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March 5, 2008
Toronto City Council votes to appeal bank towers’ ARB assessment
  
Toronto City Council voted today to appeal the recent Assessment Review Board (ARB) Interim Decision on six office tower complexes in Toronto’s downtown financial core referred to as the “Bank Towers” (Scotia Plaza, BCE Place, First Canadian Place, Royal Bank Plaza, Commerce Court, and the Toronto-Dominion Centre).

The ARB’s Interim Decision, released on February 22, sets out a methodology for determining the “current value” of the properties based on the ARB’s interpretation of parts of the Assessment Act, in particular the meaning of “current value.” However, the Interim Decision does not make a final determination of what is the correct “current value” assessment for the properties.

The interpretation of current value and the methodology adopted by the ARB differs significantly from that used by the Municipal Property Assessment Corporation (MPAC) in assessing income-producing properties, such as office buildings and shopping centres:

• MPAC has consistently valued commercial properties with the aim of establishing what the property would sell for in the open market “as is” (i.e. occupied and finished, with an allowance for average vacancy rates).

• The ARB’s Interim Decision directs that commercial properties should be assessed as if the property is vacant on the date of valuation and unfinished (i.e. the current value should not include a value for tenant finishes).

If the ARB Interim Decision stands, it is estimated that the current value assessment and associated property taxes on the Bank Tower properties could be reduced. The result would mean that the total assessed value for the commercial property class would drop, resulting in a reduction in the City’s commercial tax levy.

“I’m very concerned about the impact of this decision if it is allowed to stand,” said Mayor David Miller. “It cannot go unchallenged.”

The properties under appeal include 12 large “AAA” office buildings that house the headquarters for banks, national law firms, insurance companies and many other well-known national enterprises.

“Since the CVA of the properties has not yet been determined by the ARB, it is not possible to calculate the detailed tax revenue impacts for the City at this time,” said Joe Pennachetti, Deputy City Manager and Chief Financial Officer for the City of Toronto. “However, any decrease in the commercial taxes would have to be recovered with a tax increase on all property classes.”

These properties represent the most valuable commercial properties in the city and their current value assessment (CVA) serves as a benchmark against which the CVA for other properties in the downtown will be compared. The ARB decision could also have significant implications on how all commercial and other income generating properties across Ontario are assessed.

In releasing its Interim Decision, the ARB has directed the property owners, the City and MPAC to undertake a further analysis of market rents in light of the ARB’s interpretation. A final decision on this matter could take months.

Toronto is Canada’s largest city and sixth largest government, and home to a diverse population of about 2.6 million people. It is the economic engine of Canada and one of the greenest and most creative cities in North America. In the past three years, Toronto has won more than 70 awards for quality, innovation and efficiency in delivering public services. Toronto’s government is dedicated to prosperity, opportunity and liveability for all its residents.


Fact Sheet - Bank Towers - Interim Assessment Appeal Decision

§ On February 22 the Assessment Review Board (ARB) released an Interim Decision regarding a series of assessment appeals for taxation years 2001 and 2002 filed on six office tower complexes located in the city’s downtown financial core referred to as the “Bank Towers” (i.e. the properties known as Scotia Plaza, BCE Place, First Canadian Place, Royal Bank Plaza, Commerce Court, and the Toronto-Dominion Centre).

§ The ARB was to determine the correct “current value assessment,” or CVA, of the properties (as defined in the Assessment Act). All parties to the appeal hearing (the property owners, the Municipal Property Assessment Corporation (MPAC), and the City) agreed that the assessed value should reflect a valuation based on an income approach.

§ Expert appraisers were called to give valuation evidence during the hearing as to the CVA for the Bank Towers. A significant issue at the ARB hearing was whether existing leasehold interests and interior finishes should be reflected in the assessed value of the properties.

§ This ARB decision did not provide an amended CVA for these properties. Instead it set out a methodology for determining the “current value” of the properties based on the ARB’s interpretation of the terms “current value.”

§ The interpretation of current value and the methodology adopted by the ARB differs significantly from that used by the MPAC in assessing income-producing properties, such as office buildings and shopping centres:

• MPAC has consistently valued commercial properties with the aim of establishing what the property would sell for in the open market “as is” (i.e. occupied and finished, with an allowance for average vacancy rates).

• The ARB’s Interim Decision directs that commercial properties should be assessed as if the property is vacant on the date of valuation and unfinished (i.e. the current value should not include a value for tenant finishes).

§ The ARB has directed that the parties undertake further analysis of the market rents for the buildings based on the methodology and interpretation set out in the Interim Decision, and to report the findings to the ARB pending the release of a Final Decision.

§ If the ARB Interim Decision stands, it is estimated that the assessed value and thus the property taxes on all 12 Bank Tower properties will be reduced.

§ This will mean that the total assessed value for the commercial property class will drop, resulting in a reduction in the City’s commercial tax levy. Any decrease in the commercial tax levy would have to be recovered from all property classes, in proportion to the tax ratios.

§ Since the CVA of the properties has not yet been determined by the ARB, it is not possible to calculate the detailed tax revenue impacts for the City at this time.

§ The properties under appeal include 12 large “AAA” office buildings that house the headquarters for banks, national law firms, insurance companies and many other well-known national enterprises. These properties represent the most valuable commercial properties in the City and their CVA serves as a benchmark against which the CVA for other properties in the downtown will be compared.

Media contact:
Cindy Bromley, Finance and Administration Communications Manager, 416-392-4993, cbromley@toronto.ca


 

 

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