City spending said unsustainable

A report investigating municipal overspending shows the City of Red Deer has fared better than 10 other Alberta cities when it comes to how many operational dollars it’s dishing out.

A report investigating municipal overspending shows the City of Red Deer has fared better than 10 other Alberta cities when it comes to how many operational dollars it’s dishing out.

The Canadian Federation of Independent Business recently released its second Alberta Municipal Spending Watch report, which analyzes the spending habits of various sized municipalities during the period that saw economic growth reach record heights before falling off in late 2007.

The organization, which represents more than 105,000 small business owners from coast to coast, obtains data from municipality financial summaries given annually to Alberta Municipal Affairs.

The federation then ranks the municipalities in descending order, based on a Fiscal Sustainability Gap, a ratio comparing the growth in operating spending with the growth in population and inflation between the years 2000 and 2007.

Red Deer’s Fiscal Sustainability Gap was 1.45. Any number over 1 shows the municipality increased spending at a rate exceeding its growth in population and inflation. Red Deer came in 11th out of 18, 18th being the best at curbing spending.

Grande Prairie came in 18th place for being the closest city to holding its spending in line. Its Fiscal Sustainability Gap was 1.12. Cold Lake had the worst spending rating, showing a 3.28 Fiscal Sustainability Gap.

Edmonton and Calgary were slightly better than Red Deer at curbing spending, placing 12th and 13th.

Red Deer Mayor Morris Flewwelling, city manager Craig Curtis and Corporate Services director Lorraine Poth were unavailable for comment Tuesday afternoon.

Richard Truscott, Alberta director for the Canadian federation, said Alberta spending habits were too high.

“Red Deer’s spending is 1.4 times the rate of inflation and population growth,” Truscott said on Tuesday. “Over the long term, that spending is unsustainable, where you are spending beyond the means of the businesses and taxpayers.”

The only way this spending can be supported is through higher taxes, levies, fees or fines, he added.

By their standard, all of Alberta’s 18 cities spent more than they should.

“Every single city is spending beyond that sustainable benchmark,” Truscott said. “We find that quite concerning, as do our members.”

Truscott said he hopes that 2008 and 2009 will show greater restraint by municipalities due to more troubling economic times.

“We’re not holding our breath,” he said. “The ability for small businesses to pay those municipal taxes has not improved and has gotten much worse over the last 18 months.”

He further hopes that Premier Ed Stelmach’s recent pledge to curb provincial spending will stick.

“We’d like to see the same rationale and determination applied by municipal governments to keeping their spending to some sort of sustainable benchmark,” Truscott said.

On a provincewide basis, population and inflation growth was 45.4 per cent, while total operating spending at the municipal level grew by 72.7 per cent. This means that the growth in spending at the municipal level was 1.6 times higher than population and inflation growth. Only 67 of Alberta’s 349 municipalities, or 19 per cent, kept operational spending at or below population and inflation growth.

Lacombe was among five Alberta towns with more than 7,500 people that grew its spending by more than double its population and inflation growth.

Clearwater County was the only one of municipal districts and counties (with a population of over 10,000) that had less spending. Red Deer County came in third place for having the highest level of spending within this category.

Besides looking at growth in spending, the report also compared current levels of per capita spending in order to get a more complete picture of municipal finances.

Red Deer was just below the average in per capita operating spending in 2007, with $1,523 per capita versus the average of $1,527.

When it came to per capita spending in towns with more than 7,500 people, Innisfail spent the least at $1,035.

The report also said the biggest cost drivers of municipalities are municipal wages and benefits. All Alberta municipalities publicly reported the number of employees they had in 2007 to Municipal Affairs. Red Deer had 831 employees, or 10 full-time employees per 1,000 population. The highest number of employees per capita was reported in Medicine Hat with 16, followed by Edmonton and Lethbridge at 13. The lowest was Brooks with five full-time staff per capita.

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