Halifax (Regional Municipality) v. Nova Scotia (Assessment)

Halifax (Regional Municipality) v. Nova Scotia (Assessment) Court Supreme Court Date 2006-05-25 Citation 2006 NSSC 164 Docket 261746, SH 250585 Judge/Registrar/Adjudicator Goodfellow, Walter R. E. (Honourable Justice) (SC) (SC) Document Type Decision Relations Library Sheet - Halifax (Regional Municipality) v. Nova Scotia (Assessment) - 2006 NSSC 164 - 2006-05-25 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Halifax (Regional Municipality) v. Nova Scotia (Assessment), 2006 NSSC 164 Date: 20060525 Docket: S.H. 250585; S.H. 261746 Registry: Halifax Between: Halifax Regional Municipality Applicant v. The Director of Assessment Respondent Judge: The Honourable Justice Walter R.E. Goodfellow Heard: March 29, 2006 in Halifax, Nova Scotia Counsel: Mary Ellen Donovan for Halifax Regional Municipality Kirby Eileen Grant for the Department of Justice (N.S.) By the Court: BACKGROUND: [1] The City of Halifax (“HRM”) owned the former TexPark facility located at Granville, Sackville and Hollis Streets the property immediately north of what is now the Metro Park Garage, the subject matter of this application. This facility was leased by HRM in 1962 to Texaco Canada for a period of forty years for the purpose of building and operating a public parking garage. In 1993 TexPark was approaching the end of its useful life when HRM was faced with the reality that it was short on public parking space in its central business district (“CBD”). In 1993 the City of Halifax retained the consulting firm of Read Jones Christofferson Ltd (“Read”) to study the feasibility of developing a replacement parking garage in the CBD. In January 1994 a Report entitled “Feasibility Study for the Municipal Parking Garage and Pedway System, Halifax, Nova Scotia” was completed. [2] In 1995 the City of Halifax assembled a block of land comprising approximately 64,200 square feet (1.44 acres), to construct Metro Park on lands abutting the old TexPark facility. Once the land had been assembled the Municipality issued two separate Requests for Proposal (“RFP”) over a period of three years for the construction of a privately owned and operated public parking garage. Two proposals were received in response to each of the RFP’s, none of which met HRM’s minimum requirements. [3] HRM determined that it was not economically feasible for the private sector to build and operate a stand-alone parking structure. One option had been for HRM to build and manage the parking garage using its own employees but the preference was to contract out the management of the operation to the private sector. Thus, HRM decided to retain ownership of Metro Park and have it operated under a management contract and issued a third RFP. [4] The third RFP resulted in HRM counsel approving a proposal from the Hardman Group Ltd. (“Hardman”). The Hardman proposal was not quite what the Municipality envisioned in its Call for Proposals because it required that HRM would have to bear some of the costs. With the construction of Bishop’s Landing on Lower Water Street and the anticipated closure of TexPark in 2002, the City considered it was facing a loss of 780 parking spaces. [5] On May 31, 2001 an agreement to design, build and operate a public parking facility in downtown Halifax, Nova Scotia, was executed between the Hardman Group Ltd. and HRM. This agreement provided for the development of a parking garage containing 572 spaces and recognizes that Metro Park is owned and controlled by HRM with Hardman managing Metro Park as HRM’s agent. Particulars of the agreement will be referred to in some detail later. [6] Construction of Metro Park commenced in June 2001 and it was officially opened April 1, 2002. [7] In the 2003 taxation year, the Director of Assessment issued assessment notices in respect of Metro Park for both commercial, realty and business occupancy in the amount of $6,097,800 and $2,873,300 respectively. [8] In the 2004 taxation year, the Director of Assessment issued business occupancy and commercial realty for Metro Park in the amounts of $6,148,500 and $2,700,700 respectively. [9] The Assessment Notices for 2005 assessed Metro Park for commercial realty in the amount of $6,171,400 plus business occupancy in the amount of $2,700,700. [10] HRM objected to the failure to exempt Metro Park from both commercial property and business occupancy assessments, on the basis that the parking garage was built and is operated and managed by the Hardman Group as an agent of the Municipality and the Hardman Group manages Metro Park for the purposes of HRM. [11] The Director of Assessment takes the position that the parking garage is occupied by the Hardman Group for its own purposes and not for a municipal purpose. EVIDENCE/RECORD: [12] The evidence before me in this application consists of a number of affidavits and records as follows: 1. Affidavit of Simpson McLeod, Senior Planner, HRM, sworn January 24, 2006. 