Date: 20100624
Docket: T-165-09
Citation: 2010 FC 687
Ottawa, Ontario, June 24,
2010
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
CITY
OF TORONTO
Applicant
and
TORONTO PORT
AUTHORITY
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
I. INTRODUCTION
[1]
There
are two matters which are the subject of this judicial review. The first is the
report of the Federal Disputes Advisory Panel (Panel) respecting the “corporation
property values” of four Toronto Port Authority (TPA) properties. The second is
the decision of the TPA to pay $5,561,607 as Payments In Lieu of Taxes (PILTs)
to the City of Toronto (City) for all of its properties, including
those in dispute. The core decision at issue is that of the Board of the TPA to
make the payment based substantially on the Panel’s Report.
[2]
The
Panel Report, and thus this judicial review, focused on four particular
properties: the Toronto City Centre Airport (TCCA), the Polson
Slipwater lot (Polson Slip), the Outer Harbour Marina on Unwin Avenue (Marina) and
the Cherry Street Marine Terminal Buildings (Marine
Terminal). These properties were used as a form of test case for current and
future PILTs payable by the TPA.
[3]
The
Panel was asked by the parties to give advice as to the “corporation property
value” of the four properties so that the applicable PILT owed by the TPA to
the City could be determined and paid as provided for in the Payments In
Lieu of Taxes Act, R.S.C. 1985, c. M-13 (Act) and the Crown Corporation
Payments Regulations, SOR/81-1030 (Regulations).
II. BACKGROUND
A. Overview
[4]
Subsequent
to the Panel Report, the Supreme Court of Canada in Montréal (City) v. Montreal Port
Authority,
2010 SCC 14, dealt extensively with the legal regime governing PILTs to be paid
by Crown corporations. While that case was based on the issue of the “applicable
tax rate”, the principles enunciated by the Court are applicable to the
determination of the property values as well.
[5]
The
City argues that the Panel and the TPA misinterpreted the relevant legislation
and failed to treat the properties as if they were taxable properties for the
purposes of arriving at corporation property values.
B. Regime
[6]
The
TPA, as a Crown corporation, is now subject to making payments under the Act as
tailored for Crown corporations pursuant to the Regulations.
[7]
The
legislative scheme bases the PILTs on the calculation of tax which might
otherwise be payable if the Crown corporation (otherwise exempt from tax) was a
taxable entity.
|
7.
(1) Subject to subsection (2), a payment made by a corporation in lieu of
a real property tax for a taxation year shall be not less than the
product of
(a) the
corporation effective rate in the taxation year applicable to the
corporation property in respect of which the payment may be made; and
(b) the
corporation property value in the taxation year of that corporation
property.
|
7.
(1) Sous réserve du paragraphe (2), un paiement versé par une société en
remplacement de l’impôt foncier pour une année d’imposition ne doit
pas être inférieur au produit des deux facteurs suivants :
a)
le taux effectif applicable à la société dans l’année d’imposition en
cause à l’égard de la propriété de celle-ci pour laquelle le paiement peut
être versé;
b)
la valeur effective de la propriété de la société pour cette année
d’imposition.
[Emphasis
added]
|
[8]
In
the Regulations, the “corporation effective rate” means:
|
“corporation effective rate” means the rate of real property tax
or of frontage or area tax that a corporation would consider applicable to its
corporation property if that property were taxable property; (taux effectif applicable à
une société)
|
« taux effectif applicable à une société » Le taux de
l’impôt foncier ou de l’impôt sur la façade ou sur la superficie qui, de
l’avis de la société, serait applicable à sa propriété si celle-ci était une
propriété imposable. (corporation effective rate)
|
and the “corporation property value” means:
|
“corporation property value” means the value that a corporation
would consider to be attributable by an assessment authority to its
corporation property, without regard to any mineral rights or any ornamental,
decorative or non-functional features thereof, as the basis for computing the
amount of any real property tax that would be applicable to that property if
it were taxable property. (valeur effective de la propriété d’une société)
|
« valeur effective de la propriété d’une société » La
valeur qui, de l’avis de la société, serait déterminée par une autorité
évaluatrice, abstraction faite de tous droits miniers et de tous éléments
décoratifs ou non-fonctionnels, comme base du calcul de l’impôt foncier
applicable à sa propriété si celle-ci était une propriété imposable. (corporation
property value)
|
[9]
The
term “assessment authority” means the “authority that has power by or under an
Act of Parliament or the legislature of a province to establish the assessed
dimension or assessed value of real property or immovables”.
