Rural Municipalities of Alberta says its members need more power to make oil and gas companies pay their taxes. Photo by PAUL COWLEY/Advocate staff

Proposed oil and gas assessment changes could have big impact on municipal revenues

Croup representing urban municipalities is concerned about the outcome

By Masha Scheele, Local Journalism Initiative Reporter, The Hinton Voice

The Government of Alberta is proposing property assessment model changes, which could have negative effects on revenues of municipalities across the province, according to an impact report from Rural Municipalities of Alberta (RMA).

If implemented, any of the four proposed scenarios would change the method of assessing oil and gas properties. Overall municipal tax revenue loss for Yellowhead County could be roughly 26 per cent based on 2020 tax rates, stated a report from County administration.

The various potential changes could require Yellowhead County to increase the residential tax rate by between 16.3 per cent and 350 per cent, or the non-residential tax rate by between 1.3 per cent and 36.5 per cent.

In reality, the County may be forced to enact a combination of both changes, as well as reduce service levels and intermunicipal collaboration agreements.

In the scenario favoured by the oil and gas industry, the residential mill rate increase could go up by 350 per cent. The proposed changes mean reduced assessment values and taxation revenues from regulated properties such as oil and gas wells and pipelines.

“Our first concern is the time allotted by the provincial government for review and feedback regarding this assessment. Yellowhead County feels the short time-frame afforded to us is not enough time to do a comprehensive review of the content, as well as the addition to the lack of communication from the provincial government to both the affected municipalities and their residents,” stated Stefan Felsing, senior communications and marketing coordinator.

The provincial government is accepting input on the proposed assessment models from municipalities and other interested stakeholders within the next 30 days. Felsing added that the county has sent out letters to the Premier, various ministers, and both local MLAs.

In addition, they are sending letters to the mayors of the Town of Hinton and the Town of Edson.

Wells, pipelines, and other oil and gas equipment would be affected by the changes with no mechanism to require the industry to re-invest their savings into Alberta through job creation or capital investment, stated the RMA. The oil and gas industry would save the same amount that municipalities will not be collecting in tax revenue, stated a letter from Al Kemmere, president of RMA.

“Under the four scenarios proposed by the Government of Alberta, Alberta municipalities will lose between $109 million and $291 million in tax revenue in 2021, with likely increases each year as assessable property depreciates,” stated the RMA position statement.

Yellowhead County stated in their report that it is among 10 municipalities predicted to lose more than 20 per cent of its revenue.

Hinton and Yellowhead County have a revenue and cost sharing agreement that would be placed in jeopardy. The amount given to Hinton is currently about $2M through the agreement.

The County states the agreement stipulates that if the province changes legislation or regulations that negatively affect the revenue of the County by more than $1M, the agreement may be terminated.

Felsing said most of the County’s budget goes to infrastructure, with the majority of that being road development and maintenance, which supports local resource industries. There are currently more than 2,000 km of gravel roads and approximately 250 km of paved roads in the County.

The group representing urban municipalities (AUMA) has been involved in the review and is aware of the impacts to their members and concerned about the outcome. Libraries, cemeteries, culture, and community groups would also see a reduction in funding. Evergreens Foundation is also supported by Yellowhead County through a requisition for operating and capital costs.

The Yellowhead County requisition provided $4,176,948 to the Evergreens Foundation in 2020.

A decrease in Yellowhead County revenues would either result in decreased spending by Evergreens or an increase in the tax rate, stated the County’s report.

“As evidenced in the recent pandemic this is a highly vulnerable sector of society and decreased spending could have a significant impact on their viability,” it read.

RMA also stated that the only groups that win in every scenario are the largest oil and gas companies operating in Alberta, many of which have holdings worldwide and would be under no obligation to reinvest savings in the province. This means the assessment model review is not meeting its mandate of enhancing competitiveness and supporting municipal viability, but reducing assessments for the largest and most well-connected companies on the backs of small oil and gas producers and municipalities, according to RMA’s report.

The county reported that over the last two years they had seen a significant spike in unpaid taxes and these are primarily from the oil and gas industry.

“If the rate of increase that has been seen in the last two years continues, and there has been no indication of improved collection to date, then the 2020 noncollectable could be in the range of six to eight million dollars,” the report read.

If assessment to smaller oil and gas companies are also increased, the numbers filing for creditor protection may increase and along with that uncollectible taxes will increase. The oil and gas industry has also demanded that municipal tax rates be frozen, stated the county’s report.

Reduced funding would also mean reduced staff and a review of all services. No changes to the model have been finalized to this point and provincial decision-makers, including ministers and MLAs, are currently reviewing the various options.

Any final decisions on changes will likely be made in late August and implemented for the 2021 municipal fiscal year, stated the RMA.

Yellowhead County and the RMA is actively advocating to ministers and rural MLAs across the province for additional changes.

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