2. Affidavit of William N. Hardman, President of the Hardman Group Limited, sworn February 8, 2006. 3. Affidavit of Gerald G. Blackwood, Manager of Revenue, HRM, sworn January 26, 2006. 4. Supplementary Affidavit of Gerald G. Blackwood, sworn February 13, 2006. 5. Affidavit of Jan Gibson, Municipal Clerk, HRM, sworn January 26, 2006. 6. Affidavit of Lloyd MacLellan, Assessment Services, Province of Nova Scotia, sworn February 6, 2006. 7. Supplementary Affidavit of Lloyd MacLellan, sworn February 15, 2006 8. Affidavit of David M. Cormier, Acting Manager of Revenue, Financial Services, HRM, sworn July 4, 2005. 9. Supplementary Affidavit of David M. Cormier, sworn July 22, 2005. 10. Affidavit of Maxine A. Wallace, Senior Financial Analyst, Province of Nova Scotia, sworn March 28, 2006. [13] All parties declined the opportunity to cross-examine any of the deponents. ISSUES: ISSUE NO. 1 - Whether the filing of the revised electronic assessment roll on February 4, 2005, replaced the December Roll thereby effecting a new date for the filing of the 2005 assessment roll? ISSUE NO. 2: For the purposes of determining the timeliness of this application, whether the filing of the 2005 assessment roll on the Acting Manager constituted compliance with the statutory requirement to file the roll on the Municipal Clerk? ISSUE NO. 3: Is the Metro Park Property exempt from taxation under s. 5(h) of the Assessment Act? APPLICATION: [14] This application is taken pursuant to s. 94 of the Assessment Act which provides: 94(1) The municipality, the Director or any person assessed may apply on originating notice to the Supreme Court or to the county court for the determination of any question relating to the assessment, except a question as to persons alleged to be wrongfully placed or omitted from the roll or assessed at too high or too low a sum or whose property is wrongfully classified. The Assessment Act, R.S.N.S., c. 23, as amended, states: 5(1) The following property is exempt from taxation under this Act: (h) the property of every municipality if occupied or used for the purposes of such municipality or unoccupied, excepting nevertheless that property owned, operated or managed by a municipality either directly or through the medium of a board or commission, for the purpose of producing, transmitting, delivering or furnishing electricity, water or power directly or indirectly to or for the public, shall be assessed and taxed by the municipality. The Municipal Government Act, 1998, S.N.S., c. 18 as amended (“MGA”) provides: 56(1) A municipality may ...(d) establish or maintain parking facilities 65 The council may expend money required by the municipality for (ap) parking lots and parking structures; 223(1) Where provided for in a municipal planning strategy, council may accept money instead of all or part of any required off-street parking lot or facility. (2) Council shall use any money received to construct or maintain municipally owned parking or transit facilities to serve the immediate area of the development with respect to which the payment was made, provided the facilities ae located in an area identified in the municipal planning strategy. (3) The method used to determine the contribution for parking or transit facilities shall be set out in the land-use by-law and shall take into account the cost of construction of an individual parking space, including costs of land, grading and paving or any other standard determined by the council. Neither the Assessment Act nor the Municipal Government Act define “municipal purpose”. LEGISLATION: The Assessment Act, R.S.N.S., c. 23, as amended, states: 2(1) In this Act: (aa) “assessable property” means (I) land and land covered by water, (v) buildings and structures erected or placed upon, in , over , under or affixed to land, including buildings or structures under construction or partially constructed; (d) “commercial property” means all property or part thereof except residential property and resource property, and includes forest property owned by a person who owns fifty thousand acres or more of forest property in the Province; (l) “municipality” means a city, a town or a municipality of