When the status quo isn’t working, it’s time to change things up.
If Red Deer city council wants to grow the economy and expand the tax base, it’s time to reconsider their strategy.
Prior to the Christmas break, the Red Deer & District Chamber of Commerce sent a letter to council advocating they pass an operating budget requiring no increase to tax rates.
The letter included recommendations to look at outsourcing more services to the private sector and freezing wages (most union-exempt staff at the provincial government, Alberta post-secondary institutions and Alberta Health Services are going into another year with a wage freeze).
The letter also recommended pursuing modest cuts in spending in areas identified as being “low priority” or having a “high level of satisfaction,” according to the 2018 citizen satisfaction survey, while reviewing the regulatory system with the goal of reducing the cost and turnaround times to promote growth.
Along with business owners, economists and other industry associations, we hold serious concerns about the economic outlook for 2019 and what it will mean for residents and businesses.
Amid a recession, our businesses have been faced with a metaphorical buffet of cost increases levied upon them over the past few years by the three levels of government. Many businesses have only survived this far by making serious cuts to reduce their overhead.
It’s getting to the point where even just the “modest” 2.15 per cent increase to city taxes can be the straw that breaks the camel’s back, keeping in mind businesses pay a little over twice as much on the assessed value of their property than residents.
As businesses and families must adjust their spending during a tough economic time, so should our government. With this consideration, there is little justification for expanding the size and scope of government through 2019.
Our province is faced with weak energy prices resulting from U.S. energy independence and inadequate market access. According to the Baker Hughes rig count, there were only 70 active oil rigs in the last two weeks of December, compared to 710 in January of 2012.
Expect this impact to be felt through our economy, especially as our other main economic driver, agriculture, also faced a tough year, thanks to poor weather.
Last year saw very little growth in our city, combined with unhealthy levels of commercial and industrial vacancy.
A quick drive through the city will reveal a glut of unsold lots as the weak economy, combined with increases to fees and levies for home builders and developers, has further eroded affordability.
Fewer home sales have these developers and home builders, along with the contractors and trades people they employ, operating at a fraction of their former capacity.
With Mayor Tara Veer being the lone dissenting voice, city council found it appropriate to further increase the fees developers and home builders are subject to.
No doubt this will exacerbate the problems and shift more development outside city boundaries.
It’s these costs, along with sub-par tax rates and regulatory structure, that is resulting in so much development occurring outside of city limits.
In discussions with investors and developers that choose to build or locate outside of the city, they cite the “ease, timeliness and cost of doing business” to be beneficial in neighbouring municipalities.
There are numerous advantages to locating within city limits. However, a look at the pace of development in and outside city boundaries suggests they are far outweighed by the disadvantages.
One only need look to the number of accounting companies choosing to locate in Gasoline Alley to know advantages, financial and otherwise, exist.
To council’s credit, they did make important investments to beef up policing and community safety. Unfortunately, there was little done to address the underlying (and quite expensive) size and cost of our city government, despite seeing little to no growth of the tax base.
The majority of the savings found were from slight reductions in Collicutt and Dawe centre hours, along with transit.
The City of Grande Prairie, facing similar economic hardship, managed to reduce property taxes by refinancing its debt load. Chestermere’s strategic plan included the goal of mitigating a tax increase and was of great success.
Red Deer County saves significant funds through contracting out most infrastructure maintenance to private companies. Chestermere, Grande Prairie and the county all spend less per capita than the City of Red Deer, showing that it can be done.
During its deliberations, council on multiple occasions laid blame for their budgetary woes at the feet of the provincial government for underfunding a number of areas.
Should the fiscally conservative UCP be elected come spring, it would be judicious to plan for a new provincial government likely to keep a tighter grip on the purse strings, which will place further pressure on the city’s bottom line.
A fun fact pointed out by an astute local accountant during deliberations: the municipal residential rate in the City of Red Deer is 69.8 per cent higher than in Calgary.
Council called budget 2019 one of the toughest yet, but council chose not to ask city staff to do more with less.
There was little scrutiny of operational inefficiencies, nor exploration of outsourcing opportunities.
Instead, there were increases to regulatory and recreational fees, adding further to the burden of Red Deer residents and businesses.
Reg Warkentin is the policy and advocacy manager with the Red Deer & District Chamber of Commerce.