Thursday, May 15, 2014

Problem 1: Inequality in Who Pays For Infrastructure and Services

As mentioned before, we are one big community who all use services offered by all the municipalities in our area.  Residents from Hythe use the Beaverlodge pool beside Beaverlodge residents, County residents from Clairmont quad in the Dunes area along with City residents.  When I install siding in Sexsmith, I use all of Sexsmith's streets to get around; farmers from LaGlace use City streets to pick up supplies...the list goes on.

If everyone in the area gets to regularly use the infrastructure and services on an equal basis, shouldn't everyone also equally contribute towards the costs as well?

Unfortunately this is not the case right now.

There are a number of ways that we can analyze who is paying what costs.  The first way is to look at how much the municipalities are paying for the cost of delivering services in the area.  Between 2009 and 2012, $789 million was spent on municipal services in the GP region.  Here's how it was broken down:

Total Expenses
% of Regional Expenses
% of Population
City of GP
County of GP
Town of Beaverlodge
Town of Sexsmith
Town of Wembley
Village of Hythe

As we can see, each municipality is paying a share of municipal services that is roughly equivalent to their population share, although the County does pay a slightly larger piece.  While in some spending areas, some municipalities pay more, it generally balances out overall.  For example, the City covers around 82% of the region's Recreation & Culture costs, but this is offset by the County who pick up about 37% of the region's Transportation costs.

Great! What's the issue then?

The issue arises when we look at how much each residential taxpayer is paying based on which municipality they live in:

Municipality Residential Taxes Paid Average Res. Tax per Dwelling % of Regional Residential Taxes % of Population
City of GP $63,772,526 $2,702 75.30% 66.80%
County of GP $15,674,556 $1,854 18.50% 24.70%
Town of Beaverlodge $1,832,191 $1,868 2.20% 2.90%
Town of Sexsmith $1,799,160 $2,004 2.10% 2.90%
Town of Wembley $901,989 $1,572 1.10% 1.70%
Village of Hythe $699,000 $2,118 0.80% 1.00%

*See note on calculations at bottom of post

Here we see that City residents are paying a much greater share of all the residential taxes that are collected in the area.  In fact, the average dwelling in the City paid $2,702 in taxes in 2012 compared to an average of $1,854 in the $850 difference.

But Rory, this doesn't make any sense.  If the municipalities are paying an equal share, but residents aren't, what's the deal?

Good question.  Here are the answers:

1. Some municipalities have additional revenue streams that help keep their residential taxes low. 

2. Some municipalities have the provincial government pick up the tab for a number of their services.

Let's look at each:

1. Revenues

In Alberta, there are two main sources of property tax that the provincial government assesses and collects: Linear assessment and Machinery & Equipment (M&E)

Linear assessment includes things like pipelines, oil & gas wells, electrical transmission lines, and telecommunication towers. M&E is the assessment class that includes industrial complexes like the Weyerhaeuser and Canfor mills and large equipment like compressors and storage tanks.  Municipalities get "rent" essentially for having all this within their jurisdiction.

So who gets this money?  Let's take a look at 2012 numbers:

Municipality Linear Revenues Linear Revenue per capita Share of Regional Linear Revenues % of Population
City of GP $1,876,031 $34 7% 67%
County of GP $23,565,319 $1,158 92% 25%
Town of Beaverlodge $75,200 $32 0.30% 2.90%
Town of Sexsmith $140,971 $58 0.50% 2.90%
Town of Wembley $21,738 $16 0.10% 1.70%
Village of Hythe $0 $0 0% 1.00%

Municipality M&E Revenues M&E Revenues Per Capita Share of Regional M&E Revenues % of Population
City of GP $670,662 $12 5% 67%
County of GP $12,450,744 $612 94% 25%
Town of Beaverlodge $9,126 $4 0.10% 2.90%
Town of Sexsmith $45,911 $19 0.30% 2.90%
Town of Wembley $1,599 $1 0% 1.70%
Village of Hythe $0 $0 0% 1.00%

Municipality M&E/Linear Revenues Combined M&E/Linear Revenues Per Capita Share of Regional M&E/Linear Revenues % of Population
City of GP $2,546,693 $46 7% 67%
County of GP $36,016,063 $1,770 93% 25%
Town of Beaverlodge $84,326 $36 0.20% 2.90%
Town of Sexsmith $186,882 $77 0.50% 2.90%
Town of Wembley $23,337 $17 0.10% 1.70%
Village of Hythe $0 $0 0% 1.00%

I don't really need to provide much commentary here.  The inequality is quite mind blowing.

