Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 26, 2019 FILE NO.: ID 161292

Assessed Person(s): Magellan Aerospace Limited Appellant(s): Magellan Aerospace Limited Respondent(s): City of Mississauga Respondent(s): Municipal Property Assessment Corporation (“MPAC”), Region 15

Property Location(s): 3160 Derry Road East Municipality(ies): City of Mississauga Roll Number(s): 2105-050-117-26201-0000 Appeal Number(s): 3190256, 3263284, and 3339863 Taxation Year(s): 2015, 2016, and 2017 Hearing Event No. 717765

Legislative Authority: Section 364.(14) of the Municipal Act, R.S.O. 2001, c.25, as amended

Heard: June 10, 2019 in Mississauga, Ontario

APPEARANCES:

Parties Counsel+/Representative

Magellan Aerospace Limited Daniel Attard+; Azhar Ahmed

City of Mississauga John O’Kane+; Joseph Fudge+ Supervisor Rebates and Appeals, Mississauga Sandie Turnbull Supervisor Assessment Review, Mississauga Denna Simoes Intermediate Tax Account, Mississauga Barbara Malta

DECISION OF THE BOARD DELIVERED BY ROBERT STEINBERG

INTRODUCTION

1Magellan Aerospace Limited owns an industrial property located at 3160 Derry Road East, Mississauga, Ontario. The subject property dates from the 1950’s and has generally been utilized as a rental property divided into three primary leased areas. The first vacant area (“Area 1”) consists of 40,000 square feet (“sq. ft.”) and is a former assembly area. The second leased area (“Area 2”) consists of 118,196 sq. ft. and was previously occupied by Colorite Plastics. The third area (“Area 3”) consists of 118,000 sq. ft. was previously occupied by Western Forest and Kember. The three appeals under s. 364.(14) of the Municipal Act, R.S.O. 2001, c. 25 (the “Act’) are for the years 2015, 2016 and 2017. The company now seeks their remedy from the Assessment Review Board (the “Board”).

2A secondary issue involved whether the 2015/2016 rebate application properly falls with s. 2.(4) of Ontario Regulation 325/01 (“Regulation) which deals with the situation of a minimum 90 day claim period straddling the year end into two taxation years.

INTERIM DECISION

3The Board determines that Magellan Aerospace is not entitled to any rebates for the years 2015, 2016 and 2017, except for a small area that is indicated below.

4Magellan Aerospace is entitled to a rebate of taxes for an area of 67850 sq. ft. of the former Weston Forest unit from September 1st. 2015 to February 20, 2017.

5Magellan Aerospace is not entitled to the remaining rebate of taxes for an area of 46,000 sq. ft. previously leased to Kember Hardwood Flooring.

REASONS FOR DECISION

Affidavits by Officers of Magellan Aerospace

6The parties presented the Board with a Joint Document Book.

7The sworn affidavit dated April 2, 2015 of Tom Logan, an officer of Magellan Aerospace Corporation, indicated that the area of 40,000 sq., ft. of the former assembly area was occupied by obsolete machinery and equipment. The 118,000 sq. ft. area formerly occupied by Colorite Plastic had 10,000 sq. ft. was utilized to temporarily store engine disposal containers. He also indicated that the remaining 108,196 sq. ft. was not used for any purpose and continues to be vacant and unused.

8The sworn affidavit dated the 13 day of July, 2016 by Tom Logan indicated that Area 1, the 50,000 sq. ft., area formerly occupied by Magellan Aerospace was in the process of vacating but still contained some obsolete machinery and equipment. 10,000 sq. ft., of this space was utilized for repairs and overhaul operations were carried out also became vacant.

9Area 2 consisting of 118,000 sq. ft. was previously occupied by Colorite Plastics who stopped paying rent in December 2011. 108,000 sq. ft., has been vacant since that time. 10,000 sq. ft., has been used to temporarily store engine disposal containers.

