Supreme Court Affirms Broad Municipal Discretion to Set Tax Rates
January 23, 2012 by Michael Styczen, P.Eng
One way that it attempted to cut costs was by carefully managing and reducing its property taxes. In 2009 it commenced judicial review against four British Columbia towns (Powell River, Campbell River, Port Alberni and North Cowichan) in an attempt to have its property tax rates in those towns reduced. Ultimately it reached settlements in several municipalities, and closed its mill in Campbell River.
Catalyst Paper's dispute with North Cowichan, however, made its way to the Supreme Court of Canada, which last week ruled in favour of North Cowichan and upheld the district's method of setting property tax rates.
Catalyst Paper had sought judicial review of North Cowichan's property tax rates for major industry (Class 4) primarily on the ground that the rate was unreasonable. The property tax rate for Class 4 property in North Cowichan was set by the municipal council at $43.3499 per $1000 of assessed value, approximately 20.3 times the rate for residential property. This was in spite of the fact that Catalyst Paper received little or nothing in the way of municipal services - the mill did not receive water or sewer service from the district.
The Supreme Court examined at some length the discretion given to municipalities to set tax rates, and the principles that guide court reviews of municipal taxation.
The Court noted that (in order to properly pass a bylaw) a muncipality must comply with mandatory procedural requirements, such as notice and voting requirements. While Catalyst Paper had alleged that proper procedures were not followed (as North Cowichan had failed to provide reasons and a rational basis for passing the taxation bylaw), the Court held that procedural fairness does not require the provision of either.
The Court went on to find that once a taxation bylaw is found to be procedurally proper, the scope for review of the substance of the bylaw is very limited. The essential question on judicial review is whether the taxation bylaw falls within the range of reasonable outcomes. That reasonableness must be assessed in the context of all relevant factors , including the scope of decision-making power given to council by the relevant legislation. In the case of municipal councils, which are "democratic institutions" that have traditionally been granted broad discretion in legislative matters, the scope for substantive review by the courts will be very limited.
In the case of property tax, the Court found that the B.C. Community Charter gives muncipalities a "broad and unfettered legislative discretion to establish property tax rates in respect of each of the property classes in the municipality, unless limited by regulation".
The Court rejected the argument that the level of a tax be related to the services consumed. Catalyst Paper had presented a "Consumption of Services Model" of municipal taxation, which the Court rejected.
The Court was not unsympathetic to Catlyst Paper. While the Court did mention that the Class 4 property taxes were harsh, and that the ratio of industrial to residential rates were among the highest in the British Columbia, it found that rates set by the muncipal council was within the range of reasonable outcomes, and accordingly declined to interfere with the bylaw.
The full text of the decision can be found at Catalyst Paper v. North Cowichan (District) 2012 SCC 2