Amendments to the Municipalities Act, 1999

Amendments to the Municipalities Act, 1999

Background… • Municipalities in this province are governed mainly by the Municipalities Act, 1999 • Amendments will: • Modernize legislation and make it more consistent with national trends • Strengthen municipal governance • Address administrative issues • Improve municipal operations, allowing municipalities to operate more effectively

Pension & Group Benefits Section(s) of Act • 2, 72, and 73 Background • Councils have authority to establish pension and group benefits for municipal employees, but cannot provide such benefits to councillors • Legislation does provide authority for payment of remuneration to councillors

Pension & Group Benefits Amendment • Councils will have discretionary authority to establish pension and group benefits for councillors • Any pension or group benefit will have to be provided within current guidelines for expenditures for councillor remuneration, as established in the Municipal Councillor Remuneration and Reimbursement Regulations, 2001 • i.e. It does not authorize spending additional municipal dollars Cont’d…

Pension & Group Benefits Amendment, cont’d… • Any municipal pension plan on a go-forward basis must be defined-contribution • Alternate types of plans may be approved at the discretion of the Minister

Pension & Group Benefits Analysis • Provision of pension and group benefits to councillors: • May benefit councillor recruitment and retention • Defined-contribution • Fixed contributions • Investment risk and reward assumed by individual receiving the contribution, and not by municipality

Grants for Charitable Causes Section(s) of Act • 99 Background • Councils not currently authorized to provide a grant to charitable or philanthropic causes it considers appropriate

Grants for Charitable Causes Amendment • Councils are now authorized to provide a grant to charitable or philanthropic causes, excluding political parties or candidates in federal/provincial/municipal elections • By 2/3 vote of Councillors in office

Grants for Charitable Causes Analysis • Councils can now provide grants to causes it deems worthy • Increased ability for councils to play an active role as a philanthropic leader in the community

Minimum Property Tax Section(s) of Act • 114 and 414 Background • Pelley v. Town of Springdale • This case clarified that, where the real property tax is imposed, all property in a municipality must be subject to assessment and taxation, including saltwater wharves and sheds Cont’d…

Minimum Property Tax Background, cont’d… • A municipality may establish a separate minimum property tax for residential and for commercial property, but cannot establish a minimum tax for vacant land or land which contains only a small structure • Issue: Minimum property tax did not reflect the modest value of this land / small structures • Therefore, owners of land containing these structures were taxed disproportionately

Minimum Property Tax Amendment • Municipalities now have the authority to impose a separate minimum real property tax for: • Vacant land, and • Land upon which there is a building used for non-residential purposes that does not exceed the square meterage specified by the municipality

Minimum Property Tax Analysis • Municipalities will have flexibility in establishing property tax structure • Reduced tax burden for owners of such properties • Inequity is reduced • Taxation structure which encourages the development of land

Tax Sales Section(s) of Act • 134, 137, and various sections from 140 to 147 Background • Currently, all third party liens (i.e. mortgages, mechanics’ liens, court judgments against owner) remain attached to a property sold at a municipal tax sale • As a result, a purchaser would inherit any debts that have attached to the property Cont’d…

Tax Sales Background, cont’d… • This limits the use of the tax sale as a collection tool in cases where a property owner has accumulated significant debts to multiple parties

Tax Sales Amendment • Municipalities will be authorized to eliminate third party liens when selling real property at a municipal tax sale • Exceptions: pre-existing easements and claims of the Crown • Municipalities will be required to notify (in writing) registered mortgagees, judgment creditors, and lien holders of the tax sale, consistent with existing timeframes for public notice by advertisement Cont’d…

Tax Sales Amendment, cont’d… • Where the balance of proceeds of the tax sale is less than $200 (after payment of outstanding municipal taxes and expenses related to tax sale), these proceeds shall be returned to the former property owner

Tax Sales Amendment, cont’d… • Where the proceeds of the tax sale exceed the tax arrears and expenses related to the sale by $200 or more: • These proceeds shall be returned to the former property owner, unless an application is made to the Supreme Court, within 90 days of the auction, by a person claiming entitlement to the proceeds. • The municipality must notify all applicable registered mortgagees, judgment creditors, and lienholders of the excess and the requirement to apply to court.

Tax Sales Analysis • These changes will bring our legislation in line with that of other provinces • Ensures that third party liens no longer form a barrier to tax collections through tax sales • Potential reduction of aggregate tax arrears if municipalities use the new tool to collect monies owing

Adverse Possession Section(s) of Act • 201 Background • What is adverse possession? • The mechanism by which a person may occupy and possess land owned by another, ultimately extinguishing the ownership claim of that other person.

Adverse Possession Amendment • Municipal real property is protected from claims of adverse possession by a third party (also known as squatters’ rights) Analysis • A municipality cannot have title to its land extinguished by a person who occupies such lands for a prolonged period, without authorization

Response to Emergencies Section(s) of Act • 183 and 395 Background • Municipal fire departments authorized only to fight fires, carry out fire prevention activities, and respond to other emergencies as authorized by the Minister

Response to Emergencies Amendment • Municipalities no longer require ministerial authorization to respond to emergencies • Municipalities are now authorized to determine the types of emergencies to which their Fire Departments may respond • While municipalities no longer require the authorization of the Minister to respond to other types of emergencies, they will need the authorization of Council

Response to Emergencies Analysis • Decisions regarding the extent of emergency response coverage will be made at the local level, by the people most informed about local circumstances • Municipalities will have increased control over the scope of emergency services provided

Disposal of Municipal Property Section(s) of Act • 201 Background • Municipalities must currently comply with the Public Tender Act when acquiring goods and services but no guidance is provided by the legislation regarding the disposal of assets

Disposal of Municipal Property Amendment • Municipalities are now authorized to sell surplus or unused real or personal property, in accordance with the following requirements: • Where the item or lot has a probable market value of more than $500, • Sale by public tender or auction • Advertised for at least 30 days before the date of the auction or tender; and Cont’d…

Disposal of Municipal Property Amendment, cont’d… 2. Where the item or lot has a probable market value of less than $500, or where a public auction or tender did not produce a purchaser for an item or lot with a probable market value of more than $500, • The municipality may dispose of the item or lot by private sale.

