Background

PILTs – Payments in Lieu of Taxes - are charges that municipalities levy on federal government agencies, i.e. Crown corporations, on land and services owned and used by the corporation.  In the case of a dispute between the municipality and Crown corporation, the Minister involved can strike a PILTs Resolution Panel (Panel).

The Supreme Court of Canada handed down a decision this spring that had a bearing on how PILTs are determined.  According to the Montréal (City) findings, the amount that a Crown corporation pays the municipality is determined by two factors: the effective rate of taxation at the corporation’s discretion; and the corporation’s view of what it considers a reasonable effective rate.

The Court defined “effective rate” as the rate of real property tax or of frontage or area tax that, in the opinion of the Minister, would be applicable to any federal property if that property were taxable property.”

These findings as applied to the TPA’s and City’s dispute over PILTs means that the TPA was to determine the taxable value of each of four properties: the Polson Slipwater lot; the Outer Harbour Marina; the Cherry Street Marine Terminal Buildings; and the island airport.  Then the TPA was to apply the effective rate (based on reasonableness) to the value of each of the properties.

In March 2002, the City requested that the TPA submit PILTs.  After waiting four years without results, the City initiated the Resolution Panel process, on April 13, 2006.  Two years later, on February 25-28, 2008, the Panel finally held hearings.

The City based its claim on the taxable value of the land as determined by the Municipal Property Assessment Corporation (MPAC) using market value assessment, the same basis for taxation for all other Ontario property owners.

As Roger Tassé, on P.82 of his report, points out the amount of PILTs using the MPAC figures exceeded the gross revenues of the TPA.

Pleading that they were a special case, the TPA asked another federal government ministry, Public Works and Government Services Canada (PWGSC), to conduct an assessment of the amount of PILTs payable.  PWGSC came up with amounts that they felt the TPA should pay for the years 1999 to 2004.  For some reason, the TPA ignored PWGSC’s determination and went with their own amounts.  All three are set out in the chart below.

 
Year   Gross Revenue   TPA
Payment   PWCSC
Assessment   MPAC
Assessment      
1999   $7,000,000     $88,255     $106,183     $1,811,183      
2000   $12,300,000     $228,061     $321,280     $3,660,651      
2001   $11,200,000     $320,420     $764,692     $6,486,672      
2002   $11,300,000     $417,674     $997,409     $9,647,055      
2003   $9,400,000     $402,700     $892,054     $10,129,408      
2004   $10,100,000     $435,445     $965,354     $10,635,608      
                      
TOTALS       $1,892,555   $4,046,972   $42,370,577   

Clearly, the TPA and the City were far apart in their determinations.  Neither did the TPA agree completely with the PWCSC Assessment.

Nevertheless, Mr. Tasse had this to say about the TPA’s PILTs determination.

“For the purposes of this review, I simply conclude that the TPA appears to have taken appropriate advice and come to reasoned conclusions about the appropriate payments that should be made. While the ultimate merits will be considered by the PILTs’ panel, I can find no obvious error in the manner in
which the TPA has conducted itself in this matter.”

Roger Tassé
Page P. 83
Review Of Toronto Port Authority Report

While the table above is illustrative of the difference in assessments between the years 1999 and 2004, the issue before the Panel when it finally met was the TPA‘s property values for TPA for the years 2004-2007.  

The Resolution Panel’s Decision

The PILTs Panel decided that the TPA should pay $5,831,569.  However, the TPA Board, based on the Panel’s Report, made some adjustments and corrections and paid $5,561, 607 or $269,962 less than the Panel advised.

The Present

The City, none too pleased with the TPA Board’s $5,561,607, took the matter to
the Federal Court of Canada.  

In a decision released on Thursday, June 24, the Federal Court of Canada overturned the Panel’s decision on which the TPA based its $5,561,607 payment, quashed the payment and provided that either the City or the TPA could take the matter back to a differently constituted Panel within 30 days.

Also on June 24, the TPA issued a press release.  

The released contained some interesting statements.  The TPA’s release stated that the Federal Court determined that the City's position on using the tax assessment model employed by the Municipal Property Assessment Corporation ("MPAC") in determining the TPA's PILTs was not legally applicable.  

However, Paragraphs 56 and 57 of the judgement state that there was nothing untoward in bringing forward MPAC’s assessment methods and that the type of evidence of provincial taxing considerations (MPAC) is germane to the valuation process but neither the Panel nor the ultimate decision maker is bound by it.

While not strictly legal, the Court determined that MPAC may be considered in arriving at a value.

Another interesting statement follows.  “The TPA believes it has provided a fair and consistent valuation of its properties, including the Billy Bishop Toronto City Airport, consistent with the Provincial Assessment Act.”

Paragraph 72 of the judgement states, “In effect, neither the Panel nor the TPA established a valuation of the airport property.”  

The paragraph also states that the TPA attempted to enjoy the benefits of the PILT regime under the Ontario Assessment Act Regulations.  The Act allows for airports to be assessed on the number of passengers it handles.  However, when the TPA went into the hearing arguing that the island airport should be assessed as an airport under the Act, the TPA had yet to apply to the province for this consideration under the Act.

The City or the TPA has 30 days after June 24 to ask for a new hearing.  Given the length of time that the matter has been drawn out and the difficulties that the City has faced to get any PILTs, it seems unlikely that the TPA will take the initiative in asking for a new panel.
 
As the TPA’s press release makes clear, “Due to the possibility of further litigation in this matter, the TPA will have no further comment.”  That may even apply to questions at the annual meeting about their PILTs.

Bob Kotyk