Budget 2021: Five Questions

This week, Council will be debating Budget 2021.

The Budget is Council’s most important work. It touches on absolutely everything the City does. So, I’m looking forward to our conversation!

Our staff have done a great job creating a Budget Book that clearly outlines City administration’s proposed revenues and spending. You can see it here.

Following, I lay out the five questions I think will receive the most conversation and debate from Council. But an important note:

Just because these will receive the most debate doesn’t mean that they are Council’s highest priorities. Instead, they are the areas of the City’s budget that have split opinions on Council. There are many high priority areas (ex: Affordable and Supportive Housing) that I anticipate receiving little debate because Council is united in investing in them.

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HOW MANY ROADS SHOULD WE REHABILITATE?

CONTEXT

Grande Prairie is behind on its road maintenance. In 2019, about 35% of our roads were at the point where they met the trigger for getting rehabilitation work.

Council has prioritized catching up on caring for our roads. A lot of work has been done to better manage projects so that work is prioritized and carried out properly. And more money is being invested too: the regular Road Rehabilitation budget has gone up from $8,000,000 to $11,000,000 over the last few years.

In addition to this continuous Rehabilitation budget, Council has set aside $18,000,00 over 3 years to rehabilitating the old Bypass.

This regular road work is important and supported by Council.

However, there is a lot of extra work scheduled for 2021. Phase 4 of the Downtown Rehabilitation Project will be happening. Park Road in Smith is getting paved. And $3.9 million in COVID Economic Recovery Funding has been allocated for residential road rehabilitations next year.

The amount of road work scheduled for 2021 is concerning to some. They worry that it will create too many problems for moving traffic through the City. They also worry that this much work will create challenges in receiving quality bids and overseeing the work that happens. I suspect that Council will have some good debate about whether or not to pull back on our 2021 investment in roads.

MY TAKE

I’ve got a number of questions I need to ask about 2021 road investment, so I don’t know where I will land on this. However:

I don’t believe that cutting back on Road Rehabilitation should be viewed as a way to cut costs.

Investing in roads is a priority I’ve heard from residents. They want to see our streets be in better repair.

Reducing taxes is also a priority in our community. And if we want to do that in the long-term, we need to properly care for our infrastructure. Allowing roads to crumble will create massive costs for future taxpayers.

Finding opportunities for reduced costs is worthwhile. But Road Rehabilitation is the wrong place to pull back.

Since we are doing so many extra projects, I’m open to the idea of Council spending less money on regular road projects in 2021. But we shouldn’t reduce this budget over the long term. If Council does decide to pull back on Road Rehabilitation in 2021, it should do so by re-allocating funding to the 2022 program, not just by cutting it out of our budget.

To see more information about caring for roads in the City, checkout www.bressey.ca/roads

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HOW DO WE CONTROL RCMP COSTS?

CONTEXT

Policing is the single biggest line in the City’s budget. And its cost is rising at a significant rate.

The City’s policing is carried out through a turn-key RCMP contract. The City gets to decide how many RCMP members it will fund and how much civilian support to provide. But it does not get any influence over the cost per RCMP member.

And the RCMP member cost is raising dramatically.

In addition to rising per-member costs, the City has also been adding members to the detachment every year. And the province has started keeping a higher proportion of fine revenue.

This is all adding up to a ballooning police budget.

In 2019, the City undertook significant re-structuring of its civilian supports to find cost savings. Despite this, RCMP costs have risen dramatically in the last 5 years. Here’s what the RCMP budget looks like:

Despite achieving cost savings, there is a $5,444,378 difference between the 2017 RCMP Budget and the proposed 2021 budget. That is equivalent to the revenue the City would collect if it raised property taxes by about 5%.

Over the next year or two, our community is going to have to have some hard and big conversations about what to do with our police budget. Big solutions aren’t going to be found this week.

However, one decision before Council: the proposed Budget 2021z calls for adding 3 RCMP members to our detachment at a cost of $388,866. This would bring our detachment up to 109 members (up from 98 in 2017 and 106 in 2020).

Council will need to decide: is this investment in increasing members worthwhile? Or are there alternative investments that should be made?

MY TAKE

I’m unlikely to support the addition of these members. Instead, I’d like to see Council invest in the Mobile Outreach Project (MOP).

MOP is several teams made up of a social worker and an Enforcement or security officer. They regularly patrol and check in on businesses in the downtown core. They also respond to reports of loitering, public intoxication, or other social disorder from people dealing with mental health or addictions challenges. MOP’s main goal is to get these people off the streets and into help. Sometimes this means getting them plugged into local services and helps. And sometimes it means getting them back to their home communities, where they have natural supports.

MOP also picks up needles and helps with responding to encampments.

MOP has been a very good program. It has helped the struggling people it interacts with. It has helped decrease social disorder on our downtown streets. And it has saved police resources- it is less expensive (and often more effective) to send MOP than the RCMP to respond to some issues.

MOP was also just funded as a pilot program in 2020. I’d like to see it funded permanently. Since it dramatically decreases the work of our RCMP, I’d like to see Council re-allocate funding for expanding the detachment towards MOP. This will allow our RCMP to better focus on actual criminal matters instead of having a lot of their resources consumed by mental health calls

You can see more on my take about police funding in this blog post.

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SHOULD WE RENOVATE REVOLUTION PLACE?

CONTEXT

Council will debating renovations to Revolution Place.

There is an option before Council to spend $4,000,000 on several small scale renovations, such as adding sky boxes to the east end of the arena. I don’t expect these renovations to receive much consideration from Council.

However, there is also an option to spend $55,000,000 on full scale renovations that would bring the facility’s seating capacity up to 5000. It is hoped that this would attract more and bigger events to the venue. This might have some support from Council.

