Legal challenge over lost revenue will be ‘difficult’

The legal minds tasked with taking the Saskatchewan government to court over its elimination of grants in lieu of taxes to municipalities “have some work cut out for them,” says a University of Saskatchewan law professor.

Felix Hoehn said the only power municipalities have are granted to them by the provincial government.

Municipalities may be able to argue that they are entitled to the remainder of their 2017 grants-inlieu payments, but there’s likely not much they can do beyond that.

“In the short term, they may have some legal basis to challenge it — it’s difficult to say how strong the legal argument will be — but, in the long run, provincial legislation will trump any rights or any expectations the municipality may have of grants in lieu of taxes. Ultimately, local governments can’t force provinces to pay them taxes,” Hoehn said.

“If the legislation isn’t already clear that (the province) doesn’t have to pay these things, they can fix the legislation and make it crystal clear that the province doesn’t have to pay anything in lieu of taxes.”

Municipalities are not allowed to charge provincial or federal Crown corporations property taxes. To address the fact that those corporations still use municipal infrastructure and services, they typically pay grants that would amount to about what they would pay in property taxes

In last week’s budget, the provincial government said grants paid to 109 municipalities by SaskPower, SaskEnergy and TransGas would cease immediately.

The move has sent shock waves through the province; many municipalities are looking at doubledigit property tax increases or service cuts to address millions of dollars in lost funding.

Over the weekend Saskatoon city council asked the city solicitor’s office to look into what legal action the city can take regarding the sudden loss in revenue. Other municipalities and the Saskatchewan Urban Municipalities Association (SUMA) have expressed interest in working with the city on this.

SUMA president Gordon Barnhart said cities will only take legal action if they believe they have a chance of success.

“We’re not going to launch a lawsuit if, in fact, the lawyers say there’s not a hope that anything will come of it. We want to be very wise with the expenditure of money — especially to lawyers.”

Hoehn said this week’s legal posturing may not be for naught, even if cities don’t end up going to court.

“It may be that the municipalities want to bring it to court to add political pressure onto the provincial government and to highlight the loss of revenue that this is for them,” he said.

“The extent to which they expect to win the action and the extent to which it’s also a political measure is difficult to know.”