In addition to the Linear and M&E, municipalities receive grants from the provincial government.  Again we see some major inequalities in how the grants have been dolled out between 2009 and 2012:

Municipality Provincial Grants Total Provincial Grants Per Capita Share of Regional Provincial Grants % of Population
City of GP $104,377,975 $1,897 61% 67%
County of GP $53,473,296 $2,628 31% 25%
Town of Beaverlodge $3,697,644 $1,563 2.10% 2.90%
Town of Sexsmith $6,068,235 $2,510 3.50% 2.90%

Is it fair that one municipality receives nearly a third of the provincial grants while having one quarter of the population?

As we can see, there are some major inequalities that exist on the revenue side, leading to a greater residential tax burden for urban taxpayers.

2. Expenses

We also need to look at the expense side where inequalities also exist.  The biggest inequality right now is in regards to policing.

In Alberta, municipalities under 5000 people and all MDs and Counties are not required to pay for policing; the expense is paid for by the Province.  In contrast, the City paid $13.6 million for policing in 2013.

In other words, the City spent about $250 on policing for every person living in the City, while our neighbours were required to spend almost nothing (I say "almost" because the County does pay for 3 RCMP officers to enhance what is given to them).

To conclude, there are some major inequalities that exist in who pays for municipal services in the region.  Now, I do realize that this whole issue is not as cut and dry as I've laid it out.  For example, grants that come to one municipality do benefit others.  Although the County received the grant for the Dinosaur museum, the City and Towns will benefit from increased tourism in the area. 

Also, I recognize that to support the pipelines and industrial complexes, the County does have a little extra burden on its transportation infrastructure.  However, objective evidence has shown that the extra revenues many rural municipalities receive far exceeds the additional infrastructure costs.  So while I don't think the goal should be perfect equality, the scales are heavily tipped in the rural municipalities' direction and changes are needed.  I look forward to sharing what those changes could be.

*I've included all the residential property taxes that are paid in the given year for simplicity sake.  If you look at just the portion that goes to the municipalities and not the province, you find City residents are actually paying 79% of residential taxes vs. 15% in the County.  This goes to show that there are inequalities in who is paying for the education and seniors lodging portion of our property taxes as well.  This can be another discussion for another day though...


  1. Your comments above suggest a bias to the city without stating that you have one. You don't include for example the income that comes to the city from the outside region when people shop here and income from regional people when they pay to use our local facilities. Many facilities which are bought and paid for in part or in whole by Albertan's. For example when the hospital is built it will bring indirect revenue to the city in shopping, hotels, use of services, etc. So you call the information you present here objective yet there is the issue that you don't have all the information as I just pointed out. Its called an error of omission. Go see your economic development people perhaps they can help you with more information. And why would you suggest punishing the county for sound business planning and economic planning decisions? Yes, the county have many industries and other infrastructure located on their lands but why is their success the city's problem? We should be following their example by managing our growth better. And its silly to point out about the policing costs. Like really, it's the rules and city's have more crime-particularly here. What I want to know is how much my taxes will go up when the city annexes all that open space in the county where there are no taxpayers established to absorb the additional service costs. Seems like some funny financial accounting.

    1. You're right, the hospital will be built in the City and there will be an economic windfall from that. However, do you think it makes more sense to build it in the middle of Clairmont where it would serve a fraction of the population? Maybe Wedgewood would be more of your liking? I say this tongue-in-cheek, but to me, within the City makes the most sense to service the largest percent of the population. As for your comment about the County's "sound business decisions", I question this as well. It was pretty easy to attract the large industry when you have a large revenue coming in from the government, linear taxes, and M&E to keep taxes low, along with the appealing services that the City provides! To me, I think you may have missed the point of the post anyways. It's to show the inequality of the region. This doesn't show a bias one way or another in opinions, but it does in it facts. In the end, great job Rory, I've really enjoyed reading the blog so far.

    2. Thanks wandreef for your comments. To address a couple of your concerns. First, I don't have a bias to the City. I have a bias for the region. I grew up spending most of my time in the County, went to the County high school, my family and inlaws all still live there and I conduct a great amount of my business there. I want the County to thrive and the taxpayers to be respected there just as I want the same for City residents.

      Second, I recognize that the City does benefit greatly in the service and retail sector because of development located outside its boundaries. However, the net benefit of the taxes derived from these industries is a small fraction of taxes derived from linear, M&E, and industrial. This is why I chose to look at revenues and expenditures as a whole. If we wanted to drill down to the cost/benefit analysis of specific industry types, we would find further inequities as the municipal costs associated with servicing the retail and service industry are much, much greater than the servicing of industrial. To address your comments on the attraction of industrial, take a look at my next post...