The City of Ottawa has lost its Federal Court appeal over how much money is owed to the municipality in lieu of property taxes on federally-owned properties around the national capital.
The Federal Court sided with the federal government in a dispute over the amount of payments in lieu of taxes (PILTs) the government should pay to the city.
The court
ruled in February 2025 that the federal government made a “reasonable” decision to pay a discounted rate
for PILTs, which are paid instead of property tax to cover the cost of municipal services because the city cannot collect property taxes from another level of government.
Mayor Mark Sutcliffe called the judge’s decision “disappointing” at the time and said there was “clear evidence that the federal government and its agencies have been underpaying their taxes to the City of Ottawa for years.”
The city’s legal team appealed the Federal Court decision in March 2025.
The court dismissed the appeal after hearing arguments on Jan. 12.
The appeal challenged the federal government’s reliance on rate reduction for the provincial government in business education taxes — which are implemented for business taxpayers — as a basis for reducing its overall PILT obligations to the City of Ottawa.
The federal government’s “interpretation has resulted in a reduction to PILT revenues of approximately $11.5 million annually, beginning in 2021,” according to a memo from interim city solicitor Stuart Huxley.
That equates to a total revenue reduction of $58 million from 2021 to 2025, though $35 million of that has been offset through provincial one-time funding.
The remaining $23 million to date represents “foregone revenues” for the city,” Huxley wrote in a Jan. 15 memo.
The city’s base budgets have been adjusted since 2024 to reflect the reduced PILT revenues and there is no impact to existing approved base budgets, Huxley wrote.
The city’s appeal was dismissed in a ruling that found the original trial court’s findings were reasonable. City staff and external legal counsel will conduct a “detailed review” of the written decision and the reasons for dismissing the appeal “to determine whether any further recourse is advisable,” Huxley wrote.
The city was ordered to pay $5,000 in legal costs to both the federal government and Canada Post.
