Province moves to fix industrial tax fiasco that puts billions in hands of cash-rich counties
The Alberta government is moving to fix one of the great taxation inequities in the province.
Rachel Notley’s government will soon propose changes to more fairly share $1.9 billion in industrial taxes between the province’s cash-poor towns and cities and its cash-rich counties.
“We’ve signalled pretty strongly that we are not leaving collaboration up to chance, that it is not OK that there are such hard lines imposing significant disparities across the province,” Municipal Affairs Minister Danielle Larivee says.
Multiple measures to ensure a more co-operative approach between towns and cities and counties will be part of the new Municipal Government Act, which will be introduced in the legislature at the end of May, Larivee says.
Alberta’s towns and cities have been badly treated on taxes for decade. The counties have enjoyed an almost unfathomable taxation bounty, courtesy of their formerly powerful Progressive Conservative friends.
Industrial taxes from factories, plants, refineries and pipelines are one way for local governments to share in the province’s industrial wealth. In 2014, these taxes amounted to $1.9 billion.
The problem? While a huge number of Albertans create industrial wealth, and while people in hamlets, towns and cities work in plants and build and maintain pipelines, if those plants and pipelines fall outside the town or city’s municipal boundaries, all the tax revenue goes to the county.
In 2014, this meant that out of the total of $1.9 billion, $1.8 billion went to county governments representing just 15 per cent of the population. The remaining $100 million was split between the 85 per cent of Albertans who live in towns and cities. Not only does this inequity exist, but it’s been rapidly growing. The counties now collect $1 billion more than they did in 1996, but hamlets, towns and cities collect about the same amount as in 1996.
Former Peace River town councillor Don Good has been investigating this issue for years and is armed with numbers. For example, the Town of Slave Lake, population 6,782, is surrounded by the Municipal District of Lesser Slave Lake, population, 2,929. But in 2014, Slave Lake got just $127,000 in industrial taxes, compared to $13.4 million for the municipal district.
In southern Alberta, the City of Brooks, population 13,676, got $403,000 in industrial taxes while the surrounding County of Newell, population 7,138, received $31.8 million.
The PCs preached that counties and towns were free to work out local agreements to share the wealth. Some did, but most did not.
Enter Rachel Notley and the NDP. During the 2015 election campaign, Notley said of the industrial tax mess: “This can’t go on. This isn’t rational, so how are we going to fix this?”
Co-operation on sharing costs for regional services will no longer be voluntary, it will be required. As Larivee, who is from Slave Lake, puts it: “We’re trying to not leave it to chance, where some places it (sharing and co-operation) is going good and other places it’s not. Instead, we will ensure that municipalities have the tools and the support to ensure that that is actually happening right across the province.”
It looks like the plan is that county and rural towns will share a major part of the industrial tax base, the so-called “linear” taxes from pipe and transmission lines. As for Edmonton itself, the city and its regional partners have appointed a panel of heavy hitters to devise a new sharing mechanism for industrial and business taxes.
Mayor Don Iveson called regional cost sharing and cooperation his priority when he was running for mayor, so he’s pushing hard on the issue.
One idea is that a portion of the Edmonton region’s industrial taxes would go into a regional pot used for regional needs, such as transit and affordable housing.
County mayors are onside with the negotiations, and have several good reasons to be.
Iveson says a new deal can be a win for the counties, Edmonton’s surrounding towns and cities and for the capital itself. If everyone pulls and works together, taxation policies can be aligned and more business attracted.
“Grow the pie and we’ll all be better off,” Iveson says.
There is, it seems to me, another somewhat darker reason driving county co-operation. If the counties don’t fully co-operate and continue to refuse to share more, Albertans now have a government in the NDP that might well push for amalgamation, as has happened to municipalities and counties in other parts of Canada. The counties would be kaput.
Perhaps they would rather share than be dissolved.