User Fee Design by Canadian Municipalities: Considerations Arising from Case Law

Abstract

User fees have become increasingly relied upon by municipal governments in Canada to fund municipal services due to the combined pressures from federal and provincial devolution of responsibility and the political costs of raising property taxes. While there is a substantial body of literature regarding the rationale for user fees, little information exists about how to design and implement a user fee such that it satisfies the Canadian legal requirements that have been established for the formal classification of user fees. We provide a detailed review of the existing Canadian case law to highlight key legal, technical, and administrative issues that present design and implementation challenges for user fees for Canadian municipalities. Through this analysis we highlight the key legal tests for user fees and discuss their application in case law. The application and interpretation of these tests in the case law draw attention to several unresolved issues and inconsistencies that need to be navigated and resolved by the courts.