Limiting Third-party Services in ICF Agreements

In 2024, the Government of Alberta undertook engagement on possible ICF changes. This includes broad municipal engagement as well as more targeted discussions with RMA and AB Munis. Included among RMA’s formal recommendations related to ICFs were the following that are relevant to this resolution:

Recommendation 3: Clarify that third-party services cannot be addressed through ICFs.

It is completely reasonable for municipalities to collaborate with one another and non-municipal entities to deliver certain types of services. This is by no means a new practice and reflects the importance of the non-profit sector in delivering many community services, especially in rural areas.

Despite this, ICFs are not an appropriate tool to facilitate third-party service agreements. By their very nature, ICFs are a formal agreement that municipalities are required to complete with one another. Including third parties in ICF negotiations adds complexity to the process and leads to legitimate questions as to the appropriate scope and level of involvement of the third party. Are they a signatory to the agreement? Should they have a say in how other services are negotiated if it impacts the level of support available for their service? Should third parties have a right to demand involvement in an ICF process if they believe they provide a service benefitting multiple municipalities? These questions demonstrate the potential complexity and unintended consequences of including third-party services into the ICF process.

Clarifying that third-party services should be addressed outside the ICF process will make life easier for both municipalities and non-profits. Amending the legislation to specifically clarify this will eliminate the current ambiguity on this issue and ensure that ICF renegotiations are not derailed by third-party service debates and can focus on direct municipal services.

Recommendation 5: Require ICFs to include agreement on both cost-sharing and joint input into service levels, service delivery mechanism, etc. for each service included within the ICF.

ICFs focus primarily on how and to what level services are provided across municipal boundaries, and how costs for delivering the service is divided. What is absent in the ICF development processes is a requirement to consider if and how decision-making related to shared services should be determined. In many cases, both municipal partners are comfortable leaving decision-making around how a particular service is delivered to the municipality that already provides it, with the other municipality simply providing a set monetary contribution to recognize the fact that its residents access the service. However, in some cases reported by RMA members, the contributing municipality was uncomfortable with how a particular service was being delivered and the associated costs in delivering it. This often occurred in cases in which services brought forward during an ICF negotiation were not previously recognized as “intermunicipal” and lacked an existing service sharing agreement or even informal discussions.

From the perspective of rural municipalities, which in most cases are responsible for contributing to services delivered by urban municipalities but accessed to some extent by rural residents, it is problematic to expect contributions without any consideration of a corresponding portion of input into service level determination and service delivery mechanisms. Some examples of this issue include rural contributions to urban-delivered recreation services, after which the urban municipality increased user fees for rural residents without consulting with the rural municipality. In this case, the rural municipality viewed the urban municipality as “double-dipping” by using an intermunicipal tool to gather contributions directly from the rural municipality and using local decision-making to further increase their revenues directly from rural residents. If the rural municipality is contributing to the service at a level proportionate to its residents’ usage levels, they should expect to have input into the service at a similar proportion, and at the very least an assurance that its residents will have equitable access. Under the current structure there is no requirement that municipalities even discuss decision-making collaboration, which places the contributing municipality at great risk in comparison to the municipality responsible for delivering the service.

In spring 2025, the GOA passed the Municipal Affairs Statutes Amendment Act (Bill 50). Bill 50 completely restructured the ICF process as described in the Municipal Government Act (MGA). The amendments to the MGA were significant. They include a defined scope of core municipal services that must be included in an ICF, stricter rules around inclusion of other municipal services that may be included, and new data sharing and good faith negotiation requirements into the development of ICFs.

There are now five mandatory services that must be included in ICFs: transportation, water and wastewater, solid waste, emergency services, and recreation. If a service does not fall under one of these categories, parties may unilaterally revoke consent to include the specified service in the ICF. Where parties cannot agree on the delivery of one or some of the mandatory services, municipalities will now be required to go to binding arbitration.

“Third-party services” are defined by Bill 50 for the purpose of an ICF. A “third-party service” is one for which a third-party is legislatively required to provide the service in question. It is RMA’s understanding that this would apply to libraries, policing, post offices, and other services for which there is legislation that oversees and manages the delivery of the service.

While there is no mandate on municipalities to establish a cost calculation model, Bill 50 signals an expectation that municipalities collaborate when developing a method for measuring costs as part of the ICF process. There are no defined requirements for this cost-calculation model; however, parties must share their data and assumptions made in forming the cost calculation model between the parties. Parties must also agree on the roles and responsibilities that each party undertakes. Failure to agree on a cost-calculation model will result in binding arbitration.

Bill 50 also introduces the ability for municipalities to decline contributions to new capital projects undertaken a neighbouring municipality (even those linked to a mandatory service) unless the contributing municipality has “participated in the design of and decision to construct the facility.”

As the requirements related to third-party services was adopted and appropriate limits to municipal funding demands under the resolution have been adopted, RMA assigns a status of Accepted. RMA plans to continue to advocate for enhanced funding and capacity-building support from the province in fulfillment of the creation of ICFs.