Van Raay Paskal Farms Ltd v County of Lethbridge, 2017 ABQB 274

Court of Queen’s Bench of Alberta Citation: Van Raay Paskal Farms Ltd v County of Lethbridge, 2017 ABQB 274 Date: 20170420 Docket: 1606 00425 Registry: Lethbridge Between: Van Raay Paskal Farms Ltd., John Schooten and Sons Custom Feedyard Ltd., Grandview Cattle Feeders Ltd., G. Thompson Livestock Co. Inc., 6a Cattle Company Ltd., Adrian Dewilde, K. Wever & Sons Farms, Monarch Feeders Ltd., 589494 Alberta Ltd. Applicants - and - County of Lethbridge Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice R.A.

Jerke _______________________________________________________ Introduction [ 1 ] The County of Lethbridge (“County”) is a rural municipality and its local economy relies predominately on agriculture. The County has the highest level of agricultural output of any municipality in Alberta. In 2010, agricultural operations in the County generated a total of over $1 billion in gross farm receipts – more than 35% more than the municipality with the second highest gross farm receipts. [ 2 ] The largest components of the agriculture sector within the County are the livestock industry, which contributes

approximately $758 million in annual economic activity, and crop production, which contributes approximately $371.4 million in annualeconomic activity. The livestock sector within the County is comprised predominately of confined feeding operations (mainly beef) andthe County has the highest concentration of intensive livestock operations in Canada. [3] The Applicants own confined feeding operations (cattle feedlots) and farm land located with the County. [4] The County passed two bylaws, styled respectively amended Business Tax Bylaw #1165 and Special Tax Bylaw #1464.

Thetaxes purported to have been levied by the bylaws will be referred to as, respectively, the “Business Tax” and the “Special Tax.” Bothbylaws can be found on the County’s website at: http://www.lethcounty.ca/government/bylaws. [5] The Special Tax applies to all farm land in the County, whereas the Business Tax applies to businesses including feedlotsand other confined feeding operations in the County.

Feedlots are also farm land, and therefore are subject to both the Special Tax andthe Business Tax. [6] The Applicants seek declarations under s536 and 537 of the Municipal Government Act, RSA 2000, c m-26 (the “MGA”)that each of the bylaws are invalid. The Applicants argue that the Business Tax Bylaw is ultra vires the County; and that the Special TaxBylaw is ultra vires the County, discriminatory, or an attempt to do indirectly what the County cannot do directly. In part, the Countyreplies that neither of the bylaws, if intra vires, is unreasonable.

The Applicants did not advance this argument so I find that it isunnecessary to address it. [7] Counsel advised there are no case authorities regarding business taxes based on the method of assessment used by theCounty or on special taxes of this nature. It may have been useful for any Hansard excerpts from the time these provisions werediscussed in the Legislative Assembly to have been produced as evidence in this hearing. [8] For the reasons which follow I have concluded that the Business Tax Bylaw is intra vires the County. It is therefore declaredvalid.

I have concluded that the Special Tax Bylaw is ultra vires the County. It is therefore declared invalid. [9] My determination requires consideration of the following questions: • What are the applicable standards of review and principles of

interpretation? The Business Tax Bylaw: • What taxing power is delegated under Division 3,

Part 10 of the MGA? • Does the Business Tax Bylaw comply with the delegation? The Special Tax Bylaw: • What taxing power is delegated under Division 5,

Part 10 of the MGA? • Does the Special Tax Bylaw comply with the delegation? What are the applicable standards of review and principles ofinterpretation? [10] The Applicants’ challenge to the bylaws is that they fall outside the scope of the empowering legislation. The Supreme Courtconfirmed in Catalyst Paper Corp. v North Cowichan, 2012 SCC 2, [2012] 1 SCR 5, at para 12, that, “...municipal acts may be set asidebecause they fall outside the scope of what the empowering legislative scheme contemplated.” Furthermore, “If there is an inconsistencybetween a bylaw and [the MGA] the bylaw is of no effect to the extent of the inconsistency”: s13, MGA. [11] Questions of statutory

