The amendments that address this subject aim to improve municipal funding models to ensure a balanced, consistent, and efficient collection of municipal revenue sources.

After hearing from Albertans about how this is important, we developed these MGA amendments to support how municipalities are funded.

Enhancing Equity of Municipal Revenue

Collection

Compliance with the Linked Tax Rate Ratio

What’s currently in place: The MMGA set a maximum property tax rate ratio of 5:1 between the highest non-residential property tax rate and the lowest residential property tax rate. Municipalities with property tax rate ratios above 5:1 (non-complying municipalities) may not increase their ratio, and are not required to lower their ratio.

What we heard: Stakeholder engagement indicated that further consultation was required to determine whether municipalities currently outside of the 5:1 ratio should be required to come into compliance with the maximum ratio within an established timeframe rather than have their ratios maintained at current levels.

What’s changing: Create authority for a regulation that will require non-complying municipalities to comply with the tax rate ratio of 5:1 over a period of time.

What this means: Municipalities with property tax ratios above 5:1 will be required to change their non-residential and residential property tax rates over a period of years to bring them into compliance. Municipalities would continue to set their own tax rates but within the ratios set out in the regulation.

When this takes effect:The related sections of legislation came into force May 31, 2016 however the regulation has yet to be developed.

Linking Residential and Non-Residential Property Tax Rates

What’s currently in place: Municipalities are free to set non-residential and residential tax rates independent of one another.

What’s the issue: Non-residential municipal property taxes have increased at rates faster than residential taxes. In some municipalities, this has resulted in owners of industrial property paying a much higher tax rate than residential property owners.

What we heard: Stakeholders from business and industry have requested a municipal tax framework that more equitably distributes property taxes among all property owners. Municipalities have indicated that any changes to the property tax framework should consider tax implications on residential property owners. Municipalities have emphasized that local councils are in the best position to make decisions for their taxpayers.

What’s changing: The MGA will be amended so that the highest non-residential tax rate can be no more than five times the lowest residential tax rate. Grandfathering provisions will be put in place to protect residential taxpayers from an immediate, dramatic increase to their residential tax rates if they live in a municipality where non-residential tax rates are greater than five times the residential rate.

What this means: For most Albertans, property taxes will continue to be wholly set at the discretion of their local councils. In municipalities where the non-residential tax rate is more than five times the residential tax rate, the percentage increase in the non-residential tax rate may not be more than the percentage increase in the residential tax rate. There were 19 such municipalities in 2015. It is anticipated these municipalities will, over time, move closer to the proposed five to one ratio.

When this takes effect: May 31, 2016.

Splitting Non-Residential Property Tax Rates

What’s currently in place: Non-residential properties are split into two subclasses for municipal taxation purposes: “improved” and “vacant.” Residential properties may be split into in any number or type of subclasses considered appropriate by the local municipality. In both instances, different tax rates may be applied to each subclass.

What’s the issue: The “improved” non-residential property class includes a range of businesses from large industrial plants to small local convenience stores. All businesses are charged the same tax rate despite their very different impacts on the municipality.

What we heard: Municipal stakeholders have asked for the ability to set different property tax rates for sub-classes of improved non-residential property. They believe this will allow for a fairer property tax framework. Business and industry stakeholders oppose creating new sub-classes for the improved non-residential tax rate. They believe this could lead to high-value industrial properties being taxed at a disproportionately higher rate than other businesses within the non-residential property class.

What’s changing: The MGA will be amended to enable splitting of the municipal non-residential class into subclasses. The regulations to accompany this change will be created with input from municipalities, assessors, and non-residential property owners to determine how splitting should be implemented to best enable a fair distribution of municipal non-residential property taxes. Any subclasses established under these provisions will be subject to the new limits on the ratio of non-residential tax rates as compared to residential tax rates.

What this means: Municipalities will be better able to set tax rates in a manner that reflects local circumstances.

When this takes effect: January 1, 2018.

Taxation of Provincial Agencies

What’s currently in place: A recent decision by a Composite Assessment Review Board (CARB) has overturned a long-standing practice that properties leased by provincial agencies are subject to property tax.

