CALGARY, Alberta – In an effort to bolster the City of Calgary’s coffers, Mayor Nenshi created a municipal royalty on oil and gas produced by companies whose headquarters are located in Calgary. This decision came after lengthy deliberations with City Council which resulted in council voting 12-2 in favour of the new tax.
Although details of the new municipal royalty have yet to be officially released, a source close to the city’s head official has said that every oil and gas company whose headquarters is located within Calgary’s city limits will be charged a royalty, or a tax, if you will, that is calculated as a complicated function of the company’s daily production (averaged over the year), and square footage of all office space within city limits. This new tax will take effect in the 4th fiscal quarter of 2013 and will be invoiced annually at around the same time that property taxes are paid.
Council member Blake Jenkins, who voted in favour of the new tax was quoted as saying,
“There is no question that this is what the City of Calgary needs. Within only 1 year of this new tax being implemented, we forecast that Calgary will be the first municipality on earth with annual revenues in the tens of billions. This sort of revenue will allow us to dust off the archives of city project proposals and approve them without hesitation or due planning and process.” – Blake Jenkins, city council
Not all council members were in favour of this new tax, however. Of the 2 Aldermen who voted no, Gretchen McDaniel fears that companies will consider relocating their headquarters outside of Calgary in order to dodge the new tax structure.
Earnest Castillo, head of the Alberta Oil and Gas Producers Association, speaks on behalf of his organization when he says that this new municipal royalty will hurt not only producing and service companies, but it will have enormous economic trickle-down effects that will result in many empty office towers in downtown Calgary.
“I have sent a memo to the CEOs of our member companies asking them to relocate their offices to just outside of the Calgary City limits in order to save some money. Although this setup does not bode well for commercial building owners nad property managers, it is what we’ll have to do because it is in the best interest of our industry and our investors.” – Earnest Castillo, AOGPA president
An artist’s rendition of the statement made by Mr. Castillo paints a bleak outlook for the future of downtown Calgary, as shown below:
At this point only time will tell how the oil and gas producing companies with office space within Calgary City limits will react to this new royalty.