10Area 3 consists of 118,000 sq. ft., and was originally occupied by Weston Forest and Kemper. They downsized to an area of 67,350 sq. ft., by 2015 and vacated this area upon the expiry of their lease at the end of August 2015.

11Inspection photographs taken on May 14, 2015 were submitted of the former assembly area and Colorite Plastics area.

12The sworn affidavit of Wendy Atkinson, an officer of Magellan Aerospace on February 13, 2018 that as of September 1, 2014 Magellan Aerospace ceased to use 40,000 sq. ft., of the former assembly area.

13The 10,000 sq. ft., of the former assembly area where repair and overhaul operations were carried out ceased to be used for any purpose effective September 1, 2015. The building was rendered substantially unusable due to demolition on August 23, 2017.

14The former Colonite Plastics area of 118,196 sq. ft. became vacant in December 2011 until occupied by the new tenant Dynevor Express until February 21, 2017. 10,000 sq. ft. was used from November 1, 2014 to temporarily store engine disposal containers.

Vacancy Site Inspection Reports - Barbara Malta, City of Mississauga

15Jose Lima, an employee of Magellan Aerospace accompanied Barbara Malta from the City of Mississauga on an inspection of the property on September 19, 2016. This inspection was carried out due to application by Magellan Aerospace (No. 20745) for a rebate of taxes. The Parties agreed as a result of the inspection what items still occupied space in the various areas and that there was no clear delineation of any areas, except for a portion of Area 3.

16Area 1: The 50,000 sq. ft. former Assembly Area contained tables, shelving, scrap storage, office equipment, and skids with some items on that was inventory of Magellan aerospace that would be handed out by staff if needed.

17Area 2: The former Colorite Plastics area of 118,196 sq. ft. was partially utilized by University of Toronto for mechanical purposes, steel cylinders and parts no longer in production, steel tables, fencing, skids with items of scrap to be disposed of in the future, desks, files, paper supplies and office items.

18Area 3: The former Weston Forest area of 67, 350 sq. ft. was totally delineated from the area of 46,000 sq. ft. leased to Kemper Hardwood Flooring.

19The Vacancy Site Inspection Report of August 31, 2017 was carried out by city staff Ms. Malta and Sean Doyle. At that time no interior inspection was done of the 50,000 sq. ft. former Assembly Area due to asbestos removal. The former Weston Forest area of 67,350 sq. ft. had a new tenant that occupies the area from November, 16, 2016. The former Colorite space of 108,196 sq. ft. had a new tenant as of Feb. 21, 2017. As a result of the new tenancies, staff did not require an interior inspection with the information obtained.

20Staff on September 19, 2016 took seventeen photographs of the various areas during their September inspection.

Magellan Aerospace’s Position

21Daniel Attard, counsel for Magellan Aerospace, submitted that, during the claimed periods, the claimed areas fell within the ambit of the vacancy rebate program. The Board swore in Azhar Ahmed, Manager of Facilities and Maintenance for Magellan Aerospace as his witness. Much of his evidence is based on the affidavits of Tom Logan, who is no longer with the company. He contended that the three areas that are in dispute were not used by either the previous tenants or the owners. The former Colorite Plastics area became vacant in December 2011, as the tenant stopping paying rent and abandoned the area. He did acknowledge that 10,000 sq. ft. was used by the landlord for the temporary storage of engines and disposal containers; however, the 108,196 sq. ft. area was not used. He also produced a real estate listing for the 118,000 sq. ft. which showed the area as vacant.

22Mr. Ahmed acknowledged that the photographs showed various items in the space that this vacant rebate is claimed; however, he stated that some of the obsolete machinery was to be removed as scrap when the building was to be demolished. Also some of the items such as the filing cabinets, desks, chairs etc. had no value and were left in the building and were to be removed when a new tenant was found.

