NEWS FILE PHOTO The massive Aurora Sun facility is seen in this photo taken in late September from the parking lot of the Canalta Centre. The company said on Thursday that construction on it and a number of other projects is going well.
cgallant@medicinehatnews.com@CollinGallant
New rules on how cannabis production facilities are assessed for local taxes could mean new revenue for the City of Medicine Hat, but it might not be a bonanza, according to local finance officials.
On Wednesday, Municipal Affairs Minister Kayce Madu announced that cannabis production facilities will be written out of an exemption for agriculture buildings for local tax assessment.
That means new revenue from the burgeoning sector would flow to counties, towns and cities where processing facilities are located in the 2020 tax year.
In Medicine Hat however, the majority of the Aurora Cannabis facility that is currently being built in the city’s northwest, is a greenhouse/growing facility which is not captured by the change.
City finance commissioner Dennis Egert said the common practice would be to apportion a percentage of the facility to its use, meaning some increase to the non-residential tax base would be added.
“We’re still examining the implications from the announcement, but this will mean some new revenue for the municipal budget,” Egert told the News on Wednesday.
The city’s current budget calls for tax increases among all classes to be 4 per cent in each of the four years from 2019 to 2022. However, each year the rate is subject to final adjustments based on assessment growth, and if the base grows the increase is lessened.
Madu told the fall meetings of the Rural Municipalities Association that current tax regulations don’t adequately address cannabis production, which doesn’t really fall under the traditional definition of agriculture.
“Cannabis production facilities are large industrial operations and like any other local businesses, they need to pay for municipal services that they use,” Madu told the convention. “Beginning next year, you will be able to collect taxes on these properties.”
Rural municipalities president Al Kemmere said the group welcomes the announcement.
“We’ve been asking the government to put cannabis-production facilities on equal footing with other industrial businesses since legalization. I’m glad the government listened to our concerns and acted swiftly.”
Local politicians have criticized the state of affairs whereby major plants could be shielded from local taxation, but how the assessment works on the facilities is a complicated matter.
For Aurora, basically, the 1.6 million square foot greenhouse portion would still be taxed as a farm building, but the connected initial processing facility and office space would be considered in the commercial class in 2020.
Complicating matters, the facility won’t be complete until mid-year, requiring another adjustment, and greenhouses in urban areas are taxed at a decreasing rate and will be fully exempt in 2022.
Last year, the New Democratic government agreed with greenhouse growers that the difference in tax exemptions in rural and urban jurisdictions should be erased in the interests of fairness.
As such, a traditional 50 per cent tax exemption on greenhouses in towns and cities is set to rise by 10 per cent each year until it reaches 100 per cent.
Wednesday’s announcement does not cover industrial hemp processing facilities, meaning it’s questionable whether the 100,000 square foot plant proposed by Folium Biosciences would garner a similar treatment.
Medicine Hat also does not apply machinery and equipment levy on business owners.
Municipal assessors will be responsible for market-value assessments and the province didn’t provide an estimate of additional revenue.
Egert said that an updated city budget due in mid-December will reflect the potential assessment and revenue changes, as well as the potential effects of lower spending for cities in the provincial budget.
