Review board decision will raise assessment on gravel pits in county

WELLINGTON COUNTY – Warden Kelly Linton called a provincial Assessment Review Board (ARB) decision that will see assessment on some area gravel pits rise by more than 60 per cent “a step in the right direction.”

However, the warden said the March 29 decision “doesn’t go far enough” to address inequities between taxes paid by aggregate producers in comparison to owners of residential and commercial properties.

There are approximately 50 licensed gravel pits in the county’s three southernmost municipalities.

The county appealed the assessments from the Municipal Property Assessment Corporation (MPAC) for the 2017 through 2020 taxation years on pits located in tPuslinch, Guelph/Eramosa and Erin as being too low.

In collaboration with the property owners, operators, licensees and MPAC, the county agreed to prepare appeals on six gravel pits, as representative cases for hearing purposes.

The six pits include: the Dufferin Pit, Capital Pit and Roszell Pits one and two in Puslinch and the Hillsburgh/Huxley Pit in Erin.

The properties under appeal were previously assessed at $9,200 per acre and the decision will increase that to $15,080 per acre for the five-year period covered by the appeal.

That period includes 2021, as the board assumed any pending appeals would be dropped in light of the interim decision.

While the decision applies directly to the six “representative” cases, Wellington County treasurer Ken DeHart expects it will have implications for all cases under appeal.

“The intent was for the decision to apply to all 50 in Puslinch, Erin and Guelph/Eramosa,” he explained.

“I expect the decision will apply to all 50 pits in those areas – but there still remains an implementation period and the owners of those other 44 pits may still have the ability to bring their particular property to a hearing.”

The county had argued for a substantially higher assessment, contending all land licensed under the Aggregate Resources Act should be classified in the industrial property class.

Taking into account a range of sale values of vacant land available to be developed as a gravel pit, along with the range of values demonstrated by the assessments of industrial land in that area, the county argued assessment of up to $137,000 per acre would be more realistic for some of the properties.

However, among its findings, the board ruled gravel pits are unique in Ontario due to legislation that sets them apart by distinguishing the value of the aggregate itself from the cost of the land.

“Therefore, the only properties that can be reasonably compared, that share the uniqueness of gravel pits, are other gravel pits,” states the decision, signed by board members Dan Weagant and Vincent Stabile.

The board notes none of properties used in county comparisons were gravel pits.

The decision states: “The board finds that $5,000 per acre should be added to the $10,080 per acre purchase price for a value of $15,080 per acre, exclusive of the value of the improvements on the land and the value of the mineral in or under the land.”

“We feel that this decision is a step in the right direction,” stated Linton in an email to the Advertiser.

“This ARB ruling begins to address the actual use of the property in terms of the classification. However, it is critical that the Municipal Property Assessment Corporation independently determines/confirms the proper acreage allocation. The values better reflects gravel properties in rural areas.”

However, Linton added, “It doesn’t go far enough because aggregate operations in prime industrial areas near busy transportation routes and close to urban centres are still vastly undervalued.

“These properties do not reflect market value –meaning that these properties are still being subsidized by small businesses and residents in these areas.

“Many large multinational aggregate producers are paying a small fraction of taxes of neighbouring properties.”

“We’re calling this a modest victory,” said DeHart.

“It’s a first step in the right direction – but the gravel pit properties in proximity to the 401 remain vastly under-assessed.”

DeHart notes the board didn’t distinguish a difference in land value from pits that are located in more rural areas versus pits that are located closer to urban/industrial areas.

“They ended up picking the sale of a property that was located in a rural area and applying that sale across the board to all six representative cases.”

He continued, “The number they arrived at is in the range of values that we were seeking for pits in rural areas – but is nowhere near the land value of business properties by the 401.”

DeHart said the county will consider appealing the properties by the 401 again in the future, but possibly on their own without the need to appeal all 50 properties in the southern part of the county.

“We can’t appeal the current cycle again, so this would have to be determined for a future cycle if MPAC doesn’t determine an acceptable methodology moving forward to account for those locational influences to value,” DeHart stated.

He added owners of the pits could appeal the decision, but only on the basis of law, “not just that they don’t like the decision.

“They need to apply to a higher court on the basis that the board got it wrong because they made an error in the application of law.”

DeHart said it’s not possible to estimate the full financial impact of the decision on the county, as “numbers aren’t finalized and will be subject to MPAC revaluing the properties and applying the new classification methodology, which will take some time to figure out.”

However, he pointed out, collectively the 50 gravel pits and quarries involved in the appeal currently pay $757,590 in property taxes annually ($442,000 to the county, $152,000 to lower tier municipalities and $163,000 for education), an average of just over $15,000 per gravel pit for all three levels of government.

He notes the assessment value of the pits has been increased by 64%.

Also as a result of the decision, the acreage on the properties that falls under industrial classification will increase and industrial tax rates are 2.4 times higher than residential rates in the county.

DeHart explained the decision is called an “interim ruling” because the board made a decision on how the properties are to be valued.

However, he said it will be MPAC’s responsibility to implement that decision for each property.

“The rate per acre of industrial land value was determined by the board to be $15,080/acre. However, another significant part of the decision was that the property owner’s determination of the portions of the property that were considered to be industrial was too narrow,” said DeHart.

“The board expanded the definitions of the property acreage that should be included in the industrial class. MPAC will need to take the board’s decision and apply it to each of the properties.”

In addition to the local impact, DeHart believes the decision will have province-wide implications.

“The ARB decision essentially threw out MPAC’s methodology for coming up with the assessment values of the pits,” he said.

The decision states, “…the board does not agree that the formula developed and adopted by MPAC is reasonable.

“This approach to assessment applies an agreed-to value, based on marginal farmland rates in the county. There was no evidence at the hearing to suggest only marginal farmland is purchased for the purpose of developing land as gravel pits.”

The decision continues, “This approach does not demonstrate the value established in sales transactions for lands being developed for gravel pits, as required when applying the cost approach to value. Nor does it meet the definition of current value in the Act.”

Linton said the county is just seeking fairness for all classes of taxpayers.

“It is really simple for us. Wellington County just wants all property owners to pay their fair share,” the warden stated.

“This recent decision brings the assessed value of the (aggregate producing) properties closer to reality, with some exceptions – like the properties located near the 401 in Puslinch.”

Linton added, “For years, Wellington County has been clear in our position that we are seeking fair assessments on all aggregate operations across the county.

“We are pushing for a permanent policy solution that achieves fair assessments and taxation in order to avoid these ongoing disputes.”