City of Mississauga’s Position

23John O’Kane, counsel for the City of Mississauga, presented Ms. Malta as his witness. She is, Intermediate Tax Accountant that deals with the inspections of the subject buildings and is responsible for the processing of the 2015, 2016 and 2017 tax applications. Her inspections as shown in the photographs indicate that the areas are not vacant. She stated that she had asked Magellan Aerospace provide further information on the applications and when the 30 day time period ended she denied the applications as no further information was supplied by Magellan Aerospace. Under cross-examination her observations for the 2015 and 2016 application were that the space was still being used.

24The 2017 application was only for 51 days and since there was no carry over from 2016, she stated that the application was denied as the criteria is that the space must be vacant for a minimum of 90 days.

LEGISLATION

25Section 364 of the Act states:

Vacant unit rebate

364. (1) Every local municipality shall have a program to provide tax rebates to owners of property that has vacant portions if that property is in any of the commercial classes or industrial classes, as defined in subsection 308 (1).

26Ontario Regulation 325 states:

Amount of rebate

2. (4) If the period of at least 90 consecutive days during which a property or portion of a property was an eligible property commences after October 3 in the prior taxation year, the amount of taxes for the taxation year is determined for the purposes of subsection (2) by adding the following amounts:

3. The amount of taxes that would be determined under subsection (2) for the previous taxation year if the only period in that year during which the property or portion of the property was an eligible property was the period after October 3 during which the building or structure or the portion of the building was an eligible property.

4. The amount of taxes that would be determined under subsection (2) for the taxation year in respect of the period in the year during which the building or structure or the portion of the building was an eligible property.

27Ontario Regulation 325(1) states:

Eligible property

1. (1) A building or structure on property that is classified in one of the commercial classes or industrial classes is prescribed to be an eligible property for the purposes of section 364 of the Act for a period of time if,

(a) the period of time is at least 90 consecutive days; and

(b) no portion of the building or structure was used at any time in the period of time.

28Ontario Regulation 325(3) states:

(3) A portion of a building on property that is classified in one of the industrial classes is prescribed to be an eligible property under section 364 of the Act for a period of time if,

(a) the period of time is at least 90 consecutive days; and

(b) throughout the period of time, the portion of the building was not used and was clearly delineated or separated by physical barriers from the portion of the building that was used.

29Ontario Regulation 325(4) states:

(4) The following rules apply for the purposes of subsections (1), (2) and (3):

1. A reference to a period of at least 90 consecutive days shall be read as a reference to a period of at least 89 consecutive days if the period includes all of February.

2. The following, in the absence of other activity, does not constitute the use of a building or structure or a portion of a building:

i. Construction, repairs or renovations of the building, structure or portion of the building.

ii. The heating, cooling, lighting or cleaning of the building, structure or portion of the building.

iii. The presence of fixtures.

ANALYSIS

30Regulation 325. (3)(b) is relied on by the Board in its decision. The areas in dispute that the Magellan Aerospace requested a rebate from the municipality were not “clearly delineated or separated by physical barriers.” This is a requirement that was not carried out by Magellan Aerospace. Since this was not done, the onus therefore would fall on the staff of the municipality to make this determination. The regulation is clear that the applicant is responsible for this delineation of the vacant area which Magellan Aerospace did not carry out.

31The real estate advertisement dated February 11, 2016 submitted by Magellan Aerospace shows the areas as vacant but there is no evidence as to when the pictures were taken and by whom.

32The Board received two sworn affidavits from a former officer of the company and also from an employee. Neither of the parties swearing the affidavits was present as they are no longer with the company and therefore could not be cross-examined on their evidence as submitted. The Board considered Mr. Ahmed’s evidence. He indicated that the areas he inspected were not used, however he did not dispute that the areas contained obsolete machinery, desks, office furnishings etc. Therefore, the Board relies on his evidence that the areas were not vacant as required by the legislation. The word vacant as referred to in the legislation is relied on by the Board as to the dictionary meaning as 1. Containing nothing; empty.

33The Board relies on the Mississauga staff report of September 19, 2016. Staff carried out their duties in an efficient and objective manner and is bound by the legislation in the carrying out of their duties.

