Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 30, 2019

FILE NO.: WR 159342

Assessed Person(s): Christine C.M.N. Morellato: David Brian Morellato

Appellant(s): Christine Morellato; David Morellato

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

Respondent(s): Township of Dorion

Property Location(s): 254 Brunner Road

Municipality(ies): Township of Dorion

Roll Number(s): 5834-000-001-27400-0000

Appeal Number(s): 3269685, 3340387 and 3368403

Taxation Year(s): 2017, 2018 and 2019

Hearing Event No. 710075

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

Heard: March 15, 2019 in writing

APPEARANCES:

Parties	Representative
Christine C.M.N. Morellato and David Brian Morellato	Self-represented
MPAC	Ed Molcan
Township of Dorion	No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

BACKGROUND

1Christine Morellato and David Morellato (the “Appellant”) are the owners of 254 Brunner Road (the “Subject Property”) in the Township of Dorion (“Township”), which is approximately 70 kilometres (“km”) east of the City of Thunder Bay. Their property is an 80 acre parcel of vacant land which has been registered in the Managed Forest Tax Incentive Plan (“MFTIP”).

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.

3MPAC has assessed the value of the Subject Property, as of January 1, 2016, at $33,000 (rounded) apportioned as follows for 2017:

• Residential Property Class (Land)- $200;

• Managed Forests Property Class - $32,800.

MPAC assessed the Subject Property in the amount of $34,500 in 2018 and 2019, apportioned as follows:

• Residential Property Class (Land) - $600

• Managed Forests Property Class - $33,900

4The Assessment Review Board (the “Board”) must determine the value of the Subject Property on January 1, 2016 for the 2017 to 2019 taxation years (“current value”). In this case, the Appellants have filed an appeal of the 2017 taxation year assessment under s. 40 of the Act. They are deemed to have appealed the 2018 and 2019 taxation year assessments as well, pursuant to s. 40(26) because the 2017 appeal was not finally disposed of by March 31, 2019. They complain that MPAC has reduced the amount of Managed Forest property enrolled in the MFTIP by one acre which has been classified “Residential” due to the construction of an outbuilding on the land which MPAC has deemed to be a “garage”. They also submit that the value assigned to the Managed Forests is excessive.

5Pursuant to s. 40(11) of the Act, the Township is a party to this proceeding. However, the Township did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on the Township’s 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 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 the assessed value for the 2017, 2018 and 2019 tax years is $24,400 in the Managed Forest Property Class.

Relevant Legislation

8The 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.

9In addition to the 2017 and 2018 taxation year appeals before the Board, there is also an appeal of the 2019 taxation year assessment of property. This is because subsection 40(26) of the Act deems that an appellant has brought the same appeal for the 2019 taxation year if the 2018 taxation year appeal has not been finally disposed of by March 31, 2019.

10Section 19.(5.2) Act states:

Conservation lands, managed forests – The current value of land that is conservation land as defined in the regulations or land in the managed forests property class shall be based only on the current use of the land and not other uses to which the land could be put.

11Section 19.(5.2.1) Act states:

Current value of managed forests – Despite subsection (5.2) and any other provision of this Act, the Minister may, by regulation, provide that the current value of land in the managed forests property class shall be determined in accordance with the regulations.

12Section 9.(1) Ontario Regulation 282/98 as amended provides:

The managed forests property class consists of eligible land determined in accordance with this section and sections 9.1 to 9.7 to be managed forest land.

13Section 9.(2) Ontario Regulation 282/98 as amended provides Land that is covered by a forest , and including outbuildings used for forest operations, is eligible land if the following requirements are satisfied:

1. The land is owned by,

i. an individual who is a Canadian citizen or has been lawfully admitted to Canada for permanent residence;

i. two or more individuals as joint tenants or tenants in common if 50 per cent or more of the beneficial interest in the land is held by persons described in paragraph 1;

2. The forest including any area included under subsections (3) and (4) is at least four hectares in size;

3. The land is all part of a single parcel of land, or, if the land consists of land from more than one parcel, the forest on land in each parcel satisfies the requirement in paragraph 2.

4. Subject to subsections (3) and (4) the forest has, per hectare, at least

i. 1,000 trees of any size;

5. The land is not licensed under the Aggregate Resources Act or zoned for aggregate extraction if that Act does not apply to the land.

