CITATION: St. Catharines Seniors Apartments Phase Three Inc. v. Municipal Property Assessment Corporation et al., 2015 ONSC 3896
ST. CATHARINES COURT FILE NO.: 55552/14
DATE: 2015/06/17
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: St. Catharines Seniors Apartments Phase Three Inc. (Applicant) v. Municipal Property Assessment Corporation and City of St. Catharines (Respondents)
BEFORE: The Honourable Mr. Justice J.W. Quinn
COUNSEL: Joseph Jebreen, for the applicant
Karey Lunau, for the respondent, Municipal Property Assessment Corporation
The respondent, City of St. Catharines, not appearing
HEARD: May 29, 2015, at St. Catharines
E N D O R S E M E N T
- Introduction
[1] Who are “the poor”? Specifically, how poor must a person be to qualify as one of “the poor” under paragraph 12(iii) of section 3(1) of the Assessment Act, R.S.O. 1990, c. A.31?
[2] The legislation reads: [Underlining added]
3(1) All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:
- Land owned, used and occupied by,
(iii) any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.
[3] It is agreed that the applicant owns, uses and occupies (in the sense contemplated by para. 12(iii)) a charitable, non-profit, philanthropic, residential apartment building for seniors of low income, municipally known as 313A Geneva Street, St. Catharines and that it is supported, in part, by public funds.
[4] Therefore, if the residents of 313A Geneva Street satisfy “the poor” requirement of paragraph 12(iii), the applicant is entitled to, and seeks, an order declaring that the property is exempt from municipal taxation.
[5] The respondent, City of St. Catharines (whom, I think, should have been described as “The Corporation of the City of St. Catharines”) did not appear on the application and, I am advised, does not take a position. The opposition to the application comes from the respondent, Municipal Property Assessment Corporation (“MPAC”).
[6] MPAC argues that the applicant merely provides affordable housing to seniors, rather than relieving poverty.
- Background
[7] The Kiwanis Club of St. Catharines (a well-known service organization with a reputation for aiding worthy causes in the community) incorporated the applicant in 2010.
[8] The letters patent of the applicant recite its objects:
To provide and operate non-profit residential accommodation and incidental facilities exclusively for:
Persons of low income;
Senior citizens primarily of low or modest income; or
Disabled persons primarily of low or modest income.
[9] The directors of the applicant are members of the Kiwanis Club of St. Catharines.
[10] On June 15, 2010, the applicant entered into a Contribution Agreement with, and sought funding from, Niagara Regional Housing in respect of the construction of an apartment building for seniors of low or modest income. The Contribution Agreement contained a number of recitals, which provide some useful historical information, including the following:
A. In order to create a supply of Affordable Housing, Canada Mortgage and Housing Corporation (‘CMHC’) and Her Majesty the Queen in Right of Ontario, as represented by the Minister of Public Infrastructure Renewal entered into a bi-lateral agreement effective April 1, 2003 (the ‘CMHC – Ontario New Affordable Housing Program Agreement’).
B. The purpose of the CMHC – Ontario New Affordable Housing Program (‘the Program’) is to provide funding for Affordable Housing.
C. The Minister of Municipal Affairs and Housing (‘the Minister’) is responsible for the Program and Niagara Regional Housing is responsible for the delivery and administration of affordable housing programs in the Niagara region.
[11] Section 1.1 of the Contribution Agreement contains some definitions. I will mention three:
▪ ‘Affordable Housing’ means Housing which is modest in terms of floor area and amenities, based on household needs and community norms, in Projects that achieve rent levels in accordance with the Program Guidelines . . .;
▪ ‘Affordable Rent’ in respect of a Unit of rental housing means a monthly occupancy cost that does not exceed 80% of the CMHC Average Market Rent for that Unit;
▪ ‘Average Market Rent’ means the average rent figures, based on geographical areas and classified by bedroom count, as determined annually in the CMHC Average Market Rent Survey or as determined by Niagara Regional Housing, based on available data, in areas where there is no information from the CMHC Average Market Rent Survey.
[12] The Contribution Agreement does not assist in the definition of “the poor” under s. 3(1) para. 12(iii) of the Assessment Act.
[13] The applicant was registered as a charity in 2010.
[14] Construction of the apartment building was completed in February of 2012. Certain financial arrangements in respect of the construction allowed the applicant to achieve its charitable status:
▪ Pursuant to the Contribution Agreement, Niagara Regional Housing provided a loan of $4.76 million, having a term of 25 years with interest at 8% per annum. The loan is secured by a mortgage, however, the interest is forgivable on a yearly basis and the loan is to be forgiven at the end of the term, provided that the applicant fulfills its obligations under the Contribution Agreement.
