City’s Municipal Projects Designations Raises Questions
By Robert Thomas
At present time the City of Moose Jaw has 11 designated municipal projects.
For the City of Moose Jaw a municipal project declaration means the project has some intrinsic value to the City and also most importantly tax deductible receipts are issued for any donations to the project.
The cost of and time used administering the issuing of tax receipts for municipal projects has been described as “minimal” by Administration when the issue comes to Council.
It is Council which ultimately decides which projects are declared municipal projects.
But is it that easy?
To find out we did some digging and found out there is more than simply accepting money, issuing tax receipts and then sending the money on to the group to use for the project.
There are clear and defined rules of what a municipality must do and their role when it comes to what is essentially accepting a gift from an individual or corporation to the municipality.
It’s not a simple task as recording the donation, issuing a tax receipt and finally passing the money onto a project being run by a third party.
There are clear and definite rules the City must follow under the Income Tax Act as well as local policies that comply with the Act.
Whether any, or all, of the present 11 municipal designated projects - as well previously designated municipal projects - conform to the true letter of the Income Tax Act may well be a matter up for interpretation.
To clarify what municipal projects are and how they are tax deductible MJ Independent contacted the Canada Revenue Agency’s (CRA) media department.
Canada Revenue Agency’s Response
In its written response the CRA said there are specific rules as to how a group or organization - like the City of Moose Jaw - can be a qualified donee.
“Under the Income Tax Act, only qualified donees can issue official donation receipts for gifts they receive from individuals and corporations. Registered Canadian municipalities are qualified donees for the purposes of the Act,” the CRA responded via email.
It’s because of the Act when the City receives a gift they can issue a tax receipt which helps reduce the payee’s income taxes.
“Therefore, when a municipality in Canada receives a gift, the municipality may issue an official donation receipt for the eligible amount of the gift. This would then allow an individual donor to claim a tax credit, or a corporate donor to claim a tax deduction,” the CRA wrote.
The CRA declined comment regarding the status of some of the groups listed as municipal projects siting privacy legislation. The CRA did however agree to respond in general terms.
Donors to the City for a third party conducting a particular municipal project could be eligible to have the City issue tax receipts.
“If a donor makes a gift to a registered Canadian municipality for the purpose of supporting a particular municipal project that is carried on by a third party, that could potentially qualify as a gift that is eligible for an official donation receipt.”
However the CRA also wrote the municipality would need to retain discretion on the project and how the money is spent.
“Generally, in order for a donation receipt to be issued in these instances, the gift would need to be made to the municipality itself, rather than to the third party, the third party would need to operate under the authority of the municipality, and the municipality would have to retain discretion as to how the project is carried out and how donated funds are to be spent,” the CRA wrote.
Funds donated to the City for a project could not just be simply passed on to a group.
“The municipality could not simply act as a conduit, by funneling gifted funds directly to the third party,” the CRA wrote.
Whether or not the gift would result in the City issuing a tax receipt was up to the municipality itself but at the same time they would have to ensure the Act was followed.
The Income Tax Act has no specific exemption for municipalities issuing tax receipts.
It does allow municipalities to tailor their municipal projects so long as they conform with the Income Tax Act.
Revenue Canada advises that if a group is itself a registered charity they, and not a municipality, should be issuing receipts for tax purposes.
“…if a third party carrying on a municipal project is itself a registered charity or other type of qualified donee, it should receive gifts directly and issue its own receipts for those gifts, rather than have the gifts flow through the municipality.”
But are there organizations with charity status listed as designated municipal projects and potentially having donations flowing through the City?
Festival Unaware Of Designation
The Saskatchewan/Moose Jaw Festival of Words is one of the listed municipal projects.
It is also a registered charity (donee for tax purposes).
According to the CRA the Saskatchewan Festival of Words received its charity designation on September 18, 2013 and has been able to issue its own tax deductible receipts since that time.
Asked if the Festival had informed the City about their decade old charity status the Festival’s artistic director Sarah Simison said such a move would have pre-dated her time with the Festival.
“The previous director did probably 10 years ago when we were initially granted our status,” Simison said via email.
She confirmed the City does not issue tax receipts nor have any control over the Festival’s operations.
“The City does not issue tax receipts on our behalf. The SK Festival of Words is a Registered Charity and we issue our own tax receipts and file our own annual returns with the CRA,” Simison wrote.
The Festival does receive funding from the City but it does not come from the municipal project designation, she wrote, adding the funding does not allow the City any control over the Festival.
“We do get annual funding from the City each year and we submit a request to the city for third party funding each fall. Our application includes a board approved budget, a copy of our most up to date audited financials, and we also include a full report on what programming the Festival provides and what those benefits are to the citizens of Moose Jaw. We then do a public presentation to City Council and are notified of what the City decides based on their budget. Of course you know this as I’ve seen you at those presentations before.
