Telephone Town Hall Follow-up Questions and Answers

Jocelyn GagnonAnnouncements, Archived

Following the Telephone Town Hall on August 17, 2020, the following questions have been received by the County. Answers are provided below.

Question: We keep getting told of 4 scenarios and % of tax increase. However we have no idea what these scenarios are. I cannot find anything anywhere on these scenarios so how can the council make assumptions of the proposed tax increases if you do not have all the facts. Why are you getting people all riled up and worried when really we have nothing to go on. How or why should we start talking to our MLA and Premier when we do not have all the facts except to make ourselves look silly. I strongly feel that if you want some assistance we as rate payers need ALL THE FACTS.

Answer: The scenarios have been developed by the province with information and data provided by industry. The 4 scenarios are provided in the attached document that was developed by the Rural Municipalities of Alberta (RMA – our rural association). The Government of Alberta based the review process on these 4 scenarios for changes to various aspects of the assessment model, with each resulting in a different level of impact to municipalities and industry in the form of overall assessment reductions. The review process focused primarily on discussing the impacts of the scenarios rather than the technical details. The province revised the scenarios throughout the process based mainly on ongoing data, information and suggestions received from the oil and gas industry participants. RMA was not provided this data or detailed information on why the scenarios were continually changed. The technical changes in each scenario are reviewed in the attached document and was provided to RMA by the Government of Alberta. (Assessment Model Review – Outcomes Summary document attached.)

NSC, as well as all other rural municipalities, has requested additional information from the Government of Alberta to be able to understand the scenarios in a more well-rounded fashion. To date, requests have not been answered. Any information that has been put out by NSC has been compiled based on the information provided to RMA from the Government.

Question: I understand and I may be wrong on this but we as ratepayers, commercial businesses etc are taxed on a market value. However oil and gas are on a replacement cost value. If this is correct then honestly the oil and gas have a reason to ask for reduction of values/taxes. How fair is it when the oil market is going great that you tax them to the max but when they are struggling we cannot work to reduce their values. Right now their equipment is worth nothing and not operating, so why would we tax based on replacement cost. Would we not be better to always tax on market value at all times so when the times are good the market value/assessment goes up equaling more taxes?

Answer: Commercial businesses are assessed at market value. There are 3 approaches to market value in appraisal and assessment depending on the information available. They are market sales comparison (what property sells for), the cost approach (what property costs), and the income approach (based on return of investment). Regular commercial businesses are assessed at 100% of their market value and this becomes the assessment. The market value is adjusted each year to the new market indicators. This type of property is assessed whether or not it is used or occupied.

Industrial linear oilfield property is assessed based on cost. The base cost is reduced to a set factor of 33%. This base cost then has additional depreciation based on production. These assessments are only adjusted yearly by equipment cost modifiers. The resulting value becomes the assessment. This type of property is only assessed if in use even if new.

M&E Industrial property is assessed based on cost. The base cost is reduced by giving it 25% depreciation immediately. The equipment is then depreciated to a maximum of 40% if it remains in use. This assessment then has a factor of .77 applied to its value and this becomes the assessed value. If this equipment is not in use it is not assessed even when new. Therefore, right now if either the industrial linear or the industrial M&E is not operating it is not assessed. Only operating producing sites are assessed.

Also, right now if a commercial business stops operation the land and the buildings are still assessable and taxable. All are assessed fully whether used or not.

The oil industry does not want market value for their property. They want a similar regulated system with even more factors applied. What is described above is as it is now. What the new method is, is not known, as this information has not been passed on to municipalities or assessors.

Question: Another comment we keep hearing is “even if we give them a break there is no guarantee they will keep the money here”. Is there ever a guarantee? The only thing I see is it is a catch 22. If we do not give them a break they do not invest in our area and provide jobs for the locals, which by the way there is no guarantee they would only hire locals. I get that they will also help with sponsorships of clubs, teams and possibly that is what the council is concerned about. If we give them a tax break and they pay their taxes but do not invest here and provide jobs, at least their taxes are paid and our roads and whatever services they use will not be used. That should equal money in your pockets does it not?

