Municipal Potash Tax Sharing

The Municipal Potash Tax Sharing Administration Board (Board) is established in accordance with Section 3 of The Municipal Tax Sharing (Potash) Act.  The Board consists of two members nominated by the Saskatchewan Association of Rural Municipalities (SARM) and one member nominated by the Minister.  The Act provides that of the two members nominated by SARM, one must be a member of a rural municipal council, and at least one must be on the executive of the association.   

The Board sets the mill rate for municipal purposes within a taxing rural municipality with respect to potash mine assessments and manages municipal potash tax sharing distributions.  Generally speaking, the duties and responsibilities of the Municipal Potash Tax Sharing Administration Board include:

• Potash Mine Taxation
• Potash Tax Sharing Distribution
• Audit and Reporting
• Administration

Pense

Esterhazy

Saskatoon-Lanigan

*Rural municipalities with potash mines

Note: Martensville became a City in 2009; Warman became a City in 2012. Neither of these municipalities receive any potash tax sharing payments since they both have more than 5,000 population.

The mill rate applicable to potash mines is not the same as the mill rate that applies to all other properties in the municipality in which the mine is located, but rather it is a mill rate established by the Board in accordance with the Act.

In setting the mill rate pursuant to the Act, the Board first determines the proportion of each area a particular rural municipality has within a 20 mile radius of the potash mine shaft and head frame.  The number of square miles for each rural municipality is multiplied by the actual mill rate of that municipality for the immediate preceding year.  The sum of the resulting figures for each rural municipality is divided by the area (total square miles) of the municipality within the 20 mile radius.  The resulting figure obtained is the municipal mine mill rate to be levied by the taxing rural municipality (see below for an example of mill rate calculation for a Potash Tax Sharing Area - Pense).

In setting the mill rate, the Act requires the Board in a year in which a new "base date" (the year in which there is a general revaluation of all assessment values in the province) takes effect, to adjust the mill rate obtained so the rural municipalities within the area of influence raise the same total tax revenue for municipal purposes from potash mines that was raised in the preceding year. A new base date is established every four years in accordance with legislation.

Base date is defined in clause 193(d) of The Municipalities Act, as the date established by the Saskatchewan Assessment Management Agency for determining the value of land and improvements for the purpose of establishing assessment rolls for the year in which the valuation is to start and for each subsequent year preceding the year in which the next revaluation commences.

A comparison table that outlines potash mines' historical average mill rates, along with related potash mine assessments and potash property taxes remitted to the Board can be found below (see 2002-2015 Mill Rate Information).

The Municipal Potash Tax Sharing Administration Board collects the potash mine property taxes remitted by the taxing rural municipalities and distributes these funds among eligible rural and urban municipalities within the tax sharing area (also known as the area of influence) in accordance with Regulations pursuant to the Act.  All rural and urban municipalities (except cities) within an "area of influence" of a potash mine are eligible for sharing in the municipal property tax revenues from potash mines.  An area of influence is deemed to be the area encompassed by a circle having a radius of 20 miles, with its centre being the potash mine shaft and head frame.

Specifically, only the municipal portion of property taxes on potash mines collected in each tax sharing area is shared among eligible rural and urban municipalities.  The education portion is paid directly to the school division in which the mine is located.  It is not shared.  Refer to Table 1 - Municipal Composition of the Potash Tax Sharing Areas  for a list of rural and urban municipalities eligible for potash tax sharing payments in each tax sharing area.

Potash tax sharing is based on a distribution formula of 90% being paid to rural municipalities and 10% to urban municipalities (except cities).  Rural payments are based on the area of the rural municipality within the 20 mile radius from the potash mine shaft and head frame and the distance from the mine.  Urban payments are based on population and distance from the mine.

Potash Tax Sharing Distribution is generally calculated as follows:

Rural/Urban Distribution

Within each tax sharing area, rural municipalities are allocated 90% of the funds collected and remitted to the Board by the taxing rural municipality.  The remaining 10% is allocated to the urban municipalities.  Within the individual tax sharing area, the proceeds (municipal property taxes collected from potash mine assessments) are shared among eligible rural and urban municipalities based on two different point systems.