Pursuant to
the Ontario Assessment Act, R.S.O. 1990 C.A-31, that authority rests
with the Municipal Property Assessment Corporation (MPAC).
C. Process
[10]
The
concern over PILTs extends as far back as 1999. It would appear that in March
2002 the City made a request to pay PILTs. The history of the dispute is not
relevant except for its crystallization on April 13, 2006 when the City of Toronto initiated
the Panel process.
[11]
Under
the Act, at the request of a party, the Minister may appoint a panel to advise
on such matters as the property value of property subject to PILT. The Panel
hearings were finally held February 25-28, 2008. The issue before the Panel was
the corporation property value for TPA properties for the 2004-2007 years. The
parties agreed to proceed with the valuation of four properties with the City
retaining the right to have the Panel consider values used by TPA for other
properties.
[12]
The
parties accepted that the “base years” or valuation years specified under the Ontario
Assessment Act were June 30, 2003 for the 2004 and 2005 taxation years and
January 1, 2005 for the 2006 and 2007 taxation years.
[13]
The
Panel, which is created for each case, was made up of two key persons with
experience in assessments/appraisals and a lawyer experienced in real estate
law.
[14]
A
number of witnesses were called by each side; the most critical for purposes here
were Bryan Cordick for
the City and Victor Manoharan for the TPA.
Cordick had
worked for MPAC for 30 years and had retired just a few months before the Panel
hearing. His evidence related to the values which would be assessed against
each of the properties.
Manoharan is
a Regional Manager for the federal department, Public Works and Government
Services Canada. He was responsible for the delivery of the PILT program and
property valuation services in Ontario. His evidence was a
direct challenge to Cordick’s and also centred on the property value of the
properties in question.
[15]
There
are no transcripts of the oral evidence and the documentary evidence is laid
out in the Court Record. While the Court does not intend to summarize all the
evidence, there are some salient features which must be underscored.
[16]
Cordick
submitted four reports, one for each property, said to have been prepared in
accordance with the Canadian Uniform Standards of Professional Appraisal
Practice. He adopted the “cost approach” to valuation of the properties which
values buildings and land separately and then totals the values to give the
“property value”. In coming to the value of the land, Cordick relied on “Table
15” prepared by MPAC for the 2003 and 2005 valuation dates. The valuations were
tested against sales of four other properties. His valuation for buildings was
based on MPAC’s Automated Costing System.
[17]
Cordick
did not use either the direct comparison approach or the income valuation
approach in part because it is MPAC policy to value special purpose public
service institutions using the cost approach.
[18]
Cordick
had concluded that the “highest and best use” of the properties was their
current use. As a consequence, he found that the federal land use restrictions
were not relevant and he was assessing the properties as if they were taxable
not as if they were TPA properties (and thus caught up in some of these federal
land use restrictions).
[19]
The
TPA, through its witnesses Manoharan and Alan Paul (the acting president and
CEO of TPA), who had been responsible for the file at TPA, gave the TPA
evidence both as to background of the dispute and the valuation of the specific
properties. Particular objection was taken to the City ignoring the federal
land use regulations. TPA looked at the properties not on the basis of
redevelopment value - had they been owned by a taxable entity - but on their
income producing history. There was a fundamental disagreement as to whether
one looked at the properties as if they were taxable and without federal
restrictions (which lowered values) or whether one took the properties as they
were and based upon what could be done with them given the existing
restrictions.
[20]
As
a consequence of TPA’s view, TPA through its expert focused on the Income
Approach. However, Manoharan used both income and costs in respect of the
Marine Terminal. He also used MPAC’s land table for Hamilton without
taking account of the differences in values between the two cities in
considering the Marine Terminal.
[21]
Manoharan
used the Income Approach for the Marina and for the Polson
Slip. However, with respect to the TCCA, the TPA relied on Paul’s evidence to
come up with a per passenger value.
D. Panel
Report
[22]
The
Panel did not accept either side’s assessment, questioning both appraisers and
the means by which they came to their respective conclusions.
[23]
A
significant feature of the Panel’s consideration is their attack on the
credibility of Cordick because of his affiliation with MPAC and espousal of its
views at the outset of his report.
