ADMINISTRATIVE REPORT
Date: July 10, 1995
TO: Vancouver City Council
FROM: General Manager Corporate Services
SUBJECT: Legislation on Railway Taxation
RECOMMENDATION
THAT Council endorse the petition circulated by the City of New
Westminster as set out in the Appendix to this report on the
withdrawal of the proposed changes to the assessment and taxation
of railway properties in the Province, and immediately communicate
this action to the Premier.
COUNCIL POLICY
There is no applicable policy which directly affects this issue,
although from time to time Council has requested the Provincial
Government to respond to its concerns by adopting or not adopting
legislation which either enables or precludes the effective operation
of the City of Vancouver as a municipal corporation.
BACKGROUND
The assessment and taxation of railway properties has been a issue with
our national railways for some time. The CN and CP railways have made a
case to the Provincial Government that they are paying too much tax in
the Province and the situation negatively affects their competitive
position. This contention, coupled with the recent elimination of
subsidies in the Federal Budget, has caused the Provincial Government
to now introduce legislation which will reduce by one-half the amount
of property tax paid by these railways over the next four years.
The figures quoted in a recent UBCM circular on the subject suggest
that the current provincial/municipal railway taxation levy is $45
million. The objective is to reduce this figure by approximately $20
million through the proposed legislation.
DISCUSSION
There has been limited discussion with municipalities on the issue of
railway taxation. The proposed legislation as reflected in Bill 55, the
Miscellaneous Statues Amendment Act (No.3) for 1995, has engendered a
negative reaction from the UBCM in terms of its sudden appearance on
the legislative agenda. The Province, however, has indicated that it
first wishes to introduce this legislation and then involve the UBCM
and local governments in a series of discussions over the next several
months in order to work out the details of how the municipal railway
tax reductions will be phased in over the next three years.
UBCM has responded to the Provincial Government in strong terms asking
them to not introduce legislation that will interfere/limit railway
assessments and/or local (municipal) taxation powers. The substance of
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the UBCM response is reflected in the following points.
1. A Poor Approach to Problem Solving - local government was not
asked to be part of the solution. Local government has been
defined as "the problem" to be fixed. A foundation of cooperation
was not explored.
2. Unfulfilled Expectations - the 1995 Provincial Budget led us to
believe there would be a consultation process to define problems
and develop solutions - not just consultation on implementation.
3. Lead Up Flawed - the committee set in place prior to the Budget
was not used properly and its mandate and purpose never clearly
established.
4. Intrusion on Local Autonomy - any moves, especially undefined, to
limit local taxing authorities will be seen as a major assault on
local autonomy.
5. A Short Term Policy - the approach taken will require long term
government involvement in micro-managing municipal railway
assessment and taxation. It may be an appealing approach in year
one but by year 15 will be a very poor way of ensuring the desired
result.
6. Flexibility May be Seen as Discretion Which May be Seen as
Potentially Discriminatory - the promise of room to apply a "tool
kit" of solutions can also be viewed as opening the way for their
selective use.
7. Property Tax Determined to be the Only Problem - the government
appears to have determined that the competitive problems of
railways can be fixed through property taxation alone.
8. An Apparent Intrusion into the Integrity of an Impartial
Assessment System.
9. Erosion of Commitment to BC Rail Grants-in-Lieu.
A review of the impact that halving the municipal property taxes on CN
and CP properties would have on the City's tax revenue indicates that
approximately $500,000 would be lost. This loss of tax revenue will be
dependent on the individual municipal contributions to this overall
reduction which is a point to be discussed after introduction of the
railway legislation. Council will remember that the Province's position
seems to be that Vancouver has deep pockets and I see nothing is this
railway proposal which would change that impression. Council should
also be aware that railway trackage and ancillary facilities are
already assessed at Commissioner's rates in the Utility Class. These
rates are established by the Province through Regulation to the
Assessment Act. Moreover, the current assessment rate, approximately
$3,600 per acre, in no way represents the real market value of these
properties in Vancouver.
Besides having a property valuation advantage, the railways are asking
for a tax advantage as well, which may come at the expense of municipal
autonomy in property taxation matters.
CONCLUSION
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Since the proposed legislation changes affecting the taxing of railway
properties is a direct intrusion into a municipality's property
taxation powers, Council is urged to endorse the attached petition and
immediately communicate this action to the Premier.
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