Supreme Court Decision on Payment In Lieu of Taxes (PILTs) – City of Montreal vs. Montreal Port Authority et al.
The following provides the background about Payment-in-lieu of Taxes (PILTs) and the Supreme Court decision of April 15, 2010 rendered on PILTs in the City of Montreal vs. Montreal Port Authority (MPA) and the Canadian Broadcasting Corporation (CBC). This document also outlines the case in question and its relevance to the Federal Court decision on PILTs matters between the Toronto Port Authority (TPA) and the City of Toronto (city).
The TPA attended a hearing of the PILTs Dispute Advisory Panel (DAP) in February, 2008. The City applied to the Panel for the hearing requesting that the DAP make recommendations to the TPA on the amount of PILTs the TPA should pay to the City.
The DAP heard evidence on valuation methods for four test properties occupied and controlled by TPA, including Billy Bishop Toronto City Airport. These properties were at the heart of the dispute over the amount of PILTs the TPA has determined is fair and equitable. The DAP rendered its recommendations on the matter on January 5, 2009.
The TPA Board reviewed the DAP’s recommendation and accepted management’s recommendation on an amount of PILTs that is fair and equitable. The TPA revised its determination of the total PILTs accrual to an amount of $5.5 million, for the period 1999-2008, inclusive.
On February 4, 2009, the City filed an Application in Federal Court for a Judicial Review of the DAP recommendations and on May 8, 2009, amended the Application to include the decision of the TPA Board with respect to the amount of PILTs it intended to pay for the 1999-2008 period. The Federal Court hearing took place on March 22 and 23, 2010, with the Court reserving until the Supreme Court’s decisions on the Montreal Port Authority and Canadian Broadcasting Corporation case concerning PILTs are rendered.
As the Supreme Court has rendered its decision on the matter, the Federal Court has directed that the City and TPA may provide written submissions based on the Supreme Court decision and both parties have agreed to provide written submissions in May, 2010.
Myths vs Facts
The TPA is committed to providing factual and up-to date information on this issue, and the following reflects the TPA’s perspective regarding facts related to PILTs as they relate to the TPA and the City.
Myth: The TPA owes $50,000,000 in PILTs to the City of Toronto.
Fact: PILTs are payments that may be paid by federal agencies to the municipality in which they operate, pursuant to the federal PILTs Act. The decision as to the quantum of PILTS payments to be made by the federal bodies governed by the PILTs Act results from valuation of the property “in use” (emphasis added).
The Supreme Court held that the PILTs Act did not intend to abolish “the immunity of federal Crown property from taxation”, but confirmed that the PILTs Act does not create a “right to a payment” and did not give municipalities the status of creditors of the Crown for PILTs. As such, there is no “$50,000,000 debt” owed to the City by the TPA for PILTs.
Myth: TPA should pay PILTs for lands occupied and controlled by the TPA based on the property values established by the Municipal Property Assessment Corporation.
Fact: The Supreme Court decision upheld that a federal PILTs granting entity, such as the TPA, has discretion in determining the property value that will apply to calculate the PILTs amount. Such determination would reflect the activities that the federal entity, in this case the TPA, can undertake pursuant to its Letters Patent.
Myth: Valuation issues for lands occupied and controlled by the TPA should be decided by the Provincial Assessment Review Board.
Fact: The Supreme Court held that provincial tribunals have no jurisdiction in deciding valuation matters for properties occupied and controlled by a Crown corporation or a federal agency. Valuation issues should be decided within the statutory and regulatory framework prescribed by the PILTs Act.
Myth: TPA is “not paying its share of taxes to the City” and is “using delay tactics to avoid paying taxes”.
Fact: The TPA has always said it would pay a reasonable amount for PILTs, as its fair share for the municipal services it used. The City delayed making applications for PILTs for years, despite the TPA’s invitations to the City to initiate the process. This was a result of the City wrongly asserting that the TPA was required to pay “tax bills” based on the Municipal Property Assessment Corporation (MPAC) assessments. The Supreme Court has affirmed that the position taken by the City is incorrect.
The TPA always accepted that the portion of the taxes that had formerly been part of the business taxes should be included in its PILTs payments. Further, the TPA already pays property taxes on lands that are leased to third-party commercial organizations.
Myth: The Supreme Court decision on PILTs in the City of Montreal vs. Montreal Port Authority et al. has decided the outcome of the decision in the litigation between the Toronto Port Authority and the City of Toronto.
Fact: The Supreme Court was required to determine whether or not the MPA and the CBC were entitled to make a PILTs payment employing a taxation rate lower than the general rate. Both federal entities had reduced the tax rate by an amount equal to earlier business tax rates. The City of Montreal had increased its tax rates when business occupancy taxes were eliminated, and as entities not previously subject to business taxes, the MPA and the CBC argued that they were entitled to adjust the tax rate.
Second, the Supreme Court dealt with specific issues relating to the tax status of certain silos.
Both of these issues are unrelated to those currently being discussed between the TPA and the City. Overall, the issues addressed directly by the Supreme Court have no direct bearing on the matters outstanding between the TPA and the City.