Feds, city in spat over CMHR servicing cost

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The Canadian Museum for Human Rights is a federal institution, but will receive services from the city such as fire protection.

Winnipeg and Ottawa are squabbling over how much money the Canadian Museum for Human Rights must pay the city to cover the cost of servicing the federal institution.

But the Province of Manitoba stands to lose out in the short term, because Broadway happens to be first in line for the cash.

Earlier this year, Winnipeg's assessment and taxation department issued the CMHR a $198,000 bill for payment in lieu of taxes, or PILT, which is money federal institutions pay municipalities in place of property taxes.

Since Ottawa technically owns all of Canada, it's unconstitutional for the federal government to pay provincial or municipal property taxes. But it still costs cities money to provide basic services such as fire protection and policing to federal institutions. PILT payments were devised to provide roughly the same form of compensation.

For the 2011 tax year, the city handed the museum a bill for $198,000, based on an empty parcel of land with no building on the surface and an overall assessment of $6.9 million, city assessor Nelson Karpa said. That $198,000 bill includes city property taxes, Winnipeg School Division taxes and the provincial education support levy.

Public Works and Government Services Canada responded with a lower value and the disagreement is now heading to a federal Dispute Advisory Panel. That panel, in turn, will make a recommendation to Public Works and Government Services Minister Rona Ambrose, who will ultimately decide on a value.

"The minister can do what the minister wants to do," Karpa said in an interview, declining to say what Ottawa proposed to pay instead of $198,000.

Sources at city hall, speaking on condition of anonymity, pegged that number at $1. Officials with Public Works and Government Services' regional office in Edmonton said they will be able to comment today.

The dispute will have no impact on Winnipeg's finances, as any museum PILT payment will be forwarded to the province, which gave the museum an $11.1-million grant on behalf of the city. The province expects to recoup this $11.1 million through museum PILT payments to the city.

While the city's repayment of the provincial loan has been delayed by Ottawa's decision to dispute the museum's PILT bill, the Selinger government is not concerned, said Naline Rampersad, spokeswoman for Local Government Minister Ron Lemieux.

"The province anticipates the result of the request-for-review process to be a fair and predictable PILT payment going forward," Rampersad said in a statement. "We are confident in the city's ability to meet its obligations."

The city has pledged a total of $23.6 million to help build the Canadian Museum for Human Rights, which has a total price tag of $351 million.

The city spent $5.1 million in cash on the project, refunded $1.1 million worth of development and permit fees and waived $2.5 million worth of lease revenue. It also plans to refund a total of $14.7 million worth of PILT payments to the museum -- $11.1 million of which will be paid to the province to cover the loan. After the loan is paid off, another $3.6 million in PILT payments will be refunded to Ottawa.

In 2011, Mayor Sam Katz estimated the museum's annual PILT payment will eventually be about $1 million, while the CMHR estimated the annual bill could be closer to $5 million.

The smaller figure appears more plausible. A reassessment of the museum property that includes the building as well as the land resulted in a $879,054 PILT-payment bill, Karpa said.

Ottawa has yet to respond to the new bill. The museum only received it on Dec. 14, said communications director Angela Cassie. In a statement, she described the city-federal dispute over PILT payments as a normal part of the process for establishing a new federal building.

While Ambrose may ultimately decide what Ottawa will pay Winnipeg, the Supreme Court of Canada has already ruled the federal government may not set the bill at an unreasonably low level.

In June, the nation's highest court ruled in favour of the City of Halifax in a dispute over PILT payments flowing from Citadel Hill, a prominent park in the Nova Scotia capital. Ottawa claimed the land was only worth $10, while Halifax pegged the value at $19 million, the Halifax Chronicle-Herald reported.

The Supreme Court ruled Ottawa has the right to determine the size of the payment but must base that decision on real-life property assessments, the paper reported.

bartley.kives@freepress.mb.ca

What is a PILT payment? Money Ottawa pays in place of property taxes for federal buildings. Since Canada owns all of its land, it's unconstitutional for Ottawa to pay municipal or provincial property taxes.

Why would one level of government pay another? The City of Winnipeg still provides services to federal buildings such as the Canadian Museum for Human Rights. The most expensive services include fire protection and policing.

Who determines a PILT payment? The city issues a bill, based on a property assessment. Ottawa then decides whether to accept the bill or amend it. In the event of a disagreement, the federal Dispute Advisory Panel holds a hearing and then forwards a recommendation to the federal public works and government services minister, who ultimately decides. If the city still disagrees, the courts could get involved.

What did the city ask the CMHR to pay?

$197,504, based on an empty plot of land.

What did Ottawa propose instead? No one will say, but sources peg the counter-offer at $1.

What would be the bill for both the land and the building? The city recently issued a new bill for $879,054, based on a reassessment.

How much money has the city pledged in total to the CMHR? $23.6 million.

Republished from the Winnipeg Free Press print edition December 19, 2012 A3