OTTAWA — The City of Ottawa is suing the federal government and Canada Post over a $22 million shortfall in what it planned to collect in lieu of taxes for 2021 and 2022.
The Payments in Lieu of Taxes Act establishes a system of compensation for municipalities to account for federal properties located within city limits.
The city said in a Federal Court filing that Ottawa is home to “a large number” of federal properties that are sheltered from local taxes.
The city collects more than $170 million each year in lieu of federal property taxes based on the provincial business school tax rate.
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But after the province of Ontario reduced that tax rate to help businesses affected by COVID-19 shutdowns, the federal government used the lower rate to calculate what it owed.
In the court filing, the city argues that the federal government’s decision to include itself in the tax relief should be invalid.
“It was not intended to provide such special reduced rates for federal and provincial properties that make payments in lieu of taxes,” the court filing said.
The documents say the city is seeking an additional $21.3 million from Public Services and Procurement Canada, more than $100,000 from the National Capital Commission and just under $975,000 from Canada Post Corporation.
These amounts would make up the difference in what the city expected to receive based on the standard tax rate normally used to calculate payments.
“The city relies on these payments to pay for the municipal services that these properties receive,” the city said in the documents.
A dispute resolution committee declined to make a decision, saying the case was outside its jurisdiction.
Ottawa is now asking the court to declare that the federal government must make the payments. Failing that, he’s asking the court to grant an extension to allow the city to seek judicial review or refer the matter to the Disputes Advisory Committee for decision.
According to the court record, the federal government argued to the panel that it had no discretion to determine the rate used to calculate these payments.
“Furthermore, there is a need to ensure fair and equitable treatment across the country for all recipients of payments in lieu of taxes,” the government wrote in a letter to the city in August.
Ottawa City Council is due to hold a special meeting on Feb. 1 on its proposed operating and capital budget.
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