Robert M. Robson, AACI, P.APP., CET
Professional Land Economist
Robson, McLean & Associates Inc.
Suite 1601 - 80 Richmond Street West, Toronto, Ontario M5H 2A4
Telephone: (416) 364-4600, Fax: (416) 364-1155
Internet: http://www.robson-mclean.com E-mail: robson@robson-mclean.com
There is little doubt in my mind, that some of the most interesting, and at the same time, perplexing appraisal problems flow from Section 14 (4) (b) of the Ontario Expropriations Act. The precise wording of this portion of the Act is outlined below:
(4) In determining the market value of land, no account shall be taken of,
(a) (b) any increase or decrease in the value of the land resulting from the development or the imminence of the development in respect of which the expropriation is made or from any expropriation or imminent prospect of expropriation;
This particular subsection was apparently incorporated into the Ontario Legislation in 1968 and was subject to some expansion of terms in 1972.
The intent of this clause appears to be founded upon fundamental fairness. A municipality, for example, should not be forced to pay prime development land prices for trunk servicing easements that form the underlying municipal service framework for the growing urban areas. On the other hand, an owner's compensation, when expropriated for open space and park uses, should be based upon a realistic assessment of the subject site's development prospects, without regard for the authority's ultimate land use intentions. The principle is simple enough, but it remains the blending of this principle within traditional appraisal practice that often presents some of the most difficult problems for the appraisal expert.
Take, for example, the co-operative development of the Federal Government (Pickering Airport) and the Provincial of Ontario (North Pickering (Seaton) Residential Community) in the early 1970's. In this instance, the announcement of the North Pickering project preceded, by almost two years, the actual expropriation. This two year delay coincided with a period of detailed land use and municipal servicing planning which accelerated the speculative prospects and therefore land values, within the area of the scheme.
The valuation technique that the then Ontario Land Compensation Board found acceptable (Wood et al vs. Ministry of Housing, 18 LCR 231 and Krabi et al vs. Ministry of Housing, 22 LCR 301) was a relatively unsophisticated system of estimating the market value of each respective property, at the announcement date, and then trending this value forward using sales and resales of somewhat similar, speculative properties within various other communities to the east of Metropolitan Toronto. In this instance, the impact of the co-operative development was so pervasive as to render virtually all of the development land sales within the Town of Pickering, after the announcement, as the subject of significant value escalations, over and above what could reasonably have been expected, without the enhanced prospects of the scheme and the municipal servicing timing generated by the scheme.
The North Pickering example illustrates how the imminence of a scheme had a fairly direct, positive impact on value, between the announcement date and the expropriation date. Similar escalations in value, which must be filtered out of the valuation equation, could be generated by a public transit scheme or a controlled-access highway interchange. Conversely, certain public requirements, within a neighborhood, may generate a detrimental impact on value. Examples of this type of influence could be a sanitary land fill site or a garbage incinerator. Whether it be a positive or a negative influence, general market activity within relatively similar communities, not necessarily the subject community, often represents the best guide to judgement available to the appraiser.
The Ontario Government's Parkway Belt West Plan and the various subsequent public acquisitions for utility corridors, controlled-access highways, trunk services and parks, have created a significantly more complex set of Section 14 (4) (b) valuation issues. Especially in the rapidly expanding urban areas to the north and west of Metropolitan Toronto, the Parkway Belt West Plan's land use controls have become so interwoven within the individual municipality's official plan and zoning by-laws, that it becomes very difficult to discern the influence of the scheme. Two particular examples of this point (Chappell et al vs. Ministry of Government Services, 28 LCR 182 and Zaichuk vs. Ministry of Government Services, 29 LCR 284) involved partial takings for the controlled-access Highway 403, in the vicinity of the Credit River, in central Mississauga.
These two expropriations were completed over three years after the government proposed the Parkway Belt West Plan, and, in this instance, the municipal land use control framework (Creditview and East Credit Secondary Plans) had evolved incorporating the 403 scheme within the Parkway Belt West reserve.
For illustration purposes, I will confine my remarks to the Chappell case, in that it illustrates virtually all of the appraisal problems created by the Parkway Belt West Scheme, as well as showing many of the difficulties and frustrations encountered by an owner of a prime parcel of development land, frozen by the Parkway Belt legislation. The Chappell holding contained 67.17 acres, in the central portion of Mississauga, and was located north of Burnhamthorpe Road West between the Credit River (on the west) and the main line of the Canadian Pacific Railway (on the east). The April 1979 partial taking from the Chappell property involved only 4.133 acres, at the northerly extremity of the subject site, for the purpose of the proposed Highway 403 and a 100 foot future utilities corridor which would have been isolated from the remaining Chappell lands by the highway right-of-way.
