July 22nd, 2024

MSI grant program replacement heavily tied to provincial revenue

By COLLIN GALLANT on December 16, 2023.

Construction crews begin work on upgrades below S. Railway Street downtown in this 2017 file photo. The province's new Local Government Fiscal Framework program, which is replacing the Municipal Sustainability Initiative, will provide $8.2 million in capital grants to Medicine Hat in 2024.--NEWS FILE PHOTO

cgallant@medicinehatnews.com@CollinGallant

The province’s major municipal infrastructure grant has been finalized as the Ministry of Municipal Affairs announced Friday allocations of the next two years under the Local Government Fiscal Framework.

That replaces the Municipal Sustainability Initiative created by Premier Ed Stelmach in 2006 as a 10-year program, which more recent governments have promised to update.

The grant, also known as the LGFF, will provide the City of Medicine Hat $8.2 million in 2024 for use on an array of capital construction projects, then $9.5 million in 2025.

The value next year is about $2 million more than the city received in 2022 under a previous formula, but less than the previous 10-year average of $11.1 million.

“The whole allocation program has changed,” said Dennis Egert, the city’s managing director of corporate services, adding the new formula for determining distribution leaves Medicine Hat in “about the same place” as the old formula, though it is uncertain whether the amount will rise over time.

The system dedicates a portion of the province’s total revenue each year, and includes a three-year lag to allow for mid-term planning.

But, said Egert, the current amounts come out of calculations when the province’s revenue is at historic levels.

“We have advanced notice, but it is tied to Alberta revenues that can be volatile considering energy business … (The 2024 amount) reflects what the government is seeing in terms of 2025 revenues, but the program is rolling out at a time of historic high for provincial revenues. The risk for municipalities is if that revenue drops for whatever reason, the municipalities will be impacted.”

Egert’s division used estimates for the LGFF amounts in the recent 2024 city capital budget update, and those sit close to the actuals released by the province this week after several years of discussions with municipalities.

The Town of Redcliff will receive $861,000 next year, then $973,000 in 2025, according to a schedule released by Municipal Affairs.

Cypress County’s allocation will be $1.85 million in 2024, then increase to $2.1 million the next year.

The total province-wide budget for the program is $1.54 billion, about half of which is dedicated for Calgary and Edmonton. That is about 8 per cent more than previously.

“Communities across Alberta have long asked for funding that is predictable and tied to provincial revenue changes,” said Minster Ric McIvor.

Previously grants were determined on criteria of population and assessment with a small portion for road length.

Going forward, population plays a larger role, but with tangible assets of a city (publicly owned infrastructure), its amortization factored in along with roads.

“It better represents the cost drivers for any municipality; population really affects a city’s infrastructure needs,” said Egert, who felt the city gains as more weight is attributed to road and tangible assets, but not on amortization.

“We’re an older city, we’re digging up older infrastructure, and the original cost of those assets are lower than newer communities,” he said. “Overall, we’re coming to the same place on bigger picture.”

The 2024 city budget assumed $10.5 million in government grants for capital construction, including the federal Buildings Canada Grant, formerly known as the Gas Tax Fund.

The total construction budget is $47 million for 2024, of which $22.6 million is to be debt-financed and $14 million combined in reserves, working capital or tax revenue in departmental budgets.

The largest portion, worth $11.5 million in total, is dedicated to replacement or upgrade programs for aging roads, sewers and bridgework.

The largest single project for the coming year is a $6.25-million upgrade to Division Avenue S., while about $3.8 million relates to irrigation upgrades and replacements for the parks department.

A second portion of MSI related to operational spending items will remain in place and rises to $451,000 in 2024 for the city.

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