Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

July 30, 2020

FILE NO.:

WR 165593A

AMENDED DECISION ISSUED ON: September 11, 2020

Assessed Person(s):

Aipco Inc.

Appellant(s):

Aipco Inc.; Benjamin Fried

Respondent(s):

Municipal Property Assessment Corporation Region14

Respondent(s):

Town of Whitchurch-Stouffville

Property Location(s):

6 Gormley Industrial Avenue

Municipality(ies):

Town of Whitchurch-Stouffville

Roll Number(s):

1944-000-041-41500-0000

Appeal Number(s):

3230733, 3394359, 3394360 and 3404108

Taxation Year(s):

2017, 2018, 2019 and 2020

Hearing Event No.:

732965

Legislative Authority:

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

APPEARANCES:

Parties

Representative

Aipco Inc.

Benjamin Fried

Municipal Property Assessment Corporation

Damian Bernacik

Town of Whitchurch-Stouffville

Tracy Parsons (observing, partial hearing)

HEARD:

July 16, 2020 by telephone conference call

ADJUDICATOR(S):

Dan Weagant, Member

AMENDED

DECISION

AMENDED DECISION

In accordance with Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, as amended May 2019, 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 paragraphs [2] and [34] of the decision. The amendments have been underlined for ease of reference. There are no other changes in this amended decision.

OVERVIEW

1Aipco Inc. (the “Appellant”’) believes that the current value assessment returned by the Municipal Property Assessment Corporation (“MPAC”) for the 2017 taxation year for its property is too high, owing to the poor condition of the building and the property’s substandard drainage. As a result, the Appellant filed an appeal of the value returned.

2In accordance with s. 40(26) of the Assessment Act, R.S.O. 1990, c. A.31 (“Act”) the 2017 appeal was deemed for the 2018, 2019 and 2020 taxation years.

3The Appellant’s position is that the subject property should have an assessment of no more than $500,000, given its condition.

4For the 2017 taxation year, MPAC returned a value of $684,000. The value returned for 2018, 2019 and 2020 was $880,000. In response to the appeal, MPAC carried out an inspection of the property and amended its opinion of current value to $717,000 for all four years under appeal. This recommended value was apportioned as follows:

• In the Commercial property class: $512,700

• In the Commercial, Excess land property sub-class: $204,300

Areas of Agreement

5The Parties agree that the Subject Property is in poor condition and that the current value should reflect its condition. They also agree that the portion of the Subject Property included in the Commercial excess land sub-class should be 28.5 percent of the total assessment; the same percentage as was reflected in the original assessments, as returned.

Issues for the Hearing

6At issue in this proceeding is:

1. A determination of the current value of the Subject Property, with consideration of:

a. Comparable Properties;

b. The condition of the Subject Property; and,

c. The method of determining current value.

2. Whether an equity reduction in the current value should be made.

Result

7The Board finds that the current value of the Subject Property is $688,000. The Board also finds that there is no evidence to indicate that a reduction in this value is necessary for it to reflect equitable assessment.

8The assessment of the subject property at 6 Gormley Industrial Avenue is increased for the 2017 taxation year to $688,000. For the 2018, 2019 and 2020 taxation years the assessment is reduced to $688,000. For all four years under appeal, this value is apportioned as follows:

• In the Commercial property class: $492,000

• In the Commercial, excess land sub-class: $196,000

ANALYSIS

Description of Subject Property

9The Subject Property is a 1.02-acre parcel of land, improved with a 4,800 square foot, single-storey commercial building. The building was constructed in 1987 and includes a parking area, a septic system and a water well that were also installed in 1987, or shortly thereafter. The Appellant purchased the property in 1993. It is agreed by the parties that the building and surface works are in poor repair.

10The property exists in an area of similarly sized lots, supporting a range of commercial and light industrial uses. The subject property is zoned ‘General Commercial’ in the Town’s Zoning By-Law.

