Danielle On Motions, October 29: Municipal Support for Resource Road Maintenance

Ms Smith: Thank you, Mr. Speaker. I’d like to thank the hon. Member for Vermilion-Lloydminster for putting forward this motion, and I will speak in favour of it, the notion of exploring options to provide “support to municipalities that experience significant local road deterioration due to heavy industry/resource truck traffic, with the goal of ensuring that these roads are adequately maintained and available for all to use.”

As I mentioned, I am sympathetic to the intention of this motion, and I want to speak in favour of finding ways to provide support for municipalities in general and, in particular, to municipalities that are impacted by the consequences of economic growth. After all, Mr. Speaker, having to repair roads that are damaged by truck traffic because of our prosperity is a problem, but in the big scheme of things it’s one of those problems that falls into the category of a good problem to have since it is an indication of our prosperity and growth. However, I do think that the motion is somewhat too narrowly constructed, and it does reflect the fundamentally different approach to municipal funding that the members opposite take versus the one that the Wildrose supports.

Let me tell you how I would adjust the thinking around this motion. It would be: how do we find ways to be able to have own source revenue provided to municipalities to be able to meet this need? I was fortunate before coming here today to speak with the board of the AAMD and C, who have raised the concern with me about a particular tax that they’re worried about coming to an end at the end of this year. I had actually expected the Member for Vermilion-Lloydminster to mention this tax because it does seem to go particularly to the point that he is making. What it is is the well-drilling equipment tax regulation, and it’s under the auspices of the Minister of Municipal Affairs.

Let me just tell you, though, the story that one of the members shared with me about how difficult it is for them to manage to keep up with the road construction and the road repair caused by the damage of heavy equipment. This one particular council member had told me that at any given time in a given year you will find 50 to 60 vehicles going up and down this particular road, which was originally not designed to have that kind of heavy traffic on it. If you’re in an area where there’s muskeg, you end up with what is almost like a marshmallow effect, he called it, on the road. They become rutted. There are potholes.

They require yearly repairing. He was saying that this one particular road that has this amount of traffic  and we all know how many kilometres of roads there are in municipal districts – takes up one-third of the overall amount of the road budget in this particular municipality.

Beyond that, of course, there is also the impact on bridges. I believe the municipal districts are responsible for something in the order of 8,500 bridges, which, once again, had not been designed for this heavy truck traffic and are all in need of repair and upgrade. In fact, it was shared with me that many of these bridges have now had loads disallowed on them because they are not in a condition to be able to support those loads. In addition, from time to time, when the road condition is particularly bad, they have to reduce the amount of load that a truck is able to carry just so that the roads can manage it.

But, as I say, there is actually, fortunately, a simple fix for the government. They had extended a regulation to expire at the end of this year, December 31, and it is, as I mentioned, the welldrilling equipment tax regulation. What this does is that it actually allows the municipality to levy a tax, with the tax rate set by the Minister of Municipal Affairs through regulation, but the dollars flow through to the municipality, the municipal district, or county on the basis of the number of wells that are actually drilled in their area. There is a relationship between the number of wells drilled and the amount of truck traffic.

Under current legislation a well, if it’s shallow, would yield about $290 to a municipality per well drilled. It could go up to $38,000 plus, depending on how deep the well is drilled. In the case of this particular municipal councillor I was speaking with, this is a significant source of revenue for them for their road budget. His municipality alone collects $7 million to $8 million out of this tax. In addition to that, there was a survey that the AAMD and C did last year to ask about the extent to which our municipalities are reliant on these revenues. Twenty-six municipalities responded – that’s not the entire universe of municipalities who benefit from this tax – and they’re generating $21.7 million from this revenue source.

The concern the AAMD and C has is that, once again, the regulation was supposed to be reviewed this year, with a view to seeing whether it fits with the current technological advancements that have been made in drilling technology. What the municipalities, of course, are finding is that with the invention of horizontal multistage fracking there isn’t a provision for how this tax might apply. There isn’t a provision for how it might apply to shallow wells. Also, we’re seeing increasingly that companies are going back into existing wells, and there isn’t an opportunity for them to be able to get the revenues that they would normally be able to get the first time that these wells are drilled.

I think that since the government has not done the review of this regulation this year, it would seem to me that one of the immediate interim fixes, to make sure that we don’t end up seeing our municipalities fall short, is to extend this regulation for another year so that we can do a review and so we don’t end up finding that we have taken away a source of revenue at the very time when we know that our municipalities are using this for road construction and that they do need it.

I would just put on the radar, then, that this regulation is one that the government needs to take a look at next year, looking at it with a view to modifying the rules to consider shallow wells, to consider as well the impact of horizontal multistage fracking. That’s the request that came forward from the AAMD and C. I think it goes directly to the hon. Member for Vermilion- Lloydminster’s point, and it clearly is a significant source of revenue for the counties and municipal districts. It also has the advantage of being a level of taxation that flows directly through to the municipality rather than being yet another granting program that pits one community against the other. That’s what I like about it.

Let me segue into the approach that we believe would solve these kinds of problems and these kinds of requests permanently. During the most recent election cycle we spoke about a new deal for municipalities that would have three different approaches to it. Number one is that we know that we need better funding for municipalities. We need more dollars to flow through to municipalities, and we have a plan for that, which I’ll talk about in a moment. We also need better planning. We need to see a priority list, whether it’s for these kinds of infrastructure projects or any of the other many, many demands that we see at the municipal level.

