Solution 5: Fair Share Agreement

I think the case has been made that the additional revenue streams of rural municipalities really distort who pays for services.  By artificially keeping taxes low, it creates a host of other problems as we've seen. 

So what's the solution?

I think one of the best solutions can be found to the west, by looking to our neighbours in the BC Peace.  Since 1994, the 8 municipalities in the region have had a "Fair Share" agreement in place that shares all the industrial taxes from the area among all the municipalities.  You can find out the details here.

How could this look in the Grande Prairie region? 

In reality, there would have to be a formula created like the one in BC that takes into account assessment values, population, cost sharing agreements, etc. which would direct the funds to all the municipalities.  As I've mentioned before, I recognize that the County does have expenses related to supporting the industrial tax base.  Thus, any agreement would most definitely have to take those expenses into account. 

For simplicity sake, and just to get a rough idea how this could look, I've divided linear assessment and M&E revenues by population to see how things would shake out.

Municipality	Linear and M&E revenue (2012)	Possible Fair Share Revenue	Change in Revenue
City of GP	$2,546,693	$25,953,915	+$23,407,222
County of GP	$36,016,063	$9,595,950	-$26,420,113
Town of Beaverlodge	$84,326	$1,115,369	+$1,031,043
Town of Sexsmith	$186,882	$1,140,365	+$953,483
Town of Wembley	$23,337	$664,977	+$641,640
Village of Hythe	$0	$386,724	+$386,724

In any case, there would have to be much negotiation to come up with a formula that would take many factors into account so that everyone receives their fair share.  There would likely have to be a phase in period as well so that there's adjustment time.

I think this is one of the best options for the success of the region.  BC's fair share agreement states, "municipalities in the Peace River region provide housing, services and infrastructure that directly benefits regional industrial development."  I believe this to be the case in Grande Prairie too and as a result, we should all share in the benefits of the development. 

The Challenges

There has been much opposition to these types of arrangements from the wealthy rural municipalities.  One of the main justifications given for their opposition is that there is a cost to providing municipal services (mostly roads) for these industrial developments.  As such, they should receive the tax money associated with these developments.  While there is some truth in this argument, it is usually greatly overstated.

Studies in Alberta have shown that the costs of servicing these developments are a small fraction of the revenues they generate.  Additionally, many of these costs are often reduced as municipalities sign "road access" agreements with industry requiring them to pay for some of the construction and/or maintenance costs.  Furthermore, many of these developments are served by provincial highways which are paid for by the Province and not the municipality.  So in essence, a very large portion of these revenues are like unconditional grants...or bonus money.  It's like winning the lottery year after year after year.

As you can imagine, it is difficult to foresee the County becoming a willing partner in this type of arrangement.  These revenue-sharing agreements are not without precedent in Alberta though.  There have been many such agreements signed, especially in the last couple of years.  Many MDs and Counties have recognized that they benefit greatly from current municipal systems and have decided to share their revenue with their urban neighbours who do not have access to the same revenue. 

Our neighbours to the South, the MD of Greenview, signed an agreement last year that gives all the municipalities within their boundaries (Grande Cache, Valleyview, and Fox Creek) $2 million/year for the next 5 years.  Further south, Yellowhead County will be giving Hinton roughly $2.5 million/year and Edson $6 million/year for the next 15 years.

So while the precedent exists, there is nothing compelling the County to participate.  In the face of a willingness to share, direction must come from the provincial government.  In BC, the provincial government directed the creation of the agreement.  Obviously it was the urban municipalities that were the push behind it though.  Interestingly enough, it was also industry partners who were pushing for the agreement as they recognized the value of their tax dollars flowing into the urban centres.  Employee attraction and retention is a key aim of industry in the north and having thriving urban centres with adequate housing and great amenities helps them to achieve this.

I believe the creation of a revenue sharing agreement would be one of the best ways to address the inequalities that exist.  Revenue-sharing would allow for greater long-term financial stability in the region as all municipal partners would share in the region's wealth. 

Revenue-sharing by itself is not ideal though.  There are still regional planning issues that would have to be addressed as well as the availability of land for future City growth.  So while I would support revenue sharing, it would have to be combined with other solutions.

The Curious Case of the MD of Greenview

Up until this point I've largely left the MD of Greenview out of discussions.  The MD of Greenview is one of the largest municipalities in the province, stretching from Grovedale to Grande Cache to Fox Creek to Valleyview to Debolt.  The MD is also one of the smaller municipalities population-wise with only 5,300 people.  However, they are also one of the wealthiest.  And by wealthy, I mean fabulously rich. 

In fact, the MD pulled in $64 million in linear and M&E in 2012...that's $26 million more than the 6 other GP municipalities combined!  This allows MD of Greenview residents to pay almost the lowest residential taxes in the province...an average of $860 per dwelling.

In my intro, I included the Grovedale and Debolt areas in my calculation of the "Grande Prairie region".  Both are tied quite closely to the region with people commuting to and from the areas daily.  I have not included MD numbers in any calculations though for simplicity sake.  But let's take a look to see how numbers would roll out if they were added to the mix:

My calculations are based on one quarter of the MD's assessment.  Arguments could be made for more or less to be calculated, but I figured this would be a good starting point.

Municipality	Linear and M&E revenue (2012)	Possible Fair Share Revenue	Change in Revenue
MD of Greenview	$64,755,258	$51,892,775	-$12,862,483
City of GP	$2,546,693	$34,545,140	+$31,998,447
County of GP	$36,016,063	$12,772,386	-$23,243,677
Town of Beaverlodge	$84,326	$1,484,577	+$1,400,251
Town of Sexsmith	$186,882	$1,517,847	+$1,330,965
Town of Wembley	$23,337	$885,097	+$861,760
Village of Hythe	$0	$514,737	+$514,737

As you can see, even having only 1/4 of the MD's linear and M&E added to the mix would have a dramatic impact on revenues.

Next post ----> Solution 6: Regional Planning/Growth Boards