Calgary councillor to pitch plan for municipal-provincial fiscal gap

In the face of an annual shortfall of hundreds of millions and even larger deficits, one Calgary city councillor is hoping to work with his government and the province to figure a way out of the fiscal quagmire.

On Thursday, Ward 14 Coun. Peter Demong released a notice of motion that would plot a way for the city to better address one-time funding and budget variances from sources like local access fees (LAF) and the annual Enmax dividend.

Demong also wants the municipal government to formally sit down with the minister of municipal affairs to address the annual shortfalls in provincial funding that he said are “downloading” more provincial responsibilities to municipalities.

“I’m looking at saying is there some way we can have a conversation? Is there some way we can open up these channels to talk about it?” Demong told reporters.

The Calgary councillor, who is one of two Calgary representatives on the Alberta Municipalities board of directors, said the new Local Government Fiscal Framework, which replaces the Municipal Sustainability Initiative to help fund capital projects, is $1 billion short in its allocation for all municipalities and doesn’t account for population growth and inflation.

Demong and other city officials said the city has experienced “persistent” cuts to capital and operating funds from the province, and faces an annual shortfall of $311 million.

The city’s coffers have also taken hits on two sides: supply and demand.

Downtown office towers that previously experienced a vacancy rate of just 5.6 per cent in 2012 saw an all-time high of 33 per cent in 2022. Until recently, those downtown properties were a significant part of the city’s tax base.

Calgary’s population has also grown by leaps and bounds recently.

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“How do we deal with the Calgary area bringing in the equivalent of a Medicine Hat population every year? As a city councillor, there’s a lot of pushes and pulls that are happening that I don’t think the province is actually completely understanding,” Demong said.

“How can we combine our powers between the province and the municipalities to better serve Albertans? If we’re in this together, let’s talk about getting a pathway together out of this.”

The notice of motion will go to the city’s executive committee less than two weeks after Finance Minister Nate Horner tabled the 2024 budget in the legislature.

Just over an hour after the budget was released, Calgary’s mayor said the new provincial plan is pulling 12 per cent more property taxes from the city than the year before. Jyoti Gondek said that ran counter to the province saying it would “entertain” allowing municipalities to keep more property taxes.

She said that left the city holding the bag.

“More and more of the services that Calgarians rely on are being punted down to us, instead of the province picking them up as they are responsible for. And if we don’t pick it up, how many Calgarians will be detrimentally affected?” Gondek said on Feb. 29.

Global News reached out to Minister of Municipal Affairs Ric McIver’s office for comment on the budget shortfalls, and this story will be updated when we receive a response.

To get a better picture of the city’s funding shortfall this year, Demong wants to get an updated estimate of the provincial funding gap since the province’s budget was published, as well as updates on the Enmax dividend and LAF funds collected in 2023.

He wants to account for how those were spent and see if there are lessons to be learned for the future.

“If such variances were to arrive again, we should probably have some kind of a plan policy going forward to deal with them in the most efficient and proper manner,” the Ward 14 councillor said.

Local access fees, which are part of electricity bills in Calgary, are tied to the price of electricity and not just usage. As electricity rates have gone up in recent years, so have LAF revenues. In 2022, LAF revenues were more than double the revenues from five years ago.

Ward 3 Coun. Jasmine Mian said it’s important for council to consider how it collects all sources of revenue.

“I know local access fees have been a big pain point for Calgarians – that we link it not just to consumption but to commodity prices. And so, moving away from that I think is an important step that council needs to take. It’s something people have asked for. And of course, what we plan to do with all revenue to ensure good value for Calgarians is an important thing,” she said.

Demong wouldn’t rule out ideas like reimbursing electricity bills for high LAF revenues, but noted there’s more to the city’s budget than what shows up on utility bills.

“When you’re dealing with one-time-only revenues (like LAFs), we have so many other competing priorities,” he said. “I’m sure that we can do something in some areas that may alleviate the property tax issue going forward.”

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