[24]
The
Panel, as part of its attack on Cordick’s evidence and its credibility, cited
significant passages from the Ontario Ombudsman’s Report of March 28, 2006,
which was highly critical of MPAC. The Ombudsman’s Report included references
to “MPAC’s sense of superiority regarding its mass appraisal techniques”, its
lack of respect for the very property market that its appraisal system is built
upon, and MPAC’s lack of adequate respect for the decisions rendered by its
appeal body, the ARB.
[25]
The
Panel then concluded that Cordick was not conducting himself as an appraiser
accredited by the Appraisal Institute of Canada, that he had failed in his duty
to question his client’s methodology, and had failed his duty to the Panel.
From this perspective the Panel then assesses the “merits” of Cordick’s and
other witnesses’ evidence. The salient passage with respect to Cordick is
paragraph 15 of the Report as set forth below.
The City’s witness was not conducting
himself as an appraiser accredited by the Appraisal Institute of Canada. He
demonstrated no independance [sic] of thought or application of method.
At p.34 of his Marina Report he sets out the three traditional approaches to
estimating the value of real estate, namely Cost, Direct Comparison &
Income. At p.36 he states that MPAC has arrived at the site value by use of
MPAC’s industrial land tables which he says are “built using the Direct
Comparison Method” and at p.37 states that “table fifteen has been used to
value the marina operation.” He failed in his duty to question his client’s
methodology. He probably assumed that there are no other marinas in Ontario or the area. However, there
are at least two marinas in the area as in his Polson Slip report, he shows at
pp.17 and 18 of tab H, two drawn in water lots opposite the Humber Bay Park
East Marina located in the City of Toronto.
Additionally, Mr. Manoharan sets forth, starting at p.118 of his report, a
series of photographs of the Scarborough Bluffer’s Park Marina.
…
[26]
Despite
this wholesale attack on Cordick’s credibility, the Panel in fact uses some of
his findings in their recommendation without explanation for the dichotomy
between their rejection of his valuations and their acceptance of some or parts
of his conclusion.
E. Re:
TCCA
[27]
The
Panel, having rejected both experts’ conclusions of value, referred to the Ontario
Assessment Act Regulations which calculated PILTs at certain designated
airports, such as Pearson International Airport, on the
basis of an amount per passenger. The TPA had made an application to be listed
as an airport covered by that particular regulation but it was not listed at
the time of the Panel’s Report.
[28]
The
Panel rejected the City’s valuation because it was based on MPAC’s Table 15
which it had already rejected. The Panel adopted the method used in the Ontario
Assessment Act Regulations and set the PILT at 80¢ per passenger for the
2004 base year. The Panel never established a valuation for the property
itself.
F. Outer
Harbour Marina
[29]
The
Panel recognized that the City adopted a direct comparison approach by using
Table 15 and testing the values against five subsequent sales. The City valued
the land but not the improvements. The TPA on the other hand used an income
approach but found significant information lacking.
[30]
Having
found difficulty with both sides’ valuations, the Panel set out its own income
approach to the valuation of the property.
G. Polson
Slip
[31]
The
Panel again rejected both parties’ assessment. Cordick was the only expert to
arrive at a concrete value but that was rejected because his opinion was found
to be poorly formulated.
[32]
As
a result, the Panel deemed it necessary to be “relatively arbitrary in
formulating its advice”. Based loosely on information in Cordick’s opinion, the
Panel developed its own valuation focusing on the relationship between land
values and water lot values.
H. Marine
Terminal
[33]
Again,
the Panel rejected both sides’ assessment, questioning the methodology,
independence and reliability of both experts. The Panel rejected Cordick’s
comparative sales analysis because it contained too many adjustments and
rejected Manoharan’s reliance on Hamilton values without
adjustment for the relevant differences between the two cities.
[34]
Having
rejected both experts, the Panel then concluded that they had to “apply
generally equal weighting to the land and improvements values indicated” by
both sides. The Panel then applied a discount to the resulting value of 30%
because it erroneously understood Paul’s evidence that the Terminal was
operating at 20-30% below capacity whereas his evidence was that it operated at
30% of its capacity.
I. TPA
Board Decision
[35]
The
TPA Board then accepted the Panel’s Report, made some adjustments and
corrections (including the 30% capacity error noted above to reflect a discount
of 70%) and paid $269,962 less in PILTs than the Panel had advised. Therefore,
the TPA paid $5,561, 607. The amount was accepted by the City without prejudice
to its right to contest the payment.
[36]
The
Panel’s Report formed the basis of the TPA’s decision to pay the PILT amount.