Point Calculation for Rural Municipalities

Each rural municipality within the respective area of influence for any potash mine is given a number of points.  It receives 4 points for each square mile of territory of the municipality which lies within a 10 mile radius of a potash mine shaft and head frame and 1 point for each square mile of territory between a 10 and 20 mile radius.

These point counts are then adjusted to take into consideration the mill rate in the municipality in the previous year.  The adjusted points are summed for all rural municipalities within the area of influence, and each municipality receives a share of the potash tax sharing payments proportional to its share of the adjusted points.

Point Calculation for Urban Municipalities

Each urban municipality within the 20 mile area of influence for any potash mine is assigned points based on the population of the municipality and its location within the area of influence.  If the municipality is within a 10 mile radius of the potash mine shaft and head frame, it receives 4 times as many points as a municipality of the same population that is between a 10 and 20 mile radius.  If only part of an urban municipality lies within the 10 mile radius, the entire urban municipality is considered to be within the 10 mile radius.

The points are therefore determined for each individual municipality and are totalled for all eligible municipalities within the area of influence.  Based on the distribution, each municipality receives a share of the available potash tax sharing payments in proportion to its share of the total points.  

Where there is an overlapping of areas within the 10 or 20 mile radius as a result of close proximity of potash mines, each area is counted once and the total area is considered one unit for the purpose of arriving at the mill rate to be applied to all the potash mines in that area.

Points are assigned as follows:

First 1000 population or portion thereof - 1 point per person  
Next 1500 population or portion thereof - ½ point per person  
Next 1500 population or portion thereof - minus ½ point per person  
Next 1000 population or portion thereof - minus 1 point per person  

Urban municipalities with a population of 5,000 or more have a net of 0 points and, therefore, are not eligible to participate in potash tax sharing.

The points formula is as follows:

• Total Points X 4 if within 10 miles of potash mine shaft and head frame = Points used to calculate municipal potash tax sharing
• Total Points X 1 if within 20 miles of potash mine shaft and head frame = Points used to calculate municipal potash tax sharing

Note: In accordance with The Municipal Tax Sharing (Potash) Act, resort villages are not eligible to receive potash tax sharing payments.  According to the Act, "urban municipality" means a town or village to which The Municipalities Act applies but does not include a resort village.

Northern municipalities are not recipients of potash tax sharing, as there are no potash mines within 20 miles of any northern community.  Municipal potash tax sharing is a significant source of revenue for most rural and urban municipalities within the three potash tax sharing areas.  See Schedule 1 - Tax Sharing Distributions and Total Municipal Property Tax Paid to Municipalities for rural and urban municipalities' potash tax sharing distributions in comparison to total municipal property taxes (excluding potash).

Particularly, municipal potash tax sharing is a significant source of revenue for municipalities with potash mines. See 2002-2015 Summary of Potash Tax Sharing Distributions.

In accordance with General Regulations under The Municipal Tax Sharing (Potash) Act, the Board appoints a secretary-treasurer to conduct its business in terms of administration of the Act.  Annually, the Board sets a percentage of potash property taxes required for its general administration and expenses.  Typically, the Board's remuneration and expenses are paid from the potash mine property taxes remitted to the Board.  In accordance with general regulations under the Act, the Board may withhold up to 0.5% to a maximum of $25,000 of the potash property taxes remitted for its expenses.

In accordance with provisions of the Act, the Municipal Potash Tax Sharing Administration Board prepares a report for the prior fiscal year showing names of rural municipalities submitting payments to the Board and eligible municipalities participating in the tax sharing program.  In addition, the Board prepares and submits to the Minister of Government Relations a financial statement showing the business of the Board for the preceding fiscal year.  The books and records of the Board are audited annually and are subject to Treasury Board's approval.

Annual financial statements of the Board including its financial position, municipal property taxes collected from potash mine assessments and schedule of tax sharing payments made by the Board to each municipality participating in the tax sharing program are available using the links.

Please note that the information provided above should be used as a guide and is not to be used as a substitute for the procedures set out in The Municipal Tax Sharing (Potash) Act, and General Regulations under The Municipal Tax Sharing (Potash) Act.

What is municipal potash tax sharing?

Municipal potash tax sharing is a redistribution of municipal tax levies on potash mines among eligible rural and urban municipalities. 

What is the authority for municipal potash tax sharing?

