Our new Council has its first Budget Deliberations this week. We’ll be meeting all day on Thursday and Friday. You can read the proposed budget here, or watch the meeting here.

I’ve also created a series of YouTube videos that show how the City budget gets set, and how it impacts individual tax bills. You can find them here.

Administration is recommending a budget which includes total spending (both Operational and Capital) of approximately $277,000,000 in 2022. To generate the necessary revenue, a below-inflation tax increase of 1.55% would be needed.

Following is some information and my take as we head into budget deliberations.

Important note: this is my personal website. Which means any mistakes or opinions in this post belong to me and me alone, not to Council or City Administration.

BACKGROUND: PUBLIC ENGAGEMENT

The City puts a lot of effort into public engagement when forming the budget. Online surveys are open to anyone. Open houses are hosted where any member of the public can learn about the budget, ask questions of department managers, and share their thoughts. Council also meets with stakeholder groups, including the Chamber of Commerce and Youth Advisory Council.

I’d encourage you to take part in these opportunities next year: I take what is said at them seriously.

You can read the What We Heard report for this year here.

One interesting graphic from it:

The results of this survey question are consistent with past surveys the City has done, including our Citizen Satisfaction Survey which involves a statistically significant and random sample of our residents. Anecdotally, it also matches what I hear when door knocking.

Only a quarter of residents prioritize reducing taxes, even if it means City services must decrease. About half think taxes should be left where they are, and about a quarter support raising taxes to increase services.

That being said, I’m sure we all agree that effort should be made to reduce taxes if that can be done without sacrificing services.

BACKGROUND: RECENT TAX CHANGES

The City budget is crunched, so there are challenges to address in deliberations. Over the past four years, we have seen rising costs due to inflation, receiving ownership of the old Bypass, and a significant salary increase for RCMP members. We have also seen significant funding cuts by the province.

If the City had continued “business as usual” while passing these changes directly onto taxpayers, an increase of approximately 11% would’ve been needed. This was not acceptable. So the City focused on finding efficiencies and reducing low priority programs. This has caused residential taxes to decrease by 1%, despite Council adding services such as driveway snow windrow removal, an outdoor pool, and the Mobile Outreach Program.

There always needs to be effort put into being more efficient and better targeting spending towards high priority programs. However, this only goes so far. We’re getting to the point where if the City wants to add services or absorb inflation without service decreases, it needs to increase taxes or other revenues.

BACKGROUND: HOW WE COMPARE TO OTHERS

A priority I often hear from residents: they want our property taxes to be more in line with other municipalities. Which I think is a reasonable expectation.

Our residential taxes are higher than many other municipalities. However, the disparity isn’t as big as some seem to believe. Here is how we stack up against a few others:

Taxes are only one component of a municipal budget. When making budget decisions, it is also important to consider non-tax revenue and expenditures.

When we look at expenditures, here is how we stack up compared to others:

Compared to other municipalities, the City of Grande Prairie’s per capita spending is low.

So why are our taxes higher? That’s due to how we collect revenue.

In the City of Grande Prairie, we collect a relatively high proportion of our revenue from taxes rather than other sources:

Grande Prairie has relatively high taxes because it has relatively low non-tax revenue. We pay more in taxes because we pay relatively less for utility franchise fees, business licenses, recreation programs, and many other services.

Furthermore, Grande Prairie has a different tax split than many other municipalities. Most places set a higher tax rate for non-residential property. In Grande Prairie, our residential rate is 60% of our non-residential rate. In many places, this split is much bigger:

So not only do we collect less tax revenue than other places, we also collect less non-residential tax revenue than many other places.

This has benefits. It keeps municipal fees and charges low, and it creates a business friendly environment. But it also leads to us having relatively high residential taxes, despite spending less per person than other municipalities.

As we work on our budget, we should always be striving to do better with our spending. However, if we want to get our residential taxes down, we also need to look at our revenue. We can’t expect to have both comparable services and comparable taxes to other places if our revenue sources aren’t comparable. To get residential taxes down, we need to increase other revenues.

BACKGROUND: IMPENDING PROVINCIAL CUTS

The biggest challenge we’ll face over the next few years is provincial grant cuts.

In Canada, municipalities own over 65% of public infrastructure. They also collect less than 10% of total tax revenue. That means that municipalities rely on senior government cuts to fund basic infrastructure.

In 2022, the province will be replacing two existing infrastructure grants with a Local Government Fiscal Framework (LGFF) grant program. The total funding for this program will be 25% less than the historical funding municipalities have received.

Graph taken from Alberta Municipalities’ analysis of the 2020 Provincial Budget: https://www.abmunis.ca/sites/default/files/Advocacy/Budget2020/auma_analysis_of_provincial_budget_2020.pdf

It’s important to note that the total funding pool is being reduced by 25%. However, the province hasn’t announced how this funding will be split between municipalities. We don’t know the total impact on our budget, but I anticipate it being somewhere between $3,000,000 and $4,000,000. Which is a very significant hit to our budget.

As Council sets its budget, it needs to decide what to do with this impending cut. Do we reduce infrastructure maintenance? Or do we increase revenue to make up for provincial cuts?

BUDGET BOOK HIGHLIGHTS

Administration is recommending a budget which includes total spending (both operational and capital) of approximately $277,000,000 in 2022. To generate the necessary revenue, a below-inflation tax increase of 1.5% would be needed.

