Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 15, 2020 FILE NO.: WR 164900A AMENDING DECISION ISSUED: May 4, 2022

Assessed Person(s): 622294 Ontario Limited Appellant(s): City of Ottawa Respondent(s): Municipal Property Assessment Corporation Region 03 Respondent(s): 622294 Ontario Limited Property Location(s): St. Laurent Boulevard Municipality(ies): City of Ottawa Roll Number(s): 0614-116-506-01016-0000 Appeal Number(s): 3317068, 3348088 and 3396910 Taxation Year(s): 2018, 2019 and 2020 Hearing Event No.: 731265

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

APPEARANCES:

Parties	Representative
622294 Ontario Limited	Paul Beauchamp
Municipal Property Assessment Corporation	Makael Nur
City of Ottawa	Guy Tudino

HEARD: April 23 and April 27, 2020 by telephone conference call

ADJUDICATOR(S): Dirk VanderBent, Vice-Chair

AMENDING DECISION

AMENDED DECISION

In accordance with Rule 99 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1 2021, related to the correction of minor errors and in accordance with Rule 21.1 of the Statutory Powers and Procedure Act regarding the correction of errors, this Amended Decision is issued to correct error(s) in the Decision on pages 3, 4 and 26-30. The amendments have been underlined for ease of reference. There are no other changes in this Amended Decision.

OVERVIEW

1622294 ONTARIO LIMITED (“the Owner”) owns a property located on St. Laurent Boulevard in the City of Ottawa (the “Subject Property”), which is a vacant lot on which the Owner operates a snow dump for the City. There is a small building on the land used as reception kiosk that is of nominal value. Paul Beauchamp is the sole shareholder and executive officer for the corporate Owner.

2Pursuant to the provisions of the Assessment Act, R.S.O. 1990, c. A.31 (“Act"), the assessment of land is based on its current value, which as defined in the Act as:

“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.

3The Act also provides that, for the 2017 to 2020 taxation years, the Municipal Property Assessment Corporation (“MPAC”) is required to conduct a general reassessment of the current value as of the valuation date, January 1, 2016 (“Valuation Date”).

4In this case, MPAC’s general reassessment of the current value of the Subject Property on the Valuation Date, is $1,218,000.

5The City of Ottawa (the “City”) has filed an appeal with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act, for the 2018 taxation year, which now includes deemed appeals for the 2019 and 2020 taxation years. It is the City’s position that MPAC’s assessment of current value is too low and that the correct current value of the Subject Property is $1,703,750. At this hearing, MPAC’s position is that the correct current value is $2,355,000. The Owner’s position is that the correct current value is in the range of $600,000 to $800,000.

6The current value of the property is based, in part, on its highest and best use, which may not be its current use. In this case, both the City and MPAC take the position that the highest and best use of the Subject Property is its current use as a snow dump lot. The Owner’s position is that its highest and best use is as a development property for 70 light industrial condominium units.

7Section 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 of the municipal tax burden according to the value of the property owned by each ratepayer. The City prepared an analysis which indicates that an equitable reduction is not required. MPAC agrees. The Owner’s position is that a reduction of approximately $200,000 is required.

8The parties also disagree on the correct land classification of the Subject Property. MPAC and the City assert that it should be Commercial, whereas the Owner argues that it should be Industrial.

9At the completion of the hearing, the Board reserved its decision.

Issues for the Hearing

10The issues to be determined in this appeal proceeding are:

a) What is the highest and best use of the Subject Property?

b) What is the correct current value of the Subject Property for the 2018 to 2020 taxation years?

c) Is an equitable reduction required, and, if so, what is the quantum of the reduction?

d) What is the correct classification of the Subject Property?

Result

11The highest and best use of the Subject Property is its current commercial use as a snow dump. Its correct current value is $1,603,750 for the 2018 to 2020 taxation years. An equitable reduction of the correct current value is not required.

ANALYSIS

Description of Subject Property

12MPAC has classified the property as vacant industrial land. The property is 4.89 acres in size and is situated behind a suburban office development at the south end of St. Laurent Boulevard. As the Subject Property does not front onto St. Laurent Boulevard, access to the property is by a right-of-way through the parking area for an adjacent property. The site does also not have municipal hydro and sewer services. Postal delivery service is not provided on-site.

13All parties agree that the property is zoned light industrial, which permits several commercial uses on the property, including the Owner’s snow dump operation, which is licenced by the City, and industrial condominium units. Because the small reception kiosk located on the property is of nominal value, the parties agree that it does not increase the current value of the property.

14A waterway, described by the Owner as the Mather Ditch, passes behind the property on the north-east side. A rail line lies to the south-east and there is a hydro tower corridor that borders the property as well.

15In 2010, the Owner granted a permanent easement for 58 vehicular parking spaces to one of the adjacent properties. The easement applies to a 50 foot strip along the south-western front of the property, the total area being 0.39 acres. For purposes of determining current value, all parties agree that the remaining 4.5 acres is the effective area of the Subject Property.

16There are additional easements held by Canadian National Railway (“CN”) to access the railway, and by the City for access to Mather Ditch to allow for stormwater management.

Appraisal Reports

17The City adduced an appraisal report prepared by Donald Davies. He describes himself as a Senior Valuation Consultant. He has conducted an appraisal of industrial properties in Canada and abroad. He has also developed training manuals and taught appraisal courses in Canada, including courses on the valuation of industrial properties for the Appraisal Institute of Canada.

