In April of this year, an amendment to the First Nations Fiscal Management Act (FMA) came into force which added “payments in lieu of taxation” (PILTs) to the definition of local revenues under the FMA. This is an important step in expanding First Nations tax-related revenues. The amendment ensures these revenues can now be included as a part of the First Nation’s local revenue account, and perhaps more importantly, it may assist in encouraging provinces to change current policies to enable these types of payments to First Nations.

Each year over $1.7 billion is paid by governments or government organizations to other governments in lieu of property tax. For the federal government, over $500 million in PILTs, are made by the Public Works Canada or Crown corporations to provinces, local governments and taxing First Nations for federally-owned properties (e.g., RCMP buildings, border facilities, Canada Post, CMHC). First Nations who have property tax laws and federal property on their lands are eligible to receive PILTs; but must complete an application each year for the PILT (for more information visit the PILT website at http://www.tpsgc-pwgsc.gc.ca/biens-property/peri-pilt/index-eng.html).

In the case of provinces, similar payments are made by the province or provincial Crown organizations to local governments for provincially-owned properties (e.g., provincial office buildings, SaskPower, BC Ferries, LCBO, Manitoba Hydro). These provincial payments are often termed “grants in lieu of taxation” (GILTs).

PILTs and GILTs evolved because of the “Crown immunity” reflected in section 125 of the Constitution. Section 125 provides an intergovernmental immunity from taxation on “…lands or property belonging to Canada or any province…”. PILTs and GILTs therefore enable the federal and provincial governments to contribute to the cost of local services while ensuring section 125 is not contravened. Most PILTs and GILTs are based on legislation (e.g., the federal Payments in Lieu of Taxation Act or Ontario’s Electricity Act), but in some cases are based on provincial policy.
While the vast majority of local governments receive PILTs and GILTs for federally-owned and provincially-owned properties situated in their jurisdictions, only a small fraction of the Canada’s First Nations receive these payments (currently four First Nations receive federal PILTs, despite the fact that there are over 100 federal properties on reserve across the country.).Though there are several reasons for this disparity (e.g., not all First Nations have tax regimes, and the amount of federal and provincial property on reserve is less than off- reserve), the most noteworthy reason is nearly all provincial governments and their Crown corporations have not extended PILTs to First Nation governments. For example, legislation supporting BC Hydro empowers the company to pay GILTs to BC cities and towns, but not to First Nation governments in BC. The same is true for SaskPower, NB Power, SaskTel, and Manitoba Hydro. All of these provincial Crown corporations occupy interests on reserve, but do not pay GILTs to First Nations.

To get a better appreciation of the PILT and GILT revenue loss experienced by First Nations, the FNTC recently commissioned economic research on federal and provincial PILT and GILT programs. This research, along with recent changes to the FMA, will greatly assist the FNTC in increasing awareness, and supporting First Nations who are taking their case for fairness to provincial policy-makers. Provincial governments will need to change their current approach to GILTs so First Nation governments are treated equally in the application of GILT programs.

Commissioner Bill McCue is a councillor and former Chief of the Chippewas of Georgina Island First Nation, and served as South East Regional Grand Chief for the Union of Ontario Indians from 1994 to 2003. He was also previously member of FNTC’s predecessor, the Indian Taxation Advisory Board (ITAB) from 1997 to 2007, when he became a Commissioner for the FNTC. As Chief, Commissioner McCue was an original signatory to the Framework Agreement on First Nations Lands Management (FNLM) and his community ratified the first Land Code in 1997. He is currently on the FNLMI board of directors, as well as the finance committee for the Lands Advisory Board. Commissioner McCue has also served as president of the Ogemawahj Tribal Council and chairman of their economic development board.

Commissioner McCue is a firm believer in the importance of local economic development. He has helped his community develop a large number of cottage leases and improve local services and infrastructure. He was also chairman of the Casino Rama Revenue Sharing Committee, which developed a revenue-sharing formula to share gaming revenues with all Ontario First Nations. Last year, the Chippewas of Georgina Island First Nation also opened a new business plaza and restaurant across from their marina. There are now approximately 75 new on-reserve jobs, with half being filled by members and half by people from the surrounding area. This is creating a significant impact in a community of approximately 200 residents.

