The City of Red Deer is struggling to curb operational spending and will continue to do so for some time because of high construction costs and other external pressures, city manager Craig Curtis says.
Red Deer was recently named in a report on municipal spending as being the 11th highest spender out of 18 Alberta cities during the period of 2000 to 2007.
“All Alberta municipalities are in a very similar position and there are very good reasons for that,” said Curtis on Wednesday. “So I think it’s a very one-sided logic that brings them to the conclusions that they did.”
The Canadian Federation of Independent Business looked at financial summaries provided by municipalities to Alberta Municipal Affairs and then ranked them based on a Fiscal Sustainability Gap, a ratio that compares the operational spending growth with the growth in population and inflation. According to the federation’s analysis, Red Deer’s Fiscal Sustainability Gap was 1.45, which translates into Red Deer spending 1.45 times the rate of inflation and population.
The report shows that only 67 of Alberta’s 349 municipalities, or 19 per cent, kept operational spending at or below population and inflation growth.
As with its first report for the years 2000 to 2006, the federation says these expenditures are growing at an unsustainable rate.
Although Curtis disagrees with the analysis, he said the report does point out that Red Deer is below the average in spending and is almost on par with Calgary and Edmonton. Red Deer is also slightly below the average regarding per capita operating spending.
Three factors are causing municipal costs to be higher than the general rate of inflation, Curtis said.
“We’re very much in the construction business and a large extent of our work deals with gravel and paving and all those sorts of things,” he said. “Those costs in the private sector have gone up over 20 per cent a year in the last number of years.”
Construction costs dipped last year and again this year, but they are expected to rise in 2010, Curtis said.
“When you are looking at 20 per cent increases, those were way above inflation, which was running around three or four (per cent).”
The city is in the business of growth, which requires spending on infrastructure and other projects before getting any revenue back, Curtis added.
Thirdly, provincial standards have driven up costs.
“There are new standards for water management, testing — all good things but they do push up costs,” Curtis said.
Richard Truscott, Alberta director for the national federation, said earlier this week he doubts municipalities will have shown greater restraint in 2008 and 2009, despite a slower economy.
“Costs haven’t come down to the extent that they went up,” he said.
Municipalities across the province are struggling with the same external pressures, many of which come from the private sector, Curtis said.