Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: June 28, 2019

FILE NO.: WR 161093

Assessed Person(s): D.B.L.

Appellant(s): D.B.L.

Respondent(s): City of Ottawa

Property Location(s): Withheld

Municipality(ies): City of Ottawa

Roll Number(s): Withheld

Appeal Number(s): 3342500

Taxation Year(s): 2017

Hearing Event No.: 717670

Legislative Authority: Section 357(1)(d.1) of the Municipal Act, 2001, S.O. 2001, c. 25, as amended

Heard: June 12, 2019 in Ottawa, Ontario

APPEARANCES:

Parties

Representative

D.B.L.

Self-represented

City of Ottawa

Lindsay Hinch

MEMORANDUM OF ORAL DECISION DELIVERED BY JEAN-PAUL PILON ON JUNE 12, 2019

INTRODUCTION

1D.B.L. (the “Appellant”) filed an application with the City of Ottawa (the “Municipality”) pursuant to section 357(1)(d.1) of the Municipal Act, 2001, S.O. 2001, c. 25, as amended (the “Act”). This provides that “upon application to the treasurer of a local municipality made in accordance with this section, the local municipality may cancel, reduce or refund all of part of the taxes levied on land in the year in respect of which the application was made if the applicant is unable to pay taxes because of sickness or extreme poverty.” The taxation year for which the Appellant sought the cancellation, reduction or refund of his property taxes was 2017.

2The property taxes levied on the Appellant’s land for the 2017 taxation year were $3,943. Including arrears, special charges and penalties accruing prior to the 2017 taxation year, the Appellant owed the Municipality $8,182.

3The Municipality denied the Appellant’s application. The Appellant then appealed the denial of the application to the Assessment Review Board (the “Board”) pursuant to subsection 357(7) of the Act, where subsection 357 (10) of the Act provides that the Board “shall hear the appeal and may make any decision that (the Municipality’s) council could have made.”

4After hearing the application de novo (anew), the Board delivered an oral decision confirming the Municipality’s decision to deny the application because the Appellant was not unable to pay his property taxes in 2017. Following are the written reasons requested by the Municipality explaining why the application was denied.

DISCUSSION

4The Act provides that a cancellation, reduction or refund of taxes should only follow “if the applicant is unable to pay taxes because of sickness or extreme poverty.” Therefore, the first question to be determined is whether the Appellant was unable to pay taxes for the year in question, 2017. If the answer is no, the application would be dismissed because the Appellant could have paid the taxes in question. If the answer is yes, the next question to be determined is whether that inability to pay taxes was because of sickness or extreme poverty.

5On May 2, 2019, the Board sent the Appellant a list of documents he should bring to the hearing to substantiate his application. In particular, the Appellant was directed to bring evidence showing his assets, liabilities, income and expenses for the 2017 taxation year. The Appellant acknowledged having received that email, and on May 13, 2019 he requested that the hearing originally scheduled for May 15, 2019 be rescheduled so that he could have more time to gather that information. That hearing was adjourned to June 12, 2019, and he was given more time to gather that information.

6The only documentation the Appellant brought to the hearing for the 2017 taxation year was his Canada Revenue Agency (“CRA”) notice of assessment. He brought other documents to the hearing: a summary bank statement, an insurance statement, a hydro bill, a gas bill and 2016 and 2018 notices of assessment, but apart from the CRA documents, all related to his financial situation in 2019 and not 2017. As a result, all of the Appellant’s evidence as to his income, expenses, assets and liabilities was either estimated from numbers shown on his 2019 documents or was from memory two years later.

Income

7The first step at the hearing was to determine the Appellant’s income in 2017. The Appellant initially testified that this totaled $2,673, the income shown on his CRA 2017 notice of assessment. There were, however, transactions that came to light at the hearing that augmented his income in 2017: the sale of an exercise machine for $600, the sale of a boat for $2,500, the sale of collectibles for $4,000, the withdrawal of $2,000 from his line of credit and a loan from his family of $16,000.

8The Appellant argued that loans should not be included in his income but the Board disagreed. This is because there is no other place in the analysis in which such incoming cash amounts could be accounted, and monies owing are reflected when liabilities are considered (see paragraph 14). Moreover, where the issue to be determined is whether the Appellant was unable to pay taxes, these amounts were properly counted as available funds that could have been used for that purpose.

9The Appellant also testified the purchasers of the items he sold were acquaintances and not strangers, but that the items were nevertheless sold at fair market value. For the purpose of determining the Appellant’s income in 2017, these items were assumed to be worth what the Appellant said they were sold for despite the lack of any supporting documentation. These amounts were added to his declared income of $2,673, raising his total income in 2017 to $27,773.

