Cooks Station Corp. v. Municipal Property Assessment Corporation, 2019 CanLII 50338

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 30, 2019

FILE NO.:

WR 157392

Assessed Person(s):

Cooks Station Corp.

Appellant(s):

Cooks Station Corp.

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 31

Respondent(s):

Plummer Additional Township

Property Location(s):

171 Station Road

Municipality(ies):

Plummer Additional Township

Roll Number(s):

5719-000-005-16800-0000

Appeal Number(s):

3314746, 3283663, 3283664, 3283665, 3283666 and 3367996

Taxation Year(s):

2014, 2015, 2016, 2017, 2018 and 2019

Hearing Event No.:

707281

Legislative Authority:

Sections 33 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard:

November 2, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Cooks Station Corp.

Paul Grossman

MPAC

Pierre Lefebvre

Plummer Additional Township

No one appeared

DECISION OF THE BOARD DELIVERED BY CARLY STRINGER AND LESLIE FLEMMING

OVERVIEW

1The subject property is a dual use farm with a commercial/industrial use structure, located at 171 Station Road in Plummer Additional Township in the District of Algoma. The property is about three (3) kilometres north of the Town of Bruce Mines, roughly 40 minutes east of Sault Ste Marie.

2The property as a whole is 90 acres in size. The structure on the property was purpose-built in 2012 as a canola oil manufacturing facility. The structure is 6,523 square feet, consisting of a canola oil plant with an attached office. It is well-built of insulated concrete form blocks, and has amenities including power, in-floor heating, and natural gas. It adjoins a rail riding. Other than some test runs and maintenance, the plant has been idle since it was built and is not currently producing canola oil. We were told at the hearing that some local farmers have been using the bays to repair equipment.

3MPAC first assessed the structure in 2014, and issued an omitted assessment for the structure alone under s. 33 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) for the 2014, 2015, and 2016 taxation years at $805,000.

4MPAC further assessed the property pursuant to s. 40 of the Assessment Act for the 2017 and 2018 taxation years at $832,000 and $871,000 respectively.

5Cooks Station Corp. (the “Appellant”) brought five (5) appeals, arguing these various assessments are too high. The Appellant believes the total current value assessments for both the 2012 and 2016 valuation dates should be no more than $189,000.

6MPAC submits the current value of the structure alone is $805,000 for the 2014, 2015 and 2016 taxation years. It further submits the entire property’s current value is $832,000 for the 2017 taxation year and $871,000 for the 2018 taxation year.

7As a preliminary matter, an 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 did not dispose of the 2018 appeal before March 31, 2019. For that reason, the Appellant is also deemed to appeal the 2019 taxation year, and this decision will apply to the 2019 taxation year.

8For the reasons outlined below, we find the current values as follows:

a. $805,000 for the structure alone for the 2014, 2015 and 2016 taxation years; and

b. $832,000 for the property for the 2017 taxation year; and

c. $871,000 for the property for the 2018 and 2019 taxation years.

ISSUES

9We must determine two issues:

a. What is the current value for the subject property for the 2014 to 2019 taxation years?

b. Are the assessments of the subject properties at current value equitable in comparison with the assessments of similar properties in the vicinity?

POSITIONS OF THE PARTIES

10Both parties were in agreement that the property is unique, being a new industrial operation in an area where such new constructions are virtually nonexistent. Although other commercial/industrial operations can be found in this area, few sell and few are newly-built in accordance with modern standards of construction and material.

11The parties disagreed regarding the appropriate approach to determining current value of this unique property.

12The Appellant also argued that MPAC did not meet its onus of proof, per the Assessment Review Board’s (“Board”) decision in Jay Patry Enterprises Inc. v Municipal Property Assessment Corporation, Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) (“Jay Patry Enterprises”).

The Cost Approach

13MPAC argued the cost approach should be used to determine current value.

14MPAC’s valuation report for the January 1, 2012 valuation date used MPAC’s Automated Cost System (“ACS”) to value the structure, analyzing major building components and subtracting an amount for depreciation. No obsolescence was identified.

15MPAC arrived at a current value rounded to $805,000 for the structure on January 1, 2012.

Reproduction Cost New

$813,428

Functional Obsolescence - Excess Capital Costs

0

Functional Obsolescence - Excess Operating Costs

0

Physical Deterioration

($8,134)

External Obsolescence

0%

Current Value of Building

$805,294

16MPAC’s valuation report for the January 1, 2016 valuation date similarly used the ACS to value the building, arriving at $780,184 for the 2017 taxation year and $815,595 for the 2018 taxation year. MPAC explained there were some components lacking in the ACS costing for 2017, including exterior siding, which added value to the structure when the correction was made for 2018.

17To arrive at a current value for the 2017 and 2018 taxation years, MPAC then added the value of the lands, being $52,356 for the 2017 taxation year and $56,087 for the 2018 taxation year. The difference in land values for 2017 and 2018 is explained by the fact that the lands in 2017 were valued as farmlands with a small industrial component. This was corrected in 2018 to reflect the actual use of the lands, being farmland, residential, and industrial.

