By Alessia Proietti

Improvement from 2020

Red Deer County council writes off $1.4 million in bad debt for 2021

Jan 11, 2022 | 2:25 PM

Red Deer County council has approved a recommendation to write off a bad debt expense for 2021 of $1,448,009.80 as a result of uncollectable property taxes from oil and gas properties.

For the second year in-a-row now, this writing off, with the necessary approval by council on Tuesday, will render the County eligible for two tax credit programs: the Provincial Education Requisition Credit (PERC) and the Designated Industrial Requisition Credit (DIRC) from Municipal Affairs.

For PERC, the provincial government is supporting municipalities by providing a tax credit for the uncollectable portion of education property taxes for oil and gas properties. Administration has calculated the county would be eligible for $228,950.35.

All municipalities in Alberta that have oil and gas properties subject to both programs are eligible to request a cancellation or refund.

The uncollectable levy associated with oil and gas properties in the county totals $235,178.20; $228,950.35 by the PERC and $6,227.85 by the DIRC.

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According to administration, the County’s lawyer predicts a high probability that payment would not be received from these companies for the outstanding tax amounts.

Director of Red Deer County Corporate Services Heather Surkan, confirmed that if entities become able to pay those property taxes, it will not limit the possibility for future collection in the new year, as the write-off is for 2021.

In 2020, the county wrote off $1.8 million in bad debt, with a credit eligibility of $297,415.77; $288,878.43 for PERC and $8,537.34 for DIRC.

READ: Red Deer County writes off $1.8 million in bad debt

Mayor Jim Wood suggested one potential reason for the reduced bad debt in 2021 was attributed to the alternative tax payment plan for struggling oil and gas companies set up at the end of 2020. The payment plan allowed companies with outstanding taxes, to enter into the normal Pre Authorized Payment (PAP) plan of monthly installments, rather than paying taxes in one lump sum.

READ: Red Deer County offers tax break to energy companies

With council confirming five applications were made for the alternative tax plan and two still remaining, the expectation is to have all five companies successfully completing the plan by the end of June 2022.

Mayor Wood recommended future discussions will entail a review of up-to-date tax collections and new options for alternative plans.

“It’s never nice that we have to make a motion to write off debt, but I think it’s extremely important that we’re recognizing that we’ll get a $235,000 credit,” said Mayor Wood.