14Section 32.1(1) of Ontario Regulation 282/98 (the “Regulation”) states:

32.1 (1) The current value of land in the managed forests property class shall be determined as follows for the 2017 and subsequent taxation years:

1. Determine the value of the land in accordance with subsection 19 (5.2) of the Act.

2. Determine the value of the land in accordance with subsection (2).

3. If the value determined under paragraph 1 is less than the value determined under paragraph 2, the current value of the land is the value determined under paragraph 1.

4. If the value determined under paragraph 2 is less than 31 per cent of the value determined under paragraph 1, the current value of the land is the amount calculated by multiplying the value determined under paragraph 1 by 0.31.

5. In any other case, the current value of the land is the value determined under paragraph 2.

32.1(2) For the purposes of paragraph 2 of subsection (1), the value of the land is determined as follows:

1. Determine whether the geographic area in which the land is located is listed in Column 2 of Table 1 to Part IX.1 of this Regulation. If it is, take the step described in paragraph 2. If it is not, take the steps described in paragraphs 4 and 5.

2. If the geographic area is listed in Column 2 of Table 1, determine whether the land band for the land, as assigned by the assessment corporation, is listed in Column 3 of Table 1 for the applicable geographic area. If it is, take the steps described in paragraphs 3 and 5. If it is not, take the steps described in paragraphs 4 and 5.

3. For land located in a geographic area listed in Column 2 of Table 1 and assigned to a land band listed in Column 3 of Table 1, identify the applicable value per acre of the land as set out in Column 4 of Table 1.

4. For any other land, identify the applicable value per acre of the land as set out in Column 2 of Table 2 to Part IX.1 of this Regulation using the land band assigned to the land by the assessment corporation.

5. The value of the land is calculated by multiplying the applicable value per acre of the land by the acreage. O. Reg. 656/05, s. 1; O. Reg. 101/09, s. 1.

Issue

15The issue to be determined on this appeal is the correct current value of the Subject Property for the taxation years 2017 to 2019.

Discussion, Analysis and Findings

16The Regulation requires that two values be determined in order to determine the current value for a Managed Forest property. First, the Board must decide what the property likely would have sold for based on its current use, which I will call the “sale value”. Secondly, the Board must determine the regulated value, in accordance with subsection 32.1(2). Here the specified rate per acre is $305 for this geographic area, which results in a regulated value of $24,400 for 80 acres. The Regulation then states that, if the sale value is less than the regulated value, the current value is the sale value. If the regulated value is less than 31% of the sale value then the current value is 31% of the sale value. Finally, if neither of those situations applies then the current value is the regulated value.

17Subsection 40(17) of the Act states that MPAC has the burden of proving “the correctness of the current value of the land.” As the Board found in Jay Patry Enterprises Inc. v Municipal Property Assessment Corporation, Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) (“Patry Enterprises”) at paragraph 21, the burden is around “current value” and not the assessment. That is, MPAC is not required to prove the correctness of their returned assessment. It is required to prove the correctness of “the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length from a willing seller to a willing buyer.”

18Patry Enterprises summarizes the procedure to follow in an appeal where current value is at issue, at paragraph 40:

first look at MPAC’s evidence on its own and make a determination as to whether it can prove its suggested current value on a balance of probabilities. If MPAC meets its burden, the Board should review all of the evidence before it and determine the current value of the property. However, if MPAC has not met its burden, the taxpayer’s evidence must be analyzed to see if it is capable of proving that a particular current value is more likely than not. If there is no evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested assessed value.

I will follow that procedure here. The same procedure applies even where the lands are classified as Managed Forests in that the Board must make a preliminary assessment of MPAC’s evidence and then the Appellants’ evidence.

Can MPAC’s Evidence Prove Its Suggested Current Value?

19As stated in Patry Enterprises at paragraph 23, in order for MPAC to meet its burden, MPAC’s evidence “must show how the current value MPAC is proposing is arrived at and why that value is correct. Without this bare minimum, the Board cannot possibly determine if MPAC’s proposed current value is correct.”

MPAC’s Evidence

20Ed Molcan represented MPAC. Mr. Molcan prepared the Valuation Report on March 29, 2018. He also prepared and filed an Equity Analysis Report. Mr. Molcan was the sole witness for MPAC in this matter. He noted that the Subject Property is Managed Forest property - vacant land, not on water. The site area is 80 acres, and Mr. Molcan describes a structure on the land as a “detached garage” of 512 square feet. In his Market Analysis Grid, Mr. Molcan has assessed the structural quality of the building as “2” out of 10.

21Mr. Molcan noted that the property included a negative 50% adjustment for being “landlocked” in 2017, but that this was an error. The property is accessible by way of seasonal road. The adjustment was removed for 2018.