FINDINGS

34The Board has considered the positions of both parties. Magellan Aerospace’s position is that they had vast areas of unused space since the tenants vacated and although they had some obsolete machinery, office furniture and some limited storage of engine oil containers, it should be considered as vacant. They had no use for such large areas for warehousing or any other use. The Board wording of section 364.(1) of the Act stipulates the criteria that determine the eligibility of the refund of taxes. The ordinary meaning of the word “vacant” is not at issue as it does not appear in Regulation 325/01. That Regulation provides the rules for determining whether a property is eligible for a vacant unit rebate based on several different parameters defining whether it was “not used”.

35However, the statute is written in a manner that in the opinion of the Board places a reasonable expectation on the taxpayer in order to be eligible for a rebate of taxes for the vacant areas. Magellan Aerospace failed in regard to clearing the space out that it had no use for and did not clearly delineated the area they were not using from the area that they required. The Board finds that this is reasonable and does not place the municipal staff in the position of trying to determine the area of eligibility for the tax rebate. The City of Mississauga conducted inspections of the property along with staff and officers of Magellan Aerospace and it should have been very clear to the company staff and officers what they were required to do. Since it was not onerous for the company to clearly delineated and separate the areas not required, the Board therefore relies on the photographs and the staff report on September 19, 2016. Municipal staff in carrying out their duties should not be put in to the position of trying to ascertain if obsolete machinery, office furnishings are going to be removed at the time of demolition of the building.

36The Board therefore finds that Magellan Aerospace has not met the test in the Act:

• AREA 1 - is not eligible for a rebate of taxes for 2015, 2016 and 2017.;

• AREA 2 - is not eligible for a rebate of taxes for 2015, 2016 and 2017;

• AREA 3 - is eligible for a rebate of taxes only for an area of 67,350 square feet from September 1st 2015, for all of 2016 and for the period from January1 to February 20, 2017. The remaining space in Area 3 of approximately 50,000 square feet is not eligible for a rebate of taxes in 2015, 2016 and 2017.

37The second issue that the Board had to determine was the carry over for subsequent years after 2015. The Board understands that the applications were made, but not acted upon by the municipality due to incomplete information. This was unfortunate, but it is not clear to the Board how and when the incomplete applications are rejected. The Act does not suggest a 30 day timeline and it does not appear that the municipality made efforts to contact the owners to ensure the 2016 application would include the necessary information in order to assess if it should be approved. The Board finds that Magellan Aerospace is entitled to a carryover of its 2015 application for 2016.

38The Board finds that Magellan Aerospace is only entitled to a rebate of taxes for a portion of Area 3 being an area of 67,850 square feet of the former Weston Forest area from September 1st. 2015 to February 20th. 2017.

39The third issue relates to the 90 day eligibility rule for rebates. In this case the Board finds that Magellan Aerospace was eligible for the 2016 taxation years. The 90 day rule is to be based on continued vacancy, even though the space was only vacant for 51 days in 2017. The Board finds that the rebate of taxes is to be carried over from 2016 to the 51 days of 2017.

40The Board concludes that Magellan Aerospace is only eligible for tax rebates for the 2016, 2017 and 2018 taxes for the 67,350 sq. ft. of the former Weston Forest area that was totally delineated from the Kemper Hardwood Flooring space and was vacant as set out in the Vacancy Site Inspection Report dated September 19, 2016.

41The Board concludes that eligibility for the 2015 taxation year should commence on September 1, 2015 run to December 31, 2015. Eligibility for the rebate should also apply for this area for all of the 2016 taxation year. In addition for the 2017 taxation year the rebate should apply for 51 days, from January 1, 2017 to February 20, 2017.

42The municipality is directed to calculate the amounts of the rebates in accordance with the Regulation within 60 days and present the amounts to the Board in writing to be incorporated in to the final decision. If the parties require further direction or clarification from the Board, the Board may be spoken to by re-convening the hearing by way of a teleconference call.