Rural municipalities wrestling with province’s oilpatch tax cut proposal

Alberta government proposed cutting shallow gas producer municipal tax bills by 35 per cent

Red Deer County is among many Alberta municipalities that have been left chasing oilpatch companies for unpaid taxes in recent years.

That is why the county is considering taking up the province’s suggestion to slash the tax bill for shallow gas producers this year in return for an equal cut in the school taxes the county collects for the Alberta government.

With the province vouching for that portion of gas companies’ bills, the county knows it can count on that money at least, said Curtis Herzberg.

Premier Jason Kenney’s proposal to give shallow gas companies — many of them coalbed methane producers in central Alberta — has proven contentious.

While the government says it will compensate municipalities for lost taxes, no similar promise has been made for future years. For some, rural municipalities future tax losses could be in the millions.

As well, this year the tax break is voluntary for municipalities, but expectations are it will be a permanent change next year. Red Deer County could lose up to $1 million in taxes.

Herzberg said while giving oil and gas companies, which have been hit hard by the downturn, financial help has merit, expecting it to come from municipal taxes is not seen by many municipalities as the best way to go about it.

“It’s an awkward methodology, is a good way to put it,” he said. “This could have been done provincially.”

As well, it is unclear exactly how the province came up with the rationale to cut future shallow gas assessment values by 35 per cent — lowering their tax bills by the same amount.

A group of 15 municipalities that the province has been told will be affected by the new tax-cutting plan have been meeting through the Rural Municipalities Association (RMA) to discuss their options.

The precedent that will be set worries some. Municipalities have already been approached by companies in other sectors wanting to know why they are not getting a similar deal, says a summary of a recent meeting of affected municipalities.

How voluntary the program is has also been questioned, with provincial staff suggesting municipalities that don’t adopt the tax program will be required to through other means later.

Frustration was also voiced that companies that the shallow gas industry is getting baled out at a time when companies already owe municipalities millions — $81 million province-wide says an RMA survey.

Herzberg said municipalities have suggested only companies in good standing should get access to a tax break.

Lacombe County manager Tim Timmons said council will be considering what to do at its Oct. 10 meeting.

Should the province go ahead with its plan to reduce shallow gas assessments by 35 per cent, the county stands to lose $320,000 a year in taxes.

Lacombe County was among the 15 municipalities to meet on the issue, but there was no decision for all to take the same approach.

“It has to be decided by each individual municipality like any other tax cancellation or reduction request.

“Obviously, we’re not enamoured with it, but it is what it is.”

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