WHEREAS the Government of Alberta annually establishes the mill rate that the municipalities are required to collect and pay into the Alberta School Foundation Fund (education property tax) on properties assessed within the municipalities; and

WHEREAS each municipality can collect education property taxes along with other taxes to operate the municipality at various times during the year, and are therefore asked to submit payment quarterly to the Government of Alberta; and

WHEREAS some of these taxes become in default and are no longer collectible leaving the municipality to recover the amount owing through the seizure of land and assets; and

WHEREAS tax recovery through the seizure of land and assets is not always an option, particularly in relation to linear property such as on oil leases on leased property; and

WHEREAS this inability to exercise tax recovery processes on some linear property leaves the municipality with bad debt for the tax burden to operate the municipality along with the debt of the education property taxes that they are required to collect by the Government of Alberta; and

WHEREAS the municipality is only acting as an invoicing and collection agency for the Government of Alberta to collect education property taxes on their behalf;

THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Government of Alberta develop new tools or utilize existing mechanisms to ensure that municipalities that are unable to collect education property taxes through the tax recovery process be exempted from forwarding those uncollectible tax amounts to Alberta Education, or have the uncollectible amount refunded.

As a collection agency for school taxes we must pay our requisition quarterly whether we are able to collect that taxation or not.  Some oilfield companies have defaulted, leaving nothing that could be converted into cash to offset the taxes outstanding.  This also leaves the amount of the school taxes as a burden of the municipality when it was not designed to be so.  The municipality has been burdened by the Government of Alberta to collect and forward school taxes; if uncollected these school taxes now become a burden of the municipality that they cannot collect.

3-16S Recovery of Linear Property, Commercial Property, and Education requsition Tax Arrears

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) request the Government of Alberta to amend the Municipal Government Act (MGA), and other provincial legislation to broaden the tax recovery power of municipalities to collect linear property taxes by granting a lien in favour of the municipality as follows:

A lien equivalent to that granted to the Alberta Energy Regulator (AER) by s. 103 of the Oil and Gas Conservation Act (OGCA) that being: “on the debtor’s interest in any well, facilities, and pipelines, land or interests in land, including mines and minerals, equipment and petroleum substances” and the power to garnish funds owed to the debtor;

A lien which ranks in priority (or equivalent) to the lien granted in favour of the AER by s. 103(2) of the OGCA;

FURTHER BE IT RESOLVED that the AAMDC requests the Government of Canada to amend the federal Bankruptcy and Insolvency Act to recognize municipal linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests;

FURTHER BE IT RESOLVED that the AAMDC request the Government of Alberta to provide a credit reimbursement to compensate for the education property taxes that become uncollectable due to linear and commercial property bankruptcy.

DEVELOPMENTS: Alberta Municipal Affairs has convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education, and the AER. The purpose of this working group is to address the concerns identified in resolution 3-16S and resolution 5-15F. More specifically, the working group is exploring how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to relieve or exempt municipalities from paying provincial education property tax requisitions on linear properties in which the municipality has not been able to gather tax revenues from the property owner. This resolution is assigned a status of Accepted in Principle and will be revisited as the working group progresses.

5-15F: Recovery of Linear Property Tax Arrears

therefore, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) requests the Government of Alberta to amend the Municipal Government Act (MGA), and other provincial legislation to broaden the tax recovery power of municipalities to collect linear property taxes by granting a lien in favour of the municipality as follows:

1. A lien equivalent to that granted to the Alberta Energy Regulator (AER) by s. 103 of the Oil and Gas Conservation Act (OGCA) that being: “on the debtor’s interest in any well, facilities, and pipelines, land or interests in land, including mines and minerals, equipment and petroleum substances” and the power to garnish funds owed to the debtor;
2. A lien which ranks in priority (or equivalent) to the lien granted in favour of the AER by s. 103(2) of the OGCA; and

FURTHER BE IT RESOLVED that the AAMDC requests the Federation of Canadian Municipalities to request the Government of Canada to amend the federal Bankruptcy and Insolvency Act to recognize municipal linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests;

FURTHER BE IT RESOLVED that the AAMDC request the Province of Alberta to provide a credit reimbursement to compensate for the Education Property Taxes that becomes uncollectable due to linear property bankruptcy.

DEVELOPMENTS: In the recent response to resolution 3-16S, Alberta Municipal Affairs has indicated steps moving forward to address a number of issues that result from the non-payment of taxes, specifically those related to linear and other industrial property. Alberta Municipal Affairs has convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education, and the AER. The purpose of this working group is to address the concerns identified in resolution 3-16S and resolution 5-15F. More specifically, the working group is exploring how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to relieve or exempt municipalities from paying provincial education property tax requisitions on linear properties in which the municipality has not been able to gather tax revenues from the property owner. This resolution is assigned a status of Accepted in Principle and will be revisited as the working group progresses.

Alberta Municipal Affairs:

Alberta Municipal Affairs recognizes that the non-collection of property taxes in arrears, particularly municipal and provincial property taxes levied against industrial property, has financial implications for some municipalities. This issue is likely to evolve, given the current economic conditions in Alberta.

In response to a previous AADMC resolution, Municipal Affairs convened an inter-ministry working group with representatives from Municipal Affairs, Alberta Treasury Board and Finance, Alberta Education, Alberta Energy, Alberta Environment and Parks (AEP), the Alberta Energy Regulator, and the AAMDC. The working group is exploring options to address the issue of uncollectable education property taxes related to linear property, specifically oil and gas.

AAMDC members are encouraged to communicate their concerns and ideas for solutions through their representative on this working group. Results of this work will be communicated to the AAMDC.

Alberta Treasury Board and Finance:

Treasury Board and Finance has no comments beyond those provided by Alberta Municipal Affairs.

In fall 2017, the Government of Alberta announced the Provincial Education Requisition Credit (PERC) program, under which municipalities who have no choice but to remit requisitions to the Government of Alberta for unpaid education property taxes on linear oil and gas properties may apply to receive a credit equivalent to the amount of the requisition. PERC is funded through the Alberta School Foundation Fund’s net asset fund.

At this point, PERC extends to the 2019 tax year, and is capped at $10 million per year. As of November 2018, 37 applications had been processed and approximately $3 million of credits had been issued. Applications are expected to continue to be accepted in 2019 and 2020. While PERC is a helpful program for municipalities, it is important to consider that municipalities are only eligible to collect PERC benefits after writing off a tax debt, which is highly unlikely to occur in cases where delinquent companies continue to operate. At this point, it is not clear whether PERC will be extended beyond the 2019 tax year. If it is not continued, the status of this resolution will be re-evaluated.

This resolution is assigned a status of Accepted, and the RMA will continue to work with the Government of Alberta to support the long-term viability of the PERC program and develop other mechanisms to address unpaid linear property taxes.

The RMA conducted a survey of unpaid taxes on oil and gas companies and found that $81 million in unpaid taxes remains outstanding despite the PERC program.