Published on September 14, 2021
Understanding Municipal Budgeting
Overview of Municipal Budget
Municipalities are required, by the Municipal Government Act, to prepare an annual operating and capital budget, which must be adopted by Council. The budget is a multi-year financial representation of Council’s Strategic Plan. The Strategic Plan outlines services that are delivered to the community and priorities that have been established in the Corporate Business Plan. These align to achieve the established vision for the community.
Currently, administration presents a three-year operating plan and budget as well as a 10-year capital plan and budget to Council. The budget is updated and presented for Council approval annually. St. Albert’s tax rate is set based on this approved budget.
In order to have a sustainable budget, you need to be able to balance the normally occurring expenses with normally occurring revenues. If the City was to rely on one-time fixes to fill its budget gaps, they would experience a higher tax increase to maintain the current spending in future years. For example, this year we have access to reserve funding from a provincial COVID relief grant. While the funding can be used to offset expenses, it is not an ongoing revenue source. Additional tax dollars will be required to fund the difference in future years.
Where the Money Comes From
A variety of revenue sources are used to pay for the wide range of services that are provided to the community. St. Albert’s major revenue sources, which are used to pay for day-to-day services, include: property taxes, utility user fees (sewer and water charges), other user fees (i.e., recreation passes, registration fees, connection fees, etc.), permit/licence fees and franchise fees.
Funding for capital projects can come from grant programs, reserve funds, tax supported funds (Pay-As-You-Go) and monies that have been borrowed. Decisions for use of these funding options are made by Council on an annual basis.
Where the Money Goes
Since municipalities are service-based organizations, a wide variety of services are provided to diverse stakeholders (residents, business owners, developers, etc.). Approximately 82 per cent of the municipal budget is allocated to the delivery of services. These services include road maintenance, garbage collection, snow removal, policing, fire protection, recreation facilities, trail systems, water/sewer systems, etc. Many of the key services provided are available 24 hours a day, seven days a week.
Each year, through the budget process, Council determines what level of funding should be allocated to each service. For example, do we want to decrease the amount we spend on snow removal (remove the snow less frequently) or do we want to increase taxes to maintain that service?
As mandated for municipal governments, by provincial legislation, the City must balance the budget each year. Municipalities can incur dept to pay for large capital acquisitions (e.g., the twinning of Ray Gibbon Drive), but they cannot incur a deficit to fund day-to-day operations. This means that all anticipated spending must be covered by incoming revenue.
The added challenge, in recent years, has been a loss in revenue due to COVID-19 restrictions and reduction in funding from other levels of government. The City was able to manage these impacts through a series of reallocation of resources, cost-saving initiatives, deferrals of projects, and temporary adjustments to services delivered to the community. Although these one-time fixes help, they are not long-term sustainable solutions.
To balance the budget, consideration must be given regarding the level of service that is required to meet the expectations of the community. A biennial community satisfaction survey is completed to better understand community expectations and inform Council’s strategic direction. In addition, annual public participation opportunities are organized to gather residents’ and stakeholders’ input. This input is used to inform Council’s budget decisions. These expectations must be balanced against realistic taxation and user-fee levels.
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Last edited: September 14, 2021