City of Windsor and Windsor Asset Management GP Ltd, Chrysler Canada Inc. Decision released on January 9, 2009

Background
• The subject property consists of land owned by the City of Windsor and improved with an office tower, retail space and a parking garage

• The Complainant, Windsor Asset Management GP Ltd, leases the tower and the retail space, pursuant to a 99-year lease dated November 15, 2000, which it purchased from the original tenant on or about August 16, 2004.

• The Complainant, Chrysler Canada Inc., is a subtenant of eight floors of the office tower pursuant to a lease date July 31, 2000, for a 20 year term.

Issues
• The City, supported by MPAC, served a notice of motion for production of materials. The focus of which was namely:

  • Any appraisals commissioned on the subject property from 2002 to present;
  • Particulars and cost details of all tenant improvements on the floors subleased by Chrysler
  • Leasehold costs.

• The City also submitted that as an active participant in the appeals, that had delivered signed Confidentiality Agreements were entitled to receive production directly from the Complainants and should not have to go to MPAC to get copies.

• The City submission stated that any appraisals obtained or relied upon by the Complainant, in its purchase of an interest in the subject property in August 2004, are relevant to the weight to be placed upon the sale and, accordingly, are relevant, or at least have a semblance of relevance, to the issue to be determined in the complaints.

• As regards the tenant improvements and leasehold improvement costs the City points out that the value of the subject property must be determined “including all assessable improvements”. MPAC supports the City’s position that tenant improvements and leasehold improvements costs are relevant.

• On the issue of direct production, Council for the Complainants submitted that:
  • A municipality has no statutory right to obtain production about anything;
  • There would be a reluctance to disclose confidential documentation and information without a safeguard of MPAC being able to keep it secure;
  • In the past, sensitive information given to another municipality had been made public by a councillor.
• With regard to the appraisals, Council of the Complainants submitted that:
  • There is no semblance of relevance between the contested materials and the matter in dispute;
  • There is no evidence before the Board, and nothing in the City’s Responding Statement of Issues, to show that the contested materials are relevant;
  • There is no evidence to establish a connection between the contested materials and the valuation methodologies proposed by the City’s Responding Statement of Issues, namely the cost, sales and capitalized income approaches;
  • The appraisals sought are valuations of a leasehold interest in part of the subject property, and have no bearing on the current value of a fee simple interest in the whole property;
  • The City’s motion in respect of the contested materials is a classic “fishing trip”;
  • The onus is on the City to show that the contested materials are relevant, and the City has not met that onus;
  • The appraisals contain limiting conditions, which prohibit disclosure without the authors’ consent;
  • Confidential disclosure agreements with the authors have been entered into to the same effect;
  • The authors of the appraisals refuse to consent to their disclosure in connection with the complaints before the Board;
  • The Complainants will not tender the appraisals in evidence, and will not call their authors as witnesses;
  • Both appraisals are in the hands of the Complainants solicitors, but are held for other clients;
  • The City should have served its Motion Record on the corporations which had commissioned the appraisals.
• With regard to tenant improvements and leasehold costs, Council for the Complainants cited the Board’s recent decision in the Toronto Bank Tower case, which turned on the Board’s finding that tenant improvements have value in use, but zero value in exchange, and that the assessments have to be valued on value in exchange

Decision
• The Board recognises that there may be a concern that confidential documentation or information provided to a municipality might be made public, but does not see how the risk would be lessened by production through MPAC, subject to a Confidentiality Agreement. Municipalities are more and more taking an active part in proceedings before the Board, and they must be recognised as full parties, with all the rights and responsibilities of parties, including the full right to obtain production of confidential documentation and information and their responsibility to keep such documentation and information secure. The Board finds that production should be made directly to the City, subject to the signing of a Confidentiality Agreement.

• The Board is not persuaded that there is a significant risk of injury to anyone resulting from production of the appraisals being ordered, nor that the injury that might result would be greater than the benefit gained for the correct disposal of the complaints ordering production.

• In these circumstances, the Board is not satisfied that the appraisals are not in the possession, control or power of the Complainants.

• While there may be merit to the Complainants’ position that the contested materials are not relevant, that is not an issue for this Board to determine. All this Board needs to decide is whether or not the City has shown that there is at least some semblance of relevance.

• Having found that the appraisals have a semblance of relevancy and that the production is not barred by privilege based on confidentiality the Board orders the Complainants to produce to the City copies of the appraisals, in so far as in their possession, control or power.

• Having found that the contested materials in regard to tenant improvements and leasehold costs have a semblance of relevancy, the Board orders the Complainants produce to the City copies of those materials.



Interesting Appeals Assessment and Taxation Updates Chrysler Canada Limited and the City of Brampton – ARB

For the 2003 taxation year, a 357 (1)(g) Cancellation, Reduction or Refund of taxes was brought before the Board on the basis that “the normal use” of the building was not being conducted effective August 26, 2003 to December 31, 2003.

The normal use of the premises was not being conducted because of the retooling (major repairs to equipment) of the facility, whereby the assembly lines were decommissioned and demolished.

It was argued by appellant counsel that the retooling of the facility prevented the normal use of the premises which both parties agreed was the production of automobiles for retail sale.

For Chrysler to qualify for a 357 (1)(g), the Board must also find that the machinery and equipment used for manufacturing is “land” pursuant to the fact.

The appellant explained that the meaning of land and building should be read to include all structures, machinery and equipment used for manufacturing and therefore any change in the operation of the equipment deemed it unusable and impeded the taxpayers ability to pay taxes.

The respondent argued that the definition of land pursuant to the Act is clear and only includes the building and as the elements such as machinery and equipment are not specifically referred to in the definition of land under the Act, they should be from section 357 (1) of the Act.

The Board learned that the appellant had proven that the normal use of the word “building” would include all fixtures and fittings affixed to the building. Further, the Board believes that Respondent position was too restrictive as to exclude activities that both parties accepted.

In the Board's decision, the following points were taken into consideration

  • Normal use of producing automobiles for retail sale could not be conducted
  • After the retooling of the facility, the intended use of the building was to continue production of automobiles for retail sale
  • Commencing August 26, 2003 to December 31, 2003 the Board found that the appellant should be granted a reduction of $1,798,256.91

Interesting Appeals Assessment and Taxation Updates Sears Canada Inc. - The City of Calgary

Interesting Appeal: The City of Calgary appealed a decision made by the ARB for assessment years 2005 and 2006 pertaining to two regional shopping centres; where the tenant (Sears Canada Inc) was situated. The ARB had passed the decision that the Fair Market Rent for the full-line department store should be reduced to $4.00/sq. ft. The City appealed and took the position that any large retail space in an enclosed centre was an appropriate comparable and the fair market rent should be increased to $5.00. However, Sears argued that the lease rates paid by tenants of full-line department stores are higher than Fair Market Rent and should only be compared to leases of the same; therefore, only 4 comparables were used to determine an average rate per square foot of $4.15 which relates to that of $4.00 decided by the ARB. The Municipal Government Board took the position that there was not enough evidence that yielded a fair market rent of $5.00 given by the assessing authority, and agreed with the $4.15 rate posited by AEC.