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Funding dilemma: a look at the city's RMR woes

City council is looking at a minimum 1.5 per cent tax increase just to cover a shortfall in replacement and repair costs but former St. Albert mayors aren't pleased with that decision.

No one likes having to ask for help paying the bills but that’s the situation the City of St. Albert has found itself in.

For years, the city has relied on government grants to help cover an approximately $16-million shortfall in its repair, maintenance and replacement (RMR) budget, which covers everything the city owns from facilities and vehicles to sidewalk repair and potholes. Unlike other levels of government, a city can’t run a deficit, and covering the shortfall out of the city's own coffers hasn't been an option.

Like most municipalities in Alberta, St. Albert turned to the provincial municipal sustainability initiative (MSI) and the federal gas tax to ensure it could pay for its assets. But with MSI set to expire in 2021-22 and no replacement funding in sight yet for municipalities outside Edmonton and Calgary, Mayor Cathy Heron has warned that the new Alberta government won’t be helping out as much in future years.

“There’s no ‘if’ regarding a decrease in other levels of government funding, especially provincial,” Heron said during the June 26 city council meeting. 

“I’m telling you guys right now it’s going to be much less. We’re good for one year but after that, there’s going to be an uphill battle.”

With grants being unpredictable, the city took steps recently to try and close that gap in RMR on its own.

On Monday, that strategy came in the form of a minimum 1.5-per-cent property tax increase over the next three years starting in 2020. The plan will only work if the city does this every year for the next 20 years, but councillors agreed to limit it to three years to give administration time to come up with a different solution.

Not everyone was happy with this decision, including two former St. Albert mayors. The Gazette asked Nolan Crouse, who sat in the mayor's seat from 2007 to 2017, and Richard Plain, who held the seat from 1974 to 1977 and from 2001 to 2004, what they would have done if they were in the current council's shoes. Both agreed an annual tax increase just didn’t cut it.

“If you look at the history of tax increases while I was mayor, you’ll see a very tightly managed approach,” Crouse said. “It would have been easy to raise taxes by 1.5 per cent and collect that money – or do some can-kicking.”

Crouse was referencing the idiom Heron used during the June 10 governance, priorities and finance meeting, where she accused previous councils of postponing and deferring projects so they didn't have to deal with it.

“It’s tough but we can’t continue to kick (the can) down the road,” Heron told council at the time.

Crouse said during his term he was criticized for “micromanaging” the city’s capital because he was trying to save as much as he could by holding off on projects.

One of those projects was the replacement of Fire Hall #1.

Originally built in 1962, a rebuild of the station has been on hold since 2010. In April 2018, councillors supported a new build for the fire station, which would see it move from its current location on Sir Winston Churchill Avenue to the Village Transit Station on Gate Avenue.

On June 17, councillors approved the 2020 municipal RMR capital plan, which includes $12.4 million for the station's rebuild. Another $775,000 is currently on the books for 2022 to cover the decommissioning of the current station.

Crouse said he continued to postpone projects when he was mayor because he could see this shortfall coming.

“I smelled this coming, and when this council got elected they decided to do a fire hall,” he said. “And that, to me, tripped the trigger, because that fire hall can be pushed back or it can be absolutely repaired with a lot less capital. Fire halls are 100 years old and 200 years old in North America. That one is only 40 years old or whatever. To me, the fire hall put them over the edge.”

Plain said if he faced a similar challenge, he would look over the books before considering a special tax levy to increase revenue.

“I’m going to review my hiring practices, the model labour, the model of other areas of cost,” he said. “I’m going to review the entire budget in a very clear, hard-nosed way with respect to finding room within that budget to be able to meet the needs of the city, which are RMR, within a particular spending gimbal.”

At the moment, a number of city assets aren’t covered by a replacement plan. RMR requires so much money already that there’s little left for future growth. On top of this, the city still has to deal with a multi-million-dollar financial gap in its 10-year growth capital plan.

For example, the RMR 10-year capital plan totals about $280 million, while the city’s growth capital plan is nearly $480 million. So far, $128 million growth projects have been removed from the growth plan, bringing the total to about $349 million. Since 2008, the city’s municipal assets have increased by 48.7 per cent while the city's funding model has only gone up by 27.4 per cent over that same time period. This means city revenue hasn’t kept pace with the amount of growth that’s been happening.

In the most recent city budget, the city estimated the amount it would have available for capital funding in 2020 wouldn't even cover RMR.

The city's ultimate goal now is to have RMR projects fully funded by property taxes and not use grants to cover the difference.

Coun. Sheena Hughes attempted twice to lower the increase but both attempts didn’t pan out. She plans to put forward one more motion asking administration to provide alternative options and capital funding strategies to reduce the tax increases from 2022 onward. She’s asking to have these recommendations come back to council by Feb. 28, 2021.

Hughes said during the June 24 meeting that in order to keep up with staffing costs alone the city has to raise taxes by 1.5 per cent every year. She said in the past staff hiring outpaced the growth that was happening in the community.

“All the money that came from new growth, all of it, was going towards new staffing,” she said. “Staffing was increasing at tremendous rates. It was increasing at tremendous rates. We’d have 1,000 new people, basically 400 new roofs and we would have 20 new staff. The next year, we’d have 25 new staff, the next year we’d have 23 staff. It was growing at five to six times the population rate.”

Hughes credited Kevin Scoble, the city’s chief administrative officer, for reining in staff hires.

Coun. Jacquie Hansen said if the city doesn’t start addressing the funding gap now, the problem is only going to get worse.

“(It is) not the job of council to make things worse down the road,” Hansen said. “I believe administration is working on a number of projects to look at ways for us to bring in new revenue. I think that’s going to be key over the next three to five years. Hopefully, this won’t be as difficult a pill to swallow. We can’t rely on grants as much as we do.”

In 2019, the city's 0.9-per-cent increase in property taxes equated to a $33 increase for an average St. Albert home valued at $450,000. If the 1.5-per-cent increase had been rolled out for this year, for example, it would have pushed the cumulative increase to 2.4 per cent, meaning owners of an average St. Albert home would have seen an increase of approximately $90.

Tax increases for 2020 will be discussed and set during budget deliberations later this year.

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