Small towns in Alberta will be looking forward to the upcoming tax season after the provincial government announced Wednesday municipalities will now be allowed to collect property taxes from cannabis production facilities.
This will bring a welcome influx of municipal funds back into communities as the province’s United Conservative Party rolls out austerity measures, Leduc County Mayor Tanni Doblanko said. She estimates the property tax could bring in up to $700,000 from a single facility in Leduc County.
The facilities were previously considered agricultural businesses under the provincial tax rules and therefore exempt from property taxes.
“These facilities are large users of municipal services and need to contribute to sharing the cost of those services like other businesses and property owners. This will help municipalities pay for services such as fire protection, police, roads and sewers,” Alberta municipal affairs spokesperson Timothy Gerwing said.
The green crop is unlike agricultural products because it produces recreational drugs and does not meet the intent of the farm-building tax exemption for agricultural operations, Gerwing added.
New tax brings Alberta cannabis producers in line with other businesses
This is a change long-called for by the Rural Municipalities of Alberta (RMA) and the Alberta Urban Municipalities Association (AUMA) who applauded the announced change.
“The RMA welcomes this announcement as we’ve been asking the government to put cannabis-production facilities on equal footing with other industrial businesses since legalization,” RMA president Al Kemmere said in a statement. “I’m glad the government listened to our concerns and acted swiftly.”
The tax change will kick in for the 2020 tax season and will not effect industrial hemp cultivation or other agricultural greenhouse operations.
For Leduc County, just outside of Edmonton, the announcement came as a surprise.
The county currently has five different operational cannabis production facilities but was not one of the municipalities calling for a change in the property tax rules, Mayor Doblanko said.
The change from the provincial government came a surprise to Leduc County, where Aurora Cannabis (TSX: ACB)(NYSE: ACB) has one of its main growing facilities, Doblanko added.
“It is unexpected but we’re looking forward to the change it will bring,” she said.
The county has not yet been able to calculate what sort of revenue this change will bring in, but calculated a $100 million building, like Aurora’s facility, would net around $700,000 in municipal taxes.
Property tax will being a welcome influx of cash in a time of economic austerity
That’s not an insignificant number, Doblanko said. The county is watching its coal generating plant be shut down — which means the county will lose $1.7 million in property tax — and the province’s tight budget is cutting into provincial grants for things like parks.
“The $700,000 which we’ll be recouping will be absolutely needed during this time of austerity,” Doblanko said.
This announcement comes at time when many major cannabis companies are struggling to make money.
Alberta-based Sundial Growers Inc. (NYSE: SNDL) posted a net revenue of $33.5 million its third quarterly results on Wednesday. The company invested $27.3 million over the last quarter in the expansion of the company’s facility in Olds, Alberta and Merritt, British Columbia.
Aurora is set to release it Q3 update Thursday evening.
Neither Aurora or Sundial responded to an interview request.