WHEREAS municipalities are given broad responsibilities under the Municipal Government Act to provide infrastructure and other services for their residents; andWHEREAS a principal source of municipal revenue comes from municipal assessment and taxation; andWHEREAS it is desirable for municipalities to be able to maximize revenues from the municipal tax base to adequately provide essential infrastructure and services; andWHEREAS the Province of Alberta has moved to fair market value assessments for land and improvements and has abandoned the previous practice of assessing land at only 65 per cent of fair market value; andWHEREAS Section 297(1)(d) of the Municipal Government Act provides for machinery and equipment to be treated as a separate assessment class; andWHEREAS Section 354(3.1) of the Municipal Government Act requires the tax rate for the machinery and equipment assessment class to equal the tax rate for the non-residential assessment class; andWHEREAS the principle of fair and equitable assessments supports granting municipalities autonomy to establish differential tax rates for different assessment classes:
THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts & Counties requests the Government of Alberta to repeal Section 354(3.1) of the Municipal Government Act, R.S.A. 2000, as amended.
Local Government Authorities throughout the Province of Alberta are committed to the principle of fair and equitable assessment and taxes for its ratepayers.Through the Municipal Government Act, the Alberta Government has enacted that the machinery and equipment assessment class must be taxed at the same rate as the non-residential assessment class.In striving to uphold the principle of fair and equitable distribution of property taxes, municipal governments are faced with inequities that are inherent in the assessment methodology that is regulated through provincial enactments and regulations, for valuation of the different property assessment classes. Of specific concern are the inequities that exist in the assessment methodology as it pertains to the machinery and equipment property assessment class compared to the non-residential and residential property assessment classes. Currently, the assessment of machinery and equipment is regulated under the Alberta Government Regulation 220/2004 (Matters Relating To Assessment And Taxation) to be assessed at 77 per cent of its value. This automatic reduction is arbitrary and bears no relation to economic depreciation or economic worth. On the other hand, non-residential and residential assessment classes are assessed at 100 per cent of market value. Although different tax rates may be applied against the non-residential assessment class, of which machinery and equipment is a component, it is not taxed at its full value. This difference in methodology creates an inequitable and unfair tax distribution amongst the various property classes.Under the Machinery and Equipment Assessment Minister’s Guidelines, the assessed value of machinery and equipment is already subject to an immediate 25 per cent depreciation factor that further diminishes the assessed value at which machinery and equipment is taxed in comparison to the other property assessment classes.Considering that the machinery and equipment assessment class is granted a reduction in value through provincial regulation and guidelines, while residential and non-residential properties are valued at fair market value, local government authorities should be granted the authority to apply a municipal tax rate against the machinery and equipment assessment class that is different than the municipal tax rate applied against the non-residential property assessment class.
Resolution 27-05F urged the government to amend the Municipal Government Act such that a municipality is authorized to assign different tax rates to the machinery and equipment assessment class and any non-residential assessment sub-class provided that the difference in any of the tax rates levied against the machinery and equipment assessment class and any non-residential assessment sub-class is not greater than one and one-half (1.5) times. The government response indicated that the Municipal Government Act authorizes a municipal council to divide non residential property into two subclasses: vacant and improved (section 297). However, some municipalities would like to be able to assign further sub-classes as they want to levy different tax rates on different types of non-residential property. Changes to the province’s assessment and taxation system would require extensive study and consultation. Amendments are not expected to take place until a major review of the Municipal Government Act is undertaken.Resolution 14-05S requested the provincial government to either amend the Municipal Government Act to allow for the non-residential class to be subdivided into industrial and commercial classes to provide for a split tax rate, or that machinery and equipment be assessed at 100 per cent value rather than 77 per cent.Resolution 6-06S requested the Government of Alberta and the Lieutenant Governor in Council to abolish subsection 9(3) of Matters Relating To Assessment And Taxation Regulation, A.R. 220/2004.The Government of Alberta response indicated that the 23 per cent assessment exemption for machinery and equipment was initially implemented in the mid-1980s to provide industry with an incentive to upgrade existing facilities and encourage development of new facilities in Alberta. Any suggestion that the provincial government amend the assessment or property tax legislation or regulations in this regard should include extensive study and consultation with all stakeholders. This is not expected to take place until a major review of the Municipal Government Act is undertaken.
The Government will be reviewing the current policies related to property assessment classes and tax rates. Consultation with municipalities and property owners will be required to determine whether or not there should be a legislative change. The AAMDC will urge the Government to act quickly to begin this review and consultation process.