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Municipal spending unsustainable - report

Spending at city hall increased at double the rate of population growth and inflation over a seven-year period, says a new report prepared by a business lobby.
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Spending at city hall increased at double the rate of population growth and inflation over a seven-year period, says a new report prepared by a business lobby.

The Canadian Federation of Independent Business (CFIB) recently released its second spending-watch report, which analyzes the spending habits of various municipalities during the period that saw economic growth reach record heights before falling off in late 2007.

According to the report, municipal operating expenditures in Alberta continue to increase at an unsustainably high rate, which comes at the expense of families, small businesses and other ratepayers through property tax increases and user fee hikes.

Between 2000 and 2007, St. Albert, along with Camrose, Leduc and Strathcona, doubled its rate of spending compared to population and inflation growth.

St. Albert ranked the fourth worst on the list of 18 municipalities at 2.23 when it comes to the fiscal responsibility gap — a ratio comparing the growth in operating spending with the growth in population and inflation during the seven-year period.

Operational spending growth jumped 87 per cent during that period, while the population and inflation growth was only 39 per cent.

Mayor Nolan Crouse largely attributed the numbers to Servus Credit Union Place, which lost $2.2 million in its first year of operation in 2007 — eight times more than budgeted.

Crouse is first to admit spending did get out of control during the start-up of the recreation facility, but other than that, he feels city council has done a good job of listening to the needs of residents and adjusting spending accordingly.

“The one measurement we continue to hang our hat on is what are residents saying about the services they are getting,” said Crouse. “It’s not easy to find budget fat. I am as penetrating on this stuff as anyone, and I just don’t see a lot of room for big waste.”

Grande Prairie was the city closest to holding spending in line with population and inflation, with a fiscal sustainability gap of 1.12 in 2007 and about the same the year before.

Cold Lake showed the least restraint with spending growth of more than three times population and inflation growth.

In all, city governments in Alberta increased spending by an average of 92 per cent, even though the average population and inflation increased by 55 per cent.

In both Edmonton and Calgary, which ranked 12th and 13th on the list respectively, the spending was 1.4 times higher than population and inflation growth, with that gap narrowing slightly from the previous year.

Between 2000 and 2007, only 67 of Alberta’s 349 municipalities (19 per cent) kept growth in operating spending at or below population and inflation growth.

After spending several months analyzing these numbers, Richard Truscott, Alberta director for the CFIB, couldn’t help but feel concerned.

“We think the long-term trend to overspend is very worrisome and it’s simply not sustainable, especially for municipalities like St. Albert that seem to be spending twice as fast as they otherwise need to be,” said Truscott.

“Most municipalities need to be far more sensitive to the needs of the people that are paying the taxes as opposed to the demands they claim are placed upon them by the citizens.”

According to Truscott, one of the knee-jerk reactions for many municipalities is to place the tax burden on the business community. But if municipalities continue to hose businesses for more tax dollars, Truscott said they will simply fade away or do business somewhere else.

The report also compared current spending levels per capita spending, which varies widely among Alberta municipalities.

Camrose spent the most per capita at $1,971 and Strathcona ranked the second highest with $1,813. St. Albert ranked 11th of 18 municipalities with $1,474 per capita.

The biggest cost drivers identified in the report were municipal wages and benefits, which account for more than 50 per cent of a typical municipal budget in Alberta.

Nationally, the Frontier Centre for Public Policy reports salaries and benefits are approximately 40 per cent of local government expenditures — about double the norm of other commonwealth countries.

The report concluded municipal governments have lost sight of their fundamental role to set priorities and make trade-offs, given their resource constraints.

Possible solutions were offered to stop the spending, such as zero-based policies, where every few years a municipality basically steps back and starts from scratch, along with the creation of an independent municipal auditor general.

Truscott said another study would be conducted again next year, which will reveal whether or not municipal governments controlled growth in spending during a recessionary period.




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