RMA’s newly-released report explains the important role that financial reserves play in long-term planning and decision-making for municipalities across Alberta
Nisku, AB, November 14, 2019 – The Rural Municipalities of Alberta (RMA) has released a report providing an overview of municipal financial reserves, including how they are used by municipalities across Alberta, their role in supporting effective municipal planning and efficient use of municipal tax dollars, and financial reserve case studies based on actual municipalities. The report, titled Understanding Municipal Financial Reserves, is intended to inform the public, stakeholders and decision-makers as to the importance of financial reserves and their effectiveness as an alternative to other means of financing large municipal capital projects, such as debt financing.
“Financial reserves have been an important aspect of municipal planning in Alberta for many years, and as our report demonstrates, are only becoming more widely used,” said Al Kemmere, President of the Rural Municipalities of Alberta. “I would encourage anyone under the impression that financial reserves are an indication of municipal wealth to read the report, as it clearly demonstrates that nearly all municipalities use reserves, and many save for many years to support major capital projects such as a bridge replacement or wastewater treatment facility.”
Financial reserves can be compared to a “savings account” for municipalities. A municipality will direct a small portion of their annual revenues to various reserves each year, which are usually “restricted” for specific purposes, such as large capital projects or for ongoing management of municipal infrastructure such as roads and water systems. Reserves can also be “unrestricted” and used as a contingency in the event of an unforeseen expense. As of 2018, 90.3% of rural municipalities’ financial reserves were “restricted,” a figure which has steadily increased each year since 2014.
Not only do financial reserves support long-range planning, they also help prepare municipalities to weather unexpected financial challenges and economic ups and downs. Without reserves, municipalities may be forced to increase taxes or reduce service levels to address reductions in taxes, grants or other sources of revenue.
“For municipalities to be engaged in the conversation around Alberta’s financial challenges, it is crucial that other stakeholders and decision-makers have a full understanding of the financial planning tools that municipalities currently use,” Kemmere stated. “Financial reserves are widely used by both urban and rural municipalities, and without them, municipalities would face the cost of borrowing, rely strictly on grants, or forego many major projects and ultimately reduce service levels for residents.”
Rural Municipalities of Alberta (RMA) is an independent association comprising Alberta’s 69 counties and municipal districts. Since 1909, we have helped rural municipalities achieve strong, effective local government. RMA provides Advocacy and Business Services (including RMA Trade, RMA Fuel and RMA Insurance).
MNP releases survey on innovation and local governments across Western Canada
MNP partnered with provincial associations from British Columbia, Alberta, and Saskatchewan to find out what is driving change in Canadian communities and how local governments are adapting. In January and February 2019, MNP surveyed local governments, including RMA members, to understand their perspectives and insights on innovation: what prompts it, barriers to innovation, and how they are deploying new solutions to best serve their communities. The results provide a candid view of challenges, demands, and opportunities local governments are facing.
RMA has not yet had an opportunity to analyze the entirety of each bill but has identified several significant changes within the bills that will impact municipalities.
Introduction of the Local Government Fiscal Framework Act
Bill 20 introduces the Local Government Fiscal Framework Act (see page 86 of the bill), which establishes part of the mechanism for post-Municipal Sustainability Initiative (MSI) funding for both Edmonton and Calgary as well as all other municipalities in the province. The act empowers the minister to enter into funding agreements and establish funding formulas for all local governments, or for different classes of local governments.
The act also establishes the overall funding amount available to municipalities remaining under the current MSI ($2,500,973,000), as well as the baseline amounts that Edmonton/Calgary ($455,000,000) and all other municipalities ($405,000,000) will receive in 2022-23 under the new Local Government Fiscal Framework.
The act also establishes formulas related to how annual funding amounts will be determined each year for both Edmonton, Calgary, and other municipalities above the baseline amounts, with both being based on 50% of the growth in provincial revenue three years prior to the current year. This is presumably intended to allow for certainty as to the extent to which the funding amount will change each year.
The act includes a specific formula for how funding will be allocated between Edmonton and Calgary, which is very similar to the formula currently used for the allocation of MSI. The Edmonton / Calgary formula is based on a combination of population (48%), education property tax requisitions (48%), and kilometres of roads (4%). All are based on figures from three years prior to the current funding year.