Clearing the Path recently had the opportunity to sit down with Commissioner McCue to talk about his experience and involvement with the FNTC and his thoughts on property taxation in Ontario.

What has your experience as a Commissioner for the FNTC been like and how has it changed since your role with FNTC’s predecessor ITAB? One of the biggest changes for the Commissioners has been the responsibility for approving First Nation laws directly rather than recommending them to the Minister for approval as we did with ITAB. Another change has been having taxpayers on the Commission, which brings additional perspectives to our discussions. I feel privileged to have helped First Nations exercise their tax jurisdiction. I’m deeply honoured to be part of such a diverse and knowledgeable group of people. I especially want to acknowledge the leadership and vision of Chief Commissioner Jules, without him this would not have happened.

Recently the federal government has emphasized nation-to- nation relationships. How does taxation fit into the emphasis on this relationship? Revenue jurisdictions such as taxation are key to a nation-to-nation relationship. Although the federal government will always have core funding obligations, First Nations need to have their own revenue sources to be equal partners in confederation.

In BC, approximately 50% of First Nations have implemented property taxation. What are your thoughts on the traction of property taxation in Ontario? What do you see as the difference? There are fewer First Nations with residential and commercial leaseholders on Ontario reserves. There also hasn’t been the history of local governments collecting taxes on reserve lands without providing services as has happened elsewhere. Where there have been on-reserve residents, in many cases the First Nation implemented service fees rather than property tax. In our community we have utility taxation and service fees for cottagers.

Recently the Chippewas of Kettle and Stony Point First Nation (CKSP) became the first First Nation in Ontario to adopt FMA property taxation. In your view, what impacts or affects will this have for other First Nations in the province? CKSP’s property tax law will be a good example for other First Nations in Ontario. It will help reduce the subsidization of local services to leaseholders and reduce collection issues. I think it will show taxing non- member interests on First Nation lands doesn’t infringe on treaty rights. Hopefully it dispels the misnomer that property taxation is tied to PST exemptions. It also demonstrates leadership and good communications can overcome fear of taxation among community members.

Looking back to the early days of ITAB, what were your expectations of property taxation at that time? How has your view changed now with the current state of property taxation? In the early days, people thought very few First Nations would participate in property tax — maybe 20 across Canada. However, as First Nation property tax was implemented, it soon became apparent that many more First Nations had taxable property on their reserves, including utility properties and railway properties. With the FMA, First Nation property tax now includes a more complete range of local revenue options such as Development Cost Charges and local revenues can be leveraged to finance local infrastructure. There are now 177 FMA First Nations across Canada generating millions of dollars for their local economies each year.

The FNTC, along with the First Nations Financial Management Board (FMB) and the First Nations Finance Authority (FNFA) hosted a side event presentation on May 12, 2016, as part of the 15th session of the United Nations Permanent Forum on Indigenous Issues, held in New York during May 9 to 20, 2016. The side event, “A Successful Model of Indigenous Governance Through an Indigenous-led Institutional Framework,” was an opportunity to share the success of First Nations who supported the development of the First Nations Fiscal Management Act with the international community and to enhance the profile of the regime.

The 90-minute panel discussion focused on three themes:
• The First Nations Fiscal Management Act as a successful model of Indigenous governance.
• Asserting jurisdiction leads to better economic development outcomes and improved social well-being.
• This successful model can be replicated to support Indigenous self-sufficiency and greater self-reliance.

Chief Commissioner Jules, Mr. Harold Calla (Executive Chair, FMB) and Mr. Ernie Daniels (President and CEO, FNFA) each made brief presentations followed by a question and answer session. The event served to position the work of the institutions within the global discourse on Indigenous economic development.

In attendance were a number of Indigenous representatives, as well as the Minister of Indigenous and Northern Affairs Canada, Ms. Carolyn Bennett, and her officials.

As the Chippewas of Kettle and Stoney Point First Nation move forward as the first First Nation in Ontario to implement FMA property taxation, the Commission also looks back on the evolution of real property taxation powers for Ontario First Nations to better understand the history of First Nation property tax in that province.

