COURT FILE NO.: CV-18-0304
DATE: 2021/06/18
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
STELMACH PROJECT MANAGEMENT LTD., and 1880551 ONTARIO LTD.
Applicants
– and –
CITY OF KINGSTON
Respondent
Michael Polowin and Jacob Polowin, for the Applicants
Tony E. Fleming, for the Respondent
HEARD: October 16, 2020
ruling on application
corthorn j.
Introduction
[1] In 2014, the City of Kingston (“the City”) enacted two by-laws under which it imposes fees or charges related to development within the City: the Impost By-law and the Development Charges By-law. Under the former, the City imposes a fee based on the capital cost of installing water and sanitary sewer services necessary to benefit the users of the systems. Under the latter, the City imposes a charge to cover the anticipated capital costs related to specific services including protection (fire and police), roads, parks and recreation, library, transit, affordable housing, and administration. Both 2014 by-laws replaced predecessor by-laws enacted in 2009 that were to expire.
[2] The Applicants are developers who own multi-unit residential properties in the City. At 630 Princess Street, Stelmach Project Management Ltd. developed a 31-unit residential condominium. At 720 Princess Street, 1880551 Ontario Ltd. developed a residential building with more than 70 units, and it applied to the City for permission to construct more than 20 additional units.
[3] The Applicants challenge the validity of the Impost By-law.
[4] As of the date on which this application was commenced, the Applicants had collectively paid, or been asked to pay, a total of $410,000 in impost fees to the City with respect to the development of the two properties.
[5] The City imposed the impost fees under By-law 2014-136 (“the Impost By-law”). The Impost By-law amends By-law 2009-138, which was passed under s. 391 of the Municipal Act, 2001, S.O. 2001, c. 25 (“the 2001 Act”). Section 391(2) authorizes a municipality to impose a fee or charge “for capital costs related to services … on persons not receiving an immediate benefit from the services or activities but who will receive a benefit at some later point in time.” The City acknowledges that the impost fees charged under the Impost By-law fund the capital costs associated with the installation of water and sewer infrastructure.
[6] The amount of the impost fees charged by the City, including to the Applicants, is based on the 2014 Development Charge and Impost Fee Background Study (the “2014 Study”). The methodology utilized in the 2014 Study, and by the City, to determine how impost fees for water and sewer infrastructure are calculated is not in dispute on this application.
[7] The Applicants ask the court to consider the Impost By-law in the context of the legislative framework, as it evolved over time. The Applicants’ primary submission is that the City was required to impose fees for growth-related water and sewer infrastructure services under another statute – the Development Charges Act, 1997, S.O. 1997, c. 27 (“DCA”).
[8] The Applicants point to significant differences between a by-law passed under the DCA and a by-law, including the Impost By-law, passed under the 2001 Act:
The DCA includes procedural protection for ratepayers. A municipality seeking to enact a development charge by-law must have a background study done. Public consultations must be held. A prescribed methodology for calculating development charges must be followed: see the DCA, ss. 10-12.
A development charge by-law under the DCA must be renewed every five years and, on renewal, be supported by a new background study: see the DCA, ss. 9(1) and 19; and
The DCA provides for oversight by way of ratepayer (a) appeals to the Ontario Land Tribunal (as of June 1, 2021, with appeals formerly made to the Local Planning Appeal Tribunal), and (b) challenges to the application of a development charge to a specific property: see the DCA, ss. 14-18 and 20.
[9] The Applicants submit that, by contrast, for an impost by-law enacted under the 2001 Act (a) there are no specific procedural requirements; (b) at the relevant time, an appeal from a fee imposed under s. 391 of the 2001 Act was specifically prohibited;[^1] and (c) the only recourse available to a ratepayer is to bring an application to quash the subject by-law.
[10] Alternatively, the Applicants question whether the City had authority under s. 391(2) of the 2001 Act to enact the Impost By-law. The Applicants make the following submissions with respect to the powers conferred by statute upon municipalities:
The Impost By-law was enacted under the specific provisions of Part XII of the 2001 Act – namely, s. 391(2). As a result, the court should narrowly interpret the authority granted to the City under that subsection;
The Impost By-law does not comply with either of ss. 394(1)(b) or (e) of the 2001 Act – both of which restrict the scope of fees or charges that may be imposed in a by-law enacted under s. 391; and
The Applicants, and developers generally, receive neither an immediate nor a deferred benefit, as contemplated by s. 391(2), from the water and sewer infrastructure funded by the impost fees. The Impost By-law is therefore discriminatory in its treatment of developers, by placing a financial burden on them that members of the general public do not experience.
[11] The Applicants ask the court to (a) conclude that the Impost By-law is ultra vires, (b) strike down or quash the Impost By-law, and (c) find that the City has been unjustly enriched by the $410,000 in impost fees paid or requested, collectively, from the Applicants.
[12] The City’s position is as follows:
The legislative history upon which the Applicants rely supports the City’s position, not the Applicants’, as it relates to the option available to the City to enact an impost fee by-law under either the 2001 Act or the DCA;
The impost fees charged under the Impost By-law are in no way duplicative of development charges imposed under the DCA By-law. The impost fees do not amount to the type of “double dipping” specifically prohibited by the legislative and regulatory framework: Fees and Charges, O. Reg. 584/06 (“the 2006 Regulation”), s. 2;
There is no specific prohibition in the 2001 Act which detracts from the general authority of a municipality to impose fees, such as impost fees, under s. 391 of the Act; and
Under s. 8(4) of the 2001 Act, a municipality has the authority to differentiate between ratepayers when imposing fees or charges.
[13] In summary, the City submits that it had the authority, under s. 391(2) of the 2001 Act, to enact the Impost By-law. The City asks the court to dismiss the application.
The Affidavit Evidence
[14] The Applicants rely on affidavits from Troy Stelmach and David Kay. Mr. Stelmach is the President of the first-named applicant; Mr. Kay is the President of the second-named applicant. In their respective affidavits, Messrs. Stelmach and Kay address the amount of the impost fees that the Applicants have paid or been asked to pay to the City. Messrs. Stelmach and Kay were not cross-examined on their respective affidavits.
[15] The City relies on the affidavits of Andrew Grunda and Desiree Kennedy. When his affidavit was sworn (2019) and when he was cross-examined (2020), Mr. Grunda was a Managing Partner, Principal, and Director of Finances at Watson & Associates Economists Ltd. (“Watson”). Watson conducted the 2014 Study upon which the City relied in calculating the impost fees charged under the Impost By-law.
[16] Mr. Grunda completed an acknowledgement of expert’s duty form (Form 53). Copies of that form and of Mr. Grunda’s curriculum vitae are attached as exhibits to his affidavit. The City relies on Mr. Grunda’s expert opinion evidence with respect to both the purpose of the 2014 Study and the methodology for the calculation of impost fees for water and wastewater services. As noted at para. 6, above, that methodology is not in issue on this application.
[17] In 2019, when Ms. Kennedy swore her affidavit, and in 2020, when she was cross-examined, Ms. Kennedy was the Treasurer and the Chief Financial Officer for the City.
The City’s By-laws
a) The Impost By-law
[18] The evidence upon which the City relies with respect to impost fees and the Impost By-law generally is uncontroverted:
The City enacted the Impost By-law to impose impost fees to recover the capital costs of installing infrastructure related to the expansion of water and wastewater[^2] systems for lands serviced by water and wastewater within the City;
The amount of the impost fees reflects the City’s approved and proposed capital budgets and master servicing and needs studies for water and wastewater; and
Impost fees collected under the Impost By-law do not generate a profit or a surplus for the City. Through the creation of a reserve fund, the City uses impost fees solely to fund the expansion of water and wastewater systems.
[19] Section 2 of By-law 2009-138 set out the events which trigger the requirement to pay impost fees. That section is incorporated in the Impost By-law and provides as follows:
Every Owner of land in the Municipality shall pay to the Municipality a water works rate and a sewer rate, as applicable and as calculated in this by-law, whenever the Owner’s lands are developed and the development requires an approval described in (1) below and the Owner’s land is connected to the water works or sewage works systems.