It is important to note that the act does not include an allocation formula for all other municipalities. The act allows the minister to develop funding formulas for individual or classes of municipalities. This suggests that an allocation formula will likely be developed in the near future. RMA plans to advocate for involvement in the development of the allocation formula to ensure it meets the needs of rural municipalities.
Changes to the Police Act
Bill 21 makes several amendments to the Police Act related to the police cost model review (see page 45 of the bill). Most significantly, the changes insert language into the Police Act that allows the minister to establish regulations requiring municipalities that currently receive policing under the Provincial Police Services Agreement to “pay a cost for these services.” The act is also amended to specify that the minister may develop a regulation specifying the terms and conditions of the cost to be paid by municipalities.
It is important to note that the changes to the Police Actdo not equate to any change in the current model at this time. These changes are to enable the minister to impose costs upon municipalities should they choose to in the future. The changes to the act also do not reference any specific costing model or costing portion to be covered by municipalities, as this would be established through a regulation.
Changes to Alberta Heath Care Insurance Act
Bill 21 adds an additional section to the Alberta Health Care Insurance Act to provide the minister with greater control over physician resource planning (see page 5 of the bill). For rural municipalities, the most relevant section of the proposed addition relates to the ability of the minister to limit the number of practitioner identification numbers that may be issued based on geographic area of the province, practice type or specialty, or any other category prescribed by regulation. This would potentially allow the minister to restrict physicians from practicing in areas of the province that are adequately- or over-served, and instead direct them to under-served areas.
At this point, RMA has not had an opportunity to conduct an in-depth analysis of the entirety of both bills but will share additional information and analysis with members as it becomes available. Other notable changes made under Bill 20 and Bill 21 include:
The City Charters Fiscal Framework Act is repealed
Changes to public sector bargaining and job action rights
Removal of tuition cap, with a limit of 7% tuition increases per year for the next three years
Elimination of the Environmental Protection and Enhancement Fund
On Tuesday, November 5, the Regional Commissioner for the Canadian Radio-television and Telecommunications Commission (CRTC) is coming to Southern Alberta to connect with stakeholders. The event features a roundtable discussion on matters that fall within the CRTC’s mandate. If you or an organization or business that you know is impacted by broadband and connectivity issues, telecommunications, internet, or any other areas that fall within the CRTC’s mandate, you are encouraged to attend.
This is a free event that will be held at Lethbridge City Hall, in the Culver City Room, starting at 3:00 pm.
Feedback is being accepted through written comments and an online survey
The Government of Alberta has announced the review of the Tobacco and Smoking Reduction Act (TSRA), to consider ways to prevent and reduce the harms associated with the use of tobacco, vaping and tobacco-like products. The TSRA establishes measures to prevent and reduce tobacco use and to protect individuals from the harms of tobacco and second-hand smoke.
RMA’s resolution deadline for the Fall 2019 Convention was Friday, October 18, 2019. Any resolutions being brought forward after this date will be considered emergent.
As per RMA’s resolution process policy, an emergent resolutionis defined as a resolution submitted to RMAafter the resolution deadline that deals with a subject or problem that has arisen subsequent to the resolution deadline. The RMA Resolutions Committee will meet prior to the resolutions session at the fall convention to review any resolutions submitted after the resolutions deadline to determine if they meet the definition of emergent.
If the resolution is deemed to be emergent, it will come to the convention floor through the appropriate process. Sponsoring municipalities will be notified by the committee as to the committee’s decision if the resolution is emergent in nature. The member bringing forward the emergent resolution must, at their own expense, provide copies for voting members in attendance (minimum 600). Members submitting an emergent resolution are encouraged to bring 600 copies of their resolution to convention for distribution in the event that the resolutions committee deems the resolution to meet the definition of emergent. The RMA is not responsible for copying or distributing emergent resolutions on behalf of sponsoring municipalities.
Any members who intend to bring forward an emergent resolution for consideration are encouraged to advise a member of the RMA Resolutions Committee or RMA Senior Policy Advisor Wyatt Skovron at wyatt@RMAlberta.com as soon as possible.