St. Albert is considering using one-time money to bring down impending tax increases, though one councillor says it could bring better benefits if invested in long-term initiatives.
St. Albert’s stabilization reserve — which is used for unanticipated, one-time events — reached low levels in 2021, but was later restored in February by an annual surplus. Now, the reserve has reached $8.3 million in uncommitted funding levels due to a $3.9-million municipal operating support transfer (MOST) funding received from the province to help shoulder the cost of COVID impacts.
City administration is recommending using the MOST funds over the next two to three years to offset the tax rate. Administration is currently working to bring the 2023 tax increase down from a projected 8.2 per cent, and high increases are also anticipated for 2024 and 2025.
“It’s the proverbial rainy day fund, and it’s definitely raining,” said Diane McMordie, the city’s director of finance.
The reserve has been used by council in recent years for expenses such as paying Edmonton Global fees ($65,000); a review of the city’s municipal naming policy ($325,000); a library internal audit ($100,000); a top-off to fund the non-profit Stop Abuse in Families (SAIF); and for a currently unnamed infrastructure investment (council gave an "infrastructure investment" $300,000 in 2021, and $300,000 in 2022).
Council discussed using the stabilization reserve funding and other options to decrease the 2023 tax levy during an Aug. 16 meeting.
Using some of the funding can buy the city “some time to properly assess options for services/service levels to ensure that we are making the best-informed decisions,” an administrative backgrounder included with the meeting said.
However, the funds within the reserve might be needed to support the assessment of service levels. For this reason, administration is only recommending council use the MOST funding to address the tax levy, and leave the remainder of the funds intact.
Funds for investment
Coun. Sheena Hughes said during the Aug. 16 discussion the MOST funding should be looked at for infrastructure investment.
Hughes noted that the city has already applied provincial COVID funding to the tax base in the past, for example in 2021 the city used $2.5 million in one-time COVID-relief funding to offset the tax levy.
“We just keep kicking this can down the road, and it’s going to come back to bite us,” Hughes said. “I’d rather put [MOST funding] towards getting something that’s going to give us actual results as opposed to just delaying the pain.
“We need to be looking at the larger picture here and not just the short term.”
McMordie said in an interview it is certainly within council’s purview to use the reserve as they wish, though noted policy outlines what the reserve is for: unanticipated, one-off events, and helping the city navigate difficult economic cycles.
“We were honestly quite fortunate to get that money from the province,” McMordie said, noting St. Albert took swift action when the COVID pandemic began in 2020 to manage the city’s deficit to the point where it became a surplus.
McMordie said other communities were unable to achieve that level of management, and subsequently spent their MOST funding, whereas St. Albert was able to apply it towards later years.
Disaster relief
During a March 21 council meeting, Trevor Duley, St. Albert’s manager of government relations, informed council of a disaster-recovery cost the province announced would become a municipal expense as part of its 2021 budget.
While in previous years, the province would foot the bill for natural disasters, 10 per cent of those costs will now be the responsibility of municipalities.
McMordie said the city is currently in the process of conducting a general review of its reserves, and specifically the stabilization reserve, to plan for how to manage a potential future disaster.
Currently, St. Albert’s stabilization reserve has a maximum balance rather than a minimum. McMordie said the review will look at best practice for how much the reserve should carry, and whether it should be funded through alternative means — currently, the reserve is only funded through annual surpluses.
McMordie said continuing to become leaner — as the city is in the process of doing to mitigate future tax increases — might have consequences for the stabilization reserve.
“As we get leaner and tighter, our chances of surpluses are going down, or they’re likely going to be smaller in the future,” McMordie said. "This means that we’re limiting our ability to replenish that fund, which is concerning."
When asked in an email to elaborate on why this is the case, McMordie said the city has reduced the tools at its disposable to deal with unanticipated events as it has tightened its budget in past years.
“We have also stretched our non-tax revenue budgets for things such as planning and development fees and anticipated fine revenues,” McMordie said.
“With reduced expense budgets and increased non-tax revenue targets, we are at greater risk for lower than historical surpluses.”