What we heard: While most crown agencies continue to pay property tax, recent appeal board decisions are creating concerns that crown agencies may begin appealing the requirement to pay.  A number of these agencies operate on property that generates a significant amount of income for their host municipality.  Municipalities expressed concern that if these crown agencies successfully appeal their property tax bills, it will create tax shifts to other citizens and create inequities within the local property tax framework.

What’s changing: Make property held by a provincial agency taxable for the purposes of property taxation.

What this means: This change requires provincial agencies, as defined in the Financial Administration Act, to support the municipalities in which they operate in consideration of the municipal services they receive (such as fire protection) through property taxes. Properties that are associated with health regions that receive financial assistance from the province, housing management bodies established under the Alberta Housing Act, schools, colleges, and universities will continue to be exempt.

When this takes effect: January 1, 2018.

Modernizing and Enhancing Consistency in the

Assessment Process

Centralization of Industrial Property Assessment

What’s currently in place: Industrial property is comprised of several taxable property types such as machinery and equipment, pipelines, and rail lines. Assessment of these property types is carried out separately by municipalities and the province.

What we heard: Municipal and industry stakeholders have indicated the complex nature of industrial sites creates province-wide challenges in consistently applying definitions, determining who assesses which portions of the property, and identifying the appropriate appeal body. During focused consultations for the MGA, municipal and industry stakeholders agreed that assessment of property on designated industrial sites should be prepared by a central body.

What’s changing: Designated industrial property will be defined as major plants, properties regulated by provincial and federal regulators, linear property, and rail property. The assessment of all designated industrial property will be centralized within Municipal Affairs. Costs associated with centralizing assessment will be recovered from designated industrial property owners. Supplementary assessment on linear properties will be allowed, and a standard assessment condition date of October 31 annually will be established for designated industrial properties. All appeals related to designated industrial property will be heard by the Municipal Government Board.

When this takes effect: Designated industrial property assessment will be the responsibility of the province as of January 1, 2018.

Assessment and Taxation of Farm Buildings (Improvements)

What’s currently in place: Farm owners in both rural and urban municipalities receive a tax exemption on farm buildings, such as barns or quonsets. However, the tax exemption is different in urban and rural municipalities. In rural municipalities, farm buildings are not assessed, and are therefore completely exempt from municipal property taxes. In urban municipalities, farm buildings are assessed at 50 per cent of their market value and are taxed by the municipality at the non-residential tax rate.

What we heard: Municipalities and urban farm owners expressed concerns about the inconsistencies that occur in the assessment and taxation of urban and rural farm building owners living in the same region.

What’s changing: All farm buildings in urban and rural municipalities will not be assessed or charged municipal or education property taxes. Provisions were put in place to phase in farm building exemptions in urban municipalities over five years.

Further work is under-way, led by the Alberta Association of Municipal Districts and Counties (AAMDC), to determine how intensive agricultural operations may be taxed.

When this takes effect: January 1, 2018.

Assessment of Farmland Intended for Development

What’s currently in place: Farm properties enjoy substantial assessment and tax benefits not afforded to commercial or residential properties. In some instances, top soil has been removed in preparation for development, limiting usefulness for farming operations, yet the property still receives the assessment and tax benefits intended for farmland. Land developers and investors, who intend to sell the land for development, may buy or hold farm property for future commercial or residential development. The owner may continue farming operations to take advantage of the substantial tax benefits until the land is ready for development. Consequently, owners of these lands pay considerably less tax than if the lands were assessed at market value.

What we heard: Municipalities and some Albertans are concerned that property owners, intent on developing farmland for commercial or residential purposes, are eligible for the assessment and tax benefits afforded to farm property. Developers have indicated that without access to these tax benefits, there is little incentive to maintain agricultural production on lands that may be held for years before development occurs.

What’s changing: Farmland will continue to be assessed as farmland until it is no longer used for farming operations. Regulations associated with the MGA will be clarified to ensure when farmland has its top soil removed, or is no longer being used for farming operations, it will no longer be assessed and taxed as farm property and will instead be assessed and taxed at market value.