18MPAC adduced an appraisal report prepared by Michel Benoit, a Property Valuation Analyst employed by MPAC. He did not provide a resume further detailing his qualifications.

19Paul Beauchamp acted as advocate for the Owner. Although he is not a valuation analyst, he prepared his own report based on his knowledge of the Subject Property and his business experience. His report summarizes his evidence and analysis in support of his position respecting the correct current value of the Subject Property.

Issue 1 - What is the highest and best use of the Subject Property?

Evidence

20The City’s expert, Mr. Davies provided his definition of highest and best use for vacant land, citing The Appraisal of Real Estate, Third Canadian Edition at p.12.1:

Highest and best use: the reasonably probable and legal use of vacant land or improved property that is physically possible, appropriately supported, financially feasible, and results in the highest value.

This definition was not disputed by the MPAC or the Owner.

21Based on this definition, both Mr. Davies, and MPAC's expert, Mr. Benoit, agree that the highest and best use of the Subject Property is its current use as a snow dump.

22The Owner disagrees. Mr. Beauchamp testified that a site plan was approved by the City in 1987 which allows for 68 to 70 light industrial condominium units. In his view, this is the highest and best use of the Subject Property.

Findings on Issue 1

23The Board accepts the definition of highest and best use provided by Mr. Davies.

24In approaching this issue, the Board first notes that the City’s Light Industrial zoning designation allows for a variety of commercial uses, which, in this case, includes both a snow dump, and for industrial condominium units, so both these uses are legally permissible. The question, therefore, is which is the highest and best use?

25The Board finds that the following factors mitigate against a finding that the highest and best use is as development land for industrial condominium units. Apart from the site plan that was approved 22 years ago, there is no evidence before the Board of any activity to further this development potential. Similarly, there is no evidence before the Board, one way or the other, that this type of development would be approved by the City today or within the foreseeable future. Assuming that it would be, the Owner did not provide any evidence of the costs to develop the property or what the current value of the property would be, based on this use. Consequently, there is no evidence before the Board on which the Board can determine that development of the land would be financially feasible, or that the value of the property as development land would result in the highest value.

26In light of the above findings, the only other use is the current use as a snow dump. Although Mr. Beauchamp expressed his view that global warming is reducing annual snowfall levels, which impacts negatively on his business income, he did not indicate that his business operations have ceased.

27For the above reasons, the Board finds that the highest and best use of the Subject Property is as a snow dump licensed by the City.

Issue 2 - What is the correct current value of the Subject Property for the 2018 to 2020 taxation years?

28Under s. 44(3)(a) of the Act, the Board must first determine “the current value of the land”. The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the property on the Valuation Date or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated Valuation Date of January 1, 2016.

City’s Evidence

29In his report, Mr. Davies used a comparable sales analysis to estimate the current value of the Subject Property. He selected six proposed comparable properties located in Ottawa. All of them are vacant land, five in the industrial class and one in the commercial class. Site acreages range from 1 acre to 2.86 acres, which are smaller than the Subject Property’s 4.86 acres. Two of the market sales of these properties occurred in December 2015, and the remainder occurred in the period from January to October 2017.

30Mr. Davies expressed his view that these sales should be time adjusted to the Valuation Date. In his report, he provided an analysis to calculate the time adjustment factor based on a paired-sale analysis of 12 vacant industrial sites in Ottawa. Based on this analysis he concluded that the time adjustment should be 0.6% per month. He indicated that this analysis is based on a limited number of properties, but he relies on this time adjustment as it is his opinion that this adjustment is necessary. Seven of the initial sales (i.e. the first sale in the pair) occurred in the years from 2010 to 2012.

31Because site acreages of the proposed comparable properties are all smaller than the Subject Property’s 4.89 acres, Mr. Davies calculated sale values as a unit value of ‘dollars per acre’. Mr. Davies explained that, in the market, there is a nonlinear relationship between land size and the value of a property. Due to economies of scale, the sale value per acre of larger properties is typically lower than the sale value per acre of smaller properties. Therefore, he made a downward adjustment of the value per acre to reflect the discrepancy in property size. The adjustments range from eight to 20%. When asked by the Board how he arrived at these specific percentages, Mr. Davies stated that they were not based on a specific study. Instead, he subjectively selected these percentages based on his experience in conducting market appraisals. He further noted that, having applied these percentage reductions, the adjusted values per acre are much closer together, which demonstrates that the market performance for vacant industrial properties in this geographic area is reasonably consistent in arriving at sale values.

32Mr. Davies calculated that the median value per acre for the suggested comparable properties is $548,875 per acre, and the mean (average) is $574,174. To value the Subject Property, he chose the median value, rounded to $550,000 per acre, which is the lower value.

33Mr. Davies included a further 15% reduction of the value per acre to reflect the fact that the Subject Property does not front on St. Laurent Boulevard, which would make the property less attractive to a potential buyer. He indicated that the specific value of 15% was subjectively chosen by him.

34The resulting value per acre is $467,500. Mr. Davies agrees that the effective area of the Subject Property is 4.5 acres (4.89 acres less the 0.39 acres that are encumbered by the easement). The resulting land value of the Subject Property is 4.5 x $467,500 = $2,103,750.

