Metropia Minto (Sixteenth) Holdings Inc. v. Markham (City), 2025 CanLII 34629

Ontario Land Tribunal

Tribunal ontarien de l’aménagement du territoire

ISSUE DATE: April 17, 2025

CASE NO(S).: OLT-24-000412

PROCEEDING COMMENCED UNDER subsection 69(3) of the Planning Act, R.S.O. 1990, c. P. 13, as amended

Appellant: Metropia Minto (Sixteenth) Holdings Inc.

Subject: Protest the levying of fees in relation to an application for Draft Plan of Subdivision

Property Location/Description: 4134 16th Avenue

Municipality/UT: City of Markham

OLT Case No.: OLT-24-000412

OLT Lead Case No.: OLT-24-000412

OLT Case Name: Metropia Minto (Sixteenth) Holdings Inc. v. Markham (City)

Heard: November 4 to 7, 2024 by Video Hearing

APPEARANCES:

Parties

Counsel

Metropia Minto (Sixteenth) Holdings Inc.

Signe Leisk and Matthew Lakatos-Hayward

City of Markham

Robert Wood and Maggie Cheung-Madar

DECISION DELIVERED BY HUGH S. WILKINS AND ORDER OF THE TRIBUNAL

Link to Order

1Metropia Minto (Sixteenth) Holdings Inc. (“Appellant”) filed an appeal under s. 69(3) of the Planning Act seeking a reduction in the application fees that it paid for a draft Plan of Subdivision application concerning lands in the City of Markham (“City”).

2The proposed draft Plan of Subdivision is for the eastern half of lands located at 4134 16th Avenue, which once comprised a portion of the York Downs Golf and Country Club. The subject lands consist of 76 hectares. The proposed draft Plan of Subdivision includes residential units, park blocks, and stormwater management blocks. The project is the second phase of a multi-phased development. The Appellant submitted its application on November 11, 2016. The fees for this phase of the project were paid in stages over an eight-year period.

3The City’s fee tariff is set out in Schedule A to its By-law 211-83. The tariff has been amended every year since 2005.

4When the draft Plan of Subdivision application was submitted in November 2016, the Appellant paid $97,703.19 (including HST) in fees for this phase of the project as required under the fee tariff in Schedule A to By-law 2015-165 (“2016 Tariff”), amending By-law 211-83.

5In March 2021, the Appellant paid $2,228,561.31 (including HST) as the initial 60 percent installment of an Engineering Review Fee as required under the fee tariff in Schedule A to By-law 2020-165 (“2021 Tariff”), amending By-law 211-83. In May 2023, it paid $25,451.56 (including HST) in subdivision request fees, which were subsequently discounted and which the City has undertaken to refund.

6In March 2024, the Appellant and the City executed a residential subdivision agreement under s. 51(26) of the Planning Act. The Appellant paid its second and final 40 percent installment of the Engineering Review Fee at that time in the amount of $415,195.73 (including HST). At that time, it also paid Landscape Review Fees in the amount of $113,991.10 (including HST) and a planning fee in the amount of $356,899.20 (including HST) as required under the fee tariff in Schedule A to By-law 2023-182 (“2024 Tariff”), amending By-law 211-83. The Appellant paid this last set of fees in 2024 under protest. None of the other payments were made under protest.

7Added together, the application fees paid by the Appellant amount to $3,237,802.09 (including HST). The Appellant seeks an Order from the Tribunal that the City refund $1,524,754.59 (including HST) of these fees, consisting of the following:

• $638,668.56 arising from the initial installment of the Engineering Review Fee that was paid in 2021, based on an updated costs estimate;

• $113,991.10 for the Landscape Review Fees that were paid in 2024, as those fees were not included in the City’s 2024 Tariff; and

• $772,094.93 for fees paid (“Residual Fees”) exceeding the total that the Appellant would have paid if solely the 2024 Tariff were applied.

8On April 12, 2024, the Appellant appealed the payment of these fees.

THE HEARING

9As its witness, the Appellant called Peter Norman. He is an economist. He was qualified by the Tribunal to provide opinion evidence in the area of land economics.

10The City called three witnesses:

• Stefan Krzeczunowicz, who is a land economist and municipal finance analyst at Hemson Consulting Ltd. He was qualified by the Tribunal to provide opinion evidence in the area of municipal finance, including cost-recovery and fee-setting matters.

• Patricia Pease, who is a process management administrator at the City. She worked on processing the Appellant’s draft Plan of Subdivision application. She provided fact evidence at the hearing.

• Ziad Yassi, who is a development engineer at the City who reviewed the Appellant’s draft Plan of Subdivision application. He provided fact evidence.

11In this Decision, the Tribunal will analyze the test to be applied under s. 69 of the Planning Act. It will then apply the test to (1) the Engineering Review Fee, (2) the Landscape Review Fees, and (3) the Residual Fees that were paid by the Appellant.

