Alberta’s Fossil Tax Relief Plan Downloads Financial Pain to Small Communities
Alberta’s United Conservative Party is considering relieving the province’s oil and gas operators of their obligation to pay municipal property taxes, an act of corporate welfare that would leave rural communities unable to balance their budgets without resorting to steep residential tax hikes or savage cuts to services.
While the province’s small towns are typically accustomed to getting by with very little, some may not survive this un-volunteered sacrifice to fossil interests, reports CBC. “Some of the 69 counties and municipal districts represented by the [Rural Municipalities of Alberta (RMA)] stand to lose up to 40% of their tax base,” said RMA president Al Kemmere.
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While the province is still consulting with municipalities and no policy decisions have yet been made, the Kenney government is now armed with a report recommending tax relief for Alberta’s beleaguered oil and gas industry.
Central to such recommendations, writes CBC, are changes in how oil and gas properties are assessed for taxation. Under current practice, oil and gas operations are evaluated “on replacement cost—not market value—a practice industry and government officials say overvalues industry assets and inflates tax bills.”
Several other rural communities weighed in on the issue later in the week, and a provincial spokesperson said no final decisions had been taken yet. “There is an ongoing debate between industry and municipalities about whether taxes are too high on oil and gas properties,” and “reviews of this kind are supposed to take place every three to five years,” said Timothy Gerwing, press secretary to Municipal Affairs Minister Kaycee Madu. “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.”
As for what will happen to rural districts that depend heavily on oil and gas tax revenues, the options are slim—and harrowing. CBC reports that, in one northern Alberta county, either the residential mill rate (a method of calculating property taxes) would have to increase by 200 to 500%, or the county’s work force—and corresponding services—would have to be cut by up to 80%.
“Years of low oil prices have left many small oil and gas producers in dire straits and rural communities are already struggling with unpaid taxes from the sector,” explains CBC. “A survey released by the RMA in January said the oil and gas sector owes $173 million in unpaid taxes to rural municipalities, double the amount in a similar report last spring.”
Camrose County, for one, “has $1.1 million in unpaid industry taxes on the books,” said Reeve Cindy Trautman. “We want everyone to succeed, but we don’t want counties to be taken down because of it. It feels like another download onto the county.”
But before they reject the idea of taking on the financial burden of fossil industry misfortunes, small communities should consider the long-term risks of saying no, said Ben Brunnen, vice-president of oilsands with the Canadian Association of Petroleum Producers. “If we don’t do something to arrest the trend of industry bankruptcies and financial insolvencies, there’s not going to be a long term or an industry in some of these communities,” he said. “It’s one of those scenarios where everyone needs to sacrifice a little bit.”
[This is the same CAPP spokesperson who’s been complaining about what fossils see as overly prescriptive rules for federal bailouts that prohibit shareholder dividends, restrict executive compensation, and require recipients to accept government representatives on their boards. “There is just absolutely no interest in pursuing that program due to the nature of the restrictions,” Brunnen said.]
As for who among the fossils stands to benefit most should the Kenney government agree that it’s time for rural Albertans to “sacrifice a little bit,” Kemmere said the reforms appear to favour larger fossils, not smaller, local operators.
“This is putting money into the big businesses who often have offshore or out-of-the-province shareholders that are potentially going to put that in their pocket,” he said.