35Mr. Davies then made one additional final downward adjustment to this value. He explained that municipal services, such as sewer and water, are provided at the street boundary, so an Owner must incur the cost to connect to these services. He stated that this service connection cost is not usually considered when determining the current value of vacant industrial land. Mr. Davies explained that the boundary for each of his proposed comparable properties all front on to municipal streets. He noted that, because the Subject Property does not front onto St. Laurent Boulevard, this increases the distance between the Subject Property and the street boundary, which will result in a higher connection cost, as compared to his suggested comparable properties. He expressed his opinion that an additional downward adjustment is required to account for this difference in property profiles.

36Regarding the quantum of the adjustment to be applied, Mr. Davies relied on publication entitled 2018 Canadian Cost Guide, published by Altus Group (the “Cost Guide”), which summarizes cost guidelines for private roads and services in major cities across Canada, including Ottawa. He stated that the Cost Guide indicates a rate of $2,500 to $3,000 per metre for roads and services. As there is already an access road to the site, he made a subjective estimate that the cost of connection services would be $2,100 per metre. He measured the distance from St. Laurent Boulevard to the Subject Property as 190 metres, and then calculated that the total service connection cost would be $400,000 (rounded)(190 x $2,100).

37Mr. Davies then calculated that the current value of the Subject Property is $1,703,750 ($2,103,750 less $400,000).

MPAC's Evidence

38In his report, Mr. Benoit also used a comparable sales analysis to estimate the current value of the Subject Property. He, in fact, relied on four of the proposed properties presented by the City. He did not time adjust these sale values. He explained that he attempted to determine a time adjustment factor, but was unable to locate a sufficient number of sales in the period from January 2015 to December 2017 (the “shoulder” years for the January 1, 2016 Valuation Date). Consequently, he calculated the value per acre for each of these properties, based on their unadjusted sale values, and chose the median value of $697,786 per acre. Applying this rate to the effective area of the Subject Property, he calculated the land value is $3,140,037 ($697,786 x 4.5 acres).

39Mr. Benoit agreed that a further reduction of the land value is required because it only has access to St. Laurent Boulevard through the right-of-way. He chose 25% as the reduction factor. He explained that that this rate had been negotiated and applied in an appeal proceeding in a previous assessment cycle, so he simply carried it forward in his calculation of current value in this appeal proceeding.

40Mr. Benoit stated that he would not make a downward adjustment for connection services such as water and sewage, as it is his opinion that vacant lots normally do not have such services installed. He also stated his understanding that the 25% adjustment included services for the upkeep of the road.

41Applying the 25% reduction to the land value of $3,140,037, Mr. Benoit calculates that the current value is $2,355,000 (rounded).

Owner's Evidence

42Mr. Beauchamp referenced problems with the designation of parking spaces in reference to the 1987 site plan (described above). He asserts, that this results in a parking shortfall that impedes access to the Subject Property, which, in turn, has a negative impact on market value.

43Mr. Beauchamp states that he has made attempts to sell the Subject Property, indicating that, in 2016 he accepted an offer for $1,600,000, but the sale “failed.” He subsequently accepted another offer in 2018 for $1,500,000, but again, the sale failed. He provided copies of the Agreement of Purchase and Sale for each of the incomplete transactions. He asserts that the reason the sales failed is that the Subject Property has limited parking space to support building any project. The 2018 Agreement of Purchase and Sale indicates that Mr. Beauchamp responded with a counter purchase price of $3,195,000. In cross-examination, he explained that the Purchaser’s initial offer included the requirement that the Owner provide site services, which he stated he was not prepared to accept.

44Mr. Beauchamp provided his estimate that the cost of installing hydro is conservatively estimated at $250,000. He estimates that the cost of sewer installation is $300,000. He bases this estimate on a high-level cost estimate provide by a construction firm in 2016, which indicates a cost of approximately $205,000. To this amount, Mr. Beauchamp adds HST of $26,650. He asserts that the remaining cost to bring the total to $300,000 is to time adjust cost increases based on current rates.

45Mr. Beauchamp also asserts that the following additional downward adjustments in property value should be made:

a) 25% due to the location of the property and its lack of visibility (limited visibility of the property and any signage), as well as no on-site postal delivery;

b) 5% as access to the property is a common roadway;

c) 3% due to CN rail line (due to constant noise, constant vibrations, which he asserts may cause damage to foundations);

d) 3% due to hydro towers - (he asserts that there would be negative health effects caused by exposure to the towers, so an onsite business would require a parking area to serve as a buffer); and

e) 5% for the Mather Ditch (mosquitos and odour and road toxins) – he asserts that the cost to rehabilitate this area negatively impacts property value.

The total percentage reduction is 41%.

46Mr. Beauchamp questioned the site acreage values for some of the properties, referenced by the City. For example, he stated that he spoke with the owner of 4084 Albion Road, who indicated that the property is 6.2 acres, not 4.9 acres as shown in Mr. Davies’s Equity Analysis.

47Mr. Beauchamp provided four suggested comparable properties. One of them has been proposed by the both the City and MPAC. The other three are all zoned as Light Industrial. In analysing the sale data, he assumed a 30% reduction for downward adjustments in addition to a reduction of $500,000 for hydro and sewer servicing costs. He deducted this $500,000 servicing cost from the sale value of each proposed comparable property. He made these deductions before he calculated the sale value per acre. He then calculates the average sale value per acre as $1,018,000. He notes that if the full 41% discount is applied, the average sale value per acre drops to $906,000. Applying a final adjustment for the exclusion of the 0.39 acre, he arrives at an adjusted value of $833,720. He maintains that this value is still inaccurate because it does not take into account the problem he has described with parking.