The City does not dictate to us where the funds are spent and the funding actually constitutes a very small percentage of our annual budget,” Simison wrote.
Once MJ Independent sent over the publicly available list of designated municipal projects to Simison said she would look into it.
“I’ll try to get some clarification through the city this year as I work through my annual application and presentation,” she wrote.
Square One Now A Registered Charity
At least one other designated municipal project - Square One Community Inc - already has its own charitable status since May 2, 2023.
Square One was added as a municipal project until it could achieve its own charity status. The status is set to expire at the end of the year.
At the time of being declared a municipal project former Square One vice-chair Councillor Crystal Froese said receiving charity status from the CRA could take some time.
The municipal project designation does not in any way indicate Council has approved and supports Square One’s objectives and actions.
Behind closed doors the City reportedly declined to sublet space to Square One and not partner with the advocacy/charity group.
The City rather opted to return the space to Moose Jaw Housing (Moose Jaw Non-Profit Housing Corporation) and allow them to effectively be Square One’s landlord.
In both cases - the Festival and Square One - have no direct City involvement or control.
But could control work the other way with groups requesting donated funding be spent in a certain manner?
The Multiplex Money
Members of designated municipal projects have in the past made demands on the City on how funds are spent.
During the Deb Higgins tenure as mayor demands were made by members of the now defunct and former municipal project - Moose Jaw Multiplex Builders Inc - that the City spend “their money” on upgrades to what was then called Mosaic Place.
The issue at that time was whether or not money not spent in the budget for building the Multiplex was either contingency funds left over or money raised by fundraisers.
At the time then Mayor Deb Higgins acquiesced to the external demands made by the fundraisers. Council voted - in a split vote - to see the funds as donated money and spend it on demanded upgrades. The funds were not returned to City coffers to be re-directed elsewhere.
There is no ready proof consideration was ever given by Council of the day to apply the relevant tax rules surrounding municipal projects when the decision was made.
It needs to be noted that Administration at the time termed leftover funds from the Multiplex build as contingency and not donated funds.
At the end of their successful fundraiser the Moose Jaw Multi-Plex Builders Inc left the responsibility of collecting pledges and remitting income tax receipts to the City.
Given the pledges were made to the Multi-Plex Builders and not the City - despite the rules surrounding municipalities as donees - and how third parties would need to operate under the authority of the municipality outstanding pledges were deemed uncollectable by the City.
This despite the Multi-Plex Builders having been granted a municipal project designation.
“I think again the lesson learned the last time it was a separate committee doing some of the work and not the City. Sometimes in the way we set these things up leads to that type of thing to happen,” former city manager Jim Puffalt said at Council’s May 11th, 2020 meeting.
RuBarb Productions
An example where a one-time City designated municipal project ending up on the rocks is RuBarb Productions.
The professional theatre company - which put on professional theatrical performances as well as operating a school of performing arts - closed its doors permanently after five years on September 28, 2018.
In its wake RuBarb Productions left numerous creditors including the Moose Jaw Cultural Centre for theatre and space rentals.
At its start RuBarb Productions Inc was designated a municipal project in October 2013 after a request from former Mayor Glenn Hagel then the chair of RuBarb Productions.
RuBarb Productions would become involved in a very public fight with the Moose Jaw Cultural Centre and leave after a disastrous summer program and more bills were wracked up.
Other than the initial report recognizing RuBarb Productions as a municipal project - and issuing tax receipts for donations - there are no public records of the City having any role in how they were spent.
City’s Response
As part of this story MJ Independent asked for the City of Moose Jaw to comment on the issue.
We asked several questions that the City said were diverse and would take time to respond to.
We asked how the City ensures and oversees how funds are spent by third parties so as to conform to their duties as laid out in the Income Tax Act.
The City replied they would answer our questions last Friday or this past Monday. No response was forthcoming.
As a result the story was published without a response from the City as there was in our opinion ample time to respond.
When the City responds we will publish their responses.
The List Of Municipal Projects
1. Moose Jaw Arts in Motion
2. Murals of Moose Jaw
3. Saskatchewan/Moose Jaw Festival of Words
4. Tourism Moose Jaw
5. Burrowing Owls Interpretive Centre
6. Northwest Community Association
7. Hillcrest Golf Club Inc. (expires December 31, 2022)
8. Moose Jaw and District Sports Hall of Fame (expires December 31, 2023)
9. Iron Bridge Sport Court (expires December 31, 2024)
10. Pickle Ball Moose Jaw (expires December 31, 2026)
11. Square One (expires Dec.31, 2023)
A Final Word From The CRA
The CRA did provide where to contact if people had concerns about any registered charities.
If members of the public are concerned that a qualified donee is not complying with the provisions of the Income Tax Act, they are encouraged to contact the CRA’s Leads Program.