Despite strong attendance, tax dispute puts CMHR in the red

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This article was published 05/02/2016 (3567 days ago), so information in it may no longer be current.

OTTAWA — The Canadian Museum for Human Rights exceeded its own expectations in its first six months after opening but the still-unsettled tax dispute with the city of Winnipeg could put the museum more than $4 million in debt.

In the 2014-15 annual report, finally tabled in the House of Commons Thursday, the museum shows an operating deficit of $200,000, pushed into the red because the tax bill came in $700,000 more than expected. However, the report, which was supposed to be tabled last fall but was delayed by the federal election, also shows own-source revenues were slightly higher than expected, and the number of people who toured the museum was more than twice the projected number of visitors.

“Overall we’re really excited about where we’re at and where we’re going,” said Chief Financial Officer Susanne Robertson.

But Robertson said a dispute with the City of Winnipeg over how much tax the museum has to pay is the number one concern hanging over the museum.

As a federal institution the museum pays what is known as Payment In Lieu of Taxes (PILT) to the City of Winnipeg. Initial planning for the museum didn’t account for any tax payments at all because it was going to be a private museum which are exempt from city taxes. But national museums are not, and the city and the Department of Public Works and Government Services Canada disagree on how much the building and the land is worth.

The dispute over the land was settled last June. The city initially pegged the land price at $6.9 million while Public Works assessed it at $1. A dispute panel which deals with PILT disagreements sided mostly in the city’s favour, valuing the land at $6.5 million.

But the city has filed new appeals with the dispute panel for the assessment of the building. The city says it’s worth $108 million. Ottawa says it’s just $30.3 million.

In 2015, the museum paid the city $808,023 for PILT based on the Ottawa property assessment. The city says the museum actually owes $2.7 million for 2015 based on its assessment.

Going back to 2009, the museum is $6.7 million behind on its tax bills to the city. Robertson said $3.4 million of that is built into the annual report. If the dispute panel sides with the city again, as it mostly did over the land assessment, the museum is going to have a hefty tax bill to pay to catch up on the arrears and it will have to adjust its budget to reflect a bigger tax bill every year.

Robertson indicated that could mean a financial gap of $4.6 million.

“The amount being unknown is the biggest difficulty,” said Robertson.

Former Heritage Minister and Manitoba MP Shelly Glover was warned in December 2014 that tax payments were becoming a major headache for national museums. The briefing note, obtained through Access to Information, said national museums have seen tax bills rising, without accompanying increases to government funding. Many agencies and departments, such as the Department of Defence and Correctional Services Canada, have automatic adjustments to their funding each year to account for tax increases. National museums do not.

New Heritage Minister Melanie Joly toured the museum on a visit to Winnipeg in November, but has not yet met with museum officials to discuss funding.

She was not available for an interview with the Free Press but said in a statement she believes the CMHR serves an essential purpose.

“I am aware that Canada’s national museums are under financial pressure and I plan on pursuing the discussion about the challenges encountered by these institutions as well as evaluating the solutions available to them,” she said.

The museum has several other looming fiscal concerns, including the fact when the museum plan was first conceived in 2006, people underestimated what the ongoing costs would be of maintaining the digital equipment. Computers, touch screens, servers and networks all have a shorter lifespan than more typical museum exhibits and will have to be replaced more often.

On top of that, the museum borrowed $35 million from Ottawa against its future funding in order to come up with the cash to pay for the final construction of the building. In 2018-19, the museum has to start paying that back and will have six years to do it.

All of that will be part of the negotiations the museum and Heritage Minister Melanie Joly have as the two start to work out how much the museum will get from Ottawa going forward. It’s current federal appropriation is $21.7 million a year. That agreement was supposed to expire this March, but the museum was given another year at that funding level.

Robertson said it will give them more time to see what the actual costs and revenues are now that the museum is open and hopefully get the PILT dispute solved.

mia.rabson@freepress.mb.ca