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EDITORIAL: Increase in franchise fee simple sleight of hand

'Businesses and non-taxable entities such as schools, churches, and some non-profits are paying for the savings passed on to the average residential taxpayer. It is a shift in costs.'
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St. Albert city council, on Monday, voted in favour of requiring city administration to report annually on the operating costs for Servus Place.

It was a good decision. It does deserve a deeper look, including COVID’s impact. The recreation facility is running in the red, operating at a 73-per-cent cost recovery and a deficit of $2.5 million.

The cost recovery for the facility improved from 92 per cent in 2013 to a peak of 101 per cent in 2014, The Gazette reported in 2020.

As the city stares down a considerable tax increase for 2023, it must start poking around in areas of its budget with large deficits. The vote last week by council to also require annual reports on consultant fees, which came in just under $2 million over the past 18 months, is a good decision, too.

The more transparency and accountability with spending in these areas, the better.

What's unfortunate, however, is that in the same meeting, on the same day, city council made the decision to approve a hike in St. Albert's electrical franchise fee — from 10 per cent to 15.

What does this mean? The city will rake in an extra $1.7 million, and, following policy, it will be offset by a reduction in property taxes.

A city administration backgrounder cites an example of how an average homeowner will see an incremental franchise fee increase of $40 per year. After factoring the total reduction of taxes, the typical homeowner will have a net benefit of $11 per year. Make no mistake, residential property taxes are going up next year, it’s just that the average homeowner used in the above example won’t pay an additional $11, or about 90 cents per month, on top of that property tax increase.

It’s not material to the homeowner, as Coun. Sheena Hughes pointed out during Monday’s meeting. It is, however, very material to many businesses, schools, and some non-profits that will make up the difference.

As the city backgrounder states, “Customers with average electricity consumption and average assessed property values will likely see an overall decrease in combined costs. Customers with higher electricity consumption (typically non-residential) may see an increase in their overall costs. Non-taxable entities will see an increase in costs as there is no property tax offset available for these groups.”

A majority of council is trying to sell this sleight of hand as a benefit to residents. It does, however, come at the expense of the other groups mentioned above. Businesses and non-taxable entities such as schools, churches, and some non-profits are paying for the savings passed on to the average residential taxpayer. It is a shift in costs.

The city’s backgrounder further states that this 50-per-cent hike in electricity franchise fees shouldn’t impact the competitiveness of St. Albert’s business environment.

“Business licensing, taxes, location, utilities, franchise fees, servicing costs, access to labour and transportation routes, etc., when assessed collectively, will do more to drive business investment within the community than focusing on a single fee, especially given that businesses will also receive property tax relief.”

Tell that to the businesses who consume more power than the average homeowner and the non-taxable entities who will simply see their costs go up.

Editorials are the consensus view of the St. Albert Gazette’s editorial board.