By Justin Seward
Cypress County council listened to what their future financing strategies need to look like in order to stay sustainable at their Aug. 13 meeting.
With the prolonged struggles of the Alberta oil and gas industry, the province has taken the steps to review and revive the industry.
Included in the review is the assessment of linear and oilfield property.
The county could see large funding impacts as these properties are over 50 per cent of tax revenue. From some of the early counts, it is expected there could be a $2-3 million shortfall with current tax rates.
In 2018, the province released a document titled “2018 Roadmap to Recovery-Reviving Alberta’s Natural Gas Industry.”
An important statement in that document in terms of the overall goal was to “implement a three-year, phased-in approach to establish market values for wells, flow lines and gas production facilities. (And) review associated mill rates for property tax purposes.”
“That throws me a red flag. That’s a really nice way of saying assessments are going down and we might strip away some of your ability to set some tax rates,” said Steven Toews, the county’s assessment supervisor.
“That’s made administration believe that something is changing. Our current funding model is under threat,”
Toews also pointed out that the province announced a 35 per cent shallow tax gas rebate, which has led county staff to believe the rebate will be funded by the education portion.
“We think that Municipal Affairs believes that linear assessments are 35 per cent higher than they should be. Instead of taking out assessments this year, they’re taking it upon themselves to have a program to rebate the taxes as a short term solution to make things right in their eyes,” said Toews.
The presentation included Cypress County being heavily reliant on linear and non-residential industry, low county tax rates may leave room for tax rate elasticity and the county has maintained high historical collection rates (95 per cent plus).
Cypress County has healthy reserves, however, they can not be relied on for long term sustainability. The county’s climate showed that its reserve breakdown through operating reserves $43,276,476 and capital and restricted reserves are at $46,455,329. Reserves are intentional allocations as to how future funds are to be allocated and permit smoothing of long term costs and projections.
Long-term sustainability solutions include shifting the tax burden from non-residential to other sectors, a combination of tax burden shift with an increase to non-residential tax rate, cut programs and spending.
Also on the list was the evaluation of five to ten year plans to measure effectiveness. Capital purchases of heavy equipment have increased 40 per cent in the last three years and resale has not kept the same trend.
The climate today is not the same as it was when the five year plans were developed, also it will be important to adopt a grass roots culture on cost control, re-evaluate county and designated purposes.
Funding models could include short-term from the stabilization fund and reduce transfers to reserve.
Toews said “It hasn’t happened here yet. I’m not trying to be all doom and gloom. We kind of need to take a look at things.”
Council approved the presentation as presented.