Woodlands County is facing a hurdle to end all hurdles following a recent change at the Provincial level

The Provincial Government recently did a review of the tax assessment model used for oil and gas properties. Though the reason for the assessment change was marked as positive and meant to enhance competitiveness in the industry, Woodlands County could be plunged further into the red in terms of finances. The reason for that is because the assessment could reduce the income the County receives by no less than a million dollars.

Four scenarios for each community were proposed, labelled A, B, C and D. Some communities could receive a benefit from the changes, but Woodlands County’s options go from bad to worse. The lowest financial hit proposed for the County is seven percent, which equates to just over a million dollars. On the high end, the biggest hit would be 14 percent. That would be a loss of $3.1 million! While the goal is to help offer relief to oil and gas companies, it seems that the burden is being moved from the companies to the municipalities.

Oddly, the Provincial Government is changing the assessment without changing the legislation that would enable municipalities to collect on unpaid taxes. As previously reported at length in the Press, Woodlands County is suffering financially due to nonpaid taxes from two oil and gas companies within their boundary. In 2018 and 2019, the County failed to receive nearly 10 million dollars in unpaid taxes and expects to add another three million to that total by the end of this year. Not only is the County facing that loss, but they also must pay the Province a share out of money they are not even receiving.

Why? Municipalities take in taxes, and the Government of Alberta is owed a portion from that for the School Tax. So, when an oil and gas company doesn’t pay its tax bill, the municipality is still on the hook for the School Tax even though it never received the company’s payment in the first place. Though the Province is trying to make companies more viable by lowering their taxes, by not protecting municipalities from non-paying entities, it puts every single resident at risk of impact due to the burden it places on the municipality.

In recent months, the County has worked diligently on its finances by cutting expenditures and postponing projects. Their most recent budget was slashed by three million dollars in favour of cost-saving practices. However, this new assessment model is taking the losses to a whole new level, and Woodlands County Mayor John Burrows is not having any of it. He said that he was told that the argument for the assessment is that the company that went broke may not have had their taxes been lower. “They didn’t pay 100 percent of their taxes for three years, and it still didn’t save them. They still went bankrupt. So, I completely reject that example.”

He said that one of the most frustrating parts of the process is that they are not too sure what the government wants them to do. “They put four scenarios forward, and each of them for Woodlands County is worse than the next. Woodlands loses 1.4 million in Scenario A to 3.1 million in Scenario D. That puts us in a bad position,” explained Mayor Burrows.

One company in Woodlands County that filed for $780 million in bankruptcy protection, and creditor protection, not only owes the County but also owes almost a million to a company that still operates in the County. Mayor Burrows said that the thought of having to “punish” a business owner who suffered that loss of almost a million dollars and still managed to come out the other side of it by having an increase in his taxes is incredibly unfair.

He said that during a recent meeting with Council, one councillor brought up the idea of reducing service levels to save money. “Ok. We’ve got a $21 million budget.  Our previous cost-sharing model with the town and other municipalities saw about $3.3 million going out for shared services. Then we have three million in uncollectable tax. Then you throw in a potentially $3.1 million loss in this assessment. Our municipality has a physical landmass of Prince Edward Island with over 800km worth of roads and some very ageing infrastructure. That leaves us with 11 million dollars to spend in the County. How can we run a municipality on eleven million dollars?”

He said that no one would want to see the level of service it would require to save money. “We were tightening as much as we could before this. There comes a point where you become unsustainable, and that is my biggest concern.” Mayor Burrows was quick to point out that they are big supporters of oil and gas companies in Woodlands County and said that everyone recognizes that the industry is suffering. He added that helping the industry cannot come at the cost of municipalities.

“There are going to be bankruptcies in this mess, and with COVID on top of it all? There will be municipalities that do not make it through this. Our focus here is to minimize the damage. Woodlands has been extremely aggressive in cutting to this point. We are doing our part. For the Province to not put legislation through that gives us a mechanism to collect those owed taxes, well, I do not know what they expect. If we cannot get the money, it is pretty tough to continue doing business.”

Adding to the confusion is that one of the companies that was going out of business and claiming to be too broke to pay taxes was able to purchase other assets. “The Alberta Energy Regulator (AER) approved those purchases even though those companies had not paid their municipal taxes in multiple municipalities. We even have letters from the AER saying that they don’t even look at that and that it isn’t a component that they look at when they transaction the wells.” Mayor Burrows said that it makes no sense that a company unable to pay its taxes for years can add to its assets. 

Over the next few weeks, Mayor Burrows will be talking with local government representatives and trying to find a solution that does not involve adding to their debt. “Small businesses pay a bulk of the taxes in the province, which isn’t who this assessment is helping. So, let’s get creative. Can we do tax rates based on flow and production, or the viability of something? There has got to be other options because this isn’t going to just turnaround.”

Another area severely affected by the County’s financial situation, even before this assessment came into play, was the cost-sharing they do with surrounding communities. “We have a good record of doing that, and we like providing that for services. We have eight different communities that we share with, but if they pull too much out of rural revenue like this, we will not be able to afford any of those things,” explained Mayor Burrows.

Woodlands County is looking to have a town hall event soon where residents will be able to call in and ask questions. “It’s about transparency.  I think Woodlands County is seeing a lot of change right now, which includes changes for the better. If we can stick it out through this process, then I think people will be happy.”