Answer: The GOA has indicated that they are providing these tax breaks in the hopes of stimulating development in Alberta. There are no guarantees that any business will keep their money here. Council is struggling with this as the GOA has not shown how these cuts will stimulate our economy. The County is not worried about donations. NSC does benefit from the revenue dollars that are paid by the oil & gas industry. Other municipalities who do not have that sector in their municipality do not have those types of revenue funding. The revenue from oil and gas allows us to provide funding to our neighbours to help offset some of their costs of our ratepayers using their infrastructure and services. A loss in revenue for the County may mean a loss in funding to these municipalities. The loss of this funding may make them no longer viable and they may cease to exist. Regarding your question about equalling money in your pockets, unfortunately, it would not. Our infrastructure is already built (roads, bridge files, water lines, etc.). All these still require maintenance and at some point, replacement, regardless of who the users are. The costs for maintaining and replacement would still be there with less revenue to allocate to same.

Question: The information provided by the council I feel is fearmongering and really needs to more professional. So far all I have heard is we are ratepayers (your voters) will be affected and your staff (you own support system which make this county what it is) are going to be cut. Not by little amounts either. Are there no other ways? Personally I think I would have felt better if council would have come to us and stated we could have start from the top. I am sure we can make a dent in costs if we stop sending every council member to meetings and conferences for one. They could also take one of the many county vehicles and travel together. We could also cut honorarium amount as they are substantially higher then most municipalities. I know this has been suggested by many in the past but I feel it is time there is a change. Boards and honorariums/conferences etc could also be reduced too. Some staff I am sure could be reduced as in most places that cannot afford to keep as many but the proposed amount is unacceptable. I am sure if council sat down and put their personal feelings/needs aside and not worry about who will be hurt in these changes and give us real numbers, they can find a way with a red pen to make cuts here and there without drastically affecting any of the services they provide. First, they have to be willing. Maybe it is time involved some independent people with a fresh set of eyes to look at the budget. Especially now while the auditors have the 2019 numbers in front of them.

Answer: The information that was shared was highly exaggerated. We know that. There is little time for municipalities and individuals to provide feedback to the provincial government on the scenarios presented. All information that has been provided to the municipalities is that this will be brought before cabinet in late August and that it would be implemented in 2021. To catch the attention of the provincial government, drastic numbers were used. When the Government implements the changes, we’re not sure which one, then yes, Council and Administration will have to look at where and how the loss of revenue can be absorbed with the least amount of impact to all stakeholders, including our ratepayers and staff. Discussions will begin on this with Council and Management at the Strategic Planning Meeting being held in October.

Question: When asked tonight on a possible timeline for these changes to occur I heard starting 2021. Does the government think they can make these drastic changes to all rural areas immediately or it is a time they will phase changes in. I heard tonight how many areas do not have the tax base to handle the proposed changes. So are we to believe they will hand over the keys of their municipality and tell the top government to handle it?

Answer: Yes, they can. And again, this is information that has been provided by the Government to RMA – that whatever was chosen, would be implemented in 2021. The other fact to note, is that the information that has been shared is only showing the effects of year 1 changes. Because of the significant changes to the depreciation curves under most of the models, there will be increased impacts in the future as assets age. This is referenced in an analysis of the 4 scenarios provided in the Assessment Model Review – Outcomes Summary document.

NSC is not the only municipality in Alberta who will be affected by the proposed assessment model review scenarios. If it was, we definitely would be fearmongering with the information shared to ratepayers. This will affect all municipalities across the province. Some to the point of dissolution, which will mean they are dissolved into another municipality – and then that municipality takes on the burden of running the municipality as well as their own, with the same financial burdens that put the first one into dissolution.

Question: You talked about 4 scenarios but only provided information on Scenario A & D. What do the other scenarios look like?

Answer: Scenario B would be a loss in revenue of $3,384,262 and Scenario C would see a revenue loss of $3,653,905.