M.D. sees over $900,000 in uncollectible taxes

Posted on March 25, 2021 by Vauxhall Advance

By Cole Parkinson
Vauxhall Advance
cparkinson@tabertimes.com

An issue stemming back throughout the past several years, the Municipal District of Taber is once again needing to write-off uncollectible taxes from oil/gas properties.

Nine different companies are listed on the M.D.’s tax roll with a total of $901,138.61 in unpaid taxes.

During council’s regular meeting held March 9, councillors discussed the issue that has been hanging over their heads for longer than they would like. 

“We’ve essentially accrued the expense in prior years and that typically involves debiting bad debts and expense, crediting allowance for doubtful accounts — which is essentially an account that offsets the receivable on the balance sheet,” stated Bryan Badura, director of Corporate Services. “By getting this resolution from council, we will be removing it from the tax rolls and taking out of the allowance for doubtful accounts. It does seem like we do bring quite a few resolutions to council for expensing these oil and gas taxes. However, with the introduction of the PERC (Provincial Education Requisition Credit) and DIRC (Designated Industrial Requisition Credit ) grant programs, part of the requirement of those programs is to get a resolution of council to write it off. When we do those resolutions, typically, we’re right at the end of the year and we’re still going to pursue these companies.”  

Programs are available to help municipalities cover some of the costs, namely PERC and DIRC.

PERC “provides municipalities with an education property tax credit equal to the uncollectible education property taxes on delinquent oil and gas properties” —while DIRC is a “process municipalities must follow to have any uncollectible Designated Industrial property tax requisition cancelled or refunded.”

“From this $900,000 figure we’re talking about, some of this is recoverable from those two programs or this is over and above what we might receive back in PECR and DIRC?” asked Reeve Merrill Harris.

“This is net of what we’ve recovered, so any amounts we received from PERC and DIRC, we’ve applied to the rolls, as essentially a payment on those taxes. This would only be municipal unrecoverable tax penalties and the such,” replied Badura.

Administration went into detail on the properties on the list and how the total has been building up over the past several years, leading to over $900,000.

“It is a big number and these amounts have been expensed in prior years already. It’s just accumulation of two or three years of property taxes,” continued Badura. 

Council also inquired around where the funds would be placed.

“Because it’s levied, we’re submitting it to the provincial government or are we for school board requisition and housing?” asked Coun. John Turcato.

“For requisition, we forward the funds to the requisition body. However, through the PERC and DIRC programs, we recover those requisitions through a grant. So in this $901,000, there would be no requisitions and the only one we don’t get a grant for is the housing authority. 

“However, what we do is account for the portion of housing authority requisition on our bad debts expense and we add it to the requisition in the following year. We essentially take that requisition and reapply it and spread it out over all the rest of the property tax owners,” answered Badura.

With the problem persisting for several years now, council was understandably worried about future costs. Considering no firm culmination has been reached on how to deal with the growing frustration of unpaid taxes across the province, council also pointed to the fact residents will be the ones having to pay for the shortfall.

“I know I’m stating the obvious, but these bad debts become the burden of every ratepayer in our municipality and has to cover those costs. Bad debts, I realize, are a reality of doing business — but these types of bad debts are a perpetual problem through the province and we’ve got to have a change,” said Coun. Tamara Miyanaga.

It was also pointed out the issue around unpaid taxes largely comes from oil/gas.

“The problem is it’s only in one class. There’s only one class where you have these perpetual problems and everyone else is having to pay for it in multiple ways. I think that problem has to be rectified,” added Turcato. 

“I don’t know if there are any resolutions coming at RMA (Rural Municipalities of Alberta), but maybe we should be presenting something there about this. This continually gets bigger every year, it’s not getting smaller. It’s going the wrong way and as long as there are no repercussions to companies that are operating in bad faith, why would you pay your taxes? That needs to be fixed.” 

Administration further explained why the total has come in over $900,000.

“The amount included in the $901,000 has been expensed in previous years — 2018, 2019 and so forth. These particular companies had entered receivership in prior years. I think in 2018 or 2019, they entered receivership and the issue comes with the bankruptcy legislation and the court decision that place the liability of the province, specifically well-site clean-up, has a priority above the property taxes. When these oil and gas companies do go into receivership, they typically don’t have enough assets to even cover their site clean-up costs,” stated Badura.

With the announcement the Alberta Energy Regulator (AER) had suspended Sanling Energy licences in early March, council was encouraged to see there was some push back to companies that didn’t pay their taxes.

According to the AER, Sanling owes a total of $67 million in security related to abandonment obligations on 2,266 wells, 227 facilities and 2,170 pipelines.

“They (AER) have the capacity to be able to hold these companies to account, but yet choose to do it on their own terms. Either the power is there or it isn’t and if it’s not there, it should be there. It seems that’s the first time I’ve seen the energy regulator actually use its power in a beneficial way,” continued Turcato.

A motion to cancel and write-off the outstanding property taxes in the amount of $901,138.61 for properties identified and to direct administration to remove the amounts from the tax roll of the properties identified was carried unanimously.

Another motion to request administration to prepare a list of historical debts the M.D. has written off for council and ratepayer knowledge was also carried unanimously.

Coun. Brian Brewin was absent from the meeting.