interpretation are reviewed on a standard of correctness: Housen v Nikolaisen, 2002 SCC 33 at para 8,[2002] 2 SCR 235; Thomson v Canada (Department of Agriculture), (SCC), [1992] 1 SCR 385 at para 77, (1992),133 NR 345; JTI-MacDonald Corp. v Alberta, 2016 ABCA 28, 2016 CarswellAlta 141. A substantive review of the exercise ofdelegated powers requires statutory

interpretation of the empowering legislation, so the standard of review is correctness. [12] The general principle for

interpretation of legislation is stated in Rizzo & Rizzo Shoes Ltd. Re, (SCC),[1998] 1 SCR 27, [1998] SCJ No 2 at para 21: Although much has been written about the

interpretation of legislation (see, e.g., Ruth Sullivan, Statutory

Interpretation (1997); ... Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes thatstatutory

interpretation cannot be found on the wording of the legislation alone. At p 87 he states: Today there is only one principle or approach, namely, the words of

an Act are to be read in their entire context and in their grammaticaland ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. [13] Bell ExpressVu Ltd Partnership v Rex, [2002] 2 SCR 559, 2002 SCC 42, at paragraph 26, also noted Driedger’s approach“has been repeatedly cited by this Court as the preferred approach to statutory

interpretation across a wide range of interpretive settings”,and: ... in the federal legislative context, this Court’s preferred approach is buttressed by s12 of the

interpretation Act RSC 1985, c I-21,which provides that every enactment “is deemed remedial, and shall be given such fair, large and liberal construction and

interpretation

as best ensures the attainment of its objects.” [14] The ordinary rules of construction apply to tax legislation. In Québec (Communaute urbaine) v Corp. Notre-Dame de Bon-Secours, (SCC), [1994] 3 SCR 3, the Supreme Court said, at paragraph 32, that, “there is no longer any doubt that theinterpretation of tax legislation should be subject to the ordinary rules of construction.” This case also then quoted Driedger’s approach,and continued: ... The first consideration should therefore be to determine the purpose of the legislation, whether as a whole or as expressed in aparticular provision. The following passage from Vivien Morgan’s

article “Stubart: What the Courts Did Next” (1987), 35 Can Tax J.155, at pages 169-70, adequately summarizes my conclusion: There has been one distinct change [after Stubart], however, in the resolution of ambiguities. In the past, resort was often made to themaxims that an ambiguity in a taxing provision is resolved in the taxpayer’s favour and that an ambiguity in an exempting provision isresolved in the Crown’s favour.

Now an ambiguity is usually resolved openly by reference to legislative intent. [15] The delegation of the imposition of a tax requires express and unambiguous language as explained by the Supreme Court ofCanada in Ontario English Catholic Teachers’ Association v Ontario (Attorney General), 2001 SCC 15, 2001 CarswellOnt 580, atparagraphs 74, 77 and 78: The delegation of the imposition of a tax is constitutional if express and unambiguous language is used in making the delegation. Theanimating principle is that only the legislature can impose a new tax ab initio.

But if the legislature expressly and clearly authorizes theimposition of a tax by a delegated body or individual, then the requirements of the principle of “no taxation without representation” willbe met. In such a situation, the delegated authority is not being used to impose a completely new tax, but only to impose a tax that hasbeen approved by the legislature. The democratic principle is thereby preserved in two ways. First, the legislation expressly delegatingthe imposition of a tax must be approved by the legislature.

Second, the government enacting the delegating legislation remainsultimately accountable to the electorate at the next general election. ... There is long-standing legal authority for the view that the test for constitutional delegation of the taxing power is the use of clear andunambiguous language.

In Attorney General v Wilts United Dairies, (1921) 37 LTR 884 (Eng CA), at p885, aff’d (1922) 91 LJKB 897(UK HL), Scrutton L.J. said: It is conceivable that Parliament, which may pass legislation requiring the subject to pay money to the Crown, may also delegate itspowers of imposing such payments to the Executive, but in my view the clearest words should be required before the Courts hold thatsuch an unusual delegation has taken place.

