Stable funding for cities includes big cut up front
‘Historic’ deal with province also pays out cash for transit projects
A “historic” fiscal agreement between Alberta’s big cities and the province means stable funding for municipalities for years to come — but will entail a “huge cut” in transfers in the medium term, Calgary’s mayor says.
In a bill introduced in the legislature Thursday, the NDP government unveiled a new fiscal framework for Calgary and Edmonton to replace the soon-to-expire Municipal Sustainability Initiative.
If passed, starting in 2022, Calgary and Edmonton would receive $500 million in funding to be split between the two cities — an amount that would increase in future years based on provincial revenues and fuel sales.
A further $400 million would be provided annually for long-term transit projects through the carbon levy, to be divided between Calgary and Edmonton starting in 2027.
Municipal Affairs Minister Shaye Anderson called it a “historic” deal, reached after years of negotiations.
“No other province has a legislated revenue-sharing agreement with municipalities like this,” Anderson said Thursday.
“No other province legislates long-term transit funding either, except for Alberta. This is a big deal.”
The promised amounts are a far cry from the $11.3 billion in total commitments made by previous governments through the MSI, but proponents say they are commensurate with Alberta’s current economic situation.
Calgary, for instance — which last received $420 million from the province through MSI — will receive just $289 million in 2022.
Mayor Naheed Nenshi said Thursday that he was “pleased” with the new agreement since it makes it difficult for future provincial governments to spontaneously change the amount of funding cities receive.
“I want to be clear though, this is a huge cut. We were expecting a huge cut, because one of the things about the new fiscal framework is that we share in the downside and we should share in the upside,” Nenshi said Thursday.
“One of the challenges with this is there is a lot of downside.”
Nenshi said at the rate the new framework increases funding, Calgary won’t see a return to even 2017 levels of provincial funding until the 2030s.
“It means that capital will be very, very constrained in the city of Calgary for a long time,” said Nenshi. “We’ll be focused on fixing things and keeping our infrastructure safe, much more than we will be on building new things.”
A key advantage for cities is that the new framework enshrines annual capital funding in provincial law.
The new funding formula will also become increasingly tied to provincial revenue, starting with transfers based on 50 per cent of provincial growth in 2023-24. However, the province plans to take a phased approach, meaning it will be more than a decade before total funding becomes a fixed percentage of provincial revenues.
The plan will also see the province set aside $50 million annually for regional infrastructure projects. One-third will go to the Calgary Metropolitan Region Board, one-third will go Edmonton’s regional board and the remainder will be awarded to other regional projects on a competitive basis.
Finance Minister Joe Ceci was a Calgary city councillor when the original MSI funding was first implemented. He told reporters Thursday that its introduction in 2007 ushered in a period of significant growth for cities including Calgary.
But with the MSI set to run out in 2022, a new agreement had to be reached. Ceci said Alberta’s big cities will finally have the “predictable” and “permanent” funding model they’ve been asking for.
“If this legislation passes, cities will have the certainty and predictability to build their budgets,” Ceci said. “Knowing exactly how much they can spend on infrastructure while still having the flexibility to choose which projects are most important to the residents.”
Both the Edmonton and Calgary mayors also praised the framework for giving cities certainty around funding for transit projects.
Nenshi said it’s important that municipalities have solidified funding sources when taking on rail-based transit projects since they invariably involve long-term debt repayment schedules.
Importantly, the new fiscal framework is expected to allow Calgary to move forward with the remaining phases of the Green Line — “in a slow, but steady fashion,” Nenshi said.
“Certainly, we would love it if it was more — we would love it if the federal government was able to match that — but ideally (it) will help us both finish the Green Line then build out other things (including ) links to the airport and the 52nd Street East Max (BRT) line.”
The new fiscal framework is a key component of the city charters plan first introduced by the province in 2017.