By Liam Verster

Municipal funding

Province lowers funding for municipalities, increases property tax

Mar 5, 2020 | 3:12 PM

Changes to the funding structure in Alberta’s Budget 2020 will see provincial support for municipalities decrease, while also creating an increase in property taxes for residents.

Mayor Bill Given says the budget will have some impacts on all municipalities in Alberta, including Grande Prairie.

Firstly, he points to the reduction in the Grants in Place of Taxes Program, which essentially is meant to cover the property taxes for provincial buildings, which include the courthouse, the hospitals, and all the schools in the City.

“In the past, the Province had provided a small grant in place of property taxes, and they had reduced that grant last year, and they are reducing it again this year. So basically the City of Grande Prairie is on the hook for providing services to these facilities, with less and less revenue coming in.”

He says the reduction is about $200,000, which isn’t too extreme when put in the context of the City’s $170-million operational budget. However, Given does say it’s still a significant change, especially because Council had previously approved a tax increase that was lower than the rate of inflation.

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However, what Given says is very concerning, is the increase that residents will see on their property tax bill due to the province increasing the requisition for the Education Property Tax. In Grande Prairie’s case for the City, it will be an increase of $2-million, which the City will have to collect on the province’s behalf, and then send to the Province.

“Many residents will get their tax notice from the city and will ultimately just look at the bottom line, and, often, when there’s an increase in that, will direct their anger or concern towards City Council. And it’s particularly frustrating because we’re not totally in control of that bill. About a third of it is actually the Provincial Education Property Tax, and the Province is increasing that this year to collect $100-million more across the Province. So cities like Grande Prairie are in a difficult spot of having to forward on a tax increase that we had no control over.”

The city’s provincial funding is also going down, as the government transitions from the Municipal Sustainability Initiative (MSI), to the new Local Government Fiscal Framework, starting in 2022. Given says in past years, the City had received an average of about $12-million in MSI grants, though the City received just $10-million this year, and the grants are forecasted to go down in the future.

“This is a real challenge because municipalities actually own the majority of infrastructure that Alberta residents use day in and day out, and we have a responsibility of building and maintaining that infrastructure, and the province is, by and large, reducing their support for that kind of capital.”

He says the historical average has been around $1.2-billion a year, but the new plan will see the figure reduced by about 25 per cent by 2022 to, which means less money to build and maintain roads, bridges, storm sewers and more.

“You know, it’s a large number, and it’s still a significant number that they are providing. But in the context of how much infrastructure there is from top to bottom of Alberta, that reduction is really troubling.”

Given says property taxes are the only real revenue for municipalities, but Grande Prairie City Council is trying to mitigate the impacts these changes will have on residents and services.

“The City of Grande Prairie has already really adjusted our budget, our taxes in 2020 will be lower than they were in 2017. With the approval of our 2019 property tax reset year, we actually reduced property taxes by 4.7 per cent. This year they are forecast to only increase by 1.25 per cent, so we’re actually still collecting less property tax revenue then we were in the past, and that’s because we proactively heard from our residents that we needed to do this. The province, since the election has come on, is essentially making it harder to do.”

Given says City Council is still focusing on providing core services and reducing costs where possible, in order to keep property tax increases as low as possible. He does say it will be difficult to avoid some increases, as the province has reduced the city’s funding and increased its own revenue through the city, which Given says is very frustrating.

The Ministry of Municipal Affairs and Housing responded to EverythingGP’s request for comment with a written statement.

In relation to MSI funding, the Provincial Government states:

“Alberta is broke. According to the MacKinnon Report, Alberta funds its municipalities 20 per cent higher than other provinces. We must address this over-spending. MSI funding for 2019-20 was maintained in an effort to help municipalities adjust to the fiscal reality we face. In Budget 2020, we have introduced a modest 9 per cent reduction that will increase later when provincial revenues allow.”

In response to the increase in Educational Property Taxes, Alberta says:

“The education requisition has gone up almost every year since it was introduced in 1994. Unlike the NDP, which increased it by a massive 7 per cent in 2016, we held it to inflation plus population growth. This was announced in Budget 2019 and will ensure we keep up with education spending, which is at a record high.”