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Cities' push for new taxes divorced from reality

Author: Franco Terrazzano 01/10/2020

We hear councillors offer nice platitudes about understanding the hardships Albertans are going through, but actions speak louder than words. And the recent push for new tax powers shows that big city councillors and mayors are divorced from the reality facing Alberta.

In June, Red Deer council voted unanimously to back an Edmonton resolution calling for their municipal lobby group to push Premier Jason Kenney for new “measures and tools” so cities can continue to fund their bloated budgets. That resolution passed on Sept. 24.

For anyone who doesn’t speak bureaucratic jargon, these “measures and tools” mean new tax powers. Councillors want Kenney to make it easier for them to put their grubby paws on our paycheques.

For some specific examples of what new “measures and tools” could be, taxpayers need to look no further than a recent city of Calgary report that looked into a whole swath of new taxes, including a municipal income tax, a fuel tax, an entertainment and amusement tax and a tax for home-based small businesses.

Kenney’s previous municipal affairs minister Kaycee Madu was quick to shut down the idea of new tax powers for municipalities.

“I am looking to prevent all councils in our province from taxing people more,” said Madu.

Now taxpayers need Kenney’s new Municipal Affairs Minister Tracy Allard to reject calls for new tax powers and force cities to cut the ample fat.

“In 2017/18, Alberta’s municipal per capita expenses were the second highest among provinces (behind Ontario where municipalities also deliver a range of social services),” explained the Blue Ribbon Panel on Alberta’s finances. “Municipalities have experienced significant revenue growth of 48 per cent per person [between 2007 and 2017].”

Red Deer and Edmonton, who sponsored the resolution for new tax powers, are both big spending cities.

At $3,544 annually, Red Deer’s per person spending is higher than the average in Alberta’s big cities, according to provincial government data published in the Canadian Taxpayers Federation’s 2020 Municipal Spending Report. With Alberta’s municipalities being the second highest spenders in Canada, Red Deer is one of the biggest of the big spenders.

Edmonton doesn’t fare much better when it comes to overspending. If the city brought its per person spending in line with other major Western Canadian cities such as Vancouver, Saskatoon, Regina and Winnipeg, its taxpayers would save $566 million every year.

Alberta’s cities need to tackle the cost elephant in the room: labour.

Since the initial oil price collapse in 2014, many Albertans outside of government have lost their jobs or have taken pay cuts. In fact, total compensation paid to all Alberta employees is lower now than it was five years ago. Throughout the downturn, however, it has largely been smooth sailing for government employees.

The city of Red Deer deserves credit for its tough decision to reduce its workforce by five per cent after labour costs increased by 15 per cent between 2014 and 2018. With about 40 per cent of the city’s spending going towards labour, meaningful cuts are necessary to reduce taxes.

Edmonton’s labour costs ballooned by 18 per cent between 2014 and 2018, with the number of middle management bureaucrats at the city increasing by more than 20 per cent since 2017.

The one saving grace for taxpayers is that a separate resolution pushing for a municipal sales tax, put forward by Lethbridge and Brooks, was defeated handily. Turns out even Alberta’s big spending big city councillors know that a sales tax is a bad idea.

For our economy to fully recover councillors and mayors will need to start playing ball and reduce costs.

“When I speak to major business leaders about prospective investment in Alberta, very often a message that I hear back is the greatest impediments they’ve experienced are at the local level, at the municipal level,” Kenney told Alberta’s big cities.

Step number one for councillors and mayors must be to stop looking for new ways to siphon off more money from taxpayers and instead cut spending.

This column was originally published in the Red Deer Advocate on October 1, 2020.