You could call it the chickens finally coming home to roost. M.D. of Lesser Slave River CAO Allan Winarski, presenting a report on expected changes to the property value assessment model for pipelines and such, called it “a generational issue.”
The ‘issue’ is the government giving oil and gas companies a break in the form of a change to the way their properties are assessed for property tax purposes. The net effect would be they pay less in taxes to municipalities. A lot less, in some cases.
How bad could it get?
“If we don’t do anything,” Winarski told council last week, “the RMA (Rural Municipalities Association) has us doubling our residential property tax next year.”
It’s there in black and white in a report in council’s Aug. 12 agenda package. The RMA has taken the proposed changes in property assessment and done the math, municipality by municipality. Its report lets its members (I.e. counties and M.D.s) know what kind of a hit to expect, based on how heavily they rely on oil and gas tax revenue.
The numbers are startling. Lesser Slave River and its neighbour Big Lakes County are both pegged at around 200 per cent tax increase to maintain the status quo.
“This of course is rather scary,” said Winarski in his written report for council. “But it could be worse.”
How much worse is laid out in a table of figures showing the estimated impact on a selection of municipalities.
Woodlands County, for example, is looking at a 352 per cent hike; Northern Sunrise is staring 512 per cent in the face and the County of Greenview would be clobbered by a 649 per cent tax hike to cover the loss in revenue from its energy-related assessment. But the worst-hit of all would be the M.D. of Opportunity. The RMA calculations have the Wabasca-based municipality having to raise residential taxes by over 2,000 per cent, to cover a 30 per cent loss in revenue. Opportunity has long been famous for getting away with having a very high industrial mill rate along with a very low residential one.
What will actually happen is yet to be determined.
“It hasn’t been fully passed by the government,” Winarski told council.
Some version of it will presumably be passed, with a corresponding revenue hit for municipalities. How they deal with it will be up to each council, but it is unlikely any council would try to flip the entire deficit onto the taxpayers. Winarski called it “political suicide,” in his report to council. Alternatives to tax increases are cutting costs. Reductions to salaries, contracted expenses, “even the size of council,” could be contemplated. Not to mention service levels, such as on roads that industry very much relies on.
Winarski also told council the economic benefits of a tax cut for oil companies are doubtful.
“Don’t get sold the farm,” he said. “It’s not a valid economic argument.”
Councillors were not pulling any punches either in their comments. Reeve Murray Kerik said the benefits would be “to a very few oil companies, not to residents and not to government. There are “zero guarantees,” he said.
Councillor Robert Esau went even further. He’s so upset with the government on this issue he’s told them to “take my name off the list,” of UCP supporters.
Councillor Brad Pearson pointed out the bad news is not just for rural municipalities. The funding agreements the M.D. has with the Town of Slave Lake can be rendered “null and void,” he said, if M.D. revenues drop. “So towns are going to take a hit.”
Winarski’s final bit of advice for council was to, “persuade individual rural MLAs to act in the best interests of the residents who elected them.”