A. The s. 69 Test

Appellant’s Submissions

12The Appellant argues that the test to be applied by the Tribunal is whether the fees were reasonable, taking into account whether they have a nexus to the City’s anticipated costs to process the application and whether it would be inequitable or disproportionate to charge them. The Appellant argues that the Tribunal should not focus on whether the fee tariffs were reasonably designed (which is the position of the City), but on whether the fees that were paid were reasonable.

City’s Evidence and Submissions

13Mr. Krzeczunowicz stated that s. 69(1) of the Planning Act allows a municipality to pass by-laws establishing tariffs of fees for the processing of planning applications provided that the tariffs are designed to meet the anticipated cost of processing each type of application in question. He stated that the Planning Act addresses fee setting for each application type. It does not envision an assessment of fees for each individual application that is filed. He stated that fees, by their nature, are imposed only to offset the cost of a specific service. Unlike a tax, fees are not intended to be for general purposes. They are payable only by those who benefit from the service provided. Referring to the Supreme Court of Canada’s decision in Eurig Estate (Re), 1998 CanLII 801 (S.C.C.) (“Eurig”), at paragraphs 21-22, Mr. Krzeczunowicz stated that the test applied by the courts when determining whether a charge is a fee is whether there is a reasonable connection between the cost of the service provided and the amount charged. He said fees do not need to correspond precisely to the cost of the relevant service, but there must be a reasonable nexus. He opined that the fees the City charged the Appellant do not need to be limited to the actual costs of reviewing the Appellant’s specific application. To establish a nexus between fees and costs, Mr. Krzeczunowicz said municipalities can carry out studies to inform the setting and design of tariffs. He said costs may change over time due to changes in legislation, municipal operations, service standards, and development opportunities. As a result, he said tariffs should be regularly updated.

Analysis and Findings

14Section 69(1) of the Planning Act sets out provisions on the setting of tariffs. It states that municipalities may establish tariffs designed to meet the anticipated costs of processing planning applications. It states (with emphasis added):

69(1) The council of a municipality, by by-law, and a planning board, by resolution, may establish a tariff of fees for the processing of applications made in respect of planning matters, which tariff shall be designed to meet only the anticipated cost to the municipality or to a committee of adjustment or land division committee constituted by the council of the municipality or to the planning board in respect of the processing of each type of application provided for in the tariff.

15Section 69(3) sets out the procedure for appealing the levying of a fee or the amount of a fee. It states that appeals arise after fees are paid under protest and that they must be filed within 30 days of the payment. It states (with emphasis added):

69(3) Any person who is required to pay a fee under subsection (1) for the processing of an application in respect of a planning matter may pay the amount of the fee under protest and thereafter appeal to the Tribunal against the levying of the fee or the amount of the fee by giving written notice of appeal to the Tribunal within thirty days of payment of the fee.

16Section 69(4) sets out the Tribunal’s powers on adjudicating an appeal under s. 69. It states:

69(4) The Tribunal shall hear an appeal made under subsection (3) and shall dismiss the appeal or direct that a refund payment be made to the appellant in such amount as the Tribunal determines.

17As agreed by the Parties, the test applied by the Supreme Court of Canada in Eurig for determining whether a charge is a fee or a tax is whether there is a reasonable nexus between the charge and the costs of the services rendered. In other words, a fee must have a reasonable connection to the costs of the service rendered.

18In Hancock v. Rideau (Township), 1994 CarswellOnt 5639 (Ont. Div. Ct.) (“Hancock”), the Divisional Court ruled that it is the duty of the Tribunal (in that case, the Ontario Municipal Board) to consider whether a disputed fee is reasonable. It made this finding based on the language set out in s. 69 of the Act. The Court did not make any reference to tariff design.

19Based on this caselaw, in determining whether a fee is reasonable, the Tribunal finds that it must first determine whether the charge is in fact a proper fee, in other words, whether it has a reasonable connection to the costs of the services rendered. If it is a fee, the Tribunal must then consider whether it meets a standard of reasonableness in light of the requirements and context set out in s. 69 of the Planning Act.

20In Hancock, the Divisional Court relied on the 1990 version of the Planning Act, which was in force at that time. Unlike the current version, s. 69(3) of the 1990 version did not include a reference back to s. 69(1). The 1990 version stated:

69(3) Any person who is required to pay a fee for the processing of an application in respect of a planning matter may pay the amount of the fee under protest and thereafter appeal to the Municipal Board against the levying of the fee or the amount of the fee by giving written notice of appeal to the Municipal Board within thirty days of payment of the fee.

The language in s. 69(3) of the current version of the Planning Act is different in that it states that appeals to the Tribunal under s. 69 only arise from the payment of a disputed fee under s. 69(1). In other words, appeals are restricted to issues arising from the payment under protest of fees set out in a tariff. This limits the scope of appeals and suggests that the Tribunal should focus on the tariff when determining the reasonableness of a fee.