There were other documents and information before the TPA when it made its
decision but at the core of that decision is the acceptance of the Panel’s
Report on “corporation property value”. Therefore, it was argued that the reasons
of the Panel are, except where clearly changed, the reasons of the Board of TPA
in paying the PILT amount.
III. ISSUES
[37]
The
issues raised by the parties, and variously described, can be distilled to:
(a)
What
is the subject of the judicial review?
(b)
What
is the applicable standard of review?
(c)
Is
there any error of law or jurisdiction regarding the valuations?
(d)
Are
the valuations reasonable?
IV.
ANALYSIS
A. Subject
of Judicial Review
[38]
The
issue of whether a panel’s report/recommendation is subject to judicial review
was addressed by this Court in Halifax (Regional Municipality) v. Canada (Public
Works and Government Services), 2009 FC 670. It was held that it was not
but the decision by the Minister effectively adopting and implementing a
panel’s recommendation opens the reasoning of the panel to scrutiny because
they are the reasons of the decision maker.
[39]
In
this case, the adopting and implementing of a panel’s recommendation and its
rationale by a Crown corporation opens the Crown corporation’s decision to
judicial review on the same basis.
[40]
There
is a slight difference between the Act which governs a Minister’s decision and
the Regulations which govern a Crown corporation’s decision but that difference
relates principally to the deference owed to the respective decision makers not
the right or basis to challenge the decision.
Payments In
Lieu of Taxes Act, s. 2(1)
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“property
value” means the value that, in the opinion of the Minister, would be
attributable by an assessment authority to federal property, without regard
to any mineral rights or any ornamental, decorative or non-functional
features thereof, as the basis for computing the amount of any real property
tax that would be applicable to that property if it were taxable property;
|
« valeur
effective » Valeur que, selon le ministre, une autorité
évaluatrice déterminerait, compte non tenu des droits miniers et des éléments
décoratifs ou non fonctionnels, comme base du calcul de l’impôt foncier qui
serait applicable à une propriété fédérale si celle-ci était une propriété imposable.
[Emphasis added]
|
Crown Corporation
Payments Regulations,
s. 2
|
“corporation property value” means the value that a
corporation would consider to be attributable by an assessment authority
to its corporation property, without regard to any mineral rights or any
ornamental, decorative or non-functional features thereof, as the basis for
computing the amount of any real property tax that would be applicable to
that property if it were taxable property. (valeur effective de la
propriété d’une société)
|
« valeur effective de la propriété d’une société » La
valeur qui, de l’avis de la société, serait déterminée par une
autorité évaluatrice, abstraction faite de tous droits miniers et de tous
éléments décoratifs ou non-fonctionnels, comme base du calcul de l’impôt
foncier applicable à sa propriété si celle-ci était une propriété imposable.
(corporation
property value)
[Emphasis added]
|
[41]
In
this instance, since the TPA largely adopted the Panel’s Report as the
rationale for its conclusion as to PILT owed and “corporation property value”,
the Report becomes part of the reasons for the TPA’s decision. The Report is
subsumed in the analysis of the reasonableness of the TPA’s decision.
B. Standard
of Review
[42]
In
the Montréal (City) decision, the Supreme Court analyzed the standard of
review applicable to a Crown corporation determining the “effective rate”. The
Court held the standard in respect to the Crown corporation’s discretion to
determine the rate applicable to be that of reasonableness.
|
“effective rate” means 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;
|
« taux effectif »
Le taux de l’impôt foncier ou de l’impôt sur la façade ou sur la superficie
qui, selon le ministre, serait applicable à une propriété fédérale si
celle-ci était une propriété imposable.
|
Payments In
Lieu of Taxes Act, s. 2(1)
[43]
In
respect of this instant case and the Crown corporation’s discretion regarding
“corporation property value”, the discretion is similar except that it is
conditioned not just by what the Crown corporation considers applicable in
terms of tax rate but what the Crown corporation considers attributable by an
assessment authority.
|
“assessment authority” means an authority that has power by or
under an Act of Parliament or the legislature of a province to establish the
assessed dimension or assessed value of real property or immovables;
|
« autorité évaluatrice » Autorité habilitée en vertu
d’une loi fédérale ou provinciale à déterminer les dimensions fiscales ou la
valeur fiscale d’un immeuble ou d’un bien réel.
|
Payments In
Lieu of Taxes Act, s. 2(1)
[44]
Despite
this difference, the rationale for the discretion, as described in Montréal
(City), above, is the same for both provisions – the preservation of the
Crown’s immunity to taxation; the need for flexibility nationwide; practicality
in terms of potential disagreements; difficulty of choice of rate (or property
value); and protection of federal interests.
