Winnipeg Free Press - PRINT EDITION

Ottawa lowballs lab payment

City loses $1.5 million after disagreement over assessment

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Ottawa assessed the lab at $60 million.


Ottawa assessed the lab at $60 million. Photo Store

Winnipeg missed out on $1.5 million last year after Ottawa balked at a city bill for providing fire protection, policing and other services to the National Microbiology Laboratory.

In 2013, Winnipeg's assessment and taxation department issued Ottawa a $3.2-million tab 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 to federal institutions.

PILT payments were devised to provide roughly the same form of compensation -- but Ottawa is not compelled to pay whatever tab municipalities desire. In the case of the National Microbiology Laboratory, a Public Health Agency of Canada complex on Arlington Street, city assessors spent months trying to obtain the security clearance necessary to inspect one of the few facilities on the planet capable of containing some of the world's most dangerous pathogens.

The city assessed the West Alexander lab complex at $115.2 million and handed Ottawa a PILT bill for $3.2 million. Public Works and Government Services Canada decided the complex is worth $60 million and paid the city $1.7 million.

"We have an assessed value and the feds decide 'Well, we're going to pay on a different value,' " city assessor Mel Chambers said Tuesday in an interview. "That's where these problems start."

The $1.5-million disagreement is heading before a federal dispute advisory panel -- but only after an earlier Winnipeg-Ottawa dispute is settled over PILT payments owing for the Canadian Museum for Human Rights.

"Their argument will inevitably be the building can't be used for something else, so it has no value," Chambers said. "They're making the same argument for the museum, and they're making the same argument across the country."

The dispute over the human-rights museum is expected to be settled before the end of June, when the dispute advisory panel makes a final recommendation about the CMHR's value to Public Works and Government Services Minister Diane Finley. The minister ultimately has the power to decide what Ottawa will pay Winnipeg, but she does not have the leeway to choose any amount. The Supreme Court of Canada has already ruled the federal government may not set the bill for PILT payments at unreasonably low levels.

In 2012, 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 at the time.

The stakes for Winnipeg are high -- and not simply because $1.5 million could cover the salaries and benefits for 15 police officers or pay for all of the downtown curb, sidewalk and street renewals in the city's summer construction plan.

As the only city on the Canadian Prairies with a relatively large number of federal buildings, Winnipeg has more financial exposure to low PILT payments.

Mayor Sam Katz said the dispute with Ottawa involves several properties, with several hundreds of thousands of dollars that the city believes it is owed by Ottawa on an annual basis.

"We’re talking serious dollars there," Katz said this morning.

"If we are successful and get the full amount that certainly helps us get revenue to fix our infrastructure," Katz said.

"For the City of Winnipeg, it's significant when you look at the inventory of federally owned buildings we have here," Chambers said.

Council property chairman Jeff Browaty (North Kildonan), a property appraiser by training, said the assessments should be based on market value and hopes Ottawa will hear the city out.

Council finance chairman Russ Wyatt (Transcona), however, said he understands what Ottawa is doing. "I cannot blame the federal government for wanting to play hardball with the City of Winnipeg," he said. "There's definitely a crisis of credibility affecting the city's ability to deal with the federal government." 

Officials with Public Works and Government Services Canada were unable to comment Tuesday.

Most of the facilities in the lab are Level Two containment labs, the same types found in universities or doctors' offices. A few Level Three labs handle more infectious diseases, while the complex has a single Level Four lab, capable of containing deadly pathogens such as ebola.

Republished from the Winnipeg Free Press print edition April 16, 2014 A3


Updated on Wednesday, April 16, 2014 at 11:20 AM CDT: Adds comments from Mayor Katz.

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