Assessment Review Board

Issue Date: October 9, 2019 File No.: WR 161197 Assessed Person(s): James Edwin Crane, Lisa Michelle Crane Appellant(s): James Edwin Crane, Lisa Michelle Crane Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 23, Township of Malahide Property Location(s): 14508 Putnam Road Municipality(ies): Township of Malahide Roll Number(s): 3408-014-010-06900-0000 Appeal Number(s): 3273457, 3312969 and 3366120 Taxation Year(s): 2017, 2018 and 2019 Hearing Event No.: 716564 Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended Heard: June 17, 2019 in London, Ontario

Appearances

Parties	Counsel⁺/Representative
James Edwin Crane, Lisa Michelle Crane	James Crane
MPAC	Ian Johnstone⁺, Wayne Williams, Corinne Van Raay
Township of Malahide	No one appeared

Decision of the Board Delivered by Dan Weagant

Introduction

1The subject property is comprised of 100.58 acres and lies within the Township of Malahide in Elgin County. MPAC returned an assessment of $1,431,000 for the 2017 taxation year; $1,323,000 for the 2018 taxation year and $1,219,000 for the 2019 taxation year. James Edwin Crane and Lisa Michelle Crane (the "Appellants") believed these assessments were too high and appealed them to the Assessment Review Board (the "Board").

[2] At the time of the assessment, the subject property was apportioned by MPAC as follows:

• For the 2017 taxation year: Farm property class - $1,334,300 Residential property class - $96,700
• For the 2018 taxation year: Farm property class - $1,225,900 Residential property class - $97,100
• For the 2019 taxation year: Farm property class - $1,219,000

3The Board heard that the subject property included a residence and 1 acre of land in the 2017 and 2018 taxation years that was severed from the overall property for the 2019 taxation year, and from that point on, was assessed separately. For the 2019 taxation year, the total property size is 99.58 acres.

4For the 2017 and 2018 taxation years, MPAC considered there to be 93.96 acres of 'land class 2' farmland and 6.62 acres of 'land class 6' farmland. The original property assessment details provided by MPAC did not consider any value attributable to the 'land class 6' portion of the property.

5The parties agreed that the residential apportionment and its assessment were not in dispute.

6The Appellant submitted that the assessment of the property was too high because the rate per acre applied by MPAC was too high and that, as a contributing factor, the property was assessed as 'land class 2' when it should have been assessed as 'land class 3' instead.

7The Board needs to make three decisions in these appeals. Firstly, the Board must determine the current value of the subject property. In order to do so, the Board must also determine the correct land class applicable to the subject property.

8Once 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

9The Board finds the current value of the subject property is $1,269,000 for the 2017 and 2018 taxation years. The Board finds that the current value of the subject property is $1,160,000 for the 2019 taxation year. The Board also finds that there is no evidence to indicate a reduction in these values is necessary for the purposes of equitable assessment.

[10] The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2017 taxation year is reduced from $1,431,000 to $1,269,000, apportioned as follows:

• Residential property class: $96,700; and
• Farm property class: $1,172,300.

[11] The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2018 taxation year is reduced from $1,323,000 to $1,269,000, apportioned as follows:

• Residential property class: $97,100; and
• Farm property class: $1,171,900

12The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2019 taxation year is reduced from $1,219,000 to $1,160,000, in the Farm property class.

The Legislation

13The 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.

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

14MPAC's assessment regarding the 1 acre portion of property with the residence was not disputed. As noted above, for the 2017 taxation year it was assessed at $96,700, and for the 2018 taxation year, it was assessed at $97,100.

15MPAC explained that 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 un-cultivatable and is usually applied to features like drainage ditches that occupy a measurable area, but that cannot be used for agricultural production.

16MPAC's assessors testified that they had walked the subject property and were present twice to review the site conditions in June and September of 2017. Based on these site reviews, they were confident that the subject property has 93.96 acres of Class 2 land for the 2017 and 2018 taxation years and 92.96 acres of Class 2 land for the 2019 taxation year.

17To arrive at an assessed value, MPAC applied a value of $14,359 per acre of the land it considered to be Class 2 farmland. This value per acre was derived from an analysis of six sales of properties in the area it deemed to be comparable. The summary of sale data for these six farms is summarized in Table A.

