A recent report by the Canadian Federation of Independent Business (CFIB) comparing municipal spending to population growth has left members of local governments shaking their heads.
“With the discussion that the three municipalities are having in February, I think the timing of it is good. But I think the report doesn’t look at the big picture,” said Town of Westlock mayor Ralph Leriger.
“The report runs from 2004-2014. It predates this particular council, but I’m not going to throw the past guys under the bus.
“We face the same challenges that they did. But there are a lot of parts to the story.”
The report, which was released in December, ranked 180 Alberta municipalities with populations of at least 1,000 residents.
It found that while populations had increased by 27 per cent from 2004 to 2014, municipal spending increased by 75 per cent.
The Town of Westlock ranked No. 146 for spending versus growth while Westlock County ranked No. 22.
Leriger has mixed feelings about the report, noting that it was not really a fair comparison to compare the town and the county’s spending because they have different obligations to their ratepayers.
“The report paints the picture that rural municipalities are doing a significantly better job of maintaining their spending than urban ones,” said Leriger.
“It doesn’t address the fact that the urbans are providing all the regional services for the whole area.”
However, CFIB Alberta vice-president Richard Truscott said that infrastructure costs missed the point of the report.
“Our research looks at operating budgets; it doesn’t look at capital or infrastructure budgets,” said Truscott. “When you build infrastructure, there’s going to be an ongoing operating cost associated with that.”
He explained that the CFIB uses budget and financial information provided to the province by municipalities and compares the growth in operating budgets to the growth in the population. Then it adjusts the spending data to inflation.
“In too many cases those lines continue to diverge — that’s a real problem. It means at some point higher taxes or additional revenue from a higher level of government, or maybe new user fees, but the gap has to be bridged at some point somehow.”
Westlock County chief administration officer Leo Ludwig offered his personal opinion, commenting that the numbers the CFIB uses for its research are not accurate representations of municipal expenses.
“They started doing these analysis a few years back and their report was debunked in the past and they still haven’t addressed the fatal flaw in the report,” said Ludwig. “They use inflation based on the Consumer Price Index (CPI). That includes things like inflation on clothing and groceries.
“Municipalities are not consumers in that sense. We buy gravel, pipe and concrete. So to say that we have to keep our spending to the consumer price index inflation numbers is very misleading. We don’t buy groceries and clothing.”
He added that the costs of things such as gravel, steel and asphalt can vary dramatically throughout a year.
“One of the earlier reports that came out was in the same year that steel had gone up three times in one year. It was a 75 per cent increase in costs. Asphalt had gone up by similar numbers. Municipalities were responding with these massive cost increases on the goods they were purchasing, and the CFIB was criticizing us for spending above CPI inflation numbers.”
Truscott conceded that the CFIB could look at using a Municipal Price Index (MPI), but argued that the underlying issue would remain the same.
“Some of the municipalities pushed back saying we should using MPI,” said Truscott. “There’s perhaps some argument to be made on that front. But overall, the inflation rate that’s affecting taxpayers who are ultimately responsible for paying for local government, their inflation rate is in CPI, in the general increase in prices throughout the economy.”
“A lot of these MPIs that I’ve seen, half of it is to account for the increase of wages and benefits of municipal government employees,” said Truscott. “That’s what’s driving the overall increase in operating budgets. So until they can control that, they can’t control their spending. To use the MPI is a false indicator.”
He added: “We’re not just talking about union costs; we’re talking about all costs of staff, including mayors and councillors.”
However, Leriger pointed out that providing good services requires hiring good staff.
“They’re painting the picture of salaries being the big issue, but guess what? Those places don’t run themselves,” said Leriger, adding that wear and tear of roads and other infrastructure adds to the cost of running a municipality.
Ludwig pointed out that while the population in the area did not increase much, people are getting older which requires more services and infrastructure in itself.
“The population didn’t increase, but the infrastructure that was built in the 50s and 60s needs to be replaced whether your population increases or not,” said Ludwig. “Population increase doesn’t always drive cost, your asset base is what drives your cost and your asset base is not always driven by population.”
Truscott argued that the circumstances affecting municipalities was secondary, and ultimately to ensure that taxes remain low, municipalities needed to watch their bottom lines more diligently.
“We’re not saying that you need to freeze budgets. You need to ensure that the growth of the budget is sustainable over time, and whatever salaries and benefits that are being negotiated are affordable by the local residential and business taxpayers,” said Truscott.
“The erosion of the tax base due to migration and aging is an issue, but it also begs the question that if that is happening, then why should municipal expenses be increasing? Where is the money going to come from?”
Leriger noted that municipalities were left with a gaping hole in their budgets after the provincial cost cutting measures of the 1990s by then-premier Ralph Klein and that hole was never refilled.
“During the Klein years, they backed away from a lot of programs and left municipalities footing the bill,” said Leriger.
“Those are services that citizens still expect but municipalities receive the responsibility for them but not the funding. If you look at where municipalities used to receive operating grant funding for major renovations and repairs to infrastructure and buildings, that all dried up.
“It was supposed to be all wrapped into the Municipal Sustainability Initiative (MSI) and that was never received in the amount that it was promised, so now municipalities are borrowing the money to do those repairs.”
He added that having to borrow money to cover maintenance and repair costs just added to the financial burdens of municipalities.
“If you don’t maintain the things that you own, it’s going to cost you more in the long run,” he said. “Sooner or later you have to maintain your assets. Where are we getting the money for that? In some cases we’re debenture it. Where do those loan payments come from? Right off your operating budget, which makes it look like you’re spending more, but really you’re trying to maintain the stuff that you own.”
