05/05/2013 02:00 EDT | Updated 07/05/2013 05:12 EDT

Citadel Hill tax dispute between Halifax, feds drags on nearly year after ruling

HALIFAX - Cities and towns across Canada are closely watching negotiations between the Halifax Regional Municipality and the federal government over the value of Citadel Hill, a legal expert says.

The amount of taxes the federal government owes the city for the national historic site has yet to be settled, nearly a year after Canada's top court ruled in favour of Halifax.

Geoffrey Loomer, a law professor at Dalhousie University, said the federal government is probably mindful of the possible repercussions the case could have for land it owns in other jurisdictions.

"The negotiation they conclude with respect to the Citadel is not legally binding on anybody else," Loomer said.

"But the information is going to get out there and presumably other municipalities or taxing authorities are going to say, 'Hey, we deserve the same kind of treatment.'"

Halifax won the case last June after the two sides battled in the Supreme Court of Canada over the value of Citadel Hill, more than 17 years after the dispute began.

Halifax said the roughly 16 hectares of land was worth $19 million, while Ottawa argued it was only worth $10 because it has no commercial value.

The Supreme Court ruled that the federal government cannot set payments based on its own property value assessments that are far lower than the provincial assessment.

But the decision did not include a proposed valuation of the site, and since then, the two sides have been unable to reach a deal.

Loomer said municipalities across the country with federal lands have been watching the case closely, including Cape Breton Regional Municipality, home of the Fortress of Louisbourg.

But he said municipalities would still have to make their own arguments to persuade the federal government to pony up, because the Supreme Court's decision doesn't have an automatic bearing on them.

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 works.

A spokeswoman for Halifax said the property value of Citadel Hill was reassessed this year at $25.8 million.

Tiffany Chase said the municipality is expecting a proposed valuation of Citadel Hill from the federal government within the next few weeks.

Public Works declined an interview request. But in an email, the department said if a settlement with Halifax could not be worked out, the matter will be sent to a dispute panel at the "earliest possible convenience."

Loomer said one option at Ottawa's disposal would be to repeal the law that gives municipalities payments in lieu of taxes.

"If the government is unhappy enough about this, they could repeal the act and pay zero," he said.

"I'm not suggesting they're going to do that, but it seems to me that in the negotiations, that could always be a threat."