Have you ever been to Picture Butte? It is the feedlot capital of Canada. Picture Butte and Lethbridge County are the largest cattle feeding area in Canada. I have lived in the Picture Butte area my entire life. It comes with a butte that no longer exists, a shut down sugar factory that now stores grain and certain smell that defines the area. That smell is cow manure.
Lethbridge County is a very intense agricultural county that is home to progressive operations covering livestock and crops. The economic output would rival any county in the country.
In order to make all of this happen you need infrastructure and this is the county’s newest controversial challenge — how to create a user-pay model to maintain the infrastructure of roads, bridges, and so on.
The Lethbridge County is about to potentially embark on instituting an infrastructure tax on livestock operations and farms that could redefine what Picture Butte looks and smells like in the future.
“We need good infrastructure in the county for all agri business. We don’t believe that this tax is a very good solution based on its simplistic inequitable approach.” — Leighton Kolk, feedyard owner
The county is proposing charging feedlots a levy of $2 – $5 per head, depending on how many times they turn their inventory. There will also be increases for farming operations as well.
The county says it needs an additional $3.5 million per year starting in 2016 to maintain and repair roads, which would represent a 25 percent increase in tax dollars collected by the county. This is a very large burden for the county’s agriculture operations to bear in such a short period of time. For some operations the increased tax bill would be over $50,000, which is not something to scoff at as it was not budgeted for.
Do livestock operations and farmers in the county use infrastructure? Of course they do. Is a user-pay model likely a fair way to collect taxes from businesses for infrastructure? Yes, but that must be done in a way that doesn’t harshly impact competitiveness with outside counties. The increase in infrastructure investment must give Lethbridge County agricultural operations a competitive advantage, or at least not put them at a disadvantage. This seems uncertain at this point in time.
With Lethbridge County being the cattle feeding capital of Canada, naturally the Alberta Cattle Feeders Association discussed the potential impacts of the new tax on county livestock operations. Here are some of their points:
- Council’s proposal focuses only on revenues. It unfairly targets livestock producers, especially cattle feeders.
- Council’s tax is narrow, simplistic and inequitable. It would be difficult and costly to administer.
- Council needs to consider a range of alternatives rather than single-mindedly pursuing a new tax.
- Council must understand that this tax will negatively impact on the competitiveness of cattle feeders in the County of Lethbridge.
Now in full disclosure, I own a feedyard. And in that full disclosure I am greatly concerned about this tax. Some of you are likely saying this quick, exorbitant tax is fair based on how many cattle trailers you see on the road. I would say that you are not evaluating this tax concept with a full perspective. Here are further thoughts to consider in this very complex problem:
- The county has established the need for increased funds for infrastructure. The unclear piece is how they will administer and create value for the agriculture industry long term.
- Most medium- to major-sized feedyards are in very close proximity to provincially controlled highways which lessens the burden on the county to maintain road infrastructure.
- The average manure haul is only around 3-4 miles due to transportation costs which lessens the impact on infrastructure.
- The oversimplified plan ignores how the funds will be administered and applied. Will the revenues be applied to maintain roads and bridges in close proximity to the users providing the funds first or will it be applied in a blanket across the entire county.
- Taxing feedyards based on NRCB permit levels rewards producers that turn their inventory more and always have a full feedyard. In reality, yards that turn inventory regularly are the ones that use the infrastructure more, but based on the simplistic taxing structure, they have a lower cost per unit than feedyards that turn 1.25 times. This tax is not tied at all to actual wear and tear on the infrastructure.
- If Lethbridge County engages a tax of this magnitude and adjacent counties do not, the county might kill the golden goose. Governments of any level have to be conscious of the realities of competitive business. If it’s cheaper to feed cattle in the MD of Taber or MD of Foothills, the higher cost Lethbridge County will suffer a loss in business.
- For many saying that this tax is poorly timed, there is never a great time to increase taxes.
- Some operation types will be omitted, which is making some question the fairness principle of this tax.
My final thought is in regards to the role that the Provincial Government plays in this infrastructure saga. I have heard Premier Notley speak about jobs and diversifying the economy away from oil many times. The province played a major role in the development of the Alberta energy sector and if it plans on diversifying the economy past lip speak then a hard look needs to be taken at their financial role in ensuring producers in all high GDP counties have the infrastructure that is required.
Time will tell if the county and producers can come to terms. The reality is that there will be a tax of some form, but questions remains about how it will be administered and how the economic output of this county will be impacted long term.