Anticipating defaults on taxes, Alberta mayors ask province for leeway on education transfer

Municipalities are asking for changes to a system in which they submit a predetermined amount of education taxes to the province, whether or not the ratepayers have paid their tax bill. 

The issue was raised by two municipal leaders during Friday’s question and answer — or “bear pit” — session with provincial cabinet ministers at the Alberta Urban Municipalities Association (AUMA) fall convention. 

Edmonton Mayor Don Iveson and Sexsmith Mayor Kate Potter asked Finance Minister Travis Toews about possible measures that could relieve pressure on municipalities, which currently have to absorb the impact of defaults. 

Many individuals and businesses are facing financial pressure because of the COVID-19 pandemic and economic downturn. 

“Right now municipalities are on the hook for submitting that to the province even when they can’t collect it,” Potter said. 

“I’m wondering … if there could be a rebate program, or something like that, where municipalities are not held responsible when people don’t pay a provincial tax.”

Toews acknowledged the current system could cause problems with cash flow in the short term but he made no commitments other than to promise to keep the lines of communication open.

“Let’s monitor how those volumes increase, perhaps, and how manageable or unmanageable they become and work forward to find a solution at a time we’re going to need one.”

Municipalities collect education taxes for the province and submit an amount based on a predetermined mill rate. The province was set to collect about $2.5 billion in 2020-21.

In 2020, Edmonton submitted $496 million in education taxes. Potter’s town of Sexsmith, north of Grande Prairie, submitted $881,281. 

Separate school boards collect their portion of property taxes directly from their municipality. 

NDP Leader Rachel Notley is proposing the province cover the shortfall for municipalities over the next two years. 

“It makes no sense to force municipalities to pay the province for education taxes that you are unable to collect because of defaults,” she told the convention. “Especially as we know those defaults are about to go through the roof.” 

Friday was marked by a speech by Tracy Allard, who took over the municipal affairs portfolio from Kaycee Madu in last month’s cabinet shuffle. 

While Allard tried to set a conciliatory tone by highlighting the need for the province and municipalities to work as partners, she also spoke about the upcoming fiscal reckoning and need to make government more efficient. 

Those remarks were tempered by word of more funding for municipalities, now that Alberta has finalized a deal with Ottawa for $1.3 billion of funding under the Safe Restart Agreement.

Allard said Alberta municipalities will receive $606 million in operating funding, with about $70 million of funding going to transit. 

“More help is on the way,” she said. 

Allard said municipalities won’t have to apply for the funding. Grants could arrive as early as next week.

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