48Mr. Beauchamp stated that the Owner purchased the Subject Property in 1997 for $180,000. He observed that the City’s proposed current value of $1,703,750 represents an increase in value in excess of 1,000% over the past 23 years, which he asserts is simply not justifiable. He states that a review of the real estate market indicates that property values have increased by only 300% to 400%. Applying these two percentage increases to the Owner’s purchase price, and taking an average of the two resulting values, he calculates that the current value of the Subject Property would be $637,000.

49Based on his analysis, it is Mr. Beauchamp’s opinion that the correct current value of the Subject Property is between $600,000 and $800,000.

Findings on Issue 2

50The parties’ submissions can be succinctly stated. Each party relies on the evidence and analysis of its witness to support its position on correct current value. Based on the evidence and submissions, there are several questions which the Board must address:

a) What are the correct site acreages for each of the proposed properties?

b) Which of the proposed properties are comparable to the Subject Property?

c) Should the sale values of comparable properties be time adjusted?

d) Should the sale value per acre of the comparable properties be adjusted downward if its site acreage is lower than the site acreage of the Subject Property, and, if so, what should the quantum of the reductions be?

e) Should a reduction be applied for site servicing costs?

f) If a reduction for site servicing costs is to be applied, what is the quantum of the reduction?

g) What reduction factor should be applied due to the location of the Subject Property?

h) Should additional reduction factors be applied due to the Subject Property’s proximity to Mather Ditch, the CN rail line, and the hydro towers?

i) Based on the Board’s determination of issues 1 through 8, what is the correct current value of the property?

j) If site servicing costs are to be considered, should this cost be deducted from a comparable property’s sale value before calculating that property’s sale value per acre?

The Board will address each question in turn.

1. What are the correct site acreages for each of the proposed properties?

51The Owner has questioned the accuracy of the site acreage provided for some of the properties, based on Mr. Beauchamp’s review of sale documents or information he received by speaking to a property owner. This information relates to Mr. Beauchamp’s understanding of site acreages based on a property’s description in the sale documents, but it is not clear whether his site acreage values correlate to the assessment roll numbers used by MPAC. Mr. Davies, for the City, has relied on MPAC records providing property details based on assessment roll number. The Board considers that MPAC's records are more likely to be accurate, as MPAC collects its information for the purpose of conducting its assessment of the property’s current value. For this reason, the Board accepts the site acreages provided by the experts for MPAC and the City.

52In his evidence, Mr. Davies noted discrepancies between the site acreage values provided by the Owner for some of the Owner’s proposed comparable properties. In light of the Board findings, the Board accepts the site acreage values provided by Mr. Davies. The impact of this finding is discussed under Question 10 below.

2. Which of the proposed properties are comparable to the Subject Property?

53All but one of the proposed comparable properties were zoned industrial. All but one of the City and MPAC's proposed properties have been classified as vacant industrial (the exception is classified vacant commercial). The Owner’s proposed properties are also zoned light industrial.

54Mr. Davies pointed out that one of the Owner’s proposed properties was the subject of a forced sale, another was purchased for residential real estate development, and the third was a government sale. These factors potentially disqualify these sales as relevant market sales as they may have been subject to special conditions that would have influenced the sale price of the properties. Nonetheless, Mr. Davies did an analysis of the median value per acre for these properties, finding that they were consistent with his analysis of the proposed comparable properties he used in his analysis. In the end, neither MPAC nor the City challenged that the Board could consider the Owner’s proposed comparable properties when determining current value. Similarly, Mr. Beauchamp, for the Owner, did not provide sufficient evidence to indicate the properties proposed the City and MPAC were not comparable.

55For all the proposed comparable properties, there are differences in site acreage as compared to the Subject Property, and some sale dates fall outside the shoulder years of the Valuation Date. While adjustments were made to account for these variances, there is always the question whether a proposed property is so different from the Subject Property, and requires such significant adjustments, that the property cannot be described as comparable. While appraisers strive to obtain the best sales evidence they can find, it is sometimes difficult to find relevant property sales, particularly in this case, where the Subject Property is vacant industrial land. In this regard, it must be remembered that property appraisal is not a precise science. Based on the profile data for each of the proposed properties, the Board accepts that they are all comparable to the Subject Property. In support of this conclusion, the Board notes, as pointed out by Mr. Davies, that the analysis of each set of proposed properties, produces similar values for the mean sale value per acre. As stated by Mr. Davies, this indicates a consistency in the performance of market. This supports the Board’s finding that all the proposed properties are comparable to the Subject Property.

3. Should the sale values of comparable properties be time adjusted?

56MPAC's expert, Mr. Benoit, has indicated that, in the period from January 2015 to December 2017, he identified only 31 property sales, averaging less than three sales per month. On this basis, he stated that a time adjustment factor could not be calculated. As noted earlier in this Decision, the City’s expert, Mr. Davies, conducted a paired-sale analysis of 12 properties to calculate a time adjustment of 0.6% per month. He acknowledged that this is a small dataset, but he made the adjustment as he felt that it was necessary to apply a time adjustment factor. Seven of the initial sales (i.e. the first sale in the pair) occurred in the years from 2010 to 2012.

