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Provincial Sales Tax for Municipal Capital Project Support

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Resolution Category: 
Strategic Initiatives B2
Subject: 
Year: 
2020
Status: 
Defeated
Sponsor(s): 
Lethbridge, City of
Active Clauses: 

IT IS THEREFORE RESOLVED THAT the AUMA request that the Government of Alberta implement a provincial sales tax of one (1) per cent, with revenues generated from that tax being completely dedicated to Alberta municipalities, solely for the purpose of provincial financial support of capital projects in Alberta’s communities.

Whereas Clauses: 

WHEREAS it is difficult for Alberta municipalities to build capital projects based on funds generated by property taxes alone;

WHEREAS Alberta municipalities depend upon provincial grants to support capital projects in our communities;

WHEREAS Alberta municipalities understand the Government of Alberta’s desire to reduce provincial spending;

WHEREAS Alberta municipalities understand that part of this reduced spending includes a reduction in funds available for municipal capital grants;

WHEREAS in the absence of provincial grants, Alberta municipalities lack the appropriate tools to generate additional revenues for capital projects;

WHEREAS the Government of Alberta, as outlined in the 2019-2023 Municipal Affairs Business Plan, wants to “work collaboratively with municipalities in continuing to offer and develop tools and programs to support well-managed, accountable, and sustainable municipalities”;

WHEREAS the Government of Alberta desires to help municipalities “meet their strategic long-term infrastructure needs”;

WHEREAS the Government of Alberta could support municipalities by implementing a provincial sales tax of one (1) per cent;

WHEREAS this sales tax would be dedicated solely to generate revenues for municipal capital projects only; and

WHEREAS this sales tax could generate approximately one point one billion dollars ($1,100,000,000) annually for municipal capital projects.

Resolution Background: 

Alberta municipalities have two primary sources of direct revenue collection: property taxes and fees. Considering the vast number of capital projects that municipalities are responsible for, these revenue sources are often not enough to subsidize this necessary work. The diversity of capital projects necessary ranges from the improvement of roads to the construction of water treatment plants and recreational facilities. All of this work is necessary to ensure our communities are livable and vibrant. In order to maintain these vital projects, we wish to advocate for the implementation of a one (1) per cent provincial sales tax (PST), with all collected funds to be redirected solely to municipal capital projects.

With the economic downturn of 2020 having dramatic effects on Alberta’s economies, revenues for many Alberta communities have been significantly impacted. The COVID-19 pandemic has been one of many crises that have impacted daily life over the past several years, from floods and fires to the opioid addiction crisis. Managing these crises has impacted the organizational capacity of many municipalities across the province. Along with the compounding effects of the growing urban-rural divide, many communities are struggling to maintain operational funds, let alone securing the funds for large capital projects. While municipalities are receiving nine hundred and ninety-three million dollars ($993,000,000) in funding from the Municipal Sustainability Initiative (MSI) and the Basic Municipal Transportation Grant (BMTG) program in 2020, funding cuts are proposed for 2021 and beyond. With less funding circulating overall, Albertan municipalities will struggle to sustainably and responsibly source the means to maintain current levels of funding for necessary capital projects.

The Province is empowered to implement a PST under sections 92.2 and 92.8 of the Constitution Act 1867. This is exactly the type of injection our communities need in this unprecedented historical moment. This funding will help maintain the high quality of life that people expect from Alberta living. All kinds of capital projects are necessary to keep our communities, safe, accessible, and lively. In order to remain a province that people are proud to call home, municipalities need to be empowered to take control of their own prosperity. This additional revenue source would be one step toward that empowerment.

Other than the 4 per cent taxes on lodging and hotel room fees, Alberta is the only province in Canada without some form of PST. If the Province were to implement a sustainable 1 per cent PST, with all funds being redirected to municipalities for capital projects, that would amount to an additional one point one billion dollars ($1,100,000,000) in annual funding for necessary infrastructure projects across Alberta’s communities.  The Province would need to develop an allocation formula to ensure that this additional funding is distributed equitably. Any additional funding to offset the reductions from upcoming cuts will be vital in ensuring our communities can recover from the variety of social, environmental, and economic catastrophes suffered over the past several years.