As Chief Justice Wilde said in Gosling v Veley, 12 QB at p407: “The rule of law that nopecuniary burden can be imposed upon the subjects of this country, by whatever name it may be called, whether tax, due, rate or toll,except upon clear and distinct legal authority, established by those who seek to impose the burthen, has been so often the subject of legaldecision that it may be deemed a legal axiom, and requires no authority to be cited in support of it.” [Emphasis added] This case was relied on in Gruen Watch Co of Canada v Canada (Attorney General), (ON SC), [1950] OR 429 (OntHC) at p438; affirmed on this point in Gruen Watch Co of Canada v Canada (Attorney General), (ON CA), [1951] OR360 (Ont CA), where McRuer C.J.H.C. stated: It is for the legislative body to decide in every case what power is to be delegated to any administrative body, and in each case theadministrative tribunal is confined to the express authority delegated to it and to the authority that may arise by necessary implication.

Inno case is the exercise of the delegated authority more carefully scrutinized than in the case where it is claimed that it gives a right toimpose any financial burden on the subject. The same principles apply to the delegation of powers to the executive. ... These principles explain how Parliament and the provincial legislatures are able to delegate taxing authority to municipalities, schoolboards and Aboriginal band councils.

Westbank First Nation, supra, provides but one example of the constitutional delegation of such ataxing power, at para 36: The impugned charges are imposed under the authority of the legislature and levied by a public body. The by-laws are imposed pursuantto the power conferred by s83 of the Indian Act.

The taxes are levied by the Band Council, under its conferred authority, and areapproved by the Minister of Indian Affairs and Northern Development. [16] The relationship and application of these principles in reference to tax statutes was described by our Court of Appeal in JTI-MacDonald Corp at paras 18 and 19: The normal, contextual and purposive approach to statutory

interpretation also applies to tax statutes but with a subtle difference ofemphasis. Where the language of the relevant provisions is clear and precise, the text has a “dominant role in the interpretive process”and purposive and contextual considerations have less weight: Placer Dome Canada Ltd v Ontario (Minister of Finance), 2006 SCC 20(SCC) at para 21, [2006] 1 SCR 715 (SCC); Canada Trustco Mortgage Co v R, 2005 SCC 54 (SCC) at para 11, [2005] 2 SCR 601(SCC).

Courts should be cautious about finding within clear provisions of a tax statute an implicit legislative intention to achieve some outcome: Shell Canada Ltd v R, [1993] 3 SCR 622 (SCC) at para 43, (1999), (SCC), 178 DLR (4th) 26 (SCC). A related principle governing

interpretation of secondary tax enactments is that a regulation can impose an obligation to pay tax only ifthe primary legislation expressly confers the power to do so on the regulation maker: see Eurig Estate, Re, (SCC), [1998] 2 SCR 565 (SCC) at paras 32, 36, 39-40, (1998), 165 DLR (4th) 1 (SCC); OECTA v Ontario (Attorney General), 2001 SCC 15

(SCC) at para 74 , [2001] 1 SCR 470 (SCC). [ 17 ] A broad and purposive approach is used for the

interpretation of municipal legislation. The Supreme Court described the approach in United Taxi Drivers’ Fellowship of Southern Alberta v Calgary (City) , 2004 SCC 19 , 2004 CarswellAlta 355, at paras 7 and 8 : Alberta’s Municipal Government Act follows the modern method of drafting municipal legislation. The legislature’s intention to enhance the powers of its municipalities by drafting the bylaw passing provisions of the Act in broad and general terms is expressly stated in s9.

Accordingly, to determine whether a municipality is authorized to exercise a certain power, such as limiting the issuance of taxi plate licenses, the provisions of the Act must be construed in a broad and purposive manner. A broad and purposive approach to the

interpretation of municipal legislation is also consistent with this Court’s approach to statutory

interpretation generally. The contextual approach requires “the words of

an Act . . . to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of the legislature”: Elmer A. Driedger , Construction of Statutes , 2 nd ed (Toronto: Butterworths, 1983), at p87: Bell ExpressVu Ltd Partnership v Rex , [2002] 2 SCR 559, 2002 SCC 42 (SCC) , at para 26 . This approach is also consistent with s10 of Alberta’s

Interpretation Act , RSA 2000, c I-8, which provides that every provincial enactment must be given a fair, large and liberal construction and

interpretation that best ensures the attainment of its object. The Business Tax Bylaw What taxing power is delegated under Division 3,