Table A

MPAC Sale Number	Sale Price / date	Sale Price / acre	Time adjusted sale (TAS) Price / acre	Farm Land Class / Acreage	Adj rate per acre*
1	$750,000 / November 2013	$15,225	$17,282	Class 1 / 49.26 acres	$13,998
2	$900,100 / February 2014	$17,813	$19,803	Class 1 / 50.53 acres	$15,240
3	$1,235,000 / April 2013	$19,489	$23,557	Class 1 / 63.37 acres	$15,034
4	$520,000 / December 2015	$13,337	$13,367	Class 2 / 37.99 acres; and Class 6 / 1 acre	$12,650
5	$450,000 / April 2016	$15,000	$14,743	Class 2 / 30 acres	$14,166
6	$950,000 / April 2013	$19,149	$27,179	Class 1 / 49.61 acres; and Class 4 / 1 acre	$15,065

*Adjusted rate per acre includes time adjustment, size adjustment and market adjustment.

18MPAC submissions indicate that some irregularities applied to these sales that affected their eventual assessment levels. An 8% across the board reduction was applied to all sales for the January 1, 2016 current value assessment in Malahide Township. MPAC explained that this adjustment reflected the 'market conditions' that applied to the Township specifically. No additional reason was provided by MPAC for this adjustment. The value of this adjustment was not in dispute at the hearing.

Farm Size

19To reflect the impact of economy of scale, where different sizes of properties sell for different rates per acre, MPAC made further adjustments. According to MPAC, sale values were adjusted by following MPAC's "Farm Size Adjustment 2016" Table. This table applies an adjustment percentage according to a farm's size. Farm properties that are less than 100 acres in size have an upward adjustment to value per acre, while farms over 100 acres in size have a downward adjustment to value per acre. 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 land, of the same quality.

20When comparing the value of the subject property to properties that are smaller requires an adjustment to the 100 acres standard to allow direct comparison of sale prices per acre.

[21] Each of the sales in MPAC's sample was adjusted for three things:

• Time adjustment, whereby the sale value was adjusted to account for changing values between the sale date and the January 1, 2016 valuation day applicable to these appeals;
• Size adjustment to account for changing values due to variable farm sizes; and
• A market reduction of 8% for Malahide Township.

22When the appropriate adjustments were applied to each of the five sales in MPAC's sample, the per acre average was $14,359. When applied to the subject property's 93.96 acres of Class 2 land, the result was $1,349,228, including an approximate value for a residence in 2017 and 2018 of $97,000. MPAC submitted this as an indicator of the value returned for the subject property for the three years under appeal, noting that the original assessment summary applied no value to the 6.62 acres of Class 6 farmland.

Appellant's Evidence

23The Appellant did not dispute the facts of MPAC's valuation or the methods used by MPAC to arrive at the returned value. However, he submitted there was one input value used by MPAC for its calculations that needed to be adjusted.

24The Appellant submitted that the subject property has approximately 40 acres that should be considered Class 3 farmland instead of Class 2. He supported this assertion by referencing an Agriculture Canada-produced sketch of the subject farm and environs. This map showed a 40-acre section of the subject farm as 'class 4'. The Appellant submitted that an Agriculture Canada Classification of 4 equates to the MPAC Classification 3. He submitted the value of those 40 acres should have a lower value as a result.

25The Appellant also submitted that between the 2018 and 2019 assessments, a house and one acre of land was severed from the farm. That transaction was for $240,000 and it was the Appellant's position that the sale price ought to have been deducted for the 2019 taxation year, whereas only $97,000 was attributed to the house and one acre in the 2017 and 2018 assessments.

Board's Analysis

What is the Appropriate farm land class?

26According to MPAC, the subject property was entirely within the Class 2 land designation, with the exception of 6.62 acres that were in the Class 6 land designation.

27The dispute lies between MPAC's opinion of Class 2 lands versus the Appellant's opinion that a portion of those Class 2 lands are actually Class 3 lands.