22The Act requires the assessor to first determine what the current value of the land is. In order to do this, MPAC uses the direct sales comparison method. Mr. Molcan selected four properties ranging in size from 78 acres to 132 acres, all four of which were in the “Vacant Residential Land Not on Water” category. None were managed forest properties. Three of the four properties had been sold in June, July or October, 2012 (the fourth was sold in 2014). Their final selling prices ranged between $33,500 (time adjusted to $39,386) and $72,000 (time-adjusted to $95,309). One of the four proposed comparable properties had a small shed and small garage on the land; otherwise they were vacant.

23Mr. Molcan estimated the current value of the Subject Property at $33,000 based on the four sales. He determined that the value of the improvement on the land – the item described as a garage – was $9,220, and that the value of the land was $23,991.

24Applying s. 19(5.2) of the Act, Mr. Molcan calculated the following:

(a) He calculated the “upper limit” or the “sale value” of the land (79 acres, plus one acre being counted as residential) in the amount of $299.89 per acre or $23,692;

(b) He calculated the value of 79 acres using the regulated rate from Table 1 of the Regulation and Land Band 3203 for Dorion, which sets out a rate of $305 per acre. Applying this formula gives a land value of $24,095.

(c) Mr. Molcan calculated the “lower limit”, or the value of the land calculated at 31% of the current value or sale value, which equaled $7,344.

25Applying the legislation, Mr. Molcan determined that the current value was less than the regulated rate and more than the lower limit, or the amount of $23,692. He then added the value of the improvement plus one acre of residential land at a rate of $299.00. The total value was $33,000 (rounded).

MPAC’s Submissions

26Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017 is $33,000. However, for 2018, MPAC advises that it removed a discount formerly and erroneously applied to the current value on the ground of “landlocked” land. MPAC concludes that the 2018 and 2019 current value is $34,500.

Has MPAC Met the Burden of Proof with Regard to Establishing a Current Value?

27The Board appreciates that property sales in Northern Ontario are less frequent than they are in the south of the province. However, that does not remove MPAC’s obligation to locate comparable sales that have taken place near enough to the valuation day to be considered “current”. While that term is undefined in the legislation, the very fact that sales took place over four years in advance of the current assessment cycle, regardless of adjustments, makes their utility in proving value limited.

28In addition, sales evidence is most helpful when it includes examples of properties less valuable, more valuable, and relatively comparable. The Board appreciates that this is not always an achievable goal, but where this information is lacking, it is difficult to confirm the correctness of current value.

29In this case, while located in the same Township as is the Subject Property, all four properties are vacant residential lands while the Subject Property is not. Not only is it a managed forest property, but various characteristics of the land itself make it unsuitable for residential development. All four properties sold for more than the current value of the subject property. While three of the four properties were either identical in size to the Subject Property or very close to it, the last property was 50 acres, or approximately two-thirds, larger.

30MPAC also included an additional line in the “Valuation” portion of their “Market Analysis Grid”. The contents of this component of the Grid is titled “Total Land Value” and appears directly below “Current Value Assessment”. In the case of the Subject Property, the value appearing in this box is $47,984.69. The four comparable sales contain slightly larger amounts as set out in the following table, along with the sales prices and time-adjusted sales prices.trfy76t

Roll Numbers	Current Value Assessment	“Total Land Value”	Sale Amount	Time-adjusted Sale amount
#1 – 5834-000-001-23900	$56,000	$51,047.54	$50,000	$66,881
#2 – 5834-000-001-24402	$51,000	$51,047.54	$33,500	$39,386
#3 – 5834-000-001-37900	$50,000	$50,851.04	$45,000	$60,077
#4 – 5834-000-001-280000	$56,000	$56,141.80	$72,000	96,309

31The evidence provided does not explain how MPAC derived a current value (or a “sales value”) for the Subject Property which would then allow it to carry out the steps involved in determining the value of the Managed Forest. Nor does MPAC explain what is meant by the “Total Land Value”.

32In the absence of sufficient evidence to make a case for current value, let alone a managed forest value, the Board finds that MPAC has not met its burden. The Board must then look at the evidence contributed by the Appellant.

Appellant’s Evidence

33David Morellato represented the Appellants and testified on their behalf. He filed a comprehensive selection of documentary evidence with the Board, including:

(a) The Appellants’ Forestry Management Plan;

(b) A copy of the building permit for the on-site structure;

(c) A copy of Request for Reconsideration;

(d) A detailed map of the property; and

(e) His written submissions in detail.