Part 10 of the MGA? [ 18 ] The County purported to enact the Business Tax Bylaw under the MGA which in part provides: 371(1) Each council may pass a business tax bylaw. 372(1) The business tax bylaw authorizes the council to impose a tax in respect of all businesses operating in the municipality except businesses that are exempt in accordance with that bylaw. [ 19 ] The MGA also prescribes the contents of a business tax bylaw and provides: 374(1) The business tax bylaw must ...

b) specify one or more of the following methods of assessment as the method or methods to be used to prepare the assessments: [ 20 ] In the MGA the Legislature has authorized the County to impose a business tax on all businesses in the municipality and to exempt businesses from the tax. If it chooses to enact a business tax bylaw, the bylaw must specify one or more methods of tax assessment from the menu of options specified in s374(1)(

b) of the MGA . [ 21 ] There are five assessment options in the menu: gross rental value; net rental value; square footage of the business area; a percentage of the property tax assessment imposed by

Part 9 of the MGA for the business premises; or, the option here chosen by the County: “assessment based on storage capacity of the premises occupied for the purposes of the business”: MGA, s374(1)(b)(ii). [ 22 ] The common element to each assessment option is to impose a tax based on the potential level of business activity arising from the property. If the business is not tied to a property within the municipality, then the business will not have to pay the tax. Conversely, if premises within the municipality are not occupied for the purposes of business there is likewise no ability to impose a business tax.

However, the potential variety of businesses which the business tax provisions could apply to, and a business tax could apply to, is legion. [ 23 ] Although no definition is provided for any of the terms in the phrase “storage capacity of the premises occupied for the purposes of the business”, the phrase chosen by the Legislature is wide. The phrase does not require the business to have storage, only storage capacity. Storage capacity is related to the premises, not the business.

And there is no requirement that the business actually have storage: the chosen phrase does not say “ the storage capacity.” In this phrase storage is used to describe the kind of capacity of the premises. [ 24 ] Reference was made to

definitions of the words “storage” and “capacity.” The meaning of “storage” includes: “space or a place for storing”: Merriam-Webster Dictionary , online, December 30, 2016. “Capacity or space for storing; a place where something is stored”: Shorter Oxford English Dictionary , 6th ed. The meaning of “capacity” includes: “Ability to receive, contain, hold, produce, or carry; cubic content, volume; the maximum amount or number that can be contained, produced, etc...”: Shorter Oxford English Dictionary , 6th ed.

The meaning of “store”, when used as a noun, includes: “a quantity of something kept available for future use; a reserve, a deposit, a stock”: Shorter Oxford English Dictionary , 6th ed. A more historical definition is “[a] sheep, steer, cow or pig acquired or kept for fattening. Also an animal kept for breeding or as part of the ordinary stock of a farm”: Shorter Oxford English Dictionary , 6th ed.

The meaning of “store”, when used as a verb, includes: “to place or leave in a location (such as a warehouse, library or computer memory) for preservation or later use or disposal”: Merriam-Webster Dictionary , online, December 30, 2016, and “keep in store for future use; collect and keep in reserve; form a store, stock, or supply of; accumulate, hoard”: Shorter Oxford English Dictionary , 6th ed . These

definitions are varied and broad, which enable the words to be applied to a wide variety of situations.

[ 25 ] Applying the normal, contextual and purposive approach to statutory

interpretation I find that the Legislature has used express and unambiguous language to delegate the imposition of a business tax to a municipality. Under the MGA municipal councils have been given authority to impose taxes through a variety of taxes and levies. Business taxes, one of the options, may be imposed against all, some, or no businesses within the municipality provided the business occupies premises within that municipality. And there are a number of methods by which business taxes may be assessed including assessment based on storage capacity of the business premises.

The purpose of these provisions is to provide municipal councils with a broad variety of tools to generate tax revenue in a scheme which allows the municipality to do so in a manner that best suits the local conditions. [ 26 ] I conclude that the Legislature used clear, express, and unambiguous language to delegate the imposition of a business tax to municipalities by requiring the tax bylaw to specify a particular method of assessment.

In this case, the chosen method is an “assessment based on storage capacity of the premises occupied for the purposes of the business.” This means an assessment may be based on the ability of the premises occupied by the business to receive, contain, hold, produce, or carry a quantity of something for preservation, accumulation, later use, or disposal. [ 27 ] The Applicants contend that feedlots cannot and do not have storage capacity for cattle because cattle are not stored at a feedlot. They say storage is by nature passive, and instead feedlot businesses actively feed, process, or care for cattle.

