The COVID-19 crisis that’s strained municipal resources has also exposed gaps in the way Alberta communities are funded, says Red Deer’s mayor.
“It’s fair to say the pandemic has proven to be a catalyst for the need to modernize our fiscal framework,” said Mayor Tara Veer.
On Wednesday, Red Deer city council unanimously supported a resolution that’s heading to the Alberta Urban Municipalities Association conference in September.
Drafted by the City of Edmonton and seconded by the City of Red Deer, the resolution calls for the AUMA to lobby the Alberta government to “reshape municipal finance for a new time,” and provide municipalities with a better and more sustainable way to meet their operating and capital budget needs.
“We need the provincial and federal governments to realize what a disaster the property tax system is,” said Red Deer city manager Allan Seabrooke.
He spoke passionately about how municipalities need a more predictable funding system than collecting annual property taxes and relying on “handouts” from government to deliver the services so many citizens depend on.
This regressive taxation system “ties our hands,” Seabrooke added, and leaves municipal officials “waiting on our knees” for scraps of federal and provincial funding.
Veer explained it’s hard for cities and towns to plan when they don’t know what their government grants will be from year to year.
The main way municipalities can afford to deliver basic services such as policing and roads maintenance, is by collecting property taxes. But the province takes about 30 per cent of these to pay for schools and housing, added Veer, while downloading additional responsibilities onto municipalities.
Noting the same property owners must also pay sales and income taxes, Veer feels there’s a problem with this “layering of taxes,” and governments then transferring tax revenues between themselves.
“It’s an unnecessarily bureaucratic system.”
Although there’s no easy fix, the mayor hopes the resolution going to the AUMA will start a conversation that will lead to reform.
Veer maintains Red Deer was in a good financial position before city revenues took a blow from pandemic measures. Council set self-imposed borrowing and debt-servicing limits that are below provincial levels.
While a temporary cash-flow problem is expected to arise as the city waits until Sept. 30 to collect deferred property taxes, city council recently approved up to $10 million more in borrowing, in case it’s needed, to cover a potential shortfall.
Veer said other municipalities in the province are in similar financial straits and have been calling on the government to provide them with COVID-19-related relief payments. “But that request remains outstanding.”