Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 05, 2019

FILE NO.: WR 159092

Assessed Person(s): Proveg Kent Inc., DVS Farms Ltd., Donna Lynn Van Segbrook, David Frank Van Segbrook

Appellant(s): David Van Segbrook, Proveg Kent Inc., Donna Van Segbrook, DVS Farms Ltd., David Van Segbrook

Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 26

Respondent(s): Municipality of Chatham-Kent

Property Location(s): Mallard Line Concession 10 Part Lot 16, Mallard Line Concession 10 Part Lot 17, and 7733 Mallard Line Dover Concession 10 Part Lot 17

Municipality(ies): Municipality of Chatham-Kent

Roll Number(s): 3650-480-007-03800-0000; 3650-480-007-03900-0000; 3650-480-007-04001-0000

Appeal Number(s): 3262093, 3313608, 3262092, 3313502, 3262094, 3313505 and 3366964, 3366906 and 3367093 (deemed 2019 appeals)

Taxation Year(s): 2017, 2018 and 2019 (deemed appeals)

Hearing Event No.: 710471, 710472, 710473

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

Heard: February 25, 2019 in Chatham, Ontario

APPEARANCES:

Parties

Representative

David Van Segbrook, Donna Van Segbrook, DVS Farms Ltd., Proveg Kent Inc.

David Van Segbrook

MPAC

Justin Johnson

Municipality of Chatham-Kent

No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS AND DAN WEAGANT

INTRODUCTION

1The subject property is comprised of three 50 acre farm properties used for farm purposes. None of the three properties has any buildings or structures. At the outset of the hearing, the Parties jointly submitted that the three properties are farmed as one 150 acre parcel and that any decision made by the Board on one of the properties should apply to all three. The parties also submitted that the issues in dispute are identical for all three properties.

2Accordingly, the Board chose to hear the evidence of all three properties simultaneously, in order to render a decision on each appeal before the Board. In addition to the original appeals filed for the 2017 taxation year, a deemed appeal for each property was created for the 2018 and 2019 taxation years.

3The Board needs to make three decisions in these appeals. Firstly, the Board must determine the current value of the subject properties. In order to do so, the Board must also determine the correct soil or land class applicable to the subject properties.

4Once the current value is determined, the Board must then decide, when reference is made to the assessments of similar properties in the vicinity, if the value should be reduced to be equitable.

DECISION

5The Board finds the current value of the subject properties, in total, is $2,036,000 for the 2017, 2018 and deemed 2019 taxation years, divided as follows:

• Roll # 3650-480-007-03800 – $684,000;

• Roll # 3650-480-007-03900 – $684,000; and

• Roll # 3650-480-007-04001 - $668,000.

6The Board also finds that there is evidence to indicate a reduction in this value is necessary for the purposes of equitable assessment.

7Therefore, the Board finds that the assessment of the subject lands on Mallard Line for the 2017, 2018 and deemed 2019 taxation years is reduced as follows:

• Roll # 3650-480-007-03800 is reduced from $712,000 to $547,000;

• Roll # 3650-480-007-03900 is reduced from $712,000 to $547,000; and

• Roll # 3650-480-007-04001, is reduced from $697,000 to $534,000;

all in the Farm property class.

THE LEGISLATION

8The relevant sections of the Assessment Act, R.S.O. 1990. c. A.31 (“Act”) are as follows:

1. “current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.

2. (1) Assessment of Easements – Where an easement is appurtenant to any land, it shall be assessed in connection with and as part of the land at the added value it gives to the land as the dominant tenement, and the assessment of the land that, as the servient tenement, is subject to the easement shall be reduced accordingly

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

19. (5) Farm lands and buildings 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;

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.

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.

What is the Current Value of the Subject Property?

MPAC’s Evidence

9MPAC’s valuation report described the subject property as a farm property with no buildings or structures. The land was considered by MPAC to be Class 1 farmland. MPAC explained that in Chatham-Kent, farm land carries classes ranging from Class 1 through Class 6, with Class 1 generally being the most valuable owing to its production capabilities. Class 6 was described as being un-cultivatable and is usually applied to features like drainage ditches that occupy a measurable area, and that may provide some function to the rest of the property, but cannot be used for agricultural production.

10According to MPAC, two of the 50 acre parcels are entirely Class 1 land. The third parcel of land has 1.25 acres in Class 6 and 48.75 acres in Class 1. MPAC also testified that different classes of farm land carry different values and that the following per acre values are applied in Chatham-Kent for the five farm land classes in evidence:

• Class 1 - $13,000;

• Class 2 - $12,315;

• Class 3 - $9,561;

• Class 5 - $2,177; and

• Class 6 - $ 1,000 to $2,000.