There are several flaws in this argument. First, the fact that the business of feedlots is to maximize cattle growth and change the cattle by maximizing cattle growth does not mean that the cattle are not also being received, held, produced, or carried for preservation, accumulation, later use, or disposal. In fact, the goal is to sell the cattle (dispose of them) at maximum market value. Second, it is quite possible that sale (disposal) of the cattle could be delayed after “maximum growth” was attained.

For example a decline in price, disease, quarantine, closed borders, or transportation issues could all slow or prevent movement of cattle out of feedlots. In such case the focus of containing, holding, or carrying the cattle might shift from processing towards preserving or accumulating.

Third, even if the normal business activities of feedlots do not include storing livestock the issue is whether the premises has storage capacity, not how it is actually used. [ 28 ] The Applicants assert they have extensive experience in the cattle feeding industry and don’t recall the term “storage” or its derivatives being applied to their business operations, hence there is no “storage capacity” at feedlots. There are two flaws in this argument. First, the Business Tax Bylaw is not restricted to cattle feeders, so the scope of the industry parlance argument is much too narrow.

It may, as the County suggests, even be irrelevant. Second, the principles of statutory construction in no way suggest that

definitions should necessarily be confined to the meanings used by a group affected by the tax. In fact, this would be contrary to the concept of “fair, large and liberal construction and

interpretation” mandated by Alberta’s

Interpretation Act , and the requirement to interpret the MGA in a “broad and purposive manner”, as set out in United Taxi Drivers . The Applicants’ argument ignores the reality that when legislation is being drafted, the drafters are often unaware of the specific situation to which the legislation may end up being applicable, thus necessitating the need for broad and liberal construction. [ 29 ] In arguing for their definition of “storage capacity”, the Applicants point out this terminology is not used when discussing agricultural operations in the Agricultural Operation Practices Act , RSA 2000, c A-7, and its regulations. However, this argument ignores another principle of statutory

interpretation: that when considering the words of

an act, they are to be read in the context of the scheme and object of the act. The Agricultural Operation Practices Act and its regulations are specifically drafted to address agricultural operations. For that purpose, it is expected that the legislation can, and perhaps should, use language more precisely relating to agricultural operations. But the MGA is not drafted with a similar purpose. In particular,

Part 10 of the MGA is drafted to set the parameters for how municipalities can validly impose taxation on a number of approaches: property tax, business tax, business improvement area tax, special tax, well drilling equipment tax, local improvement tax, and community aggregate payment levy. And the MGA applies to many municipalities, each with its own local conditions. Thus, the MGA must be interpreted broadly enough to include the imposition of tax, when the process is properly followed, regardless of whether the business is agricultural or otherwise.

Imposing a restrictive definition of “storage capacity” by looking only at its potential definition through the use of agricultural operations illustrates why broad and liberal construction and

interpretation must guide the process: it is the only way legislative enactments directed to different purposes can simultaneously be effective, rather than running afoul of one another. Does the Business Tax Bylaw comply with the delegation? [ 30 ] I find that the Business Tax Bylaw complies with the delegated taxation powers. It is intra vires the County. [ 31 ] The Business Tax Bylaw provides as follows: 1.2 In this Bylaw, unless the context otherwise requires, (a) “animal units” means the number obtained by multiplying the number of animals permitted to be stored on a premises by the number of animals equivalent to one animal unit for that species of animal, as set out in

Schedule “B” attached hereto. ... (i) “ranch operation” means a business where cows, bison, llamas, horses, sheep, alpacas, ostriches, or similar animals are kept primarily for breeding purposes, and where the offspring from such animals are sold or kept for breeding. ... (k) “confined feeding operation” means a confined feeding operation as defined by the current Lethbridge County Land Use Bylaw. ... 4.1 The storage capacity for each confined feeding operation shall be determined by using the animal storage capacity as set out in either the Development Permit or as approved by the National Resources Conservation Board (NRCB) for such premises. In the event there is

no existing Development Permit, registration from the NCRB [sic] or an approval from the NRCB for such premises, then the assessor shall determine the animal storage capacity in accordance with generally accepted Alberta Agriculture Source Materials and Practices. 4.2 The number of animals units for each confined feeding operation shall be determined by multiplying the relevant ratio as set out in

