Cautious optimism over giving cities tax power
By COLLIN GALLANT on June 16, 2019.
cgallant@medicinehatnews.com@CollinGallant New rules that could allow cities to give lengthy tax concessions to spur business activity could be beneficial, or could under cut Medicine Hat’s traditional advantage luring business, Ted Clugston told the News this week. Local Chamber of Commerce officials, as well welcomed the proposals, but say protocols must be established to not disadvantage competing businesses or taxpayers. The legislation, Bill 7, was only introduced by the UCP government last week, and Medicine Hat council has not yet developed a formal position, said Clugston. However, the issue has been part of local economic development conversations for years, and council recently applauded NDP-led changes that discount taxes in certain cases on sales of contaminated brownfield sites. “I do think the previous government did it right, give them credit,” he said. “On (new proposals) the jury is still out.” Concerns are a potential ofor bidding wars between municipalities for new business, or it being applied too broadly, particularly in cases where existing businesses would face a new competitor that benefits from the break. Clugston said internal policies would need to be developed and the Alberta Urban Municipalities Association is developing recommendations. “Maybe we need to tighten it up a little bit, but I do applaud the government,” he said. “They campaigned on jobs and the economy. It’s noble, they’re trying to incent business.” Alberta’s new Municipal Affairs Minister Kaycee Madu sent letters to various media outlets saying such programs give “power” to cities to attract business by offering long-term tax reductions or cancellation. Further, it reads, they are available in jurisdictions that Alberta competes with for investment, such as Saskatchewan, B.C. and the U.S. Gulf Coast. “These jurisdictions have successfully used this tool to spur investment and revitalize their local economies. If passed, Bill 7 would bring the same advantage here,” it reads. Last year the News was first to report locally that Methanex had been awarded up to a $100-million break by paying state and local taxes on an increasing scale over several years on a potential expansion in the U.S. However, local taxes in Canada are charged on a much lower rate, and specifically in Medicine Hat, no Machinery and Equipment levy is in effect – long touted as a key selling point by the city. In the Methanex case, the local plant’s assessed value and the 2019 tax rate translate to a property tax bill of only about $200,000. Medicine Hat Chamber of Commerce executive director Lisa Kowalchuk said the program described in Bill 7 could be advantageous to attracting new business activity or retaining employers, but qualification standards, such as total investment and job creation, should be developed. “When site selectors are looking there are a number of factors, and incentives are certainly one of those variables” she said. “There’s a challenge for municipalities … structuring them so it doesn’t put existing businesses as at a disadvantage.” For years, business and development lobby groups have asked the province to give municipalities the ability to lower local property taxes to encourage investment, target specific industries or support diversification efforts. This spring, Medicine Hat council heard first reading of a potential tax abatement bylaw specifically targeted towards an effort to sell two municipal properties – the parking lot at 603 First St., and the Medicine Hat Arena. In those cases, discounts are spread over up to five years and require a public hearing, which is scheduled in July, for the downtown parking lot. Tax concessions are capped at the potential cost to cleanup of specific sites, have a five-year sunset clause, and require a public hearing. The matter related to the parking lot will be heard in July. Medicine Hat is one of the first to propose using the regulation, though local administrators said first two properties would be test case for developing future protocols. Council members generally applauded the move, with Clugston saying he could see it being more broadly applied. 25-24
