Jerome Powell, chair of the U.S. Federal Reserve, put it succinctly when he pronounced he was “concerned about a domino effect, where consumers lose jobs and sharply cut spending. That, in turn, can cause more restaurants, gyms and other businesses to close, hurting more jobs. Companies that go out of business also stop paying their suppliers, which can drag down other firms.”
That dilemma was brought sharply to the attention of St. Albert city councillors recently by Margaret Mrazek, chair of the board of directors for the St. Albert and District Chamber of Commerce.
There comes a time when we need to consider what fundamental changes we need to accept to our municipal services when all around us, local businesses are at the point of collapse and many household incomes have been severely reduced.
There are huge challenges in trying to reduce municipal taxes, even on a temporary basis, especially when we are nearly halfway through the calendar year. First is the persistent complaint by municipal governments of an imbalance of responsibility for services cities have taken on compared with restrictions on access to the tax dollars they need to meet the costs.
Certainly, the legislative restraints that prohibit municipalities from budgeting an operating deficit in times such as these are terribly difficult to deal with when city councils would very much like to offer their citizens and businesses temporary relief from municipal taxation and utility charges.
There are some ways around this, of course. Municipalities can borrow money, but in Alberta they must repay the loans within a year or seek permission from the provincial Minister of Municipal Affairs to defer that repayment beyond 12 months. They can also borrow money from their own reserves. The penalty here is they would lose interest on the investments that they would otherwise be making with those reserve funds, and would thus have to delay or reduce the scope of projects the funds have been set aside for – items such as building municipal service infrastructure on lands that have been planned for business or residential expansion.
Thus, one has considerable sympathy watching the struggles our city councillors are having in reviewing the 2020 budget that they approved last fall as they try to offer some relief to local businesses. At the same time, the guidelines set by council on this review, which needs to be finalized before the 2020 tax bills are issued in June, are in my view painfully timid.
St. Albert city councillors fully admit the tax relief they have provided to businesses to date is symbolic rather than substantive. They have eliminated part of a planned increase from the 2019 tax levy, but that is the limit they are prepared to offer. So while businesses will not face a property tax increase this year, residents will still see a 1.9-per-cent increase, down from the initially proposed 2.5 per cent.
To be fair, significant efforts have been made to reduce operating expenses and grants in areas where revenues from fees and sales have been significantly affected (for example, the Arts and Heritage Foundation, the St. Albert Public Library, the Arden Theatre and Servus Place). The city is also in the midst of cutting seven per cent from all departments.
However, city administration and council have not been prepared to put less money from property taxes into reserves. Council policy allows reserves to help cover emergent financial needs, stabilize tax rates, save money to replace outdated equipment and facilities, and help fund future projects. Currently, the city has roughly $140 million sitting in such reserves.
It seems odd that council, which works on our behalf, is billing us to put money into city savings accounts when some of us (homeowners and businesses) will be drawing out of our own savings accounts to pay our tax bills.
I say this not to point fingers of scorn at the timidity of those St. Albert citizens who we elected to take responsibility for our municipal services, but rather to point out that there needs to be a rationale more powerful than the misleading threat that the city won’t be able to fix potholes if we do not give them the money they ask for this year. There is clearly enough money in reserves for the city to make do with what it has, even if it requires service level reductions or delayed projects. The alternative – saving for future projects on the backs of taxpayers who can’t afford them – is a poor one indeed.