+ RMA Rural Municipalities
of Alberta

Resolution 16-20F

Federal and Provincial Disaster Support

Date:
November 1, 2020
Expiry Date:
December 1, 2023
Active Status:
Active
Sponsors:
RM of Wood Buffalo
District:
4 - Northern
Year:
2020
Convention:
Fall
Category:
Planning and Development
Status:
Sent to Government
Vote Results:
Carried
Preamble:

WHEREAS the Government of Canada maintains a disaster recovery assistance program known as the Disaster Funding Assistance Arrangements (DFAA); and

WHEREAS the DFAA reimburses provinces, including the Government of Alberta, for recovery costs incurred from a natural disaster; and

WHEREAS the Government of Alberta maintains the Disaster Recovery Program (DRP), to which the DFAA contributes funding; and

WHEREAS natural disasters have recently increased in both frequency and severity, resulting in rising recovery costs such that according to a 2016 Government of Canada report entitled Estimate of the Average Annual Cost for DFAA Due to Weather Events, Alberta is the highest overall recipient of DFAA funding, having received $2.3 billion between 1970 and 2014; and

WHEREAS the Government of Canada and Government of Alberta have signaled their intention to modify disaster support such that DRP assistance may not be available in its current form to Alberta municipalities going forward;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta advocate to the Government of Alberta for continued Disaster Recovery Program funding to support community reslience and enable the relocation of affected property owners where re-construction is impractical or inadvisable.

Member Background:

2020 Spring Floods

In 2020, Alberta was once again facing the resulting effects from severe spring flooding.  Portions of Fort McMurray and the adjoining community of Draper were submerged under high flood waters that reached approximately the 1:100 flood level.  According to the Insurance Bureau of Canada, insurable damages in the Regional Municipality of Wood Buffalo (RMWB) have now exceeded $400 million as a result of this flooding event.

In 2020, other communities throughout Alberta were also impacted by flooding. In addition to the RMWB, the Government of Alberta has also extended Disaster Recovery Program (DRP) funding to Calgary, Airdrie, Rocky View County and Mackenzie County.

Federal Disaster Funding Assistance Arrangements (DFAA)

The Disaster Funding Assistance Arrangements (DFAA) is a federal program that assists provinces and territories with a portion of the costs of dealing with a disaster where those costs would otherwise place a significant burden on the provincial economy and would exceed what they might reasonably be expected to fully bear on their own.

The DFAA is intended to support the province in providing or reinstating the necessities of life to individuals, including help to repair and restore damaged homes; re-establishing or maintain the viability of small businesses and working farms; repairing, rebuilding, and restoring public works and the essential community services to their pre-disaster capabilities; and funding limited mitigation measures to reduce the future vulnerability of repaired or replaced infrastructure.

Provinces and territories are responsible to design, develop, and deliver disaster response and assistance programs within their own jurisdictions. This includes establishing the financial assistance criteria they consider appropriate for response and recovery.

As natural disasters are increasing in both frequency and severity, all levels of government are responding by altering their policies in a manner that may result in changes to and reductions in disaster relief program spending; thereby transferring more risk to the municipalities and people in flood hazard areas. In 2016, the Government of Canada authored a report analyzing the DFAA entitled Estimate of the Average Annual Cost for DFAA due to Weather Events. The report indicated that over the last 20 years, the annual cost[1] for DFAA for weather events has been steadily increasing.

Inflated to 2014 values using nominal gross domestic product (GDP), the average DFAA cost from 1970 to 1994 amounted to $54 million per year; between 1995 and 2004 this annual average cost had risen to $291 million, and between 2005 and 2014,[2] it reached $410 million per year. Given the substantial increase in DFAA event costs over the past 20 years, the Parliamentary Budget Officer (PBO) set out to determine if these high costs would increase further, stay the same or return to their previous levels.

The report noted that the DFAA does not cover expenses where “insurance coverage for a specific hazard for the individual, family, small business owner, or farmer was available in the area at reasonable cost.”[3]  At the time the report was published, individual (private property) overland flood insurance at a reasonable cost did not exist. Based on the availability and affordability of overland flood insurance, the Government of Canada has likely been highly relied upon for disaster funding. However, the report also noted that the program’s design does not incentivize active flood damage mitigation in many of the affected areas.

Between 1970 and 2014, Alberta received more than $2.3 billion from the DFAA, which exceeds that of any other province. This does not include DFAA funding that Alberta received for the 2016 Horse River Wildfire or the 2020 flooding that occurred throughout the province.

