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 - 2 - 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 - 3 - 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. * * * * *