Fiscal prudence essential to future prosperity
The Red Deer & District Chamber of Commerce recently submitted a letter to Mayor Veer, City Council, and the City Manager advocating for a zero per cent increase to the 2018 Operating Budget and not just because we’re trying to be difficult or grab a headline.
While employment seems to have recovered to pre-recession levels, the quality and pay of the jobs have not. The metaphorical gold-rush for oil drove up wages to unsustainable levels as companies competed for drillers, frackers, truckers, tradespeople, and the like. Thousands moved to Red Deer to fill those positions and new businesses popped up left, right, and centre in a flourishing economy. It was the textbook definition of the ‘boom’ period in a cyclical economy.
Until the recession hit, economic growth in Red Deer was a function of oil and gas activity. While we believe oil and gas will remain a staple of our economy, the impact of it will likely be a shadow of its former self. Lower oil prices are projected well into the foreseeable future. The industry has developed and adopted new technologies and methods that have slashed labour requirements. Conventional reserves in Alberta are becoming increasingly difficult to reach, while the economics of oilsands projects remain challenged. Our largest customer, the United States has become all but self sufficient when it comes to energy, while we still struggle with pipeline approvals, let alone pipeline construction.
However, the lower energy prices and the softer energy industry can’t take all the credit for the subdued economic growth that we’re experiencing. The provincial and federal government both deserve some credit for their role in compounding and layering additional costs onto business during one of the biggest recessions our province has ever faced. Cost increases in the way of an increasing minimum wage, the carbon levy, high corporate, and payroll taxes, complicated changes to the employment standard code and unreasonable federal tax statutes have played a role in redirecting funds away from individuals and businesses. In isolation most of these changes could be absorbed with relative ease; however, combined and layered upon one another, they represent a massive obstacle to ongoing prosperity.
Today a quick drive around the city’s industrial and commercial areas will reveal countless vacant lots, yards full of equipment collecting dust (or snow), and a corresponding number of “for sale” signs. On the residential side, the average assessment is down as sales of homes and new homes remain low, a trend that may continue as the Bank of Canada continues to increase interest rates.
The good news is the city does have levers available that can and will increase growth and expand our tax base by improving our competitiveness and attractiveness as a place to live, work, and operate a business.
Primarily that lever is of course our municipal taxes which are largely dependent on the size and scope of operational spending at the city and why we advocated them to target a zero per cent increase. Scrutiny of city spending is especially appropriate when you consider it has increased by 219% between 2003 and 2016 while the combined rate of population growth and inflation has only increased by 67%.
The City of Red Deer is responsible for providing and paying for essential services, a task they for the most part, do an exemplary job at. But as the fiscal stewards of our tax dollars there has to be ongoing, critical analysis at how those services are delivered and how much they cost. After all, many municipalities across Alberta spend far less per capita while providing similar service levels.
The city has a number of options available to them, whether it’s to institute a zero-based review system to justify expenses, ensure public wages are in-line with the private sector, review procurement policies and increase the utilization of private sector services, public – private partnerships and of course reprioritize current spending.
If council chooses to focus on business competitiveness, as it should, the city should also give consideration to reducing the tax-gap paid between residential and business properties. Currently businesses pay a little more than twice the property tax as residents, ranking Red Deer 48th out of the 87 Alberta municipalities compared for tax fairness. Additionally, changes to the Municipal Government Act gave the city the ability to create subclasses for non-residential properties, allowing for varied and more favourable tax rates.
In an era of subdued economic growth, individuals and businesses must strive to find savings. We should expect the same of our governments. The reality is, if there are financial benefits to locating (or relocating) in a neighbouring municipality, residents and businesses will do just that; a risk the city council must work to mitigate. If the City of Red Deer is able to make substantial reductions in spending it will regain a competitive advantage, easing the burden on those of us already here and attracting additional businesses and families to our great city, thereby expanding our tax base. A far more preferable and sustainable goal than the regular increases of taxes, parking fees, fines, recreation fees and so on.