More tax increases in city's future
| Posted: Saturday, Feb 16, 2013 06:00 am
It is becoming increasingly clear that a decline in the rate of increase in taxes in St. Albert is unlikely in the short or medium-term future, a sobering thought with municipal elections eight months away.
Two items of note this week reinforced that particular forecast for St. Albert residents. Specifically as it pertains to property taxes, Mayor Nolan Crouse made his feelings apparent during his State of the City address at Wednesday’s Chamber of Commerce lunch. He told the hundreds of people gathered at The Enjoy Centre that the increases of three and four per cent the last few years will likely remain the norm going forward.
“I don’t see that changing much to be frank. We have no indication you can freeze taxes. We will likely have to raise them in some modest way,” Crouse said.
The second event this week was the presentation Monday of a report on how St. Albert should pay for new utility infrastructure. The city’s present model – the 100-year utility model – estimates costs for future capital utility expenditures over the next 100 years, charges users for those future costs in today’s utility rates and banks the money in reserves. As a result, the city doesn't use debt for capital utility costs. The problem is the city isn’t saving enough for all its future projects.
Case in point – the city needs $65 million for three projects beginning in 2020. But even if the city collected and banked $8.5 million – the current annual total – for the next seven years through its utility rates, it would still come up short. Utility bills, according to the report, could jump as much as 20 per cent annually. Consider that utility rates climbed 6.5 per cent this year after climbing 9.5 per cent in 2011 and 2012. Monday’s report suggests using debt to pay for projects, but the chances of approving such a change before October’s election are minimal, meaning utility rates will continue to increase.
And there might be more costs in the future. Crouse, while answering a question about the employment lands, said the city might have to get into the business of paying for the cost of extending infrastructure out to St. Albert’s new 617 acres of light industrial land. That cost has been estimated by some to reach $10 million, a large chunk of money for a suburban city with a predominantly residential tax base. The city can recoup the money through off-site levies, but if it continues with its debt-averse philosophy, the up-front money to start construction is going to have to come from residents’ pocketbooks.
The theory goes that once industry starts setting up shop, less of the money the city needs for operations will come from residential properties. But it will take years of significant, consistent development for non-residential development to have any tangible effect on property taxes. And the increased demand on city services in infrastructure, transit and other core services, makes it unlikely residents will get any kind of significant break in the future.
How the city proceeds will fall to residents in October in the next municipal election. High taxes always come up as an important topic in local politics, but how much do they really matter to average St. Albertans? Are we prepared to shelve our aversion to debt and reconsider borrowing to finance large capital infrastructure costs? We’ll have to wait until the fall to find out.