21Section 69(1) of the Act states that the tariff shall be designed to meet only the anticipated costs to the municipality, signaling a need for the Tribunal on an appeal to focus on the design of the tariff and indicating an emphasis on achieving full cost recovery, rather than achieving fairness or equity. Although the Supreme Court of Canada in Eurig found that fees do not need to precisely cover costs, s. 69(1) implies that a tariff should aim to avoid resulting in surplus revenues. A focus on the design of the tariff facilitates the analysis of the reasonableness of the fee. If a fee is unreasonable, it is likely because the tariff’s design is inadequate. In undertaking this analysis, the Tribunal should focus on the substantive aspects of the tariff’s design and on any studies that were undertaken on applicable costs and revenues to inform the design of the tariff.

22The Tribunal finds that its focus in an appeal under s. 69(3) should be whether the disputed charge has a reasonable connection to the costs of the services in question and whether it is reasonable in light of the requirements and context set out in s. 69. As suggested by the language in s. 69(1) and (3), this requires consideration of the adequacy of the tariff’s design and, consequently, consideration of any studies that were undertaken on applicable costs and revenues.

1. The Engineering Review Fee

Appellant’s Evidence and Submissions

23Mr. Norman stated that the City’s aim is to achieve full cost recovery, however, he opined that tying Engineering Review Fee rates to rates associated with construction costs does not achieve this because the costs of each may increase at a different pace. He said the City retained Mr. Krzeczunowicz to review and report on the structure of the City’s fee by-law in 2023. This culminated in a report, entitled Development Application Fee Review, dated November 27, 2023 (“Hemson Report”), which, among other things, recommends changes to the structure of the City’s Engineering Review Fee. He said that the Report’s recommendations included the introduction of a tiered variable rate with declining marginal rates as construction costs increase. The recommendations were subsequently adopted in the 2024 Tariff. Mr. Norman stated that if the 2024 Tariff had been applied when calculating the first installment of the Engineering Review Fee, the amount payable would have been considerably less.

24Mr. Norman stated that the amount paid for the initial installment of the Engineering Review Fee was based on a projected cost of $25,881,603.00 for construction of municipal infrastructure associated with the proposed development. He said the Appellant’s initial development proposal required alterations to an existing stormwater management pond, but in 2022, those plans changed and the alterations to the pond were dropped. This resulted in the projected construction costs of municipal infrastructure for the project to fall from $25,881,603.00 to $18,464,365.80. He opined that this change resulted in an overpayment of $638,668.56 (including HST), which should be reimbursed. Mr. Norman stated that a fee must be adjusted at each payment stage to reflect changes to construction costs.

25The Appellant submits that the City adjusted the 2024 Engineering Review Fee based on the updated construction cost estimate, but only did so for the 2024 installment and not for the one paid in 2021. The Appellant submits that the City’s fee tariffs up until 2023 permitted adjustments for fee increases and decreases to be determined at each payment stage. It submits that s. 2.3 of the 2024 Tariff allows for refunds to be determined at the rate applicable when the original application was made. In the present case, the application was made in 2016. Section 4.1 of both the 2016 and the 2021 Tariffs states that adjustments may be made to fees to reflect changes in, among other things, the estimated cost of works. Section 4.2 of these tariffs states that such adjustments to the total fee payable are required at each payment stage. While the Appellant acknowledges that s. 3.1 of the 2024 Tariff only addresses adjustments for cost increases, it argues that because s. 2.3 of the 2024 Tariff allows for refunds to be determined at the rate applicable when the original application was made, the language in the earlier tariffs should apply and adjustments should be allowed to decrease the Engineering Review Fee, taking into account the updated construction cost estimate.

26The Appellant further argues that to interpret the 2024 Tariff to only allow for adjustments to increase fees would be inconsistent with s. 69 of the Planning Act. It submits that the City is limited to exercising the powers that are explicitly conferred upon it by statute. In regard to s. 69, those powers are to recover anticipated costs to process applications. The Appellant submits that it would be inequitable to charge fees for services that are no longer required or part of the application or that will be charged at a later time. In the present case, it submits that the Engineering Review Fee associated with the stormwater management pond will be charged when the pond is reviewed as part of a subsequent phase of development.

27The Appellant argues that, under s. 69(4) of the Planning Act, the Tribunal may direct a refund in any amount that is reasonable. As such, it can order a refund regarding the payment of both the 2021 and 2024 installments of the Engineering Review Fee, even though the first installment itself was not paid under protest in 2021. The Appellant argues that the Tribunal has the authority to consider the totality of fees as a relevant factor in its analysis and has the power to adjust all fees that were paid, including installments that were not themselves paid under protest.

City’s Evidence and Submissions

28The City argues that the rate charged for the 2021 installment was correct, the amount of both installments of the Engineering Review Fee should be based on the initial construction cost estimate of $25,881,603.00, and the Appellant did not have a right in 2024 to appeal the payment of the 2021 installment of the Engineering Review Fee under s. 69(3) of the Act.

29Mr. Krzeczunowicz said that 60 percent of the Engineering Review Fee was payable in 2021 and the remaining 40 percent was due upon execution of the subdivision agreement, which occurred on March 7, 2024. He stated that s. 2.4 of the 2024 Tariff states that outstanding fees for applications for which a portion has already been charged must be paid in accordance with the current tariff. Accordingly, the Appellant paid the first installment of the Engineering Review Fee under the 2021 Tariff using the 2021 rates and the second installment was calculated under the 2024 Tariff using the 2024 rates. Mr. Krzeczunowicz said that the Hemson Report found that the City’s Engineering Review fee rate was high, but within the benchmark range for the area.