- Subject to subsection (2), water works rates and sewer rates shall be calculated and collected in accordance with the provisions of this by-law and be imposed on land where the development requires:
a) the passing of a zoning by-law or an amendment thereto under Section 34 of the Planning Act;
b) the approval of a minor variance under Section 45 of the Planning Act;
c) a conveyance of land to which a by-law passed under subsection 50(7) of the Planning Act applies;
d) the approval of a plan of subdivision under Section 51 of the Planning Act;
e) a consent under Section 53 of the Planning Act;
f) the approval of a description under Section 50 of the Condominium Act, R.S.O. 1990, c. C.26; or
g) the issuing of a permit under the Building Code Act, in relation to a building or structure.
[20] I turn next to the by-law enacted under the DCA.
b) The Development Charges By-law
[21] In 2014, the City also enacted By-law 2014-135 under the DCA (“the DC By-law”). The development charges imposed under the DC By-law relate to the following types of services: Protection Service (Fire and Police), Roads and Related Service, Parks and Recreation Service (excluding land acquisition for parks), Library Service, Transit Service, Affordable Housing Service, and Administration Service.
[22] Notably, the list of services to which the DC By-law applies does not include either water or wastewater services. Nor does the DC By-law contain a specific exclusion of water or wastewater services.
[23] The uncontradicted evidence of Ms. Kennedy is that, like impost fees under the Impost By-law, development charges under the DC By-law are calculated based on the 2014 Study.
[24] Section 2 of the DC By-law sets out the events which trigger the requirement to pay development charges. Those events, listed in ss. 2(2)(a)-(g) of the DC By-law, are identical to the events which trigger the requirement to pay an impost fee (see By-law 2009-138, ss. 2(1)(a)-(g), at para. 19, above). These triggering events relate in essence to various forms of development approvals and requests for building permits.
[25] The Applicants highlight that the City is but one of only a very few municipalities in the Province of Ontario who charge impost fees under a by-law enacted under the 2001 Act, as opposed to under a by-law enacted under the DCA. In that regard, the Applicants rely on the evidence of Mr. Grunda. When cross-examined, Mr. Grunda testified that out of the 100 or so municipalities for whom Watson does work, only five to seven of them charge impost fees pursuant to a by-law enacted under the 2001 Act. The other municipalities for whom Watson does work charge fees related to the anticipated capital cost of water and sewer infrastructure pursuant to by-laws enacted under the DCA.
The Issues
[26] The issues to be determined on this application are,
Did the legislative framework, as it existed when the Impost By-law was enacted, require the City to impose fees or charges for the installation of water and wastewater infrastructure under a by-law enacted pursuant to the DCA?
Is the Impost By-law of no effect because it conflicts with the DCA?
Is the Impost By-law ultra vires, in contravention of s. 394(1)(e) of the 2001 Act, because it “impose[s] a fee or charge that is based on, is in respect of or is computed by reference to … the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources”?
Is the Impost By-law ultra vires, in contravention of s. 394(1)(b) of the 2001 Act, because it deals with “the use, purchase or consumption by a person of property other than property belonging to or under the control of the” City?
Is the Impost By-law discriminatory in its treatment of developers by placing a financial burden on them that members of the general public do not experience?
If the answer to any of Issue Nos. 1-5 is “yes”, has the City been unjustly enriched?
[27] To determine the majority of the issues listed above, the court is required to interpret the powers granted to municipalities under several statutes and regulations. Therefore, before turning to each of the issues, I will review the law with respect to the interpretation of municipal powers.
Interpretation of Municipal Powers
[28] The modern approach to interpretation of municipal powers “allow[s] for a more generous interpretation of municipal powers, with a view toward showing deference to, and respect for, the decisions of locally elected officials”: Croplife Canada v. Toronto (City) (2005), 2005 CanLII 15709 (ON CA), 75 O.R. (3d) 357 (C.A.), at para. 17, leave to appeal refused, [2005] S.C.C.A. No. 329.
[29] The Supreme Court of Canada described this approach to interpretation of municipal powers as “evolv[ing] concomitantly with the modern method of drafting municipal legislation”, including the move away from granting specific powers and, instead, to granting broad authority over generally defined matters: United Taxi Drivers’ Fellowship of Southern Alberta v. Calgary (City), 2004 SCC 19, [2004] 1 S.C.R. 485, at para. 6.
[30] The language used in the 2001 Act is in keeping with the modern method of drafting legislation as described in United Taxi Drivers’. The relevant sections of the 2001 Act reflect the move away from grants of specific powers and to grants of broad authority.
[31] The 2001 Act is divided into seventeen primary parts. For the purposes of this application, Part II – “General Municipal Powers” and Part XII – “Fees and Charges” are relevant. Sections 8, 9, 10, and 15 fall within Part II; ss. 391 and 394 fall within Part XII.
[32] The scope of powers conferred on a municipality, including those under Parts II and XII, are to be interpreted in accordance with s. 8 of the 2001 Act:
Scope of powers
(1) The powers of a municipality under this or any other Act shall be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality’s ability to respond to municipal issues.
Ambiguity
(2) In the event of ambiguity in whether or not a municipality has the authority under this or any other Act to pass a by-law or to take any other action, the ambiguity shall be resolved so as to include, rather than exclude, powers the municipality had on the day before this Act came into force.
Scope of by-law making power
(3) Without limiting the generality of subsections (1) and (2), a by-law under sections 10 and 11 respecting a matter may,
(a) regulate or prohibit respecting the matter;
(b) require persons to do things respecting the matter;
(c) provide for a system of licences respecting the matter.
Scope of by-laws generally
(4) Without limiting the generality of subsections (1), (2) and (3) and except as otherwise provided, a by-law under this Act may be general or specific in its application and may differentiate in any way and on any basis a municipality considers appropriate.
[33] The move away from specific powers and to broad authority is explicitly reflected in s. 8(1) and implicitly reflected in ss. 8(2)-(4).
[34] Section 9 provides that for the purpose of exercising its authority under the 2001 Act or any other Act, “[a] municipality has the capacity, rights, powers and privileges of a natural person”.
[35] It is undisputed that the City is a single-tier municipality. As such, it derives its broad authority from s. 10, which provides as follows:
Broad authority, single-tier municipalities
(1) A single-tier municipality may provide any service or thing that the municipality considers necessary or desirable for the public.
By-laws
(2) A single-tier municipality may pass by-laws respecting the following matters:
Governance structure of the municipality and its local boards.
Accountability and transparency of the municipality and its operations and of its local boards and their operations.
Financial management of the municipality and its local boards.
Public assets of the municipality acquired for the purpose of exercising its authority under this or any other Act.
Economic, social and environmental well-being of the municipality, including respecting climate change.
Health, safety and well-being of persons.
Services and things that the municipality is authorized to provide under subsection (1).
Protection of persons and property, including consumer protection.
Animals.
Structures, including fences and signs.
Business licensing.
One power not affecting another
(3) The power to pass a by-law respecting a matter set out in a paragraph of subsection (2) is not limited or restricted by the power to pass a by-law respecting a matter set out in another paragraph of subsection (2).
Services or things provided by others
(4) The power of a municipality to pass a by-law respecting the matter set out in paragraph 7 of subsection (2) does not include the power to pass a by-law respecting services or things provided by a person other than the municipality or a municipal service board of the municipality.
Exception
(5) Nothing in subsection (4) prevents a municipality from passing a by-law with respect to services or things provided by any person to the extent necessary,
(a) to ensure the physical operation of a system of the municipality or of a municipal service board of the municipality is not impaired; or
(b) to ensure the municipality, a municipal service board of the municipality or a system of the municipality or municipal service board meet any provincial standards or regulations that apply to them.
[36] The spheres of jurisdiction for lower-tier and upper-tier municipalities are prescribed in s. 11. Given that the City is a single-tier municipality, s. 11 is not relevant to the analyses and findings in this ruling.
