The Canadian Federation of Independent Business (CFIB) released a new report recently that reveals operating expenditures by the vast majority of Alberta’s municipalities have been rising at an unsustainable rate over the past 11 years.
The report looks at growth in real (i.e. inflation-adjusted) operational spending by each Alberta municipality between 2000 and 2011, and compares it to population growth over the same period as a benchmark to determine the level of fiscal sustainability.
Overall, Alberta’s population grew by 24 per cent, while real operational spending by all municipalities rose by 78 per cent, more than three times faster. Of the 181 municipalities with a population of at least 1,000, 92 per cent were spending at a faster rate on operations than the local population was increasing.
“The vast majority of Alberta’s largest municipalities have charted an unsustainable course over the past decade. Failure to exercise greater spending restraint in the future will inevitably mean higher taxes, not to mention more borrowing, and a growing appetite for new sources of revenue”, says Richard Truscott, Alberta director for CFIB.
Based on information provided by Alberta Municipal Affairs, the report shows operating spending by all municipalities across Alberta totaled $7.6 billion in 2011. Fifty-five per cent was spent on salaries, wages, and benefits.
“It will be virtually impossible for mayors, councils, and administrators to exert better control over rising municipal government operating expenses without more restraint over employee compensation costs, the biggest line item in their operating budgets,” Truscott said.
“If the past is an indication of what the future holds, Alberta’s entrepreneurs should be worried. Municipalities have been increasingly turning to commercial property owners as a cash cow to fund their soaring operational costs,” he said.
Previous CFIB research has shown Alberta businesses pay a disproportionate share of property taxes. In 2011, commercial property in Alberta paid an average of 2.5 times more property tax that residential property of similar assessed value, a ratio that has continued to rise over the past decade.
“Municipalities have the ability to take corrective steps, but it will require political leadership, vision, and immediate action,” he said. “The upcoming election campaign is the perfect opportunity to have a frank and honest conversation about the underlying fiscal sustainability of our province’s municipal governments.”
The CFIB report makes a series of recommendations to enable municipal governments to better control growth in operating costs, including: limiting spending increases to the rate of population growth, conducting formal spending reviews, adopting sustainable wage growth policies, determining what services can be out-sourced, and creating a municipal auditor general to scrutinize the spending practices of Alberta’s municipalities.