Farmer says Penhold annexation plan will prove costly to producers

Tax relief for landowners affected by annexation should be extended, says farmer

A Penhold-area farmer said the town’s annexation plans will hit his wallet hard.

David Kaun said a proposal to allow landowners affected by annexation to pay the lower of Red Deer County’s or Penhold’s tax rates for 10 years should be extended to 50 years.

After the 10-year period expires, paying the town’s tax rate would boost his annual tax bill on his home quarter section by almost $4,000, Kaun told the Municipal Government Board at a public hearing on Thursday.

Kaun said the tax increase would have a “significant impact on reducing our farming profitability.”

If the land does not get developed for decades, the total amount of additional taxes paid would be about $40,000 after 20 years based on the 2016 tax rate, he said.

Other landowners nearby share his concerns, he said.

The town is aware of the financial concerns some landowners have with the annexation proposal, said Craig Teal, director of Parkland Community Planning Services.

Allowing the lower tax rates for 10 years was seen as a way to address that.

Annexation could also mean a financial windfall for landowners whose land is scooped up for development.

Owners of farmland will see the value of their land increased when it becomes a prospect for residential development. Farmland in the area typically sells for $1,500 to $2,000 per acre, while residential-zoned land goes for $10,000 to $15,000 per acre, said Teal.

“There is a potential capital gain waiting for the landowners,” he told the thee-person Municipal Government Board panel. “It’s just the timing is uncertain.”

Penhold has also worked out a five-year tax-sharing agreement with Red Deer County, which supports the annexation proposal. The county will receive all of the taxes from the annexed land in the first year. In the second year, it will drop to 80 per cent, the third year to 60 per cent and so on.

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