30Mr. Krzeczunowicz stated that the Appellant paid $2,228,561.31 (including HST) in March 2021. He said this fee was calculated as the first installment of the Engineering Review Fee based on the then-estimated $25,881,603.00 in construction costs for municipal infrastructure works associated with the proposed project. Mr. Krzeczunowicz and Mr. Yassi each said that the 2024 Tariff allows adjustments in relation to increases in construction costs, but it does not include a provision for reducing fees based on decreases in costs. They said that, although the Appellant is not entitled to a recalculation of the fee based on the lower costs estimate, the City calculated the second installment in 2024 using the lower projected construction cost of $18,464,365.80. Mr. Krzeczunowicz said the City should have used the higher estimate of $25,881,603.00, which would have resulted in a higher Engineering Review Fee of $549,299.83 (including HST) rather than the $415,195.73 (including HST) that the Appellant paid for the second installment. Under cross-examination, Mr. Krzeczunowicz acknowledged that the use of the term “construction costs” in the 2024 Tariff refers to construction costs at the time of the execution of the draft Plan of Subdivision agreement.

31Mr. Yassi said that the Tariff’s provisions on refunds only apply to situations where an application is withdrawn and they do not apply to adjustments. He stated that the Appellant’s entire application was reviewed by City staff.

32The City submits that the Appellant’s claim for a refund of part of the 2021 payment of the Engineering Review Fee is invalid. It submits that s. 69(3) of the Planning Act states that an appeal arises only with regard to fees that were paid under protest and appealed within 30 days of payment. It submits that the 2021 payment was not paid under protest and no appeal was filed within 30 days. Regarding concerns that the Appellant may be subject to duplicative review fees if alterations to the stormwater management pond are part of a future phase of development, the City submits that the Appellant’s remedy is to request City Council to reduce or waive the future fee under s. 69(2) of the Planning Act.

Analysis and Findings

33The Tribunal’s analysis regarding the Engineering Review Fee is divided into three parts: (1) whether the Tribunal has the authority to determine the reasonableness of the 2021 installment of the Engineering Review Fee; (2) whether the rates that were applied were reasonable; and (3) whether the application of the original projected construction costs in determining the fee is reasonable.

(1) The Tribunal’s Authority

34Section 69(3) of the Planning Act states that an appeal must be filed within 30 days of payment of a fee under protest. The question is whether this refers separately to the payment of each installment of a fee or to the entire fee. Section 69(3) grants a right to appeal to a person who is required to pay a “fee” under s. 69(1) and the Divisional Court in Hancock found that it is the duty of the Tribunal to consider whether a “fee” is reasonable. It is not whether the payment was reasonable, but whether the fee was reasonable. On this basis, the Tribunal finds that the 2021 installment of the Engineering Review Fee should be considered as part of the Engineering Review Fee, the remainder of which was paid in 2024. The entire Engineering Review Fee needs to be considered in order to determine its reasonableness. The Tribunal should consider all application fee installments, when determining the reasonableness of a fee. Section 2.4 of the 2024 Tariff states that the outstanding amounts of fees that have been previously paid in part shall be paid in accordance with the current tariff and s. 2.2 requires that fees are to be based on the fee rate in effect at the time of the payment. This does not mean that the total amount paid (including first and subsequent installments) should not be considered when determining the reasonableness of a fee. It would be unfair to determine the reasonableness of a fee based solely on the second installment, especially where the factors upon which the fee is calculated have changed. In this case, the Tribunal finds that the fact that the 2024 payment was made under protest is sufficient to trigger an appeal of the entire Engineering Review Fee that was paid through installments in 2021 and 2024.

(2) The Rates

35Regarding what rates should be applied when calculating the amount of the Engineering Review Fee, s. 2.2 of both the 2021 and 2024 Tariffs states that fees are to be calculated at the rate that was in effect at the time that the fees were paid. For the initial installment of the Engineering Review Fee, that was the rate in the 2021 Tariff and, for the second installment, it was the rate in the 2024 Tariff.

36No compelling evidence was produced demonstrating that either the 2021 or 2024 Engineering Review Fee rate was unreasonable. There was a jump in the rate between 2016 and 2018, but increases after that time period were not significant. The Hemson Report states that the amount of work that is put into engineering reviews is driven mainly by the size and complexity of municipal infrastructure that needs to be constructed. It states that the most common variable used to determine the application fee, therefore, is the projected construction cost of infrastructure, with the fee rate being a percentage of construction cost.

