Federal appeal court rules in favour of Cold Lake in fighter base tax dispute

The City of Cold Lake may be in line to receive a hefty payout from the federal government after the Federal Court of Appeal found that a former minister was "unreasonable" in a decision that the city says undervalued Canada's busiest fighter base.

For more than 10 years, Cold Lake has contended that the federal government has been undervaluing 4 Wing Cold Lake, effectively shorting the city's tax bill by $1.1 million to $1.8 million annually.

The city said from 2013 to 2021, short payments totalled almost $14 million, and the community's taxpayers have had to cover the difference. 

Last week, the Federal Court of Appeal issued a judgment in favour of Cold Lake. The court has now directed that the minister of Public Services and Procurement Canada reconsider the earlier position in light of the court's interpretation of the Payment in Lieu of Taxes (PILT) Act.

"It's been an interesting journey," said Mayor Craig Copeland told CBC about the appeal ruling, which was made on July 23 and found the minister's decision unreasonable. 

"I really appreciate council [and] administration sticking to their guns over the years and every new council that came on board, we've championed this, that we feel that it's not right." 

Valuation

Multiple ministers handled the PILT dispute with Cold Lake, including Anita Anand and Helena Jaczek. The program sees the government make a payment in lieu of tax as set out by the PILT Act. It is supposed to be the same as what would've been paid in property tax, had the federal property been taxable

In February 2022, the Cold Lake PILT matter went before a dispute advisory panel, which was tasked with providing advice to the minister regarding the valuations and payments at issue.

Differing advice emerged from the panel.

A majority of the panel put forward a recommendation that the valuation of the base exclude water and sewer mains, while a minority advised that the valuation should not ignore any positive impact on the value of the land from the water and sewer mains.

The minister at the time, who was Jaczek, issued a decision in November 2022 that agreed with the majority opinion of the panel, that the water and sewer mains should be excluded for all purposes.

This is the decision the Federal Court of Appeal found was unreasonable. It noted that the minister failed to meaningfully account for the central concerns raised by the city, and disregarded an earlier panel that concluded the opposite. 

National implications 

The Federation of Canadian Municipalities, which represents municipalities across Canada, intervened at the Federal Court of Appeal on the side of the City of Cold Lake.

The federation would not comment when asked by CBC, further stating, "We recognize the importance of this decision and are taking the time to evaluate it thoroughly before commenting."

Copeland said the decision has significant implications for municipalities across Canada. 

"This has huge implications to communities like Edmonton. Like all you gotta do is sort of look at a community and the federal properties in your community. So certainly in Ottawa, Halifax, Montreal, it's huge," Copeland said.

"The federal government owns a lot of property, which is great, they need to contribute to the tax base, like every person does, and we shouldn't be making special carve outs, and we just want everybody to contribute to running a municipality in a fair, equitable way and I think that's what the judges saw here in this case."

University of Alberta Prof. Andy Knight specializes in researching Canadian defence and foreign policy and said it's is an important case given 4 Wing is Canada's busiest fighter base.

"For the city of Cold Lake, where nearly one-third of the land falls on the federal ownership, I think this is really a game changer for the city," Knight said. 

"[The base] isn't just a strategically important area of Canada, but it's also an economic anchor for the region, and I think to properly assess what the valuation of that property is, this goes a long way in making sure that there's accountability by the federal government for treating that area fairly. And the court simply reaffirmed that principle." 

Public Services and Procurement Canada said it is reviewing the court's ruling and is unable to comment at this time.

The Canadian government is now tasked with making a new decision based on the finding of the Federal Court of Appeal or make an application to the Supreme Court of Canada.