MSI program for municipalities not so sustainable

Municipal leaders knew the provincial government was facing a budget squeeze this year and that grants would take a hit.

Municipal leaders knew the provincial government was facing a budget squeeze this year and that grants would take a hit.

But Blackfalds Mayor Melodie Stol wasn’t expecting to see the knife cut so deeply into the pool of cash the province had promised municipalities as part of its Municipal Sustainability Initiative (MSI).

The10-year, $11.3 billion program was launched with much fanfare in 2007. This year, the government was expected to boost grants to $600 million, but instead rolled it back to $400 million.

By the government’s own preliminary estimates in 2007, Blackfalds was in line for about $688,000 this year. When grant numbers trickled out after the April budget, the town found out it would get just a shade under $400,000, nearly $200,000 less than it got last year.

“Next year, we don’t know what to expect.”

Stol and the rest of council were able to patch up their budget. Some projects were postponed and the town may have to borrow a little more than it planned.

What concerns her most is the uncertainty the province’s decision has created.

The Municipal Sustainability Initiative was pitched as an aggressive response to the province’s infrastructure deficit. It was to provide communities with a reliable source of funding they could use when building long-term plans.

“And now the whole purpose of the grant seems to be defeated because they’ve made it unreliable.”

Stol understands the province is facing tougher economic times than it has seen in years.

“But I think they need to step back and say if the priority for municipalities and the province’s relationship with municipalities is to give them something they can rely on, tinkering with that reliability is not going to help the situation.”

After all, the projects communities would funnel the money into are just the kinds of initiatives that will create jobs, she added.

Alberta Municipal Affairs spokesman Jerry Ward said Tuesday the province’s commitment to municipalities remains but there has been a “significant shift in the economic climate” and where that goes will determine what happens down the road.

“I don’t know if we can say what will happen next year at this point because it’s still 10 months away before the next budget comes out.”

“But government will continue to invest and support municipalities with this unmatched support despite these tough economic times.”

In addition to the $400 million, the government has set aside $100 million to be used as matching funding for a federal Building Canada Fund program that has earmarked $88 million for Alberta communities.

Addressing the concerns about the MSI program’s certainty, Ward said the government made it clear when it was announced that it could be altered to respond to the economics of the day.

In Lacombe County, the provincial belt-tightening meant an expected $2.6 million grant cheque was reduced to $1.8 million.

The municipality did not have any projects directly tied to this funding, so it did not have to cancel or delay a specific improvement.

Lacombe County commissioner Terry Hager said the depth of the province’s grant cut was unexpected.

“We recognized that the province had some difficult financial decisions to make. We were somewhat surprised when the actual amount was released.”

The funding situation could be more dire in 2010 when another funding program, the Alberta Municipal Infrastructure Program, runs out.

The MSI funding was supposed to be boosted to cover the loss of that program, and in total, Lacombe County was expecting about $7 million.

But if the government doesn’t boost funding, and holds it at 2009 levels, “It will put us in a difficult financial position.”

When funding dries up, road projects take longer to reach the top of priority list. Regional trails, or improvements to water and sewer systems in rural hamlets could also be delayed if the expected cash does not come forward.

Mountain View County received nearly $2.7 million in MSI funding last year and will have to make do with just over $2 million this year. Under the 2007 estimate, Mountain View would have had $3.2 million to spend.

County chief administrative officer Doug Plamping said the municipality has built flexibility into its long-term capital plans to deal with changing financial fortunes. For instance, a 13-year capital plan may now have to be pushed out to 20 years.

However, uncertainty over grant funding makes it tricky to plan a major project that could take many years to complete and contracts need signing.

“It’s a very difficult situation for municipalities.”

Some relief will be offered through other funding sources. The federal government is doubling the amount municipalities get in gas taxes to two cents a litre this year and there is the Building Canada Fund.

A Building Canada program has earmarked $89 million for Alberta, although communities must compete to receive the maximum $3 million up for grabs.

Alberta Urban Municipalities Association president Lloyd Bertschi, said the province had planned to dole out $1.4 billion next year, but it is unclear where that target stands given this year’s cutbacks.

“There are a number of question marks.”

Given the depth of the government’s cut to MSI, he would not advise municipalities to count on the grants when planning future finances. In fact, that was the advice he gave his own administration in Morinville, where he serves as mayor.

Bertschi said there is no doubt times are tough, but the government should not lay aside infrastructure plans to make ends meet. That approach was taken in the early 1990s and it left the province with the infrastructure deficit it is now trying to fix.

But Bertschi compliments the province for coming up with the sustainability initiative that put Alberta’s communities on a better footing than those in many other provinces.

In a recent visit to Saskatchewan, municipalities were talking about a $100 million infrastructure program that just been rolled out.

“We were already, at that time, at $500 million. We are still getting significant contributions from the province.”

pcowley@bprda.wpengine.com

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