Most of the funding for this project would come through borrowing. To date, the City has not had any conversations with other levels of government or other potential sponsors and partners about this project.

MY TAKE

I’m completely against funding full scale renovations to Revolution Place in 2021.

It might be worthwhile funding a great entertainment venue in the future.

However, I voted against Council even having this conversation at this time. Now is not the time to be taking on a project like this. To see my thinking on why the timing is wrong, checkout this video:

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SHOULD WE FUND VARIOUS CAPITAL PROJECTS?

CONTEXT

The budget has a long list of ~80 capital projects. I don’t know what particular projects will be flagged by Council. But I suspect the bulk of our time in deliberations will be spent discussing the capital side of our budget.

MY TAKE

I’m very open to the conversation about particular capital projects. And I’ve got a few I’ll be flagging for discussion myself. We should be giving this list scrutiny to make sure each project is enhancing the lives of residents and delivering good value to taxpayers. However:

Often, Council seems to view cutting the capital budget as the best path towards reducing taxes. And this can be a dangerous view.

Defunding a capital project only delivers a one year savings to taxpayers. And sometimes it doesn’t even do that: sometimes, it just kicks a problem down the line by a couple of years.

If we wish to find long-term savings for taxpayers, that needs to happen on the operational side of our budget. But operations are a whole lot more complex and difficult to govern than capital spends. Sometimes, I worry politicians’ focus on capital budgeting is used to make them feel better about not doing hard work operationally.

So I want our capital budget to be carefully considered. But I hope that doing so doesn’t detract from careful consideration of the operational needs of the City.

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TO WHAT DEGREE SHOULD WE FUND THE FACILITY RENEWAL AND FINANCIAL STABILIZATION RESERVES?

CONTEXT

The recommended budget is based on a 1.5% tax increase to keep up with inflation.

If this increase happens, taxes will still have fallen over the course of this Council term. That is despite inflation, new facilities (the grandstands and outdoor pool), and financial hits from senior government (decreased infrastructure funding, decreased fine revenue, increased RCMP costs) putting pressure on the City budget.

The blue line on this graph is what will happen to taxes if the budget is approved as recommended.

Blue line represents the changes to taxes this term if Budget 2021 is adopted as recommended.

Green line represents a 0% change to taxes each year. Grey line represents how taxes would’ve changed if they’d kept pace with inflation. Red line represents how they would’ve changed if Council had passed inflation and changes by senior governments directly onto taxpayers rather than making reductions to City spending.

Even though a 1.5% tax increase 2021 would still mean taxes were reduced over this Council term, Council may wish to have a 0% increase in 2020.

Administration recommends that if Council wishes to have a 0% increase, it do so by reducing reserve contributions.

Reserves are important to municipalities. They work to stabilize tax rates.

Revenues and costs can vary significantly year-to-year. By making regular contributions to reserves, the City doesn’t have to compensate for a variable budget by constantly changing tax rates. It keeps taxes stable by contributing to reserves when the budget is strong, and withdrawing from them when the budget is struggling.

If Council wishes to have a 0% tax increase, administration recommends lowering contributions to two reserves:

• Facility Renewal Reserve: The amount of money spent on caring for our buildings varies significantly every year. This is due to the large one-time expenses that every building requires occasionally (ex: replacing an aged roof). To prevent these expenses from causing a significant fluctuation in the overall City budget, a regular amount is contributed every year to a Facility Renewal Reserve. Then funding for major renewal projects on City facilities is taken from this reserve instead of the general budget. To achieve 0% tax increase, Administration recommends funding this reserve to 75% of its recommended level. This level of funding will allow the City to maintain its buildings in their current condition, but will not allow for any resources to be dedicated to improving some buildings which are in poor condition.

• Financial Stabilization Reserve: This is a reserve that is used for unbudgeted expenses or losses of revenue. For example, if we had a year of unusually heavy snow fall and so spent twice as much on clearing streets as we usually spend: the overage might be taken from this reserve. This reserve would also be used if we had major expenses arising from a natural disaster or the unexpected failing of a significant piece of infrastructure. It is generally recommended that municipalities have money available in this reserve to meet 2 months of their operational needs. The City is currently about $5,000,000 (or 25% short) of this recommended minimum, so regular contributions are being made to this reserve. To achieve a 0% tax increase, Administration recommends making no contributions to this reserve in 2020.

The reason these reserves will be discussed this week: because they are relevant to our tax rate.

MY TAKE

I’m not fundamentally opposed to allowing taxes to keep up with inflation. Over the long term, they need to if we want to maintain our current levels of service.

But we are currently in tough times. I’d sure love to keep a 0% increase this year.

I’m supportive of making no additions to the Financial Stabilization Reserve. It exists to help our community get through rainy days. If COVID-19 and low energy markets aren’t a “rainy day,” I don’t know what is. We’ve been fortunate not to have to draw on this reserve to make do. But it doesn’t make sense to use taxpayer money to grow it at this time.

I’m unlikely to support not fully funding the Facility Renewal Reserve. Neglecting to properly fund or plan for building maintenance is penny-wise, pound-foolish. It is likely to cost us more money in the long-term. If Council wishes to achieve a 0% tax increase, this is not the way to do it.

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Those are some of the big questions Council will be grappling with this week. I look forward to the conversation!

And I’d love to hear your thoughts and questions, whether about these or other parts of the budget.

If you want to chat, you can reach out to be at dbressey@cityofgp.com or 780-402-4166.

I’m also hosting a Zoom conversation about the budget on Sunday, November 8th at 2:00pm. If you’d like to get a link emailed to you, signup at www.bressey.ca/coffee.

Thanks for reading!

-Dylan