BIGHORN – The MD of Bighorn could lose almost half a million in revenue from its annual budget if a provincial proposal to give oil and gas companies a tax break gets approved.
A new document recently released to the Rural Municipalities of Alberta (RMA) association outlines Alberta’s proposal to cancel linear taxes from oil and gas companies, but officials are warning the loss would be on the backs of rural municipalities.
“This is a massive impact … this is one of the most profound documents that we have been given,” RMA president Al Kemmere said.
“This would be a tax break on oil and gas companies that would be on the back of municipalities and that is the residents.”
In the provincial document, Kemmere said there are four proposed scenarios to change Alberta’s assessment model for linear taxation for oil and gas companies, with the effect ranging from a $130 million to $400 million loss in revenue across Alberta for the first year.
Designated industrial properties are assessed by the provincial assessor with linear taxes drawn from linear properties, according to the Alberta government website. Linear properties include pipelines, railways, telecommunications and electrical power systems.
Historically, the taxes from the properties are given to urban and rural municipalities where the industrial property is located, which helps contribute to overall revenue in annual municipal budgets.
Outlined in the new document, is the proposed change to cancel linear taxation in the province, which would come as devastating news to municipalities, the RMA president explained.
“Under the worst-case scenario, it would be $400 million a year for the first year loss in revenue. The challenges that come along with that is the taxes would then have to be sourced [elsewhere],” Kemmere said.
One of the municipalities that would be impacted in the Bow Valley is the MD of Bighorn, which is host to several industrial properties within its borders. The proposed change would remove about eight per cent of revenue from the annual budget, Reeve Dene Cooper said. Depending on the four scenarios, the loss ranges from $398,169 to $496,324.
“The situation in our letter said there is a four per cent reduction in total taxes but [it] made a mistake because of our flood funding … the flood money has distorted our normal budget,” Cooper said.
Thanks to the flood funding received in the last annual budget, the modest $6.5 million MD budget, ballooned to over $12 million last year. Cooper said that makes the proposed change look less significant in the letter.
But after adjusting the proposed loss in proportion to the regular annual budget and the eight per cent would be a “very serious” loss, Copper said.
“The fact is revenue we are depending on would be missing,” Copper said.
MD officials said it would have been hit harder by the proposed change if the old Burnt Timber refinery by Sundre, Alta. was still operational, noting the closure was a revenue loss the MD took more than a decade ago.
Bighorn officials said it is also fortunate because its the oil and gas companies have been paying their taxes.
“There are MDs right now where small companies haven’t been paying their [taxes] for years. Our companies have been paying their taxes up to and including this point,” Cooper said.
That is one of the reasons the document was made in the first place, Kemmere noted, as the government led a panel to conduct a review on how to help struggling oil and gas operators in Alberta.
A spokesperson from Alberta Municipal Affairs said there has been an ongoing debate between industry and municipalities about whether taxes are too high on oil and gas properties.
“A careful balance has to be found to ensure both sides are strong and viable. Government has been consulting on this matter and will continue to do so into the fall,” Timothy Gerwing, press secretary to Alberta’s Municipal Affairs minister shared in a statement.
“No decisions have been made at this time.”
While the proposal has yet to be approved, Kemmere said the RMA wants to raise awareness for the potential impacts, as it is the RMA’s understanding the provincial government wants to set direction on the document in the next month.
“There is nothing in the proposal that will allow for more assurance of unpaid property tax, there is no assurance the money would stay in Alberta … there is nothing to say that the money will get reinvested in Alberta,” Kemmere said.
Meanwhile, MD of Bighorn officials said they are trying to understand the situation as it has been presented by the government.
“I cannot share strategies and potential outcomes at this time, as those conversations are just starting to take place and will take considerable time to determine,” Cooper wrote in an email.
“The situation is challenging.”