LAC LA BICHE - An increase of three per cent to the municipal tax rate of an average Lac La Biche County homeowner would mean an increase of about $60 a year. The increase would bring in about $100,000 in additional revenue to the municipality. A similar increase would affect the municipality's industrial tax base more significantly, generating approximately $1 million in new tax revenue.
The idea of municipal tax rate increases is currently being discussed by Lac La Biche County Councillors.
Using three possible tax scenarios, councillors are working out a hypothetical financial exercise about tax rates as they work towards finalizing the municipal 2023 budget by the end of 2022. The tax rate bylaw will not be officially discussed until the new year, and won't be approved until April or May of next year. The three scenarios all see increases to residential and industrial tax rates. The first scenario looks at increasing residential rates by 1. 5 per cent, and increasing industrial rates by one per cent. The second scenario is a three per cent hike for residential and a 1.5 per cent increase for industrial properties within the municipality. The third scenario is a four percent increase for residents and a 2.5 per cent hike for industrial ratepayers. The increased revenues generated from the scenarios range from $700,000 to $1.78 million.
Budget exercise
The scenarios are just that — scenarios, says the municipality's top financial administrator.
"These options are not going to set tax rates right now, they are just an indication ... this is just an exercise to see what could happen," said Lac La Biche County's Associate CAO of Finance Zeeshan Hasan.
The exercise is also helping councillors to see the impacts of reducing the current 'tax gap' between residential and rural industrial rates. Currently, the municipality has a residential tax rate that is 5.89 times lower than the municipal rate paid by industrial ratepayers in the rural areas. The provincial government has mandated the municipality — and several others in the same situation across Alberta — to reduce that ratio to 5:1. So far, provincial officials have not mandated a set timeframe for the ratio to be met — but councillors are concerned that it could be mandated without warning, potentially forcing year-over year rate hikes for residents of double digits.
Currently, the Lac La Biche County municipal mill rate for a residential homeowner in an urban area is 3.12. The mill rate for an industrial owner in the rural area of the municipality is 18.3647. That means a home with an assessed value of one million dollars would pay $3,120 for its municipal portion of taxation. An industrial business in rural Lac La Biche County with the same assessed value of one million dollars is paying $18,364.70.
To bring the two values within the mandated range, Hasan said, it would mean increasing the residential rates and lowering the industrial rates. The issue there, he cautioned, is that a reduction of even a fraction to the industrial rates means reductions of significant revenue to the municipality.
"About 90 per cent of our revenues come from non-residential assessment," he said, formulating that a decrease of even one percent of the non-residential tax rate would mean a reduction of almost three-quarters of a million dollars into the County coffers.
The last residential tax increase was a three-quarter percent increase in 2020. Before that, residential ratepayers saw a three per cent increase in 2014 and another in 2018.
Across the province, several industrial corporations are legally challenging their tax rates. In Lac La Biche County, representatives of several oil and gas operations have expressed concerns over their rates to councillors in public sessions.
'Below water'
Without tax increases, Hasan said the upcoming financial picture is challenging.The projections for the County's 2023 budget will see an estimated $64 million spent on operating expenses, $78 million in tax revenues and $42 million in capital spending. Those figures are estimated without any tax increases. Without added funding, and thanks to several of those large capital projects, and continuing debenture payments, Hasan cautioned that the county will be financially "below the water line" in 2024 and 2025 — perhaps until 2028, "because we have big debentures coming on board and there are some heavy payments with those debentures."
The scenario that generates the highest tax revenue would make the capital plans easier, he said.
Although still months away from a final decision, council members listening to the scenarios agree.
"I'm leaning towards scenario 3 myself," said councillor Jason Stedman, explaining that it will generate revenues, and also help to reduce the 'tax gap' more quickly. "Eventually the 5:1 ratio is going to get forced on us.. I think it slowly fills the gap up and if the province sees us working to close the gap, maybe they will give us seven more years."
Councillor Sterling Johnson was also in favor of a tax increase.
"For year we haven't raised taxes," he said, explaining that costs have risen across the board in all aspects of community life. "We have to keep up with the times ... it's affecting our capital projects."
Lac La Biche County Mayor Paul Reutov knows that taxes have to increase, but he isn't in favour of the highest tax rate scenario, instead he said the second scenario — combined with an investigation into County efficiencies — was better.
"I like the second option — and then we look internally to find savings. There are ways to find efficiencies within the organization," he said, even suggesting an expansive internal audit to help find those savings and efficiencies."
In a 5-4 decision, Lac La Biche County councillors opted to further investigate the third scenario, with administrators expected to bring back a more comprehensive overview of its implications to a meeting early in the new year.
According to the County's 2021 Financial Statement, of the approximately $78 million in tax revenues collected by the municipality in 2021, $70 million came from non-residential and industrial property taxes.
