Sunday, March 7, 2010

Water case law in Québec 2: water services tariffication


In the province of Québec (Canada), municipalities provide more than 80% of the population with drinking water, and tariffication is not volumetric but generally indirect and linked to municipal real-estate property taxation.

As a result, tariffication of water services is moslty a non-contentious issue and case law relatively scarce.

In this context, the recent delivery of two judgements from the Superior Court in less than a month regarding drinking water tariffication is a notable occurence.

In the first judgement, 2623-4617 Québec inc. v Sept-Îles (Ville de) (in French), the plaintiff company, owner of real-estate properties, requests that be declared inapplicable the municipal regulation setting repayments for the municipal debt incurred further to drinking water infrastructure extension.

The municipal regulation imposes taxation on the owners of immovable property in the sector where service is extended. The Plaintiff opposes this on the basis that it does not actually receive drinking water, that there are no buildings on its lots, that the lots cannot be built upon, and that it does not and cannot derive a benefice from service extension.

The municipal regulation relies on the powers granted by section 487 of the Cities and Towns Act, which reads as follows:

487. [...] the council may impose the special tax for the payment of municipal works of any kind, including works of maintenance, according to either the municipal valuation or the area or the frontage of the taxable property subject to such tax. [...]
The council may also charge the cost of such works
(1) to the municipality;
(2) to the ratepayers of part of the territory of the municipality;
(3) to the ratepayers benefiting from the works when they are carried out in any part of the territory of the municipality [...]
[Emphasis added]

Section 561 of the Cities and Towns Act adds that:

561. Where the repayment of a loan is to be borne by the owners of immovables of a part only of the territory of the municipality or by those who benefit from the works as determined under section 487, the tax to be levied each year during the term of the loan shall be assessed only on the immovables of the owners concerned. [Emphasis added]

So the question is whether the Plaintiff is an interested owner that benefit from the infrastructure extension.

After a review of case law precedents, the tribunal decide that the municipal regulation is applicable to the Plaintiff. Benefits do not have to be direct and immediate to impose on owners the financial burden of infrastructure extension, but it is necessary that the taxable owner derive a potential future benefit. In this instance, the tribunal decides that it remains possible that the Plaintiff benefit from connection to the service in the future, and the municipal regulation must be applied. Of note is the fact that the infrastructure serves to provide water for fire hydrants.

Legal principles similar to these in various jurisdictions have a significant impact on investment amortization. Investment viability may be influenced by court decisions that interpret the reach of the norms governing who should pay for infrastructure extension. However, economic studies and academic research on watsan provision rarely look at such legal norms and their interpretation in case law. Doing so could help ground blackboard economic studies.

In the second judgement, 2957-6345 Québec inc. c. Roberval (Ville de) (in French), the Plaintiff corporation is the owner and operator of a shopping mall in which the 23 businesses use drinking water provided by the Defendant municipality.

The Plaintiff attacks the validity of a municipal regulation on drinking water tariffication that requires the Plaintiff to pay 23 times the CAN$210 minimal service fee per year.

The Plaintiff's motion is rejected by the Court on the ground that the Plaintiff has not put forward any evidence that the municipal regulation is invalid because unjust, while the burden rests clearly of the Plaintiff's shoulders to do so according to consistent Court of Appeal precedents.

All in all, this case is notable because it is one of the very few that focuses on the interpretation of sections 244.1 to 244.6 of the An Act respecting Municipal taxation in the context of drinking water tariffication.

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