37Although the Hemson Report recommended changes to the structure of the Engineering Review Fees, it stated that the City’s Engineering Review Fee rate for 2021 was within the benchmark range for the area. The Tribunal finds this to be reasonable. There was no compelling evidence produced establishing a lack of connection between the fee rate that was used in 2021 and the services that were provided. The evidence before the Tribunal is that the City’s Engineering Review Fee revenues exceeded the City’s costs in 2021, but not to an unreasonable degree, and it was not contested that the rate applied for the second installment under the 2024 Tariff was reasonable. Taking into account the provisions in the City’s tariffs, their design, and the recommendations in the Hemson Report, the Tribunal finds that there was a reasonable connection between the Engineering Review Fee rates that were applied in 2021 and 2024 and the City’s costs in processing the application and that, in this regard, the Engineering Review Fee was reasonable.

(3) The Construction Costs

38The first installment of the Engineering Review Fee was paid in 2021. It was based on projected cost of $25,881,603.00 for municipal infrastructure associated with the proposed draft Plan of Subdivision. With the removal in 2022 of planned alterations to the stormwater management pond, the projected cost dropped to $18,464,365.80. The amount of the second installment of the Engineering Review Fee was calculated by the City based on this revised estimate. The City submits that this reduced fee was charged in error, and that, in accordance with the 2024 Tariff, it should still have been based on the original $25,881,603.00 construction estimate.

39As noted above, s. 2.4 of the 2024 Tariff states that outstanding fees that have previously been paid in part shall be calculated based on the fees set out in the current tariff. It states that:

2.4 Applications for which fees have been paid in part, prior to the effective date of this by-law, shall be required to pay any outstanding amounts in accordance with this by-law. For clarity, where a percentage

of a fee applicable to an application was paid prior to the effective date of this by-law, the balance of the percentage owing shall be calculated on the fees set out in this by-law.

Based on this, the second installment should be calculated based on the fees set out in the 2024 Tariff.

40Adjustments refer to changes in the calculation of a fee. Under the 2024 Tariff, adjustments may be made where there is a cost increase. Paragraph 3.1 of the 2024 Tariff states:

3.1 Fees payable shall be adjusted at each payment stage or at execution of agreements to reflect increases in the Construction Cost used to calculate the application fee, based on the fee rate in effect on the date the additional payment is required.

It does not address situations in which costs decrease.

41The manner in which the fees set out in the 2024 Tariff are to be determined is elaborated on in note 2 to Table 4 in the 2024 Tariff, which states that the Engineering Review Fee is to be re-calculated based on the verified construction cost on or before the execution of a subdivision agreement. Unlike s. 3.1, it does not restrict this re-calculation to addressing increasing costs. Note 2 states (with emphasis added):

Fee will be recalculated based on Construction Cost verified on or before execution of Subdivision Agreement and additional fees, if applicable, will be payable prior to execution of the Subdivision Agreement.

This is substantiated by the definition of “Construction Cost” in the 2024 Tariff, which also refers to the verified cost on or before execution of a subdivision agreement. It states (with emphasis added):

Construction Cost: the estimated cost of all internal and external works associated with the Plan of Subdivision, plus a 10% contingency and 10% for contract administration, prepared by the applicant's Consulting Engineer and verified on or before execution of the Subdivision Agreement.

In the present case, the subdivision agreement was executed in 2024.

42Applying Note 2 to the 2024 payment of the Engineering Review Fee, the Tribunal finds that the City should have re-calculated the entire Engineering Review Fee (including the 2021 installment) and required the Appellant to pay the outstanding balance. Both the 2021 and 2024 installments of the Engineering Review Fee should be based, using the applicable rates, on the construction cost verified on or before the execution of the subdivision agreement. In the present case, the construction cost was verified in 2024. It was verified to be $18,464,365.80.

43The Tribunal finds that the design of the restriction in s. 3.1 of the 2024 Tariff, which only permits adjustments where there is a cost increase, is not reasonable. In situations, like the present, where a fee calculation is based on outdated information or data, an adjustment up or down should be permissible. Charging a fee based on an outdated construction estimate is not reasonable.

44Mr. Yassi stated that the Appellant’s entire application had been reviewed by staff, and apparently included review of the proposed retrofit to the stormwater management pond. As the retrofit will be included in a subsequent phase of the development, the Tribunal notes that the staff costs that have already been incurred in reviewing that aspect of the project should be recovered at the time of the City’s review of the subsequent phase’s subdivision application.

45The verified construction cost was $18,464,365.80. The Tribunal finds that the Appellant is entitled to a refund in the amount of $638,668.56, as requested. This constitutes the difference between the amount that was charged for the first installment using the initially projected cost of $25,881,603.00 for municipal infrastructure associated with the proposed draft Plan of Subdivision and the amount that would be charged using the verified cost of $18,464,365.80. Taking into account the provisions in the City’s tariffs and their design, the Tribunal finds that there is not a reasonable connection between the Engineering Review Fee that was paid and the City’s costs for the review, due to the application of the initial non-verified construction cost when calculating the first installment of the fee. On this basis, the Tribunal finds that the amount charged for the first installment of the Engineering Review Fee in 2021 was not reasonable.

