There has been much discussion surrounding St. Albert city council’s decision to remove municipal sustainability initiative (MSI) grants from subsidizing utilities of the city. While this is a very controversial issue, I thought that I would take the time to cut through the rhetoric and examine the issue at its core.
MSI is a province-wide per capita grant that was instituted to provide municipalities with sustainable funding for capital projects. Such projects include, but are not limited to roads, bridges, transit, emergency services, recreation and sports facilities, libraries, public works and community and culture centres. Prior to October 2014, St. Albert allocated 70 per cent of its MSI funds to municipal projects and 30 per cent of the MSI funds to utility capital projects. In October, city council voted to phase out the 30 per cent allocation to utilities and direct 100 per cent into municipal projects.
At the heart of this issue is the reality that St. Albert has had a significantly underfunded utility capital program for decades. Previous councils made the easy decisions to keep utility rates falsely low by ignoring a growing capital deficit as opposed to addressing the problem and providing long term stable funding to ensure the sins of our past are not forced upon the future. In St. Albert we have had significant (10 per cent plus) utility rate hikes year over year for the past several years. Even with those increases we are still “average” in utility rates for the capital region and well below Edmonton’s utility rates. That, in and of itself, should be an indication of how underfunded our utilities are.
Utilities are a commodity and the infrastructure designed to deliver these commodities should be paid for by the rate payers. By using MSI funds to decrease the capital requirements, we are taking money away from other needs like roads, libraries and fire stations and using said funds to offset utility rates. We do not have mechanisms in place to fund fire halls by charging by the fire, we do not toll roads in St. Albert, we do not toll walking paths in St. Albert. There is no mechanism for these infrastructure costs to be recovered aside from property taxes. When we use MSI to fund utilities, we put an extra burden on the municipal property tax to fund this deficit.
Now, while some members of council will tout this move as a shift toward an independent utility program, council has failed to remove the public art levy on utility capital projects. If you truly want an independent self-funded utility program, you need to remove the levies associated with municipal operation. I would encourage council to consider removing this levy to further move utilities toward independence.
Other members of council declare that MSI was set up for utility projects and that the majority of municipalities in Alberta use MSI for utility capital projects. Well, I decided to do some research and check for myself.
In 2013, 88 municipalities utilized MSI grants for a total of 151 utility projects. There are 357 current municipalities in Alberta, therefore; only 24.6 per cent of all municipalities use MSI grants for utilities. Further to that, there were a total of 1031 MSI projects in 2013 of which 151 were utility projects. Again, this points out that only 14.7 per cent of all projects for MSI are utilities based. The total dollar value of all MSI projects for 2013 was $583,065,292 with $55,274,368 or 9.48 per cent being used for utilities. These facts highlight to me that use of MSI to subsidize utilities is really an exception not the norm.
Also important to note is that of the 88 municipalities that used MSI for utility projects, 40 of them had a population of less than 1,000. St. Albert and Calgary were the only cities that used MSI for utilities and only six municipalities (including St. Albert and Calgary) had a population of greater than 10,000. This indicates that cites of size are not relying on MSI for subsidization of utilities. It is smaller communities with small populations where the per capita project assessment would be unaffordable.
MSI is a zero sum game. Any dollar used on utilities is taken from municipal funding and de facto not available for roads, bridges, fire halls, etc.
All that being said, the policy moved by city council and the utility rate models certainly has its flaws and pitfalls. For example, using a fixed capital contribution rate like we have is regressive and punitive. Logically, the more usage one has, the more demand and stress placed on the system. I would strongly encourage city council to link capital contributions to usage so everyone pays their fair share. Currently, any multifamily dwellings are assessed as a single utility account holder. That means that a 50-unit complex is assessed the $9 a month just like a single-family home. That needs to change to better reflect a balanced approach.
Finally, while I am not enjoying the new higher utility rates in St. Albert, I can tell you I take comfort knowing that the utilities are now being properly funded and increases in rates should be relatively stable and benign on a go forward basis. We can rest assured that if/when MSI grants are discontinued by the province (which they can be at any time) our stable funding model will protect us from the whims of the provincial government.
Dana Popadynetz, St. Albert
