In a mid-pandemic decision on municipal parkland charges, the Ontario Land Tribunal has clarified the procedure for determining the amount required for cash-in-lieu of parkland, as well as the extent to which COVID-19 has had an effect on the valuation process.
Section 42 of the Planning Act provides the framework for municipalities to require the conveyance of parkland or else a cash-in-lieu payment as a condition of development. An applicable bylaw may require up to 2 percent of the lands for industrial and commercial developments or up to 5 percent in all other cases. In residential cases, a bylaw may alternatively impose the rate of up to one hectare for each 300 dwelling unit proposed.
Developer Challenged Parks Levy Payment to Ontario Land Tribunal
The Applicant, Widmer-Adelaide Corp., is the developer of the “Downtown West” project located at 8-30 Widmer Street in the busy King Street and Spadina Avenue area of Toronto.
The City notified the Applicant that the total amount of the Parks Levy Payment (including an appraisal fee) was $7,819,421.80, and $5,701,117.15, for 8 Widmer Street and 30 Widmer Street, respectively. These levy notices featured no reference to how the City arrived at their value determination, resulting in the Applicant submitting payment under protest and bringing the matter before the Ontario Land Tribunal, pursuant to s. 42(12) of the Planning Act.
Disagreement Based on Appraisal Method Used to Determine Cash-in-Lieu Amount
In the event of a dispute over parkland valuation, an application to the Ontario Land Tribunal is guided by section 42(10) of the Planning Act, whereby the required amount of cash-in-lieu is determined based on the appraised value of the lands that would have been required to be dedicated, as of the valuation date (typically, prior to issuance of first building permit). The Tribunal’s valuation process accords as nearly as possible with valuation under the Expropriations Act.
At the Ontario Land Tribunal, while both parties agreed to the valuation date of September 3, 2020, and that the highest and best use of the subject lands is high-density mixed-use redevelopment, there was disagreement as to how the appraisers arrived at their values determining the applicable cash-in-lieu amount.
The Applicant sought a market value based on a unit rate of $170 per square foot for both towers’ residential and non-residential gross floor areas. The City, in contrast, asserted a market value based on $190 per square foot for the commercial portion and $300 per square foot for the residential portion of the gross floor areas in the north tower (30 Widmer), and $255 per square foot for the residential gross floor area of the south tower (8 Widmer). These differences resulted from the City’s expert using the qualitative adjustment technique in her analysis of the comparable properties she chose, in contrast to the Applicant’s expert, who used both quantitative and qualitative techniques.
City Argued No “COVID Adjustment” Should Apply to Valuation
There was also disagreement on the effect of the ongoing COVID-19 pandemic in determining the correct valuation. The Applicant’s expert witness relied on a 12.5% downward adjustment to the prices of the comparable sales negotiated before the onset of the pandemic, estimating a 10-15% decline in land value attributable to the pandemic for condominium properties within the City’s downtown core as of September 3, 2020. In contrast, the City believed that a “COVID adjustment” should not be made. Significant time was devoted by the expert witnesses attempting to quantify the effect COVID-19 had on the City’s downtown condominium market, as well as the Applicant’s expert witnesses’ inclusion of valuation adjustments based on pre-sale discounts and “view/shadow encumbrance.”
Ontario Land Tribunal Accepted Developer’s Valuation Method & Downward Effect of COVID-19
The Tribunal ultimately found in favour of the Applicant, accepting both the Applicant’s planner and real estate appraiser’s evidence regarding the market value determination of 8-30 Widmer Street as well as the downward effect COVID-19 had on the Toronto condominium market. It found that even in a generally rising market, the “noticeable slow-down in condominium apartment sales and prices during the pandemic period would reasonably be expected to have a negative effect on land values”. The Tribunal ordered the City of Toronto to refund the overpayment sum of $4,698,173.95 to the Applicant.
City Admonished for Overcharging Developer for Appraisal Fees
In their decision, the Tribunal also ordered the City to refund the Applicant’s overpayment of the appraisal fees charged by KPMG, admonishing the City for charging an amount admitted to be in excess of what they paid KPMG for the work performed on their behalf.
This decision serves as a reminder that land value determination for parkland purposes is a contextual exercise which should be transparent and account for broader market trends. It also sets an informative precedent in the context of the COVID-19 pandemic, which will continue to affect land valuation and municipal decision-making in diverse areas.
Duncan, Linton LLP Provides Robust Municipal Law Solutions in Waterloo
At Duncan, Linton LLP, our team of skilled municipal lawyers have significant experience assisting municipalities and private organizations with all matters relating to municipal bylaws and policies. We also represent clients in substantial matters before the Ontario Land Tribunal. To speak with a lawyer, please contact us online at [email protected] or by phone at 519-886-3340 to make an appointment.