Provincial grants in place of taxes down 40% since 2019, says Town

By Masha Scheele, Local Journalism Initiative Reporter

Published Oct 01, 2021

Canadian governments under fiscal pressures have a history of downloading their costs and responsibilities onto lower levels of government and Hinton is not immune to this.

Hinton saw the Grants in Place of Taxes (GIPOT) fall nearly 40 per cent from 2019 levels, a direct tax impact of more than $35,000 or 0.3 per cent of taxes, according to Hinton’s communication coordinator.

“[By next year], the total revenue lost by the Town from Grants in Lieu is 50 per cent or $32,655.42 no further communication has come out for future losses,” said Carlos Tenias Gil, Hinton’s communications coordinator, on behalf of the Town in response to questions from The Voice.

“Understanding that the province of Alberta has its own fiscal pressures, it’s disappointing to see these cuts trickle down to municipalities,” said Mayor Marcel Michaels.

After a 50 per cent cut in funding over the past two years, GIPOT was forecasted to remain at $30 million per year for the next three years, according to the Alberta Urban Municipalities Association (AUMA). The past reductions disproportionately impacted communities with provincially owned properties that are exempt from property tax.

The GIPOT program is being reduced by 32 per cent in 2020-21 on top of the 24 per cent reduction in 2019, stated the Town of Hinton.

The Ministry of Municipal Affairs clarified that no additional decreases are expected to GIPOT. The 2021/22 program budget is $30 million; future years targets 2022/23 and 2023/24 are also $30 million.

“Residents and businesses already face huge challenges when it comes to property taxes, fees, and other costs. Cuts such as these add extra pressure on the municipality to either find new money, increase taxes, or cut services,” Michaels said.

Michaels will continue to lobby the provincial governments to look at creative ways of securing new money and avoiding the downloading of costs to municipalities. 

The loss of Grants in Lieu revenue, like any revenue loss, is ultimately recovered through property taxation at large, stated the Town’s communication coordinator. All revenue recovery is seen in tax increases or curtailing service levels.

“The reduction in the GiPOT program funding is aligned with our government’s commitment to reduce operating spending, while continuing a portion of the grant to contribute to the cost of municipal services to government properties that would otherwise be exempt from taxation,” stated Greg Smith, press secretary for Ric McIver, Minister of Municipal Affairs.

He noted that for most communities, the reduction in GiPOT is a small proportion of their overall revenue, compared to what they generate in property taxes, provincial grants like the Municipal Sustainability Initiative, federal grants such as the Canada Community-Building Fund, and other local sources of revenue. 

“Like the provincial government, municipalities must make choices to determine what infrastructure and services they will provide, and how they will fund these within the available revenue sources,” Smith said. He added that the province implemented the reduction to GiPOT in phases, to give communities more time to adapt to the new funding levels.

GIPOT is meant to cover the costs of the services municipalities provide to Crown properties, which are exempt from tax. Crown-owned properties are exempt from assessment and therefore exempt from taxation, but the Government of Alberta pays a grant equivalent to the property taxes that would otherwise be levied on many of these properties. Approximately 170 municipalities receive GiPOT for 6,600 Crown properties.

“Municipalities will need to look for ways to cover these costs through user fees or other mechanisms so that other property owners don’t have to subsidize the costs of providing essential services such as policing, fire, water and waste management, and transportation for provincial properties,” stated Tenias Gil, Hinton’s communications coordinator.

In 2020, the total revenue lost by the Town of Hinton from the GiPOT claw back by the province is 25 per cent. This reduction was initially announced in the province’s 2019 – 2020 fiscal plan.  

Budget 2022 will be released this fall. It is currently too early in Hinton’s budget process to provide a figure on revenue losses, as the 2022-2024 operating plan is being prepared.

The Town is reviewing the continuing impacts of the pandemic on the current and future municipal budgets.

It was announced in the 2021-22 Alberta Provincial Budget, that in coming years Municipalities would see significant cuts to the Municipal Sustainability Initiative (MSI) but the full local impact of the Province’s plan is not yet known.

This item is reprinted with permission from The Hinton Voice.

If you wish to comment on this story, click HERE for the Discussion Board at TheRegional.com/AlbertaChat.com