Fiscal Prudence and Management

Fiscal Prudence and Management

Download our full Great Calgary 2013 policy book

Calgary was named one of the top-five most livable cities in the world by The Economist  and Canada’s top place to live by MoneySense in 2013.  This is a testament to Calgary’s status as a leading global city and its reputation as a great place to live and do business. Our success and reputation means that Calgary continues to lead all Canadian cities in terms of population growth.  Unsurprisingly, the continued growth of the city has resulted in increased demands for public services that have put a strain on The City of Calgary’s ability to provide them.

Maintaining these services is vital to making sure Calgary remains an attractive place to work and live. However, we cannot expect municipal revenues to grow proportionately with demand. How The City funds infrastructure development and ensures core services operate on a daily basis is essential to maintaining the key characteristics that make Calgary globally competitive. It is also imperative that The City shows it is able to effectively manage its existing budget and can continue to service its debt. This is especially important as existing infrastructure reaches its end-of-life and need to be replaced.

Increased demands must be funded by a corresponding increase in municipal revenues. However, continued property tax increases beyond rates of economic and population growth are an unsustainable method of paying for services that jeopardizes our competitiveness. Furthermore, The City cannot borrow indefinitely to pay for infrastructure development. How do we make sure Calgary stays great, even when population growth and economic conditions may make it more difficult to do so?

Calgary, like most major Canadian cities, has traditionally taken a cyclical approach to managing its debt and debt service. This means that borrowing typically goes up when infrastructure is needed, and attempts to reduce debt loads occur after infrastructure is completed. The City, for the most part, has done a good job of managing its total debt limit under the Municipal Government Act, and has received an exemption from the Province of Alberta to exceed its legislated annual debt service limit of 35% annual revenues until December 2016. However, recent infrastructure projects are expected to put The City close to its debt service limit in the upcoming years.  While rates are favorable for borrowing right now, The City should actively be looking to find ways to reduce its total debt service before it becomes too difficult to manage – though Calgary has grown at a higher rate, its municipal debt load has reached 59% of its total allowable debt, versus Edmonton’s 48%, amounting to a difference in $1 billion worth of debt.  Options such as expanding its current zero-based reviews to all city departments, or finding new financial models to address its increased spending needs without increasing its overall debt service can help provide better value for money for Calgarians when it comes to municipal spending.

As Calgary continues to pay for its growing infrastructure needs, responsible spending is paramount. One way to ensure responsible spending is the Calgary Chamber’s concept of the smart spending bandwidth,  which limits operational spending increases within the range of real GDP plus inflation and population growth plus inflation. This bandwidth method ensures that The City is able to increase spending to address increased service demands, while ensuring it does not rely on the ability of taxpayers to shoulder large tax increases year over year.

External auditing and financial advice also provides a significant opportunity to ensure better value-for-money for Calgarians. The current City Auditor ensures accountability over the spending of municipal funds, but the auditor can be dismissed by a simple majority, which limits the true independence that the auditor can exercise.

The positive impacts of external auditing have been recognized in other municipalities: Hamilton and Kingston, Ontario have established long term contract agreements with private external auditors to provide oversight and advice to their administrations to ensure  responsible spending and  best practices are followed. ,  External audits also increase transparency and credibility, letting citizens know where their tax dollars go and why. External auditing can help achieve a truly Great Calgary by promoting the most financial responsible practices possible and developing trust between Calgary’s citizen’s and City Council.

In light of the information above, the Calgary Chamber recommends The City of Calgary:

  • Limit spending increases within the range of real GDP plus inflation and population growth plus inflation.
  • Develop a budgetary framework that identifies essential and discretionary spending areas, directly engages citizens, and increases transparency in the budget planning process to ensure Calgarians receive the best possible value-for-money.
  • Develop stringent debt spending criteria to help ensure The City of Calgary stays under its permitted debt load and debt service thresholds.
  • Expand the zero-base review program to all city departments and business units.
  • Create an archive of public engagement results to increase transparency with citizens.
  • Explore alternative financing options for municipal infrastructure, such as public private-partnerships, where appropriate.
  • Establish a regular schedule for external audits of City financials for departments and funded organizations.

Download our full Great Calgary 2013 policy book

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