Casual Legal: Q&A on Linear Property Taxes
By Maddison Croden
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
Bill 77: Municipal Government (Restoring Tax Accountability) Amendment Act, was proclaimed in force in December 2021. Bill 77 amended the Municipal Government Act (MGA) to restore a “special lien” giving municipalities priority to collect unpaid linear property taxes. The purpose of Bill 77 and the “special lien” is to strengthen the collection powers of municipalities for unpaid linear property taxes.
What is linear property?
Linear property is a defined term in the MGA. It means electric power systems, street lighting systems, telecommunication systems, pipelines, railway property, and wells. As its name suggests, linear property usually runs in a linear fashion, often across property lines and across the province. Linear property includes the pipes and cables of linear infrastructure. Operators of linear property must pay taxes on that property. In Alberta, tax collection on linear property can form a substantial amount of a municipality’s tax base.
Why was collecting linear property taxes challenging?
Collection of linear property taxes became problematic, particularly in Alberta, in 2017 when oil prices dropped. The number of oil and gas insolvencies rose sharply and linear property taxes on oil pipelines and wells began to go unpaid.
In 2021, a survey conducted by the Rural Municipalities of Alberta found that its members were owed $245 million in unpaid property taxes – a 42% increase from 2020. Unpaid linear property taxes accounted for a significant portion of this. The large value of unpaid property taxes reduced the funds available for municipalities to meet their budgets and provide services to residents and businesses.
What does Bill 77 do?
The key change to the MGA brought by Bill 77 is the addition of section 381.1(1), which gives municipalities authority to place a special lien on all of a debtor’s assessable property located within a municipality for outstanding taxes due to the municipality on linear property or on machinery and equipment. This lien takes priority over the claims of every other person except the Crown. A lien placed on a debtor’s property makes them a secured creditor in addition to the municipality’s rights under the MGA to seize and sell property to recoup the funds owed.
Section 381.1(1) applies to debt for linear property taxes, regardless of whether the debt became due before or after the enactment of this legislative change. Further, the amendments make the owner and assessed person (the operator of linear property) jointly and severally liable for arrears. This means that municipalities can collect the entire debt from either the owner or the operator of the linear property. Finally, Bill 77 introduces a 120-day period between the passing of the Bill and the payment period to allow municipalities and those owing linear property tax to negotiate a payment arrangement.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.
