Fort Frances council has agreed to back a campaign with Emo, to apply pressure for a new taxation deal with railroads and power companies.
Emo council reached out to Fort Frances Council, seeking a resolution of support to continue petitioning the provincial government and the Ontario Ministry of Finance to revisit or recalculate the rates paid by railroads and utility companies. The letter states the rates have not been adjusted since “modest increases” in 2017 and 2018.
Currently, the tax rate for land (roadway or right of way of a railway company) other than land that is a shortline railway, roadway or right of way, is paid to the municipality at $110 per acre. The rate is the same for most of Ontario. The exceptions are Durham, Halton, Peel and York, which are paid $624.33 per acre, and Niagara, Waterloo and Hamilton, which are paid $277.83 per acre. Shortline rates range from $35.26 per acre in the Kenora/Rainy River and Thunder Bay region to $611.33 per acre in the Peel/York region. The Rainy River district does not have a shortline rail line in operation at this time.
The hydro right of way rates vary greatly, from $12.54 per acre in the greater Sudbury region, to $834.02 in the Peel/York region. The Rainy River district is paid $122.15 per acre. Other Districts which are paid more than ours are the Ottawa region, at $367.09 per acre, and the Niagara/Hamilton region, at $396.09. The remaining five regions are paid less than $100 per acre.
The letter expresses an interest in one of three options for the province to consider:
- A significant increase to the per-acre rate
- For Ontario to be switched to a tonnage per linear kilometre rate.
- For Ontario to be switched to a combination of per-acre/per linear kilometre rate.
Council was on board with supporting the campaign, which Coun. Wendy Brunetta noted has been a long-standing issue throughout northern Ontario.
“This issue as you know has been at the NOMA (Northern Ontario Municipal Association) table for some time,” she said, noting that NOMA has requested that the taxation model be shifted to a ton per mile model, as it is in the western provinces. “It’s something that we are trying to get the province to look at, but we really have not been successful in getting any traction on that.”
Brunetta said that NOMA is looking to change its focus onto rail crossings.
“That’s something that they’re talking about here. So I think that it’s worth supporting.”
Maintenance of road crossings is a joint cost, with railway companies billing municipalities for their portion of the work done. So despite the 2018 per acre increase, “the maintenance costs have just been getting higher and higher. So again, we’re going backwards. You know, it’s almost like we’re paying CN to go through our community.”
Mayor Andrew Hallikas agreed with Brunetta’s statements, and added that Fort Frances, as one of the busiest rail crossings in North America, is “assuming a tremendous amount of risk and we’re also assuming costs, because our emergency services have to train for this. So, I think it’s only fair that CN, which is benefiting by traversing through our community and increasing our risk, pays their fair share,” he said.
Altering the tax structure to earn more from rail companies isn’t isolated to northern Ontario. Toronto City Council’s Executive Committee was presented with a report from the city controller, exploring the issue of rail taxation. The report’s information portion included a range of correspondence, including letters from the Railway Association of Canada (RAC) exploring the pitfalls of changing the tax structure.
In 2020, Michael Gulio of RAC wrote that in the western model, railway companies provide the provincial assessment authorities with information about average costs for railway track and infrastructure and a traffic profile of net and gross Ton Miles, carried through each subdivision on an annual basis. The assessment authorities then use that information to estimate the railway’s construction costs and prescribe a regulated rate for each class of railway. The assessments are done at a provincial level, by subdivision, not by municipality.
In Ontario, a switch to a tonnage based tax system, “would effectively treat railway track as an assessable component and breach section 30(3) of the Ontario Assessment Act,” Gulio states in the letter.
“Furthermore, replicating the assessment processes in Western Canada would also require the Municipal Property Assessment Corporation (MPAC) to scale up their ability to complete railway costing analysis. This analysis needs to be transparent, predictable and fair, while ensuring the railway information remains confidential. For railways, the administrative and reporting burden required to support the analysis would be substantive.”
Section 30(3) of the Assessment Act states, “Despite any other provision in this Act, the structures, substructures, superstructures, rails, ties, poles, wires and other property on railway lands and used exclusively for railway purposes or incidental thereto (except stations, freight sheds, offices, warehouses, elevators, hotels, heating plants, round houses and machine, repair and other shops) shall not be assessed, but heating plants shall be exempt from assessment to the extent that the amount of steam or heat is used in relation to the cleaning or heating of rolling stock.”
Toronto staff also created a report to council, with information on rail taxation. It noted that in 2018, the Ontario Ministry of Finance proposed a high-tonnage rate of $300 per acre, which could be requested by any municipality that believed it crossed a 70-million gross ton-mile per route mile threshold. It would then be up to the railway company to provide data to prove or disprove the tonnage claims. The high-tonnage rate was not introduced in 2019, and railway companies do not report on tonnage or kilometres of railway right of way to any municipality in Ontario, the report noted.
“A taxation system that is entirely dependent on industry-supplied data that cannot be independently verified may prove problematic to administer, and carries the risk that data can be manipulated or under-reported, or that companies may change their business model in an effort to avoid taxation,” the staff report stated. “Information received from municipalities in Saskatchewan, Alberta and Manitoba, confirm that relying on the railway companies to provide data can be quite challenging.”
The report explored taxation methods for each of the western provinces. In Saskatchewan, rates are established by the province, with five tonnage-based rate classifications, ranging from less than 1 million tonnes to greater than or equal to 15 million tonnes, with rates ranging from $18,900 per mile of right of way to $609,500 per mile between 2017 and 2020. For the City of Regina, the tax levy from railways totalled $108,903 for 2020.
In Alberta, the assessment is also done on a provincial level, and includes assessments of rights of way and structures. The rates have a base rate and a modifier, which is adjusted for tonnage annually. In 2020, the City of Calgary had a total tax levy of $626,871 for railway rights-of-way from CN Rail and CP Rail combined. The city’s own rail rights of way were tax exempt.
In Manitoba, railways are taxed on rights-of-way, including the rail, ballast, ties, etc, used in the operation of the railway, but not including buildings or stations, even if they land inside the right of way. Regulated rates are based on the gross tonnage carried on the tracks, the miles of track and the average assessed land value. There are eight tonnage based classifications, ranging from zero tons to 30 million tons or more, with rates ranging from $0 per mile to $634,100 per mile. In 2020, the City of Winnipeg’s tax levy for railway rights-of-way was $1,242,860.
Fort Frances’ expression of support for tax reform efforts will be returned to Emo’s Administration, and will be a topic of discussion at Emo’s next town council meeting, currently scheduled for October 10. Any petition resulting from the support is expected to be presented to the province, and cc’d to MP Marcus Powlowski.