[45]
Therefore,
as held in Halifax, above, and
reinforced by Montréal (City), above, the applicable standard of review
is reasonableness. However, on issues of law and procedural fairness, the
standard would be correctness.
C. Law
and Fairness
[46]
There
was no error of law in the Panel not accepting the MPAC assessment, as outlined
by Cordick’s expert report. The City’s position that the Panel must accept the
MPAC valuation would undercut the very discretion confirmed by the Supreme
Court of Canada.
[47]
Further,
the Panel did not err in law in taking into account the existence of the
federal land use restrictions as they applied to the relevant properties. While
the Crown corporation must be treated as if it is taxable, that does not mean
that the realities of land restrictions, such as zoning, is not relevant use in
the same way it is for non-Crown corporations.
[48]
In
the Montréal (City), the Supreme Court underscored that the corporation
had to take the system as it was. In Halifax, the
restricted use of the Citadel to that of a fort and the regional municipality’s
Regional Park Zone under its land use by-law were facts that could not be
ignored. They were relevant considerations for valuation purposes.
[49]
In
both Halifax and this
case, the properties were used at their “highest and best use” given the
existing regimes. The Panel in the present case could not ignore land use
restrictions and find that the properties could be more valuable if used
differently any more than the panel in Halifax could have
found the Citadel would be more valuable than, for example, if used for high
end condominiums.
[50]
Where
the Panel went awry was its consideration of the Ombudsman’s Report and in its
basis for finding Cordick not credible. In this regard, the Panel acted unfairly
and unreasonably and failed to appreciate the import of the MPAC assessment
evidence.
[51]
In
expressing its distain for MPAC’s assessment methods, the Panel relied upon the
Ombudsman’s Report, as discussed in paragraph 24. That document was never raised
by either party nor was it put to the City or its witnesses. Yet that Report is
cited as part of the rationale for rejecting MPAC’s mass appraisal techniques
and for its questioning the conduct of Cordick.
[52]
At
a minimum, the City was entitled to notice of the intended use of the document
and an opportunity to respond. Further, that report is no more than the opinion
of the Ombudsman and as opinion evidence it was untested. The report is
directed at issues not entirely in sync, if at all, with the Panel’s mandate
and its relevance is highly questionable.
[53]
The
Panel had a right to reject MPAC’s approach on sound reasons related to
valuation but the criticism of MPAC’s attitude and the alleged loss of public
confidence in that institution are far removed from property values in the Toronto Harbour and
the mandate of the Panel.
[54]
The
Panel committed a further error in discounting the basis of Cordick’s evidence.
The Court was advised that Cordick’s evidence was also intended to show how
MPAC assessed or would assess the properties in issue. The Panel’s comments
exhibit a failure to appreciate the nature of that evidence.
[55]
Further,
the Panel failed to appreciate the importance of the evidence which has now
been clarified by the Montréal (City) decision. That decision confirms
the importance of evidence as to the existing provincial or municipal taxation
regimes in the analysis of either the tax rate or property value.
20 … For the purpose of establishing those
amounts, the PILT Act must define the relationship between the system
for setting payments in lieu, on the one hand, and the provincial and municipal
tax systems, which can vary from place to place in Canada, on the other.
…
22 The reference point used in the PILT
Act is the real property tax established by a “taxing authority”, which is
defined in s. 2 as “(a) any municipality, province, municipal or
provincial board, commission, corporation or other authority that levies and
collects a real property tax … pursuant to an Act of the legislature of a province”.
[56]
There
was nothing untoward in bringing forward MPAC’s assessment methods and the
Panel’s attack on that purpose and on the character of the witness was
unwarranted.
[57]
As
pointed out in Halifax, this type of evidence of provincial taxing
considerations is germane to the valuation process but neither the Panel nor
the ultimate decision maker is bound by it. However, the Panel never appeared
to appreciate the importance of that evidence within the legislative scheme.
Its rejection of the evidence on those grounds is an error that goes to the
root of the decision.
D. Reasonableness
[58]
The
Supreme Court has pointed out that reasonableness means more than transparency
and intelligibility, it encompasses a qualitative requirement that applies to
those reasons and to the outcome of the decision-making process (Montréal
(City), para. 38).