▪ Further financing for the construction came in the form of a long-term loan from RBC Life Insurance Company, due in 2032, with a 3.73% fixed rate of interest secured by a mortgage.
▪ The property on which the apartment building was constructed (313A Geneva Street) was severed from lands owned by another charitable housing project owned and operated by the Kiwanis Club of St. Catharines for which the applicant paid $600,000 by way of a take-back mortgage, repayable one year after demand, with no requirement for ongoing payments.
[15] The apartment building at 313A Geneva Street contains 35 one-bedroom units each measuring approximately 574 square feet (currently renting at $596 per month) and five two-bedroom units at approximately 738 square feet each (with the monthly rent being $715). Three of the first-floor units are wheelchair accessible.
[16] Those who seek to reside in this apartment building must complete an application form. One of the eligibility requirements is that prospective tenants be 55 years of age or older. At the present time, the estimated average age of the tenants is 75.
[17] Another eligibility requirement is that tenants must have less annual household income than the maximum allowed under the Contribution Agreement (being $35,000 for a one-bedroom unit and $41,000 for two bedrooms). The approximate actual annual average household income for current tenants of one-bedroom units is $24,140.74 and of two-bedroom units is $30,320.89; the median income of those tenants is $22,042 and $30,471, respectively.
[18] There is a waiting list of 75 prospective tenants for 313A Geneva Street. Selection is generally made by chronological priority (although the applicant may choose to exercise discretion in cases of special hardship).
[19] For the purposes of this proceeding, it is acknowledged that:
▪ In 2011, the population of St. Catharines was 131,400;
▪ According to Statistics Canada, in 2011, the low income cut-off for a metropolitan area with 100,000 to 499,000 inhabitants was $20,065 for one person and $24,978 for two persons; and,
▪ The annual rate of inflation in the period 2011-2015 averaged 1.41%.
[20] I will summarize the above figures as they relate to the 35 one-bedroom units:
One-bedroom maximum household income allowable under Contribution Agreement
Actual average household income for tenants of one-bedroom units at 313A Geneva Street
Median income for one person at 313A Geneva Street.
Statistics Canada low income cut-off for one person
Low income cut-off adjusted for inflation
$35,000
$24,140
$22,042
$20,065
$21,225
[21] With the Statistics Canada low income cut-off ($20,065) adjusted for inflation, the result ($21,225) is within $1,000 of the median one-person income at 313A Geneva Street ($22,042).
[22] The summarized figures for the five two-bedroom units are:
Two-bedroom maximum household income allowable under Contribution Agreement
Actual average household income for tenants of two-bedroom units at 313A Geneva Street
Median income for two persons at 313A Geneva Street.
Statistics Canada low income cut-off for two persons
Low income cut-off adjusted for inflation
$41,000
$30,320
$30,471
$24,978
$26,421
[23] Low income cut-offs are described at p. 6 of “Low Income Lines, 2010 to 2011,” Income Research Paper Series, Statistics Canada:
Statistics Canada has a long history of publishing data on the low income of Canadians. The low income cut-offs (LICOs) were first published in 1967 as part of the 1961 Census monograph series and are by far Statistics Canada’s most established and widely recognized approach to estimating low income cut-offs. LICOs are income thresholds below which families devote a larger share of income to the necessities of food, shelter and clothing than the average family would.
[24] In that same paper, at pp. 4 and 6, Statistics Canada makes it clear that low income cut-offs are not a measure of poverty but strictly a measure of low income:
Media, researchers and policy-makers interested in measures of low income are typically concerned with the extent to which individuals in the population are living in poverty. Unfortunately, defining poverty is far from straightforward. The underlying difficulty is that poverty is a question of social consensus, defined for a given point in time and in the context of a given country. Decisions on what defines poverty are subjective and ultimately arbitrary (Statistics Canada, 1999 and Skuterud et al., 2004). Given this, Statistics Canada has always referred to the low income lines as indicators of the extent to which some Canadians are less well-off than others based solely on income and, as such, are low income and not poverty measures.
[25] Although MPAC does not regard the applicant as exempt from paying property taxes, the municipality (St. Catharines) does provide tax relief: the applicant pays taxes that are approximately one-half of the usual residential rate.
[26] Despite this tax relief, the absence of a tax exemption means that the applicant had a deficit of more than $43,000 in 2013 (the last year for which audited financial statements are available). A tax exemption would eliminate that deficit.
- Some legal principles
(a) all real property to be assessed and taxed unless exempt
[27] “All real property in Ontario is liable to assessment and taxation,” subject to certain exemptions: see s. 3(1) of the Assessment Act.