11By applying these values to the subject property, MPAC arrived at a value of $712,000 each for two of the parcels and $697,000 for the third parcel.

12According to MPAC, these values were adjusted according to MPAC’s Farm Size Value Adjustment Table. This table applies an adjustment percentage according to a farm’s size. Farm properties that are less than 100 acres in size have a slight upward adjustment to value, while farms over 100 acres in size have a slight downward adjustment. These adjustments are intended to apply the generally accepted concept of economy of scale, whereby a larger volume of land purchased together would sell for somewhat less than a smaller volume of the same quality.

13MPAC explained than when the assessments for the three properties were returned, a 2.5 % upward adjustment was applied because the properties were 50 acres in size. MPAC’s valuation report arrived at a lower recommended value because the three properties are farmed together as one 150 acre parcel. This led MPAC to first reduce the small property premium then apply the large property discount to arrive at recommended values of $665,000, $665,000 and $650,000 for a total of $1,980,000.

14MPAC then compared the subject properties with four other vacant farm properties in the area covering the former Dover Township. These four properties sold between June 2014 and December 2016, for between $700,000 and $790,500. MPAC submitted the time adjusted sales ranged from $737,000 and $789,000. The properties range in size from 47.21 acres to 50.04 acres.

15MPAC’s valuation report stated that these four property sales were selected for comparison to the subject property owing to their geographic proximity to the subject property, the size of each property, and the amount apportioned between class 1 and class 6 lands. Lastly, these four sales were selected based on the proximity of their sale dates to the valuation day of January 1, 2016 for these appeals. None of this was contested by the Appellant.

16The four sales derived a range of per acre value of $13,889 to $16,299 when the sale values are used. When time adjusted sale (TAS) values are used (TAS values allow MPAC to compare sale values as though they all occurred on the valuation day) the range is $14,745 to $16,049 per acre.

17MPAC submitted that all of these per acre values would need to be adjusted for farm property size and recommended values of $13,300 for roll numbers 03800 and 03900 and $13,374 for roll number 04001 were reasonable given the foregoing analysis.

Appellant’s Evidence

18The Appellant did not dispute the facts of MPAC’s valuation, the methods used by MPAC to arrive at the returned value, or the recommended value. However, he submitted there was one input value used by MPAC for its calculations that needed to be adjusted.

19The Appellant submitted that the subject properties all lie within an area known to have ‘Toledo Clay’. He testified that soil type is a significant contributor to decisions related to farm land class.

20According to the Appellant, Toledo Clay as the predominant soil type places a restriction on crop production. While it is fertile, its composition restricts certain types of crops that require the use of a transplanter, such as tomatoes and peppers. He testified the subject lands, being in an area of Toledo Clay, are restricted to commodity crops like corn, beans, grain and sugar beets.

21The Appellant testified that he and his family work a number of farms in the area. He cited two properties as being significant when making a comparison of land productivity as it relates to the value of the subject properties. The first property is known as 7401 Mallard Line. It is owned by the Appellant’s family. It has ‘Clyde Clay’ which was described by the Appellant as having the same characteristics as Toledo Clay. The Assessment of 7401 Mallard Line is $10,684 per acre.

22The second property, also owned by the Appellant’s family is known as Langstaff Line. It has Toledo Clay and is assessed at $10,778 per Acre.

23The Appellant finally submitted that, since the subject properties have the same or similar crop choices and productivity of the 7401 Mallard Line and Langstaff Line properties, the assessment ought to be similar as well. He submitted that the farm land class of his two cited properties is a mix between Class 2 and Class 3. The assessments applicable to both fall within the range of Class 2 and Class 3 farm land as testified to by MPAC.

Board’s Analysis

What is the Appropriate farm land class?

24MPAC prepared a valuation report with the assumption that the subject property occupied lands that were considered to be Class 1 farm land. Its unrefuted testimony of the value per acre of Class 1 lands was used to apply to the subject property’s 150 acres. This value was then adjusted for farm size, to arrive at the recommended value.

25The Appellant sought to refute MPAC’s application of Class 1 farm land. He did so by personal experience and observation and also cited the “Soils of Kent County West Sheet Townships of Camden, Chatham and Dover Soil Survey Report No. 64”. This map indicated that the parent soils in the vicinity of the subject properties and the two comparable properties cited by the Appellant are in fact the same. MPAC’s assessor testified that he was familiar with this map and its designation of the subject area as having Toledo Clay.