Conclusions – Engineering Review Fee

46The Tribunal finds that the fact that the 2024 payment was made under protest is sufficient to trigger an appeal under s. 69(3) of the Planning Act of the entire Engineering Review Fee that was paid in 2021 and 2024. The Tribunal finds that although the rates that were applied in calculating each installment of the Engineering Review Fee were reasonable, the amount charged should have been based on the verified construction cost estimate of $18,464,365.80. As the fee that was charged for the first installment was based on the higher unverified construction costs estimate of $25,881,603.00, the Tribunal finds that the fee was not reasonable and the Appellant is entitled to a refund in the amount of $638,668.56.

2. The Landscape Review Fees

The Appellant’s Evidence

47Mr. Norman stated that the Landscape Review Fees were due in 2021, but were not charged until 2024 as the final calculation depended on the determination of the project’s verified construction costs estimate. However, he said the fees were eliminated when the City enacted the 2024 Tariff. Mr. Norman stated that the Appellant was nonetheless charged the fees in 2024. As a result, he opined that the Appellant was overcharged by $113,991.10 (including HST), which was the amount of the fees.

The City’s Submissions

48The City agrees that Landscape Review Fees are not included in the 2024 Tariff and should not have been charged. However, it submits that the problem arises from an implementation issue whereby 2021 fees were not charged until 2024. As such, the City acknowledges that they should not have been charged, but it also submits that they are not the appropriate subject matter of an appeal.

Analysis and Findings

49Regarding the Landscape Review Fees, note 4 to Table 4 in the 2021 Tariff states that these fees are payable at the time of execution of the subdivision agreement. Although note 3 indicates that the fee can be paid in installments, the City applied note 4 and charged the fee at the time of the execution of the subdivision agreement in 2024. As noted above, s. 2.4 of the 2024 Tariff states that fees are to be calculated based on the provisions of the tariff in effect at the time of payment and s. 2.2 of the 2024 Tariff states that fees shall be calculated at the rate in effect on the date paid. In the present case, the tariff in effect at the time of payment was the 2024 Tariff. The 2024 Tariff does not require the payment of any Landscape Review Fees as the cost of review of these matters is now covered by other fees. The Tribunal, therefore, finds that there is not a reasonable connection between the Landscape Review Fees that were paid and the City’s costs for the review. Given that there was no basis for charging the fees based on the 2024 Tariff, the Tribunal finds that the fees were unreasonable. This problem may have arisen due an issue in implementation of the tariffs, but the Tribunal finds that such issues may be considered when assessing a tariff’s design and determining whether a fee is reasonable. The Tribunal finds that the Appellant’s payment in 2024 of $113,991.10 for the Landscape Review Fees should be refunded.

3. Residual Fees

Appellant’s Evidence and Submissions

50The Appellant submits that the City has imposed a total of $3,237,802.81 (including HST) in application fees. It submits that, if the Appellant’s draft Plan of Subdivision application had been filed in 2024, the applicable fees under the 2024 Tariff would have been $1,682,805.04 (including HST). It submits that this represents an overcharge of $1,554,997.77. Excluding the Engineering Review, Landscape Review, and non-applicable fees, the Appellant submits that the overpayment amounts to $772,094.93.

51Mr. Norman stated that the City’s goal is to fully recover its costs for processing and reviewing planning applications, but he said the amount imposed on the Appellant exceeded this. He said that, from 2005 to 2013, the City based its fees on a 2005 model to assess fee cost recovery effectiveness. He said that, from 2005 to 2020, it generally did not achieve its full cost recovery goals. To correct this, he said the City raised its fees and, by 2021, its revenues began to increasingly exceed costs.

52Mr. Norman said the City used a reserve fund (“Reserve Fund”) to facilitate rate stabilization. Between 2005 and 2020, the Reserve Fund generally operated at a deficit. He stated that, from 2014 to 2020, the City tried to reduce the Reserve Fund deficit through increases in fees. As a result of these efforts, he said the Reserve Fund achieved a surplus of $28 million in 2021. He said that in 2022, the Reserve Fund surplus grew significantly, resulting in the need for a review of the process. He said the Hemson Report benchmarked the City’s fees against fees in other local municipalities and found that the City’s were the highest. After a thorough review, the Report recommended changes to the fees.

53The Appellant argues that the 2024 Tariff should be used as a proxy for identifying reasonable fees for other years. It submits that, although the fees were intended to provide for full cost recovery, they were not related to the costs incurred by the City in reviewing applications. It submits that the City did not present any evidence reflecting its actual costs of reviewing the Appellant’s application. It submits that the City’s evidence on the design of its tariffs shows that, from 2020 to 2023, the tariffs lacked a connection to the anticipated costs to process draft Plan of Subdivision applications and, therefore, neither the fees nor the tariffs’ design was reasonable.

54The Appellant submits that the City required the Appellant to make multiple re-submissions of the application, and that it has taken several years to process, which reflects the unreasonableness of the City’s review. It submits that there has been staff turnover during the review, which has likely impacted its length. Comparing the fees that it paid to those charged in other municipalities, taking into account the changes recommended in the Hemson Report, and considering the Appellant’s evidence that the City’s fees likely exceeded its actual costs, the Appellant submits that the Tribunal should order a refund regarding the Residual Fees.