Issue 1 - What is the correct current value for the 2017, 2018, 2019 and 2020 taxation years?

11MPAC took the cost approach to determining the current value of the Subject Property. The cost approach separates the value of the land portion and the improvements of a property to arrive at a total current value.

Land Value and Comparable Properties

12To determine the land value, MPAC compared the Subject Property to vacant properties of comparable size and zoning in the area that sold on dates at or near the valuation day applicable to the taxation years under appeal. In this case the valuation day is January 1, 2016.

13MPAC identified five properties in the area that sold between July 2013 and January 2016 as vacant, unimproved land. The five sale values were time-adjusted by MPAC to reflect the effect of the passage of time between the sale dates and the valuation day. They were all in the immediate area of the Subject Property.

14The resultant range of time adjusted sale values in MPAC’s sample was $436,463 to $557,935. The median value per acre of these five sales was $517,819. By applying this median, time adjusted value to the Subject Property, MPAC derived a land value of $528,175.

15MPAC identified that the Subject Property differs from the five proposed comparable properties in its sample because it has both a septic system and a water well. MPAC’s position is that to equate the land values of the five comparable properties to the Subject Property, an accounting for these differences must be made.

16MPAC consulted with the local Municipality to determine an expected cost for the installation of a water well and a septic system. MPAC’s assessor testified that, based on this consultation the costs would be approximately $10,000 and $40,000 respectively. To account for these differences, MPAC added $50,000 to the land value determined, to arrive at a total land value of $578,175 or $578,000, rounded.

Value of Site Improvements

17The second part of MPAC’s cost approach to value was to calculate a value for the site improvements, based on its internally developed Automated Cost System, (or “ACS”). The ACS breaks down the building into its constituent components and applies a constructed cost per component. When these component values are added together, the total is known as the Constructed Cost – New (‘CCN’).

18To account for the passage of time and other impacts to the building’s value, MPAC applied a depreciation amount to estimate the loss of value from the CCN. In this case the depreciation applied was 58%. To illustrate the magnitude of this reduction in value, MPAC’s Assessor testified that the maximum depreciation used for commercial properties like the Subject Property is 60%.

19This high rate of depreciation was applied by MPAC because of the poor condition of the building and its component parts in comparison with other buildings of similar age and utility.

20Once the value of the building is determined by MPAC’s cost approach, the value of yard work is added. This normally includes such things as parking lots, lighting and landscaping improvements. To reflect the poor condition of the parking area and other site features, MPAC chose not to add any value for the purpose of assessment.

21The constructed cost new value determined by MPAC was $343,462. When the 58% depreciation was applied, the resulting value was $139,000.

22MPAC’s submission was that when the depreciated building value and the market-based land value are added together, the resulting $717,000 is a reasonable current value for the Subject Property.

23The Appellant had no documentary evidence to support his opinion of current value. He sought to impugn MPAC’s evidence because it was based on the values of other properties and did not reflect the true value of the Subject property. His position was that the subject property suffered from significant challenges, as follows:

a. The building has water damage stemming from leaks in the roof, windows and other structural components;

b. The Municipality has failed to maintain the municipal drainage system nearby. This, combined with the property being at a lower elevation than its neighbours, causes flooding of the property; and,

c. The electrical system in the building is substandard.

24The Appellant submitted that these conditions greatly impact the property’s value and would affect the amount of money the property would attract if it were sold.

25The Appellant cited a recent conversation he had with a local land developer who suggested that for the property to attract the best possible price, the building and other improvements would have to be removed and the grading would have to be amended. Using MPAC’s base land value of $528,000, the Appellant submitted that the work required to attract such a price would be in the $200,000 range based on this conversation. This led the Appellant to his position that the actual current value was approximately $328,000. He concluded his submissions by suggesting this value represented an overly aggressive position on his part and that he would be satisfied with a total current value of the Subject Property of $500,000.

