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Who will benefit from proposed assessment model change?

County of Barrhead administration and council say it isn't the municipality or its ratepayers
Debbie Oyarzun-encroachment agreement
County of Barrhead manager Debbie Oyarzun, pictured here at the July 7 council meeting, said no matter which scenario the government chooses for its new oil and gas assessment model it will harm rural municipalities and their ratepayers. Barry Kerton/T&C

BARRHEAD - No matter which assessment model the province chooses, it is going to hurt rural municipalities and their ratepayers.

That was what County of Barrhead county manager Debbie Oyarzun told councillors during a July 30 special meeting over the province's proposed changes to the amount of property taxes they can collect from energy companies that have the infrastructure in their jurisdiction.

She said depending on which of the four models the province selects it could cost municipalities anywhere between $127 and $382 million in tax revenue in 2021. This is according to Rural Municipalities of Alberta (RMA) figures.

It should be noted that it was only recently that the RMA, which has come out against the proposals, has been able to comment on them because of a mandated provincial embargo.

Oyarzun called for the special Zoom meeting, due to a two-week window that municipalities have to respond.

The province started the review in 2017 with select government agencies and industry representatives with other stakeholders, such as the RMA and the Alberta Urban Municipalities Associaton (AUMA) being added to the process this year.

In the government's term of reference, it states the purpose of the review was to "enhance industry competitiveness while concurrently ensuring the ongoing viability of municipalities."

"I think they forgot that," she said referring specifically to the viability of rural municipalities.

Potential models

Scenario A would see a 14 per cent in non-residential assessments for rural municipalities; Scenario B, 16 per cent; Scenario C, 19 per cent and Scenario D, which was proposed by industry a 24 per cent overall assessment decrease.

"What that translates to, in a best-case scenario is rural municipalities, on average, $1.6 million in tax revenue, but that could go as high as $4.2 million," Oyarzun said.

The RMA estimates that 62 to 88 per cent of rural municipalities will lose more than 10 per cent of their assessment base. To compensate for the loss of the assessment base and the associated lost revenue the RMA believes many rural municipalities will have to increase their residential mill rates dramatically from 85.8 to 199.4 per cent, while the non-residential mill rate could go up anywhere from 15.6 to 31.9 per cent depending on the solution local governments chose.

The RMA also estimates that provincewide municipalities would shed 960 to 2,400 jobs.

Impact on the county

Luckily, Oyarzun said the County of Barrhead was among the more fortunate rural municipalities.

Depending on the scenario that is chosen the county could lose from three to five per cent of its total assessment base equating to between $30 million and $52 million which equates to an estimated $500,000 to $900,000 loss in tax revenue.

To compensate for that loss of revenue the county would leave the county relatively few options.

She said they either have to drastically increase its residential and non-residential mill rates anywhere from 11 to 19.5 per cent (residential) and/or 16.6 to 32.8 per cent to its non-residential mill rate.

Oyarzun added that they would likely have to cut jobs as well with up to eight full-time positions being put to risk.

"Keep in mind we only have 31 full-time employees, so where those cuts would come from would be a challenge," she said.

Oyarzun also questions RMA's provincial municipal job forecast will be higher.

"There are some higher-paid positions that you have to maintain in a municipality such as the chief administrative officer so you would have to cut more lower-paid positions so we think the number would be much higher," Oyarzun said.

The other option municipalities have at their disposal is the reduction of services and infrastructure spending.

However, she said in all likelihood the cuts would be made across the board, noting the overall cuts would be in the range of four to seven per cent.

Later in the meeting, Oyarzun noted in addition to the change in the assessment model, rural municipalities are faced with paying for an increasing amount of policing costs.

Starting this year, counties and municipal districts and communities under 5,000 will have to start paying a portion of their policing costs.

In 2020, municipalities will have to contribute 10 per cent. Their share will rise every year until it reaches 30 per cent of policing costs by 2023.

The funds, in part, will be used to add 200 additional civilian support workers and 300 RCMP officers. For the County of Barrhead in 2020, this means an extra $133,492 increasing to just over $400,000 in 2024.

"One of the things the province is pressuring municipalities is the use of their reserves. But they fail to remember that reserves are funds we put in place because we don't have enough money for a project and we save until we do," she said.

And even if they were willing to use their unrestricted reserves, Oyarzun noted under the first two scenarios they would be used up in less than a year.

Coun. Darrell Troock asked what would happen if the municipality slowed its road construction schedule for two years and what impact it would have.

"I take it the province's vision is to generate some economy and this would only be a short term measure," he said.

Oyarzun said the models the province is sharing is only for one year and have revealed little of what it might look like in subsequent years.

She also said the last time the province reviewed the assessment model in about 2005 many of the clauses were meant as a temporary measure, but are still being used.

"So we are a little bit sceptical," Oyarzun said.

Will it help the oil and gas industry?

The RMA and the County of Barrhead don't believe any of the proposed scenarios will help the majority of energy companies.

The RMA divided the 750 energy companies that own assets that would be impacted by the review into five tiers based on asset value. Tier 1, companies that have assets of over $500 million, has 27 companies; Tier 2, companies with assets between $100-$500 million, has 63 companies; Tier 3, has 98 companies with assets valued between $20 million-$100 million, Tier 4, has 227 companies with assets valued between $1 million and $20 million and Tier 5, has 335 companies with assets valued of up to $1 million.

The majority of the 33 companies in the companies in the county range from Tier 2 and Tier 5, with most falling in the last three tiers.

Companies in Tier 1 make up 62 per cent of the province's assessment.

"Using Scenario A, Tier 1 companies would save 140 per cent, while its assessment value increased by 22 per cent ... and as you go down the tiers the smaller companies are not seeing any savings [or increases in assessment] and I'm not sure they know that," Oyarzun said.

Using Scenario D, are projected to save about 72 per cent, while the other tiers would save about 20, six, 1.5 and less than a per cent respectively, while making small to moderate gains in assessment value.

The RMA did not make projections for the other scenarios due to incomplete information.

"So who are the big winners, large oil companies, which are owned mostly foreign-owned. There is no policy that says they have to reinvest it back into Alberta, capital investment or job creation," Oyarzun said. "In fact, it is causing the loss of jobs in the municipal sector."

Barry Kerton,