Province charts course to full restoration of grants-in-place-of-taxes system

By George Lee, Local Journalism Initiative Reporter

Alberta is financially sound enough to fully restore municipal grants based on the value of local taxation on eligible provincial properties, the government said today.

The budget tabled last month paves the way for putting $17 million more into the hands of municipalities in 2025 through the grants-in-place-of-taxes system. Another $20 million is projected for next year.

The system is separate from the major grant envelope, the local government fiscal framework, which is projected in the 2025 budget to increase by more than 13 per cent.

Grants-in-place rise first to 75 per cent from 50 per cent of the value of taxation, followed by a move to 100 per cent. The announcement is a reversal of what the UCP did in 2019 after electors chose the party to replace the NDP.

Eligible properties belonging to provincial governments in Canada are exempt from municipal taxes. But municipalities in Alberta are paid a discretionary grant rather than taxes on the provincial properties within their boundaries.

Today’s government forecasts three successive budget deficits. But the situation was more dire in 2019, Municipal Affairs Minister Ric McIver told The Macleod Gazette.

“The cupboards were bare then,” the minister said. “We needed to right-size government, because frankly, things just weren’t under control. So we actually had to look at all government expenditures and bring them into line with what was deemed to be reasonable at the time, which was a whole lot of adjustment.”

The cuts in 2019 were not popular with municipalities. Rural Municipalities of Alberta said then that the reduction would force municipalities to increase local taxes or reduce essential services.

McIver couldn’t say how long the restoration will survive. “My hope is that it will remain permanent, that’s the intention. But who knows what the future brings.”

The move reflects acceptance from municipalities that where the province goes financially, so too should municipal funding and spending. “I can tell you that our government is working hard to attract investment, jobs, a bigger taxbase, and that if we’re successful in doing that, then they’ll be along for the ride,” McIver added.

The province’s budget pegs funding in 2025 for grants-in-place at over $55 million, up from $38 million. The money is divided among 167 rural and urban municipalities with provincially owned properties like the legislature building, remand centres, court houses, and other service and admin buildings.

The funding system is projected to provide another $20 million the following year, bringing the total to more than $75 million. Tax value increases in 2027 are forecast to bump the grants up slightly to nearly $80 million.

In a news release distributed this morning, two municipal leaders are quoted endorsing the move.

The Rural Municipalities of Alberta “appreciates the government of Alberta’s increase” in 2025 and its commitment to fully restore funding in 2026, said Kara Westerlund, the organization’s president. “It’s essential that the province works in partnership with all municipalities to ensure that they have the resources to deliver the essential services their residents and business communities rely on,” she said.

Said Jeff Genung, chair of Alberta Mid-Sized Cities Mayors’ Caucus: “As we collectively look to find ways to strengthen and foster resiliency in our municipalities, this increase helps us continue to make critical investments that support residents in growing communities.” 

The news release quotes McIver as saying: “We heard clearly from municipalities that they need more stable funding to deliver local services effectively while avoiding property tax increases. Boosting (grants-in-place-of-taxes) shows how our government is doing its part to help our municipal partners fund the municipal services their residents rely on.”