City’s Evidence and Submissions

55Mr. Krzeczunowicz stated that, in 2023, the City retained him to review its fees and to make recommendations on new fee rates and a new rate structure to improve full cost recovery. This culminated in the Hemson Report. He said he reviewed the City’s existing fee recovery model and fee structure and analyzed direct, indirect, and anticipated costs arising from the processing and review of applications. He reviewed the staff time allocated to processing and reviewing applications to determine the direct costs, such as payroll, office space, and operating costs. He said that he also analyzed the indirect costs, such as overhead support. Mr. Krzeczunowicz said that contributions to the Reserve Fund were not included in either of the calculations. He said that he also undertook a revenue analysis, reviewing both past revenue projections and anticipated revenues under a full cost recovery framework.

56Mr. Krzeczunowicz stated that draft Plan of Subdivision applications have increasingly become more complex, requiring more staff time and often multiple re-submissions and the re-circulation of applications for review. He said they are time-consuming and that often more than 120 staff members participate in their review. He said most of the application review costs are payroll costs and it would be impractical to try to match revenues and costs annually on a precise basis. He stated that the number of applications varies yearly, resulting in fluctuating annual costs for processing and review. In some years, the City collects less in revenue than is needed to cover its costs while in other years the revenues exceed costs. He said the Hemson Report recommended a cap on the maximum number of units for which fees could be charged, along with a base fee to cover the minimum level of effort required for reviewing typical draft Plan of Subdivision applications. He said the Hemson Report also recommended a sliding-scale fee (based on a percentage of construction costs) for engineering reviews. He said, in 2021 and 2022, revenues exceeded costs due to economic uncertainty arising from the COVID-19 pandemic and legislative changes to planning law. As a consequence of the increased revenues, he said the City applied fee discounts in 2023 and adjusted the fee rates and structures as recommended in the Hemson Report.

57Mr. Krzeczunowicz stated that the Hemson Report made its recommendations based on the situation in 2023 and that the recommendations that were incorporated in the 2024 Tariff were appropriate for that time. However, he stated that the 2024 Tariff cannot be used as a proxy for determining the reasonableness of fees and fee structures from other years given the different circumstances that are present from year to year. He emphasized that draft Plan of Subdivision application revenues fluctuate annually depending on the types, number, and size of development opportunities in the City in any given year.

58Regarding the Reserve Fund, Mr. Krzeczunowicz stated that a surplus does not contravene the Planning Act provided that the municipality reasonably attempted to match revenues with costs. He reiterated that yearly fluctuations in application numbers and fee revenues result in imbalances between costs and revenues. Due to uncertainty in 2019 over projected development activity and associated application review cost impacts caused in part by new application timelines legislated in Bill 108, the More Homes, More Choice Act, 2019, he said the Reserve Fund’s balance fell into deficit. He said that, in 2020, the COVID-19 pandemic resulted in uncertainty in the projections for the following year and development activity ended up being higher than expected, resulting in the Reserve Fund achieving a surplus. He opined that the City’s target of between 100 percent to 150% of annual planning, urban design, and engineering expenditures for the Reserve Fund reflected reasonable caution during a volatile time. He said this target was exceeded for the first time in 2022 and the City addressed the surplus by commissioning and following the recommendations in the Hemson Report, which resulted in new fee rates and structures for 2024.

59Mr. Krzeczunowicz stated that it is difficult to compare the planning application fees of one municipality to another. He said they have varying fixed costs, service standards, and revenues. He said some municipalities aim to achieve full cost recovery, while others do not. In terms of the City, he stated that it provides best-in-class service and aims to achieve full cost recovery.

60Regarding the Planning and Urban Design fees, Ms. Pease stated that the City neglected to charge the Appellant’s deferred fees from 2021 and that these fees are outstanding.

61The City argues that the Tribunal’s analysis must focus on forecasted future costs and revenues and not on actual or past ones. It submits that the focus also should not be on the actual fees paid. Rather, the Tribunal must focus on the forecasted costs and fees for an average application and examine the design of a tariff based on these elements and on the number of expected applications. The City submits that it engaged in continuous, diligent efforts to balance application fees and costs. It prepared annual staff reports detailing how the tariffs were designed and demonstrating the challenges that the City faced in anticipating its costs and fee revenues. It reiterates that there was considerable uncertainty in projecting conditions and revenues due to varying yearly fee revenues and costs, changing development patterns, legislative changes impacting development activity, and uncertainty due to the COVID-19 pandemic. It submits that ordering the requested refund for Residual Fees would cause financial uncertainty and risk for municipalities and would create a disincentive for municipalities to reduce fees generally.

62The City submits that claims based on hindsight are not permitted under s. 69 of the Planning Act and that the Appellant’s claims regarding the payment of Residual Fees in 2016 and 2021 are invalid as they were not paid under protest and the appeal of those payments was not filed within 30 days of the payments.

