Ponoka County is experiencing an unprecedented increase in its outstanding property taxes and the issue isn’t as simple as blaming the downturn in the energy sector.
At council’s Sept. 10 meeting, CAO Charlie Cutforth brought up the issue when discussing the monthly budget report for August.
It showed the county is dealing with a shocking $3.9 million in unpaid property taxes plus penalties, that is more than double its budget of $200,000, as penalties now sits at $435,000.
“About $2.9 million is maintenance and equipment plus linear, while residential/farmland and commercial is about $1 million, which is highly unusual for the county if we look back at previous years,” explained Cutforth.
“In a typical year, the amount of outstanding taxes has been about $400,000. So when I see residential and farmland at $1 million, it makes me nervous.”
When asked by Reeve Paul McLauchlin what would likely be uncollectable from the current outstanding amount, Cutforth estimated the figure would be in $1 million range.
“Some of that is from arrears of previous years, but the majority is simply past due,” he said.
However, Cutforth added that would be on top of the $1 million of unrecoverable penalties on the outstanding taxes and the $1 million written off over the past few years through two energy companies going bankrupt.
“The majority of the operating oil and gas companies are paid up. However, it’s the ones that you expect that are not and, sadly, this is not their first time around declaring bankruptcy and then simply changing their name,” he said.
The county established a special reserve a couple of years ago, specifically to cushion itself from the potential of energy companies not paying their taxes or going under. The reserve is currently at $870,000, though Cutforth feels council may need to double that figure over the next few years to ensure the county is well covered.
The outstanding taxes work out to be approximately 14.5 per cent of Ponoka County’s overall property taxes of $26.45 million for 2019.
Coun. Doug Weir wondered where the county will find additional revenue, “Because you can’t go back to the taxpayers, as we can tell they are already hurting.”
Cutforth and the rest of council are wondering the same thing, with Coun. Mark Matejka questioning what the province intends to do about these energy companies.
“As part of the RMA (Rural Municipalities of Alberta), we’ve been trying to meet with Alberta Energy Regulator (AER) and have been literally ignored. We want a company’s unpaid taxes to be one of their liability indicators for operating, but we’ve gotten nowhere,” said McLauchlin, who is also an RM district director.
“There is also a bit of a tax revolt going on in some municipalities now and the recent situations with Trident and Sequoia are not helping. Things have gone as high as the energy minister, but I also don’t think this is over yet either.”
Waiting on budget
Unpaid taxes is just one financial hurdle facing the county, while municipalities are bracing themselves for another when the provincial budget comes out later this fall.
“We have the lowest residential/farmland taxes in the province and you want to believe the government knows that. And, if you read the finance panel report, they specifically identified that municipalities have kept their taxes low and farmed, milked government grants for years,” Cutforth told council.
“At one time that might have been true, but not in Ponoka County. One hundred per cent of our operation comes from our local property taxes. When the Municipal Assistance Grant was wiped out about two decades ago, everyone had incorporated it into their revenue and when it was gone we scrambled and swore to never again rely on anyone other than our local taxes.”
He added that for the next seven years, the county was barely able to gravel a road since raising taxes wasn’t possible due to the province tacking on a 15 per school tax hike for five years on county taxpayers.
McLauchlin further explained that the province is also cognizant of how much municipalities have in reserves and, coupled with looming funding changes to the Municipal Sustainability Initiative (MSI), the county is going to be left with two choices.
“We start to use our reserves to balance our cash flow, stop any capital donation contributions and once those funds get down to a level we are not comfortable with, we will have to change our mill rates,” he said.
“It’s going to be better to deplete your reserves than to tax your people.”