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Tax Pulse by DMA Canada - Western Update

by DMA Staff | Jun 23, 2016
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On May 31, the draft Modernized Municipal Government Act (MGA) was introduced into the Alberta legislature for First Reading. The legislation, labeled as Bill 21, will now be tabled for the summer while the province engages in province-wide stakeholder consultations through various city visits across Alberta. There are some positives and negatives from the proposed legislation. Here are some of the larger ones relating to property tax assessment:

1. Non-residential to residential mill rate ratio cap.

  • The draft MGA imposes a non-residential to residential mill rate ratio cap at 5:1 for all municipalities in the province. This cap will take effect the date the legislation is introduced in the legislature.

  • There is no provision for municipalities to reduce their rate ratios to come in line with the cap. Current ratios will be frozen unless a municipality voluntarily lowers their ratio, which would then be the new cap.

  • There is currently the following number of municipalities in Alberta. Of these, less than 20 currently have a ratio above 5:1.
Municipality Type  # in Alberta
 Cities 17 
 Towns 108
 Villages 93
 Summer Villages 51
 Municipal Districts 64 
 Improvements Districts 8
 Metis Settlements
 Special Areas

 

2. Split Mill Rates within the non-residential assessment base

The draft MGA legislation enables municipalities to split the non-residential assessment base into sub-classes (that will be defined by regulation) and to establish different mill rates for these subclasses.

This is similar to other provinces although there could be a large concern in Alberta, as Alberta assesses and taxes manufacturing processing and equipment. Municipalities will be allowed to split the non-residential property class into subclasses and tax them at different rates. The classes will be defined in regulation so there is not a current idea of how the classes will be defined. The tax rates will be subject to the maximum ratio limitation of 5:1.

The split mill rate classes in conjunction with the mill rate ratio cap is a potential concern for industrial ratepayers.

3. Centralization of Industrial Assessment

  • The Government will centralize all industrial property assessment within Municipal Affairs, effective 2019 rather than the other changes that will take effect for 2018 tax. A new industrial property class will be created that will include: linear property, railway property, major industrial plants (including land, buildings and structures and M&E), oilfield properties (including land, buildings, M&E and Linear), and all properties regulated by Alberta Energy Regulator, Alberta Utilities Commission, and National Energy Board.

  • There is still significant unknowns as to what is all included in this industrial class.

  • The appeal mechanism will be to the Municipal Government Board rather than the current Composite Assessment Review Board. The Municipal Government Board has a perception of being under the same umbrella as Alberta Municipal Affairs, who will now prepare the assessments.

  • Industry had requested centralized assessment be under an independent third party rather than Alberta Municipal Affairs.

4. M & E Assessment

A Policy decision was taken to continue the statutory level at 77 percent and the M&E education tax exemption. In addition, progressive assessments for manufacturing and processing operations will still not be available.  Assessments cannot be prepared for these facilities until they are operational.

The potential of any or all of these being taken away from industry would have had a significant negative impact on industry. 

Currently, a property owner is allowed, under the Municipal Government Act, to request information on how their assessment was prepared.  The Province has proposed to change this wording to the benefit of the assessor to only what they have in their possession, which is not defined.

The assessor can currently request information from the ratepayer that is necessary to prepare the assessment. The proposed wording allows the assessor to request anything they deem reasonable, including information to defend the assessment. This is a clear shift in requirements. The onus is still on the ratepayer in an appeal despite these potential changes.

5. Distribution of Linear Assessment base/ regional cost sharing

Requirements for inter-municipal collaborative frameworks will ensure appropriate regional planning, services, and funding of those services have been introduced. Municipalities will have 2two years to implement regional planning and must have agreements with all rural and urban municipalities they have borders with. The specific municipalities will still have the responsibility to collect their own taxes rather than have regional allocations as some municipalities requested.

What's Next?

  • The Province is conducting their "Summer Tour" to present and take feedback on the MGA draft. 

  • A schedule of stops is included in the attached link: http://mgareview.alberta.ca/get-involved/

  • The Act is expected to be passed in the fall during the 2016 legislative session.
     
  • The province is concurrently updating/introducing 60 regulations to support the revised legislation. Committee groups are currently being organized and some discussions have started.

  • There will be room for public input on any changes to the act that arise as a result of the public consultation in the fall, as well as any regulatory changes that are anticipated to be made public in January/February 2017.

  • The Act and the Regulations are expected to come into effect by October 2017, for 2018 tax unless otherwise mentioned (centralized assessment).

These are just a few of the proposed changes. As we are able to review the entirety of the proposed changes further and be able to speak to the Province, there will likely be additional issues identified and clarity obtained for others. Please contact us at any time with any questions or concerns.

Supporting document(s) attached: Modernized Municipal Government Act

Please do not hesitate to contact your local DMA office should you have specific questions or requests.