Schedule “B” by the animal storage capacity as set out in either the Development Permit or the NRCB approval or as determined by the assessor in accordance with generally accepted Alberta Agriculture Source Materials and Practices. ... 4.4 The business tax assessment for each confined feeding operation and ranch operation shall be arrived at by multiplying the number of animal units of storage capacity for the premises by the dollar value per animal unit of storage capacity as set out in

Schedule “C”. ... 4.7 The number of animals approved in a Development Permit or by the NRCB shall be deemed to be the storage capacity of the business on the premises. [ 32 ] Feedlot businesses have the ability to receive, contain, hold, produce, or carry cattle, and to preserve, accumulate, use or dispose of them. Ranch operations, where animals are kept primarily for breeding purposes, have the same capability.

It follows that feedlots and ranches have storage capacity for cattle. [ 33 ] Accordingly, I find that the County was correct when it based the assessment of the business tax on storage capacity of the business premises. The application for a declaration that the business tax bylaw is invalid is dismissed. The Special Tax Bylaw What taxing power is delegated under Division 5,

Part 10 of the MGA? [ 34 ] The County purported to enact the Special Tax Bylaw under the MGA which in part provides: 382(1) Each council may pass a special tax bylaw to raise revenue to pay for a specific service or purpose by imposing one or more of the following special taxes: (

a) a waterworks tax; (

b) a sewer tax; (

c) a boulevard tax; (

d) a dust treatment tax; (

e) a paving tax; (

f) a tax to cover the cost of repair and maintenance of roads, boulevards, sewer facilities and water facilities; (

g) repealed 2008 cE-6.6 s55; (

h) a tax to enable the municipality to provide incentives to health professionals to reside and practice their professions in the municipality; (

i) a fire protection area tax; (

j) a drainage ditch tax; (

k) a tax to provide a supply of water for the residents of a hamlet; (

l) a recreational service tax.

(2) A special tax bylaw must be passed annually. 383(1) The special tax bylaw authorizes the council to impose the tax in respect of property in any area of the municipality that will benefit from the specific service or purpose stated in the bylaw. 384 The special tax bylaw must (

a) state the specific service or purpose for which the bylaw is passed, (

b) describe the area of the municipality that will benefit from the service or purpose and in which the special tax is to be imposed, (

c) state the estimated cost of the service or purpose, and

(

d) state whether the tax rate is to be based on (

i) the assessment prepared in accordance with

Part 9, (ii) each parcel of land, (iii) each unit of frontage, or (iv) each unit of area, and set the tax rate to be imposed in each case. 385 A special tax bylaw must not be passed unless the estimated cost of the specific service or purpose for which the tax is imposed is included in the budget of the municipality as an estimated expenditure. 386(1) The revenue raised by a special tax bylaw must be applied to the specific service or purpose stated in the bylaw.

(2) If there is any excess revenue, the municipality must advertise the use to which it proposes to put the excess revenue. 387 The person liable to pay the tax imposed in accordance with a special tax bylaw is the owner of the property in respect of which the tax is imposed. [ 35 ] Under Division 3 of

Part 10 of the MGA business taxes can be imposed on businesses within the municipality provided the business occupies premises within that municipality. Under Division 5 of

Part 10 special taxes can be imposed for a specific service or purpose on property in any area of the municipality that will benefit from the specific service or purpose. [ 36 ] There are other restrictions on special taxes.

The legislation limits a municipality to 11 options of permissible special taxes which may be imposed to pay for the specific service or purpose: the tax in issue in this Special Tax Bylaw is “a tax to cover the cost of repair and maintenance of roads.” Further the estimated cost for the specific service or purpose must be included as an estimated expenditure in the municipality’s budget and the revenue from the tax must be applied to that specific service or purpose. [ 37 ] Applying the normal, contextual and purposive approach to statutory

interpretation I find that the Legislature has used express and unambiguous language to delegate the imposition of a special tax to a municipality. But the delegation is narrow: such a tax must fit within the legislative menu of options: be for a time limited and specific service or purpose: must identify the area of the municipality that will benefit: and is limited to taxation of property in the area that will benefit. Does the Special Tax Bylaw comply with the delegation? [ 38 ] I find the Special Tax Bylaw fails to comply with Division 5. It is ultra vires the County. [ 39 ] The special tax is a relatively narrow delegation of taxation power, and Division 5 of

