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Future municipal funding from province up for renegotiation

BOW VALLEY - If there is one common refrain municipal leaders have been delivering to provincial officials over the past two decades in Alberta, it is the need for sustainable funding into the future.
Canmore used the majority of its Municipal Sustainability Initiative money to develop Elevation Place, which has been open since spring 2013.
Canmore used the majority of its Municipal Sustainability Initiative money to develop Elevation Place, which has been open since spring 2013.

BOW VALLEY - If there is one common refrain municipal leaders have been delivering to provincial officials over the past two decades in Alberta, it is the need for sustainable funding into the future.

With that in mind, the former Progressive Conservative government announced the Municipal Sustainability Initiative more than a decade ago, but as the economic outlook for the province took a turn for the worse the year after it was created, the funding program was scaled back throughout Alberta and municipalities saw the promised yearly funding somewhat diminished.

When it was first announced in 2007, the MSI funding was promised to ramp up to $1.4 billion a year by 2011 and as of 2009 the Town of Canmore had hopes of collecting $61 million over 10 years in capital funding. By 2010, the province indicated it would not allocate all of those funds due to record-breaking provincial deficits. In total, $11.2 billion was identified for the life of the program.

Canmore quickly put together plans for a major recreation facility - the multiplex that the community knows as Elevation Place - and committed $31 million in MSI funding for it, as well as $5 million for renovations of the Rec Centre and $5 million for road reconstruction work.

Those funds were realized because the Town of Canmore had approved the projects in its capital budget soon after the MSI was created.

The Town of Banff also acted on the capital funding, allocating $33 million for the Fenlands Recreation Centre. As that municipality receives MSI each year, it puts that money toward the borrowed funds to build the major recreational facility.

Mayor Karen Sorensen said it was great to be able to use MSI for the Fenlands and the debt is going to be completely repaid by 2019.

"It has been a great funding system for us I think," she said. "I am so proud of the work we do at the Town of Banff around budgets and capital expenditures. We look at a 10-year cycle and plan reserves on a 110-year cycle. MSI is calculated into our revenue forecasts."

For the last fiscal year, the MSI capital fund has $638 million in it, including $344 million from the former municipal transportation grant program and $30 million in MSI operating funds.

MSI, however, has an expiry date as a funding source for municipalities of 2021-22 and Finance Minister Joe Ceci announced changes to the program as it begins to wrap up. For the upcoming fiscal year, Ceci said future MSI funds were brought forward to the tune of $800 million from future years.

"During the recession, we stood by our municipalities to make sure they could continue to deliver high-quality services for their residents," he said while delivering his budget speech in the Legislature. "As we dial back our capital spending to reduce our debt burden and reduce our borrowing costs, the government will make changes to the Municipality Sustainability Initiative and small reductions will be made to other municipal grants.

"Alberta's transfers to municipalities will remain above the national average. As we bring our budgets into balance, and as the expiry of MSI approaches in fiscal year 2021-22, funding arrangements with municipalities will be reviewed."

The adjustment to MSI is part of the NDP government's plan to balance the budget by 2023-24, and this year it is expected to run an $8.8 billion deficit. The debt by 2024, however, is expected to reach $96 billion.

While in Canmore recently, Ceci indicated communities like Canmore and Banff would not see reductions in MSI, but cities like Calgary and Edmonton would.

"We have said the municipalities in the budget speech we are going to come up with a new arrangement to fund revenue sharing arrangement with all municipalities, but we have not done that yet," he said. "We are going to legislate in the fall a new funding arrangement with municipalities and we are going to work that through and have it in place before MSI runs out."

Sorensen said one of the reasons MSI has worked for communities like Banff and Canmore is that it is calculated using a per capita and assessment based formula.

Banff is not a community that grows in ways like other communities in the province do, but has higher property assessment values. Grant funds that only look at a per capita formula can put communities with no or low growth rates at a disadvantage.

"It has been a great funding system for us ... very often provincial grants are on a per capita basis, which doesn't work well for Banff," she said.

Sorensen said she hopes future conversations around how municipalities are funded include the issue of tourism-based communities like Banff, Jasper and Canmore and reflects the philosophy that municipalities should see part of the revenues they generate invested back into them.

"We certainly, from a Banff perspective, look forward to upcoming discussions on the future of municipal funding and whether tourism-based communities could be differentiated," she said.




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