28The Appellant refuted MPAC's application of Class 2 using his personal experience; first as a farmer and second as having farmed this particular property for some time. He cited a small-scale map issued by a federal agency indicating that approximately 40 acres of the farm were considered Class 4, which the Appellant equates to MPAC's Class 3 in its system of classification of farm land and soil types. It is important to note that the purpose of this map was to identify areas of the Township for potential solar power farms and not soil classification types.

29At the outset of the hearing, Mr. Johnstone sought to have both Mr. Williams and Ms. Van Raay recognized as expert witnesses. Upon reviewing their respective qualifications, the Board sought submissions from the Appellant who had no issue with their qualifications as such. The Board found that both assessors met the qualification requirements to be considered expert witnesses. This is important because, on the subject of farm land class, the Board is faced with comparing the opinions and respective qualifications of the witnesses at the hearing.

30While the Board places value on the Appellant's knowledge and farming expertise, the Board finds that MPAC's experts, with combined experience of over 40 years in the valuation of farm properties, provide the more compelling evidence.

31Determining the land class for valuation purposes requires more than an understanding of the 'ins and outs' of modern farming. It also requires an ability to identify and compare the characteristics of farm properties and make consistent and fair judgements as to their respective values. The Board heard from MPAC that drainage, soil type, slopes and production capability were the kinds of characteristics that were considered in determining the land class for the subject lands. In contrast, the Appellant based his opinion on a document (the small-scale map) of questionable use in determining land class within the consistently applied class system employed by MPAC. The Board finds therefore that the best evidence of land class is that of MPAC. The Board finds that the Class 2 farmland designation is most appropriate for the lands outside of the Class 6 designation.

What is the Current Value of the Subject Property?

32The Board finds that, for the 2017 taxation year, the current value of the residential portion of the property (including one acre of land) is $96,700. This value was not in dispute.

33The Board also finds that, for the 2018 taxation year, the current value of the residential portion of the property (including one acre of land) is $97,100. This value was not in dispute.

34The Appellant's evidence was based on his experience in farming in Malahide Township. His position on current value was not supported by documentary evidence related to sale prices of other farms. The sale prices of other comparable farms, where the subject farm has not sold in proximity to the statutory valuation day, is the best evidence of the current value of the subject property.

[35] MPAC used the sale values of comparable farms in the Township to arrive at a value for the subject property. For this reason, the Board finds that the best evidence of current value of the subject farm property is the sales of MPAC's proposed comparable properties #4 and #5, for the following reasons:

• These sales occurred very near to the valuation day applicable to these appeals of January 1, 2016;
• Sale #4 included only one acre of Class 6 land, which the Board heard in testimony from MPAC, carries little or no value for assessment purposes, so the total value of Sale #4 is not skewed by other land classes;
• Sale #5 included only lands considered to be in Class 2, representing only a Class 2 sale value.

36The Board heard that there was evidence that sale price per acre did not necessarily indicate property values if the comparison used properties of varying size. For this reason, MPAC applied its ''Farm Size Adjustment 2016" table. Sale #4 has 37.99 acres of Class 2 land. Sale #5 has 30 acres of Class 2 land.

[37] By using the "Farm Size Adjustment 2016" table, the Board is able to arrive at a per acre value attributable to the subject property of 93.96 acres in size, as follows:

• Sale #4 price per acre (38 acres rounded): $13,688 / 100 acres, 106% adjustment factor = $12,913 ($775 reduction).
• Sale #5 price per acre (30 acres): $15,000 / 100 acres, 107.5% adjustment factor = $13,953 ($1,047 reduction).

38This results in an average of $13,433 per acre, as these two sales would compare to a 100-acre farm in Elgin County. The Board finds that the last step of the process is to adjust this value to the 93.96 acres of Class 2 farmland at the subject property for the 2017 and 2018 taxation years. The adjustment factor in this case is 100.3%, resulting in an average, adjusted value per acre of $13,473.

[39] MPAC testified that, in addition to the size adjustments applied to sale values, it applied an across the Board 8% market reduction to all sales in Malahide Township for the 2016 current value assessment cycle. When this undisputed reduction is applied to the size-adjusted value per acre the result is:

• $13,473 / 1.08 = $12,475 per acre of Class 2 farmland.

40When applied to the subject property's 93.96 acres, the result is $1,172,151, or $1,172,000, rounded for the 2017 and 2018 taxation years.

