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:

• One member from the Saskatchewan Potash Producers Association
• One member nominated by the Minister
• One member from the Saskatchewan Urban Municipalities Association (SUMA), who must be an official of an urban municipal council or on SUMA's executive
• Two members nominated by the Saskatchewan Association of Rural Municipalities (SARM); one must be an official of a rural municipal council and at least one must be on SARM's executive

The Board administers the tax sharing program. The Board's duties and responsibilities are to:

• Establish the potash mine municipal mill rate
• Determine the potash tax sharing distribution
• Conduct audit and prepare the annual report
• Provide administration of the tax sharing process

Each year, the Board sets the municipal mill rate for potash mines in each potash tax sharing area following the formula specified in the Act. (See Mill Rates for details about this process.)

During a mine's exploration stage, it is assessed and taxable after being on the site for 30 days. When the mine is established, the following are assessed and taxable:

• Buildings and the land they are situated on;
• Mine processing equipment and their fixtures;
• Mobile mining equipment; and
• A building that has been in place for more than 30 days.

Mine features that are not assessable include the land of the mining operation, shaft linings, safety equipment and shop tools.

The rural municipalities in which the potash mines are located apply the municipal mill rate established by the Board to the potash mine assessments within their municipality, and remit the potash property taxes to the Board.

Currently, there are three potash tax sharing areas in the province: Pense, Esterhazy and Saskatoon-Lanigan.

Table 1: Municipal Composition of the Potash Tax Sharing Areas

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 municipal mill rate that applies to potash mines is not the same as the mill rate that applies to all other properties in the municipality where the mine is located. Instead, the potash mine's mill rate is 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 32.2 kilometre radius of the potash mine shaft and head frame. The number of square kilometres 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 kilometres) of the municipality within the 32.2 kilometre 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).

Every four years, there is a general revaluation of all assessment values in the province to establish a new "base date". (Visit the Saskatchewan Assessment Management Agency to learn more about this process.) In setting the mill rate, the Act requires the Board in a year in which a new "base date" 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.

Municipal potash tax sharing is a significant source of revenue for most rural and urban municipalities within the three potash tax sharing areas. (See Table 1.) The 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 "area of influence" in accordance with the Act and Section 7(1) of the Regulations. 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.

Only the municipal portion of property taxes on potash mines collected within the area of influence is shared among eligible rural and urban municipalities. The education portion is paid to the province and distributed the same as all education property tax.

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 province and distributed the same as all education property tax. 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:

• Four points for each square kilometre of territory of the municipality which lies within a 16.1 kilometre radius of a potash mine shaft and head frame or load out and production facility; and
• One point for each square kilometre of territory between a 16.1 and 32.2 kilometre radius.

In years where a new potash mine enters into production, the area of each rural municipality in which the mine is located shall be multiplied by six for the first year, multiplied by five in the second year, and then multiplied by four for each following year. (This is done to address the change in tax status for the host municipality and account for the municipality's expenses before the mine became operational.)

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 32.2 kilometre 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 16.1 kilometre radius of the potash mine shaft and head frame or load out and production facility, it receives four times as many points as a municipality of the same population that is between a 16.1 and 32.2 kilometre radius. If only part of an urban municipality lies within the 16.1 kilometre radius, the entire urban municipality is considered to be within the 16.1 kilometre 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 16.1 or 32.2 kilometre 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 1,000 population or portion thereof - one point per person
• Next 1,500 population or portion thereof - half point per person
• Next 1,500 population or portion thereof - minus half point per person
• Next 1,000 population or portion thereof - minus one point per person

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

The points formula is as follows:

• Total Points X four if within 16.1 kilometres of potash mine shaft and head frame = Points used to calculate municipal potash tax sharing
• Total Points X one if within 32.2 kilometres of potash mine shaft and head frame = Points used to calculate municipal potash tax sharing

Northern municipalities are not recipients of potash tax sharing, as there are no potash mines within 32.2 kilometres of any northern community. Resort villages became eligible to receive payment in 2019.

In accordance with the Act (section 3.2), the Board appoints a secretary-treasurer to conduct its business in terms of administration of the Act. The Board sets a percentage of potash property taxes required for its general administration and expenses each year. Typically, the Board's remuneration and expenses are paid from the potash mine property taxes remitted to the Board. The Regulations allow the Board to 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 Board prepares an annual 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. The Board also 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 below.