When this takes effect: January 1, 2018.

Enabling Efficient and Effective Assessment

Processes

Access to Assessment Information

What’s currently in place: The MMGA centralized the assessment of designated industrial property and gave municipalities the right to appeal Designated Industrial Property (DIP) assessments. Municipalities currently do not have the right to access all the information they may need to prepare their case or determine if an appeal is warranted.

What we heard: Property owners and municipalities both have a stake in ensuring that assessments prepared for DIP properties are accurate. Municipalities have requested the same right to request DIP assessment information as currently afforded to property owners. This information may be necessary for a municipality to determine if the property is assessable, if the assessment is prepared correctly, if a complaint is warranted; and to prepare a case.

What’s changing: Allow municipalities to request information regarding DIPs within their jurisdiction, subject to confidentiality restrictions that do not preclude use of the information in an appeal.

What this means: By allowing municipalities to access information, a balance will be created in the information access rights of industrial property owners and municipalities. This information could be used by the municipality to determine if the assessment was prepared correctly, to determine if an appeal is warranted, and to prepare a case.

Municipalities will be required to sign a confidentiality agreement to protect sensitive corporate information including information received by the provincial assessor from property owners.

When this takes effect: January 1, 2018.

Access to Information for Assessors and Property Owners

What’s currently in place: Assessors can ask property owners to provide any information deemed necessary to accurately prepare a property tax assessment, or determine if a property should be assessed. Municipalities are required to provide property owners with enough information to determine how their property assessment was prepared.

What we heard: Property tax assessors and landowners have indicated that providing this information can be onerous, and the information provided from both sides is often regarded as incomplete by the other side.

What’s changing: The existing scope of information requirements for both property tax assessors and landowners will be clarified by enhancing the regulation-making authority and by providing detailed direction in a guide on best practices.

When this takes effect: January 1, 2018.

Assessment Complaints

What’s currently in place: The assessment process determines property values for property taxation purposes. The MGA sets out a complaints system for property owners who have concerns about their property assessments. The Act also provides property owners with the ability to ask for an independent review of their property assessment. Currently, there are three bodies that hear complaints, depending on the type of property being assessed: Local Assessment Review Boards, Composite Assessment Review Boards, and the Municipal Government Board.

What we heard: Municipalities and assessors provided feedback on the following issues related to the current system for assessment complaints and appeals:

Local Assessment Review Boards hear complaints about business tax and levies on business improvement areas. We heard that these complaints should be heard by Composite Assessment Review Boards so that costs can be awarded where appropriate.
An assessor is not allowed to make corrections to an assessment that is under complaint. We heard that allowing an assessor to make corrections to an assessment that is the subject of a complaint could sometimes help resolve the complaint more quickly.
When appealing an assessment complaint ruling to the courts, an appellant must first seek leave to appeal from the court to appeal. That is followed by the actual appeal, then finally the judicial review. We heard that the three stages of a legal appeal were redundant, since the system requires the courts to consider and rule on the same issue three times.

What’s changing: The MGA will be updated as follows:

Composite Assessment Review Boards will hear complaints about business taxes, as well as levies on business improvement areas. These boards will also be able to award costs to participants when appropriate.
Assessor will be able to make corrections to assessments under complaint without needing ratification from the assessment review board or having the complaint withdrawn first.
Assessment Review Board decisions may be appealed at Court of Queen’s Bench by judicial review only.

When this takes effect: January 1, 2018.

Notice of Assessment Date

What’s currently in place: Assessment notices must include the deadline for filing a complaint about the assessment, which must be 60 days from the date the assessment notice is sent.

What we heard: Municipalities and stakeholders feel there is confusion around how to best determine the notice of assessment date. More specifically, some stakeholders interpret the MGA to mean the notice of assessment date is the day the municipality sends the assessment notice while others believe it is the day the assessment notice is received.

What’s changing: Municipalities and the provincial assessor will be required to set a “notice of assessment date” between January 1 and July 1; and mail the assessment notices seven days prior to the “notice of assessment date”.

