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Alberta budget brings capital funding infusion for municipalities followed by deep cuts

The province is bumping up capital funding this year, but the following two years will bring cuts of 44 per cent to expected municipal capital funding.

Alberta’s municipalities can expect more capital funding this year but should brace for substantially less in the following two years.

The Municipal Sustainability Initiative (MSI) – a major source of provincial funding for Alberta’s municipalities, especially on the capital side – will live on two years longer than expected, before a new fiscal framework kicks in. More MSI dollars are being doled out this year, before significant cuts take effect in 2022-23 and 2023-24.

On Feb. 25, the province released its 2021-22 budget. That budget shows $1.2 billion in MSI dollars coming to municipalities across the province, $200 million more than was given out last year.

The money is being increased this year to support infrastructure projects, in a bid to bolster jobs.

In his budget address Feb. 25, Alberta Finance Minister Travis Toews said the province's capital plan for 2021 "will build roads, bridges, overpasses, water projects, gas lines, schools, hospitals, long-term care homes for seniors, addiction treatment centres, tourism infrastructure, and agriculture and natural resources projects that will help develop and protect Alberta's distinct resources and support environmental sustainability."

"We are aggressively pursuing every area where Alberta has a competitive advantage in private sector investment and job growth," he added.

Deep cut next year

In 2022-23 and 2023-24, municipalities will see total MSI dollars slashed down to $485 million. That's a 44-per-cent decrease from the amount municipalities were expecting to receive.

For each of those years, the province is putting an additional $375 million in a new pot of money it will invest in strategic capital projects, called the Economic Recovery Capital Envelope.

MSI has long been a source of anxiety for local governments, which have called for changes to the program for years. MSI dollars help pay for myriad major infrastructure projects, but municipalities typically don’t know how much money to expect.

The program was expected to end this year and be replaced by the Local Government Fiscal Framework, aimed at providing more predictable dollars to municipalities. It will now run for two more years, and then in 2024-25, municipalities can expect a combined $722 million coming their way under the new framework.

Election 2021

As municipalities prepare for election season to roll around this fall, the province will be providing some dollars to offset the added cost of a referendum on equalization as well as a Senate election.

Both initiatives were introduced by the UCP government and have not been part of previous municipal elections.

According to the province’s 2021-22 fiscal plan, there is $10 million set aside to help elected authorities conduct these votes.

Education tax

The education property tax, which residents pay through their local property tax bills, has been frozen for a second year.