Taking sides in Lethbridge County head tax dispute
By Tim Kalinowski, Staff Writer
Lethbridge County drew the ire of livestock producers and cattle feeders when it recently passed a head tax per animal unit as part of its efforts to increase revenue for road and bridge infrastructure repair. Beef operations and cattle feeders bore the brunt of the new head tax: $3.00 per animal unit this year and $4.00 the next. The county defends the tax as necessary given the tough fiscal situation of the moment, while some critics refer to it as an industry killer.
Rick Paskal, president Van Raay Paskal Farms, a long-standing cattle feeding operation near Picture Butte in Lethbridge County, certainly feels that way.
“This is a short-sighted tax which kills a sustainable industry,” states Paskal. “That’s what the long and short of it is. Six or seven County of Lethbridge councillors have taken it upon themselves to determine if there is going to be a cattle feeding business in western Canada. And they have determined there is not going to be.”
Paskal says his margins are already slender enough as is without another major tax burden like this at the county level.
“Everything in agriculture is about value-added. And all we are doing (in Lethbridge County) is eliminating value-added. They start with three dollars now, and then they go to four dollars. Beyond a doubt (eventually) it’s going be ten dollars. There is no margin for us in that.”
Paskal acknowledges the county is feeling the financial crunch right now, but feels this solution unfairly taxes his industry, and is a consequence of an extended period of fiscal mismanagement at both the provincial and local levels.
“The provincial government has a responsibility of proper fiscal management,” he says. “They don’t do it, and I can’t just blame this on the NDP because the Conservative government before was the same. They have a responsibility to fund these municipalities, but our municipalities are also so out of control in what they are spending. There are so many wrongs that have happened to incur this tax that it is totally unbelievable.”
Paskal says he likely won’t be packing up his operation and shutting down in the near future, but can’t guarantee that might not happen over the long-term as the burden of the head tax continues to accrue.
“I am totally upset with this, but let’s not get carried away. I am not going to shut it down this year or probably next year. But I can tell you, beyond a doubt, within five or six years there will be feedlots around here dropping by the wayside. And if enough of these feedlots fall by the wayside you will shut down one of these meat packing plants, either Cargill or JBS.”
Lethbridge County reeve Lorne Hickey sees it differently, of course. He says council has been forced to take this step as there are no other viable fiscal levers at their disposal at the moment.
“We’re to there point where in the last three years we did not receive any funding resources for roads or local bridges (from the province). With our bridges, there are 157 of them and the majority were built 40-60 years ago. They are ending their lifespan. The irrigation districts are not responsible for the infrastructure of them any longer, and our roads are certainly seeing extremely heavy use from the intensive agriculture we have, whether it be for livestock, or beets or potatoes or things like that. We are to the point where we needed to address the issue.”
Hickey acknowledges other forms of taxation were discussed. Perhaps a specific road levy applied to all local residents. But, ultimately, councillors decided, based on public input, that was not fair to those in the county who do not place the same heavy traffic burden on local roads and bridges like the agriculture industry does.
“We had four roundtables before we went to our first open house,” explains Hickey. “At those roundtables we sat down with producers from various commodity groups and we had a discussion about what our (financial) issues were and what potentially could be the solutions. We did have a discussion about road use agreements, and coming out of that that was not the direction the majority of people wished to go.
“Producers and feedlots are the ones who use the infrastructure the most. So we chose the method which we felt was the fairest to all people.”
Hickey points to tax and fee increases brought in across the board in his county’s budget. Everyone, says Hickey, not just livestock operations and cattle feeders, will be paying more this year.
“We are already at one of the highest mill rates for agricultural land in the province,” he admits, “but we have no linear assessment and we have very limited business. We didn’t just decide to pick on one industry. Everybody is getting taxed (in this budget). The majority of my land is dryland, and even I am paying extra taxes as well.”
However, when pressed, Hickey does acknowledge the cattle head tax is going to disproportionately impact cattle feeders the most, of which there are several in Lethbridge County.
“We are to the point where we absolutely have to do something with the infrastructure. This is fairest way we could come up with to cover everybody off. And will it effect certain people more than others? Yes, there is no question about that. But it is also a fact that those (cattle feeders) are the heaviest users of the infrastructure.
Hickey goes on to say,“Their profit margins are what they are, and they can accuse us of being inefficient or whatever they want to, but, on the same hand, there are always methods so they can become more efficient than what they are too.”
Lethbridge County is the first jurisdiction to pass such a cattle head tax in Alberta, and Bryan Walton, CEO of the Alberta Cattle Feeders Association, says that is worrying given the uncertain economic climate in the province right now, and as cash-strapped municipalities begin looking for other tax options.
“It’s obviously a concern. Remember when they said income taxes were supposed to be a temporary war measure? But these business taxes are reviewed annually, and I think we have to step back and ask what are the long-term consequences. We have to think about the next generation of producers who are at risk here. It may not be obvious right now, but it is death by a thousand cuts, and this is one of the big ones, that are going to kill the industry.
“The precedent this is setting is dangerous. We want be able to have a real discussion with the county on other options.
“We would like to see that door is kept open, and I think there is a willingness on their part to do so. I think there are ways to look at (their budget) that are more equitable than just focusing on livestock.”
Walton says he understands Lethbridge County is looking to raise revenues, but believes the county’s approach so far has been “simplistic.”
“You have to step back and look at this with a bigger lens; and that is the Municipal Government Act is going to be amended.
“We have been working with the Alberta Association of Municipal Districts and Counties, ours and other agricultural organizations. We have what is called an Intensive Livestock Working Group, a cross sector working group, looking at what could be potential solutions to a fair and equitable tax allotment. So we are not treating the county as the enemy here. We want to work with them. But I think they have to look at land and find what kind of special tax they can have based on land…
“We owe them the benefit of the conversation.”
According to Walton, there is a real danger to the long-term survival of the entire livestock industry in Alberta if farmers and cattle operations are subjected to disproportionate and arbitrary tax burdens because municipalities are looking for a quick fix for their fiscal problems.
“If you start impairing our ability to be competitive, over time you will erode our base,” states Walton. “And then you kill the goose that lays the golden egg. If you put cattle feeders in a non-competitive situation; yes, the land will always stay there, but the feedlots may not.”