Property Taxes: Exemptions, PILs & Lord Durham

This week, in our ongoing exploration of property taxes in Nova Scotia generally (and the CBRM in particular), we’re going to look at exempt properties, payments in lieu of taxes (or PILs) and  stuff I forgot to tell you last week, not necessarily in that order.

Lord Durham (Source: British Library https://www.flickr.com/photos/britishlibrary/ via Wikimedia Commons)

Lord Durham (Source: British Library  via Wikimedia Commons)

We’re doing this because a) it’s useful information and b) I’ve discovered this property tax issue is so closely linked to other municipal funding issues that it’s hard to separate the two and I’m going to have to expand the scope of my research. (I actually bumped into Lord Durham in my reading on municipal taxes last week — remember him? The author of the famous “Durham Report?”  I hadn’t seen him since Grade 7 but I would have known him anywhere, he looks exactly the same.)

So expect this series on property tax to continue well into early 2020…

 

Stuff I forgot

I forgot was to tell you how property tax rates are set: the municipality figures out how much it needs to deliver services then divides that by the total taxable assessment base.

I  forgot to tell you that the CBRM has a minimum property tax of $400, which it established in the ’90s.

And I also forgot to cover resource land, forest land and farm land. But I will do that in a separate article.

Okay, on to today’s first subject: exemptions.

 

‘Infant children’

Some properties in the CBRM are exempt from property taxes under The Nova Scotia Assessment Act. Exempt properties include churches, community cemeteries, legions, colleges, public schools, hospitals and “property belonging…to infant children and occupied by them.” (That house of babies down the street? They’re not paying taxes.)

In their 2014 report on municipal taxation in Nova Scotia for the Union of Nova Scotia Municipalities (UNSM), Drs Harry Kitchen and Enid Slack found exempt properties problematic:

Since taxed properties face higher property taxes than exempt properties, economic competition among businesses and between businesses and government is distorted. Differential tax treatment may affect location decisions, choices about what activities to undertake, and other economic decisions. Exemptions narrow the tax base and either increase taxes on the remaining taxpayers or reduce the level of local services. Finally, since the proportion of tax-exempt properties varies by municipality, disproportionate tax burdens may be created across communities.

Slack and Kitchen (who sound like purveyors of high-end hipster appliances: “Have you seen my new Slack + Kitchen olive press?”) draw a hard line on exempt properties, stating simply that a property owner benefiting from municipal services should pay for municipal services. They recommended the provincial government cull its list of exempt properties.

It’s a view shared by Laurie Murley, president of the UNSM (and deputy mayor of Windsor), who told me in an email:

UNSM believes all properties should be taxed at the current municipal property tax rate. Municipalities provide services to these properties so they should not be treated differently.

 

Jagged Little PILs

Some tax exempt properties are owned by other levels of government.

Cities, towns and villages cannot tax the province or the feds, for which we can thank the British North America Act, Section 125, which states, “no lands or property belonging to Canada or any Province shall be liable to taxation.” Instead, provincial and federal governments often provide a PIL (and some can be hard to swallow).

Lingan coal-fired generating station, Cape Breton (Photo by By Ken Heaton (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons)

Lingan coal-fired generating station, Cape Breton (Photo by Ken Heaton, own work, CC BY-SA 3.0 , via Wikimedia Commons)

One of the main providers of PILs in this province is Nova Scotia Power Incorporated (NSPI) which is just plain weird, given the company was privatized in 1992, and is therefore not owned by the provincial government and should therefore not be exempt from municipal property taxes.

As Drs Paul Hobeson, David Cameron and Wade Locke explained in their 2005 paper for the Union of Nova Scotia Municipalites (UNSM), “A Question of Balance — An Assessment of the State of Local Government in Nova Scotia”:

Nova Scotia Power, although privatized a decade ago, still does not pay property taxes to the municipalities in which its facilities are located, but pays a special, negotiated, levy to the Province. The Province now pays a portion of the proceeds of this levy to municipalities that qualify for equalization.