2017 Taxation Year

2018 Taxation Year

Reproduction Cost New

$812,692

$849,579

Functional Obsolescence - Excess Capital Costs

$0

$0

Functional Obsolescence - Excess Operating Costs

$0

$0

Physical Deterioration

($32,507)

($33,983)

External Obsolescence

0%

0%

Current Value of Building

$780,184

$815,595

Land Value

$52,356

$56,087

Total Property Value

$832,540

$871,682

18MPAC therefore arrived at the current values of the subject property of $832,000 (rounded) for the 2017 taxation year and $871,000 (rounded) for the 2018 taxation year.

19The Appellant suggested in written submissions that MPAC did not capture economic obsolescence in its cost analysis, but did not produce any evidence on obsolescence. Moreover, the Appellant failed to provide any evidence challenging MPAC’s calculation of component costs, or any other factor that could influence the determination of current value using the cost approach.

20In the end, the Appellant simply argued the cost approach to determining current value was inappropriate as the approach is not market-driven. According to the Appellant, MPAC’s cost approach analysis was based almost exclusively on the component costs less a small measure of depreciation rather than being checked by actual market values.

The Sales Comparison Approach

21The Appellant suggested determining the current value of the property based on (a) a sales comparison approach; or alternatively (b) a comparison approach using the assessed values of other properties. The Appellant included a list of industrial/commercial properties from the area as suggested comparable properties. On this list, only one property had sold in recent years, for $110,000 in November 2015. The other properties in the Appellant’s evidence had not sold in recent years, but were assessed in the range of $84,000 to $603,000.

22In oral submissions, the Appellant suggested we consider comparable property sales from MPAC’s valuation reports, which it argued do not reconcile to the assessment of the subject property.

23According to MPAC, the sales comparison method is not an appropriate way to determine current value of the subject property. During the relevant period, there were minimal sales of commercial/industrial properties in the area, and those properties that did sell varied considerably from the subject property in terms of development, construction type, and age. MPAC did provide evidence of commercial/industrial property sales in the area, but argued that this information was useful only to validate its calculation of current value using the cost approach. MPAC suggested it is helpful to examine sales of properties that are inferior and superior to the subject property to establish a range of value. Essentially, MPAC included sales information relating to other properties solely for the purpose of demonstrating the reasonableness of its cost approach to current value.

MPAC’s COMPARABLE SALES FOR THE JANUARY 1, 2012 VALUATION DATE

Property

Assessed Value

Sale Value

Adjusted Sale Value

Sale Date

Building Area (sq. ft.)

Year Built

Acreage

Sale Value (sq. ft.)

Property #1

$221,000

$205,000

$209,305

February 2011

7,532

1955

0.39

27.22

Property #2

$119,000

$125,900

$128,796

January 2011

12,000

1984

4.06

10.49

Property #3

$132,000

$127,900

$125,342

December 2012

4,457

1972

1.5

28.70

Subject Property

6,523

2012

90

24MPAC identified that the three properties above were all inferior to the subject property, and therefore its determination of current value of the subject property for the January 1, 2012 valuation date was reasonable, since it was significantly higher.

MPAC’s COMPARABLE SALES FOR THE JANUARY 1, 2016 VALUATION DATE

Property

Assessed Value

Sale Value

Adjusted Sale Value

Sale Date

Building Area (sq. ft.)

Year Built

Acreage

Sale Value (sq. ft.)

Property #1

1,093,000

1,200,000

1,200,293

April 2015

17,267

1991

6.81

69.50

Property #2

130,000

110,000

110,005

Nov 2015

2,711

1963

16.94

40.57

Property #3

221,000

280,000

280,159

May 2014

7,532

1938

0.39

37.17

Property #4

222,000

160,000

160,159

March 2013

5,920

1989

2.02

27.05

Subject Property

6523

2012

90

25MPAC identified that Properties 2, 3 and 4 were inferior to the subject property and Property 1 was superior to the subject property, and was the most closely comparable. Therefore, MPAC suggested its current value for the January 1, 2016 valuation date was reasonable since it was higher than the inferior properties but lower than the superior property.

LAW AND ANALYSIS

MPAC’s Burden of Proof

26First, we considered the Appellant’s argument that MPAC did not meet its statutory burden of proving “the correctness of the current value of the land” in accordance with s. 40(17) of the Act. MPAC’s evidence “…must show how the current value MPAC is proposing is arrived at and why that value is correct”: Jay Patry Enterprises, at para. 23.

27We are not of the view this is a situation like Jay Patry Enterprises where MPAC failed to meet its burden. Both parties were in agreement this is a unique property, and there were minimal sales of comparable properties in the area. In that context, MPAC provided evidence supporting the cost approach to determining current value rather than the comparable sales method. MPAC’s evidence included an itemized list of the various components that would be used to reproduce the building and the cost of those components less depreciation. MPAC was extremely transparent in this respect, and the Appellant did not present evidence or otherwise meaningfully challenge this data. Although the Appellant suggested that MPAC did not provide evidence on external or economic obsolescence and how that would factor into the cost approach, MPAC’s evidence was there was no obsolescence. MPAC supported this by providing evidence that despite being purpose-built, the building was a common construction that could be put to numerous other uses. MPAC provided evidence that the building was in fact being put to other use, including farmers using the bays to perform maintenance on their equipment. In this context, there was no loss in utility and therefore no obsolescence. The Appellant declined to produce its own evidence on obsolescence.