Municipalities and the provincial assessor are enabled to establish additional notice of assessment dates for amended and supplementary assessment, which could occur at any time throughout the year. The amended or supplementary assessment notice would state the deadline for filing a complaint regarding that assessment.

What this means: The deadline for filing a complaint about an assessment will be 60 days from the “notice of assessment date” as indicated on the assessment notice.

When this takes effect: January 1, 2018.

Corrections to Assessments under Complaint

What’s currently in place: The MMGA enables assessors to revise an assessment even after a complaint has been filed on the assessment.

What we heard: Municipalities and assessors feel the current assessment complaint system does not adequately allow the municipality and the complainant to work together to correct assessments once a formal complaint is filed.

What’s changing: The MGA will be amended to clarify the process to be followed if an assessment that is under complaint is amended.  In such cases, the complaint will be cancelled and all taxpayer rights reset, unless the amended assessment has been agreed to by both parties (in which case no further appeal or amended assessment notice is required).

What this means: The process for revising an assessment that is under complaint will include:

  • sending the amended assessment notice and rationale for the changes to the assessed person or complainant, assessment review board or Municipal Government Board;
  • requiring the assessment review board or Municipal Government Board to cancel the complaint, notify the property owner of the cancellation, and refund the complaint fee;
  • allow the assessed person or a municipality to file a complaint about the amended assessment notice within 60 days of the “assessment notice date”; and
  • establish a process to ensure that the property owner or municipality may request information regarding an amended assessment notice under Section 299 and 300.

An amended assessment notice is not required if an assessment is revised as a result of a complaint being withdrawn by agreement between the complainant and the assessor.

An assessor will not be permitted to revise an assessment after an assessment review board or the Municipal Government board has rendered a decision on a complaint regarding the assessment.

When this takes effect: January 1, 2018.

Tax Receipts

What’s currently in place: Municipalities are required to provide a receipt when taxes are paid.

What we heard: Some stakeholders expressed concern the requirement to provide tax receipts is onerous and costly. They further suggested that property owners do not often express interest in receiving a tax receipt. Municipalities have requested this requirement be changed so that a tax receipt is only sent when requested by a property owner.

What’s changing: Clarify that municipalities are not required to provide receipts unless requested by the taxpayer. Municipalities must notify taxpayers how to request a receipt and clearly explain the process on a property tax notice.

When this takes effect: January 1, 2018.

Business Improvement Areas

What’s currently in place: The current legislation allows the Business Improvement Area (BIA) levy to be charged to the business owners.

What we heard: Stakeholders consider it important that property owners are involved in the BIA; however, BIAs should be driven by the business owners.

What’s changing: Strengthen the sections in the MGA regarding BIAs.

What this means: No changes are proposed to the way BIAs operate; however, the legislation regarding BIAs has been clarified.

When this takes effect: Upon proclamation of An Act to Strengthen Municipal Government.

Tax Exemptions

What’s currently in place: “Held by” and “used in connection with” are terms used in the MGA in relation to property tax exemptions.

What we heard: Stakeholders have noted that this wording is not clear and in some instances can lead to businesses that are typically expected to pay property tax being exempt because they are loosely connected to an exempt use.

What’s changing: Provide the Minister with the ability to create a regulation to define the terms “held by” or “used in connection with” if required after further analysis and consultation.

When this takes effect: It has yet to be determined when the related provisions of An Act to Strengthen Municipal Government will be proclaimed.

Areas Where No Legislative Change Will Occur

Industrial Exemptions

What’s currently in place: Some types of industrial property receive special tax benefits to encourage investment. Most prominently, machinery and equipment property is assessed at 77 per cent of its value, which is regulated. Machinery and equipment, as well as electric power generation property do not pay education tax.

What we heard: Municipalities would prefer that all property is assessed at 100 per cent of its value, and that all properties pay education tax equally.

What’s changing: There will be no change. These special tax benefits are an important part of how Alberta encourages investment. At this time, it makes sense to maintain these benefits to grow our economy.

What this means: The current system will remain in effect.