[59]
The
Court must accord deference to the judgments of the Panel on matters which are
open to reasonable disagreement. However, in this case there are areas of the
Panel’s Report which do not meet this qualitative aspect of the reasonableness
criterion. In assessing the reasonableness of the Panel’s recommendation, the
Court assumes, for this purpose only, that the legal infirmities discussed are
not present and that the Panel had a proper basis for rejecting the City’s
evidence.
(1) Polson Slip
[60]
The
parties acknowledged that the Panel referred to the wrong Manoharan evidence.
Manoharan valued the properties on the basis of income whereas the Panel used
Cordick’s method. This is despite their general rejection of Cordick’s evidence
and the absence of any explanation for its acceptance in this case.
[61]
Neither
side advanced any discount for pollution or a pollution factor. The Panel made
its own calculation. The Respondent says that the basis for a pollution factor
arose in cross-examination of Manoharan and therefore there was a basis for the
Panel’s conclusion.
[62]
While
there may be some difficulties with the Panel’s reasoning, they are not sufficient,
in and of themselves, to conclude that the Panel’s finding on this matter was
so unreasonable as to warrant quashing of the TPA’s decision on its acceptance
of this finding alone.
(2) Marina
[63]
In
regard to this property, the Panel explained clearly why it would not adopt the
MPAC assessment value. The Panel, having expertise in the area, could and did
articulate its basis for accepting the income approach.
45. With this is [sic]
mind our decision relies on the basic appraisal principal in the analysis of
Highest and Best Use. On page 32 of Mr. Cordick’s report, he indicates ‘the use
of the site as a marina is legally permissible, probably, marketable and financially
feasible.’ In addition, consideration was given to typical market
transactions and the expectation that were the property to be offered on the
open market it would trade based on its income producing capabilities. As such,
it is our opinion that the Marina, operating as an income
producing marina, should be valued by the Income Approach to value and having
no other evidence than that provided by the Port Authority we must depend upon
that.
[64]
Therefore,
the Panel’s conclusion is reasonable and thus the TPA’s acceptance of it is
likewise reasonable.
(3) Marine Terminal
[65]
While
the Applicant argued that obsolescence as a valuation factor was not raised by
TPA, Manoharan does in fact raise the issue.
[66]
As
noted earlier, the Panel erroneously used a discount rate based on the property
being used only to the extent of 30% of capacity. The TPA Board corrected that
error. As the issue is the TPA’s decision, to the extent that it revised and
thus did not accept the Panel’s advice, the determination of reasonableness
focuses on the TPA Board not the Panel.
[67]
The
more problematic area of the Panel’s consideration of this property is the
decision to average the values of both sides. The Panel had generally not
accepted Cordick’s evidence. In this case the Panel specifically rejected both
parties’ valuations as unreasonable. Despite this rejection the Panel averaged
the two valuations in arriving at its recommendation.
[68]
Absent
a rationale for averaging rejected evaluations, the Panel’s recommendation is
not reasonable. There may have been a rationale but the record does not give
any basis for the Court to conclude what it may have been. This recommended
value cannot stand.
(4) TCCA
[69]
The
valuation for the airport is unique in that it is not a valuation but a
recommended PILT amount of 80¢ per passenger. The Panel recommended the amount
which was adopted and applied by the Board.
[70]
The
Panel’s mandate never encompassed specifying the amount of the PILT. Its
function was to make a recommendation of property valuation. The scheme of the
legislation is that a property value must be established to which a tax rate is
then applied to arrive at a possible PILT amount. Both the Act and the
Regulations make that clear. Section 3 of the Act authorizes the Minister to
make a PILT on the basis that:
|
4.
(1) Subject to subsections (2) and (3) and 5(1) and (2),
a payment referred to in paragraph 3(1)(a) shall not exceed the
product of
(a) the effective
rate in the taxation year applicable to the federal property in respect of
which the payment may be made, and
(b) the property
value in the taxation year of that federal property.
|
4.
(1) Sous réserve des paragraphes (2), (3) et 5(1) et (2),
le paiement visé à l’alinéa 3(1)a) ne peut dépasser le produit des
deux facteurs suivants :
a)
le taux effectif applicable à la propriété fédérale en cause pour l’année
d’imposition;
b)
la valeur effective de celle-ci pour l’année d’imposition.
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Section 7 of the Regulations has the same basis
in respect of a Crown corporation:
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7.
