What is a university? What are its purposes? These are big and important questions for academics, policy-makers and the general public, especially in light of rapid societal change and enduring fiscal challenges in the public sector.
In the important area of property tax, the question takes on additional relevance because, pursuant to section 54(1) of the British Columbia University Act (the “Act”), land that is:
- (1) vested in a university; and
- (2) held or used for university purposes
is exempt from property tax under the Community Charter, the Local Government Act, the School Act, the Vancouver Charter and the Taxation (Rural Area) Act.
It can safely be said that a university’s purposes include education, research, student and faculty services, university administration and student accommodation. So, there is little doubt that, for example, land used for classrooms or laboratories is “used for a university purpose”. But what about the on–campus bus station? What about fast-food restaurants, convenience stores and pubs at the student union building? Would it make a difference if they are student-run or operated by a private business?
The requirement that land vested in a university be “held or used for university purposes” was added to the Act in 2003, but the Act does not provide guidance about how broadly or narrowly to define a university’s purposes. Clearly, there is room for reasonable people to disagree.
In fact, reasonable people did disagree. As we reported back in February 2008, differing interpretations of the University Act led to tax assessments of certain university lands at SFU and UVic, and an appeal to the Property Assessment Appeal Board. That decision was, in turn, appealed, and now the BC Supreme Court has issued its decision, confirming that university land held or used by for-profit ventures may qualify as land “held or used for university purposes” and therefore be exempt from property tax.
Background
SFU and UVic own the land comprising their main campuses, including their respective student union buildings. The buildings are leased to each university’s student society and some of the commercial retail units are, in turn, leased to third party businesses.
At issue were commercial retail units that were being used as fast-food outlets and travel agencies, as well as a mini-mart, hair salon, pharmacy, chiropractic office and dental office. These units were assessed property taxes by the relevant tax assessment authorities (whom we’ll refer to as the “Assessors”) because, in the Assessors’ view, the units were not being held or used for university purposes. Note, the Assessors accepted that food outlets and commercial operations that were student-run did qualify for the tax-exemption.
The SFU bus loop was also assessed. The bus loop is located on land owned by SFU, with Translink using the land for bus services pursuant to a non-exclusive license to occupy.
While the businesses and the bus loop are open to and serve the public, each primarily serves the students, faculty and staff of the university.
UVic, the UVic Student’s Society and the Simon Fraser Student Society appealed the tax assessments to the Property Assessment Appeal Board and won. The Assessors appealed to the BC Supreme Court.
The Decision
Where words in a statute are undefined, the general rule is that they are to be read in their plain and ordinary sense, in the context of the Act and harmoniously with the Act’s scheme and object and the intention of the legislature. Rather than a narrow interpretation, the words are to be given a broad and liberal interpretation.
The Assessors’ position was that the context of the Act and the objects and intention of the legislature put various constraints on the interpretation of the words “university purposes”. One proposed constraint was the Act’s description of various functions, duties and powers of a university and its principle actors (the board, the senate, faculties etc). Since these descriptions are centered on education, academic activity and degree granting; so too should “university purposes” be limited to education, academic activity and degree granting.
Madame Justice Ballance disagreed. In reviewing various provisions of the Act that set out processes and constraints on certain particular activities and powers (e.g. disposing of interests in land, creating faculties etc.), she concluded that these do not preclude any particular activities. Rather, she found that the scope of university’s powers is “considerably open-ended”, which complements a university’s natural person powers and the stipulation that universities must “generally, promote and carry on the work of a university in all its branches.” The Act as a whole, therefore, sets out “a broader notion” of what a university is and what it can be, and empowers the board, in particular, to shape the purposes of a university. The scope of “university purposes”, therefore, “reaches beyond the functions and duties of the university and its components as set out in the Act – the whole is greater than the sum of its individual parts.”
Another proposed constraint was the Assessors’ interpretation of the legislative intent behind the 2003 amendment – they argued that the purpose of the provision was to ensure commercial enterprises that happened to operate on-campus would not have preferred property tax status, and so the words should be given a restrictive interpretation. In support, they cited several Canadian cases that, in their view, supported the interpretation that, in order to qualify for a tax exemption, the land’s use had to be “necessary in the sense of critical”, or “inextricably intertwined or otherwise indispensable” to the furtherance of a university objective. Madame Justice Ballance reviewed and ultimately found that neither the legislative intent nor the case law compelled her to apply a restrictive interpretation to the tax exemption.
The final proposed constraint on the interpretation was the argument that universities do not pursue profits, and therefore for-profit ventures cannot pursue university purposes. Once again, a plain reading of section 54(1) shows that there is no distinction made between land used for a for-profit purpose and land used for a not-for-profit purpose. Madame Justice Ballance was convinced that a for-profit private business could simultaneously serve a university purpose (i.e. the two purposes are not mutually exclusive). Therefore, land held or used for a for-profit purpose will qualify for the tax emption if it is also held or used for a university purpose.
With no statutory or other legal constraints on the interpretation of the words “university purposes”, Madame Justice Ballance applied the general rule of statutory interpretation described above, and concluded that “university purposes” must refer to today’s modern Canadian universities – these are multifaceted institutions with broad objectives, offering a broad array of ancillary services beyond the provision of academic courses, research and granting degrees. She accepted that educational and academic objectives are “university purposes”, and that other functions and activities may also qualify as university purposes.
In particular, one of the main objectives of a university is student and faculty recruitment and retention – after all, what can a university be without both students and faculty?
On these bases, Madame Justice Ballance concluded:
The services carried out at those properties, and hence the uses of such properties, are important and convenient to the student body and demonstrably beneficial to the quality of their university life. While it is true that they are not indispensable or critically necessary to the attainment of the university’s educational objectives, they have a substantial and reasonable connection to the furtherance and advancement of the multiple bona fide broad objectives of a modern Canadian university, including attracting and retaining the ever vital student body. In that way, they qualify as “university purposes” as contemplated by section 54(1). To the extent that the purpose of the tax exemption is to bestow preferential tax treatment to universities is reflective of the societal benefit that such institutions confer, then a broad and liberal reading also accords with the purposive approach which forms part of the modern rule of interpretation. [emphasis added]
To summarize, the SFU bus loop provides space for an important service to students and faculty – public transportation. The assessed businesses (fast-food outlets and travel agencies, as well as a mini-mart, hair salon, pharmacy, chiropractic office and dental office) provide services to students at convenient locations and at lower cost than off-campus alternatives. This means that the lands are being used to improve the quality of life at the university and that helps achieve the recruitment and retention objectives of a university. Therefore, the lands are being used for a “university purpose”.
Conclusion
We have been informed that the Assessors have not filed an appeal of this decision and the time to do so has passed. So, for the time being, many for-profit businesses operating from university lands may benefit from the property taxation exemption found in section 54(1) of the Act.
Considering the broad interpretation given to “university purposes” by the Court, it will be interesting to see how tax assessment authorities apply the reasoning in this case. This is especially so because many universities are undertaking residential and mixed-use developments on their lands, thereby bringing into close proximity land uses that serve both the resident community and the university community. In addition, it will be interesting to see how “university purposes” will be interpreted in the future as for-profit activities become increasingly necessary and desirable to produce the capital to develop first-class infrastructure and attract top faculty and students.