Findings on Current Value

26The only documentary evidence before the Board on the question of current value is that of MPAC. While the Appellant consulted with people he knows in the real estate field, the conversations he had were not subject to cross examination by MPAC, nor were they corroborated in any way. For this reason, the Board gives less weight to the Appellant’s position.

27MPAC’s land value calculation uses five sales, four of which occurred in 2014 or earlier. These four properties range in size from 1.32 to 1.63 acres and carry Industrial zones.

28The fifth property, fronting on both Gormley Industrial Avenue and Woodbine Avenue (‘Woodbine’) shares a common boundary with the Subject Property and sold in January 2016, 27 days from the valuation day. It also has the same zoning and is 1.07 acres in size. MPAC considers this property to be the best comparable to determine the current value of the Subject Property, based on sales. The Board agrees. However, the Board also heard that given Woodbine’s frontage on Woodbine Avenue (a major thoroughfare) it has greater exposure than the subject property and therefore, would likely command a higher price. MPAC quantified this difference in value due to location by applying the median value of the five sales, arguing that the industrial values represented by the other four sales was reflective of a lower value per acre than the Woodbine property.

29The Board finds that the best evidence of the current value of the land portion of the Subject Property is the median, time adjusted sale price per acre derived from MPAC’s sample of five comparable sales, noting that it is the best indicator of value in evidence and provides a basis of value that is lower than the sale value of the superior Woodbine property. The Board finds that the land value of the Subject Property is $528,175.

30The second component of MPAC’s cost approach to value is the valuation of the site’s improvements. The Appellant submitted that the building and site works add no value to the property, and in fact would need to be removed to attract the best value for the resultant land.

31However, in cross-examination the Appellant agreed that the building had been in continuous use since the Appellant’s purchase in 1993. The Appellant also testified that the septic system and water well system were functional. The Board views this as strong evidence that the building and on-site utilities do in fact have value.

32The only documentary evidence of the building’s value at the hearing was that of MPAC. Using a depreciation of 58% of the CCN value, MPAC estimated the building to be worth $139,000 as of the valuation day.

33MPAC’s Assessor testified that he didn’t normally apply depreciation to the cost of on-site, private services like water wells and septic systems. His submission was that the value of those services, on a CCN basis would be approximately $50,000. This was neither agreed-to nor refuted by the Appellant. The Board is compelled to include some value for these services. The Board heard that they were installed when the building was constructed in 1987. Given that the $50,000 estimate in evidence is the CCN, it makes sense to depreciate this cost for age and loss of function over time. The only depreciation for improvements in evidence is MPAC’s 58%, as applied to the rest of the building improvements. The Board finds that the value of the on-site services is $21,000 by applying the 58% depreciation to the $50,000 estimate for septic and water services.

34Accordingly, the Board finds that the current value of the Subject Property is $688,000, as follows:

• Land portion: $528,175 ($528,000, rounded)

• Building portion: $139,000

• On site utility portion: $21,000

Issue 2 - When reference is made to the assessments of similar properties in the vicinity, does the current value determined for the Subject Property need to be reduced for it to reflect equitable assessment?

35Neither Party advanced a position on whether a reduction in the current value as determined is necessary for that value to be equitable. The Act requires the Board to reduce the assessment of the land if required to make the assessment equitable to that of similar lands in the vicinity. In this instance, the Board finds that there is no evidence to support a reduction in the current value determined for it to reflect equitable assessment.

CONCLUSION

36The Board finds that the current value of the subject property is $688,000. The Board also finds that there is no evidence to indicate that a reduction in this value is necessary for it to reflect equitable assessment.

ORDER

37The Board orders that the assessment of the subject property at 6 Gormley Industrial Avenue is increased for the 2017 taxation year to $688,000. For the 2018, 2019 and 2020 taxation years, the assessment is reduced to $688,000. For all four years under appeal, this value is apportioned as follows:

• In the Commercial property class: $492,000; and

• In the Commercial, excess land sub-class: $196,000.