[37] Section 15 addresses the relationship between specific provisions, such as those set out in Part XII (i.e., s. 391), and the general powers set out in Part II. Section 15 falls within a sub-part of Part II titled “Restrictions Affecting Municipal Powers”; it includes the following provisions:[^3]
Specific powers, by-laws under general powers
(1) If a municipality has power to pass a by-law under section 9, 10 or 11 and also under a specific provision of this or any other Act, the power conferred by section 9, 10 or 11 is subject to any procedural requirements, including conditions, approvals and appeals, that apply to the power and any limits on the power contained in the specific provision.
Interpretation
(1.1) For the purpose of subsection (1) and, unless the context otherwise requires, the fact that a specific provision is silent on whether or not a municipality has a particular power shall not be interpreted as a limit on the power contained in the specific provision.
Application to new and existing provisions
(2) Subsection (1) applies whether the specific provision was enacted before or after,
(a) the day this section comes into force; or
(b) the day a by-law passed under section 9, 10 or 11 comes into force.
No retroactive effect
(3) Nothing in this section invalidates a by-law which was passed in accordance with the procedural requirements in force at the time the by-law was passed.
Interpretation
(4) Subsection (1) applies to limit the powers of a municipality despite the inclusion of the words “without limiting sections 9, 10 and 11” or any similar form of words in the specific provision.
[38] The full text of s. 391 is set out below under Issue No. 1. The introductory phrase of s. 391(1) is relevant to this review of the interpretation of municipal powers. That subsection begins with the following: “Without limiting sections 9, 10 and 11, those sections authorize a municipality to impose fees or charges on persons”. That introduction confirms, and I find, that the authority under which a municipality has the power to enact a by-law related to the subject-matters addressed in s. 391 stems from s. 10 – the broad authority granted to a single-tier municipality.
[39] That introduction also serves to identify that, in accordance with s. 15(1), the procedural requirements, if any, in the specific provision (i.e., s. 391) must be met: Croplife, at para. 48.
[40] Following this approach to the interpretation of municipal powers, I turn to the six issues to be determined.
Issue No. 1 - Did the legislative framework, as it existed in 2014 when the Impost By-law was enacted, require the City to impose fees or charges for the installation of water and wastewater infrastructure under a by-law enacted pursuant to the [DCA](https://www.canlii.org/en/on/laws/stat/so-1997-c-27/latest/so-1997-c-27.html)?
a) The Positions of the Parties
[41] The Applicants submit that the Ontario Legislature approaches the funding of growth-related capital costs through a comprehensive legislative scheme. The Applicants submit that, through amendments to the Municipal Act and the DCA, from 1990 forward, the Legislature carried out its intent of requiring a municipality to enact an impost fee by-law under s. 2(1) of the DCA, exclusively. The Applicants’ position is that, by 2014, the City did not have the option of enacting an impost fee by-law under one or the other of the 2001 Act and the DCA.
[42] In response, the City submits that the legislative history does not support the Applicants’ position. The City submits that the Applicants misconstrue the intent behind and the effect of the changes over time to the legislative scheme. The City’s position is that those changes support a conclusion that, in 2014, the City had the option of enacting an impost by-law under either s. 391(2) of the 2001 Act or s. 2(1) of the DCA. The City submits that nothing in either the 2001 Act or the overall legislative scheme prohibited it from enacting the Impost By-law under s. 391(2) of the 2001 Act.
b) The Legislative Framework as of 2014
[43] In its entirety, s. 391 of the 2001 Act provides as follows:
By-laws re: fees and charges
(1) Without limiting sections 9, 10 and 11, those sections authorize a municipality to impose fees or charges on persons,
(a) for services or activities provided or done by or on behalf of it;
(b) for costs payable by it for services or activities provided or done by or on behalf of any other municipality or any local board; and
(c) for the use of its property including property under its control.
Local board
(1.1) A local board may impose fees or charges on persons,
(a) for services or activities provided or done by or on behalf of it;
(b) for costs payable by it for services or activities provided or done by or on behalf of any municipality or other local board; and
(c) for the use of its property including property under its control.
Deferred benefit
(2) A fee or charge imposed for capital costs related to services or activities may be imposed on persons not receiving an immediate benefit from the services or activities but who will receive a benefit at some later point in time.
Costs related to administration, etc.
(3) The costs included in a fee or charge may include costs incurred by the municipality or local board related to administration, enforcement and the establishment, acquisition and replacement of capital assets.
Fees for mandatory services, etc.
(4) A fee or charge may be imposed whether or not it is mandatory for the municipality or local board imposing the fee or charge to provide or do the service or activity, pay the costs or allow the use of its property.
Conflict
(5) In the event of a conflict between a fee or charge by-law and this Act, other than this Part, or any other Act or regulation made under any other Act, the by-law prevails.
[44] Section 394 of the 2001 Act sets out certain restrictions on the fees and charges that a municipality could impose through a by-law enacted under s. 391. In particular, the Applicants rely only on ss. 394(1)(b) and (e):
Restriction, fees and charges
(1) No fee or charge by-law shall impose a fee or charge that is based on, is in respect of or is computed by reference to,
(a) the income of a person, however it is earned or received, except that a municipality or local board may exempt, in whole or in part, any class of persons from all or part of a fee or charge on the basis of inability to pay;
(b) the use, purchase or consumption by a person of property other than property belonging to or under the control of the municipality or local board that passes the by-law;
(c) the use, consumption or purchase by a person of a service other than a service provided or performed by or on behalf of or paid for by the municipality or local board that passes the by-law;
(d) the benefit received by a person from a service other than a service provided or performed by or on behalf of or paid for by the municipality or local board that passes the by-law; or
(e) the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources.
Basis of fee not limited
(2) Nothing in clause (1) (b) prevents the imposition of a fee or charge that is based on, is in respect of or is computed by reference to the location of the property, the physical characteristics of property, including buildings and structures on the property, or the zoning of property or other land use classification.
[45] Additional restrictions on the fees and charges that a municipality has the power to impose by by-law are also found in s. 2(1) of the 2006 Regulation, which provides as follows:
A municipality and a local board do not have power under the [Municipal] Act to impose fees or charges to obtain revenue to pay capital costs, if as a result of development charges by-laws or front-ending agreements under the Development Charges Act, 1997 or a predecessor of that Act that was passed or entered into before the imposition of the fees or charges, payments have been, will be or could be made to the municipality or local board to pay those costs.
[46] The development charges that a municipality has the power to impose are prescribed by s. 2(1) of the DCA: “The council of a municipality may by by-law impose development charges against land to pay for increased capital costs required because of increased needs for services arising from development of the area to which the by-law applies” (emphasis added).
[47] The Applicants submit that, when interpreting the relevant statutes and regulations, the court must consider the history of the legislative scheme.
c) The History of the Legislative Scheme
[48] The legislative history reviewed dates back to the 1990 version of the Municipal Act, and includes each of subsequent amendments to that statute, the 1990 version of the DCA, and regulations passed under either statute. The relevant statutory and regulatory provisions include the following:
Municipal Act, R.S.O. 1990, c. M.45 (“the 1990 Act”), ss. 218 and 221(1)-(2);
Savings and Restructuring Act, 1996, S.O. 1996, c. 1, Sched. M, s. 10 (“the SRA”), which amended the 1990 Act by adding s. 220.1;
Development Charges Act, R.S.O. 1990, c. D.9 (“1990 DCA”);
Fees and Charges By-Laws, O. Reg. 26/96 (“the 1996 Regulation”), s. 3, which was revoked on January 1, 2003;
Fees and Charges, O. Reg. 244/02 (“the 2002 Regulation”), s. 2(1), which was revoked on January 1, 2007; and
The 2006 Regulation, s. 2(1).
[49] For the reasons that follow, I find that the changes to the legislative scheme under the Municipal Act served the purpose of increasing the discretion that municipalities have to manage their operations. This increased discretion was achieved through the removal from the Municipal Act of certain specific powers and the replacement of those powers with broadly worded general powers and certain specific provisions.
[50] I also find that the changes to the legislative scheme did not result in the elimination of the authority of a municipality to enact an impost fee by-law under s. 10 of the 2001 Act, which authority is subject to the specific provisions in Part XII (i.e., including ss. 391 and 394). As of 2014, the City had the option of enacting such a by-law under either the DCA or the 2001 Act.
