The proposed tax increase for the city’s draft budget always gets the most attention, and the 2013 proposed budget is no exception.
Administration has presented council with a proposed 5.14 per cent tax increase made up of two parts — a 2.32 per cent increase to the 2012 base budget to maintain services, and a 2.82 per cent increase to fund 38 recommended business cases. Council has the option of declining some or all of the business cases.
But a series of town halls in early November made it clear that some residents don’t like the city’s math and don’t see the need for any kind of tax increase.
“I just shake my head at the way they spend money in this community,” said Gord Hennigar, president of the St. Albert Taxpayers Association. “If you manage the city properly, there shouldn’t have to be an increase.”
City manager Patrick Draper says there are many reasons for the tax increase. While the proposed business cases, if approved, would add more expenses to the budget, the increase to the base budget stems from several different influences, namely salary costs, inflation and materiel prices.
“In May we started to develop the assumptions that will drive the budget,” Draper said. “What are the trends, so that we can begin to start to forecast some of the budget items.”
The 2012 municipal operating budget came in, when approved, at just more than $116 million, according to Draper’s presentation. Before new revenues, assessment growth or cost savings are taken into account, administration forecast the city’s base budget will require an additional $5.37 million to maintain levels of service into 2013. If simply rolled into increased taxes, that would equate to a hike of 6.93 per cent.
“The majority of the increases will be staff-related expenses, primarily compensation, being able to provide the kinds of increases that would be negotiated in union and non-union contracts,” Draper said.
The city approved two new significant contracts in 2012 – the first was with the firefighters union for wages retroactive to 2011, which saw increases of 2.5 per cent starting Jan. 1, 2011 and 2.25 per cent from July 1, 2011. Also permanent non-union staff received a pay increase. That increase is determined by looking at how much similar employees make in six similar communities, and then St. Albert wages are set at 60 per cent of that. Non-permanent, non-union employees such as lifeguards received a 2.73 per cent increase. All will receive a 2.5 per cent cost of living adjustment next April.
The other driver, according to Draper, is inflation, but not in the way the average consumer experiences it. Instead of the consumer price index, the city uses a different “basket of goods” called the municipal price index. While CPI focuses on household items like bread, eggs and milk, municipalities look at the costs of items like fuel, electricity, asphalt and concrete. For 2013, MPI is anticipated to increase 3.1 per cent in 2013, compared to 2.5 per cent for CPI. A backgrounder issued by the City of Edmonton notes MPI increase percentages are typically 0.5 per cent to two per cent greater than CPI increases because of the difference in what municipalities buy compared to what consumers buy.
Acting city manager Guy Boston said there is no one item in the MPI driving the increase.
For Hennigar, the city’s use of MPI over CPI doesn’t add up.
“As inflation increases, in my mind, I guess expenses would have to fall in line with that increase,” Hennigar said, pointing out the proposed total tax increase is higher than CPI.
Then the city looked at revenues and savings. Increasing user fees saw an extra $690,000 in revenues, while staff also looked for savings in costs, including renegotiating the city’s natural gas contract to decreasing the city’s insurance liability so it can pay less in insurance. In so doing, the city found $1.14 million in savings. Coupled with increased revenues and assessment growth of 2.25 per cent, that brings the base budget increase to $1.79 million, or a 2.32 per cent increase.
Mayor Nolan Crouse and other members of council have pointed to the 1990s, when the city froze tax increases, but later had to steadily increase taxes to make up for what it didn’t do in those years. Living off growth, Crouse warned, doesn’t account for significant expenses down the line.
“You can keep your taxes low for a while but soon you need to build a fire hall or a Servus Place,” Crouse said. “We’re not using that growth in an inappropriate way.”
