Green Line in ‘jeopardy’ as province slashes funding for cities
They’ve given us no choice but to increase your property taxes.
Alberta’s cities were warned that serious cuts were coming in the United Conservative Party’s first budget, and Thursday the province made good on that threat with slashes to capital transfers and grants, and delays in funding for transit projects.
Cities and towns across the province will be forced to shoulder a greater share of capital costs thanks to significant reductions over the next three years in transfers provided under the Municipal Sustainability Initiative, amounting to $236 million, or a nine per cent cut.
“When hard-working Albertans see their incomes shrink and struggle to make ends meet, they have to face their fiscal realities — and so do governments,” the province said of the cuts to municipalities in Thursday’s budget.
The province singled out Calgary and Edmonton for the largest reductions in municipal grants, with the big cities expected to see a 50 per cent reduction to the Grants in Place of Taxes program by 202021, amounting to $81 million in savings for the province.
Notably, the province said it would tear up the City Charters Fiscal Framework — an agreement established with Alberta’s big cities under the previous NDP government — to be replaced with a new arrangement for Calgary and Edmonton and reduced funding from $500 million to $455 million starting in 2022-23.
“The UCP caucus voted for the City Charters Fiscal Framework act in the fall legislature sitting and (promised) they would respect the multi-year funding in that agreement,” Mayor Naheed Nenshi said Thursday afternoon following the release of the budget.
“That’s a black-and-white promise and that’s a promise broken. They’re not respecting that longterm fiscal framework.”
Thursday’s budget also raises serious questions about the timeline for construction of Calgary’s Green Line LRT project, with delays now expected in the $1.53 billion in promised funding from the province for Stage 1 of the project.
The city had been expecting $555 million for the Green Line over the next four years. Thursday, the province announced the city will be receiving just $75 million. The remainder of the $1.53 billion will come in future years, the province said.
Nenshi reacted forcefully, suggesting the timing for construction of Stage 1 of the Green Line — which had a previously projected opening date of 2026 — is now in jeopardy.
“I don’t think it’s too much to say the project itself is in jeopardy,” he added.
Nenshi said the delay in funding amounts to a cut since it forces the city to borrow more money in the interim, resulting in greater interest payments to the bank.
“I don’t know how you complete the Green Line in time,” said Nenshi. “We certainly don’t have the debt capacity, that’s just way too much money going to the banks and we just don’t have the ability to borrow that much money at the city level. We can’t take that downloaded debt.”
It’s not yet known what the precise effect of the funding delay could mean for the Green Line. The project requires the city to have cash on hand far in advance to fund land procurement along the route and to secure contracts with construction firms and suppliers. However, the province argued Thursday that the fact that federal funding will likely proceed as planned in the interim should mitigate the harm of delays to provincial funding.
The delay is unfortunate, said Nenshi, since the Green Line will create 20,000 jobs during construction and is an important part of the city’s economic stimulus plans.
The province has also increased the amount of property taxes it will be taking from the city in 2019 by $15.5 million over the previous year. Since tax bills have already gone out, Nenshi said, Calgarians can expect to feel the effect of the province’s hike in the tax share next year.
“While the province says they’re maintaining front-line services, they’re downloading a bunch of this money onto the cities, which goes onto the property tax,” Nenshi said. “They’ve given us no choice but to increase your property taxes or cut services to the most vulnerable people. We’ll continue to find efficiencies, we always do, but this is going to be tough.”
On a positive note for cities, a revenue-sharing scheme for capital costs promised by the NDP to replace the MSI when it expires in 2021-22 will be maintained. Municipalities will eventually receive transfers that are adjusted each year based on half the rate of provincial revenue growth. For example, if provincial revenues change by four per cent (up or down), capital funding would be adjusted by two per cent.
As Postmedia first reported, the province said Thursday that existing grants for policing to municipalities will be maintained — though the funding model is currently under review by Alberta Justice.
Low-income transit pass pilot projects in Calgary and Edmonton will also continue to receive support from the province, approximately $9.5 million per year — an amount that will still require cities such as Calgary to hike fares on low-income riders to ensure a continuation of the program.