The Main—July 20: This Provincial Download is Malware
Municipalities take all the political pain while the province takes all the political gain
Hanna is a town of roughly 2,600 people a few hours northeast of Calgary that’s known to most as the home of Nickelback. Its mayor, Chris Warwick, hopes his municipality and many other smaller municipalities in Alberta start to speak back to the provincial government — by literally sending them invoices for services.
“I don’t expect to get payment but it sends a message,” he says.
Warwick’s frustration is linked to the provincial government’s decision to halve the amount of money it pays to Hanna and many other communities in lieu of property taxes on its properties across Alberta. The program is called Grants in Place of Taxes, and the 50 per cent cut the province granted itself will mean a $38,000-sized hole in the Hanna’s finances this year.
The Grants program injects provincial money in roughly 170 communities to cover the costs for municipalities to provide services at their many properties rather than for the province to pay direct property taxes.
With the phased-in cuts — first announced in the United Conservative Party’s first budget in 2019 — now coming into force, many municipalities will face a huge crunch in 2021. CBC has reported that Calgary will shoulder a $2.5-million shortfall this year and $900,000 next year.
Municipalities, by law, cannot run a deficit. Their choice with a shortfall is to cut services or increase taxes.
Warwick says there’s little he can do to explain the download in a way that people care about, and that this is the darkly brilliant part of the province’s strategy. “It comes down to who gets the blame,” he says, in an interview with Rage. “We have to raise taxes to offset [the lost revenues]. Now the residents can come to me and say ‘Why did our taxes go up?’ You can explain but they don’t care.”
Given Warwick is mayor as well as the owner of a local hardware store, he says residents often do walk in and share their views with him. He’s accessible, while the government making the decision that he has to deal with is far less so. And trying to explain the minutiae of difficult-to-understand property taxes to voters is a losing game, especially in an election, he adds.
This is the unfortunate reality that will almost surely see the province continue to download further costs onto Alberta’s municipalities and all but dare them to raise property taxes to maintain services (we wrote about the choices munis will have to make given shrinking resources here) or watch them cut the basics further.
As Warwick points out, the decision on the Grants program is not the province cutting its own spending. Instead, it’s just shifting costs to another government that it has near-complete control over. And he also points out that this isn’t just a current government thing: the former New Democratic Party government was interested in these cuts, too, he says.
Warwick’s suggested response, one that he says he’s discussed with municipal officials in Hanna and hopes others consider, is a largely tongue-in-cheek idea to send bills to the province for any infrastructure repairs connected to the provincial property in town. A replaced pipe or a repaired sidewalk should see the cost invoiced to the province, he says. He adds that he came to this idea after contemplating just withholding the amount of property tax the municipality collects on behalf of the province for education but realizing this would devolve into a tit-for-tat. If Hanna withheld money from the province, the province would likely then withhold money it provides through the vital Municipal Sustainability Initiative.
“They have us over the barrel for our MSI funding,” Warwick says. “You can’t fight the war with that type of armoury.”
But the battle needs to be fought, Warwick says, as doing nothing will only invite the behaviour to accelerate. “If they don’t get any backlash, it just opens the door for them to do more downloading,” he says.
“We all have to pay tax — unless you’re the provincial government, apparently.”
Very informative article, including the information that municipalities can’t run deficits; when a candidate runs for municipal office on “fighting deficits” you know they don’t know what they are talking about so have zero credibility on anything else they say.
This on top of the UCP government allowing oil companies the ability not to pay their property taxes in these rural communities could cause some of these places to go bankrupt or to increase property taxes so high that people have to start walking away from their homes. This government needs to go.