28In the circumstances, we are satisfied that MPAC met its burden of providing sufficient evidence.

Determining Current Value

29Determining the current value of a property such as this one is a challenging task. We agree with the Appellant that the sales comparison approach is generally the preferred method of determining current value – this Board prefers market data in establishing current value.

30The Appellant largely presented evidence of the assessed values of allegedly comparable properties in the area, with only two sales: one from 1999 and another from November 2015. Comparison of assessed values is not a recognized or reliable method of determining current value, and the 1999 sale occurred more than a decade before the valuation dates. In this respect, we cannot use most of the Appellant’s evidence of allegedly comparable properties for the sales comparison approach to determining current value. We will consider the sale from November 2015, which was also included in MPAC’s market data.

31MPAC provided sales information, but insists the properties are not sufficiently similar to be used in the direct comparison method. We have reviewed the evidence and we find that the sales information is useful insofar as it provides us with a range of values based on superior and inferior properties, giving us a range of potential current values for the subject property.

32Regarding MPAC’s use of the cost approach, this is generally a method of last resort for determining current value. It is not a market-driven analysis, to be sure, although it is a recognized method of determining current value when dealing with a unique property if there is a dearth of comparable sales to analyze.

33That said, this Board confirmed in Bakor Inc. (c.o.b. Henry Company Canada) v. Municipal Property Assessment Corp., Region No. 09, [2013] O.A.R.B.D. No. 259 at para. 58 that the cost approach “…must always be checked with market data to ensure that the cost approach is producing a reasonable market value.”

34MPAC suggests that its evidence does just that – although not directly comparable, the market data reflects generally that a superior property sold for more than the alleged current values of the subject property, while inferior properties sold for less. This emphasizes the reasonableness of its current values using the cost approach method, according to MPAC.

35We agree with MPAC. The evidence supported the correctness of their determination of current value, using either the cost approach or the sales comparison approach. The subject property clearly fits within the range of values provided by MPAC’s comparable sales for the January 1, 2016 valuation date, where the only superior property is Property #1 which sold for $1.2 million in April 2015. The highest inferior property in MPAC’s study for the January 1, 2016 valuation date, Property #3, sold for $280,000 in May 2014. We agree with MPAC, and find on the evidence, that Property #1 is superior to the subject, and Property #3 is inferior. Putting each of these properties at either end of the spectrum, MPAC’s proposed current value for the January 1, 2016 valuation date fits within that range.

36We cannot agree with the Appellant’s submission that a current value of $189,000 is reasonable. There is virtually no acceptable evidence to support the Appellant’s proposed current value – sales data shows decidedly inferior properties were sold around that amount.

37With respect to the current value as of the January 1, 2012 valuation date, we are unable to test MPAC’s cost approach against the market data, as there were no superior properties included in the comparable sales study for the January 1, 2012 valuation date. That said, MPAC’s time adjusted sales are almost identical to the actual sale values, representing a very flat market. Based on very little change in property values between 2012 and 2016, and the cost approach analysis prepared by MPAC, we accept MPAC’s current value determination for the January 1, 2012 valuation date to be applied to the 2014, 2015 and 2016 taxation year appeals relating to the building alone.

Adjustments for Equity

38MPAC maintained that no adjustment was required for equity, as its analysis showed that similar properties in the vicinity have been assessed at or near their current values.

39The Appellant did not ask for an adjustment in equity, nor did the Appellant produce its own evidence respecting the equity analysis, nor did the Appellant challenge MPAC’s equity reports.

40We have reviewed and considered MPAC’s equity studies for the January 1, 2012 valuation date and the January 1, 2016 valuation date. Respecting the January 1, 2012 valuation date, we were provided with data for 26 properties and calculated the mean ASR to be 1.125 at a 0.102 confidence interval, which suggests that similar properties in the vicinity have, on average, been assessed above their current values. Respecting the January 1, 2016 valuation date, we were provided with data for 30 properties and calculated the mean ASR to be 1.029 at a confidence interval of 0.141, showing that property is likely assessed near its current value.

41Therefore, no adjustment in equity is required.

CONCLUSION

42Therefore, we find the current value of subject property is as follows:

a. $805,000 for the 2014, 2015 and 2016 taxation years;

b. $832,000 (rounded) for the 2017 taxation year, apportioned as follows:

i. $781,000 industrial; and

ii. $51,000 farmland.

c. $871,000 (rounded) for the 2018 and 2019 taxation years, apportioned as follows:

i. $816,000 industrial;

ii. $45,000 residential; and

iii. $10,000 farmland.

43No adjustment is required for equity.

44The assessments stand with no adjustments.