A provincial sales tax aimed at boosting municipal budgets is not the way to go, say a pair of central Alberta mayors.
The cities of Lethbridge and Brooks are backing a proposed Alberta Urban Municipalities Association resolution calling on the province to bring in a temporary one per cent sales tax that would go only toward municipal infrastructure projects.
The resolution says municipalities have trouble funding capital projects on property taxes alone, and the provincial grants typically relied on to cover costs are expected to be reduced as the UCP government tries to reduce spending.
Red Deer Mayor Tara Veer said she understands the desire to find alternate ways to fund important infrastructure, but does not see a sales tax as the way to go.
“I personally think it would be tone deaf to the financial circumstances of households and businesses at this point,” said Veer on Friday.
Veer is all for taking a look at how municipalities fund their operations and capital plans, but believes it should be done in a “comprehensive and systematic way, instead of proposing one solution that may have unintended consequences.”
On Wednesday, city council unanimously supported a City of Edmonton-drafted resolution that calls on the AUMA to lobby the Alberta government to “reshape municipal finances for a new time,” and provide municipalities with a better and more sustainable way to meet their operating and capital budget needs.
Veer pointed out during the council debate that municipalities rely on property taxes, 30 per cent of which are taken by the province. At the same time, municipalities count on provincial and federal grants that fluctuate depending on the financial priorities of other levels of government.
“I do think it’s a more complex discussion than one resolution would lead us to believe,” she said of the tax proposal.
Lacombe Mayor Grant Creasey also opposed a sales tax as a solution to municipal financial challenges.
“I can tell you it’s a non-starter for the City of Lacombe,” said Creasey.
“As much as I can empathize with all municipalities trying to squeeze that orange from every different direction, I think we already have enough taxation strings in people’s pockets and methodologies to tax for whatever projects, in this case, municipal infrastructure.”
The mayor also questions how “temporary” the tax may prove to be.
“I find it quite interesting when anybody suggests a temporary tax. I believe, if, in fact, it were successful, that it would not be temporary, much like income tax was introduced as a temporary measure.”
Canada’s personal and corporate income taxes were introduced in the Income Tax War Act as a temporary measure to pay for the First World War. It never ended, and in 1948, its temporary designation was dropped, and the Income Tax Act was born.
The Canadian Taxpayers Federation is strongly opposed to a new tax, arguing municipalities should be cutting back.
“What we need all municipalities to be doing is looking into their budgets and really cutting spending,” said the federation’s Alberta director, Franco Terrazzano.
“We have so many families and so many businesses struggling right now, and there is no way they can afford higher taxes.”
The federation issued a report earlier this week critical of the amount municipalities spend on staffing. Between 2014-18, municipal labour costs increased nearly 17 per cent — $873 million.
In the same period, total compensation for Alberta workers declined by six per cent.
The message, the federation says, is municipalities need to be more realistic about their spending.
Premier Jason Kenney has said no provincial sales tax would be considered in Alberta without a referendum.