By Cole Parkinson
The Municipal District of Taber has been noticing a trend of late tax collection and as a result, have been exploring moving their usual tax collection date up.
With the collection date currently in November, they have been seeing a shortfall in revenue once that particular day comes and passes.
“Currently, the M.D. levies and mails property tax notices out in May each year. The taxes are paid on or before November 15 to avoid the five per cent penalty. Any taxes remaining after December 31 each year have a penalty of 12 per cent that is applied to the outstanding amount. Tax revenues are approximately $20.5 million. The funds are utilized throughout the year to pay budgeted operating and capital expenditures to meet our financial obligations,” said Coun. Jen Crowson at the M.D. of Taber’s Annual General Meeting on April 30.
A major factor of this stems from the steady decline of the oil and gas industry throughout Alberta.
“Over the past few years, commercial bankruptcies have resulted in greater allowances for uncollectible property taxes. The majority of these bankruptcies have occurred in the latter part of each calendar year so usually after November 15. In 2015, the uncollectible amount after November 15 was $414,000. In 2016 it was $315,000, in 2017 it was $224,000 and in 2018 $1,029,000. Those totals were actually as of December 31 or January 1,” continued Crowson. “As of November 16 this past collection year of 2018, we had over $3 million outstanding. As you can imagine as we go into the budgeting season when we are short $3 million we are looking at what we have to cut and where we can trim the budget the best we can.”
As far as changing the date, nothing has been set in stone but council was hoping for feedback on whether or not it was a good idea moving forward.
Crowson also detailed how tax collection was split between the different properties.
“Eighteen per cent of our tax collection is residential, nine per cent comes from farm taxation and then 73 per cent comes from commercial, industrial or non-residential,” said Crowson. “We do feel changing the date somewhat it may help us in planning our budget.”
A question came from the crowd around where the major shortfall was coming from.
“The majority is (commercial). In 2018, the commercial and industrial taxation collection was $14.9 million. Of that shortfall, we had one company that was close to $1 million that they had owed us. We have been able to collect some of that back. So on December 31, we were at $1 million outstanding instead of $3 million,” answered Crowson.
With commercial properties providing a majority of the headaches, it was inquired if there were any ways they could get the tax dollars from those companies.
“I’d like to know why the commercial is weaseling out of paying their fair share of their taxes and what the municipality does to recover it?” asked resident Jim Rabusic.
While municipalities across Alberta have been trying to do just that, things are still not looking ideal.
“A recent Alberta Court of Appeal ruling, Northern Sunrise County versus Virginia Hills, has dealt another blow to rural municipalities in regard to their ability to collect unpaid non-residential taxes. The court of appeal ruled in this regard that municipalities have no more collection power than any other creditor. Previously to this, we believed we were a secured creditor to the collection of these taxes. This court case indicated that we had no more security than the average creditor to these corporations that are having difficulty paying their taxes and may have entered bankruptcy procedures,” explained Bryan Badura, director of corporate services. “The authority given to municipalities under the Municipal Government Act is to use distress warrants as a tool to collect unpaid liner taxes and this has also been affected by this decision.”
With this decision, Badura also said Northern Sunrise County has appealed to the Supreme Court of Canada, though they expect it will take awhile for a final ruling.
Further, when oil and gas was steady and thriving, it led to lower tax rates in the M.D. but with the shift in the oil and gas sector, taxes for all properties may need to level off to cover the shortfall.
“Over the past 20 years, the contributions from the oil and gas sector enabled the M.D. to maintain some of the lowest taxation levels in all of Alberta. Previously, the healthy oil and gas sector lowered taxation rates for farmland and residential property. The impact of the downturn in Alberta’s resource-based economy indicates tax shifts to farmland and residential could become a reality. In the foreseeable future, rural municipalities will continue to see the collection of the non-residential side of the tax levy become more difficult,” continued Badura.
Another crowd question stemmed around the uncollectible portion of the education requisition. The entire province is estimated to be down $87 to $100 million and the M.D. has reserved approximately $2.2 million for uncollectible tax revenue due to bankrupt oil and gas companies over the last four to five years.
Some good news on that side of things has come from the Provincial Education Requisition Credit (PERC) program.
“For the past few years, there has been a grant from the provincial government with regard to the uncollectible portion of education requisition. It is called PERC,” said Badura.
With the majority of the issues from late collection coming from commercial properties, it was asked if they could implement separate collection dates for properties.
Even though that was pointed as a logical move, Badura informed everyone it would not be possible as current legislation does not allow it.
“The reason we are looking at this is, we are looking at alternatives to raising mill rates and raising the amount of taxes residents have to pay,” he added.
“In general with these court rulings, we could be seeing a shift in the taxes. Property taxes are the means which municipalities generate revenue to fund the services, infrastructure and reserves that we provide to residents. Property tax is the single largest revenue source for municipalities. Other revenue sources are user fees, a fee for service and things like that. However, property taxes are based on an ability to pay based on the value of somebody’s property. What the intent is of the property taxes is to fairly distribute the cost of municipal services that create the clear public benefit.”