Municipal leaders will be waiting with baited breath on provincial budget day to find out how much money will be dedicated to funding capital projects in their communities.
Right now municipal governments across Alberta receive billions of dollars through a provincial grant program called the Municipal Sustainability Initiative (MSI). The program was created in 2007 and was set to last for 10 years but has been extended past the original deadline.
MSI funding has always been a double-edged sword in municipal budgeting. On the one hand, municipalities rely heavily on the grant money for capital projects. But on the other hand, they don't know how much money to expect.
Diane McMordie, director of financial services for the city of St. Albert, said that around 51 per cent of capital funding for projects in the city comes from MSI.
“St. Albert along with every municipality in the province has a high reliance on MSI for their capital programs,” McMordie said.
McMordie said that if the province were to eliminate the MSI program and the funding altogether, the city would be hard pressed to fund repairs to existing assets in the city, let alone be able to fund new projects in the city. Any money that they don’t get from MSI has to be collected through municipal taxes.
The timing of the MSI announcements is also a challenge, because it is out of step with municipal budgets which are usually set at the end of the calendar year. MSI is announced in the spring with the provincial budget. This means that when municipalities are putting together their budgets they are guessing how much money they will get from the province three months later.
McMordie said that they have some confidence that the amount of funding will not fluctuate too wildly but if they hear rumblings that there will be reductions from the province they will estimate their numbers conservatively.
“We certainly do try and be conservative from that perspective,” McMordie said. “If they did end up reducing the money substantially there is possibility that we would have to go back and look at our approved capital budget.”
St. Albert Mayor Cathy Heron said that one year when the budget came out in March the city lost some operating money it was expecting.
“We have no money to fund that operating cost. We hadn’t budgeted for it so we have to increase our tax rate,” Heron said.
Municipalities are also concerned that the province has not spent all the MSI money that was originally announced for the program.
Chair of Alberta Urban Municipalities Association (AUMA) and mayor of Brooks, Barry Morishita, said over the course of the whole program the province has left $3.8 billion on the table and under-delivered in nine out of ten years.
Morishita said that originally the Progressive Conservative government, which was leading the province when the program was created, promised to spend around $1.4 billion a year in MSI funding. The provincial government spent that only in one of the nine years.
“Every year it has been short of the target that has been assigned,” Morishita said.
One other reason MSI is seen as an unpredictable source of revenue is that the program always has an end date, which leaves municipalities and local leaders wondering what will come next or if the program will disappear altogether.
McMordie said that the city always keeps an eye on the looming end date for the program.
“There is always this threatened end date without any understanding of what would come to replace it, if anything. We are always kind of waiting for an extension or some type of replacement program,” McMordie said.
The NDP government has promised to reform the program and make it more friendly to municipal governments. The NDP has pledged a new funding framework that will include a new infrastructure funding formula that is tied to provincial revenues. In November, Premier Rachel Notley told reporters that the government wants to ensure predictable funding to municipalities and stakeholders. But a week earlier at the Alberta Association of Municipal Districts and Counties Notley said that the provincial government would have to “compassionately tighten our belts.”
All of the talk of belt-tightening has left municipalities wondering what MSI funding will look like this year.
AUMA asking for change
The AUMA has laid out criteria for its desired funding model for the provincial government and what they would like to see in any upcoming changes to the program.The municipal organization wants to see the new program provide revenue adequacy. They want to see enough money to ensure sure local leaders can build our communities, both in terms of infrastructure and other ways.
AUMA also wants to see a degree of predictability with the funding. The province has asked the municipalities to do 10-year capital plans and three-year operating budgets, but Heron said that is challenging with the unpredictable funding from the province.
“How can be we do long-term planning when the funding source changes annually and at the whim of the government of the day?” Heron said.
Morishita said they would like to see the money legislated so they know what the amount of MSI will be delivered every year with money being allocated two years in advance.
Another criteria for a desired funding model is money that is responsive to community growth and revenue pressure.
Morishita said that their final desire is that the new program will honour the prior funding commitments made by the provincial government. He wants to see the $3.8 billion shortfall to be recognized and delivered.
“Some municipalities have been told they were getting it and made commitments based on that so to be told they are not getting it isn’t really fair,” Morishita said.
Morishita said that he would also like to see the program become less steeped in paperwork and be less restrictive.
Right now municipalities need to fill out grant paperwork for each project, which fit under specific funding criteria. Morishita said that he would like to see municipalities be transferred the money in bulk based on a funding formula rather than apply to the province for every separate project.
Morishita said that he would like to see more flexibility given to municipalities to choose what they spend their money on.
“The flexibility should be allowed to identify and use it on municipal priorities as a municipality determines. I don’t think we should be beholden to the province,” Morishita said. “At the end of the day it is being able to use the funds for the best municipal purpose."
The provincial budget will be unveiled on March 22.
St. Albert has received MSI funding for a variety of various projects both large and small over the years.
NOTABLE LOCAL PROJECTS FUNDED BY MSI:
2008-2016 – Operational funding for St. Albert Public Library totalled $6,725,807
2008 – Repair the Akinsdale and Kinex arenas: 292,000
2009 – Rehabilitate historic grain elevator site: $1,650,000
2012 – Phase 3 and 4 of Riel Park redevelopment: $4,500,000
2012 – Reconstruct Delage and Linwood Crescent: $1,300,000
2014 – Renovate and expand the 50+ Club building: $2,346,300
2014 – Construct a stormwater retention pond in Campbell Park: $1,200,000
2016 – Expand the Dez Liggett Transit Facility: $1,055,000
