WHEREAS Section 297(1) of the Municipal Government Act (MGA), identifies assessment classes to be assigned to properties when preparing an assessment; and WHEREAS the MGA authorizes municipalities to divide the residential assessment class into sub-classes on any basis that it considers appropriate and to assign a different tax rate for each residential sub-class; and
WHEREAS the MGA only authorizes a municipality to divide the non-residential assessment class into vacant or improved sub-classes; and
WHEREAS some municipalities currently have non-residential classes for both the urban service area and the rural service area; and
WHEREAS in some cases there is an inequity between taxation against similar properties located in the rural service area versus the urban service area; and
WHEREAS municipalities do not presently have the legislative authority to create a new assessment subclass of rural non-residential property;
THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the provincial government to amend the Municipal Government Act to: § authorize municipalities to assign a new assessment class to be levied on rural small business properties; or § expedite the creation of a regulation which would enable municipalities to create sub-classes within the rural non-residential tax category; or § create a special category to deal specifically with small businesses; or § create additional/unique urban service areas around hamlets within municipalities or any other legislation that would allow a different property assessment class or sub-class for small businesses in the rural areas of a municipality.
The Regional Municipality of Wood Buffalo is a specialized municipality established in 1995 by the Government of Alberta. Recognizing the uniqueness of the region, the establishing Order In Council provided the Municipality with the ability to create separate taxation rates for the rural and urban service areas. The oil sands industry is located within the Regional Municipality of Wood Buffalo, specifically within the Municipality’s rural service area. This industry is assessed and taxed as rural non-residential property; however, that tax class also includes small businesses operating within the rural service area, which means that all businesses in the rural service area, regardless of size or impact, are taxed at the same rate. Significant growth within the Municipality has placed considerable strain on municipal services and infrastructure. As a result, incremental tax increases were implemented in the rural non-residential tax category to fund the cost of the needed improvements and new projects required to accommodate the increasing population. With small businesses falling in the same tax category as industry, they have had to accommodate significant taxation increases, which can be financially crippling to small businesses. The Municipal Government Act allows for the creation of assessment sub-classes for residential properties (class 1) on any basis that Council considers appropriate. Legislation does not grant the same degree of flexibility in establishing assessment sub-classes when dealing with non-residential (class 2) properties, and limits the extent of sub-class creation to built-upon and vacant properties. Assessment legislation varies from province to province, with varying degrees of flexibility. For example, Ontario offers seven standard property classes (residential; multi-residential; commercial; industrial; pipeline; farmland; and managed forests) and an additional five optional classes have been prescribed by regulation. Under Saskatchewan’s legislation, one uniform mill rate is established for municipal taxes, which may be adjusted by mill rate factors which are created by municipal councils as they see fit. The restriction in Alberta’s legislation has resulted in significant tax increases for rural small businesses, while businesses residing in the urban service area have benefitted from relatively stable taxation. For example, in 2002, the urban non-residential and rural non-residential tax rates were on par, at 0.0800 and 0.0800, respectively. In 2012, the same rates were 0.0053058 and 0.0183209, respectively which translates to the rural non-residential rate being three times higher than the urban non-residential rate. The Municipality has no means to separate small businesses from industry for taxation purposes. A resolution of the Alberta Association of Municipal Districts and Counties, supporting the creation of an additional tax category for the Regional Municipality of Wood Buffalo is critical to the continued economic viability of rural small businesses in the Regional Municipality of Wood Buffalo.
Resolution 27-05F (expired): THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request the Government of Alberta to amend the Municipal Government Act such that a municipality may divide the non-residential assessment class into sub-classes that it considers appropriate; and FURTHER BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the provincial 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. Resolution 14-05S (expired): THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request 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% value rather than 77%.
Municipal Affairs recognizes and supports the priority that municipalities place on property tax obligations being allocated among property owners in a fair and equitable manner. Care must also be taken to ensure that Alberta’s tax regime remains a competitive advantage for this province.
In 2007, the Minister’s Council on Municipal Sustainability recommended that municipalities be authorized to levy, at their discretion, a number of additional own source revenues, including limited split mill rates within the non-residential property class. The government noted that in light of the $11.3 billion in new funding committed under the Municipal Sustainability Initiative, it believed that the issue of additional revenue sources had been addressed.
Municipal Affairs is undertaking a “principles-based” review of the Municipal Government Act. Any assessment and taxation concerns or issues raised will be addressed through this comprehensive and collaborative conversation with all partners and stakeholders, including municipal officials, municipal associations, private businesses and industry, agricultural stakeholders, as well as members of the public. The Alberta Association of Municipal Districts and Counties is a key partner and stakeholder in this initiative. The association will have the opportunity to provide input into all assessment and taxation matters that come under review, including those related to property assessment classes.
The government’s response indicates that the introduction of the Municipal Sustainability Initiative would have addressed revenue issues for municipalities; however, this does not address the resolution’s intent of diversifying tax equity to different business classes. As such, the AAMDC deems this response to be Unsatisfactory. The AAMDC appreciates the opportunity to participate in the MGA review and will continue to use that process to advocate for this important change in legislation. The AAMDC continues to advocate on this issue through our engagement in the MGA Review Process. As part of this process, the AAMDC understands that there will be opportunities for municipalities and industry to discuss areas of mutual interest, such as assessment classes.