[51] I deal with the changes to the legislative scheme in chronological order.
i) The [Municipal Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-m45/latest/rso-1990-c-m45.html) in 1990
[52] One example of a change from specific powers to broadly worded general powers begins with what was s. 218(1) in the 1990 Act. Under that section, municipalities had a specific power to impose special charges related to additional sewer or water supply capacity:
With the approval of the Municipal Board, councils of local municipalities may, by by-law, define the class or classes of buildings to be erected or enlarged after the effective date of the by-law that impose or may impose a heavy load on the sewer system or water system, or both, by reason of which expenditures are or may be required to provide additional sanitary or storm sewer or water supply capacity that in the opinion of a council would not otherwise be required, and may impose upon the owners of such buildings a special charge or charges over and above all other rates and charges to pay for all or part of the cost of providing the additional capacity.
[53] The specific powers granted under s. 218 are in contrast to the general powers now authorized by the 2001 Act, including those under Part II, s. 10 (and those found in the specific provisions in Part XII or in the regulations).
[54] In addition to the specific power granted under s. 218(1), a municipality had the power, under s. 221(2) of the 1990 Act, to pass by-laws imposing “a sewer rate or water works rate upon owners or occupants of land who derive or will or may derive a benefit therefrom sufficient to pay all or such portion of the capital costs of the works as the by-law may specify.” On this application, the City describes the charges that a municipality was entitled to impose through a by-law enacted under s. 221(2) as “impost-type charges”.
ii) The 1996 Changes
[55] The City submits that the Applicants misconstrue the amendments made in 1996 through the SRA and the 1996 Regulation as intended both to prohibit municipalities from enacting an impost by-law under the Municipal Act and to require them to enact such a by-law under the DCA. For the reasons set out immediately below, I agree with the City in that regard. The 1996 amendments did not have either the intent or the effect suggested by the Applicants.
[56] The first amendment to the legislative scheme was to the Municipal Act, through the SRA (resulting in the 1996 version of the Municipal Act – “the 1996 Act”). Section 220.1 was introduced in the 1996 Act. The significance of that amendment is that, in addition to having the power to enact by-laws to impose special charges (s. 218(1)) and/or impost-type charges (s. 221(2)), a municipality had the power to enact by-laws to provide for “fees and charges that are in the nature of a direct tax for the purpose of raising revenue”: s. 220.1(6)(a) of the 1996 Act. Fees and charges imposed under s. 220.1(6) could be added to the tax roll and collected in the same manner as municipal taxes: s. 220.1(11) of the 1996 Act.
[57] The amendments to the legislative scheme at that time also include the 1996 Regulation. That regulation was the first in a series of regulations that (a) restrict the authority of a municipality to impose direct taxes, and (b) prohibit a municipality from imposing fees or charges under the Municipal Act, which are being or could be collected under a by-law previously enacted pursuant to the DCA. Other regulations in that series, passed in 2002 and in 2006, are discussed below.
[58] Section 3 of the 1996 Regulation provides that “[a] municipality or local board does not have the power under section 220.1 of the Act to impose fees or charges to obtain revenue to pay growth-related net capital costs as defined in section 1 of the Development Charges Act as it reads on February 28, 1998.” The term “growth-related net capital costs” is defined in s. 1 of the 1990 DCA as “the portion of the net capital cost of services that is reasonably attributable to the need for such net capital cost that results or will result from development in all or a defined part of the municipality.”[^4]
[59] The specific reference in the 1996 Regulation to s. 220.1 of the 1996 Act is important. Under s. 220.1(6)(a) of the 1996 Act, a municipality had authority to enact a by-law providing for “fees and charges that are in the nature of a direct tax for the purpose of raising revenue” (emphasis added).
[60] I find that, when read together, s. 3 of the 1996 Regulation, s. 1 of the 1990 DCA, s. 2(1) of the DCA, and ss. 218(1), 220.1(6), and 221(2) of the 1996 Act had the effect of restricting the ability of a municipality to impose taxes, “to obtain revenue”, to pay growth-related net capital costs. Those same provisions did not, however, when read together, amount to a prohibition against enacting a by-law under the 1996 Act to impose a special charge under s. 218(1) or to impose a sewer rate or water works rate under s. 221(2).
[61] In summary, I find that the changes made in 1996 do not support the Applicants’ position with respect to the history of the legislative scheme; they support the City’s position in that regard.
iii) The 2001 Changes
[62] The next changes to the legislative scheme are a series of amendments in 2001 to the 1996 Act, with the adoption of the Municipal Act, 2001.[^5] At para. 6 of Croplife, the Court of Appeal for Ontario described the purpose of the 2001 Act as providing municipalities with,
“the tools they need to tackle the challenges of governing in the 21st century” (Ontario, Legislative Assembly, Official Report of Debates (Hansard), 53 (18 October 2001) at 1350 (Hon. Chris Hodgson)), including more authority, accountability and flexibility so that municipal governments would be able to deliver services as they saw fit.
[63] At para. 7 of Croplife, the Court of Appeal noted as follows with respect to the powers given to municipalities pursuant to the 2001 amendments:
Under Part II, municipalities were, for the first time, given the power of a natural person (s. 8) and ten broad spheres of jurisdiction;
Pursuant to those powers, municipalities “have wide discretion to enact by-laws”; and
Under Part III, municipalities are given “specifically defined by-law making powers, as under the old Act”.
[64] With respect to the third bullet point, it is important to distinguish between specifically defined by-law making powers under Part III and the specific provisions set out in Part XII of the 2001 Act.
[65] The 2001 amendments include the removal of s. 218 (i.e., the specific power with respect to water and sewer supply capacity); a similar section is not included in the 2001 Act. The removal of s. 218 is another example of the transition from specific powers to the general powers set out in s. 10, including a broad discretion in the management of municipal operations.
[66] Another change made through the 2001 amendments was the removal of ss. 220.1 and 221. Those sections were replaced by the general powers in s. 10, in combination with the specific provisions in ss. 391 and 394 of the 2001 Act. For example, the wording of the former s. 220.1(2) is almost identical to the wording of s. 391(1) with respect to the authority of a municipality, under the broad general powers found in ss. 9, 10, and 11, to enact a by-law to impose fees or charges related to services and activities. The minor differences between the wording of the former s. 220.1(2) and the current s. 391(1) are not relevant for the purpose of this application.
[67] Important, however, is the difference between the specific wording of the former s. 221(2), titled “Sewer, water works rate”, and the current s. 391(2), titled “Deferred benefit”. Subsection 221(2) read as follows:
The council of a local municipality, in authorizing the construction of sewage works or water works, may by by-law impose a sewer rate or water works rate upon owners or occupants of land who derive or will or may derive a benefit therefrom sufficient to pay all or such portion of the capital costs of the works as the by-law may specify.
[68] By contrast, s. 391(2) of the 2001 Act is broadly worded and refers generally to deferred benefits arising from capital costs related to services or activities, without identifying specific services or activities. When enacting the Impost By-law, the City relied upon the specific provisions under s. 391(2). That subsection is quoted in para. 43, above. I repeat it here to emphasize the change, over time, from specific powers to the broad authority that municipalities now have under ss. 9 and 10 of the 2001 Act:
A fee or charge imposed for capital costs related to services or activities may be imposed on persons not receiving an immediate benefit from the services or activities but who will receive a benefit at some later point in time.
[69] I find that the changes made in 2001 do not support the Applicants’ position with respect to the history of the legislative scheme; they support the City’s position in that regard.
iv) The 2002 and 2006 Regulations
[70] The most recent changes to the legislative scheme are those made through the 2002 Regulation and the 2006 Regulation. The 2002 Regulation replaced the 1996 Regulation; in turn, the 2006 Regulation replaced the 2002 Regulation.
