Explainer: What’s a PILT and why does the mayor think Ottawa is getting shafted

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The federal government isn’t paying its fair share to Ottawa, Mayor Mark Sutcliffe complained this week, citing a shortfall in money received through “an arcane issue called PILTs.”

PILT — payment in lieu of taxes — is what the federal government pays instead of property tax. Government aren’t allowed to tax each other, so it’s through PILTs that the federal government pays for the services it receives from the municipality.

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As the largest property owner in downtown Ottawa, the federal PILT isn’t chump change: It was worth $162 million last year, Sutcliffe said. But eight years ago, the federal PILT was $192 million, $30 million more than it is today. The decrease is due to a number of reasons, mainly that the feds are selling off some properties while others are vacant and valued for less.

But Sutcliffe’s main complaint is that the federal government gets to decide on its own how much its property is worth before applying the city’s tax rate to it. Under the Payment in Lieu of Taxes Act, the PILT “is the value that, in the opinion of the Minister of Public Services and Procurement, would be attributable if the property was taxable.”

It’s as if a homeowner could decide themselves how much their house should be assessed at before calculating their property tax bill.

“Wouldn’t that be a great deal?” Sutcliffe said.

“For decades now, through successive governments representing different parties, the federal government and its many agencies have simply stopped paying their fair share of taxes, or payments in lieu of taxes, in Ottawa.”

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A 2020 decision by the Province of Ontario to reduce business education tax rates to provide financial relief to small businesses has also affected PILT revenue since the federal government decided it would calculate PILTs based on the reduced rate.

Kanata-Carleton MP Jenna Sudds, a former Ottawa city councillor who is now Minister of Families, Children and Social Development, said the federal government was doing its part for the city.

“I appreciate the city is in a difficult financial situation. Like many cities, the impacts of COVID linger on all government’s budgets,” Sudds said in an emailed statement. “Our government is doing our part, just as we outlined in this year’s budget, by sticking to our responsible fiscal targets.”

She cited a $50-million federal grant for interim housing and another $173 million for Ottawa from the federal Housing Accelerator Fund.

“As a former city councillor, and now federal minister representing Ottawa, I will always advocate and work for the best interests of Ottawa residents and have strong relationships with the mayor and council, and incredible Ottawa MPs to work alongside,” Sudds said.

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“However, we must remember that there is only one taxpayer. The residents of Ottawa have paid their property taxes and they’ve paid their federal tax with expectations that we manage their money well and spend it wisely.  We at the federal level take this responsibility seriously, especially at a time when the people of Ottawa are watching their pocketbooks, and the City of Ottawa is not exempt from this responsibility, either.”

In an emailed statement Friday, Guillaume Bertrand, press secretary to Public Services and Procurement Canada Minister Jean-Yves Duclos, said the federal government owned and operated one of the largest and most diverse portfolios of real estate in Canada and made payments in lieu of taxes to more than 1,100 taxing authorities.

“The federal government and the National Capital Commission are committed to work with the cities of Ottawa and Gatineau to make sure all Canadians can be proud of our nation’s capital,” Bertrand said.

“Many local governments across Canada are trying to find new sources of revenues to face the cost-of-living crisis we are experiencing right now. This is a global phenomenon, not one specific to the region or the city of Ottawa. And, while interest rates are going down and inflation is back inside the Bank of Canada target for a sixth month in a row, we understand it remains difficult for many municipal governments.

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“PSPC officials continue to work with the City of Ottawa to ensure that payments in lieu of taxes for Crown-owned properties are fair and equitable. Our government has been and will continue to be a committed partner for the city of Ottawa.”

PSPC manages the payment in lieu of taxes budget, doling out nearly $610 million to municipal and provincial governments in 2023, according to its website.

The City of Ottawa received by far the largest portion of that total, $124 million, followed by Gatineau at $48.5 million and the City of Dorval, site of Pierre Elliott Trudeau Airport, at $35.3 million. (Sutcliffe said Thursday that Ottawa received $164 million. There was no immediate explanation for the discrepancy.)

According to PSPC, Ottawa received $119.6 million in PILT in 2022, $114.6 million in 2021, $124.8 million in 2020 and $122.7 million in 2019.

There are five types of PILT payments: payments in lieu of property tax; payments in lieu of frontage to fund work such as sewer repairs or street lighting; payment in lieu of service charges to pay for things like water service or garbage collection; late-payment supplements for cases where payment has been unreasonably delayed; and payments in lieu of business occupancy tax that are paid by Crown corporations.

Municipalities can and do dispute PILT payments through the Payment in Lieu of Taxes Dispute Advisory Panel.

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