a county or district; (m) “occupant” includes the resident occupier of the land or, if there is no resident occupier, the person entitled to possession thereof, a leaseholder and a person having or enjoying in any way for any purpose the use of land otherwise than as owner and includes a landlord where the average period of occupancy th individual tenants is less than three months; 5(1) The following property is exempt from taxation under this Act: (h) the property of every municipality if occupied or used for the purposes of such municipality or unoccupied, excepting nevertheless that property owned, operated or managed by a municipality either directly or through the medium of a board or commission, for the purpose of producing, transmitting, delivering or furnishing electricity, natural gas, water or power directly or indirectly to or for the public, shall be assessed and taxed by that municipality; 11(1) In addition to any assessment of property under this Act, every person occupying or using any commercial property except . . . shall be assessed for a sum to be called business occupancy assessment. (2) Where commercial property is not occupied or used within the meaning of sub section (1) and that property. (a) is used as a utility area, common area or public area in respect of or is used ancillary to other commercial property, including another part of the same commercial property; and (b) is not used for parking or, if it is, no fee is charged to persons for the parking by those persons of motor vehicles on that property, the occupiers of the other commercial property are all deemed to proportionately occupy or use that property within the meaning of subsection (1). (5) Subject to subsection (2), every assessed owner of commercial property used for parking motor vehicles shall be deemed to be the occupier of the property. ISSUE NO. 1 - Whether the filing of the revised electronic assessment roll on February 4, 2005, replaced the December Roll thereby effecting a new date for the filing of the 2005 assessment roll? [15] This Issue applies only to the 2005 HRM application. It arises because the Director of Assessment has raised s. 95 of the Assessment Act which reads as follows: Limitation period No action or other proceeding, except an action or other proceeding brought by a municipality for the collection of rates and taxes, shall be brought in any court with respect to an assessment or to rates based on an assessment (a) except within six months after the date upon which the roll is required by Section 52 to be forwarded to the clerk, or within six months after the forwarding of the roll in case the roll is not forwarded within the time fixed for that purpose; (b) where an appeal has been taken to the assessment appeal court, except within six months from the time limited for appealing therefrom to the Nova Scotia Utility and Review Board; or (c) where an appeal has been taken to the Nova Scotia Utility and Review Board, except within thirty days after the date of the decision of the Nova Scotia Utility and Review Board. but, where an appeal has been taken to the Appeal Division of the Supreme Court, no action or proceeding shall be brought in any other court with respect to the assessment, except an action or other proceeding brought by a municipality for the collection of rates. R.S., c. 23, s. 95; 1992, c. 11, s. 35. [16] There are two arguments advanced by HRM, one based upon the fact that on May 20, 2004 by Royal assent, amendments to the Assessment Act were enacted adopting the CAP Assessment Program (“CAP”) which limits or “caps” the annual increase in an assessment for certain “eligible” property. To implement the CAP program on or about February 4, 2005, the Province provided two separate electronic files containing in total the assessments for the 2005 taxation year for all properties within HRM and HRM relied upon these electronic files as representing the taxable assessed value for all properties within the Municipality and on the basis of these revised assessment values issued its 2005 tax bills. ANSWER: [17] I am of the view that the answer provided by the Director of Assessment, namely that its obligation was to provide the assessment roll and that a subsequent revision, here the revised electronic assessment roll of February 4, 2005, did not replace the statutory requirement that applied to the December roll. If such were intended it should have been expressly stated in the legislation. ISSUE NO. 2: For the purposes of determining the timeliness of this application, whether the filing