Having a priority list that is public with clear criteria for how it is the projects are prioritized is absolutely essential for municipalities to be able to do their own planning. The third thing, of course, is better governance. We believe that we need to have a new relationship with our municipalities and recognize them as another order of government. The only way you do that is that you respect them as an entity which is able to raise and steward its resources without a lot of interference from the provincial level of government.

In keeping with the spirit of what the Member for Vermilion-Lloydminster has proposed, we think that a better approach and one of the options that we would hope the government would consider when they’re looking at options for how we fill this gap is what we have called our 10-10 plan, our community infrastructure transfer. What we had proposed here is rolling a number of different granting programs into a single community infrastructure transfer where 10 per cent of provincial tax revenues would flow through on a formula basis to each municipality, similar to MSI. But we have heard that there are concerns with the MSI formula. The 10 per cent of provincial tax revenues would be based on personal income tax, corporate income tax, fuel taxes, insurance taxes, tobacco tax, and so on. If you identify 10 per cent of provincial tax revenues each and every year that you earmark for municipal purposes and then develop a formula to flow it through, similar to MSI, we believe that this will meet a number of objectives.

One of the most important objectives it will meet is predictability. One of the concerns that we hear from municipalities and the reason why they’re facing such difficulty in managing things like their road budgets and the additional pressure of industrial activity is because they don’t know from year to year whether or not the municipal sustainability initiative is going to be spread out for another length of time and ultimately end up seeing them have fewer dollars or whether or not the government is going to keep its commitment year after year to provide that predictable funding. If we create a formula where we’re earmarking 10 per cent of our revenues, that provides predictability.

It also provides simplicity. We know that there is a lot of confusion in the grant application process. I’ve spoken with municipal leaders who tell me that they actually have to hire fulltime staff to be able to navigate through the approval process for grant applications. We think that having more of these grants divvied up to the municipalities on the basis of a formula gets at the issue of simplicity as well.

We also know that the level of government that governs best is the level of government that is closest to the people, and having a program like the community infrastructure transfer would meet that goal.

In addition, we believe firmly that municipalities need to have control over their own revenue base rather than having to go begging cap in hand to the province or their MLA every time they have a new need in their community. It’s simply not fair to force a municipality to have to petition their MLA to be able to get enough money to be able to pay for basic needs in their community, in this case roads and infrastructure.

It is also not fair to pit one community against another, trying to argue that they deserve a grant more than another community deserves a grant when we know that all of our municipalities have their own source needs at the local level. They’re all quite different from each other. We have an infrastructure deficit in every single community across the province, so we need to stop pitting one neighbour against the other.

It’s also not fair to have to go through some secret and mystifying process to figure out how you actually get your project moved up the priority list or, if you’re on the priority list, the secret and mystifying process that causes you to move down. We think that if you have a community infrastructure transfer based on a percentage of revenue divvied up on the basis of a formula, we would get away from the politics of determining who gets what grants and where.

The other part of our 10-10 plan is, of course, flowing through 10 per cent of provincial surpluses to municipalities. We, of course, are a party that believes it’s attainable for us to get back into budget balance, a real budget balance that includes all of our sources, both capital and operating. We also believe that once we’re back into budget balance and back into surplus, every part of our Alberta community needs to be able to benefit from it.

What we’ve seen in the past is that when the provincial government has racked up huge surpluses, they have not been as good at sharing it with those who are also the ones who are suffering from managing the pressures of growth, the pressures of growth being described in this motion. One of the things that we think we could do is take the approach of also earmarking 10 per cent of provincial surpluses and flowing it through this community infrastructure transfer on the same basis, where you develop a formula and you develop some fairness. So in a given year – let’s say that you have a billion-dollar surplus – 10 per cent of that would be $100 million flowed through to each municipality.

We know $100 million would go an awfully long way to meeting many of the community needs at the local level. In some communities it would be for seniors’ housing. In other communities it would be for recreation centres. I think that in the community of Vermilion-Lloydminster they might decide to use that to be able to repair the roads from heavy truck traffic.

Whatever it is that is the concern at the municipal level, this kind of approach allows for municipal leaders to be in the driver’s seat, where they get the resources and then are able to target the money to what they believe is the priority for their community.

In conclusion, Mr. Speaker, I think that there are a great many options for us to be able to rebalance the revenues between the municipal level of government and the provincial level of government. I think the most immediate fix would be for us to look at this well-drilling equipment tax regulation to make sure that we don’t end up leaving our municipalities short when it expires at the end of this year. But I would hope that we could engage in a broader discussion over the course of the next year or two as we’re examining the Municipal Government Act.

Surely, we do want to talk about roles and responsibilities, but you can’t talk about roles and responsibilities in the absence of fixing this fiscal imbalance. We believe that we’ve got a plan, through our 10-10 plan, our community infrastructure transfer, that would ensure that not only do we meet the needs that were identified in the hon. Member for Vermilion-Lloydminster’s motion today but that we would also address the various pressure points that we would know every single community ends up experiencing on a year-by-year basis.

With that, Mr. Speaker, I’d be happy to turn it over to the next.