Woodlands County council working towards resolution as it digs out of a $4.3 million tax arrears hole

Back in November, the Press reported on Woodlands County’s decision to terminate the Intermunicipal Cost Sharing Contribution Agreement it had in place with Whitecourt. At the time, it was revealed that increasing financial pressures, including large uncollected tax levies from industry, were a big factor in its need to re-evaluate the agreement. After a recently-published article mentioned that Woodlands was within a couple of years of being bankrupt, the county put through a media release to set the record straight. Newly-appointed County Mayor Ron Govenlock spoke with the Press on the matter.

At the centre of it all is $4.3 million in unpaid 2018 taxes from two oil and gas businesses within the county. Although Woodlands isn’t alone in this issue as there are 68 other municipalities in Alberta that are dealing with unpaid taxes from industry valued at over $18 million, it is certainly one of the most affected. “When you look at $4.3 million out of $18 million it represents a substantial percentage,” said Mayor Govenlock.

One obstacle is that the county is limited in how it can recover the taxes. Typically, when a company is unable to pay it is because it is bankrupt but the two companies in question continue to run. That creates a dilemma. “We want to see those companies succeed. We rely on them for the economy in the area, the jobs, and the taxes they generate as a result, so they have to remain viable in balance with their obligation to pay the municipality.”

Another dilemma is that the county cannot allow any company to pay less taxes than what they owe. “We cannot provide any preferential treatment for one company or another regarding those classes of business. We need to be able to expect to collect the tax arrears, but we want to work with industry.” He said one of the companies had asked for a break on their taxes but that, instead, the county sent them an option to do a payment plan.

“If we can reach an agreement as to how and when we can expect payment of those taxes then we will not be pursuing with the legal option of seizure of assets and the sale of those assets because that’s an additional cost for the municipality and a timely delay,” explained Mayor Govenlock. “Given some recent court decisions (Virginia Hills) it would further put the municipality in a potentially libelous scenario because anyone who seizes property in the oil and gas industry is responsible for any reclamations obligations. We don’t want to find ourselves in that situation. The rules are made by the province and our hands are effectively tied as to what our options are to attempt to collect or pressure these companies to meet their civic obligations.”

The fear of bankruptcy comes from the potential scenario that the two companies continue down the same path of non-payment. On its own, the $4.3 million represents about 22.5 per cent of Woodlands revenue from taxation. In two years, that would be roughly $8.5 million in arrears. “If you do one more year then mathematics suggest we would be in serious financial debt.”

Woodlands County has reserves set aside to the tune of about $12 million that will allow it to operate through the 2019 calendar year which should come as a relief to residents. However, the focus is on correcting the issue at hand before it gets worse. One of the biggest issues are the taxes for education that are collected on behalf of the province. “We are obliged to forward that to the province whether we collect it or not.”

The province previously had a program called the Provincial Education Requisition Credit Program (PERCP) but it’s a finite program that ends soon. It allowed municipalities to write off the debt and to claim from the province a credit for education and taxes that would have otherwise been paid. “But the problem is that it only applies to bankrupt companies that have not paid their taxes and we don’t want to write the debt off; we want to collect it.” Since the companies are not bankrupt it leaves Woodlands County ineligible for the grant.

One of the current strategies being focused on is advocating for change. “We are looking at encouraging the province to change the regulations to help provide us with the tools to properly plan for and enforce the payment of tax arrears. Rural Municipalities of Alberta (RMA) is the regional group that represents rural municipalities. This problem isn’t unique to Woodlands County, but it is dear to us and we are working with RMA to ensure that the discussion reaches the highest levels of the provincial government so that we can find a solution that works for all of us,” Govenlock explained.   

As far as what Woodlands County could stand to lose in the future should the process not be rectified either through provincial help or payment of the tax arrears, Mayor Govenlock said he and council remain positive. “We are focusing on what we believe will be reasonable actions on behalf of the oil and gas industry that’s involved. The thought process associated with this continuing has not been seriously contemplated at this stage. It would be unreasonable for the province to sit back and watch municipalities fail. We are the children of the province and they absolutely cannot allow the present set of regulations to prevail and favour large oil and gas industry without there being some mechanism to resolve this.”

Ever since the decision to terminate the Intermunicipal Cost Sharing Contribution Agreement with the Town of Whitecourt both communities have been in talks on resolving the issues each face. Mayor Govenlock said if the current set of circumstances were to continue, with the tax arrears, it would compromise the financial commitments they have with their neighbours including Whitecourt. “I expect, representing Woodlands County, to be able to sit down with our partners and work out a respectful and amiable agreement that works for both of us.”

He added that once they get a firm commitment from the industries involved that they will share it. “We have legal advice with regards to our options and we have communication established with the industries. We’re trying to work through the process to get a scheduled payment plan in place and if that happens it’ll take a lot of pressure off all of us.”