It looks like the city is facing yet another funding problem, this time to cover the basic repair, maintenance and replacement of its current capital assets, and as senior business analyst Stephen Graham told city council last week, there’s a serious capital funding challenge ahead of us.
Repair, maintenance and replacement, often called RMR, is the most important part of a city’s capital budget – so important, in fact, that council approves it months in advance of the municipal budget.
But thanks to a capital funding decision made more than a decade ago, the city has increasingly been relying on grants (which are inherently unreliable) to cover this basic capital expense.
On average, between 2014 and 2017, more than 60 per cent of RMR funding came from grants. The city now says that shows we’ve been living beyond our means – in fact, this latest chapter in the ongoing saga of capital financing drama puts St. Albert in the hole to the tune of $16 million.
To put that in perspective, Graham says closing that funding gap would require a property tax increase of between 12 and 17 per cent. That’s not something that can – or should – be fixed quickly, given the inevitable impact it would have on taxpayers.
“This is not a minor issue. This is a very significant shortfall we’re looking at,” Graham said last Monday. And although city finance director Diane McMordie says St. Albert is in “fine financial shape,” the city clearly has an uphill battle ahead of it if it wants to tackle the issue of RMR funding.
The problem stems from a decision made by the council of the day at least a decade ago, which created a fixed amount of money for capital funding. The formula for that hasn’t kept pace with St. Albert’s growth, which leaves the city with two options: find more funding, or start reviewing service levels.
Neither of those options spell good things for taxpayers. The latter could mean a reduction in the services St. Albertans have become accustomed to, while the former could involve anything from a municipal utility corporation to tax levies in order to pay off debt. We’ll learn more about those options in April, but either way, taxpayers will be impacted.
While ideally a city would run as a self-sustaining machine, the reality is that all municipalities rely on some sort of funding from provincial and federal sources to stay afloat – whether that’s through the municipal sustainability initiative or another avenue. That’s become a necessity as other levels of government continue to download financial responsibilities onto municipalities.
If RMR should theoretically be covered municipally instead of through grants, the city is going to need to come up with creative ways to find $16 million. While this capital funding deficit was cooked up by past councils, it now falls to our current council to serve up the unsavoury stew of bad decisions.
Let’s hope it doesn’t burn too much on the way down.
Editorials are the consensus view of the St. Albert Gazette’s editorial board.