Report to: General Committee                                         Date of Meeting: November 26, 2007

SUBJECT:                          Crown Owned Properties – Payments in Lieu of Taxes

PREPARED BY:               Paul Wealleans, Director, Taxation

RECOMMENDATIONS:

THAT the report entitled “Crown Owned Properties – Payments in Lieu of Taxes” be received;

AND THAT Council support the motion by the Federation of Canadian Municipalities (FCM) requesting that the Federal Government withdraw its appeal for properties in the City of Montreal and pay its fair share of property taxes to the local government in communities where it owns property;

AND THAT staff be authorized and directed to do all things necessary to give effect to this resolution.

EXECUTIVE SUMMARY:

This report provides information relating to payments in lieu of taxes for Crown owned property.

FINANCIAL CONSIDERATIONS:

None.

PURPOSE:

This report recommends that Council support the motion by the Federation of Canadian Municipalities (FCM) requesting that the Federal Government withdraw its appeal for properties in the City of Montreal and pay its fair share of property taxes to the local government in communities where it owns property.

BACKGROUND:

At its meeting of  September 24, 2007, General Committee had before it a letter dated September 18, 2007 from the City of Mississauga with a resolution by the Council of the City of Mississauga in support of a motion by the Federation of Canadian Municipalities (FCM) requesting that the Federal Government “withdraw its appeal to be exempt from the payment of property taxes”. To clarify, the Federal Government is currently exempt from property tax and the FCM resolution, in fact, requests that the Federal Government pay its fair share of property taxes (by way of payments in lieu) to the local government in communities where it owns property. The specific appeal relates to three properties owned by the Federal Government in the City of Montreal.

Committee received the letter and referred it to the Commissioner of Corporate Services for a report back to Committee.

Property owned by the Federal and Provincial Governments in Ontario is exempt from the payment of property tax. Instead, there is federal and provincial legislation that permits both governments to make “payments in lieu” (PILs) of taxes for the properties they own. The legislation, in both cases, is permissive which means that as senior levels of governments they are not required to make payments but rather may make voluntary payments to municipalities in which its property is located.

In Markham, there are approximately 135 Federal Government properties that are eligible for a payment in lieu of taxes and 132 eligible Provincial properties. The Town’s share of payments in lieu billed for 2007 was $1.31 million.

Since the legislation that governs payments in lieu is permissive, the Town bills PIL properties based on the values on the assessment roll and the senior levels of governments pay based on their analysis of the values. Generally, both levels of government submit payment based on the Town’s billing. There have been instances where the Federal Government disagrees with the values placed by the Municipal Property Assessment Corporation (MPAC) or the classifications and have remitted lesser amounts. However, these are generally infrequent and these issues are then brought to the attention of MPAC by the Town for review. The situation with the Provincial Government is similar. There are, however, instances where it has been necessary for the Town to write-off  outstanding amounts of payments in lieu but in virtually all cases, it is because MPAC had incorrectly assessed or classified the properties or the valuation opinion differs.

OPTIONS/ DISCUSSION:

The issue that caused FCM to pass a motion that the Federal Government not file an appeal relates to three properties in the City of Montreal that have been under dispute for some time. The properties in question are Montreal port lands, a CBC building and Dorval’s Trudeau airport. The issues include the Federal Government’s use of a tax rate different than that struck by the City, paying significantly less annually by the port authority as it chose to excluded wharves and silos from payment, and nonpayment of outstanding taxes by subtenants at the airport. The total amount under dispute for the properties, retroactive to 2004, is estimated at $18 million.

The crux of the disputes is that the Federal Government has unilaterally decided to pay what it deems appropriate without regard to Montreal and Quebec’s assessment and tax regime. Under the current legislation, it has that right.

The resolution from the City of Mississauga that supports FCM’s motion makes it clear that a major reason for its action is the dispute between Mississauga and the Federal Government with respect to Pearson Airport. Significant airport expansion has occurred over the past few years with considerable financial investment which results in increased assessed values. There is, apparently, a dispute between Mississauga and the Federal Government on the amount of payments in lieu that the Federal Government should pay.

Although Markham has not experienced any dispute of that magnitude with the Federal Government with respect to payment in lieu of taxes, it is recommended that the Town support the FCM motion as that action would further support the principle that the Federal Government pay as billed and disputes be dealt with in a manner similar to other taxpayers.  The legislation governing these payments would likely need to be amended.

ENVIRONMENTAL CONSIDERATIONS:

Not applicable.

ACCESSIBILITY CONSIDERATIONS:

Not applicable.

ENGAGE 21st CONSIDERATIONS:

Not applicable.

BUSINESS UNITS CONSULTED AND AFFECTED:

None.

RECOMMENDED BY:

________________________                        ________________________

Barb Cribbett                                                   Andy Taylor

Treasurer                                                         Commissioner, Corporate Services

ATTACHMENTS:

None

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