Authority for municipal potash tax sharing is under The Municipal Tax Sharing (Potash) Act and General Regulations under The Municipal Tax Sharing (Potash) Act.

What is the purpose of the Municipal Potash Tax Sharing Administration Board?

The Municipal Potash Tax Sharing Administration Board was established under Section 3 of The Municipal Tax Sharing (Potash) Act to administer the tax sharing program.  The Board sets the mill rate for each potash tax sharing area annually in accordance to a formula specified in the Act.

The taxing rural municipality applies the mill rate set by the Board for potash mine assessments and remits these funds collected to the Board for distribution to eligible rural and urban municipalities.

Who are the members on Municipal Potash Tax Sharing Administration Board?

The Municipal Tax Sharing (Potash) Act requires that the Saskatchewan Association of Rural Municipalities (SARM) nominate two members of rural municipal councils, at least one of whom must be on the Association executive, plus one member is nominated by the Minister.  SARM has traditionally nominated the president and vice president to sit on the Board.

What is a potash tax sharing area?

Potash tax sharing area (also known as the area of influence) is a 20 mile radius around a potash mine shaft and head frame.  There are three potash tax sharing areas - Pense, Esterhazy and Saskatoon-Lanigan.  The potash mine property taxes collected in each area are shared by the eligible rural and urban municipalities within the area.

How is taxation on potash mines determined?

Taxation on potash mines, for municipal purposes, is determined by taking the mine assessment and multiplying it by an average mill rate, which is determined by the Municipal Potash Tax Sharing Administration Board according to The Municipal Tax Sharing (Potash) Act and Regulations.  The rural municipalities in which the potash mines are located apply the mill rate established by the Board to the potash mine assessments within that municipality, and remit the potash property tax to the Board.

How are the municipal potash property taxes redistributed?

As per Section 7(1) of the General Regulations under The Municipal Tax Sharing (Potash) Act, 90% of the funds remitted to the Board are paid to the rural municipalities and 10% of the funds are paid to the urban municipalities.  Rural payments are based on the area of the municipality within the 20 mile radius from the potash mine shaft and head frame and the distance from the mine, while urban payments are based on population and distance from the mine.

What is the basis for potash tax sharing distributions?

Potash tax sharing distribution is based on a point calculation system.  Each rural municipality within the respective area of influence (potash tax sharing area) of a potash mine is given a number of points.  It receives 4 points for each square mile of territory of the municipality which lies within a 10 mile radius of a potash mine shaft and head frame and 1 point for each square mile of territory between a 10 and 20 mile radius.

Each urban municipality within the 20 mile area of influence for any potash mine shaft and head frame is assigned points based on the population of the municipality and its location within the area of influence.  If the municipality is within a 10 mile radius of the potash mine shaft and head frame, it receives 4 times as many points as a municipality of the same population that is between a 10 and 20 mile radius.  If only part of an urban municipality lies within the 10 mile radius, the entire urban municipality is considered to be within the 10 mile radius.

An area of influence is the area in square miles of the municipality which lies within the area encompassed by a circle having a radius of 20 miles, with its centre being the potash mine shaft and head frame.

Who are the funds distributed to?

The Municipal Potash Tax Sharing Administration Board redistributes the potash property taxes to 42 rural and 45 urban municipalities within a 20 mile radius of the  potash mine shaft and head frame in accordance with a formula pursuant to regulations under The Municipal Tax Sharing (Potash) Act (see Table 1 for eligible rural and urban municipalities by area).

What qualifies a municipality to receive a portion of potash tax sharing payments?

In order to be eligible for potash tax sharing, a municipality must be within the 20 mile radius of a potash mine shaft and head frame.  Based on the point system used to calculate payments, urban municipalities with a population of 5,000 or more have a net of zero points and, therefore, are not eligible to participate in potash tax sharing.

What happens to the education share of potash mine property tax?

The education portion of potash property taxes is collected by the municipality in which the mine is located, based on the provincially set mill rate, and paid to the school division(s) within which the mine is located.  It is not distributed through the Municipal Potash Tax Sharing Administration Board.

What parts of a mine are assessed?

In Saskatchewan, the following are assessable for mines, namely:  buildings and the land they are situated on; mine processing equipment and their fixtures; and mobile mining equipment.  A building that has been in place for more than 30 days is assessable and taxable for any commercial/industrial property.  During a mine's exploration stage, it is assessed and taxable after being on the site for 30 days.

