A per-animal-unit tax imposed primarily on cattle feedlots by Lethbridge County has been deemed legal in Alberta Court of Queen’s Bench and has opened the door to similar tax levies across the province.
It has also raised questions among feedlot owners about the future of their operations and the cattle feeding industry in the county, where about half a million head of cattle are fed annually.
In a ruling issued April 20, Justice R.A. Jerke ruled that the bylaw allowing the county’s per animal unit business tax, levied at $3 per head in 2016, complies with municipal taxation powers.
However, he also ruled that the county’s “special tax,” which it levied on farmland and grassland in 2016, was not compliant because it failed to be sufficiently specific about designation of the funds collected.
Lethbridge County Reeve Lorne Hickey said the municipality is happy that the head tax survived the legal challenge brought by nine feedlot owners. It was implemented to fund road and bridge improvements.
The business tax, generally referred to as a head tax in county circles, generated $1.855 million for the county last year, and of that $1.7 million — 91 percent of the total — was from beef feedlot operations.
The special tax, now ruled uncompliant, generated $694,286.
Feedlot owners plan to appeal the ruling, said Rick Paskal, president of Van Raay Paskal Farms Ltd. and one of the litigants.
“We don’t think that we can afford not to, and the message that is being sent to the industry is, this is not a place where you want to invest money, in this province,” said Paskal.
He said county councillors “have a high degree of animosity” toward the cattle feeding industry despite its economic contributions to the county, province and country and warned that the county tax could force closure of feedlots and possibly one of the two federally inspected packing plants in Alberta.
“It’s a sorry, sorry, sorry day for Alberta agriculture, for the cattle industry in Alberta. We’ll keep appealing this.”
The Alberta Cattle Feeders Association (ACFA) has lobbied the provincial government to address the tax situation in its current review of the Municipal Government Act.
Alberta Beef Producers has also spoken against the head tax in Lethbridge County, suggesting it could hurt the long-term viability of the industry.
The head tax and special tax were imposed to raise money for infrastructure when provincial funding was not available, said Hickey.
The government has now reinstated its Strategic Transportation Infrastructure Program (STIP), which earmarks $100 million province-wide over the next two years.
“We have applied to STIP for roads and bridges,” said Hickey. “Unfortunately, when you consider the entire province, that’s very little dollars to go around, but it’s more than what we had before, because for the last three years we’ve had zero dollars.”
Hickey acknowledged that other Alberta municipalities have been monitoring the head tax and its court challenge, potentially with the view of imposing similar taxes.
They are also monitoring the NDP government’s review of the Municipal Government Act now underway.
“I think everybody’s kind of waiting to see just exactly, in the Municipal Government Act review, what’s going to come out. I know there hasn’t been anything on agriculture so far, but I think potentially in the fall there may be some movement there, but not in this sitting currently,” Hickey said.
“So I think everybody’s kind of waiting to see what happens, and being an election year, I don’t know whether anyone will …. throw that into their tax regime or not. I think it depends on your community and how things are operating.”
County council recently moved to reduce the head tax in 2017 to $2.50 per animal unit, a change from previously stated intentions to increase it to $4 this year and possibly more in subsequent years.
“There’s (municipal) elections this fall,” said ACFA chief executive officer Bryan Walton, in response to news of the head tax reduction for 2017.
The ACFA will continue to seek tax changes at the provincial level, he said, seeking taxes that are fair, equitable and transparent.
The association succeeded in reigniting a working group on rural municipal taxation, he added, and commissioned an independent study of the county business tax and its effect on confined feeding operations.
The latter report, still in draft form, brought two things into focus, he said.
“One was that feedlots will close, and the second thing is that we’ve seen nowhere else in the cattle feeding jurisdiction where this kind of tax is applied.
“So you have to think about the bigger picture. You have to think about competitiveness, and you can’t just assume that these additional costs can just be absorbed in a margin business. And that’s the troubling part about this, is that there’s the economic engine, you’re taxing the economic engine. The preponderance of burden is carried by the cattle feeders.”
Paskal agreed the provincial government must alter the MGA to curb municipalities’ abilities to impose special levies.
“It will kill our industry,” he said.
“It makes me sick right now, the authority, the power that this premier, that that NDP government, what they’re doing here. They will totally destroy the value-added sector that we’ve worked so hard to build up here.”
The other litigants in the case involving Lethbridge County, in addition to VRP Farms, are John Schooten and Sons Custom Feedyard Ltd., Grandview Cattle Feeders Ltd., G. Thompson Livestock Co. Inc., 6a Cattle Company Ltd., Adrian Dewilde, K. Wever and Sons Farms, Monarch Feeders Ltd. and 589494 Alberta.