Sunday, March 16, 2014

2014 FDA Process Review of the Alberta Municipal Levies

Executive Summary

The Foundation for Democratic Advancement (FDA) asserts that municipalities like any other government department and agency, corporation, and non-profit/charity organization are expected to operate efficiently and effectively in order to provide adequate services at reasonable cost. In this report, the FDA is not promoting and will never promote the idea that municipalities have the right to impose their own levies in order to create more revenue. The reader knows that extra revenue and abundance of cash and resources may lead to complacency, inefficiency, waste, and corruption. However, the FDA supports and advocates that municipalities have the right, when needed and warranted, to supplement their revenue in order to provide services and develop and maintain safe and reliable communities.

In its research, the Foundation for Democratic Advancement uncovers the bias of section 648 of the Alberta Municipal Government Act (MGA, 2000) and the section’s inconsistent application throughout Alberta. As it stands, section 648 only allows Alberta municipalities to charge hard infrastructure levies (such as charges for sewer or water infrastructure) on new off-site developments as opposed to municipalities having the discretionary capacity to charge for both hard and soft levies which includes police and fire services, parks, and community infrastructure. Currently, several Alberta cities (most notably the City of Calgary) bypass this restriction on levies by signing private negotiated agreements (standard development agreements) with development community stakeholders. These agreements allow the City of Calgary, for instance, to charge also for soft infrastructure levies because the development industry agreed to them, and therefore it cannot sue on grounds of violation of the MGA. All other Alberta municipalities are restricted to charging only hard infrastructure levies unless they too can negotiate private agreements with developers and/or developer associations. Moreover, the Government of Alberta ignores the bypass of section 648 by Alberta municipalities.

In the FDA’s view, section 648 is a process shortcoming by allowing developers to either avoid soft infrastructure levies or negotiate low levies from a strong negotiating position. In either scenario, Alberta municipal taxpayers likely pay more for the capital costs of new off-site developments, while developers, which are the principle profit beneficiaries of new developments, pay less. This issue resolves around who pays for soft infrastructure which is critical to new off-site infrastructure and the ability of municipalities to maintain safe and viable communities (MGA, Part 1, Section 3).

An off-site levy is one financing source to both pay for growth-related infrastructure and pass on infrastructure costs to those individuals and organizations who are the primary beneficiaries of the growth, and thereby ensure “growth pays for growth” (Baumeister, 2012; Slack, 2012; Corvus, 2014). If developers assume full cost of growth-related infrastructure, then their profits will be less, or the additional development charges will be passed onto the consumer which will increase the cost of new developments. If the municipal taxpayers absorb the cost of growth then their tax rates will be higher, and the consumer cost of new off-site developments may be lower, unless developers set higher profit margins and keep the difference.

Currently under section 648, Alberta taxpayers likely have higher municipal tax rates and/or deferred tax in the form of municipal debt from unfair soft infrastructure costs. Also, FDA financial analysis shows that Alberta small and medium municipalities may be facing unfunded liability and/or debt from their limited ability to charge for growth-related soft infrastructure. In contrast, developers have greater profits from new off-site developments through low soft infrastructure levies or no soft levies at all. Related to this issue, both rural and urban Alberta municipal associations (AAMD&C and AUMA) have passed repeated resolutions requesting that the Government of Alberta amend section 648 in order to give municipalities the legislative authority and discretionary capacity to charge for both hard and soft infrastructure in regard to off-site developments and in response to new and additional service requirements and demands (AAMD&C, Resolution 6-07F, 2007 and Resolution 4-11S, 2011; AUMA, Resolution C.ii.3, 2008 and Resolution C.ii.3, 2011).

Through its analysis and professional experience, the FDA believes the process limitation of section 648 is a political decision because the Government of Alberta has authority over the contents of the Municipal Government Act (MGA) including amendments. How could this limitation be accepted and even passed by elected officials who ought to represent the interests of all Albertans? Why are most Albertans uninformed about this issue, especially when it affects how much municipal tax they pay and impacts all Alberta municipalities? How can the Government of Alberta ignore the repeated resolutions of the Alberta Association of Municipal Districts and Counties, and the Alberta Urban Municipal Association? These resolutions in essence mean every Alberta municipality wants to be granted the ability to charge for growth-related soft infrastructure in order to meet the service demands of new growth.

The FDA believes that section 648 is rooted in democratic and electoral issues. In particular, the FDA believes that Alberta lacks guiding fundamental democratic principles for its provincial and municipal democracies (as compared for instance to the State of California) and that provincial elected officials have substantive political say in the Alberta Legislature, while Albertans have given substantive political say only on Election Day, barring government initiated referendums. To illustrate, Alberta has no mechanisms for citizen-initiated referendum or recall, or citizen-initiated legislation. Compounding this inherent political bias to elected officials over the voice of Albertans, and lack of concrete democratic principles of Alberta democracy such as "all political power is inherent in the people" (CSC, 1879, Article 2, Section 1), the fairness of the Alberta provincial electoral system is compromised by a number of legislative biases to large, established parties (FDA Electoral Fairness Report on Alberta, 2012).

The FDA concludes that Alberta requires reform in its election law and governance practices. Simply amending section 648 of the MGA by allowing municipalities to charge developers soft infrastructure levies ignores deficiencies in Alberta democracy and its corresponding reduction in the rights and political power of its citizens. The FDA recommends that all Albertans within their means get involved with the Alberta legislative process and implementation if they want to protect and advance their democratic voice, and create a society of their choosing.

"If liberty and equality, as is thought by some, are chiefly to be found in democracy, they will be best attained when all persons alike share in government to the utmost."
- Aristotle

2014 FDA Process Review of Alberta Municipal Levies