Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 14, 2019 FILE NO.: WR 155902

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): 561 McDonald Road Municipality(ies): Municipality of West Nipissing Roll Number(s): 4852-110-001-15700-0000 Appeal Number(s): 3266268 and 3314101 Taxation Year(s): 2017 and 2018 Hearing Event No. 703691

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 165.4 acres of land at 561 McDonald Road in the Municipality of West Nipissing. This property (the “Subject Property”) is classified as farmland without any buildings. According to MPAC, the farm features 128.9 acres of Class 6 farmland, which is itself comprised of 120.6 acres of rocky bush land and 8.25 acres of swamp or marsh land. The remaining 36.5 acres is described by MPAC as “Class 4 overgrown ‘pasture’ land”. The farm is situated in an area formerly known as Kirkpatrick Township in West Nipissing. It is bisected by the Veuve River near the north end of the land.

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. The general reassessment for this farm property was returned in the amount of $31,500 for the 2017 taxation year and $47,000 for the 2018 taxation year. Mr. McDonald appeals these values on the ground that they are not representative of the true, significantly lower, value of this parcel of land, the value of which Mr. McDonald submits is closer to $15,600. He also submits that MPAC increased the value of his property dramatically since the last assessment cycle.

3Pursuant 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.

4Section 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.

5At 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 reduces the assessment of the Subject Property for the 2017 and 2018 taxation years to the last uncontested value, which is $15,600. An equitable reduction of this value is not required.

Relevant Legislation

6Current 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.

7Section 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.”

8The 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 in this class.

Issue

9The issue to be determined on this appeal is the correct current value of the Subject Property for the taxation years 2017 and 2018.

Discussion, Analysis and Findings

MPAC’s Evidence

10Blair Adams, a Property Valuation Analyst, represented MPAC, and gave the evidence on its behalf. He filed a Valuation Report dated March 20, 2018.

11Mr. Adams testified that he attempted to inspect the property on two occasions but was unable to conduct an inspection due to snow. He was able to obtain a satellite photo of the land, and advised that these photographs showed the roof of another structure on the land that he estimated to be 1,000 square feet (“sq. ft.”). Any structures on the land are not included in the current value assessment as Mr. Adams has not had an opportunity to inspect them.

12Mr. Adams described the Subject Property as being located on a municipally maintained road, with a driveway onto the property. There are no improvements such as sanitary facilities, running water, or hydro, although hydro is available. Mr. McDonald qualifies for the farm tax rate through the Ontario Ministry of Agriculture, Food and Rural Affairs. The classification of this property is not being disputed.

13MPAC uses the cost approach when valuing farms, assessing any improvements using this method and adding that value to the value of the lands which would be derived from comparing them with other farms in the neighbourhood. Mr. Adams then broke down the valuation components of this property. The various soil types are valued differently. In this case MPAC has assessed that there are 120.65 acres of Class 6 land in rocky and forested terrain, and 8.25 acres of Class 6 in marshland. The value he assigns to this portion of the land is $242.56 per acre for a total of $31,265.98. The remaining balance of 36.4 acres is in Class 4 land at $441.27 per acre or $16,062.23 in total value. The number of acres of Class 4 land was estimated from the cleared land visible on the satellite image.

14Mr. 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 2016.

15Mr. 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”. However, none of the proposed farms is similar enough to the Subject Property to be useful in acting a check against the value assigned to the Subject Property. Mr. Adams ultimately excluded the direct sales comparison approach from his analysis of value. Similarly, he also excluded the income approach for the reason that it is too difficult to assess the respective value of the labour, equipment versus income generated by the land itself.

16To conclude the process of valuing the land by the cost approach, Mr. Adams would add to the value of the lands any value of the improvements thereon. While Mr. Adams is aware that there is an improvement on the lands, it has not been inspected nor assessed, and therefore will not be included in this appeal.

MPAC’s Submission

17Relying on its evidence, MPAC’s submits that the correct current value for the taxation years 2017 and 2018 is $ $47,000. However, the assessment was returned in the amount of $31,500 for 2017. No application was made under the Board’s Rules of Practice and Procedure to increase the amount of the assessment for 2017, and therefore MPAC asks the Board to confirm that amount for the 2017 taxation year.