Assessment of Farmland

What’s currently in place: Farmland is assessed and taxed using agricultural productivity rates set by Municipal Affairs. The rates used to determine farmland assessments were developed in the 1970s and were based on the typical agricultural productivity of that time. These rates were last reviewed and updated in 1994.

What we heard: Municipalities and assessors indicated the current farmland rates are out of date and do not reflect technological, economic and market-related changes that have occurred in the agricultural industry.

What’s changing: There will be no change. Farmland will continue to be assessed using agricultural productivity rates. Maintaining the current rates provides stability for Alberta’s agriculture sector.

What this means: The current system and rates will remain in effect.

Assessment of Farm Residences

What’s currently in place: Under regulations associated with the MGA, the residential portion of a farm is defined as three acres and is assessed at market value. Currently, farmers in rural municipalities receive a partial property tax exemption for each residential home on their land. This exemption is based on property values set in 1989. The total reduction in taxes varies, depending on the amount of farm land the farmer owns, the number of homes on the farm property and the municipal tax rate.

What we heard: Municipalities and assessors have indicated that the effort required to administer this tax incentive is significant and results in a relatively small benefit to farmers. Some Albertans requested property assessment exemptions for farms to be limited to farming operations or farm land, not land associated with residences. Some Albertans expressed support for the exemption on farm residences, and consider it to be an important incentive.

What’s changing: There will be no change. Farm residences will continue to receive the partial tax exemption, and the residential portion of the farm will continue to be defined as three acres.

What this means: Farm residence assessment rules will not be changed.

Municipal Taxation Powers and Provincial Revenue Sharing

What’s currently in place: The largest source of revenue for municipalities is property taxes, followed by user fees and charges, then provincial grants. The MGA establishes a variety of revenue sources for municipalities to support their operations, including property taxes, targeted taxes (i.e. business tax, local improvement tax, etc.), levies, fees, fines and investment income. Municipalities may also enter into regional funding and cost-sharing agreements with neighbours for shared services.

Municipalities can access additional funding through discretionary provincial and federal transfers. The Municipal Sustainability Initiative, a provincial grant program, is the main source of provincial funding to municipalities.

What’s the issue: Municipalities have expressed concern that rising operational costs and a desire to provide a wider range of services may require additional taxation powers, plus a more predictable provincial grant framework.

What we heard: Municipalities requested new taxation powers and dedicated long-term funding through grants. They believe property taxes – their primary source of revenue –cannot keep pace with economic changes. As well, the value of a given property is not always an accurate reflection of an individual’s ability to pay. Both residential property owners, and business and industry owners with non-residential property, have expressed strong opposition to any approach that would increase their municipal taxes.

What is changing: There will be no change. No new taxes are proposed through the MGA Review. Municipalities will continue to work within the existing taxation and provincial grant framework to collect the required operating revenues.

What this means: Most Alberta municipalities are in good financial positions and are able to raise revenue year over year to fund their operations.

Linear Property Assessment and Taxation

What’s currently in place: Linear properties include gas and oil wells, pipelines, telecommunications and cable property, as well as the generation, transmission and distribution systems for electric power. Tax revenues from linear properties are collected by and remain in the municipality where the linear property is located.

What’s the issue: Some municipalities with large amounts of linear property and the subsequent tax revenue have voluntary cost-sharing agreements with their neighbouring municipalities to help fund services that benefit the entire region. Those municipalities with no linear properties or cost-sharing agreements have asked the province to pool all the taxes from linear properties, then redistribute them throughout Alberta (based on population) or within a region.

What we heard: Some municipalities have asked the province to collect and redistribute taxes from linear properties rather than allowing those revenues to remain in the municipality where they were collected.

What’s changing: There will be no change. Linear taxes will continue to be collected by and accrue to the municipality in which the property is located. Requirements for intermunicipal collaborative frameworks (see section on Requiring Regional Decision Making) will help ensure appropriate regional planning, services and funding of those services.

What this means: Municipalities will continue to collect and keep the taxes from linear properties within their boundaries. As mandatory Intermunicipal Collaboration Frameworks are set up, regional planning mechanisms will enhance sharing of those revenues.