The DMA Way

CCRG to RIPA: Proposed Changes to Alberta Regulations and Guidelines

by DMA Staff | May 23, 2017

The Construction Cost Reporting Guideline (CCRG) has been a Ministers Guideline used in Alberta since 2005 as the document used to report and assess industrial properties using construction costs. This document has been under review for some time, with consultation groups providing an enormous amount of input over the past 2 years. The new CCRG was released yesterday in draft format and is now called RIPA, or Regulated Industrial Property Assessment Ministers Guidelines. The draft version of this document is open for a 60-day review period, which you can find here.

Upon initial review, this draft document removes many ratepayer rights we previously had. All discretion is placed to the assessor and he/she has the final call on assessable or non-assessable costs. For example, the guide has removed any reference to abnormal costs and tried to standardize assessment by using provincial averaged hourly rates applied to actual project hours. These rates are contained at the Government of Alberta’s Ministry of Labor Learning Information Service wage information is contained on the “OCCinfo” website here. If the discipline rate wage is not listed on the site, actual costs are to be used. There is no mention of the impact on the direct and indirect hours due to any abnormal causes. The hourly rate covers everything, and all additional costs incurred that could be excluded today, such as rework, unproductive labour, errors in construction or inadequate labor claims will now be assessable. Municipal Affairs appears to have tried to take the subjective calls out of the classification of the project costs. If it can’t be measured in a black and white calculation, it becomes taxable regardless of the cause. They have listed all the excluded cost types and claimed that this is an exhaustive list. We have only mentioned a few but there are many areas of concern.

The requirements to report a new project are extensive and will require considerably more work and analysis although many items are not logical in their flow, and do not seem to consider how major projects are executed, managed, or tracked, or any of the challenges that are encountered resulting in potential abnormal cost overruns. It seems that all previous committee work from years of discussions and working groups have been disregarded in an attempt to over simplify a new model

This potential impact of increased assessable costs for greenfield construction is further compounded by the expanded right of the assessor to request both expense and capital classified project costs. Specifically maintenance costs, turnaround or similar costs will be subject to assessment and tax, despite not adding any improvements or improvement value in many cases. These seems to contradict the Municipal Government which directs assessors to value Property, which is defined as land and improvements. The administrative complexity of ratepayer requirements and the compliance this adds is substantial.

An additional new item is the locking of assessments. There is proposed wording that assessments from previous years cannot be altered in future years except in select circumstances. This means there could no longer be reviews or appeals of assessments except within the very short current year cycle.  You will not be able to correct an incorrect assessment, whether the error was made by the property owner, or inherited through a purchase. Although not in this document, Schedule D of the Machinery & equipment guidelines will have a difficult time existing with this locking mechanism so we expect even more changes to come.

These are just a few items that seem to be fundamentally at odds with taxpayer rights.  This along with the move to sub class assessments and the potential increase in the tax rates for these classes will result in even higher property taxes, particularly for 2019 tax onward. We will provide additional information as we get further into the details of the draft document, along with some possible ideas to get involved in the feedback process.

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