Is Our Tax Policy Legal?


To understand the following, remember that the problem with our tax policy is that s. 307 of the Municipal Act requires the same mill rates in the whole municipality except where specifically provided elsewhere.  The Municipal Act does not allow discounts as we have in Napanee.  s. 326 allows surcharges for the additional cost of specific services in areas where such service is provided at a higher level than elsewhere but only after the additional cost has been determined.

Was this what staff was trying to do in 2014?  Read on and make your own decision.

The Treasurer first proposed a “Service Delivery Review” (SDR) at the September 10, 2013 meeting.

Staff Recommendation: That current tax policy not be changed ad hoc but rather tax policy be an included feature of an overall Service Delivery Review. And further that as part of 2014 Budget process staff resources be set aside to prepare a request for proposal for expressions of interest and completion of a Service Delivery Review process….Since our current tax policy has been established, our municipality has changed greatly in all aspects, including the way municipal services are funded. Staff fully supports conducting a Service Delivery Review that would include reviewing our tax policy to ensure that our tax rates are fair and equitable across the municipality.

TheNapanee Beaver reported in the September 19 edition that the CAO said:

“The legislation on which the town operates has changed considerably since 1998 when we amalgamated this municipality. The decisions that were made in 1998-2000 were based on legislative requirements and legislative direction at that point in time. That was the best framework we had. This review would also take a look at the changes in these legislative requirements and incorporate them into some recommendations as well.”

On June 24, 2014 the CAO updated council suggesting a 6-step processs:  The first two steps were:

1) Provide Council with the framework of legislative limitations that municipal tax policy must be developed within. This will be completed by the end of June.

2) Provide a independently moderated session (staff recommends Tim Wilkin [the Town’s lawyer] to run the session) for Council to review the management identified service areas and determine the final services to be included within the limits of the RFP. This should be completed by the end of July.

None of this happened. The matter still dragged on. Possibly the lawyers were busy. Or perhaps they did a lot of head scratching trying to figure out what exactly had happened in Napanee.  Or perhaps…. well, who knows.  On August 8, the CAO reported:

Unfortunately, the first step [providing Council with the framework of the legislative limitations that tax policy must be developed within] has become very arduous, as there are a number of complicating factors of overlapping legislation passed by a succession of governments. Our lawyers have spent a great deal of time on research and interpretation, with no case law to provide guidance.

Possibly the lawyers simply called up and said “it’s complicated.” It would be strange if they only sent a bill for their hours of research with no report on their findings.

 On August 8, 2014 Councillor Lucas (Ward 5) sent a letter to the CAO asking:

 “In general or specific terms is the present urban/rural levy legal and consistent with current provincial legislation?”

 On September 23, 2014 Councillor Lucas received a two page written response from the CAO:

The basis of our tax policy comes from the work completed in 2000 by staff. The original urban/rural difference was based on a basic differential in the cost of policing. This differential was accommodated under tax policy based on a section of the Minister’s Order that authorized the terms and conditions of amalgamation. No further legal review was done prior to setting taxation policy between the implementation of the program and 2014. A succession of Councils, other than one small adjustment to the rate structure, has been opposed to any adjustment to the rate structure. With over ten years of legislation passed, changes to policing formulas and changes to the services provided within the community,staff fully support a complete review of all legislation and that the lawyer work in conjunction with the successful bidder on the RFP for Service Delivery Review…

 In verbal conversation with our legal consultant, no case law exists in  Ontario  where a municipality has been challenged on their tax policy based on the legislative framework that exists in the province.

It’s hardly a satisfying answer.  And, if there’s no case law, perhaps it’s because there’s no ambiguity in what the Municipal Act requires and other municipalities understand that and comply.

 At it’s first meeting in December 2014, council voted unanimously to cancel the SDR. this was done on its own initiative and against the advice of staff.  Reportedly, staff were unhappy and shortly after there was talk of re-activating it under a new name, a Cost of Services Study (CSS).  By March, the Rural Ratepayers Association were talking up the CSS idea.

On April 21, on a 4-2 vote, council requested a legal opinion. (Councillors Schenk & Kaiser voted against the motion.)

On May 12, 2015, a 16th taxing by-law was passed with the differential tax rates.  This was done over the objections of councillors Lucas and Harvey who felt it should wait for the legal opinion.  Councillor Schenk said something like, “who cares – we need the money.”

Finally, On June 9, 2015, Tax Policy – Legal Opinion appeared on the agenda. The Mayor said this would be dealt with later in closed session. Councillor Lucas moved that the legal opinion be dealt with in open session and Councillor Harvey seconded it.  The acting CAO, Jim Timlin stated (incorrectly) that legal opinions must be dealt with in closed session. In fact, under s. 239 of the Municipal Act, it’s optional.  The motion was defeated 5-2.

Councillor Lucas reviewed the above statements made by the CAO which indicated that advice on the legality of the tax policy had been received in 2014. He moved that all such advice be presented to the council at the next meeting.   This caused a howl of protest from the mayor and the rest of council and the motion was promptly defeated on the usual 5-2 division.  In effect council voted that there are some things you are better off not knowing.

The legal opinion, apparently was not presented on June 9 but rather at a later meeting on June 17 when Tony Fleming, a lawyer with Cunningham Swan, attended. Council is entitled to hold a closed session to receive legal advice but must first meet in open session and resolve itself into closed session and state the reason for doing so. Such meetings must be publicized in advance. It wasn’t. Minutes of the open portion of the meeting must be made public but no record of the meeting having been held appears on the Town website.

Councillors have not revealed what the lawyer told them. But it is not hard to figure our given that they elected to keep it secret.

The real questions are:  What advice did the lawyers give in 2014? Who, if anyone was it shared with? Was council informed of the advice in 2014? If not, why not?  Why did councillor Schenk and councillor Kaiser vote in 2015 against getting a legal opinion? Did they have reason to suspect that the answer wouldn’t be good? Why hasn’t the legal opinion been publicized?

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