NCC won't pay tax-like fees for LeBreton Flats, arguing it's a park

Imagine a day at the park. 

Are you picturing a picnic at the soon-to-be developed downtown LeBreton Flats property? 

Perhaps you're throwing a Frisbee at a lot wedged between Corkstown Road and Highway 417 — not exactly the bucolic setting young families strive to find in the city. 

That's a taste of how the City of Ottawa and its mayor has framed the National Capital Commission's (NCC) decision not to make tax-like payments for 187 of its properties, which staff say could cost the capital $30 to $45 million over the next decade. 

"So they're actually stealing from us now," Coun. Tim Tierney said at a technical briefing last September. 

He was particularly frustrated with the idea that land being prepared for a downtown arena could be considered parkland. 

"When it comes to speeding up building homes and building arenas … they're not paying market rate on that land at all. What? What's the incentive for them to get building?" 

The NCC clarified after this article was published that the planned "major events centre" is not included in the lands referenced by the city, but adjacent to it. 

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The exemption battle is just part of a struggle to reclaim lost revenue from what's called payments in lieu of taxes, or PILTs. 

The city aims to close a number of purported loopholes that, if left unfilled, could see a funding gap balloon up to $445 million by 2035. 

'It's a shock'

The little-known system is central to Mayor Mark Sutcliffe's Fairness for Ottawa campaign. 

"People often ask me what has surprised me since I became mayor. The situation with our PILTs is more than a surprise — it's a shock," he told reporters at its launch. 

"If they want to pay less, they pay less. And they do pay less, much less than they should."

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As negotiations have dragged on, the city has become more tight-lipped, eventually refusing any media interviews that touch on the issue, whether related to ongoing court challenges or not. 

If they want to pay less, they pay less. And they do pay less, much less than they should.- Ottawa Mayor Mark Sutcliffe

The federal government, Crown corporations, universities and airports are constitutionally exempt from paying municipal taxes. But they still provide money for services. 

Those payments are a simple calculation of the value of a property multiplied by the relevant tax rate. 

But unlike with any other property owner, federal entities have some discretion over what they pay. 

Parks exemption costs millions per year

The NCC has been taking advantage of a legal exemption for parks or "active use pathways" since 2013 — unilaterally applying it to any properties within environmental protection zones. 

The mayor said this has so far cost the city $20 million. 

Documents filed in federal court show the 13-hectare LeBreton Flats property could have netted the city $1.8 million from 2018 to 2022. Instead, Ottawa received nothing. 

That case has been stalled for months, as the two sides try to reach an agreement. 

The NCC would not provide an interview, but said in a written statement that it's "proud to contribute to the region's economic success through investments in its green spaces, animation of public places and commercial offerings."

It says the NCC paid the city $4.85 million last year, using "equitable" calculations.

Prolonged renovations

Other disputes have not — and will never — make it to court, but the city has no avenue to appeal. 

Look no further than Parliament Hill for an example of one such issue: prolonged renovations. 

City staff and the mayor have criticized the federal government for taking far longer than private landlords to fix issues with the properties. During those periods, they're eligible for tax breaks. 

The Bank of Canada's renovations took four years, as did the Government Conference Centre. 

The West Memorial building across from Library and Archives Canada was closed in 2017 for safety reasons and much-needed upgrades, with construction expected to extend through 2026. Its closure costs the city $240,000 per year. 

Renovations at the Lester B. Pearson Building in Lowertown are losing the city $1.7 million annually. The 12-year Centre Block rehabilitation is costing the city $2 million per year. 

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Vacant office space

Other buildings aren't being renovated, but have lost property value as they sit empty. 

"Look at the Jackson Building at the corner of Bank and Slater, right in the heart of our downtown," said Sutcliffe. "The federal government reduced their payment of taxes unilaterally in 2017 due to the poor condition of the building, and they've let it sit vacant ever since. That's $261,000 a year in taxes that we're not collecting." 

L'Esplanade Laurier's closure adds another $1.8 million to annual lost revenue. Both properties have been labelled surplus. 

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Another famous example is 24 Sussex Dr., which hasn't housed a prime minister in nearly a decade. 

"No private sector owner would abandon a building for that long. They couldn't afford to let it sit without any income," Sutcliffe said. 

Negotiations underway

The city would not provide any update to CBC on the progress of the highly publicized negotiations.

There is precedent for cities to win these sorts of challenges, however: In 2010, the Supreme Court ruled that the Montreal Port Authority could not use a parks exemption, saying the major tourist attraction doesn't meet the needed definition of being urban, planned as a park, and enjoyed as a park by the public. 

A win at court would mean the city gets to collect more in payments moving forward. 

But Sutcliffe said the issue isn't just about the budget's bottom line. 

"We're in big trouble financially, but we're in big trouble because we will have a hollowed-out downtown core and there won't be a reason to come downtown," he said. "I don't want that for Ottawa. I don't want that for Canada's capital."

While the NCC federal court challenge is on hold, the city has finished arguing another case involving a COVID-era tax break and is awaiting a judge's decision.

After this article was published, the NCC told CBC it made $255,000 in payments in lieu of taxes for the planned events centre in 2023 based on a "preliminary" independent property assessment. 

As part of its negotiations with the City of Ottawa, it's re-evaluating that valuation and related tax-like payments. 

It also said the land on LeBreton Flats for which it claims an exemption is becoming parkland. 

The area contains landfill and construction debris making it "unfavourable for buildings," the NCC wrote in a 2021 master plan. Its transformation will be made in three phases and will take approximately 30 years.