57In determining whether a time adjustment factor could be calculated, it may be that the analytical approach considered by MPAC was to compare sale values to assessed values over time, as this is the approach commonly used by MPAC. In this context, an insufficient number of available sales, has led Mr. Benoit to conclude that the analysis of available data would not produce a reliable time adjustment factor. The City’s analysis is different. It is a paired-sales analysis where each of the 12 identified properties has had two sales at different points in time. MPAC did not challenge the calculations made in the City’s analysis. The Board accepts that the City’s paired-sale analysis has its limitations, specifically the relatively small number of properties in the data set, and sale dates that fall well outside the 2015 and 2017 shoulder years. However, MPAC did not assert that the City’s analysis is unreliable.

58The Board accepts that time adjustment of sales values of comparable properties is important, as the most accurate determination of current value is obtained when the sale values of comparable properties are adjusted to reflect their value as of the Valuation Date.

59Where market values increase over time, a sale that post-dates the Valuation Date must be reduced in order to arrive at the sale value that notionally represents the sale value, had the sale taken place on the Valuation Date. In this regard, the Board notes that four of the City’s six comparable properties had sales which occurred in 2017, so these sale values are reduced by time adjustments ranging from 7.6% to 12.8%. Sales of the remaining two properties occurred in December 2015, (very close to the Jan. 1, 2016 Valuation Date), which required an upward adjustment of only 0.3%. Given this data, the Board finds that excluding the application of a time adjustment factor would distort the sale value per acre as of the Valuation Date, by overstating these values. The Board ought to avoid excluding the application of a time adjustment factor where doing so may result in a significant incorrect calculation of current value. In this case, the Board finds that the exclusion of reductions in sale values ranging from 7.6% to 12.8% is significant.

60For these reasons, the Board accepts Mr. Davies’s opinion that a time adjustment factor should be applied. As the City adduced the only evidence regarding calculation of the specific time adjustment factor, the Board accepts that the factor should be 0.6% per month.

4. Should the sale value per acre of the comparable properties be adjusted downward if its site acreage is lower than the site acreage of the Subject Property, and, if so, what should the quantum of the reductions be?

61As noted above, MPAC's four comparable properties were also relied on by the City in its analysis. The site acreages for these comparable properties are significantly lower than site acreage for the Subject Property. The City’s expert, Mr. Davies, has testified that, due to economies of scale, the sale value per acre of larger properties is lower than the sale value per acre of smaller properties. Therefore, he made a downward adjustment of the value per acre of the smaller properties to reflect the discrepancy in property size. The Owner agrees with this approach.

62In its analysis, MPAC's expert, Mr. Benoit, did not make any downward adjustment for this market factor, but he did not explain why an adjustment would not be required, nor did he challenge the specific percentage reductions proposed by Mr. Davies. MPAC, in its submissions, did not address this issue.

63The Board accepts Mr. Davies’s evidence that it is a market reality that a larger property typically sells for a value per acre that is lower than value per acre of a smaller property. Because the Subject Property is larger than the comparable properties, the sale value per acre of the smaller comparable properties should be discounted. The only evidence provided to the Board of the specific percentage reductions to be applied, is based on Mr. Davies’s qualitative estimates. As this is the best evidence before the Board, the Board accepts these percentage reduction values.

5. Should a reduction be applied for site servicing costs?

64MPAC's expert, Mr. Benoit expressed his opinion that, because vacant industrial lots typically are not serviced, no adjustment should be applied for sewer and hydro servicing costs. The City’s expert, Mr. Davies, agreed, in part, with Mr. Benoit. Mr. Davies explained that the owner of a vacant lot will not proceed to install services, because prospective purchasers will have their own preferences/needs for such service installation. Therefore, he agrees that such servicing costs typically are not considered when appraising the value of a vacant lot.

65However, all parties agree that, because the Subject Property does not front on St. Laurent Boulevard, there would be an exceptional, significant service connection cost. In Dr. Davies’s opinion, a prospective buyer would take such an exceptional expense into consideration when making an offer to purchase the property. For this reason, it is Mr. Davies’s view that this exceptional cost must be considered when determining current value. The Owner agrees with this approach.

66The City and MPAC do not dispute Mr. Beauchamp’s evidence that one of the two purchase offers he received for the property did not result in a final sale because the purchaser required that the Owner install the services as part of the sale transaction.

67MPAC's evidence and submissions did not provide a rationale for excluding consideration of this exceptional expense when determining the correct current value of the Subject Property.

68While the Board accepts that such servicing costs are typically not considered, in this case, the location of the Subject Property makes it different from all the comparable properties. To account for this difference, the Board finds that it is appropriate to apply a reduction for this exceptional cost when determining the correct current value of the Subject Property.

6. If a reduction for site servicing costs is to be applied, what is the quantum of the reduction?

69The City and the Owner have only provided estimates of the cost to install hydro and sewer services.