of the 2005 assessment roll on the Acting Manager constituted compliance with the statutory requirement to file the roll on the Municipal Clerk? [18] The second argument advanced by HRM is that the Director of Assessment must strictly comply with the legislation and that it failed to comply with s. 95 of the Assessment Act in that the roll was not forwarded to the Clerk of HRM. [19] It is common knowledge that the roll was not delivered or forwarded to the Municipal Clerk on December 22, 2004 but rather received by Gerald G. Blackwood in his capacity as Manager of Revenue for HRM on December 22, 2004. [20] Generally speaking, the court takes a fairly strict view of the procedural provisions of the Assessment Act (Director of Assessment v. Wedgewood Motel C.H. 33165, OHearn, JCC unreported). The Assessment Act is very specific. [21] Is the Municipality Properly Served with the Assessment Roll? In relation to the proper procedure for serving the roll, . 95(a) expressly refers to s. 52 and states: “No action or other proceeding . . . shall be brought in any court with respect to an assessment or to rates based on an assessment except within six months after the date upon which the roll is required by s. 52 to be forwarded to the clerk or within six months after the forwarding of the roll . . . “. Section 95(a) expressly mentions “the clerk” and refers to s. 52 wherein the Legislature imposed, by mandatory language, that the Director “shall complete the roll and . . . forward the roll and certificate to the clerk”. Section 9(3) of the Interpretation Act states that “shall is imperative”. Specifically naming the Clerk provides a useful function. It provides clarity of determination as to whether or not a municipality has received formal notice and avoids a determination of whether or not notice served upon the mayor, senior management, officials, revenue manager, etc., would in whatever circumstances exist constitute valid legal notice to the municipality, thus the Director has no discretion in this matter. Reading s. 95(a) and s. 52 together, the six month period only commences after the Rolls are forwarded to “the clerk” meaning that service on “the clerk” is a statutory prerequisite to the commencement of the six month limitation period. [22] It is open and reasonable to infer that at some point in time compliance with the requirement of forwarding the roll to the Municipal Clerk was complied with. It can still be forwarded to the Clerk if it is in fact delivered to the Manager of Revenue and subsequently have been passed on to the Municipal Clerk. I cannot however infer on the evidence before that this was done in time to start the clock ticking so as to preclude the limitation expiring as early as July 9, 2005. The 2005 application therefore stands and has not been extinguished. ISSUE NO. 3: Is the Metro Park Property exempt from taxation under s. 5(h) of the Assessment Act? [23] The determination of this issue starts from a premise that Metro Park is subject to taxation, Toronto Transit Commission v. City of Toronto (1971), 18 D.L.R. (3d) 68 SCC, and that HRM must establish that Metro Park is exempt because it is used for a “municipal purpose”. As previously noted, the Assessment Act does not define “municipal purpose”. The Province however did expressly grant to municipalities the power to establish parking facilities. The Municipal Government Act s. 56 (1)(d) above. In the previous Tex Park situation HRM entered into a lease and the relationship was that of a landlord and tenant, a commercial arrangement whereby the operation of the parking facility was under the control and direction of a tenant and not an employee or agent of HRM. In order for HRM to be successful in its application it must meet the onus of establishing on a balance of probabilities that the Metro Park is “occupied or used” for a “municipal purpose”, i.e., public parking. This requires an analysis of the relationship between Hardman and HRM. There is no doubt that Hardman managed the garage for HRM as an agent of HRM and the following features of the agreement between HRM and Hardman are cumulatively significant: 1. Hardman agrees to manage, operate and maintain the Facility as an agent of HRM throughout the operating period: s. 21.1. However, Hardman expressly manages the Facility on behalf of HRM and receives a monthly management fee: ss 22.1, 23.1. 