+ RMA Rural Municipalities
of Alberta

Resolution 1-22S

A More Equitable Funding Model for Municipalities (defeated)

MD of Smoky River
4 - Northern
Municipal Governance and Finances
Vote Results:

WHEREAS municipalities benefit from long-term and stable financial commitments from the Government of Alberta; and

WHEREAS municipal costs have increased recently due to a higher demand for services, inflation, COVID-19 and increased downloading of service requirements by the provincial and federal governments; and

WHEREAS municipal revenues have decreased recently due to a widespread energy sector crisis (both lower activity and  energy sector non-payment of taxes) as well as decreased funding from the provincial and federal governments to municipalities; and

WHEREAS some municipalities are able to adapt to increased costs and lower revenues due to high assessment levels and limited infrastructure responsibilities; and

WHEREAS in 2001 the RMA Advisory Committee on Targeted Investment released its report recommending a funding model known as the Targeted Investment Program (TIP) which was based on need; and

WHEREAS funding through TIP was later replaced by the Municipal Sustainability Initiative (MSI); and

WHEREAS although MSI was intended to ensure municipalities remained sustainable, allocation of MSI funding relies on a formula based primarily on a municipality’s assessment and did not consider a municipality’s infrastructure costs; and

WHEREAS the MSI formula does not equitably distribute provincial funding based on need; and

WHEREAS municipalities that receive disproportionately lower funding for infrastructure and economic ventures have higher mill rates, which places their residents at a financial disadvantage while also reducing the likelihood of attracting industry; and

WHEREAS this inequity places an increased burden on the Government of Alberta and neighboring municipalities; and

WHEREAS the Local Government Fiscal Framework Act (LGFF) which is anticipated to take effect in 2024 or 2025 to replace MSI funding is expected to help address the disparity with a funding formula that takes into consideration both assessment and the kilometres of roads being maintained by a municipality; and

WHEREAS many of the rural municipalities in Alberta are desperately in need of a revised, more equitable funding formula and require immediate funding interventions prior to the anticipated LGFF introduction in 2024 or 2025; and

WHEREAS allocating funding more equitably does not increase the financial burden on the Government of Alberta, but would significantly improve the financial sustainability of the majority of rural municipalities;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta request the Government of Alberta to introduce the Local Government Fiscal Framework starting in 2023, using an allocation formula based on equalized assessment per kilometer of open road maintained by the municipality.

Member Background:

Municipalities rely on provincial revenue sharing to help with the maintenance of their infrastructure and improve their financial sustainability. In 2001, the RMA Advisory Committee released a report that addressed the fiscal inequalities of rural municipalities by recommending a funding model, the Targeted Investment Program (TIP) which was based on need. In that report, RMA identified municipalities with limited revenue by recognizing two main factors:

  1. Revenue generation capabilities are limited by the size of the local assessment base in comparison to the local population and the local road network; and
  2. Local ratepayers pay a higher than average tax rate in order to support the cost of municipal services.

The same factors are more prevalent in today’s economic environment due to a dwindling energy sector, unpaid taxes by an energy sector which is only now recovering, reduced provincial and federal funding with increased downloading of service requirements from the provincial and federal governments on municipalities, as well as the strain caused by the COVID-19 pandemic. The TIP model was replaced by the Municipal Sustainability Initiative (MSI), which provided municipalities some ability to address their infrastructure priorities. The Strategic Transportation Infrastructure Program (STIP) also allowed municipalities to address certain basic responsibilities to maintain airports, bridges and road development.

The Local Government Fiscal Framework Act, SA 2019, c. L-21-5 stands to provide another new framework for infrastructure funding. Given the mounting losses of oil and gas revenues, unpaid taxes, and arrears from energy companies, not to mention the burden municipalities have taken on from towns and villages dissolving into hamlets, the financial challenges are staggering.

These challenges necessitate a rollback to the older approach to municipal funding first suggested in 2001.

Implementing the Local Government Fiscal Framework funding formula that allocates funding based on equalized assessment per kilometre of open road maintained by municipalities would offer more funding for struggling municipalities.

In light of the ongoing challenges that “in need” municipalities face, the district supports an allocation in line with the 2001 recommended report.

Supporting Documentation

  • Funding model attachment (for LGFF) based on 2020 Assessment figures and including a minimum funding level per municipality of $1,852,048.27
RMA Background:

RMA Background

RMA has no active resolutions directly related to this issue.

Provincial Ministries:
Municipal Affairs
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