Disposal of Municipal Property Analysis • A gap in the legislation has been addressed, and • Municipalities now have much needed direction on the disposal of assets in a transparent manner

Municipal Budgets Section(s) of Act • 78 and 79 Background • A municipality may not currently budget for a capital reserve without the approval of the Minister • The Act requires that municipal expenditures and revenues balance

Municipal Budgets Amendment • The Act has been amended so that: • Expenditures in municipal budgets shall not exceed revenues, and • A capital reserve can be established without requiring Ministerial approval

Municipal Budgets Analysis • Municipalities will now have the flexibility to create capital reserves as determined by local circumstances. • The ability to budget a surplus will permit municipalities to create reserves for unexpected expenses such as equipment or infrastructure breakdowns. • This will give municipalities another tool to help them implement prudent financial planning.

Audited Financial Statements Section(s) of Act • 86 Background • Municipalities are required to prepare annual audited financial statements • Historically prepared on a cash-basis • However, cash-based statements are dated and do not align with current standards established by Public Sector Accounting Board (PSAB)

Audited Financial Statements Amendment • Annual financial statements are now required to be consistent with the standards of the Public Sector Accounting Board Analysis • Financial reporting by municipalities will be in line with national standards for public sector bodies • This will provide municipalities with improved tools for assessing their long-term financial sustainability and future infrastructure needs

Municipal Departments Section(s) of Act • 63 and 64 Background • Section 63 of the Act authorizes a council to create various departments and department heads, listing the most common: • Engineer / Superintendent of works • Treasurer • Planner • Recreation Director • Fire Chief

Municipal Departments Amendment • Councils now have the authority to: • Establish those departments and appoint those department heads that are necessary for the effective operation of the Council • Establish the roles and responsibilities of those department heads

Municipal Departments Analysis • Provides flexibility to councils in structuring their operations • Decisions regarding council administrative structures will be made at the local level

Appointment of Auditor Section(s) of Act • 87 Background • Municipalities are required to appoint an auditor by August 1 in the year before the year in which the audited financial statements are due. • Municipalities are required to notify the Minister in writing within 30 days of that appointment.

Appointment of Auditor Amendment • Notification of the Minister with respect to the appointment of an auditor by a municipality is no longer required Analysis • Notification of the appointment of an auditor is unnecessary • Municipalities still required to submit audited financial statements • Reduction of red tape

Report on Insurance Coverage Section(s) of Act • 91 Background • Municipal auditors are currently not required to report on the adequacy of insurance carried by a municipality

Report on Insurance Coverage Amendment • The Act has been amended so that auditors are required to report on adequacy of insurance coverage for municipal property Analysis • This will provide municipalities with critical information needed to make informed decisions on risk and liability management

Approval to Borrow Section(s) of Act • 94 Background • Prior to borrowing for capital purposes, a municipality is required to obtain the prior written approval of the Minister Cont’d…

Approval to Borrow Background, cont’d… • However, some municipalities enter into capital lease arrangements without obtaining Ministerial approval • Legislation does not clearly require such approval • This is a gap in the legislation, as a capital lease arrangement is often simply an alternative to capital borrowing

Approval to Borrow Amendment • Ministerial approval will be required before a municipality enters into a capital lease agreement for three years or more Analysis • This will ensure that long-term borrowing / financial commitments receive Ministerial approval • Close an existing loophole in legislation • Department of Municipal Affairs will have accurate picture of long-term financial commitment of Councils

Supplementary Assessment Section(s) of Act • 119 Background • The provisions of section 119 are not consistent with those of the Assessment Act, 2006 • Section 119: provides for taxation of real property based on a supplementary assessment in the case of new or newly-occupied buildings Cont’d…

Supplementary Assessment Background, cont’d… • Assessment Act, 2006: provides for supplementary assessments in additional circumstances • Destruction of a building • A change in use • The end of the application of a tax exemption

Supplementary Assessment Amendment • The Act will now provide for full integration and consistency with the provisions of the Assessment Act, 2006 in regards to supplementary assessments. Analysis • This will create consistency across related legislation, ensuring ease of use.

Definition of Real Property Section(s) of Act • 2 Background • The definition of ‘real property’ in the Act includes ‘machinery’ and ‘equipment’ • This is not consistent with the definition of ‘real property’ in the Assessment Act, 2006, which does not include ‘machinery’ and ‘equipment’

Definition of Real Property Amendment • The Act has been amended to define ‘real property’ as it is defined in the Assessment Act, 2006 Analysis • Consistency between the Act and the Assessment Act, 2006 • Provide clarity to councils

Debt Collection Mechanism Section(s) of Act • 133 Background • Municipalities are authorized to collect arrears of taxes, and interest on those taxes, through court action • No explicit authority to use other legitimate means of debt collection, such as collection agencies • No clear authority to recover reasonable costs of collection

Debt Collection Mechanism Amendment • The Act has been amended to allow municipalities to use lawful means of civil debt collection and to be reimbursed the reasonable costs of such collection Analysis • This will facilitate tax collection and give municipalities a cost-effective collection tool

Amendments to the Municipalities Act, 1999