City Administration has done a very good job of creating a Budget Book. It clearly lays out the proposed budget. It also includes descriptions of all City departments and their primary operating objectives.

I highly encourage you to skim through the budget. You can find it here.

Some highlights (all graphics taken from the budget book):

The City uses Priority Based Budgeting (PBB) to target spending. Every City program (over 350 of them!) is costed out and ranked by how well it supports Council’s strategic plan. This allows us to see how much money is being spent on high or low priority programs. The proposed 2022 budget would see 68% of spending happen in Quartile 1 (ie: in the 25% of programs which have the highest priority). You can see which programs fall into which Quartile on page 5 of the budget book.

A number of changes are proposed on both the revenue and expense side of the budget.

$11.6 million in new revenue is anticipated. This includes a 1% increase in the tax base (not an increase to taxes for existing properties but an increase in property value through development or redevelopment) and a 12% decrease in user fees and sales due to COVID-19. It also includes operating grants. However, my understanding is that most of these aren’t new grants: they are grants that we have always received, but didn’t put in the budget due to them being “flow through” funding to other organisations. They are being added to the budget now for increased transparency.

You can see the changes here (with explanatory notes on page 8 of the budget book):

There is also a proposed increase of $13.5 million in Expenditures. Most notable is an increase in “Services,” which is mostly due to our RCMP contract costs being increased significantly.

You can see the changes here (with explanatory notes on page 9 of the budget book):

The proposed new expenditures are $1.9 million higher than the new revenues. This is where the proposed 1.55% tax increase comes from: it would cover this amount.

As we dive deeper into the budget, it is broken into an Operating and a Capital budget.

Here is how the Operating Budget is funded:

And here is where the Operating money goes:

On the Capital side, here is where the money comes from:

And here is where the Capital budget goes:

These budgets are broken down in detail throughout the budget book.

Finally, the budget book also includes a number of proposed changes to the Fees & Charges Bylaw. These can be found starting on page 84.

Big questions for council

This will be our new Council’s first budget deliberations. Since I’m still getting to know my new colleagues, it is hard to predict where we will spend most of our time.

However, there are some potential additions and subtractions from the capital budget that I expect will get lots of conversation.

Administration has highlighted $740,800 of money in the capital budget that can be removed with minimal impacts to the organisation (page 82 of the budget book). Removing all of these would allow the tax increase to be lowered to 0.98% in 2022. However, this would only be a one-time saving. This would necessitate Council making additional cuts or supporting a higher tax increase in 2023 than it will have to make if it keeps this $740,800 in the 2022 budget.

There are also a number of potential additions to the capital budget. These include $1,000,000 to go towards redeveloping the Leisure Centre and Composite High School sites, $200,000 to go towards COVID recovery business grants, and $75,000 to build a redevelopment strategy for Richmond Industrial Park.

I don’t expect there to be as much conversation on the Operational Budget. On the operating side, changes are a lot more complex with more risk of changing them on the fly. They aren’t often made during the two days of budget deliberations. Instead, they are driven by other work Council does throughout the year. Early in the New Year, Council will be making a Strategic Plan. This will have big impacts on the City, and could lead to significant operating changes starting in 2023.

my approach

I’m going into budget deliberations with an open mind and a lot of questions. I’m looking forward to the presentations and debate: they’ll inform how I vote on particular items. However, a few general thoughts on the budget:

Inflation is a reality. Over the last four years, Council has reduced an average residential tax bill by 1%. It has done this despite inflation, adding services, dealing with massively increased RCMP costs, and absorbing big provincial cuts. We should continue striving for efficiency, but are also at a point where inflation can’t continue to be absorbed without consequence and where expenses can’t be cut without big service impacts. We have work to do in terms of reviewing levels of service and expanding non-tax revenues. But since that work is still ahead of us, something needs to give on the revenue side of our budget. Going into 2022, I’m comfortable with a tax increase that matches the level of inflation.
Incremental changes are better than occasional big changes. Taxes should be predictable. Small changes every year are preferable to big changes every few years. I don’t favour strategies that will reduce taxes this year by leading to larger increases in further years. Any efforts to reduce our taxes should be ones that have recurring benefits. This means that taking one-off projects out of the Capital Budget should not be viewed as a way to reduce taxes. This reduces the Capital Tax this year, but also means that a larger increase will be needed in the following years to make up for the lost revenue. If Council removes items from the Capital Budget, it should still collect the Capital Tax allocated to them. However, it could be re-directed to roads or other pieces of infrastructure that have a maintenance deficit.
We should be focused on revenue generation. Grande Prairie has lower per capita expenses than many other municipalities. This is despite being in the north, having lots of heavy traffic on our roads, and acting as a regional service centre. There isn’t a lot of room in our budget to reduce expenses unless we are willing to have much lower levels of service than other municipalities. However, we also collect a much bigger proportion of our revenue from taxes than other municipalities do. We should be working to lower taxes, but most of the opportunity for that is through new revenue. This needs to be a priority heading into next year.

Thanks for reading this information and my take on our budget!

Again, I would encourage you to skim over the Budget Book for yourself. You can find it here.

As always, I welcome any thoughts or questions you might have.

Thanks again!

-Dylan

Coming Up: Budget Deliberations