In the boom years, Fort McMurray struggled with the growing pains that came with the rapid expansion of the oil sands industry – not only wasn't there enough housing for the workers and families streaming in, there weren't enough roads, sewers or new rec facilities. As the demand for services intensified, the oil sands firms that benefited from sky-high oil prices carried more than 90 per cent of total municipal tax burden in the region, and residents paid one of the lowest property-tax rates in the country.
Fast-forward to 2017 and everything's being turned on its head.
After years and years of flat-lined residential tax rates – most can't remember the last increase – homeowners are learning they are going to have to pick up more of the slack. The plan is to give oil sands players annual reductions on their tax bill in the decade ahead, while residents pay more, and to swallow huge spending cuts. Facing a slump in housing prices, high unemployment and the after-effects of last year's devastating wildfire, the community will still need to retain and attract residents to keep the municipal lights on.
As voters head to the polls on Oct. 16th to elect a new mayor and councillors, much of the debate is swirling around that 10-year tax plan – which was approved this month by the departing council and was spurred by new provincial legislation specifically designed to cut high municipal tax rates for Alberta industries.
A Fort McMurray housing development completed in 2015. As the oil industry in Fort McMurray grew, its residents paid one of the lowest property-tax rates in the country.
Ben Nelms/Bloomberg
Some say the 10-year plan is an inevitable fiscal reckoning to chop municipal spending in line with low oil prices and the end of construction on big, new oil sands projects in the region. However, some candidates say residents have been betrayed, and the plan will financially hamstring the community that has both profited from and borne the brunt of two decades of rapid growth in Canada's heavy oil sector.
"We have given industry exactly what it wants, but there is no true partnership," says Don Scott, one of four candidates for mayor and a critic of the plan.
Fort McMurray's fate is intertwined with the massive bitumen resources located in the boreal forest that surrounds the community. The gearing up of oil sands developments between 2000 and 2014, spurred by high oil prices, saw the doubling of the population of the Regional Municipality of Wood Buffalo – the name for the amalgamation that includes Fort McMurray and nearby towns, rural areas and aboriginal communities. Many residents viewed the low property taxes as a fair exchange to the skyrocketing cost of housing, congested roads and infrastructure stretched to its limits during those years.
But spending on new oil sands projects has dropped by more than half from a $60-billion peak hit in 2014, and isn't expected to grow in the years ahead. A consultant's report for the municipality forecasts that the population will expand slowly in next several years, then decrease, then plateau between 2024 and 2030.
Highway 63 curves past the Syncrude oil sands site, north of Fort McMurray.
Ian Willms/For the Globe and Mail
Homeowners have also been hit by tumbling real estate prices: The average single-family home in Fort McMurray now costs somewhere around $590,000, down from more than $765,000 in 2014.
The Oil Sands Community Alliance, an industry group, said it "appreciated the need" for significant municipal investments in the boom years. Between 2006 and 2015, Wood Buffalo's municipal budget increased more than five-fold. As of last year, property taxes for the region were forecast at $797-million, with "non-residential rate payers" – mostly oil sands companies and service firms – picking up $749-million of that tab.
"Local taxes are a significant cost to our industry," said Karim Zariffa, executive director of the alliance. "From a taxation perspective, it's second to royalties."
In contrast, the 10-year plan will see municipal taxes on industry reduced on an annual basis to 2027, accompanied by increases to residential taxes that Wood Buffalo says will average no more than $50 per year and put it in line with other Alberta municipalities. Most dramatically, taxation revenues for the region will drop to $528 million a year by 2027, a 28 per cent drop from 2017's $737 million. The municipality says it can still meet the needs of the region by finding operational savings, but also by setting aside any major new infrastructure projects.
Houses in the Parsons Creek subdivision in Fort McMurray. Homeowners in the region have been hit by tumbling real estate prices.
IAN WILLMS/The New York Times
Allan Vinni, a municipal councillor who is also in the contest for the mayor's chair, says he believes the plan means no increases to the costs of municipal wages or services in the years ahead.
"We would operate as if inflation did not exist, and as if we can convince our employees for the next 10 years to take a zero-per-cent wage increase."
The plan was approved as the last act of the current council – which is headed by long-serving and now-departing Mayor Melissa Blake. For those who voted for it, the 10-year plan is a gradual and perhaps malleable transition to comply with provincial Bills 21 and 8.
Together, the bills push municipalities toward better balancing the tax burden ratio between non-residential and residential payers – an issue that has become particularly salient with the oil-price downturn of the last three years. The province says non-residential municipal property taxes have increased at rates faster than residential taxes, and in some cases, this has resulted in owners of industrial property paying significantly higher tax rates than residential property owners.
The silhouettes of travelers are seen standing in line at the Fort McMurray Airport.
Ben Nelms/Bloomberg
In Fort McMurray, the ratio is about 18:1. The province wants to eventually bring it down, alongside other municipalities, to 5:1.
"Oil and gas companies create thousands of jobs for Albertans and we know their success is linked to the success of Fort McMurray. So our objective is to support both," said Lauren Arscott, press secretary for Alberta's municipal affairs minister, who noted the government still needs to review the plan.
Mr. Zariffa argues the tax plan could make the oil sands more competitive in the race for investment against other global oil regions. "Everybody knows that the mill rate is quite high here, for non-residential," he says. The change "will maybe make investment attractive again, for the region."
This week, Suncor Energy Inc. spokeswoman Erin Rees said the company believes "the Regional Municipality of Wood Buffalo's plan is an appropriate step to address the economic reality."
A charter bus to take workers to and from oil sands sites in the Parsons Creek subdivision in Fort McMurray.
IAN WILLMS/The New York Times
Allan Grandison , a Fort McMurray realtor also in the mayoral race, said the 10-year implementation plan gives the region time "to review our budgets, and tighten our belts," and it was prudent for the current council to get something in place. The fourth mayoral candidate, Tony Needham, said high home vacancies and slow growth mean the municipality can finish up some sewer and water upgrades for rural areas, and then give big infrastructure projects a rest.
But the fact that oil sands giants including Suncor and Canadian Natural Resources Ltd. have spent recent years lobbying for municipal tax breaks, and are now getting their wish, has raised some eyebrows. Mr. Vinni, for one, says the timing of the changes makes him believe the provincial legislation on the tax ratio "is what the oil companies got in exchange for supporting the carbon tax."
Mr. Scott – a former Progressive Conservative MLA and cabinet minister – says oil sands industry has a legitimate argument in favour of a tax cut. But he says any tax reduction should also be linked to reducing industry's reliance on employees that fly in and fly out from other parts of the country, who don't live in the municipality and don't pay property taxes.
"That would also give us the opportunity to broaden our tax base, to make up for the fact industry would be paying less taxes," Mr. Scott says.
"I want this region to be viable."