[28] One exemption is, “land owned, used and occupied by . . . any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds”: see s. 3(1) para. 12(iii).
(b) purpose of s. 3(1) of Assessment Act
[29] The purpose of s. 3(1) of the Assessment Act is “to impose upon all real property in Ontario a general obligation to pay a property tax so that the government can meet its expenditures”: see Ottawa Salus Corp. v. Municipal Property Assessment Corp. (2004), 2004 CanLII 14620 (ON CA), 69 O.R. (3d) 417 (C.A.) at para. 25, citing Canadian Mental Health Assn. v. Ontario Property Assessment Corp., [2002] O.J. No. 2199 (S.C.J.) at para. 42.
[30] In other words, the Assessment Act creates the tax base used by municipalities to pay for municipal services.
(c) this purpose is not an absolute one
[31] “However, this purpose is not an absolute one”: see Ottawa Salus Corp. v. Municipal Property Assessment Corp., supra, at para. 26.
(d) is it in the public interest to relieve against poverty?
[32] “The clear implication of these exemptions [under the Assessment Act] is that while there is a substantial public interest in the generation of revenue through the taxation of real property, in the context of the real property covered by these exemptions, that public interest is outweighed by the public interest in giving relief from property taxation to certain organizations . . . The specific purpose of subparagraph 12(iii) of s. 3(1) of the Act is to grant relief from property taxation to non-profit corporations ‘organized for the relief of the poor’ because the public interest in granting these organizations additional resources to relieve poverty outweighs the public interest in generating revenue through the taxation of property”: see Ottawa Salus Corp. v. Municipal Property Assessment Corp., supra, at paras. 26 and 27.
[33] “[T]he principle that taxation is clearly the rule and exemption the exception no longer corresponds to the reality of present-day tax law. Such a way of looking at things was undoubtedly tenable at a time when the purpose of tax legislation was limited to raising funds to cover government expenses. In our time it has been recognized that such legislation serves other purposes and functions as a tool of economic and social policy”: see Québec (Communauté urbaine) v. Notre-Dame de Bonsecours (Corp.), 1994 CanLII 58 (SCC), [1994] 3 S.C.R. 3 (S.C.C.) at p. 18.
(e) strict or liberal statutory interpretation?
[34] “[T]he proposition that taxation laws, including provisions creating exemptions, should be strictly construed,” has been “specifically rejected”: see Ottawa Salus Corp. v. Municipal Property Assessment Corp., supra, at para. 15.
[35] One factor to be considered when interpreting tax legislation is “the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and the legislative intent; this is the teleological approach”: see Québec (Communauté urbaine) v. Notre-Dame de Bonsecours (Corp.), supra, at p. 20.
(f) operation versus objects
[36] It is the actual operation of the organization and not its corporate objects which determine its purpose: Stouffville Assessment Commissioner v. Mennonite Home Assn., 1972 CarswellOnt 221 (S.C.C.) at para. 20.
(g) primary purpose of applicant must come within the exemption
[37] “[T]he test for determining whether an exemption should be granted is whether the primary purpose of the institution comes within the words defining the exemption in the Assessment Act”: Buenavista on the Rideau v. Regional Assessment Commissioner, Region No. 2 et al. (1996), 1996 CanLII 11792 (ON SC), 28 O.R. (3d) 272 (Div. Ct.), at 276, cited with approval in Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corp., Region 16 (2004), 2004 CanLII 34918 (ON CA), 191 O.A.C. 278 at para. 11.
[38] “The ‘primary purpose’ test . . . requires an objective determination of the principal purpose for which the land is used and occupied. That purpose must be distinguished from others that are incidental to it”: see Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corp., Region 16, supra, at para. 12, citing various authorities.
(h) what is the meaning of “the poor”?
[39] For convenience, I will again set out s. 3(1) para. 12(iii) of the Assessment Act:
3(1) All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:
- Land owned, used and occupied by,
(iii) any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.
[40] As I have said, it is not in dispute that the applicant is a charitable, non-profit, philanthropic corporation, supported, in part, by public funds and that 313A Geneva Street is owned, used and occupied by the applicant. The issue is: Are the residents of the apartment building “poor,” as contemplated by the legislation? Or, as previously noted, does the applicant merely provide affordable housing to seniors, rather than relieving poverty?
[41] In Stouffville Assessment Commissioner v. Mennonite Home Assn., supra, the Court was considering whether “a home for the aged” was operated “for the relief of the poor” so as to be tax exempt under a provision of the Assessment Act of Ontario, R.S.O. 1960, c. 23, which contained a provision similar to s. 3(1) para. 12(iii) of the current statute. At para. 21, Spence J., writing for the majority, said:
I adopt the test of the word ‘poor’ from the judgment of Romer J. in Re Clarke . . . where he cited with approval the judgment of Channell J. in Attorney-General v. Wilkinson: . . . the expression ‘poor person’ . . . does not mean the very poorest, the absolutely destitute; the word ‘poor’ is more or less relative . . .