41Accordingly, the Board finds the current value of the subject property, including the farm house and one acre of residential land, is $1,269,000 for the 2017 and 2018 tax years. For the 2019 taxation year, the calculation is the same, but one acre of class 2 farm land must be removed from the equation to reflect the one acre sold with the farm house. Accordingly, the Board finds that the current value of the subject property is $1,160,000, rounded ($1,172,151 minus $12,475 = $1,159,676). To account for the value of the residential portion of the property, the Board sought submissions from the Parties at the conclusion of the hearing as to how to apportion the values of Farm and Residential property, in the event the value changed from that returned as a result of this decision.

42MPAC submitted that any change is value should be made to the farm portion of the property because there was no dispute among the Parties with regarding the Residential component. The Residential component was returned at $96,700 for 2017 and $97,100 for 2018. The Appellant did not make a submission on the issue.

43The Board finds that MPAC's submission is reasonable for the reason cited and that in the absence of a submission from the Appellant, MPAC's approach is applied. As to the Appellant's assertion that the sale value of $240,000 ought to be deducted from the overall assessment, there was no statistical or documentary evidence offered to support this figure. If the house and one acre of land was in fact sold after their severance from the parent property, the Board finds that it is more likely that the house and one acre of land had been underassessed in years prior.

44For the Appellant's argument to make sense, the additional value reflected in the sale would have to first be added to the 2017 and 2019 assessments, prior to being deducted for 2019. There is no evidence to suggest that the assessed value of the house and one acre had any impact on the central issue being argued; that being the per acre value of the 100.58 acres of farmland.

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

45The Appellant made no submissions with respect to whether or not a reduction in the current value determined was necessary for it to be considered equitable when the assessments of similar properties in the vicinity are considered. The only documentary evidence at hearing was the Assessment to Sale Ratio ("ASR") study submitted by MPAC.

46The Appellant did refer to several sales in the area, that occurred at different times, of varying farm sizes with differing farmland classes. However, he was not able to articulate any resulting adjustment that could be applied to the subject's current value to create further equity.

47MPAC's ASR study is a common method of determining whether an equity adjustment to current value is necessary to reflect equitable assessment, or not. The ASR approach uses the median ASR of a number of sales that occurred in the vicinity. MPAC chose 24 sales that occurred in Malahide Township, from 2012 through 2016. Each sale value was adjusted to account for changes in value over time. Those adjusted values were then compared to those assessments for the 2016 current value assessment.

48MPAC testified that the International Association of Assessing Officers considers that a median ASR that falls within the range of 0.9 to 1.0, the result should be considered to reflect that properties in the vicinity are being assessed at or very near their current value.

49MPAC indicated that its standard is more restrictive, and it uses a range of 0.95 to 1.05. The ASR study indicated a median ASR of 0.98, suggesting, according to MPAC, that equitable assessment is being achieved among similar properties in the vicinity and therefore an adjustment to the current value determined in not required.

50The Board prefers the evidence of MPAC on the question of equitable assessment. It undertook a common method of making its determination. The input data was clearly laid out and the conclusion was clearly presented. By contrast, the Appellant's submission on the issue lacked a cohesive purpose and was not supported by statistics or any other corroborating evidence and didn't answer the fundamental question of whether the current value determined would be equitable or not.

51The Board finds that no adjustment to the current value determined is required for it to be considered equitable when compared to the assessments of similar properties in the vicinity.

Decision

52The Board finds the current value of the subject property is $1,269,000 for the 2017 and 2018 taxation years. The Board finds that the current value of the subject property is $1,172,000 for the 2019 taxation year. The Board also finds that there is no evidence to indicate a reduction in these values is necessary for the purposes of equitable assessment.

[53] The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2017 taxation year is reduced from $1,431,000 to $1,269,000, apportioned as follows:

• Residential property class: $96,700; and
• Farm property class: $1,172,300.

[54] The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2018 taxation year is reduced from $1,323,000 to $1,269,000, apportioned as follows:

• Residential property class: $97,100; and
• Farm property class: $1,171,900

55The Board finds that the assessment of the subject lands at 14508 Putnam Road, for the 2019 taxation year is reduced from $1,219,000 to $1,160,000, in the Farm property class.