County of Barrhead councillors are concerned a recent decision by the Canadian Revenue Agency (CRA) could have potential financial ramifications as well as impact how they deal with other municipalities.
On Aug. 20 councillors discussed a letter they received from the Town of Peace River addressed to the municipalities of Alberta stating that the CRA issued a demand letter for over $600,000 the federal government says is due for unpaid GST.
The letter, signed by Peace River’s chief administrative officer Christopher Parker states that in May 2019, following a routine GST audit, CRA advised the town that its intermunicipal cost-sharing agreements were subject to GST.
“The town is extremely concerned by the implications of this ruling and the effect it will have on all Alberta municipalities, particularly on Intermunicipal Collaboration Framework (ICF) agreements,” Parker stated.
ICF agreements are established between neighbouring municipalities on a wide variety of issues that impact both communities such as recreation, shared water and sewer to joint land planning. These agreements are mandatory under the province’s revised Municipal Government Act (MGA). The deadline for coming to these agreements between rural (county) and urban (town) municipalities is April 1, 2020. Rural to rural municipalities have until April 1, 2021.
Reeve Doug Drozd agreed with Parker saying the ruling could potentially have serious implications for the County of Barrhead.
“Like the Town of Peace River, we have lots of shared services that we go back and forth with. I guess we will see what our various associations can do for us,” he said.
The Town of Peace River forwarded their concerns to the Federation of Canadian Municipalities (FCM), Alberta Urban Municipalities Association (AUMA), Rural Municipalities Association (RMA) and the Northern Alberta Development Council (NADC).
“Basically what the CRA is saying is that the monies that the [Municipal District of Peace River] has contributed to the town implies a certain level of access which requires the town to collect GST from the [municipal district] which they didn’t,” said Barrhead county manager Debbie Oyarzun. “Because that isn’t how they set up the agreement.”
Drozd noted one of the things the CRA claims is that the Town of Peace River should have collected GST for is the $8 million in donations to the capital costs of constructing a new regional multiplex.
Coun. Marvin Schatz asked if that means the CRA will ask the Town of Barrhead for GST on the $5 million the County of Barrhead contributed for the construction cost of the aquatic centre?
“I don’t know the answer to that,” Oyarzun replied.
Coun. Darrell Troock asked how much of a concern this is because municipalities eventually would receive any GST they pay back in rebates.
Oyarzun said that might be the case, but there are costs involved in collecting the GST that a municipality wouldn’t get back.
“Plus it artificially inflates budgets,” she said, adding it could cost the county additional money if the Town of Barrhead started charging GST on services it provides the county under the existing agreements.
Oyarzun added this CRA ruling puts a shadow over the ICF negotiations municipalities are having province-wide.
“This isn’t how we are organized, we do not operate as a business,” she said. “This is why this message [CRA ruling] is unsettling.”