34The Appellants provided some background on this property, and detailed their plans for its future use. Its present use is as managed forest land only, and the Appellants outlined why this particular 80-acres parcel is unsuitable for residential construction. The land is rocky, steep and partially treed, having been significantly logged in the past. There is a hydro right-of-way over a portion of the land. The road accessing the property is seasonal access only.

35The Appellants’ reason for appealing their assessment is primarily because the managed forest land doubled in value in the current cycle, going from $16,000 in the last assessment cycle to $33,000 in 2017. In addition, the Appellants refute the evidence presented by MPAC on the ground that no comparable properties were selected as a means to determine the current value. All four properties presented by MPAC were coded 100 or vacant residential land. Three of the four properties are accessible by year round road access, the Appellants argue, and can be built upon. Even if the Subject Property were of a different topography, the Appellants submit that the presence of a large Hydro right-of-way would make construction of anything other than an outbuilding impossible. No septic bed is possible, and the Appellants note that the only sanitation on the property is an outhouse.

36The Appellants also objected to the inclusion of the structure, identified by MPAC as a garage, in the “residential” portion of the land. He argues that the building does not meet the Building Code requirements for floor drainage. He also cites the Regulation, s. 9(2) and submits that the section mandates that “outbuildings used for forest operations” are included in the definition of eligible land. In his case, the “garage” is a storage building for equipment he uses to maintain the managed forest. He describes in his materials that his actions on the land include planting juvenile trees and transplanting trees from the Hydro right-of-way to other portions of the land. The Appellants state that the area of the Managed Forest has been 80 acres for years and provided a copy of the Managed Forest Tax Incentive Program Property Statement dated February 2012. The document notes that the renewal date for this plan is July 31, 2017.

37The Appellants also included a detailed chart entitled “Property Comparison Dorion”. They set out some characteristics of 11 the Township properties, some with buildings and some without, including the four comparable sales produced by MPAC. They set out the current assessed values of these properties, but did not include sales evidence, and then compared the assessed values of these properties on a per-acre basis.

Appellants’ Submissions

38Relying on their evidence, the Appellants submit that the correct current value for taxation years 2017 to 2018 is $16,000, apportioned as follows: $9,500 land (Managed Forest) and $5,500 building.

Findings on Issue 1

39In this case, MPAC has failed to meet its burden of proof in respect of the current value of the subject property and the resulting calculation of the value of the Managed Forest portion of this property. The four comparable property sales involved residential lands that were suitable for future building, while the subject property is not. MPAC noted that it had erred in the 2017 assessment, and had to make a 50% adjustment, which was actually 5%. The reason underlying the calculation of the amount of the adjustment was never explained. MPAC used four more expensive properties to gauge the current value of the Subject Property, without explaining how the Subject Property related to these four proposed comparable residential properties, each with year-round access according to the Appellant. Lastly, MPAC listed a “Total Land Value” along with the current value, an amount approximately one-third again the current value. This term and its relevance to current value were never explained.

40Where MPAC has failed to satisfy its burden of proof, the Board must look to the Appellants to determine whether or not the Appellants have produced sufficient evidence of current value to allow the calculation of the Managed Forest value to take place. Because current value is the amount a willing buyer would pay to a willing seller of the Subject Property, unencumbered, it is frequently established by looking at the amounts a willing buyer has paid for similar properties. In the present case, neither party has provided the Board with evidence of the sales of similar properties. Nor was the sales evidence that was provided in any way current. The Appellants provided no sales evidence at all.

41When the evidence from all parties is absent or inconclusive, the Board then looks to the Regulation for direction. In the case of managed forests, s. 32.(1)1 of the Regulation, subsection 5, directs the Board “in any other case” to find the current value in accordance with paragraph 2. In other words, the land value will be determined by reference to the Table, which sets out the value per acre of land in Dorion Township (land band 3203) as $305 per acre. The Subject Property is 80 acres in size, so the value is $24,400.

42Lastly, the Regulation, in section 9.(2) that land that is covered by a forest and including outbuildings used for forest operations is eligible land if the certain requirements are satisfied. In this case, the evidence provided through the Appellants’ “Managed Forest Tax Incentive Property Statement” shows that all 80 acres are eligible for inclusion in the program. The evidence submitted by the Appellants demonstrates that the building constructed on the property is used for forest management operations, and it is therefore included in the definition of eligible land. There is no residential component of the property, and the Board finds that the current value of the land includes the outbuilding located thereon.

DECISION

The current value of the Subject Property is $24,400 as 100% managed forest property. No apportionment is required as there is no residential land included in the Subject Property.