Prior to the 1970s, municipalities in Ontario could and did tax leasehold properties on reserve. At that time, the Ontario Assessment Act (R.S.O. 1960) exempted “property held in trust for a tribe or body of Indians, but not if occupied by a person who is not a member of a band or body of Indians”. In other words, the Ontario assessment legislation of the day provided for the assessment for taxation purpose of non-Indian lessees of reserve lands in the same way as if the land was owned and held by any other person. Consequently, municipalities collected property taxes from reserves, but in almost all cases, delivered very little, if any, services within the reserves in return.

In 1968 and 1969, Chiefs of the Curve Lake, Christian Island, Walpole Island, Chippewas of Sarnia, Kettle and Stony Point and Georgina Island formed an “Indian Taxation Grievance Committee” (ITGC) and met with officials of the Ontario Ministry of Municipal Affairs. The Chiefs’ position was that while they could not commit all First Nations in Ontario to support an initiative to remove the reserve taxation provisions, the removal of reserve lands from municipal taxation could be made optional and with this change, the taxes previously paid to municipalities by the lessees on reserve lands could go to the First Nations in order to ensure that the necessary services previously lacking on reserve are provided.

These discussions led the Ontario government to review its taxation practices and eventually decide to stop the assessment, and thereby the taxation, of real property interests located on reserve. Bill 107, An Act to Amend the Assessment Act was passed by the Ontario legislature and became law on May 18, 1973. Bill 107, in effect, repealed municipal taxation powers in relation to First Nation lands and left the property taxation field open for First Nations to exercise their jurisdiction pursuant to the Indian Act.

Last year, the FNTC commissioned a report to examine the circumstances under which the province of Ontario decided to forego tax jurisdiction on reserve lands. One aspect of the report was to consider “whether the reasons behind that decision bear on the reluctance of some Ontario First Nations to engage in real property taxation today.” The report’s author Paul Salembier is a former general counsel with the federal Department of Justice who provided advice on legislative and regulatory issues affecting First Nations.

The report found the fundamental issue in 1973 in Ontario was the disconnection between the collection of property taxes from the non-status holders of interests in Indian reserve lands and the non- provision of local services by the municipalities/province to those non-status taxpayers.

While the report didn’t directly connect the 1973 changes to any ongoing reluctance by Ontario First Nations in regard to property taxation, clearly the First Nations who formed the ITGC in 1968 were opposed to municipalities collecting taxes on reserve lands and not providing services.

The Chippewas of Kettle and Stony Point (CKSP) has recently become the first First Nation in Ontario to establish its property taxation jurisdiction under the FMA. As part of rolling out its property tax regime, the CKSP has also formalized a working relationship with Municipal Property Assessment Corporation of Ontario (MPAC) resulting in contracted assessment services being provided to the First Nation.

The Kettle Point reserve is located in southwestern Ontario along the southeast shore of Lake Huron, 35 kilometres northeast of Sarnia and adjacent to the town of Forest. The Kettle Point reserve is approximately 1,100 hectares and includes 300 cottage leaseholds.

The CKSP has invested many years into the establishment of their property taxation regime. The work included developing their annual laws, registering their tax administrator Stephanie Bressette in Tulo’s First Nation Tax Administrator certificate program and working with FNTC to modify the Tax Administration Software (TAS) to support their tax administration. The software modification was necessary to support a First Nation property tax system in Ontario, as well as to meet CKSP’s specific tax administration and reporting needs. FNTC also facilitated work with the Ontario assessor, MPAC, who agreed to provide assessment services for the new tax system.

CKSP has extensive plans for development of their lands that highlight the need for increased services being requested by leaseholders and member residents. It is clear property taxation under the FMA will lead to more revenue for the CKSP community, provide formal mechanisms to address taxpayer concerns regarding assessed values and lead to increased land values and associated leasehold revenues for the locatee landlords.

CKSP has many local attractions for visitors to enjoy including its famous “kettles,” recreational beach, golf course, shopping plaza, veteran’s memorial, and annual pow wow. Now the First Nations has a property tax system to generate stable local revenues to ensure the provision of quality local services and further infrastructure and community development. The CKSP property tax system, supported by TAS and the authoritative assessment services provided by MPAC, can serve as a model of best practices for other First Nations in Ontario.