Imposition of tax need bear no relationship to costs of service being provided

Supreme court | Municipal Law


Imposition of tax need bear no relationship to costs of service being provided

Appellant owned pulp and paper mill in respondent district. Mill had own transportation infrastructure, waste disposal, emergency response systems and water supply and not highly dependent on municipal services. Assessed values of residential properties increased greatly over years, but taxes had not. Ratio between residential and major industry classes dramatically higher than ratio prescribed by statute and highest in British Columbia. Mill encountered severe financial challenges. Appellant concerned it could not sustain unreasonably high property taxes and hired consultants to analyze relationship between services and benefits provided by local municipalities and consumed or available to major industry and proportion of taxes paid by that class. Consultants found that major industry paid disproportionately high percentage of total municipal tax relative to consumption while other classes paid far less in taxes than they consumed in services. Consultants advanced municipal sustainability model but district declined to adopt model, instead passing tax rates by-law that perpetuated very high ratio between residential and major industry classes. Appellant brought petition to set aside by-law on basis it was unreasonable and therefore illegal. Chambers judge found that argument based on model inconsistent with nature of decision-making process contemplated by Community Charter (B.C.). He concluded by-law within range of reasonable and acceptable outcomes and dismissed petition. British Columbia Court of Appeal dismissed appellant’s appeal, finding that municipality had virtually unfettered discretion to consider whatever information it deemed relevant and to allocate tax burden among classes as it saw fit. Appeal to Supreme Court of Canada dismissed. In passing delegated legislation, municipality must make policy choices that fall reasonably within scope of authority granted by legislature. Parties disagreed on what standard of reasonableness required. Case law suggests review of municipal by-laws must reflect broad discretion provincial legislators have traditionally accorded to municipalities. By-laws involve array of social, economic, political and other non-legal considerations. Municipal by-laws will not be overturned unless “no reasonable body could have adopted them”. Reasonableness means substance of by-laws must conform to rationale of statutory regime. Community Charter gives municipalities broad and virtually unfettered legislative discretion to establish property tax rates. Imposition of tax need bear no relationship to costs of service being provided. Municipality not required to formally explain or provide rational basis for by-law. Reasons for by-law traditionally deduced from debate, deliberations and policy statements. Municipal councils entitled to consider broader social, economic and political factors relevant to electorate. Adoption of tax rates by-law did not constitute decision that no reasonable elected municipal council could have made.

Catalyst Paper Corp. v. North Cowichan (District) (Jan. 20, 2012, S.C.C., McLachlin C.J.C., LeBel, Deschamps, Fish, Abella, Rothstein and Cromwell JJ., File No. 33744) Decision at 318 D.L.R. (4th) 350, 188 A.C.W.S. (3d) 548 was affirmed. 209 A.C.W.S. (3d) 697 (22 pp.).

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