2. Hardman must follow any applicable directives, instructions, guidelines, policies and procedures of HRM: s. 22.1 3. HRM may set the number of parking spaces available for hourly parking, the number of spaces available for monthly parking and limit the number of spaces which are available for rent to commercial landlords, businesses or hotels: s. 21.2 4. HRM sets the amounts that re to be charged for hourly and monthly parking: s. 21.3. 5. The hours of operation are set by HRM requiring 24 hours per day access for monthly parking and, at a minimum, from 7:00 a.m. to 12:00 midnight for hourly parking, seven days per week: s. 21.4 6. Hardman charges the hourly rate set by HRM and collects monthly rent for the retail space for HRM. Hardman makes its best effort to collect arrears in rent or monthly parking fees, but is not required to seek legal action on behalf of HRM: s. 22.2. 7. Hardman and HRM have a joint operating account. All rents and revenues are deposited therein by Hardman. Hardman issues monthly cheques at the end of each month in excess of a set minimum balance: ss. 22.3. 8. Hardman can issue cheques from the Operating Account for the purposes of paying all reasonable and proper Reimbursable Expenses incurred on behalf of HRM in connection with the operation and maintenance of the Facility and to pay Hardman’s management fee. The account cannot be used to pay capital expenditures or for any other purpose: s. 22.4 9. The HST is collected on behalf of HRM and remitted to the municipality on a monthly basis: s. 22.9. 10. The records, reports, books of account and other documents and materials relating to the management, operation and maintenance of the Facility are the property of HRM and not Hardman: s. 22.15. 11. The Operations Manual and all other manuals, documents, plans and specifications produced in the performance of the Agreement are the sole property of HRM: s. 25.5. 12. HRM pays Hardman to manage, operate and maintain the facility: s. 23.1. 13. HRM has the right, at any time, to require Hardman to make modifications to its Operating Procedures for the Facility, including modifications to its maintenance practices (providing such modifications will not adversely affect the Company’s ability to perform any of its obligations under the Agreement): s. 32.1(a). 14. HRM also has the right to make modifications to the parking garage itself: s. 32(1)(b). [24] The treatment of HST is noted above. Hardman collects the HST on the taxable sales generated by Metro Park pursuant to s. 22.9 of the Agreement (“collections”) and Hardman accounts for the HST paid on expenditures are reported in the financial statements submitted thereby enabling HRM to remit to the Canada Revenue Agency the HST collected on the taxable revenues and to enable HRM to claim input tax credits (100% of the HST) on the HST paid on expenditures in the operation of Metro Park. These amounts are reported monthly to the Canada Revenue Agency under the HRM Business number on the GST/HST Return for Registrants for the monthly reporting period. [25] The HST payable and receivable as well as the revenues and expenditures from the Metro Park are recorded in HRM’s books. The difference between the HST Payable and Receivable (ITC’s) and the monthly surplus/deficit on the financial statements is recorded in the HRM Receivable Account. The Hardman Group submits a cheque monthly from the Metro Park joint operating account to the HRM in payment of the HST as show in the HRM Receivable Account. [26] The HST is treated by HRM in the same manner as if HRM were managing Metro Park directly rather than through a contract manager. HRM records the HST, HRM remits the HST to the Canada Revenue Agency and HRM claims the input tax credits on the expenditures for Metro Park. [27] The Agreement itself expressly recognizes that the Metro Park is owned and controlled by HRM with Hardman operating as a manager and agent of HRM. The evidence establishes that there are really three ways that HRM could deal with Metro Park. First, by entering into a landlord/tenant relationship similar to what existed with TexPark. Second, by operating itself with the utilization of its employees or third, as it did in this case, utilizing an agent. Given the background and circumstances, particularly that HRM clearly determined that it was not economically feasible for the private sector to build and operate a stand-alone parking structure, here I am satisfied that HRM has met the onus upon it of establishing on a balance of probabilities that at the relevant times HRM did and continues to occupy and use its property for a municipal purpose and has therefore brought itself within the exemption provision of Clause 5(1)(h) of the Assessment Act. Order accordingly. J.