particular current value.

49Patry stands for the principle that, where there is inadequate evidence from both parties, the Board should fix the assessment at the last uncontested assessed value. This is a fairer “default position” than ruling that the current value is zero. A ruling like that penalizes the Municipality and does not support fair and balanced taxation, which is the goal of assessment laws. Where the Board defaults to the last uncontested assessment, there is a clear consequence for MPAC, and, as Patry suggests, a predictable outcome for everyone concerned.

50Therefore, in this case, the last uncontested assessment was in 2016 and the value was $11,000. Because insufficient evidence has been available allowing the Board to determine the current value of the land, the Board will default to the previous assessed values. Consequently, the assessment for 2017 will be reduced from $32,000 to $11,000. The assessment for 2018 will be reduced from $54,000 to $11,000.

51An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.