On December 19, 2017 the Honourable Shaye Anderson approved the Minister’s Guidelines for Linear Property, Machinery & Equipment, Railway, and Farm Land. The bulletin outlining the approved 2017 assessment year modifiers (AYM) was released concurrently.

Altus had previously shared the proposed AYMs and our concerns, especially regarding the significant increase to wells and pipelines.

The approved 2017 AYMs differ from those proposed. Both wells and pipelines will remain unchanged for the 2018 tax year.

Should municipal tax rates remain unchanged in 2018, ratepayers can expect the tax levies associated with wells and pipelines to be equal to 2017 levies.

Please see below for the complete list of AYMs as approved.

Property Type 2016 AYM 2017 Confirmed AYM Percent change from 2016 AYM to 2017 AYM
Pipelines 0.971 0.971 0%
Wells 1.175 1.175 0%
Electric power 1.406 1.406 0%
Telecommunication carriers 1.139 1.139 0%
Cable distribution undertakings 1.375 1.389 1.018%
Railway property 1.34 1.37 2.238%
Machinery and Equipment 1.38 1.40 1.45%

 

Regulated assessment rates in the province currently reflect a 2005 base cost and are adjusted each year through the AYM process to bring the value to the present assessment year. The AYM’s are approved annually by the Minister of Municipal Affairs.

For additional information, please contact us!

Original Post from November 2017: Alberta Assessment Changes Affecting 2018 Property Tax Liabilities

Update: Since publishing the Assessment Year Modifier information earlier this week, Altus has identified errors in Municipal Affairs percent change calculations within the table as distributed. Altus has amended the table to include the actual percent change in the modifiers. Specifically, the Machinery & Equipment (M&E) modifier is 50% higher than the original percentage change indicated. We remind stakeholders the M&E modifier has not previously been reduced as it remained unchanged in 2016 over the 2015 value. The reduced construction costs experienced by industry have not been reflected in the assessed value.

In preparation for the 2018 property tax year, Alberta Municipal Affairs has released the proposed assessment year modifiers (AYM) intended to reflect the annual change in construction costs of regulated property throughout the province. Regulated assessment rates in the province currently reflect a 2005 base cost and are adjusted each year through the AYM process to bring the value to the present assessment year. The AYM’s are approved annually by the Minister of Municipal Affairs in late Q4.

There appears to be a significant disconnect between the construction costs being referenced by Municipal Affairs, as provided by their independent consultants, and that recorded by the oil and gas industry. This disconnect is particularly highlighted in the proposed AYM for pipelines and wells to impact the 2018 taxation year.

Property Type 2016 AYM 2017 Construction Cost Change 2017 Proposed AYM Posted Percent change from 2016 AYM to 2017 AYM Actual Percent change from 2016 AYM to 2017 AYM
Pipelines 0.971 1.1022 1.070 10.22% 10.20%
Wells 1.175 1.1839 1.391 18.39% 18.38%
Electric power 1.406 1.0210 1.435 2.10% 2.06%
Telecommunication carriers 1.139 1.0110 1.152 1.10% 1.14%
Cable distribution undertakings 1.375 1.0100 1.389 1.00% 1.02%
Railway property 1.34 1.0222 1.37 2.22% 2.24%
Machinery and Equipment 1.38 1.0099 1.40 0.99% 1.45%

While Municipal Affairs’ consultants are reporting significant increases in construction costs related to pipelines and wells, Altus Groups own Cost Consulting division is not reporting the same increases. This opinion is also shared with industry stakeholders where decreased construction costs are still being realized for the construction of pipelines, facilities, and the drilling and completing of wells.

Should tax rates in Alberta municipalities remain flat for 2018, industry should expect increases for well and pipeline of 10-18% in their 2018 budget for property tax liability.