Rural municipalities stinging from oilpatch tax breaks are banding together

Rural municipalities concerned about provincial plan to cut taxes from shallow gas wells

Rural municipalities that could lose millions of dollars in tax revenues because of an oilpatch bailout plan are banding together.

Red Deer County has estimated the provincial government initiative could cost it $500,000 a year in lost taxes in coming years. Lacombe County puts its losses at $350,000.

Red Deer County Mayor Jim Wood has said the proposal amounts to provincial government downloading on to municipalities.

Wood said the government’s plan simply shifts the tax burden from the oil and gas sector to municipalities.

Red Deer County, with its strong commercial and industrial sectors, is better positioned to swallow the tax loss than other communities, he said. Other municipalities that are reliant on oil and gas industry tax revenues would be devastated by severe revenue cuts.

Representatives from 15 municipalities were called to Edmonton last month and told about a government initiative to give shallow gas well producers a tax break by cutting their municipal taxes by one-third.

Lost tax revenues would be offset this year by corresponding cuts in the amount of school taxes rural municipalities must provide.

However, there has been no indication similar compensation will be coming next year.

The government has also indicated it intends to review how much the oil and gas industry is taxed by municipalities, a move that makes some local officials nervous that further revenue hits are coming.

Lacombe County manager Tim Timmons said the province has said the reduction in shallow gas well taxes has been encouraged — but not mandated — by the province this year.

“Next year, and for future years, there is going to be a change in the assessment model to reflect that 35 per cent decrease,” said Timmons.

“In future years, it’s going to be a direct hit on municipalities that have those types of properties within their jurisdiction.”

Lacombe County council discussed the implications of the provincial plan at its meeting last week and voted to host a meeting of municipalities affected.

Among the concerns raised by councillors is the precedent set by directly helping a struggling industry with municipal tax breaks.

“The biggest concern is you’re picking winners and losers. What you do for one industry, there may be an expectation that you do it for other industries, or other sectors within the same industry.

“Council’s biggest concern is they just didn’t feel that was appropriate.”

There have been plenty of examples of industries hit hard economically, such as the cattle industry when bovine spongiform encephalopathy (BSE) was detected in 2003. Municipalities were not asked to slash cattle producers’ taxes then.

“It creates a little bit of a challenge for us, because where do you start and where do you stop?”

Rural Municipalities of Alberta president Al Kemmere said he spoke with Lacombe County and they decided the association would take the lead on setting up a meeting of the municipalities affected.

“We’re going to try and get a good understanding from each other of what the municipalities are looking at so we know that there can be a consistency in our approach,” said Kemmere.

“We’re waiting to get more information from the province first. They are supposed to be in the process of creating some guidelines and an application process.”

The meeting is likely to take place in late August.

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