18Mr. 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.

19In 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

20Raymond 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 (WR 124984). This unreported decision is a decision of Member N. Plumstead. In that decision, Member Plumstead reduced the assessed value of the subject property on the ground that there were insufficient particulars as to the soil quality of MPAC’s proposed comparable property sales, as well as her finding that MPAC had overestimated the percentage of productive land on the subject property.

21Mr. McDonald started by explaining that Ontario soil charts, which are used by MPAC, are not as accurate as the Canadian equivalent. He entered a copy of the “Canada Land Inventory: Soil Capability for Agriculture” map for the area between Noelville to the south and Temagami in the north. He drew his lands on this map. He pointed out that the federal chart has a seventh classification: non-arable land even less valuable than Class 6 land. The map depicts the Appellant’s lands in Class 7 and a smaller area in Class 5 soils.

22Class 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.

23Class 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.”

24Mr. 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. For that reason, he asserts that the comparable properties recommended by MPAC are not comparable with his much poorer soils.

25On cross examination, Mr. McDonald admitted that he and a neighbour have used this land for pasturing 22 cattle for a few weeks. He noted that it would be suitable for cattle for several weeks as long as there was rain; otherwise it was too dry and could not sustain the livestock.

26Mr. McDonald also admitted to having built a pole barn on the property for firewood storage. This has not been assessed and the value is not included in this appeal.

27In 2017, Mr. McDonald put the property up for sale, listing it at $27,000. He testified that the highest offer he received was $19,500. He did not sell it. He did not enter a copy of the listing or the offer into evidence.

Appellant’s Submission

28Relying on his evidence, the Appellant submits that the correct current value for taxation years 2017 and 2018 is $15,600.

Findings

29The very best way of gauging current value is by assessing the amount that a 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 lands. There were no improvements inspected for this assessment although there is evidence of a pole barn on the land, which is admitted by the Appellant. However, in this appeal the lands alone form the basis of the current value.

30The 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 the value of lands identified as Class 7 lands under the federal system.

31MPAC’s evidence was also incomplete in that the per-acre values attributed to these lands were not tied to any other source. The amounts differed from per-acre amounts given in two other similar proceedings involving the same Appellant (WR 155900 and WR 155901) while the lands in both appeals are in the same neighbourhood and have a very similar description to the lands in this appeal: primarily Class 6 lands with a smaller portion of Class 4 farmland as well. The same proposed comparable sales were introduced by MPAC as well. For example, in the appeals for a property identified as Roll # 4852-110-001-11501-0000, owned by the Appellant and located in the same vicinity as the Subject Property, the values of the soil classes given in evidence differed from these, as set out below:

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

32In 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 if the current value of the land” as per subsection 40(17) of the Act.

33The 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 determined and why it is right.

34The only way this burden shifts, as set out in 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.

35In this case the evidence reveals that MPAC’s inspection of the property was limited by snow. Mr. Adams attended on two occasions, both in March, in 2017 and 2018. However, no mention is made by Mr. Adams of any other reason for failing to inspect the premises. 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.

36The difficulty with the evidence provided and MPAC’s end result is that there is no clear path from the four selected proposed 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 differences in values between the different properties 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.

37Where 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.

38In this case, the Appellant indicated that the property had been offered for sale and that an offer was received. However, no documentary evidence was provided, which would have been a useful means of establishing a firm date for this to have occurred. In the absence of this evidence, and with no other evidence proving value provided by the Appellant, the Board is left with no means to make the decision.

39Patry 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 law. 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.

40Therefore, in this case, the last uncontested assessment was in 2016 and the value was $15,600. 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 value. Consequently, the assessment for 2017 will be reduced from $31,500 to $15,600. The assessment for 2018 will be reduced from $47,000 to $15,600.

41An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.

DECISION

42The Board reduces the assessment for the 2017 taxation year from $31,500 to $15,600. The Board reduces the assessment for the 2018 taxation year from $47,000 to $15,600.