[42] A similar statement is found 11 years later in Byron Optimist Sports Complex Inc. v. London City, [1983] O.J. No. 62 (C.A.):
. . . the term ‘poor’ is a relative term and that while the persons who benefit need not be destitute, there must be an element of economic deprivation or need, the relief from which is a part of the purpose of the institution claiming the exemption.
[43] And, 15 years after those words were written, we see, in Canadian Centre for Torture Victims (Toronto) Inc. v. Regional Assessment Commissioner, Region No. 9 (1998), 1998 CanLII 14626 (ON SC), 36 O.R. (3d) 743 (Gen. Div.), Lax J., following a review of the decisions in this area of the law since Stouffville Assessment Commissioner v. Mennonite Home Assn., supra, state, at p. 745:
It has been accepted since the decision in Mennonite Home, that the term ‘poor’ is a word of relative meaning and is not limited to the destitute.
[44] Lax J. goes on to say, at p. 746: (Footnote added)
It is not easy to reconcile all of the authorities which have considered s. 3, para. 12.
[45] Adding to the semantic confusion, the word “destitute,” used by some jurists as representing a condition worse than poor, is one of the definitions of “poor,” according to the New Shorter Oxford English Dictionary.
[46] Importantly, the fact that some individuals who benefit from services provided by a charitable corporation are not poor does not necessarily mean that the corporation is not organized for the relief of the poor: see Stouffville Assessment Commissioner v. Mennonite Home Assn., supra, at para. 23.
- Discussion
[47] It is immaterial that the corporate objects of the applicant do not mention “the poor.” Corporately describing the tenants of 313A Geneva Street as poor would not make them poor. Instead, the court must look to the actual use and operation of the property.
[48] Thirty-five units at 313A Geneva Street are one-bedroom accommodation for senior citizens with an average age of 75 years, an average annual income of $24,140 and a median annual income of $22,042. In the circumstances of this case, such figures equate with any common sense notion of “poor” as envisioned by s. 3(1) para. 12(iii).
[49] And, even if one were to conclude that the two-bedroom units at 313A Geneva Street (of which there are five) do not meet the definition of “poor,” the incomes associated with the 35 one-bedroom units mean that the primary actual purpose of the applicant continues to be to provide affordable housing for poor senior citizens. This actual purpose is consistent with the corporate objects.
[50] The Contribution Agreement speaks of affordable housing. It does not preclude the applicant from providing affordable housing to poor senior citizens.
[51] To qualify for tax exemption under the Assessment Act, s. 3(1) para. 12(iii) does not require that 313A Geneva Street be occupied by the poorest of the poor. The fact that others in the community may be poorer is neither helpful nor relevant.
[52] The 35 senior citizens occupying the one-bedroom units at 313A Geneva Street are poor; they are not cardboard-box-in-the-park poor, but they are poor.
[53] Although a tax exemption means that the applicant will not pay anything for the municipal services that property taxes support, the exemption recognizes the important public interest in providing affordable housing for poor senior citizens. The fact that there is a lengthy waiting list for a unit at 313A Geneva Street is evidence of a need for such housing.
- Result
[54] The application is allowed. An order shall issue, pursuant to s. 46 of the Assessment Act, declaring that, commencing with the 2013 taxation year, the property municipally known as 313A Geneva Street, St. Catharines, is exempt from municipal taxation pursuant to paragraph 12(iii) of section 3(1). Costs are not sought.
The Honourable Mr. Justice J.W. Quinn
DATE: June 17, 2015
CITATION: St. Catharines Seniors Apartments Phase Three Inc. v. Municipal Property Assessment Corporation et al., 2015 ONSC 3896
ST. CATHARINES COURT FILE NO.: 55552/14
DATE: 2015/06/17
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: ST. CATHARINES SENIORS APARTMENTS PHASE THREE INC. (Applicant) v. MUNICIPAL PROPERTY ASSESSMENT CORPORATION and CITY OF ST. CATHARINES (Respondents)
BEFORE: The Honourable Mr. Justice J.W. Quinn
COUNSEL: Joseph Jebreen, for the applicant
Karey Lunau, for the respondent, Municipal Property Assessment Corporation
The respondent, City of St. Catharines, not appearing
ENDORSEMENT
The Honourable Mr. Justice J.W. Quinn
DATE: June 17, 2015