Federal Court sides with National Capital Commission in tax battle over Gatineau Park

The Federal Court has sided with the National Capital Commission in the latest round of the Crown corporation’s extended tax battle with the Municipality of Chelsea over the valuation of Gatineau Park.

In a recent decision, Federal Court Judge Peter George Pamel ruled that the NCC was justified in the way it calculated the payments it made to Chelsea in lieu of taxes for its Gatineau Park properties.

“Overall, I am of the view that the commission’s use of its discretion in aggregating properties and determining their effective value was, both in process and in result, transparent, intelligible, and adequately justified,” Pamel concluded.

The judge also awarded court costs to the NCC.

Two years ago, angry Chelsea taxpayers threatened to disrupt access to Gatineau Park over the NCC’s payments.

Federally owned land is not subject to taxation by municipal governments in Canada, but like other federal landholders, the NCC makes payments in lieu of taxes.

In late 2021, Chelsea went to Federal Court for judicial review of the NCC’s decision to override the recommendations of a federal advisory panel, which said the Crown corporation should give the municipality $1.4 million for payment in lieu of property taxes for the years 2018 through 2020.

But the NCC argued the system used to value its Gatineau Park properties was fundamentally unfair because it treated the land as if it had development potential.

The NCC said it could not accept a valuation of its Gatineau Park properties based on the sale of comparable residential properties when none were as large, or as restricted, as those owned by the Crown corporation.

The municipality argued the NCC was dutybound to follow the recommendations of the federal advisory panel.

The two sides have been fighting about the payments for five years.

In his ruling, Pamel said the NCC is not legally bound by the advisory panel decision and can deviate from its conclusions “if it is of the opinion that these conclusions do not comply with the principles applicable to property taxation.”

According to the decision, the Municipality of Chelsea sought to impose valuation increases of 19 to 25 per cent on NCC properties in Gatineau Park. During the same period, the average valuation increase in Chelsea was 3.9 per cent.

After conducting its own analysis, the NCC decided it would pay the municipality of Chelsea $1.1 million for the years 2018-2020 based on an effective value of $49 million for its Gatineau Park holdings, according to the court decision.

The Municipality of Chelsea said that the valuation was less than half of what the advisory panel recommended.

Chelsea Mayor Pierre Guénard did not respond Wednesday to questions about whether the municipality would appeal the ruling or what it would potentially mean for municipal finances.

Spokesperson Maude Prud’homme Séguin said the municipality will issue a statement in the coming days. “We are still in the process of analyzing the judgment,” she said.

Meanwhile, the NCC welcomed the Federal Court decision, which backed its argument that the property in question must be evaluated based on its use as a conservation park.

“The NCC is confident that we can continue to work closely with the Municipality of Chelsea, and hopes that the clarity of this decision will help us move forward,” the Crown corporation said in a statement Wednesday.

The Federal Court decision holds important implications for all municipalities with federal lands.

A spokesperson for the NCC said it has paid the municipality a total of $1.8 million in payments in lieu of taxes for the years 2018-2020, and another $1 million for those same properties in 2021 and 2022.

The NCC did not respond to a request for clarification by deadline on the breakdown of those numbers or an explanation as to why the totals are inconsistent with other published figures.

According to the NCC, Gatineau Park generates more than $240 million in economic activity and helps to support more than 4,700 jobs in the region.

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