A plan to give oil and gas companies a break on municipal property taxes would deal massive blows to the revenues of Alberta’s rural governments, warns a group representing Alberta counties and municipal districts.
A plan to give oil and gas companies a break on municipal property taxes would deal massive blows to the revenues of Alberta’s rural governments, warns a group representing the province’s counties and municipal districts.
If the overhaul to the provincial rate assessment model is pursued, rural councils would be forced to balance their budgets through steep residential tax hikes or deep cuts to municipal services, said Al Kemmere, president of the Rural Municipalities of Alberta (RMA).
Some rural municipalities simply may not survive, Kemmere said.
“Nobody lives in a Cadillac world here,” Kemmere said. “Rural Albertans often get by with the marginal, but when you reduce like this, it’s going to hurt.
“Municipal viability hangs on this, in a lot of cases. Under this new model, will the municipality be viable within the next five years?”
The proposed changes are the result of a year-long, government-led review to provide relief to Alberta’s struggling oil and gas operators.
Consultations, led by a committee made up of industry and government representatives, began in December, and a report outlining four possible linear taxation models was given to the governing United Conservative Party’s caucus last week, Kemmere said.
Doubling residential tax rates ‘just not doable’
The province says no policy decisions have been made and it continues to consult with municipalities.
At issue are property assessment practices for oil and gas operations. The current system evaluates them on replacement cost — not market value — a practice industry and government officials say overvalues industry assets and inflates tax bills.
The four model scenarios look at factors such as asset depreciation, base costs, land assessment and other adjustments.
According to an RMA report, the proposed reforms would result in revenue cuts ranging from seven to 20 per cent annually. Some of the 69 counties and municipal districts represented by the RMA stand to lose up to 40 per cent of their tax base, Kemmere said.
To deal with pending revenue loss, some regions are looking at increasing the residential mill rate by up to 50 per cent, but rate increases could be significantly more for communities that rely more heavily on tax revenues from oil and gas companies.
“To collect what we’re losing, it’s almost a non-realistic approach,” Kemmere said. “We’ve got some members that are going to have to double their present tax rates within the residential sector. And that’s just not doable.”
‘Drastic cuts’
In Northern Sunrise County, the residential mill rate would have to be hiked by 200 to 500 per cent, or the county’s workforce — and corresponding services — cut by up to 80 per cent, its council said in a news release.
The council hopes to join with other rural municipalities f