70For the City, Mr. Davies relies on the Cost Guide, which provides an estimated cost to install both road and sewer services, expressed as a cost per metre. The Cost Guide was entered into evidence. It appears that Mr. Davies erroneously cited the cost per metre for the Greater Toronto Area ($2,500 to $3,300), whereas the Cost Guide shows that the cost per metre for the Ottawa/Gatineau region is $2,400 to $3,200. Mr. Davies correctly points out that the road is already installed, so he subjectively reduces the cost per metre to $2,100. However, he does not provide any additional rationale in support of this reduction. He does indicate that he measured the distance from the Subject Property’s lot line to St. Laurent Boulevard (190 metres). This measurement was not disputed by the Owner. As noted above, using these assumptions, he calculates that the cost of servicing is $400,000.

71For the Owner, as noted above, Mr. Beauchamp provided his own evaluation of servicing costs, which is supported only in part by the 2016 estimate he received for installing sewer services. On this basis, he estimates that the total cost would be at least $500,000. Regarding the distance between the road and the property line, Mr. Beauchamp testified that it is his understanding that the actual point of connection would be further down St. Laurent Boulevard, so the distance would be longer than 190 metres. However, he did not provide any indication of how much longer this distance would be.

72The Board, therefore, must determine the cost based on two approximate estimates that are $100,000 apart. The Board finds that Mr. Beauchamp’s estimate is well within the range of what can be described as a reasonable estimate. It is reasonable to assume that a prospective purchaser, in making an offer to purchase the Subject Property, would cautiously avoid under-estimating the installation cost. Therefore, the Board accepts that the reduction to be applied for the service installations cost should be $500,000.

7. What reduction factor should be applied due to the location of the Subject Property?

73Because the Subject’s Property’s location does not front on St. Laurent Boulevard, this results in reduced commercial visibility of the property (including visibility of buildings or other signage). In addition, in order to access St. Laurent Boulevard, the property requires right-of-way road access over another property. All parties agree that these factors negatively impact the current value of the property. However, they do not agree on the specific reduction factor to be applied.

74MPAC asserts that the reduction factor should be 25%. Mr. Benoit’s rationale is that, for previous assessment cycles, a 25% reduction has been applied in determining the Subject Property’s current value, so he simply carries this reduction forward for this assessment cycle. However, he could give no explanation regarding why this reduction was previously applied or how it was determined to be 25%, other than speculating that it could include the reduction for the exceptional servicing cost. For the Owner, Mr. Beauchamp agrees that the reduction should be 25%, but he also provides no specific rationale in support of this value. For the City, Mr. Davies expressed his opinion that a 15% reduction is appropriate. He also gave no specific rationale in support of this value. It is his subjective determination based on his experience as an industrial property appraiser.

75In weighing this evidence, the Board notes that, although Mr. Benoit is a property valuation specialist, he did not provide his own opinion regarding the reduction factor. He simply endorsed a decision made in a previous assessment.

76While the Board does not discount Mr. Beauchamp’s view, solely on the basis that he is not a property appraiser, the Board must, nonetheless, assign greater weight to Mr. Davies’s opinion evidence, given his extensive experience as a property appraiser.

77Consequently, the Board accepts that the reduction factor should be 15%.

8. Should additional reduction factors be applied due to the Subject Property’s proximity to Mather Ditch, the CN rail line, and the hydro towers?

78The Owner asserts that proximity of the property to the Mather Ditch, CN rail line and hydro towers are all factors that negatively impact the value of the Subject Property. However, the potential impact must be evaluated in the context of the Subject Property’s use a snow dump. The Board finds that Mr. Beauchamp’s evidence in this regard, does not indicate that these factors have impeded the property’s use. As such, the Board finds that he has not provided any convincing rationale that these factors would negatively impact the current value of the Subject Property. Therefore, the Board finds that the Owner has not established that these factors necessitate additional downward adjustments when determining the correct current value of the Subject Property.

9. Based on the Board’s determination of issues 1 through 8, what is the correct current value of the property?

79The Board re-iterates that the four comparable properties presented by MPAC include the comparable properties presented by the City. Both MPAC and the City use the median sale value per acre. The difference between MPAC's analysis and the City’s analysis, is that MPAC did not time adjust the sale values, did not apply an adjustment to sale value per acre due to differences in site acreage, and did not apply a reduction for servicing costs. The Board has not accepted MPAC's position on these three factors. The net effect of this finding is that there is no difference between MPAC's position and the City’s position on the median sale value per acre.

80Using the corrected size acreages for the Owner’s comparable properties, Mr. Davies calculated that the median sale value is $543,000 and the mean value is $492,000. The Board again notes that these values were not based on time adjusted sale values and not adjusted for property size differentials. For the City’s comparable properties, the median sale value per acre is $548,875 and the mean value is $574,000. Therefore, the Board accepts Mr. Davies’s observation that the Owner’s comparable sales produce a similar median sale value per acre. As noted above, although the City and MPAC did not oppose consideration of the Owner’s comparable properties, there is some uncertainty whether some these properties should be considered, based on the nature of their sales transactions. There is also a question regarding the accuracy of the site acreages for these properties.

81Taking the above observations into account, the Board finds that the comparable properties provided by the City provide the best evidence on which to determine current value. As both MPAC and the City agree that the median value should be chosen, and because this value is very close to the median value for the Owner’s comparable properties, the Board accepts that the sale value per acre of the Subject Property is $550,000.

82Based on the above, the Board accepts the City’s position that, in determining the current value of the Subject Property, its sale value per acre of the Subject Property should be the rounded value of $550,000 per acre.

