MUNICIPAL UPDATE
AUGUST 1998
User fees? Not so fast
Government, Courts limit opportunities
Author: Municipal Law Practice Group
Appearances are often deceiving: this could prove to be true of the user fee powers granted
to Ontario municipalities in 1996.
Before 1996, municipalities were limited to collecting the specific user fees and charges listed
in the legislation, about 80 in total. The Savings and Restructuring Act, 1996 was supposed to
change that and give municipalities a broad general power to impose user fees and charges,
and so raise additional revenues.
Reform of the often archaic, overly restrictive user fee provisions of the Municipal Act has
not proven to be the revenue opportunity municipalities may have hoped for. First, the
government used its regulation-making authority to shut down several municipal user fee
initiatives which the Province deemed inappropriate. For example, the government
disallowed a plan to charge residential developers for sewage treatment capacity allocated to
them (and so lost to more lucrative industrial development). The Province also stopped a
charge on non-refillable bottle sales, through which municipalities could have recouped the
cost of recycling non-refillable bottles. Now, two court decisions (both dealing with camp
ground levies) have further limited municipalities’ powers to impose fees and charges.
In Carson’s Camp Limited v. Township of Amabel, (Ontario Court, General Division,
April 22, 1998), a camp ground operator challenged a by-law of the respondent township
which imposed fees on all camp ground operators in the township. The by-law provided
that each operator would be charged $50.00 for every seasonal site and $20.00 for each tent
and trailer site on its camp ground. Carson’s Camp Limited challenged the by-law on the
following three grounds: first, the by-law created a tax, not a fee or charge; second, the tax
was indirect; and third, the tax was based on the use of land.
The Court found that the levy was actually a tax because the camp ground operator received
no service or benefit specifically related to the fee or charge levied. Further, the camp
ground operator had no way to avoid paying the tax by declining to receive the service or
benefit. The Court was further influenced in this finding by the fact that camp ground levy
went into general revenues.
STIKEMAN ELLIOTT
2
Although s. 220.1(6)(a) of the Municipal Act provides that fees and levies may be “in the
nature of a direct tax for the purpose of raising revenues”, the Court found that it is still
necessary that the fee or charge be levied in respect of a specific service or benefit.
Having found that the fee was actually a tax, the Court then decided that it was an indirect
tax. A municipality, as a creation of the Province, is forbidden to levy indirect taxes under
the British North America Act. The Court found that the levy would likely be passed on to the
camp ground users.
In reaching its conclusions, the Court was influenced by the reasons in Ontario Private
Campgrounds Association v. The Corporation of the Township of Harvey, which
overturned a camp ground levy for similar reasons.
The municipality tried to defend the by-law by saying that the township was merely
exercising its power to regulate businesses, including imposing fees. The Court rejected this
defence and found that the by-law was not enacted under the licensing provisions of the
Municipal Act but under the fees and levies provision.
In the case of user fees, the government replaced a list of narrow, specific powers by a
single, more general and more flexible grant of authority. The same approach is being used
by the government in its proposed reform of the entire Municipal Act. Therefore, the
restrictions that have arisen around the broad user fee power could signal what might
happen were the whole Municipal Act reformed along similar lines.