Rural Alberta municipalities to get credit for education tax they can't collect from oil and gas firms

Rural Alberta counties and municipalities will get a tax credit for education property taxes they can't collect on abandoned oil and gas properties.

The program, retroactive to 2015 when oil prices began to fall,was announced Wednesday in Edmontonat the annual convention of the Alberta Association of Municipal Districts and Counties.

The Provincial Education Requisition Credit (PERC) program will be in effect until 2019. The government says it will make up to $10 million in funding available each year.

Municipalities that have written off the municipal property tax for oil and gas facilities will be eligible to apply for a credit on the education portion of their property tax.

The creditaddresses a tax issue that kept coming up in discussions during a tour of rural communities this past summer, said Municipal Affairs Minister Shaye Anderson.

• Rural governments out tax revenue from struggling resource sector

Municipalities collect education property taxes on behalf of the province. During the economic downturn that began in 2015, some oil and gas companies have walked away from their wells.

But until the facilities are properly listed as abandoned, municipalities still have to pay the education property taxesto the province.

The difficulty is there's lag time sometimes years before that abandoned well status gets on the records of the Alberta Energy Regulator, Anderson said.

"It really was exacerbated by the fall in the oil prices. A lot of companies just weren't able to be viable," said Anderson. "Unfortunately that really hit the rural municipalities very hard."

Of the 69 counties and communities in the AAMDC, about 50 are affected by the tax-collection problem, said Al Kemmere, the organization's president. Kemmere is also a councillor with Mountain View County in central Alberta.

"This is an item that we couldn't collect but then we actually would have to take out of our regular budget," said Kemmere.

The amount of money depends on the level of oil and gas activity within a community, and how long it has taken place, he said.

"It ranges. I know I have one municipal member where this has been about $400,000 a year, down to my own county [where] it's between $30,000to $40,000 a year," said Kemmere.

Counties have had difficult choices

For towns and counties it has meant making a choice between raising taxes or reducing services, because the money had to be taken from the operating budget, he said.

"You modify service levels, or you increase taxes. Neither one of those are palatable or good solutions for the long term."

The credit will apply only to oil and gas properties that have had their municipal taxes written off. It won't apply to other types of uncollectable property tax.

The money for the program is coming from the Alberta School Foundation Fund.

A government spokesperson said that fund contains $25 million a year, all of it coming from education taxes collected across the province.