[71] The wording of s. 2(1) in both the 2002 Regulation and the 2006 Regulation is, in essence, identical – save and except that the 2002 Regulation makes reference to Part XII of the 2001 Act and the 2006 Regulation does not. For ease of reference, I include the wording of both versions of the section below. The strike-through function serves to differentiate between the two versions:
A municipality and or a local board does not have the power under Part XII of the Act to impose fees or charges to obtain revenue to pay capital costs, if as a result of development charges by-laws or front-ending agreements under the Development Charges Act, 1997 or a predecessor of that Act that was passed or entered into before the imposition of the fees or charges, payments have been, will be or could be made to the municipality or local board to pay those costs.
[72] The Applicants rely on the 2002 Regulation and the 2006 Regulation as prohibiting municipalities from imposing impost fees by by-law enacted under the 2001 Act. Put another way, the Applicants submit that the effect of these regulations is to require municipalities to impose impost fees by by-law enacted under the DCA. I disagree.
[73] There is nothing in either the 2002 Regulation or the 2006 Regulation that prohibited the City from enacting both an impost fee by-law under the 2001 Act and a separate and distinct development charges by-law under the DCA.
[74] The language of s. 2(1) of both regulations is clear. For the prohibition under the regulatory section to apply, a by-law enacted under the DCA must already be in force – as the method by which “payments have been, will be or could be made” to pay the capital costs that a municipality subsequently seeks to recover under a by-law enacted pursuant to the 2001 Act.
[75] The changes made through the 2002 Regulation and the 2006 Regulation do not support the Applicants’ position with respect to the history of the legislative scheme. Instead, those changes support the City’s position in that regard. The language in both regulations contemplates that, in 2014, a municipality had the choice to enact an impost by-law under either the 2001 Act or the DCA, but not both.
d) Summary
[76] The answer to Issue No. 1 is “no”: as it existed in 2014, the legislative framework did not require the City to impose fees or charges to recover the capital costs of water and sewer infrastructure under a by-law enacted pursuant to the DCA.
[77] The City had the option of imposing impost fees under either the 2001 Act or the DCA. It had the option of enacting the Impost By-law under s. 10 of the 2001 Act, subject to the specific provisions in Part XII, because the City had not enacted a by-law under the DCA pursuant to which the City had received, would be receiving, or could receive payments for impost fees. The City was not engaged in the form of “double-dipping” prohibited by the 2006 Regulation.
Issue No. 2 - Is the Impost By-law of no effect because it conflicts with the [DCA](https://www.canlii.org/en/on/laws/stat/so-1997-c-27/latest/so-1997-c-27.html)?
a) The Positions of the Parties
[78] The Applicants submit that charging impost fees under the Impost By-law runs contrary to the purpose of the DCA and, as a result, the Impost By-law is, under s. 14 of the 2001 Act, without effect. The Applicants’ position is that the DCA was the exclusive authority under which the City could impose fees or charges to recover the capital costs of water and sewer infrastructure. The Applicants emphasize that only under the DCA do ratepayers have robust procedural protections and the guarantee of openness and transparency.
[79] The City submits that the purpose of the DCA is to permit municipalities to levy development charges to pay for the capital costs associated with increased needs for services that result from development; the Impost By-law aligns with that purpose. The City’s position is that the DCA and the Impost By-law can and do co-exist without conflict.
b) The Law
[80] Subsections 14(1) and (2) of the 2001 Act address when and how a by-law is without effect by reason of conflict:
(1) A by-law is without effect to the extent of any conflict with,
(a) a provincial or federal Act or a regulation made under such an Act; or
(b) an instrument of a legislative nature, including an order, licence or approval, made or issued under a provincial or federal Act or regulation.
(2) Without restricting the generality of subsection (1), there is a conflict between a by-law of a municipality and an Act, regulation or instrument described in that subsection if the by-law frustrates the purpose of the Act, regulation or instrument.
[81] In addition to considering s. 14, the court must apply the doctrine of paramountcy: Croplife, at para. 63.
[82] In a series of cases, the Supreme Court of Canada explains how that doctrine applies to different levels of government which legislate in related or overlapping fields: see e.g., Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327; and Rothmans, Benson & Hedges Inc. v. Saskatchewan, 2005 SCC 13, [2005] 1 S.C.R. 188. Those cases deal with potential conflict between and paramountcy in the context of provincial and federal legislation.
[83] At paras. 62-63 of Croplife, the Court of Appeal for Ontario confirmed that the doctrine of paramountcy applies, by analogy, to an alleged conflict between a municipal by-law and provincial legislation.
[84] The principles based on the doctrine of paramountcy to be applied include the following:
A conflict may arise in one of two situations: (1) if there is an operational conflict because it is impossible to comply with both laws, and (2) if the inferior law frustrates the superior law: Croplife, at paras. 62-63; Alberta, at para. 18; and Cash Converters Canada Inc. v. Oshawa (City), 2007 ONCA 502, 86 O.R. (3d) 401, at para. 32;
There is no conflict where the two laws are merely duplicative or the inferior law is more restrictive than the superior law: Alberta, at para. 26;
Absent a genuine inconsistency, the court is to favour an interpretation that allows the concurrent operation of both laws: Alberta, para. 27;
Conflict is to be defined narrowly, so that each level of government may act as freely as possible within their respective spheres of authority: Alberta, at para. 27; and
The party alleging a conflict has the burden of establishing a conflict as defined by these principles: Alberta, at para. 27.
c) Analysis
[85] When the conflicts test established in s. 14 of the 2001 Act is interpreted in accordance with the two-pronged paramountcy test established by the Supreme Court of Canada (see the first bullet point listed immediately above), the questions to be answered on this application are,
i) Was it possible for the City to enact the Impost By-law under s. 10, subject to the specific provisions in Part XII of the 2001 Act and, at the same time, enact a development charges by-law, imposing distinct and separate development charges, under the DCA? and
ii) Does the Impost By-law frustrate the purpose of the DCA?
[86] For the reasons that follow, I find that the answer to both questions is “no”. In summary, there is no conflict, within the meaning of s. 14 of the 2001 Act, between the DCA and the Impost By-law.
i) Was it possible for the City to enact the Impost By-law under s. 10, subject to the specific provisions in Part XII of the 2001 Act and, at the same time, enact a development charges by-law, imposing distinct and separate development charges, under the [DCA](https://www.canlii.org/en/on/laws/stat/so-1997-c-27/latest/so-1997-c-27.html)?
[87] Under s. 2(1) of the DCA, a municipality has authority to impose development charges by by-law: “The council of a municipality may by by-law impose development charges against land to pay for increased capital costs required because of increased needs for services arising from development of the area to which the by-law applies.” The language of s. 2(1) is permissive – “a municipality may by by-law impose development charges” (emphasis added). That section does not require or prescribe that all development charges be imposed by by-law enacted under the DCA.
[88] The Applicants take an occupy-the-field approach to the issue of a potential conflict. Yet, in the absence of very clear statutory language, judicial restraint is to be exercised before adopting an occupy-the-field approach in matters of paramountcy: Croplife, at para. 61.
[89] I find that the language of the DCA does not reflect an occupy-the-field approach.
[90] First, in 2014, the DCA did not specifically identify all of the services for which a development charge may be imposed. The DCA did, however, prohibit the imposition of a development charge for an enumerated set of services; “Ineligible Services” were listed in s. 2(4). The services listed therein include “[t]he provision of tourism facilities, including convention centres” (item 2) and “[t]he provision of waste management services” (item 5).
[91] Water supply and wastewater services were not included in the defined list of “ineligible services”. I find that the fact that water supply and wastewater services were not included in that list does not detract from the permissive language of s. 2(1). The language of s. 2(4) is not the type of clear statutory language required to support a finding that the DCA is intended to occupy the field.
[92] Second, in s. 5(1), the DCA prescribes how the amount of a development charge is determined. As of 2014, for all but some excluded services, a 10 per cent reduction from the total of the projected capital costs was required: s. 5(1), item 8, as it appeared in 2014. The capital costs to which the 10 per cent reduction do not apply include those for water supply services (s. 5(5), item 1, as it appeared in 2014) and wastewater services (s. 5(5), item 2, as it appeared in 2014).[^6]
[93] I find that the reference in s. 5(5) to both water supply and wastewater services does not detract from the permissive language of s. 2(1). Section 5(5) does nothing more than identify that, if a municipality chose to impose development charges for such services by by-law enacted under the DCA, it had to account for that 10 per cent reduction when doing so. Subsection 5(5) does not amount to the type of clear statutory language required to support a finding that the DCA is intended to occupy the field.