Part 10 of the MGA sets out specific requirements that must be met for it to be validly engaged: − The revenue raised must be for a specific service or purpose: s382(1) − The special tax must cover the cost: s382(1)(f) − The tax bylaw must be passed annually: s382(2) − The property in the area that will benefit is the property to be taxed: s383(1) − The estimated cost must be included in the budget as an estimated expenditure: s385 − The revenue raised must be applied to the specific service or purpose: s386(1) [ 40 ] Because Division 5 has such specific requirements, it may at first seem that the listing of “a tax to cover the repair and maintenance of roads” to pay for a “specific service or purpose” in s382(1) of the MGA is incongruous because the repair and maintenance of roads must be a general, regular, ongoing expense item for all municipalities.

This County is no different, and in fact gave evidence that it is responsible for the maintenance and repair of approximately 2,000 km of roads and 167 bridges. [ 41 ] But in my view, the wording of s382(1) actually gives municipalities significant latitude to potentially design and then fund special programs for specific services or purposes within the menu of permissible tax options to address problems specific to that municipality. The relationship between specific services or purposes on the one hand and the permissible type of special tax is more easily understood if stated this way.

A municipality may impose a special tax to cover the cost of repair and maintenance of roads to pay for a specific service or purpose; but a municipality may not impose a special tax to simply cover the cost of repair and maintenance of roads. [ 42 ] In argument, the County gave undisputed evidence about its transportation infrastructure deficit and explained the difficulties it has funding repair and maintenance of its roads, particularly its designated haul routes, which are collectively referred to as the Market Access Network.

The County gave evidence that the Market Access Network has become dramatically more expensive to maintain because of the weight and size of vehicular traffic, and that the County lacks the funds to complete necessary repairs. The County extensively considered the various strategies it could use to address this problem, and obtained taxpayer input. From this effort the County devised the multi-year “Funding Our Future Program”, the goal of which is to improve the maintenance standard of the Market

Access Network. [ 43 ] But the ability of a municipality to design special programs to address problems specific to that municipality is only one component of Division 5,

Part 10 of the MGA . To then fund that specific service or purpose through a special tax, the municipality is required to expressly set out enumerated components in a special tax bylaw. Of particular importance here,

section 384 says the special bylaw must state the specific service or purpose for which the bylaw is passed; it must describe the area of the municipality that will benefit and in which the tax will be imposed; and it must state the estimated cost. [ 44 ] Thus, for a special tax to be valid, the municipality must comply with two broad components in compliance with Division 5,

Part 10 of the MGA : it must design a specific service or purpose that falls within one of the 11 permissible options; and the bylaw which passes the tax must reflect certain legislated requirements about the specific service or purpose. Compliance with these components achieves consistency and transparency from the creation of the special program through to the expenditure of the special revenue raised. [ 45 ] The Special Tax Bylaw must be considered against these specific requirements. The salient portions state the following: WHEREAS under the provisions of Section 382(1) (

f) of the Municipal Government Act, RSA 2000,

Chapter M-26 , the Council of Lethbridge County deems it necessary to levy a special tax to assist in covering the costs of the repair and maintenance of roads; AND WHEREAS farmland in Lethbridge County benefits from the use of roads for transportation and pays limited property taxes; AND WHEREAS for the tax year 2016, the estimated cost of the repair and maintenance of roads is $1,500,000, which is budgeted and approved by the Council; ... 2. The purpose of this bylaw is to authorize the levying of a special tax for the repair and maintenance of roads. ... 4.

A special tax for the repair and maintenance of roads shall be levied against all benefiting lands, being all farmland property in the County. [ 46 ] The purpose of the tax is in the

preamble where it states “the Council...deems it necessary to levy a special tax to assist in covering the costs of the repair and maintenance or roads.” And the purpose of the bylaw as stated in paragraph 2 is “to authorize the levying of a special tax for the repair and maintenance of roads.” However, both of these sections do nothing more than reference the authority given to municipalities under s382(1)(

f) to raise revenues to cover the cost of repair and maintenance of roads; reference or a link to a “specific service or purpose” is missing entirely. There is nothing about the Funding Our Future program or the specific use of funds for it in the Special Tax Bylaw. [ 47 ] It is undisputed that the County has a serious problem with the condition of the Market Access Network, and that after much investigation and deliberation it devised a carefully-thought out plan to address the problem. The Special Tax Bylaw maybe a specific part of that plan. But no one reading the Special Tax Bylaw would ever know this.