This case was originally heard by the Ontario Municipal Board in August of 1983 (28 LCR 18), the Ontario Divisional Court in November of 1984 (31 LCR 214), and the Ontario Court of Appeal in March of 1986 (34 LCR 207). The various appeals revolved around whether "the development" for the purposes of Section 14 (4) (b) of the Expropriations Act was the proposed highway, as found by the Divisional Court, or the Parkway Belt West Plan, as found by the Board.
The owner believed that the expropriation of the relatively small acreage, for the purposes of Highway 403, implemented the Parkway Belt Legislation, and, therefore, destroyed the site's overall development potential, as a result of the general open space designations that encumbered a majority of the property, within the Parkway Belt Plan. The Court of Appeal found that the designation of the remainder of this site for public purposes was not compensable and that compensation, for the owners, should be restricted to the market value of the lands actually taken. Therefore, in this instance, the owner was given full allowance for the part expropriated on the basis of its best use, "screening out" the whole Parkway Belt Plan, but the owner was not compensated for the down-zoning of the remainder of the property brought about by the overall plan.
In this appraisal exercise it became necessary to establish, with the assistance of a planner, the probable urban development format of this property, were it not only for the Highway 403 project but also the Parkway Belt West Plan. Market evidence of development land sales were then gathered and analysed to reflect an estimated market value consistent with the probable urban development scenario. It is vital, to most valuation exercises involving development land, to not only establish a comparable sales base that is likely to develop in a similar format as the subject site, but it must also develop on a relatively similar time table.
In this example, the Ontario Municipal Board found that development land sales within the neighbouring Creditview Community, situated immediately to the east of the Canadian Pacific Railway, were most indicative of the land values for the Chappell property. In this type of a situation, the appraiser's function, before beginning the mechanical operation of collecting and analysing sales, is to try to filter out all the influences that the scheme may have had upon the municipal land use control framework of the district. This exercise is often very time consuming and complex. It may be necessary to trace the history of the evolution of the local land use controls, for several years, in order to be sure that the project, or the authority, has not unduly influenced the development of the official plan, secondary plan, or zoning by-laws.
It should be noted that the City of Mississauga acquired the remaining Chappell property, in the mid-eighties, for a proposed botannical garden or for a use that generally conforms to the public open space uses envisaged by the parkway Belt West Plan. The valuation exercise and ultimate purchase was completed utilizing the 14 (4) (b) principle that the overall property would have developed in a fashion similar to the neighbouring Creditview Community or predominately low density, residential uses. Therefore, in this instance, while this particular owner was delayed in realizing the development potential of the site as a result of the plan, in the long term there was no monetary loss since full development land values were paid by the City of Mississauga.
Appraisers must always be mindful that public authorities, in order to protect an area that they ultimately intend to acquire, have sometimes been successful in influencing area land use controls. In an August 1988 ruling of the Ontario Municipal Board (Torvalley & C.I.B.C vs. M.T.R.C.A. 40 LCR 81) the question of an historical perspective of the evolution of local land use controls was addressed. This case involved the February 1987 expropriation of the Toronto Brickyard property situation on Bayview Avenue, in the City of Toronto. The Board said in its decision:
The Board has no difficulty finding therefore, that even though the first statement of acquisition intentions is clearly made approximately 28 years prior to the expropriation, that intent is continued and has been supported by ongoing statements of the respondent in published documents. That clearly brings it within the wording "imminent prospect of expropriation" in the Act and is therefore not to be taken into account in determining the market value.
That, in turn, affects a variety of other issues such as the willingness of the public authorities to process the application for Official Plan and Zoning Amendment and the approach to the granting of the necessary fill permit. It follows that these issues must be examined in the light of there being no prospect of expropriation.
In this particular instance, the Authority felt that the parcel (43 acres) should be worth about $4,000,000 since it was designated open space, and it did not have any development potential. The Board awarded the owners $16,150,000.
In summary, Section 14 (4) (b) is likely to present continuing challenges for the practicing appraiser, not only with reference to the Parkway Belt West Plan, but particularly in light of the several major land fill schemes being proposed within the Metropolitan Toronto area, as well as the various substantial public transit proposals like the Sheppard Avenue subway line. The key question that the appraiser must tackle is "How, when and in what format would this particular community have developed were it not for the public project?" This principle is fundamental to all municipal inquires with regard to official plan, zoning and servicing information upon which the eventual highest and best use assessment and value estimate will be founded.