Currently, flooding is Canada’s most costly natural hazard and accounts for roughly three quarters of DFAA payments. However, residential losses account for only 5-15% of that total – a greater portion by far, perhaps as much as 70%, is spent on recovery of public infrastructure.[4] The PBO estimated that over the period 2017 to 2022, the DFAA program can expect claims of $673 million per year for floods. Recognizing this trend, the Government of Canada established an Advisory Council on Flooding in early 2018 with the purpose of advancing the national agenda on flood risk management.  This led to the creation of a public-private sector Working Group on the Financial Management of Flood Risk, co-chaired by Public Safety Canada and the Insurance Bureau of Canada.

Provincial Disaster Recovery Program

At the provincial level, disaster recovery is overseen by the Alberta Emergency Management Agency (AEMA) and funded through a mechanism known as the Disaster Recovery Program (DRP). The DRP is funded primarily through the DFAA. The DRP provides disaster recovery assistance to residents, small businesses, agriculture operators, and provincial and municipal governments when a disaster occurs that is considered:

  • extraordinary,
  • when the event is widespread, and
  • when insurance is not reasonably or readily available.

The Emergency Management Act defines a disaster as an event resulting in serious harm to safety, health or welfare of people or in widespread property damage. After a disaster, the affected municipality can apply for the DRP and if the municipal application is approved, affected residents can subsequently apply for financial assistance. According to the Alberta Disaster Assistance Guidelines, DRPs assist with:

  • providing or reinstating the basic essentials of life to individuals, including financial assistance to help repair and restore damaged homes;
  • re-establishing or maintaining the viability of small businesses and working farms; and
  • repairing, rebuilding and restoring public works and the essential community services specific in the Guidelines to their pre-disaster functional capabilities.

According to the Guidelines, the DFAA prescribes procedures that must be followed for the cost-sharing of DRP. The federal guidelines stipulate that only provinces and territories are eligible for disaster financial assistance. Federal assistance is available when Alberta’s eligible expenses incurred in carrying out its own programs are above $3.25 per capita of the provincial population.[5] Once the threshold is exceeded in any given event, the federal government will provide financial assistance in accordance with the following formula:

Eligible cost sharing of provincial expenses
after per capita threshold met
Government of Canada share
First $3.25 (per capita) 0%
Next $6.51 (per capita) 50%
Next $6.51 (per capita) 75%
Remainder 90%

Both the federal and provincial levels of government are looking at the severity and frequency of disasters and seeking to understand potential future recovery costs. Given the increasing costs highlighted above, there are indications that the province may be changing the format of the DRP, resulting in disaster recovery costs being redistributed to municipalities and property owners. As such, municipalities cannot assume that DRP funding will be available in its current form to cover future disasters.

Insurance Availability

A recent report from the National Working Group on Financial Risk of Flooding published in June 2019, Options for Managing Flood Costs of Canada’s Highest Risk Residential Properties, focused primarily on measures to transfer residential property risk from public sector disaster financial assistance programs, which are funded by the taxpayer, to private sector insurance solutions, which are primarily funded by the property owner. However, the report recognized that many homeowners, particularly those with low incomes, simply cannot afford the premiums that would be required to cover that risk.

The report advocates for a new approach to disaster-related insurance that is inclusive, efficient, and financially sustainable while providing optimal compensation to residential property owners and reducing reliance on ongoing taxpayer-funded subsidies. The optimal approach would be financially self-sufficient; create the conditions necessary for expansion of private market insurance coverage; elevate risk awareness; and incent de-risking efforts amongst Canadians.

It is unclear what approach the Government of Canada and insurance industry will adopt and the timeline for implementation.  What is clear is that the Government of Canada has given strong indications that it does not consider the current disaster relief framework financially sustainable in the long-term. In the interim, it is anticipated that insurance will continue to be difficult to obtain at reasonable rates for private property in flood hazard areas.

All municipalities in Alberta would be affected by the changes that the federal and provincial levels of government have signaled, in addition to concerns related to insurance availability and premiums.

[1] Cost refers to the sum of the payments due to all weather events that occurred in a particular year. The actual payments to provinces can occur several years after the actual event.

[2] Some of the values included in the 2005 to 2014 average are estimates since all costs and their eligibility for some events have not been determined.

[3] Public Safety Canada (2015d) p. 14.

[4]  Insurance Bureau of Canada (2019).  P.6.

[5]  Population figures are as estimated by Statistics Canada to exist on July 1st in the calendar year of the disaster. The per capita threshold is adjusted annually by Public Safety Canada for inflation on January 1st of every year, starting in 2016.

Provincial Ministries:
Municipal Affairs
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