83Applying the correct mathematical formula (discussed further under Issue 10 below), the Board calculates the correct current value of the Subject Property as follows:

• Total Acreage Value: $2,475,000 ($550,000 x 4.5 acres)

• Less: 15% Location Adjustment Factor: $371,250 ($2,475,000 x 15%)

• Less: $500,000 Service Cost Reduction

• Correct Current Value is: $1,603,750

84In arriving at this conclusion, the Board has considered the Owner’s submission that this current value is over 1,000% higher than the purchase value of $180,000, when the Owner purchased the Subject Property 23 years ago. The Owner argues that a huge increase in value to $1.6 million dollars over this time period, is not realistic based on how the market performs. For the following reasons, the Board does not accept this submission. First, the evidence shows that current sales of comparable properties are in the range of $1.6 million dollars. Furthermore, the Owner, in listing the Subject Property for sale, received offers for $1.5 million and $1.6 million. Secondly, the Act provides that the current value of a property is its value on the Valuation Date, which is a specific point in time. Current value is not based on the value of the Subject Property at a different point of time, nor is it based on a change in value over a specific time period.

10. If site servicing costs are to be considered, should this cost be deducted from a comparable property’s sale value before calculating that property’s sale value per acre?

85The Owner argues that the City has incorrectly calculated the sale value per acre for each of the comparable properties. If this calculation is incorrect, then the calculation of current value based on these values would also be incorrect.

86For the Owner, the formula applied by Mr. Beauchamp can mathematically be described as follows:

(Comparable Property Sale Value - $500,000 servicing cost) = Adjusted Sale Value Per Acre Comparable Property Site Acreage

Mr. Beauchamp then multiplies the Adjusted Sale Value per Acre by 4.5 acres to obtain a total value for the Subject Property.

87Mr. Davies applied a different formula, where he does not adjust the sale value per acre by deducting the servicing cost. Mathematically, his approach is described as follows:

Comparable Property Sale Value = Sale Value Per Acre Comparable Property Site Acreage

Mr. Davies multiplies the Sale Value per Acre by 4.5 acres to obtain an unadjusted total value for the Subject Property. He then applies the services cost reduction to arrive at an adjusted total value for the Subject Property.

88While, at first glance, it may appear that both approaches will provide the same total value for the Subject Property, they do not. An example serves to prove this point. Assuming a Comparable Property Sale Value is $750,000 and its Site Acreage is 1 acre, Mr. Beauchamp’s formula results in a total value of $1,250,000, whereas Mr. Davies’s formula results in a total value of $2,875,000.

89The Board finds that Mr. Davies’s formula is the correct approach. The flaw in Mr. Beauchamp’s calculation is that it includes the servicing cost as part of the sale value per acre. In other words, it quantifies the servicing cost as a cost per acre. As the calculation of the total value of a property will vary based on the size of its site acreage, this means that the servicing cost component would also vary (i.e. the larger the site acreage, the higher the servicing cost value). However, the servicing cost is a fixed cost, not a variable cost. For this reason, Mr. Beauchamp’s formula significantly overstates the amount of the servicing cost reduction, which, in turn, significantly understates the correct current value of the Subject Property.

Issue 3 - Is an equitable reduction required, and, if so, what is the quantum of the reduction?

90For the City, Mr. Davies provided an equity analysis which indicates that an equitable reduction is not required. MPAC agrees that an equitable adjustment is not required. On behalf of the Owner, Mr. Beauchamp provided no evidence. He relies on his submission that assessed values of the properties exceed market values, and, for this reason, the Board should reduce the current value of the Subject Property to a value in the range of $600,000 to $800,000.

Findings on Issue 3

91The Board does not accept the Owner’s submission for two reasons. First, he adduced no analysis to support this position. He presented no data comparing assessed values of other properties to their sale values. His submission more properly relates to his position respecting the correct current value of the Subject Property, i.e. that the market simply does not support a conclusion that the correct current value could be as high as $1.6 million dollars. The Board has not accepted this submission, and, in any event, this submission is not relevant to the issue of whether an equitable reduction is required.

92Based on the above findings, the Board accepts the City’s equity analysis, and finds that an equitable reduction is not required.

Issue 4 – What is the correct classification of the Subject Property?

Relevant Legislation

93Property classification is governed by Ontario Regulation 282/98 (the “General Regulation”). MPAC and the City submit that the Subject Property should be classified in the Commercial Property Class, whereas the Owner submits it should be classified in the Industrial Property Class. No party asserts that the Subject Property qualifies as “vacant land” as this term is defined in s.1 of the Regulation.

94Section 4 of the General Regulation defines the Commercial Property Class. The relevant provision is:

5. (1) The commercial property class consists of the following:

6. Land and vacant land that is not included in any other property class. …

The remaining criteria relate to other specific property types that do not apply to the Subject Property.

95Section 4 of the General Regulation defines the Industrial Property Class. The relevant provisions are:

6. (1) The industrial property class consists of the following:

7. Land used for or in connection with,

i. manufacturing, producing or processing anything,

ii. research or development in connection with manufacturing, producing or processing anything,

iii. storage, by a manufacturer, producer or processor, of anything used or produced in such manufacturing, production or processing if the storage is at the site where the manufacturing, production or processing takes place, or

iv. retail sales by a manufacturer, producer or processor of anything produced in manufacturing, production or processing, if the retail sales are at the site where the manufacturing, production or processing takes place but are not on land to which section 44 applies.