26The Board finds the Appellant’s submissions compelling with respect to the nature of the soil at the subject property. Even with the small sample of comparable properties advanced by the Appellant, the Board finds that the Class 2 and 3 farmland designation is most appropriate for the subject property.

What is the Current value of the Subject property?

27The best evidence of current value of the subject property is that of MPAC. By definition, the current value of land is based on sales. The best sales evidence is a sale of the subject property. When that is not possible, as the case is here, the next best sales evidence is that of properties that are comparable to the subject property. There were no sales in evidence for properties in the Class 2 or 3 farmland categories. This requires the Board to use the best evidence available, which is reflected by MPAC’s sales of Class 1 farm land.

28MPAC cited four sales in the former Dover Township area. All four of these had sale dates in proximity to the valuation day of January 1, 2016, with a mean value per acre of $15,244. When applied to the 148.86 acres of the subject property, this would suggest a value of $2,269,222, not accounting for the economy of scale adjustment for size.

29However, one of MPAC’s comparable sales, the property at St. Phillipes Line stands out as the best example of value. The sale price of this property was $735,000 and represented a sale of 50 acres in Class 1. This sale occurred on December 11, 2015; 21 days before the valuation day. The Board prefers this sale as it does not require any adjustment to the sale value owing to the proximity of the sale date to the valuation day.

30The per acre value of the sale of St. Phillipes Line property was $14,700. When applied to the subject property as a whole of 148.86 acres, the total value is $2,188,242. MPAC’s “Farm Size Adjustment, 2016” table suggests that a property of 150 acres is valued at a rate of 93.03 % of that for a 50 acre parcel. When applied to the total value found, based on the 50 acre sale at St. Phillipes Line, the reduced value is $2,035,721 ($2,036,000 rounded).

31Accordingly, the Board finds the current value of the three component parcels as follows:

• Roll # …03800 - $684,000 (rounded);

• Roll # ...03900 - $684,000 (rounded); and

• Roll # …04001 - $668,000 (rounded).

Should the Current Value Determined be Reduced for the Purpose of Equitable Assessment, when the Assessments of Similar Properties in the Vicinity are Considered?

32The Appellants submitted the assessments of two properties in the vicinity with the same Toledo Clay soil as the subject property. These assessments indicated a value between the assessments used by MPAC for Class 2 and 3 land of between $9,561 and $12,315 per acre. The Appellants suggested a reasonable value to apply to the subject property would be the average of these two as both are applied to the two similar properties advanced.

33MPAC did not refute this approach.

34MPAC submitted an equity study that compared the assessments of 30 properties to their sale prices. These 30 properties, according to MPAC, are all in the vicinity of the subject property and were sales of Class 1 farm land. According to MPAC the study indicates that similar Class 1 farm properties in the vicinity of the subject property are assessed at approximately 103.9% of their time adjusted sale value (or, current value); indicating that no downward adjustment to the current value of the subject property is necessary for it to reflect an equitable assessment.

35The Board prefers the evidence of the Appellant. In order for the Board to make a finding of an adjustment to assessment based on equity or fairness, properties with the same productivity and similar crop choices should be used when available. The Appellant provided two examples where similar land class properties were assessed at a level below what was returned or recommended by MPAC.

36The Board finds that the most equitable assessment for the subject property is determined by using the average of the per acre values of Class 2 and Class 3 lands in evidence, of $10,938. Applying this to the Subject Property’s 148.86 acres results in a total value of $1,628,231 or $547,000, rounded, for 50 acres and $534,000, rounded, for 48.86 acres.

DECISION

37The Board finds the current value of the subject property is $2,036,000 for the 2017, 2018 and deemed 2019 taxation years, divided as follows:

• Roll # 3650-480-007-03800 – $684,000;

• Roll # 3650-480-007-03900 – $684,000; and

• Roll # 3650-480-007-04001 - $668,000.

38The Board also finds that there is evidence to indicate a reduction in this value is necessary for the purposes of equitable assessment.

39Therefore, the Board finds that the assessment of the subject lands on Mallard Line for the 2017, 2018 and deemed 2019 taxation years is reduced as follows:

• Roll # 3650-480-007-03800, from $712,000 to $547,000;

• Roll # 3650-480-007-03900, from $712,000 to $547,000; and

• Roll # 3650-480-007-04001, from $697,000 to $534,000;

all in the Farm property class.

2019 DEEMED APPEAL

40An appeal for the 2018 taxation year is presently before the Board. Section 40.(26) of the Assessment Act provides that the appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2018 appeal before March 31, 2019. For that reason, this decision also applies to the 2019 taxation year.

41Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

(26) For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.