[94] I turn to the second question in this conflict analysis.
ii) Does the Impost By-law frustrate the purpose of the [DCA](https://www.canlii.org/en/on/laws/stat/so-1997-c-27/latest/so-1997-c-27.html)?
[95] The Applicants have the burden of establishing that the Impost By-law frustrates the purpose of the DCA. They submit that the purpose of the DCA is to ensure that growth-related capital costs, including for water and wastewater, are funded through charges imposed in a fair and transparent manner, complete with robust procedural protections for ratepayers.
[96] I am not convinced that the purpose of the DCA is as suggested by the Applicants. The title of the 1997 DCA is, “An act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth” (emphasis added). I distinguish between the term “promote” and the term suggested by the Applicants, “ensure”.
[97] In the analysis below, the purpose of the DCA as suggested by the Applicants is divided into two components. For ease of reference, the two components are referred to as “Increased Municipal Accountability” and “Recovery of Development Charges”.
▪ Increased Municipal Accountability
[98] The evidence upon which the Applicants rely with respect to the suggested purpose of the DCA is a series of excerpts from the Legislative Assembly of Ontario. The excerpts are admissible as evidence on this application. They must, however, be given only limited weight: Canadian National Railway Co. v. Canada (Attorney General), 2014 SCC 40, [2014] 2 S.C.R. 135, at para. 47.
[99] I find that the excerpts upon which the Applicants rely do not support a finding that the purpose of the DCA is to ensure, rather than to promote, increased municipal accountability. For example, in one such excerpt, the Member speaking refers to the DCA as “an important first step to finding … fairness” in the financing of community growth: Ontario, Legislative Assembly, Official Report of Debates (Hansard), 36th Parl., 1st Sess., (6 March 1997) at 1710 (Mr. Bruce Smith).
[100] That statement reflects what was happening at the time and has, since 1997, continued to happen – the legislative scheme by which municipalities are governed evolved. The DCA is but one step in that evolution; it is not an all-encompassing revision to the legislative scheme.
[101] For the reasons set out under Issue No. 1, above, the evolution of the legislative scheme does not include the elimination of the authority of a municipality to enact an impost fee by-law under s. 10, subject to s. 15(1) and Part XII, of the 2001 Act. The purpose and effect of the DCA must be read in that context: Alberta, at para. 47.
[102] In any event, the Reports of Debate upon which the Applicants rely support a finding that the DCA was intended to serve more than one purpose. For example, the purposes to which speakers referred during the Debates included the following:
The creation of new jobs in the construction industry: Ontario, Legislative Assembly, Official Report of Debates (Hansard), 36th Parl., 1st Sess., (25 November 1996), at 1340 (Hon. Al Leach);
Making new homes more affordable: Ontario, Legislative Assembly, Official Report of Debates (Hansard), 36th Parl., 1st Sess., (25 November 1996), at 1340 (Hon. Al Leach); Ontario, Legislative Assembly, Official Report of Debates (Hansard), 36th Parl., 1st Sess., (3 March 1997), at 1520 (Mr. Ernie Hardeman); and
Stimulation of the economy within the province (Ontario, Legislative Assembly, Official Report of Debates (Hansard), 36th Parl., 1st Sess., (3 March 1997), at 1520 (Mr. Ernie Hardeman).
[103] I agree with the Applicants that the procedural protections and appeal rights included in the DCA reflect increased municipal accountability. As per the title of the statute, however, those protections and rights reflect the legislative intention to promote, rather than to ensure, increased municipal accountability.
[104] The inclusion of protections and rights in the DCA does not mean that a ratepayer affected by a by-law enacted under the 2001 Act (i.e., including the Impost By-law) is treated unfairly or has no method by which to question the fairness of the by-law. Under s. 273 of the Municipal Act, the ratepayer is entitled to bring an application to quash the subject by-law. The Applicants provided no authority to support a conclusion that the existence of protections and rights under the DCA that are not available under the 2001 Act renders a by-law enacted under the latter statute ultra vires.
[105] Furthermore, from the 2014 Study, it is clear that, when enacting the Impost By-law, the City followed a similar, if not the same, approach to transparency and accountability as required under the DCA with respect to the enactment of the DC By-law. For example, the City included the Impost By-law as part of the 2014 Study, conducted a five-year review, and followed the same public consultation process carried out for the DC By-law. I find that the manner in which the City enacted the Impost By-law was in keeping with the promotion of increased municipal accountability.
▪ Evidentiary Issue
[106] I turn next to an evidentiary issue that arises from the Applicants’ attempt to rely on copies of notes produced in an entirely separate proceeding (“the Notes”). None of the parties to this application was a party to the separate proceeding. The Notes were made by the Director of Infrastructure Services of Loyalist Township (i.e., not the City).
[107] Relying on the Notes, the Applicants seek to establish that, in enacting the Impost By-law, the City was deliberate in its efforts to avoid having that by-law subject to the protections and rights available to ratepayers under the DCA. I find that the Notes are not admissible as evidence. I disregard them entirely.
[108] First, the Notes are subject to the deemed undertaking rule: r. 30.1 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. There is no evidence that Loyalist Township waived the deemed undertaking or consented to the production of the Notes within the context of this application. The Notes are therefore inadmissible in this proceeding.
[109] Second, even if the Notes were admissible, they would be admissible for a limited purpose and they would not support the finding the Applicants ask the court to make. The Notes are an exhibit to one of Mr. Kay’s two affidavits. The contents of an affidavit for use on an application are governed by r. 39.01(5). As the Notes are not Mr. Kay’s, and in the absence of any statement from him as to information and belief, the contents of the Notes are not evidence. Even if they were admissible, the Notes would be nothing more than evidence of their existence and that Mr. Kay is in possession of a copy of them.
[110] Third, and in keeping with the requirements of r. 39.01(5), the Notes are inadmissible because they relate to facts that are contentious.
[111] Finally, even if the Notes were admissible, I would find that they fall short of establishing that the City enacted the Impost By-law under the 2001 Act in an effort to avoid having that by-law subject to the protections and rights available to ratepayers under the DCA.
[112] Instead, I find that the City opted to enact the Impost By-law under the 2001 Act (rather than the DCA) as part of the exercise of its broad authority, under Part II of the 2001 Act, to govern its affairs as it considers appropriate.
[113] I continue with consideration of the second component of the purpose of the DCA, as suggested by the Applicants.
▪ Recovery of Development Costs Related to New Growth
[114] The Applicants’ emphasis on municipal accountability minimizes another purpose of the DCA: to “provid[e] for the recovery of development costs related to new growth”. Under s. 2(1), a municipality is permitted to impose development charges to pay for increased costs arising from development.
[115] Does the Impost By-law frustrate that purpose? I find that it does not. Rather, it supports that purpose by providing an alternative mechanism by which the City is able to recover capital costs associated with the expansion of water and wastewater infrastructure. The availability of alternatives or other options is supported by the wording of s. 2(1) of the 2006 Regulation. That section contemplates that the DC By-law and the Impost By-law can coexist provided that the fees collected under the latter by-law are not duplicative of charges that have been, will be, or could be paid to the City under the former by-law.
d) Summary
[116] The answer to Issue No. 2 is “no”. The Impost By-law does not conflict with the DCA. Section 14 of the Municipal Act does not apply to render the Impost By-law without effect. The Impost By-law can and does co-exist with the DC By-law.
Issue No. 3 - Is the Impost By-law ultra vires, in contravention of s. 394(1)(e) of the 2001 Act, because it “impose[s] a fee or charge that is based on, is in respect of or is computed by reference to … the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources”?
a) The Positions of the Parties
[117] The Applicants submit that both water and wastewater are a “natural resource” within the meaning of s. 394(1)(e) of the 2001 Act. The Applicants’ position is that the City was specifically prohibited from enacting the Impost By-law under s. 391(2) of that Act.
