Fees and Charges Effective Cost Recovery

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1 Fees and Charges Effective Cost Recovery Eastern Ontario Treasurer s Association Presented by Tony Fleming May 27, 2011

2 Overview Fees and charges Fees and charges vs taxes Cost recovery - can we do it better

3 Fees and Charges 391. (1) Without limiting sections 9, 10 and 11, those sections authorize a municipality to impose fees or charges on persons, (a) for services or activities provided or done by or on behalf of it; (b) for costs payable by it for services or activities provided or done by or on behalf of any other municipality or any local board; and (c) for the use of its property including property under its control.

4 Fees and Charges 391(2) A fee or charge imposed for capital costs related to services or activities may be imposed on persons not receiving an immediate benefit from the services or activities but who will receive a benefit at some later point in time. 391(3) The costs included in a fee or charge may include costs incurred by the municipality or local board related to administration, enforcement and the establishment, acquisition and replacement of capital assets.

5 Fees and Charges 394. Fees and Charges may not be computed: On the basis of the income of a person With reference to the use, purchase or consumption of property (except municipal property) With reference to the use, purchase or consumption of a service (except municipal services) With reference to the benefit received from a service (except municipal services) Natural resources

6 Fees and Charges O. Reg. 584/06 limits fees and charges No authority to impose a fee or charge on a class of persons comprised solely of the Crown No authority to impose a fee or charge on the Crown for court security, or for escorting/conveying persons in custody No recovery of costs that are or could be recovered under a development charge by-law No fees or charges on telecommunications, electricity and gas but costs to install are recoverable

7 Fees and Charges Municipality may impose licensing fees: On group homes (163(2)) On trailers and trailer camps, but not for trailers assessed under the Assessment Act (164) On businesses (151) Not on manufacturing/industry Not on wholesaler Not on natural resource business No refusal to issue a license based only on location (where compliant with zoning)

8 Fees and Charges Section 7 of the Building Code Act Authorizes fees for building permits The total amount of the fee must not exceed the anticipated reasonable costs to administer and enforce the regime Annual reports on fees and costs to administer and enforce Any changes in fees requires notice and a public meeting Can the municipality retain fees where the permit is abandoned or revoked Attempts to raise revenue not reasonably connected to the actual costs to administer the system is illegal

9 Fees and Charges When is a fee or charge illegal? Municipalities have no jurisdiction to levy a tax, other than property taxes 5 criteria to assess whether a fee is a tax: Enforceable by law Imposed under authority of the legislature Levied by a public body Intended for a public purpose Nexus/connection between the quantum and the actual cost

10 Fees and Charges What is the public purpose? Related to whether the intent is to defray expenses or raise revenue Raising revenue is a tax and illegal Not necessary to create reserve funds specifically for every fee or charge to demonstrate that the money is not for general revenue The courts are more interested in purpose than application

11 Fees and Charges How accurate does your estimate need to be? There must be a reasonable relationship between the fee or charge and the cost to deliver the service Generating a surplus is not determinative of a tax, provided a rational connection with the service exists The surplus can be used for general municipal expenses When is the fee too much? License fee equal to 80% of the revenue generated by a sign rental was acceptable Building permit fees that exceed the cost to inspect and administer are not acceptable

12 Fees and Charges How can you draft a defensible By-law? Do your homework up-front What are the costs What has happened historically What is the reasonably anticipated permit activity Set out the purpose in the recitals The courts indicate that detailed recitals can be of assistance Self-serving statements will not cure an illegal by-law Re-evaluate the accuracy and recalculate if necessary What level of accuracy did your estimate have? Are there reasons not to readjust?

13 Fees and Charges Solar Farm experience Is a fee for an entrance permit a tax? What is the total of the fee Is the magnitude of the fee such that it must be intended to generate revenue What costs are included in administration and enforcement Is the fee reasonably related to the actual costs Is it reasonable to include costs to repair the road General revenue is used to repair roads

14 Cost Recovery Practical strategies for cost recovery Debts recovered in like manner as property taxes Liens on property Priority liens Security Structuring all by-laws to maximize cost recovery

15 Cost Recovery Section 398 fees and charges constitute a debt The Treasurer may add the debt to the tax roll and collect in the same manner as taxes, for the following property: For fees and charges for the supply of a public utility, the property to which the utility was supplied; In all other cases, any property for which all of the owners are responsible for paying the fees and charges Who is responsible is key Joint ownership may defeat the ability to add the debt

16 Cost Recovery Costs to take remedial actions can be recovered as a lien registered on title Section 446 Authority under the Municipal Act or another act or By-law Authority to direct or require a person to do something In default of compliance the Municipality may do that thing at the person s expense Recover costs by action or by adding the costs to the tax roll and collecting in the same manner as taxes Includes interest May be registered as a lien on title

17 Cost Recovery Fees and charges are not priority liens, unless specifically stated as such S. 1(3) - If an amount added to the tax roll in respect of a property is a priority lien, that amount, including interest: (a)may be collected in the same manner as taxes; (b)may be recovered with costs as a debt from the owner and any subsequent owner; (c)is a special lien on the property in the same manner as taxes; and (d)may be included in the cancellation price in a tax sale

18 Cost Recovery Priority liens have priority to every claim, privilege, encumbrance or lien of every person, except the Crown Cancellation price includes priority liens Recovered under a tax sale Priority as against any other encumbrance or registered lien Business improvement levy has priority lien status Municipal utilities charges have priority lien status

19 Cost Recovery Section 15 of the Building Code Act Property standards orders Where the municipality does the work it shall have a lien on the land equal to the value of the work The lien has priority status

20 Cost Recovery Why bother with liens or tax sales? Take the money up-front Site plans, development agreements, subdivision agreements and contracts Easier to get paid if you already have the money Easier to force people to comply if you already have their money Underutilized tool As between the general ratepayer and the developer, who should bear the burden of ensuring compliance

21 Cost Recovery Proper by-laws make it easier to collect fees and charges The by-law should include provisions: To permit the municipality to issue orders to comply To permit the municipality to take remedial action in cases of default To permit the municipality to add the costs to remediate to the tax roll To permit the municipality to place a lien on title in the amount of the costs, plus interest

22 Cost Recovery Example encroachment by-law Permit encroachments on municipal lands on conditions One condition is ability to order removal of encroachment In default of removal, municipality removes at encroaching party s expense enforced by placing costs on the Roll/liening the property Example tree by-law Section 135 grants broad powers to prohibit or regulate the destruction/injuring of trees Permits can be issued with conditions By-law and/or permits should include cost recovery mechanisms tied to orders to comply

23 Questions Ask me anything

24 Profile Tony Fleming is a Partner in the Land Use Planning, Development and Environmental Group and the Municipal Group at Cunningham Swan. Tony is recognized by the Law Society of Upper Canada as a Certified Specialist in Municipal Law (Local Government/ Land Use Planning and Development). As a Certified Specialist, Tony has demonstrated expertise in the fields of municipal law and land use planning and development law. Tony provides advice to municipalities and private sector companies on all aspects of land use planning and development as well as environmental law. Tony appears regularly before the Ontario Municipal Board, the Assessment Review Board and the Environmental Review Tribunal. In addition, Tony appears in all levels of Ontario Courts on administrative law matters, including defending challenges to municipal by laws. Prior to joining Cunningham Swan, Tony was Senior Legal Counsel with the City of Kingston. Tony focused on providing advice on land use planning and development and environmental law with the City of Kingston, building on his experience in private law firms in Toronto where Tony practised as a land use planning and environmental lawyer. To contact Tony, please tfleming@cswan.com, or call