The Manitoba Home Builders Association is expected to file its legal challenge against the City of Winnipeg's new growth fees this week, intensifying the rift between Mayor Brian Bowman and the development industry.

In October, city council voted 10-6 in favour of charging $500 for every 100 square feet of new residential space in selected areas at the fringes of the city, starting on May 1. The city's intention is to use the revenue from the new fees to pay for growth-related infrastructure.

The council-approved plan also calls for the fees to be applied to industrial, commercial, institutional and office developments in 2018 and to residential infill developments in older and mature neighbourhoods, including downtown, in 2019.

Several high-profile developers, including Qualico, warned council they would challenge the city's authority to charge the new fees. Following the council vote, the Manitoba Home Builders Association hired Thomson Dorfman Sweatman LLP to formulate the legal challenge.

That challenge is slated to be filed this week, setting up a battle with the potential to determine more than just whether Winnipeg can follow through on the mayor's promise to create a new revenue stream for the cash-strapped city.

Given that Winnipeg's growth-fee plan was created by the city's finance department, as opposed to city planners, a win for the city would further diminish the importance of urban planning in a city with a poor track record of developing long-term plans and sticking to them. Other cities typically use growth fees to stimulate higher-density development and discourage sprawl, rather than to generate revenue.

A city victory could also diminish profit margins for developers, drive up their costs or — as some maintain — drive more development outside city limits.

A city loss, meanwhile, would further weaken Bowman, who has struggled to see the city implement promises that range from complex (reopening Portage & Main to pedestrians) to the mundane (creating a downtown dog park).

Mike Moore of the Manitoba Home Builders Association and Winnipeg Mayor Brian Bowman stood next to each other in September, before council approved growth fees. The MHBA's legal challenge of those fees is expected this week. (Jeff Stapleton/CBC)

A loss would also diminish the mayor's leverage with Brian Pallister's Progressive Conservative government, which has signalled it is not keen on granting the city any additional taxation powers.

All of this presumes a legal challenge against growth fees could be settled during a relatively short time frame, and that isn't clear right now. Here's how that battle is likely to shape up:

The city's position

During the Sam Katz administration, the former mayor wanted to know whether the city possessed the ability to levy development cost charges. The conclusion, at the time, was Winnipeg required permission from the province to proceed with the charges.

Despite pleas by Katz, Greg Selinger's NDP government expressed no interest in amending the City of Winnipeg Charter to allow Winnipeg to expand its arsenal of taxation instruments.

This did not discourage Bowman to take another stab at a legal justification for growth fees. In a report to city council last fall, finance officials say Winnipeg can impose fees, issue permits and licenses for practically any reason council determines is good for the city.

This is because of some very general language in the charter, which states one of the city's purposes is "to develop and maintain safe, orderly, viable and sustainable communities."

According to the finance report, this purpose gives "broad authority to council to govern the city in whatever way council considers appropriate" in order "to enhance the ability of council to respond to present and future issues in the city."

In other words, Winnipeg is arguing growth fees are no different than zoning regulations or even building codes, which are also used to create orderly cities, at the behest of council.

The developer position

While the paperwork has not been filed, the developers are expected to make at least two arguments.

For starters, there's some low-lying fruit. In their report to council, finance officials concede the city charter "differs from that of most other major Canadian cities and other Manitoba municipalities who have been given specific legislative authority in their planning legislation to impose development cost charges."

The developers are also expected to pick apart the city's assertion that the authority to charge growth fees is no different than the authority to create zoning regulations.

"What we think we'll do is prove the proposed bylaw is illegal," Manitoba Home Builders Association president Mike Moore said in the fall. "The advice we have is the city does not have the authority to impose it."

The Brian Pallister wildcard

Within months of taking office, Manitoba Premier Brian Pallister stated he was opposed to the city's growth fees and would explore the legal basis for the fees.

He later declared the results of that review to be inconclusive and backed away from critical comments about the city plan.

While it's highly unlikely for the province to get involved in the lawsuit, it could play a role in determining the fate of growth fees following the conclusion of the legal battle.