June 07, 2010
A dozen years after Ontario overhauled its property assessment system, Toronto’s biggest office towers bearing the names of the Big Five banks are still fighting for lower assessed values.
The towers carried their battle to Ontario’s highest court Monday, looking for a decision that could ultimately help them win tax refunds of up to $150 million, and see their assessed value reduced by $1 billion or more.
No one is quite sure what the final numbers would be, but the Municipal Property Assessment Corp. has put the towers’ collective assessment as high as $4.7 billion, while the towers have argued for a value in the range of $3.4 billion.
Even lawyers fighting the case acknowledge that the legal tools and principles at stake are far from obvious; one lawyer described the calculations as “esoteric.”
“I understand it because I’ve worked in this business for 30 years,” Richard Poole, a lawyer for the towers, told a three-judge panel of Ontario Court of Appeal.
But the case is not just of interest to the tenants of the bank towers – who ultimately pay the property taxes – or a gaggle of assessment lawyers.
Larry Hummel, who heads the Municipal Property Tax Assessment Corp., which is defending the assessments, says the case affects all property taxpayers.
“It would be a reallocation of tax burden,” if the towers win their case, Hummel said in an interview. “If someone doesn’t pay, someone else has to pay.”
That gives an edge to the arcane arguments of the case, which centre on the meanings of phrases that only lawyers could love, or even think of.
The Assessment Act says that assessments should be based on a property’s value “in fee simple, if unencumbered.”
Poole and the office tower lawyers argue that the words mean the towers should be valued the same way a house is valued – as an empty, unfurnished building.
The assessment corporation, and the City of Toronto, argue that traditionally commercial buildings are valued as operating enterprises, with tenants in place and a stream of income that can be given a value by relatively straightforward calculations.
The way the towers value the buildings would produce a lower value.
Their lawyers argue that if the Legislature had meant the buildings to be valued as operating enterprises, they would have said so. In B.C., for example, legislation says commercial buildings should be valued as going concerns.
Another arcane legal phrase that would have accomplished much the same purpose, they said, would have been to decree that the buildings should be valued based on “leased fee at market.”
But the Legislature chose otherwise, they said, and both cities and taxpayers are stuck with it.