A Manitoba Court of Queen’s Bench decision released on July 8 has ordered the City of Winnipeg to repay approximately $32 million collected in impact fees to homeowners and builders.
In early 2017, Ladco Company Limited filed an application to quash the Impact Fee By-law and Resolution which was approved by the City of Winnipeg Council on October 26, 2016, effective May 1, 2017. The application was heard collectively by the Court in 2019 with other developers and home-building advocates who also commenced proceedings to quash the bylaw. The claimants challenged the legitimacy of the impact fees arguing that the city lacked the authority under its Charter to create the Impact Fee Bylaw and that the fee unfairly imposes an indirect tax on new homebuyers.
Ladco raised additional concerns with respect to the manner in which the fee was to be phased in, claiming it was discriminatory in the sense that certain areas were selected to pay the fee and others not without any principled justification.
The city introduced the impact fee in 2017 on all new residential developments constructed in “New Communities and Emerging Communities” to cover the cost of infrastructure required by new developments. The impact fee revenue collected by the city has been kept in reserve due to the ongoing legal proceedings. To date, the city has collected in excess of $32 million.
Extensive evidence was filed on behalf of Ladco, holding the position that growth-related development already pays for all onsite infrastructure and that agreements had been made with respect to offsite and regional infrastructure. Ladco expressed concern with the city’s methodology providing that it did not take into account contributions made by Ladco, claiming that those paying the fee within their developments were “paying twice”. Given the manner in which the fee was calculated and the lack of restriction on use of the reserve fund, Ladco argued that the fees collected in their developments may never be used to fund any costs associated with their developments.
Manitoba Court of Queen’s Bench Justice James Edmond quashed the city’s Impact Fee Bylaw on the basis that it “imposes a constitutionally invalid indirect tax and is not saved as a valid user fee or regulatory charge.” The Court determined that the impact fees accumulated in the reserve fund must be refunded to the taxpayers together with any interest that has accrued, although it is yet to be determined how the refund of collected impact fees will be implemented.
The city can appeal the decision, however, there has been no formal indication as to whether it will proceed with the appeal. The mayor has expressed that he will not support an appeal, and that he plans to work with the industry to develop a fee within the city’s legal authority, taking into consideration the findings of the Court.
MLT Aikins has extensive experience representing numerous municipalities in Western Canada. Learn more about our municipal practice.