According to the Nova Scotia government web site, that levy is “increased annually by the Consumer Price Index.” But as Hobeson, Cameron and Locke explain:

This deal raised the ire of the Cape Breton Regional Municipality in particular, since it is the home to about half of Nova Scotia Power’s facilities.

Add to this chronic underfunding of the provincial equalization program (oh yeah, we’re going there — not this week, but we’re going there) and you begin to see why my article on “property taxes” is morphing into a series on municipal funding.

 

Parks, prisons and post offices

As for the federal government, it provides payments-in-lieu for everything from prisons to national parks to RCMP detachments to post offices. (Here in the CBRM, Devco was once a significant source of PILs for the mining towns like Glace Bay and New Waterford.)

(Photo via Canadian Public Transit Discussion Board https://cptdb.ca/topic/15804-the-englishtown-ns-ferry/)" width="300" height="200" /></a> Entrance CB Highlands National Park (Photo via <a href="https://cptdb.ca/topic/15804-the-englishtown-ns-ferry/" target="_blank">Canadian Public Transit Discussion Board</a> )

Entrance Cape Breton Highlands National Park (Photo via Canadian Public Transit Discussion Board )

Slack and Kitchen found that of Nova Scotia’s three types of municipalities — rural municipalities, towns and regional municipalities —  payments-in-lieu of taxes mattered most to regional municipalities, like our own, where they account for almost 5% of all municipal revenues.

And yet, the authors said many of the people they talked to in preparing their report (people I refuse to call “stakeholders” because I reserve that term for prospectors and Vampire hunters) complained the payments in lieu of taxes provided by the federal government were “often not at the level based on market value assessment.”

Again, UNSM President Laurie Murely agreed, telling me in an email that “the situation Halifax has had with the Citadel suggests it is still a problem.”

(Briefly: Ottawa put the value of Citadel Hill, for PIL purposes, at $10 million. Halifax begged to differ. The courts sided with Halifax.)

Slack and Kitchen recommended that PILs “be examined to ensure that the province is paying its fair share.” Their report was concerned only with the province of Nova Scotia or I presume they might have recommended the same be done with federal payments in lieu.

 

‘Puppets on a Shoestring’

What’s striking about the exemptions and the PILs and the weird status of Nova Scotia Power is that all three represent ways in which the province, while allowing municipalities to levy property taxes, limits their ability to do so. The province decides which properties are exempt, the province decides how much it will pay in lieu of taxes and the province has decided that NSPI will not pay property taxes.

Which is simply to say that Nova Scotia municipalities, like all Canadian municipalities, are and always have been creatures of the provinces.

But it didn’t have to be this way. In fact, if the drafters of the BNA had just listened to Lord Durham, things might have been very different.

Durham, whom I bet you can’t believe I’ve now worked into this article not once but twice, was sent to Canada in 1838 to investigate the 1837 rebellions in Upper and Lower Canada. In his report, he concluded:

The utter want of municipal institutions giving the people any control over their local affairs, may indeed be considered as one of the main causes of the failure of representative government, and of the bad administration of the country.

Durham recommended establishing a system of elected municipal government in what would become Canada and had the British taken his advice, say Hobeson, Cameron and Locke:

…it is quite possible that such a system, being part of the emerging constitutions of the colonies, would have found its way into the BNA Act and thus secured constitutional protection for this level of government. As it was, the establishment of municipal institutions was left to the discretion of the provinces. The only reference to municipalities in the constitution is found in section 92(8) “Municipal Institutions in the Province”, which is included in the list of legislative responsibilities of the provinces.

And thus, Canadian municipalities became what the Canadian Federation of Mayors and Municipalities (now the Canadian Federation of Municipalities) in 1976 called, “Puppets on a Shoestring.”

Next week: Tune in and find out!

 

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