[118] The City’s position includes that wastewater is not a “natural resource” within the meaning of s. 394(1)(e). Therefore, the wastewater component of the Impost By-law is intra vires.
[119] With respect to the water component of the Impost By-law, the City acknowledges that water is a “natural resource” within the meaning of s. 394(1)(e) of the 2001 Act. The City submits that the water component of the Impost By-law is intra vires because of the manner in which impost fees are calculated and charged. The City submits that the impost fees are calculated and charged with reference to the capital costs for the infrastructure through which water flows. The impost fees do not relate to any of the services or activities listed in s. 394(1)(e).
b) The Law
[120] Subsection 394(1)(e) of the 2001 Act states that “[n]o fee or charge by-law shall impose a fee or charge that is based on, is in respect of or is computed by reference to … the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources.”
[121] The term “natural resources” is not defined in the 2001 Act. Ordinary meaning and grammatical sense are applied to a term in a statute for which no definition is provided. Ordinary meaning prevails over strained, unnatural, or technical meanings: Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Toronto: LexisNexis, 2014), at §§3.2 and 3.6.
c) Analysis
[122] Two aspects of s. 394(1)(e) of the 2001 Act require consideration. I first consider the phrase “a fee or charge that is based on, is in respect of or is computed by reference to”. The second phrase considered is “the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources.”
i) The Basis for the Fee or Charge
[123] The intended purpose of the Impost By-law is set out in its title: “A By-Law To Amend By-Law Number 2009-138, ‘A By-law To Impose Water Rates And Sewer Rates To Recover The Capital Cost Of Installing Water And Sanitary Sewer Services Necessary To Benefit Users Of The System’, As Amended”. The recitations in the pre-amble to the Impost By-law reflect that purpose. They include the following:
Whereas the City of Kingston passed By-law 2009-138 on September 15, 2009 pursuant to the Municipal Act, 2001, S.O. 2001, c. 25, as amended, to impose a water works rate and sewer rate upon owners or occupants of land who derive a benefit from the construction of water and sewer works sufficient to pay all or such portion of the capital costs of the works as Council deems appropriate;
Whereas the lands to be benefited and charged with the water works rate and sewer rate are all lands in the Municipality connecting to the system or systems as applicable; and
Whereas the Municipality has determined that the capital costs of such water works and sewer works shall be rated against the lands in the Municipality and shall be borne by users of the systems; and
Whereas the Municipality has adopted the 2014 Development Charge and Impost Fee Background Study, dated June 30, 2014, as amended by Addendum Reports dated July 7, 2014 and August 4, 2014, which Study has calculated revised rates for water works and sewer works in the Municipality; and
Whereas the Municipality deems it appropriate to amend By-law Number 2009- 138, as amended.
[124] The only evidence before the court with respect to how the impost fees are calculated is that of Mr. Grunda; the evidence includes the 2014 Study (see paras. 15 and 16, above). As already noted, the methodology upon which the City calculated the impost fees is not in issue. Mr. Grunda’s evidence and the contents of the 2014 Study are consistent with the purpose of the Impost By-law, as reflected both in its title and the recitations.
[125] Relying on that evidence, I find that the impost fees under the Impost By-law are calculated and charged based on the capital cost of installing water and sewer works infrastructure. The impost fees are not “based on, … in respect of or … computed by reference to” any of the activities listed in s. 394(1)(e). The subject of the Impost By-law is the water and wastewater rates related specifically to the distribution and treatment systems for water and wastewater (i.e., not any of the activities listed in s. 394(1)(e)).
[126] The Applicants did not provide any case authority specifically in support of their position with respect to s. 394(1)(e). I am, in any event, satisfied that the restriction set out in s. 394(1)(e) does not apply to the infrastructure funded by the impost fees.
ii) Natural Resources
[127] Given the finding made with respect to the basis upon which impost fees are charged, it is not necessary to consider the Applicants’ position with respect to the Impost By-law and “natural resources” within the meaning of s. 394(1)(e). In any event, I note the following.
[128] The Applicants rely on evidence from the cross-examination of Mr. Grunda and ask the court to conclude that he admitted, on behalf of the City, that the impost fees relate to the activities with respect to natural resources listed in s. 394(1)(e). A review of Mr. Grunda’s evidence during cross-examination reveals, however, that he did not make such an admission. Rather, his responses support a finding that the intent of the impost fees is the recovery of the capital costs related to water and wastewater services.
[129] The fact that a natural resource (i.e., water) will ultimately flow through that infrastructure, once installed, is irrelevant to how the impost fees are calculated and charged. The treatment and distribution of water and wastewater fall within the scope of the broad authority granted to municipalities under s. 10 of the 2001 Act. To interpret section 394(1)(e) in the restrictive manner proposed by the Applicants runs contrary to both s. 8 and the modern approach to interpretation of municipal powers.
d) Summary
[130] The answer to Issue No. 3 is “no”. Applying the principles of statutory interpretation to s. 394(1)(e) – including the ordinary meaning of words and phrases, the ordinary grammatical sense, and the modern approach to the interpretation of municipal powers – the Impost By-law is not ultra vires by virtue of that section.
Issue No. 4 - Is the Impost By-law ultra vires, in contravention of s. 394(1)(b) of the 2001 Act, because it deals with “the use, purchase or consumption by a person of property other than property belonging to or under the control of the” City?
a) The Positions of the Parties
[131] The Applicants submit that the Impost By-law is ultra vires because the impost fees charged under it are based on the use by developers of privately owned property that does not belong to the City. As such, the Impost By-law violates s. 394(1)(b) of the Municipal Act.
[132] The City’s position is that the impost fees are not calculated based on how developers, including the Applicants, use their respective properties. Rather, the impost fees relate to property under the City’s control and the increased need for infrastructure on that property.
b) The Law
[133] Subsection 394(1)(b) of the Municipal Act states that “[n]o fee or charge by-law shall impose a fee or charge that is based on, is in respect of or is computed by reference to … the use, purchase or consumption by a person of property other than property belonging to or under the control of the [City].”
c) Analysis
[134] At para. 9 of his affidavit, Mr. Grunda provides a breakdown of the capital costs encompassed in the impost fees: “The capital costs for water and wastewater services include treatment plant expansions, pumping or booster stations, and distribution/collection system improvements to accommodate the demands of anticipated new development over the forecast period.” Mr. Grunda’s evidence in that regard is uncontradicted.
[135] First, and though not determinative of the issue, it is clear that the municipal infrastructure that gives rise to the capital costs in question is located on municipal lands.
[136] Second, the 2001 Act does not include a definition of the phrase, “use, purchase or consumption”. Those words are to be given their ordinary meaning. The Impost By-law imposes a charge based on the installation of municipal infrastructure and the use of municipal services. The charge is not based on the ownership or use of land. The charge is based on the increased demand on municipal infrastructure following the connection of a property to that infrastructure and the services it supports.
[137] It is uncontroverted that water and wastewater services fall within the broad authority granted under s. 10 of the 2001 Act. The restrictions set out in s. 394(1)(b) are to be interpreted in light of the broad authority granted to municipalities under s. 10.
[138] To interpret s. 394(1)(b) in the restrictive manner proposed by the Applicants runs contrary to both s. 8 and the modern approach to interpretation of municipal powers. In keeping with that approach, the authority granted under s. 10 is to be interpreted broadly so as to include the municipal power in question (i.e., to enact the Impost By-law) rather than to exclude that power: United Taxi Drivers’, at para. 6; Croplife, at para. 37.
d) Summary
[139] The answer to Issue No. 4 is “no”. Applying the principles of statutory interpretation to s. 394(1)(b) – including the ordinary meaning of words and phrases, the ordinary grammatical sense, and the modern approach to interpretation of municipal powers – the Impost By-law is not ultra vires by virtue of that section.