(1) Subject to subsection (2), a payment made by a corporation in lieu of a
real property tax for a taxation year shall be not less than the product of
(a) the corporation
effective rate in the taxation year applicable to the corporation property in
respect of which the payment may be made; and
(b) the corporation
property value in the taxation year of that corporation property.
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7.
(1) Sous réserve du paragraphe (2), un paiement versé par une société en
remplacement de l’impôt foncier pour une année d’imposition ne doit pas être
inférieur au produit des deux facteurs suivants :
a)
le taux effectif applicable à la société dans l’année d’imposition en cause à
l’égard de la propriété de celle-ci pour laquelle le paiement peut être
versé;
b)
la valeur effective de la propriété de la société pour cette année
d’imposition.
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[71]
The
Panel also exceeded its own Rules of Practice in not determining the property
value.
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2.5 Only a
disagreement by a Taxing Authority as to the property value, the property
dimensions, the effective rate including the method of application of any tax
mitigation measures such as capping and claw back provisions, rebates and
discounts applicable to any federal or corporation property, or a claim that
a payment should be supplemented under subsection 3 (1.1) of the Act is
admissible as an application to the Advisory Panel. Issues dealing with the
eligibility of a property, improvement or structure or decisions arising from
the interpretation of the Act and its Regulations are outside the mandate of
the Advisory Panel and should be addressed directly to the federal
organization.
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2.5 Seule une
contestation par l'autorité taxatrice de la valeur effective, de la dimension
effective, du taux effectif incluant toutes méthodes d'application de
déductions de taxes, telles que les dispositions en matière de plafonnement
et de prélèvement, de dégrèvements et de rabais applicables à toute propriété
fédérale ou d'une propriété de société ou de l'augmentation ou non d'un
paiement déterminé au paragraphe 3(1.1) de la Loi est
admissible devant le Comité consultatif. Les questions touchant
notamment l'admissibilité d'une propriété, les améliorations et la structure
ainsi que les décisions découlant de l'interprétation de la Loi et
de son Règlement ne relèvent pas du mandat du Comité consultatif.
Ces questions doivent être soumises directement à l'organisme fédéral.
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[72]
In
effect, neither the Panel nor the TPA established a valuation of the airport
property. The TPA attempted to enjoy the benefits of the PILT regime under the Assessment
Act (see paragraphs 27 and 28 of these Reasons) without having had its
application for inclusion in that regime approved.
[73]
The Panel
and the Board’s legal error is compounded by the absence of any explanation as
to the merits of the quantum of the per passenger amount.
[74]
Therefore,
the valuation, to the extent that it may be classified as such, is not
sustainable as a matter of jurisdiction nor as a matter of reasonableness.
[75]
In
summary and based on disregarding the legal errors referred to, some but not
all of the valuations found by the Panel are reasonable. The TPA Board’s
decision to pay the $5,561,607 is not entirely supported by reasonable
conclusions.
V. CONCLUSION
[76]
Having
found parts of the decision of the TPA to be unreasonable, the Court ought to
also consider the decision as a whole. A court should not find unreasonable and
lightly overturn a panel recommendation. If the decision as a whole but not
necessarily all its constituent parts is reasonable or if parts can be
segregated and kept whole, a court should consider letting the decision stand
or consider letting those parts of the decision which are not infirmed, remain
valid.
[77]
However,
in this case, the problematic areas are significant and multiple. They cover
areas of jurisdiction, of law and of procedural fairness. They include a
failure to appreciate the significance of evidence and they contain conclusions
as to specific properties which are unreasonable. Further, if the Panel had
properly considered the City’s evidence and its import, its conclusions on
specific properties might well have been different.
[78]
Considered
as a whole, the Court concludes that it would be preferable to commence the
process again. A proper PILT determination is potentially a bedrock for the
future amounts and provides stability and certainty to both parties.
[79]
Therefore,
the TPA’s decision to pay $5,561.607 is quashed, the Panel’s Report is to be
set aside and at the request of either party a new PILT process is to be
commenced before a differently constituted panel. The City shall have its
costs.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that the Toronto
Port Authority’s decision to pay $5,561,607 is quashed, the Federal Disputes
Advisory Panel’s Report is to be set aside and at the request of either party,
a new Payments In Lieu of Taxes process is to be commenced before a differently
constituted panel. The City of Toronto shall have its costs.
“Michael
L. Phelan”
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