Analysis and Findings

63The test that the Tribunal applies is reasonableness. It is not correctness. A municipality does not have to have fees that precisely match costs. As noted in Eurig, there must be a connection between the fee and the cost of the services provided, but the connection does not need to be perfect. Fee structures may vary among municipalities. The key objective is that the fees are reasonable.

64The evidence before the Tribunal is that the City received surplus revenues in 2021, 2022 and 2023, but for most years prior to that, including 2016, it did not have surplus revenues and the Reserve Fund ran a deficit. In those years, it did not achieve full cost recovery. The City’s fees were high compared to other local municipalities, but the evidence before the Tribunal is that not all local municipalities strive to achieve full cost recovery and the level of service among them varies. Based on the City’s evidence, it aims to achieve full cost recovery and its standard of service is high.

65Throughout the time period in question, the City undertook annual reviews of costs and revenues resulting in amendments to the by-law to update its tariffs in an effort to achieve full cost recovery. The evidence before the Tribunal is that the City did not start to achieve its full cost recovery goal until 2021. Subsequent revenues in 2022 may have been excessive; however, the Appellant was not charged fees in 2022.

66Stakeholders raised market concerns regarding increasing fees in 2019, but taking into account the emphasis on cost recovery in s. 69, this is not a compelling indicator of improper tariff design or the unreasonableness of fees.

67The evidence before the Tribunal indicates that surpluses in revenue really began in 2021. The Reserve Fund achieved a surplus in 2021, but as a rate stabilization tool, this is reasonable given that the Fund is designed to have surpluses and deficits from year to year. Mr. Krzeczunowicz’s evidence, which the Tribunal accepts, was that a target for the Reserve Fund of between 100 percent to 150 percent of annual planning, urban design, and engineering expenditures is reasonable. The Reserve Fund balance was within that target range in 2021.

68The evidence before the Tribunal demonstrates that the Appellant’s project is large, having required a significant number of staff and experts to review it, and that multiple re-submissions have been required. Given its size, the costs of reviewing the application have also been spread over several years. It is not an average draft Plan of Subdivision application. Although revenue surpluses may have begun in 2021, it is unlikely, given the size and complexity of the Appellant’s project, that the surpluses were due to the overpayment of fees by the Appellant. Given that the City’s costs and revenues varied significantly during the time period in question, the Tribunal is not satisfied that the 2024 Tariff would serve as an appropriate proxy for what the fees should have been in 2021.

69The Planning Act does not state that an appellant automatically gets a refund if it has paid too much or above the average for that year in fees. Taking into account the Hemson Report’s findings, the actions taken by the City to update its tariffs, and the design and content of the City’s tariffs, the Tribunal finds that there is a reasonable connection between the Residual Fees that were paid and the City’s costs for processing these aspects of the draft Plan of Subdivision application. Given that the City’s efforts to achieve full cost recovery, the annual adjustments that it made to its tariffs to address changing circumstances, and the size of the Appellant’s project, the Tribunal finds that the City’s fees in question were reasonable.

70Regarding the deferred Planning and Urban Design fees that were not charged to the Appellant, the Tribunal finds that, as the deferred fees have not been charged or paid, the fees are not the subject matter of the appeal. Under s. 69(3) of the Planning Act, a person may file an appeal within 30 days of the date of payment of a fee under protest. If that payment was made in 2021, then the 30-day window for filing an appeal has passed. If the City requests the Appellant to pay a further installment of the fee in the future, then the Appellant may have the ability to file a further appeal regarding the reasonableness of the Planning and Urban Design fees, if that future charge is paid under protest and the appeal is filed within 30 days of the payment.

71The Tribunal notes that the City has undertaken to refund the subdivision request fees that were paid by the Appellant in 2023.

CONCLUSIONS

72The Tribunal finds that the amount charged by the City for the first installment of the Engineering Review Fee that was calculated based on an unverified construction costs estimate and that, in this regard, the fee was not reasonable. As a result, the Tribunal finds that the Appellant is entitled to a refund in the amount of $638,668.56 regarding the Engineering Review Fee.

73The Tribunal finds that as the Landscape Review Fees were eliminated in the 2024 Tariff, the Appellant is entitled to a refund in the amount of $113,991.10 for the payment of these fees in 2024.

74The Tribunal finds that the Residual Fees paid by the Appellant were reasonable.

ORDER

75THE TRIBUNAL ORDERS THAT the appeal is allowed in part and the City is directed to pay a refund in the amount of $638,668.56 to the Appellant regarding the Engineering Review Fee and the City is directed to pay a refund in the amount of $113,991.10 to the Appellant regarding the Landscape Review Fees.

“Hugh S. Wilkins”

HUGH S. WILKINS

VICE-CHAIR

Ontario Land Tribunal

Website: www.olt.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248

The Conservation Review Board, the Environmental Review Tribunal, the Local Planning Appeal Tribunal and the Mining and Lands Tribunal are amalgamated and continued as the Ontario Land Tribunal (“Tribunal”). Any reference to the preceding tribunals or the former Ontario Municipal Board is deemed to be a reference to the Tribunal.