This is why the information on the specific service or purpose is required to be in the bylaw. It achieves the goal of transparency, and enables the taxpayer and the court to see the link between the expenditure and the taxing provision. Without this information, the stated purpose of the tax, “to assist in covering the costs or repair and maintenance” cannot be said to be a specific service or purpose within the parameters of permissible taxation under Division 5.

The Special Tax Bylaw fails to comply with s384(a). [ 48 ] Just as the Special Tax Bylaw fails to comply with the requirement that it state the specific service or purpose for which it is passed, it also fails to meet the requirements regarding cost. The

preamble to the Special Tax Bylaw states that the cost of repair and maintenance of roads is $1,500,000.00. This is a general amount, not specific to any special service or purpose. Further, the bylaw goes on to state that the application of the set tax rate to the assessed farm land value will raise $694.286.00, far short of the stated estimated cost of $1.5 million. How then, is this a special tax to raise revenue to pay for a specific purpose? On the face of the Special Tax Bylaw, the revenue from the tax is nowhere near enough to cover the expenditure.

The Special Tax Bylaw fails to comply with s384(c). [ 49 ] The County has also failed to demonstrate compliance with s385. It states that a special tax bylaw is not to be passed unless the estimated cost for which the tax is imposed is an estimated expenditure in the municipality’s budget. In this case, the County’s 2016 budget

summary includes: o Haul Road Calcium Base Stabilization (Special Tax) $1,000,000 o Local Road Bridge Program (Special Tax) $1,400,000 [ 50 ] Which amount was the special tax passed to collect? Neither of these amounts, nor their accumulation, equate to any of the amounts in the Special Tax Bylaw. Because the County has not complied with s385, the Special Tax Bylaw does not achieve the goals of consistency and transparency. [ 51 ] In

summary, the special tax provisions allow a municipality to impose a special tax, but only within the confines of Division 5,

Part 10. And once the municipality makes the decision to impose that tax, s384 requires transparency of that decision by setting out very precise requirements regarding the special tax bylaw contents. In this instance, the Special Tax Bylaw’s lack of precision simply does not enable a finding that it is a lawful use of the narrow delegation of the special taxation power. Specifically, it fails to comply with s384 because it fails to state the specific service or purpose for which it is passed, and it fails to set out the estimated cost of a specific service or purpose.

The requirements of s385 have also not been met. [ 52 ] Viewed another way, the Special Tax Bylaw is not valid because it does not reflect the specific service or purpose the County

is trying to accomplish using the special taxing provisions. While the County appears to have designed the Funding Our Future program to be a valid use of the special tax power, the bylaw fails to even mention the program. There is no consistency and transparency from the creation of the specific idea through to revenue expenditure.

Nothing about the bylaw is “special.” [ 53 ] The application for a declaration that the Special Tax Bylaw is invalid is granted. [ 54 ] In light of this finding, it is not necessary for me to consider whether the Special Tax Bylaw is discriminatory, or an attempt to do indirectly what the County cannot do directly. There was also extensive argument concerning identification of the area of the municipality that will benefit, but it is also not necessary for me to address this issue. Conclusion [ 55 ] In the result I find that the Business Tax Bylaw is intra vires the County. I declare it valid.

I find that the Special Tax Bylaw is ultra vires the County. I declare it invalid. [ 56 ] There has been divided success. If there are circumstances the Court is not aware of costs may be spoken to within 30 days of these reasons. Otherwise, each party shall bear their own costs of the application. Heard on the 03 rd day of February, 2017. Dated at the City of Lethbridge, Alberta this 19 th day of April, 2017. R.A. Jerke J.C.Q.B.A. Appearances: Robert D. McCue, Bennett Jones LLP for the Applicants Michael S. Solowan, Brownlee LLP for the Respondent