Counties tout tax change pause but still face financial issues ahead
By COLLIN GALLANT on October 21, 2020.
cgallant@medicinehatnews.com@CollinGallant Alberta’s counties say a plan to pause and study major changes to how property tax is determined for oil and gas wells is positive, but also that a continuing tax abatement program will hit their budgets soon. On Monday, Municipal Affairs Minister Tracy Allard announced that the province would hold off implementing changes that rural leaders said could cut 20 per cent of their tax revenue next year. New incentives include a three-year property tax holiday for newly drilled wells, and keeping in place a one-third reduction for older wells, until a final assessment review can be implemented. Newell County Reeve Molly Douglas called the announcement “absolutely positive” on face value, but she is still awaiting final details. “The good news is that they’re taking a better look at it,” Douglas told the News, but added that the one-third relief program will start showing up in county budgets for 2021 that are being prepared now. Plus, assessment will have to be reopened at some point. “It hasn’t been looked at since 2005, but it’s not something that can be done quickly,” she said. The potential worst-case scenario for the County of Newell was an $11.6-million loss in revenue among four options considered for re-evaluating tax values. The one-third reduction in taxes for shallow gas wells amounted to between $2.7 million and $3 million per year since 2018. Cypress County, as well, is particularly exposed to struggles in the shallow gas sector. The two counties are home to tens of thousands of wells that pay a major portion of municipal budgets, but are increasing uneconomical to operate compared to other gas discoveries. Cypress County officials were in all-day meetings Tuesday and were unavailable to respond. The province and energy firms called Monday’s co-ordinated tax relief and tax incentives a way to sustain and eventually grow the sector. “Municipalities need a strong oil and gas industry to provide jobs for their residents … and need to maintain roads and bridge to get workers to those worksites,” said Allard. She took over the portfolio this summer amid controversy and an uproar from rural leaders that updating the assessment model would hollow out their assessment rates and in some cases, put counties underwater financially. Cypress County officials told the News that to make up a loss, the county could cut its operational spending by 70 per cent and still need to raise taxes to make up the difference. Oilpatch firms have lobbied for new assessment rules as they seek to cut costs to combat low commodity prices. Four scenarios for changes were optioned that would cut between 7 and 20 per cent of revenue in some rural areas. Counties argued that to balance budgets deep cuts would be coupled with huge tax increases on farms, residences and non-linear businesses. Al Kemmere, of the Rural Municipalities Association, said Monday’s announcement was “a modified approach” that sets the table for new talks on “long-term solutions.” “This is also going to be a challenge for members, because reduced assessment immediately plays on to the tax rolls of municipalities,” he said. “The challenge is that municipalities are out those dollars … but our members will be willing to do their part.” 20-19