2. Vacant land principally zoned for industrial development. …

The remaining criteria relate to other specific property types that do not apply to the Subject Property.

Findings on Issue 4

96MPAC and the City submit that, under s. 6(1) of the General Regulation, the only qualification criterium that could possibly apply is “2. Vacant land principally zoned for industrial development.” However, they point out that, although the land is zoned as light industrial, it is not vacant land. Therefore, they maintain that the Subject Property cannot be classified in the Industrial Property Class, so, by default, the Subject Property must fall in the Commercial Property Class.

97The Appellant, however, argues that the applicable criterium is s.6(1)(1)(i) of the General Regulation. In this regard, he points out the following:

a) Regarding “manufacturing, producing or processing anything”, he states that his snow dump processes thousands of truck loads of snow, which is processed by melting and manipulating the chlorides, as well as removing several tons of garbage found in the snow.

b) Regarding research and development, he states that he has experimented with more efficient means of melting snow, including techniques to repurpose melted chlorides so that they can be reused to melt snow. He also has experimented with different types of equipment to move and pile snow.

c) Regarding storage by a manufacturer, producer, or processor, he asserts that he stores snow for environmental processing (which includes storage of garbage).

d) Regarding retail sales by a manufacturer, producer, or processor, he states that he sells “dump tickets” to contractors, as the fee for accepting a truckload of snow from a contractor.

98The Board begins by addressing whether the snow dump operation can qualify as “manufacturing, producing, or processing”. On plain reading of these terms, the Board concludes that the terms “manufacturing” or “producing” do not apply to the snow dump operation. In this regard, the Board notes that the Owner does not argue that they do. Instead, he asserts that his snow dump business processes snow. Therefore, the questions that the Board must address are: (1) What is the scope of the term “processing”? and (2) Does the Owner’s snow dump operation fall within the scope of this term?

99The Board has reviewed the following cases:

a) Bruno's Contracting (Thunder Bay) Ltd. v. Ontario Property Assessment Corp., Region No. 32, 2001 CarswellOnt 8356, [2001] O.A.R.B.D. No. 359 (“Bruno’s Contracting”)

b) Golden Gate Wyecroft Plaza v Municipal Property Assessment Corporation, Region 15, 2017 CanLII 36452 (ON ARB)

c) Toyota Tsusho Canada Inc. v Municipal Property Assessment Corporation, Region 23, 2016 CanLII 63289 (ON ARB)

d) Tenneco Canada Inc. v. R., 1987 CanLII 9000 (FC), 1987 CarswellNat 467, 1987 CarswellNat 888, [1987] 2 C.T.C. 231, [1987] F.C.J. No. 955, [1988] 2 F.C. 3, 15 F.T.R. 315, 7 A.C.W.S. (3d) 219, 87 D.T.C. 5434 (Federal Court — Trial Division)

100Regarding the scope of the term “processing”, the Board finds that the Hearing Panel in Bruno’s Contracting, accurately summarized the scope of this term, as discussed in the above decisions. At para. 19 the decision states:

9 Having read the reasoning in all of the cases, the Board has reached the following conclusions:

a) Manufacturing is an activity whereby material is given new form(s), qualities and properties or combinations by machinery and/or labour.

b) Producing is conceptually similar to and related to manufacturing.

c) Processing results in some change in the appearance or nature of the goods and makes them more marketable. Processing is also similar to and related to manufacturing.

d) Categorization of an activity between manufacturing, producing and processing is often difficult and indeterminate. A particular activity is often described incorporating the terms interchangeably or together in some combination. The courts have struggled to differentiate between the three terms. The wording of the Act is intended to ensure the broadest or most comprehensive interpretation.

e) A common sense layman’s interpretation of the commercial nature of any activity should prevail. [emphasis added]

Therefore, the Board accepts that the scope of the term “processing” includes two components: (1) the result must be some ‘change’ in the appearance or nature of the goods; and (2) the ‘change’ makes them more marketable.

101Apply the term “processing” to the snow dump operation in this case, the first component is satisfied. The ‘goods’ are snow mixed with garbage, and the ‘change’ in the ‘goods’ is the separation of snow and garbage and the conversion of snow to water. However, the Board finds that the second component has not been met. The cases cited make it clear that goods must be changed so that they will be used by others, more specifically that the change will make the goods more desirable to others (i.e. more marketable), than in their original state. In this case, the snow dump operation does not market the water or garbage for use by others.

102For this above reason, the Board finds that s.6(1)(1)(i) does not apply to the Subject Property. Subsections 6(1)(1)(ii), (iii), and (iv), respecting research, storage, and retail sales, all require that these activities be undertaken “in connection with … processing”. Therefore, none of these subsections can apply in this case, as the snow dump operation does not qualify as “processing”.

103In summary, as the Subject Property does not meet any of the criteria necessary to be classified in the Industrial Property Class, the Subject Property, by default, must be classified in the Commercial Property Class.

CONCLUSION AND ORDER

104The current value of the Subject Property is $1,603,750 for the 2018 to 2020 taxation years.

105An equitable reduction of the current value of the Subject Property, pursuant to s. 44(3)(b) of the Act, is not required.

106The Subject Property is classified in the Commercial Property Class.