Ottawa to pay $24M in decades-long dispute over Citadel Hill's value

A man walks across Citadel Hill as the sun sets over Halifax on June 20, 2016. (Darren Calabrese / THE CANADIAN PRESS)

HALIFAX -- A decades-long dispute involving a historic fortress in the heart of downtown Halifax has ended with a multimillion-dollar payout from Ottawa to the municipality.

The municipality says Ottawa has agreed to pay a total of $24 million in back taxes for Citadel Hill for the years 1997 to 2015.

The resolution comes more than 20 years after the disagreement began and more than four years after the Supreme Court of Canada ruled in favour of Halifax.

Halifax Mayor Mike Savage said he's satisfied with the resolution, which was the result of lengthy discussions between senior officials from the municipality and Public Services and Procurement Canada.

"I think it's a good day. It shows a reasonable approach to resolving this, which has been going on for some time," said Savage on Friday. "We think the number is fair."

Property owned by the federal government is exempt from provincial and municipal taxation, but Ottawa has established an act that provides payments in lieu of taxes. The amount of those payments are established by the minister of Public Services and Procurement Canada and are based on the value of the land.

Early last year, a federal panel valued the national historic site at $41.2 million -- $37.6 million more than what Ottawa argued it was worth.

The federal government had originally argued in Canada's top court that the roughly 16 hectares of land was only worth $10 because it has no commercial value.

But the Supreme Court ruled in June 2012 that Ottawa cannot set payments based on its own property value assessments, far lower than provincial assessments.

However the decision didn't include a value for the site, and the two sides were not able to come to an agreement on their own.

John Traves, the municipality's director of legal services, said the $24 million figure was reached after considering many factors, including the property value.

He said the federal government has already paid the municipality roughly $4 million in back taxes over the years, and it will soon hand over another $20 million.

Traves said as for payments going forward, that has yet to be determined.

"We're pretty excited because it's a very fair resolution," said Traves, who was involved in the discussions with Ottawa.

"But rather than get bogged down in a commitment that says we'll get X next year and X the following year... we're just pleased that we can put the disputed years behind us and we'll go forward as if it was any other property in the future."

In a statement, Public Services and Procurement Minister Judy Foote said she is pleased an agreement has been reached.

"Government is committed to ensuring that municipalities receive fair and reasonable payments in lieu of taxes for federal properties in their jurisdiction," she said.

The municipality says staff will be looking at how to allocate the forthcoming $20 million payment and will make recommendations to the audit and finance committee.

It said external legal costs for the federal panel hearings were $76,900, while external appraisal service fees were $40,000.