Law Times

PAGE 8 An online resource 1.800.263.3269 Focus On MUNICIPAL & PLANNING LAW Golf courses lining up for tax refunds New assessment framework has resolved appeals at 245 facilities BY GLENN KAUTH Law Times H undreds of Ontario golf courses are cashing in after a test case last year led to a frame- work for resolving a litany of property tax as- sessment appeals. Th e test case involved ClubLink Corp., the owner of the storied Glen Abbey golf course in Oakville, Ont. It and other golf courses, with the support of the Na- tional Golf Course Owners Association Canada (NG- COA) had been challenging their assessments since the Municipal Property Assessment Corp. changed its valuation method in 2001 following the introduction of current value assessment. Th ey launched roughly 3,000 appeals of those as- sessments, which resulted in signifi cantly higher property tax bills for them, to the Assessment Review Board during the subsequent years. As Larry Hummel, MPAC's vice president of valuation and customer rela- tions for business properties, points out, 491 of the ap- proximately 850 golf courses in Ontario appealed their assessments during those years. Of those, MPAC and the taxpayer have resolved appeals related to 245 golf courses since the ClubLink deal last year. Resolutions are close to reality at a further 135 golf courses, while the cases at the remaining facilities are still at the stage of providing fi nancial information, Hummel notes. "We set out a framework or a basis which the NG- COA could endorse as a methodology to get the value of the real estate," says Hummel. In the Glen Abbey case, the deal "severely lowered" ClubLink's assessment, says Erica Roberts, manager of revenue and taxation for the Town of Oakville. "As you can imagine, we were quite disappointed," she adds, noting the town had made its case in favour of the previous assessment method as a third party be- fore the board when MPAC and ClubLink suddenly announced the deal. Still, she notes Oakville council has since approved the agreement. At the same time, she says that while colleagues elsewhere have told her the new assessment method could result in very signifi cant reductions in golf courses' land value, facilities that have commer- cial operations like a restaurant would still have to pay a higher rate for that part of the business. Neverthe- less, she calls the saga a "sad story for municipalities because, as I said, it's going to mean millions of dol- lars across the province." 'Generally speaking, the assessments were reduced because they were overvalued in the first place,' says Jeff Cowan. Jeff Cowan, a partner at WeirFoulds LLP whose practice deals in part with municipal assessments, notes current value assessment brought in a signifi cant change to the way the government valued golf courses for property tax purposes. "Th e historical problem was courses tended to be valued on the value of the land and the cost of the buildings on them," he says. But the change in assessment regimes led to what is called an income approach that looks at, for example, the amount of sales per area of land. But that creates a challenge as authorities are supposed to assess land only according to the real property without including what's called the business enterprise value. In the case of shopping malls, Cowan notes, assessments consider the value of the rent earned but not the revenue of the stores inside in order to avoid valuing the business. For a time, then, MPAC moved to what's called a green-fee multiplier. In general, that involves tak- ing the number of rounds played per year multiplied by the fee charged. Such an income approach would also include other revenue like cart rentals and shop sales minus costs and operating expenses. Th at gives a net income to be capitalized along with provisions for personal property. But as Hummel points out, the original green-fee multiplier was a "rough" approach that didn't neces- sarily take into account the various income scenarios of golf courses around the province. Some clubs, for example, run on a for-profi t basis, while others are non-profi t operations. As well, not all courses charge green fees. "Th e problem was the initial MPAC model just overvalued golf courses," says Cowan. "Th ey tended to be low on their cost of sales," he adds. But Cowan notes there was good reason to be con- cerned about golf course assessments in the fi rst place due to relatively low values, particularly since it was hard to get an accurate number for them as they often weren't selling in urban areas at current prices. At the same time, Hummel says the new frame- work requires assessing the properties on the basis of their highest and best use as a golf course. Th at means that if the land could be subject to development, the framework wouldn't apply. But in cases where there's restrictive zoning or a conservation designation on the land, a golf course would be the highest and best use. Essentially, Hummel says the new pro forma or in- come approach to golf courses allows for consideration of more detailed fi nancial information that takes into ac- count, for example, the fact that a facility might charge players a reduced green fee at times of low demand. Th e result, however, is that many golf courses will get retroactive tax decreases for the years they appealed and pay less in the future, something that obviously concerns people like Roberts. Cowan, how- ever, says another way of viewing the issue is that golf courses were paying too much in the fi rst place under the revised assessment regime. At the same time, he notes municipalities are required to hold reserves as provisions for adverse tax appeals. "Generally speak- ing, the assessments were reduced because they were overvalued in the fi rst place," he says. Toronto businesses to report toxics this week T BY GLENN KAUTH Law Times oronto residents are one step closer to having information on toxic substances in their neighbourhoods as businesses face a deadline of this Th urs- day to report on the chemicals they use and release. Th e requirement is part of the City of Toronto's land- mark environmental report- ing and disclosure bylaw. Under the provisions, busi- nesses must report their use of 25 chemicals and substances deemed to be harmful to the public. Large companies have long had to disclose similar types of information under the federal government's national pol- lutant release inventory, but the Toronto bylaw will aff ect much smaller facilities such as the local dry cleaner and print- ing and publishing businesses. "I think that a lot of small businesses will have a lot of administrative responsibility," says Lana Finney, a partner with Davis LLP's environ- mental and municipal groups. She notes the bylaw requires reporting of the amount of each substance manufactured, processed, used, and released to the environment. Rich Whate, a health pro- motion consultant involved with the ChemTRAC pro- gram that resulted from the bylaw, says the city has worked to minimize the burden for businesses. "We weren't in- tending to make this burden- some to business," he says. Whate gives the example of how things work with volatile organic compounds, a key component in smog. Th e substance evaporates off paint used at businesses like auto shops. Whate notes in- formation on the amount of the smog-causing substance is available on material safety data sheets that come with the www.lawtimesnews.com product and that businesses can calculate their numbers by looking at how much paint they use and the effi ciency of the guns. At the same time, the city has provided tools such as online calculators to help businesses with their re- porting obligations. Toronto is rolling out the program in three phases. Un- der the fi rst phase, only certain businesses — food and bever- age manufacturers, print- ing and publishing facilities, chemical producers, wood industries, power generators, and water and wastewater plants — must report by June 30. In the second phase, which June 27, 2011 • Law Times begins this year, other busi- nesses such as dry cleaners, auto shops, and funeral homes must track their data in order to report by 2012. In that year, the bylaw takes eff ect for all remaining facilities that then have to report by 2013. Penal- ties for failing to comply range from $5,000 for a fi rst off ence to $100,000 for a third or sub- sequent infraction. Th e bylaw is a unique eff ort in Canada to provide commu- nities with information about the substances in their neigh- bourhoods. "Certainly, at the time this was passed, it was groundbreaking for Toronto to See Online, page 9

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