Expenses

10The second step at the hearing was to determine the Appellant’s expenses in 2017. The Appellant testified that he spent $2,053 per month or $24,636 for the year which included amounts for his mortgage, insurance, internet, telephone, hydro, natural gas, line of credit, auto repair and maintenance, house repair, grooming and food. There were other expenses he could not quantify which were not considered including gas for his car, clothing and child care (where his child was 17 years of age in 2017). While these must have cost something, in the absence of any evidence as to what these amounts might be, they were also not considered.

11With a total income of $27,773 and expenses of $24,636, it was determined that the Appellant had a net surplus of $3,137 in 2017.

Assets

12The third step was to determine the Appellant’s assets. The Appellant estimated, based on what he testified a real estate agent told him at the time, that his house was worth $410,000 in 2017. He argued that costs of disposition, such as real agent commission, should be deducted from the value of his house but the Board disagreed because such costs would be entirely speculative in the absence of any agreement to sell the property. The Municipality argued the house must have been worth more, where it had been assessed as having a value of $472,000 on January 1, 2016 and a phased in assessment value in 2017 of $447,250. The Municipality may have been correct that the property was worth more, where the Appellant acquired it in June, 2009 for $375,000, and where the Appellant’s estimate of an increased value of only $35,000 during that time period seemed low. Nevertheless, and solely for the purpose of determining his net worth in this application, it was assumed that the property was worth the amount he said it was of $410,000.

13The Appellant had other assets: a car worth $300, a truck worth $3,500, an RRSP worth $12,035, a locked in RRSP worth $6,869 and an RESP worth $913 in 2019 according to his RBC statement which had no contributions since 2017. Together, these assets were valued at $433,617.

Liabilities

14The fourth step was to determine the Appellant’s liabilities, which included a single mortgage of $142,000, a debt to the CRA of $17,520, a debt to his family of $16,000, a fully used line of credit of $50,000 and an outstanding property tax bill in 2017 of $8,182 which included the 2017 property taxes of $3,943. The Appellant’s liabilities therefore amounted to $233,702.

Net Worth

15With assets of $433,617 and liabilities of $233,702, the Appellant had an estimated net worth in 2017 of $199,915.

16In summary, and based almost entirely on the Appellant’s own estimates, he had a net income of $3,137 and a net worth of $199,915 in 2017.

DECISION

17The Board finds that the Appellant was not unable to pay taxes for the 2017 taxation year.

Analysis of Inability to Pay

18The first source of funds for the payment of taxes could have been the Appellant’s net cash surplus at the end of 2017 which amounted to $3,137. Then, there were other steps that could have been taken to meet the shortfall of approximately $806, being the difference between the 2017 taxes and his surplus income. In other words, the Appellant could, for example, have contacted his bank to see if he could have borrowed additional money on his line of credit or on the equity of his house, or restructure his debts, including his credit card which he testified he did not want to draw from preferring to keep it at a zero balance. He could also have spoken to his family, from whom he had already borrowed money, to see if more could be loaned. He made no attempt to rent out an unused bedroom in his house, where he indicated at the hearing that it was an option he was not interested in.

19This decision does not, however, turn on those determinations because the most significant possible source of funds was the Appellant’s RRSPs. His bank statement indicated he had two RRSPs and that one was locked in. The other, valued at just over $12,000 in 2019, was not.

20In a Board decision entitled G.E.B. v. Municipal Property Assessment Corp. Region 18, [2016] O.A.R.B.D. No. 103, where the only respondent was actually the Township of West Lincoln, the Board determined that to successfully show an inability to pay taxes, a party “must demonstrate, that after having called upon every resource available to them and having explored every reasonable opportunity to mitigate any financial stresses that exist, they have no means of being able to pay some or all of their property taxes.” In this case, the Appellant did neither, having failed to call on every resource available, such as his bank, and having not mitigated his financial stresses by liquidating at least one of his RRSPs. Moreover, the Appellant’s evidence was that he had funds available to satisfy most of his tax obligation for the year in question.

21As noted above, the first question to be determined is whether the Appellant was unable to pay taxes. If the answer is yes, the next question is whether that inability to pay was caused by sickness or poverty. The Appellant was invited to present evidence on sickness or poverty at the hearing in the event it was decided that he was unable to pay, and he presented evidence of sickness. As the decision rendered orally at the hearing was that he was not unable to pay taxes in 2017, the issue of sickness did not need to be determined and is therefore not in this decision. The Appellant was not unable to pay taxes and therefore his application was dismissed.

CONCLUSION

22D.B.L.’s application to cancel, reduce or refund all of part of the taxes levied on land for the 2017 taxation year is dismissed.