While municipalities operate autonomously in many respects, local governments are undeniably reliant on funding from other orders of government, to one extent or another. Intermunicipal collaboration efforts can be effective in numerous ways, as discussed in Part 1 and Part 2 of this three-part series. The past two pieces explored collaboration efforts in shared departmental resources and environmental sustainability, respectively.
It’s no secret that in certain provinces, municipal officials fear changes in budget sustainability due to potential funding shifts from other orders of government. Specifically, austerity measures seen at the provincial level often result in negative impacts to municipal funding for local governments, as well as reduced — or altogether eliminated — funding for project-specific opportunities. Moreover, in some municipalities, such project funding shifts have been seen after provincial commitments were already made, leaving officials scrambling to determine their next steps.
Further changes exist in potential provincial management of areas in which municipalities have typically operated on a historically autonomous level, such as the undertaking of industrial tax assessments. This fear has been widespread, particularly in Alberta, and while no changes related to tax assessments have been made to date, the anxiety is one often expressed by municipal officials. Such a change could have far-reaching impacts within municipalities, both in annual operating budgets, and in costs being downloaded onto residents and local business owners.
Such anxieties seem to have increased over the past handful of years, and municipalities are therefore tasked with being proactive in coming up with plans in case any major funding shifts occur from provincial or federal governments. However, simply raising fees and residential taxes is not a solution, and even if such measures were to be taken, it’s likely the adjusted income would still not be enough to cover funding losses. With municipalities required to stay in the black, the obvious result would be at least some level of service cuts — but that doesn’t have to be the case.
By getting ahead of potential funding shortfalls and finding significant cost savings through inter-municipal regionalization, dollars can then be reallocated. Any cuts resulting from government funding changes would have mitigated impacts on residents and business owners. For example, a large funding change from the provincial government may mean a “luxury” project falls by the wayside, but infrastructure maintenance and garbage pickup go unaffected. Handled properly — and with a regional approach to certain initiatives, such as environmentally-focused projects, for example — the “luxury” projects may be able to continue as well. (As an aside: Priority-Based Budgeting creates a system of service and spending prioritization, creating a hierarchy of budget lines, which helps to ease the fund reallocation process.)
We often talk about municipal risk tolerance, but there are always two sides to that coin. Is it more of a risk to explore effective regional collaboration efforts in a way that fundamentally shifts some areas of how a municipality operates? Or is it riskier to not explore such opportunities at all, and then be left scrambling when provincial funding unexpectedly changes?
It’s a question that every municipal official must ask themselves. We’d propose that the latter — putting yourselves behind the proverbial eight-ball — carries far more risk, both in the short- and long-term.