Court of Appeal Clarifies Parcel Tax Authority for Local Area Services

By
Christopher S. Murdy
Barrister & Solicitor
csm@murdymcallister.com
April 30, 2009

              On April 29, 2009 the Court of Appeal handed down its decision in the case of O’Flanagan v. City of Rossland which upheld a bylaw that had been challenged by an owner within the service area.                          

        Rossland had enacted a bylaw under the Community Charter to establish a local area service for the purpose of funding a new reservoir which would allow for development of lands within the service area outside of the main developed part of the City.

        Initially a property value tax had been proposed but ultimately the City elected to go with a parcel tax based on the notion that the project would enhance the development potential of the area in question and that the cost recovery method should incorporate the maximum development potential of each parcel into the taxable base.                          

        The bylaw established that the parcel tax would be “based on the taxable area of each parcel calculated on the full parcel build out (maximum permitted units) for each parcel”.

        The evidence was that the parcel tax was designed by City officials in this manner so that owners with the greatest development potential, and who had the most to gain from the service, would pay a proportionately higher amount of the tax for the cost of this service.  The full parcel build out was a function of the actual physical area and a value corresponding to the maximum development potential density per gross hectare based on zoning densities.

        The main argument raised against the bylaw was that it was beyond the powers of the City under the Charter that where a parcel tax is used, the method of establishing the taxable area “must be based on the physical characteristics of the parcel…”.                          

        A second challenge was that there was discrimination or improper purpose in passing the bylaw due to the deliberate exclusion of certain parcels that had already been built out or were subject to another analogous tax.                          

        The Court of Appeal held the bylaw was valid and concluded that zoning considerations do not render the bylaw invalid, so long as it can be said that the taxable area is based on the physical characteristics of the parcel.  Here, it was clear that the gross hectares was obviously a physical characteristic, but it was not the only characteristic considered, as the bylaw also took into account zoning.                          

        The Court of Appeal agreed with the Chambers Judge that zoning density governing potential build out takes into account physical characteristics of the property and concluded that this was a reasonable conclusion since zoning must take into consideration the physical nature and dimensions of a property.                          

        Accordingly, the Court upheld taxation based on development potential as being based on a physical characteristic.                          

        The Court noted that although zoning could change, Section 208 of the Charter provides a remedy which allows for an appeal to the parcel tax roll review panel  if there was a change in the manner of calculating the taxable area.                          

        The decision to exclude parcels was held to be a matter that could properly be considered by the council and, in the absence of bad faith or an improper motive, it was for council and not for a reviewing Court to make that determination.  The Court referred to earlier Supreme Court of Canada decisions and concluded that Courts should be slow to impose their notions of what is fair or appropriate in place of decisions of those by local government.

        The argument that the bylaw encouraged development rather than taxing parcels that could benefit from the service was also held to be beyond the purview of the Court, which concluded that the ultimate effects of the bylaw are proper considerations for the council concerned.                            

        The decision is important for local governments in tailoring taxation schemes with parcel taxes in local area services to achieve policy objectives based on council’s determination of what is fair and equitable.  To that end, the decision may provide an important and helpful precedent for such bylaws.  

                                               

This client bulletin is intended to provide commentary on issues that may be of interest or legal significance to local governments in British Columbia.  The comments reflect the views of the individual author and are not intended to provide legal advice or establish a legal retainer.  For specific advice or information, please directly contact the author noted at the head of the client bulletin.  If you wish to be added to or removed from the distribution list for Murdy & McAllister client bulletins, or if you have any comments, please contact James Yardley at 604-689-5263, or jgy@murdymcallister.com.  

© 2009 Murdy & McAllister