Brewers frothing over city tax bill

Barb Sweet
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Labatt's Brewery in St. John's. — Telegram file photo

The provincial Supreme Court of Appeal says tax assessment legislation affecting certain commercial buildings in the city is "vague and inherently discriminatory."

The decision came in an appeal launched by the city's largest breweries, Labatt Brewing Co. Ltd. and Molson Breweries Ltd., of their assessments, beginning in 2008. The assessments saw the value of their properties skyrocket.

The higher assessments stemmed from new assessment legislation enacted by the province in 2006 that allowed the designation "special purpose property" to deal with hard to assess properties.

Under the previous legislation, the St. John's Assessment Act, Labatt's plant on Leslie Street in St. John's was assessed at $993,000, while Molson's across town on Circular Road was valued at $602,363.

In 2008, using the new legislation, the city assessed Labatt at $6,531,800 and Molson, $5,566,500.

The conundrum stems from certain commercial buildings that don't have much market value because they were constructed for a narrow purpose.

As the old real estate saying goes, "the value is in the land."

When it comes to determining property taxes for such operations, the task is difficult and the intent of the "special purpose property" designation was to allow the assessment based on rebuild value.

Both national brewery corporations acquired their buildings from original operators, who located the facilities on what was then the outskirts of the city to take advantage of hills and local streams for gravity-fed production. The structures were built on several different levels - a "unique design" without much resale value, the beer giants argue.

The Court of Appeal deemed the case the latest skirmish in an ongoing battle over assessment, with the beer companies arguing there isn't a level playing field - and that some commercial enterprises that should fall into the same special purpose category were still being assessed the old way.

That argument had no success when the breweries originally appealed their assessments to the city's review commissioner, who didn't see any inequity.

The battle isn't over yet.

Lawyer Michael Crosbie of McInnes Cooper, whose areas of expertise include municipal law and real estate, represented the breweries.

"For Labatt and Molson, the city got these new legislative provisions that the province passed provincewide and then applied them a certain way. The complaint was the way they applied them was inappropriate," Crosbie told The Telegram.

"The Court of Appeal's ruling is that Labatt and Molson were right to complain about how these things were applied. In that sense, Labatt and Molson are pleased with the ruling ... all they are looking for, per se, is fair treatment."

The breweries and the city are reviewing the decision and will have to go back to the commissioner for another hearing.

"It's too early to discuss in any way what that means," Crosbie said.

"We may be able to agree on this yet. We haven't had any of those discussions."

The breweries have been paying their higher tax bills ever since the new assessments were done, as it has taken awhile for the case to wind its way through the courts.

Crosbie said it's a similar process to other tax disputes and he's comfortable with going back to the commissioner, based on the appeal decision.

While the outcome can't be predicted, the decision could either revise the breweries' tax bills or have implications for other commercial operations that are being assessed at lower values.

It could even lead to an amendment to the provincial legislation.

The Court of Appeal said the city's attempt to use the legislation to solve the assessment dilemma caused "discrimination in the municipal taxation sense" and the root cause is the "vague and inherently discriminatory language" in the legislation.

"On these appeals I am satisfied that the appellants have established that the city's assessor assessed their properties in an arbitrary, inequitable and discriminatory manner by the exclusion of a significant number of properties which the city's representatives, during the hearing before the commissioner, acknowledged would or could fit the (special purpose property) definition," Justice Michael Harrington wrote in the decision, which was agreed to by Justices Malcolm Rowe and Charles White.

"Such discriminatory classifications could be avoided in the future with greater clarity in the definition of "special purpose property."

The city assessment of "special purpose property" not only applied to the two breweries, but also to a third brewery, a soft drink bottling plant, a baked goods factory and a dairy/ice cream products plant.

Crosbie argued there were many other commercial operations in the same situation still being assessed at lower levels.

"The problem became the choice of definition (of special purpose buildings) gave headaches to people as to what was included and not included," Crosbie said.

"It is impossible to know what is likely to transpire and who this effects or doesn't effect and that was part of the concern in the first instance which was applied to Labatt and Molson and some others."

The court awarded Molson and Labatt its legal costs to be paid by the city.

The city said it couldn't comment until it reviewed the decision.


Organizations: Labatt, Molson, Supreme Court The Telegram

Geographic location: St. John's, Leslie Street, Circular Road

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Recent comments

  • McLovin
    December 06, 2011 - 07:45

    Three breweries, a soft drink bottling plant, a baked goods factory and a dairy/ice cream products plant? Is this City going after all the major commercial water consumers for any specific reason?

  • McLovin
    December 05, 2011 - 12:21

    Do commercial buildings in St. John's have water meters?

  • EB
    December 04, 2011 - 03:45

    By all means let them pay increased taxes, homeowners were reassessed and this resulted in higher taxes. Why should businesses be exempt? They make millions and can afford to pay higher taxes. That is one of the problems in this country, the rich are not taxed enough. It is time they paid their dues.

  • David
    December 03, 2011 - 14:12

    At $24 a dozen for such truly godawful products, these "brewers" should just quietly pay the tax and keep thier business profile as low as possible....they have a license to print money, thanks to a clueless and oblivious market. Pay the tax, keep telling us how quintessentially "Canadian" (!) your wretched swill is, keep shipping the profits to your foreign owners, and let the good times roll.

    • PETER
      December 03, 2011 - 20:38

      DAVID, before you make such comments on the price of beer and the licence to print money you should look deeper into the pricing. Do you realize that a huge percentage of that is already tax? If the business and property tax proves too much and they pull up stakes and move out, the city will be left with huge buildings that cannot sell, a loss of business and property tax, and a loss of jobs for one aweful lot of people. You should also look into owner ship, you make comments that really have no basis in reality. As for the product, some like it, some don't, but you shouldn't make such biased comments without looking at facts. Me? I hate beer, but others like it, and it is part of our commerce, if you don't like it fine, but at least make comments that make sense.

    • David
      December 05, 2011 - 15:41

      Molson's and Labbatt's are subsidiaries of foreign mulit-national companies...if you don't even know that much, I suspect a discussion of the criminally robust economics of selling alcohol, including the aspect that each provincial government puts their own tax ON TOP of the price (not as a 'cut' of the manufacturer's profit) would surely be pointless.

    • PETER
      December 06, 2011 - 16:33

      DAVID, again you have it wrong. Beer is $24 a dozen, taxes in, not $24 a dozen plus tax, so the tax is not on top, it is included. There is nothing criminal about selling beer or alcohol, you may not agree with it, but it is not illegal. The companies involved to not send $24 a dozen away to foreign companies, only a small fraction goes, and that is the same for most large companies operating in Newfoundland, again nothing illegal about that. Gas companies, food and restaurant industries and so many more do that, how about cigarettes?Also, the huge jump in assessed values, even according to the courts is unfair. Imagine if your home went from $100,000 to over a million dollars for tax assessment, that is the kind of jump they took. If they closed up, the price of beer would be higher, that matters not at all to me. But the unemployment it would cause, and the loss of a city tax income, plus those who like a beer would have to pay more just for the shipping, and the foreign companies would still get their cut. Again, at least have a balanced view, not a biased view.

  • MBC
    December 03, 2011 - 11:29

    I'll drink to that appeal !!

  • c brewer
    December 03, 2011 - 09:47

    Of course, tax them all to death so that they all pull up stakes and transfer their businesses to NOVA SCOTIA.

    • David
      December 03, 2011 - 17:04

      Please don't let them leave...we'll pay them to stay! Just have them fill out this ACOA application, and their expenses become sources of's the Newfie business math, aka Finance for [Politicians of] Dummies.