July 7th, 2020

Grow-op set for tax exemption

By Collin Gallant on September 26, 2018.

Work continues installing utility lines and roads at the site of Aurora Cannabis' proposed 1.2-million square-foot greenhouse in the Box Springs Business Park. Municipal leaders from across the province are planning to lobby the provincial government to change farm tax exemption regulations that could capture cannabis growing facilites, making farm buildings tax free by 2022.--NEWS PHOTO COLLIN GALLANT


The property tax bill on a million-square-foot greenhouse in Medicine Hat will be almost zero by 2022 under a long-existing provincial plan to lower taxes on farm buildings in major municipalities, the News has learned.

Right now, provincial taxation rules state sheds, silos and greenhouses are 60 per cent exempt from local property taxes. That will rise by 10 per cent each year until they are totally exempt after five years.

Municipal leaders from across the province this week will consider lobbying the Alberta government to carve marijuana production from the regulation when they hold annual meetings this week in Red Deer.

Such a move could provide a huge tax windfall in Medicine Hat, where the massive Aurora Sun facility, budgeted to cost $130 million to build, was announced last spring.

Such a boost to the tax base was likely considered a lock by Hatters when the project was unveiled last spring.

It was held up as an economic development coup, slated to bring in 400 permanent jobs, new revenue and a major power contract to bolster city coffers. At that point council approved a $6.6-million subsidy to help pay development and utility costs.

On Tuesday, Mayor Ted Clugston said he hopes the tax rules will be revisited, but even without tax revenue, the gains for the city are still significant.

“It’s not off the table completely,” he told the News of tax issue. “When you factor in (the city is) also the utility provider, there’s an economic benefit. There are jobs, the servicing, the spin-offs, and hopefully, net migration and home construction.

“Council had to make a quick decision, I’ll admit, but in the long term I think it will pay dividends.”

Both Clugston and officials from the city’s assessment department said council was aware of the taxation issue when deciding on the subsidy.

It will be paid out of reserve funds to cover the cost of extending utility service and roads to the site that would have typically been paid by the developer then recovered in the purchase price on 71 acres Aurora bought in the Box Springs Business Park.

“The public probably wasn’t aware of (the tax issue),” said Clugston, who says he is often asked about new tax revenue from the project. “I’m quick to point out it’s on a declining scale.”

This week’s annual conference of the Alberta Urban Municipal Association will take up the issue.

A resolution asking the province to clearly delineate marijuana production as taxable is being put forward by the Town of Sundre, where a 42,000 square-foot greenhouse is slated to be built.

It states that such operations are large and industrial in nature. As such, they require significant servicing from municipalities, and “ratepayers will be forced to subsidize … cannabis grow operations unless municipalities are clearly enabled to tax them at fair market value.”

The Aurora Sky facility, near Leduc, is located on federal land adjacent to the Edmonton International Airport, meaning it is not subject to local taxation.

Aurora also has growing space in Cremona, and other companies have plans to build cannabis growing facilities in Brooks and a host of communities in Alberta.

Sue Sterkenburg, the city’s chief assessor, stated she informed council in February of potential tax impact during the time period the Aurora deal was being put together.

“Those types of assessments include greenhouses and grain silos, sheds, anything that’s used for farming inside city limits,” she told the News. “A large-scale cannabis growing operation would also fall under those same regulations.”

The exemption only extends to growing space, and not operations to change the product, retail or office space, she said.

Clugston said the issue is similar to the fact Medicine Hat doesn’t charge a machinery and equipment tax. That means that industrial complexes are essentially only taxed on the assessment for their office space.

“It’s a major industrial player who is exempt,” he said.

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