Issue No. 5 - Is the Impost By-law discriminatory in its treatment of developers by placing a financial burden on them that members of the general public do not experience?
a) The Positions of the Parties
[140] The Applicants submit that the impost fees charged under the Impost By-law constitute an additional and discriminatory fee levied against developers, notwithstanding that developers receive no benefit under the Impost By-law that is distinct from the benefits realized by the general public. The Applicants submit that a non-discriminatory approach to impost fees would be to distribute them equally amongst the general public. The Applicants’ position is that the Impost By-law impermissibly discriminates against developers and places a greater financial burden on them, in contrast to members of the general public who also receive water and wastewater services; the Impost By-law is therefore illegal.
[141] The City’s position is that s. 8(4) of the 2001 Act is a complete answer to the Applicants’ submissions on this issue. The City submits that pursuant to s. 8(4), it is entirely appropriate and permissible for a municipality to differentiate in the application of fees and charges imposed under a by-law enacted pursuant to Part XII of the Act.
b) The Law
[142] For ease of reference, I repeat ss. 8(1) and (4) here:
Scope of powers
(1) The powers of a municipality under this or any other Act shall be interpreted broadly so as to confer broad authority on the municipality to enable the municipality to govern its affairs as it considers appropriate and to enhance the municipality’s ability to respond to municipal issues.
Scope of by-laws generally
(4) Without limiting the generality of subsections (1), (2) and (3) and except as otherwise provided, a by-law under this Act may be general or specific in its application and may differentiate in any way and on any basis a municipality considers appropriate.
[143] The City relies on three recent decisions of this court related to licensing by-laws: London Taxicab Owners’ et al v. Corporation of the City of London, 2013 ONSC 1460, 9 M.P.L.R. (5th) 76; 1736095 Ontario Ltd. v. Waterloo (City), 2015 ONSC 6541, 340 O.A.C. 290 (Div. Ct.); and Unifor, Local 1688 v. The City of Ottawa, 2018 ONSC 3377, 75 M.P.L.R. (5th) 278. In each of those decisions, the court relied on the permission granted within s. 8(4) for a municipality to “differentiate between taxicabs and limousines on any basis it considers appropriate as a matter of policy”: see e.g., London, at para. 54.
c) Analysis
[144] The issue of potential discriminatory treatment is not identified in the Applicants’ amended notice of application. This issue is not addressed in either of the Kay Affidavits or in the Stelmach Affidavit. For example, there is no evidence to suggest that a member of the general public applying for the same permits and authorizations, as did the Applicants, would be treated any differently than were the Applicants.
[145] The issue of alleged discriminatory treatment is first raised by the Applicants in their factum. At para. 67, the Applicants make the following broad-sweeping submission:
Impost Fees are triggered by any one of a series of events characterized as “development”. However, the water and wastewater services that are the subject of the Impost By-law exist irrespective of that development. Moreover, the fees imposed by the City under the Impost By-law benefit all users, as opposed to just the developers whose actions trigger the charging of Impost Fees under the Impost By-law.
[146] The Applicants cite nothing in support of that submission – not evidence, not a statutory or regulatory provision, and not a section of the Impost By-law.
[147] The Applicants’ unsupported, broad-sweeping submission is entirely lacking in any substantive basis – in particular when contrasted with the detailed and uncontroverted evidence of Mr. Grunda with respect to the methodology relied on for the calculation of impost fees. That methodology, summarized in paras. 4(i)-(viii) of the Grunda Affidavit, includes the following factors:
The amount, type and location of development within the City’s urban area are estimated (i.e., “growth forecast estimates”);
The increase in need for services and capital costs for new development is estimated, with specific capital projects identified;
Impost fee recoverable costs are calculated. The incremental new resident population forecast is a factor in calculating the per capita charge and, in turn, the residential charge; and
Impost fee cashflows for residential, industrial and other non-industrial types of development are forecasted to project anticipated financing costs for inclusion in the calculation of impost fees.
[148] Based on Mr. Grunda’s evidence, including the 2014 Study, I find that the City exercised due diligence in calculating the impost fees charged under the Impost By-law.
[149] Mr. Grunda’s evidence is that the impost fees are imposed on all new connections to the water and wastewater systems. One need only consider the triggering events set out in s. 2(1) of the Impost By-law (such as the issuance of a building permit or a connection to the infrastructure) to see that impost fees are imposed on anyone, including a private citizen, who proposes to connect to the water or wastewater systems.
[150] It is not surprising that developers are called upon to pay more in total impost fees than are private citizens, the majority of whom are already connected to water and wastewater systems. The imposition of such fees is a consequence of the day-to-day business in which developers are involved.
[151] Developers, the Applicants included, may be unhappy that they are required to pay impost fees to the City. Their dissatisfaction in that regard does not, however, support a finding that the Impost By-law is discriminatory.
d) Summary
[152] The answer to Issue No. 5 is “no”: the Impost By-law does not discriminate against developers, including the Applicants. Regardless, if developers are more affected by the Impost By-law because of the increased demands they place on the municipal infrastructure, I am satisfied that in the process of enacting the Impost By-law, the City exercised, appropriately, both its broad authority under s. 10 and its power to differentiate under s. 8(4) of the 2001 Act.
Issue No. 6 - If the answer to any of Issue Nos. 1-5 is “yes”, has the City been unjustly enriched?
[153] The answer to all of Issue Nos. 1-5 is “no”. As a result, it is not necessary to consider Issue No. 6.
Disposition
[154] The application is dismissed in its entirety.
Costs
[155] In the event the parties are unable to agree upon costs of the application, they may make submissions as follows:
a) Their respective primary submissions shall be limited to a maximum of four pages (excluding the bill of costs);
b) Written submissions shall comply with Rule 4 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”);
c) Case and other authorities referred to in the submissions shall be hyperlinked. For any case or other authorities that are not available through a hyperlink function, a copy in pdf format shall be included with the submissions;
d) Case or other authorities, whether hyperlinked or provided in pdf format, shall comply with Rule 4 of the Rules with respect to font size;
e) In addition to electronically filing the submissions, the submissions shall be sent by email, to my attention, at SCJ.Assistants@ontario.ca. For the purpose of sub-paragraphs (f)-(h), below, “deliver” includes both electronic filing and sending a copy by email to my attention as directed in this sub-paragraph;
f) As the successful party on the application, the City shall deliver its written submissions by 5:00 p.m. on the fifteenth business day following the date on which this ruling is released;
g) The Applicants shall deliver their responding submissions by 5:00 p.m. on the twenty-fifth business day following the date on which this ruling is released; and
h) The City shall deliver its reply submissions, if any, by the thirtieth business day following the date on which this ruling is released
[156] If no submissions are delivered pursuant to subparagraph (f) above, there will be no further order with respect to costs.
Madam Justice Sylvia Corthorn
Released: June 18, 2021
[^1]: With respect to (b), s. 399 of the Municipal Act prohibited such an appeal. That section was repealed subsequent to the date on which the Impost By-law was enacted: Building Better Communities and Conserving Watersheds Act, 2017, S.O. 2017, c. 23, Sched. 5, s. 53. The subsequent repeal of s. 399 is not relevant for the purpose of this application.
[^2]: The terms “sewer” and “wastewater” are used interchangeably in this ruling, with the latter being the more modern terminology.
[^3]: Section 15 also includes sub-sections (5) and (6). They relate to fences, signs, and other matters and are not relevant for the purposes of this application.
[^4]: The definition of “growth-related net capital costs” set out in s. 1 of the 1990 DCA was subsequently repealed: see the DCA, s. 69(2). Subsequent amendments to the DCA did not include the re-insertion of that definition or the addition of a new definition of that term. In any event, the outcome of this application turns on the legislative scheme, including the DCA, as it existed in 2014.
[^5]: The full citation for this statute is provided in para. 5, above.
[^6]: I say, “as it appeared in 2014” because of changes made to the DCA in subsequent years. For example, a subsequent amendment to s. 2(4) of the DCA is not relevant for the purposes of this application: see e.g., COVID-19 Economic Recovery Act, 2020, S.O. 2020, c. 18, Sched. 3, s. 1(2). Nor is the subsequent repeal of ss. 5(1), item 8, and 5(5): see More Homes, More Choice Act, 2019, S.O. 2019, c. 9, Sched. 3, ss. 3(2) and 3(5). The outcome of this application turns on the legislative scheme, including the DCA, as it existed in 2014.