Mine features which are not assessable include:  the land of the mining operation; shaft linings; safety equipment; and shop tools.

Will municipal potash tax sharing, and the associated Act and regulations, apply to new potash mines?

As new mines are built, they will automatically fit within the municipal potash tax sharing program and the associated Act and regulations.  The Municipal Tax Sharing (Potash) Act applies to those portions of rural municipalities and potash mine assessments that are within the areas of influence (potash tax sharing areas).  These areas of influence are determined with respect to the location of a potash mine shaft and head frame as opposed to any specific designation of a mine by an Act or regulation.

Please note that the information provided above should be used as a guide and is not to be used as a substitute for the procedures set out in The Municipal Tax Sharing (Potash) Act, and General Regulations under The Municipal Tax Sharing (Potash) Act.

Why have the potash payments decreased in each of the municipal potash tax sharing areas?

The potash mill rate is based on the number of square miles for each RM that is located within a potash area of influence (20 mile radius) multiplied by the actual mill rate applicable to that RM for the immediate preceding year.  The sum of these calculations is divided by the total number of square miles within each applicable tax sharing area.

Most property classes experienced significant assessed value increases with the 2013 revaluation: agriculture by 50 per cent; residential by 86 per cent; and commercial by 
79 per cent.  With the taxable assessment base growing significantly in RMs, most RMs lowered their mill rates accordingly, while still maintaining or increasing their amount of tax revenue, for the most part.

Potash mine assessments did not increase at the same rate as other property classes.  The increase was 11 per cent for the 2013 revaluation.  With lower local municipal mill rates and assessed values that remained relatively unchanged for potash mines, property taxes decreased in each potash tax sharing area due to the impacts of the revaluation.

In accordance with subsection 8(4.1) of The Municipal Tax Sharing (Potash) Act, in a revaluation year, such as the 2013 taxation year, the total tax revenues for municipal purposes from potash mines will be at the same level as raised in the preceding year (for 2013 the 2012 amount).  The most recent revaluation was implemented on January 1, 2013; therefore the impact of the changes in assessed values and associated adjustments to local municipal mill rates only comes into effect in the 2014 taxation year.

Why are mill rate factors no longer being applied to the mill rate determined for potash property tax collection?

The applicable mill rate for municipal potash property taxes is based on the sum of each individual RM calculation (involves actual municipal mill rates and square miles) in the area of influence (20 mile radius) and then divided by the total square miles in the area.  Once the mill rate is determined by the Municipal Potash Tax Sharing Administration Board (MPTSAB), it is to be applied by the RM to potash property assessments to generate the appropriate property tax revenues.

Municipalities determine a mill rate to collect needed revenues to provide services to citizens from the property tax base.  A number of the RMs within the 20 mile radius use a straight forward approach by taking the municipal tax levy divided by the taxable assessment base equalling the uniform municipal mill rate and do not use local tax tools.  Normally, municipalities have the option of determining a different property tax distribution between the three local property tax classes (agriculture, residential, and commercial/industrial) using local tax tools (mill rate factors, base tax minimum tax) if desired.  When mill rate factors are used, a municipality determines the funding it wishes to raise from each of the three local property classes.  Mill rate factors are decided upon, and then the uniform mill rate is adjusted so the desired municipal property tax revenues are generated from each of the three local property classes.

Potash mine property tax revenues are generated in accordance with 
The Municipal Tax Sharing (Potash) Act.  The taxable potash mine assessment should not be considered as a part of the local tax decision - the municipality collects the property tax from the potash mine located in its municipality, based on the mill rate set by the MPTSAB, and then remits monies to the MPTSAB for redistribution to all municipalities within the area of influence of each of the tax sharing areas.

The MPTSAB and municipalities had been applying a local mill rate factor after the mill rate was determined, based on where the potash mine is located; this adjusted the mill rate as set by the MPTSAB.  This does not follow the intent of the legislation nor does it comply with the proper calculations involved in determining local mill rate factor application.  The MPTSAB has changed its practices and will no longer allow the application of local mill rate factors.

See Table 1 Municipal Composition of the Potash Tax Sharing Areas