Moving the Finish Line: The deadline to complete your Intermunicipal Collaboration Frameworks is April 1, 2021

With the deadline looming for adjacent municipalities to negotiate, complete and adopt their Intermunicipal Collaboration Frameworks (“ICFs”), we offer the following food for thought.

• Municipalities can attempt to complete their ICF by way of voluntary arbitration before the deadline. With certain exceptions, in the event municipalities with common boundaries are not able to create an ICF by April 1, 2021, they will find themselves bound to follow the arbitration provisions set out in the Municipal Government Act (the “MGA”). Parties are free to engage in an arbitration process in advance of that date, which could mean entering into an ICF based on an agreed-upon overall framework, where a particular area of dispute is later referred to arbitration or agreeing to commence an arbitration in the absence of any agreed framework but starting that process in advance of April 1, 2021.

• Voluntary arbitration allows the participants greater flexibility in the process. Voluntary arbitration permits the parties to select the arbitrator, agree upon the procedural steps and timelines for the arbitration (such as the dates for the exchange of evidence and written argument and the opportunity for public input), and agree upon the apportionment of the costs of the arbitration. Under the mandatory arbitration process, the arbitrator determines when and how written submissions will be received pursuant to s. 708.36(6) of the MGA. Arbitration costs are apportioned in accordance with s. 708.41 of the MGA, which provides the costs must be paid on a proportional basis calculated based on the respective equalized assessment.

• Mandatory arbitration means figuring out how the public can attend. Section 708.36(5) of the MGA mandates that the hearings be open to the public unless the arbitrator rules otherwise, which will likely continue to present challenges to municipalities for many months. Section 5 of the Meeting Procedures (COVID-19 Suppression) Regulation provides that an arbitration may be held by electronic means, including, without limitation, a live, publicly streamed broadcast, if members of the public are able to hear the meeting as it occurs.

• Whether voluntary or mandatory, parties will have to determine which issues are in dispute. As in any arbitration, the first task for the arbitrator will be to determine what they are required or expected to address and decide. The requirements in the MGA with respect to ICFs and the associated arbitration to settle the terms of an ICF are quite general. When the MGA was first amended to include the requirements for ICFs, it was contemplated by s. 708.36(1) of the MGA that absent an agreement, the arbitrator must actually create the ICF itself for the parties. Now, however, that section has been amended to read as follows: Where a dispute is referred to an arbitrator under section 708.35, the arbitrator must make an award that resolves the issues in dispute among the municipalities. Therefore, municipalities must begin by identifying which issues are in dispute as it relates to the ICF, the arbitrator will settle those issues, and the parties are then required, based on the outcome of the arbitration, to enter into an ICF consistent with the decisions and directions of the arbitrator within 60 days, in accordance with s. 708.4(1) of the MGA.

• The narrower the issues that remain in dispute, the less costly and risky the arbitration process. An arbitration can be framed very narrowly in circumstances where the parties have agreed to many items but require an arbitrator to resolve certain specific areas of dispute; or very broadly in circumstances where the parties have not been able to reach agreement on any substantive items.

• There are many different ways of splitting the costs of intermunicipal services, facilities and infrastructure. Generally, however, costs are apportioned either on the basis of user ratios or catchment area. The user ratio approach is the most direct and concrete approach, but requires clear evidence of which residents benefit from a particular service. The catchment area requires the identification of an appropriate catchment area for a facility or service, and then allocating the costs between the municipalities based on their respective percentage of populations within that area. The applicable catchment area may vary between different types of facilities or programs, recognizing that people are likely to travel further for certain types of services than others. As the aim is identifying the overall value of the services provided, an often difficult task given differing perspectives, it is also possible to allocate costs based on a single lump sum contribution, a fixed percentage of costs or a fixed percentage of a party’s revenue or assessment.

• No matter which approach is taken, in order to establish fair cost sharing both parties will need to produce evidence. Municipalities must be prepared to provide evidence and information respecting the services in question, including the total cost of the services and their value to the residents of each municipality, as well as evidence that would help establish the proportionate benefit to the residents of each municipality. Gathering this evidence can be time consuming and costly but is essential to arriving at an equitable apportionment of costs.

• The decision of an arbitrator is, at some point, out of your hands. While it might not feel like it right now, municipalities have been given considerable time to negotiate, complete and adopt their required ICFs because it is recognized that a solution agreed upon by the affected municipalities is far superior to one which is foisted upon them. Any time a decision is left to a third party, be it a judge or an arbitrator, there is a level of risk and uncertainty of outcome. The arbitrator may not accept your arguments or agree with your position and you may find yourself on the receiving end of a decision which is far beyond the compromise you may have been willing to make.

Arbitration can be a very effective way to resolve a dispute when the parties are unable to do so themselves but municipalities must understand what they are getting themselves into and the effort and cost associated therewith.