In the recent case of Kitchener Frame Limited, the Assessment Review Board (“Board”) again considered the question of what constitutes a “use” with respect to a vacant unit application under s.364 of the Municipal Act, 2001 (“Act”). The property located at 1011 Homer Watson Boulevard in Kitchener (“Subject Property”) was constructed as a sport utility vehicle frame manufacturing facility that ceased operation in 2008. The Board was reviewing the vacancy rebate application made by Kitchener Frame Limited for the 2009 taxation year.
The total assessment of the Subject Property for the 2009 taxation year was $21,000,000. The total building area of the Subject Property was 1,210,438 square feet and the portion in question constituted 1,203,618 square feet of large industrial area.
The relevant section of the statutory scheme is contained in Ontario Regulation 325/01 at (1) which states that eligible property for the purposes of s.364 of the Act is “a building constructor on property that is classified in one of the commercial classes or industrial classes and is prescribed to be eligible property for the purposes of s.364 of the Act for a period of time if, (a) the period of time is at least 90 consecutive days; and (b) no portion of the building or structure was used at any time in the period of time.”
Subsequent to the closure of the manufacturing operations at the Subject Property during the 2008 taxation year the owner of the property began to disassemble the large industrial manufacturing equipment contained in the 1,000,000 plus square foot area that was once part of the manufacturing operation. It was in evidence that the assessment personnel for the City of Kitchener and a representative of the Appellant had agreed that an area of approximately 103,700 square feet had been sectioned off as equipment storage along with 5,000 square feet for storage of wire and a staff working area of 1,000 square feet that being utilized as staging areas for dismantling and removing the remaining equipment. The evidence presented indicated that in 2009 the activity within the remainder of the Subject Property was the dismantling and removal of equipment which was being sold as used equipment or as scrap. During the entire period, two to three staff members worked on the dismantling process. This was a reduction in staff from the over 2,000 personnel at peek operations in the years past. The Municipality conceded that production had ceased at the plant and that no part of the building was being used for the purposes of manufacturing any automotive parts.
The Board in making a determination began by reviewing the section 364 of the Legislation Act which states that “an Act shall be interpreted as being remedial and shall be given such fair, large, and liberal interpretation as best ensures the attainment of its objects.”
No reference was made by the Board with respect to the rules of statutory interpretation or any case law with respect to either interpretation of physical statutes or the interpretation of section 364. The Board held that the purpose of section 364 of the Act is that “every municipality should have a program to provide tax rebates to owners of property that have vacant portions if that property is in any of the commercial or industrial classes.” The Board found, as a matter of fact, that a staging area of 103,700 square feet was designated for equipment which was dismantled and taken out of the plant. Furthermore, both parties agreed that the remainder of the plant still had existing manufacturing equipment which was slowly being removed through the staging area. The Board noted that subsection 325.1(1) states that “no portion of the building or structure can be used at any time during the period of time for which vacancy rebate is claimed.” The Board concluded that based on the evidence “provided to the Board, it is clear that the building was not vacant.” The Board, despite the agreement between the parties being in evidence, concluded on its own prerogative that there was no evidence of physical separation between the staging area and the manufacturing area where the equipment lay idle. The Board found that the activity of the three personnel in removing the idle equipment from the over a million square foot industrial plant constituted a use under Regulation 325/01. The Board denied the application for vacancy on the basis that the dismantling and removal of the industrial manufacturing equipment for the purposes of auto parts constituted a “use” for the purposes of the statutory scheme.
This decision is quite opposite of the Board’s 2009 decision in the matter of 539843 Ontario Limited v. Marathon (Town), 2009 CarswellOnt 6779. Member Whitehurst found that section 364 and the related regulation provisions provide property tax relief for industrial and commercial businesses when a portion of the property is not used for 90 days or more. The Board states that “this situation often occurs when companies suffer from economic distress.” The Board believes the legislation is intended to promote the economy by helping businesses whether economic distress. Ultimately, the Board in that case determined that while emptiness may provide an indication as to whether or not a unit is being used, it is not the determinative factor. Member Whitehurst found that the restaurant in question was not eligible because it was not inhabited, unoccupied, and unused and that the furniture equipment remaining in the unit may have promoted the sale or lease of the property but does not constitute a use because it was not used for its intended function, which in that case was to prepare and serve food. Clearly these two decisions are on opposite sides of the spectrum and will require a future determination by the Board as to whether “use” under the statutory scheme requires a use of the property for its intended purpose or whether the section is indeed intended to assist tax payers suffering economic distress. It is our understanding that the matter of Kitchener Frames Limited is continuing a pursuit of its administrative remedies towards correcting the decision of the Board and reconciling it with its earlier decisions such as that of the Marathon case through the Board’s Request for Review process.