Published On: Thursday, 01 December 2016

Municipal Governments on Unsustainable Spending Path

Municipal Governments on Unsustainable Spending Path

BC - The Canadian Federation of Independent Business (CFIB) has recently released a report examining municipal spending across the country, which reveals 97 per cent of British Columbia’s municipalities have increased their operating spending at an unsustainable pace since 2004.

The 9th edition of the BC Municipal Spending Watch ranks 152 municipalities based on 2004-2014 inflation-adjusted operating spending growth and the most recent spending levels per capita in 2014. This iteration places a special focus on the 20 largest municipalities. The worst ranked municipalities in the province show operating spending far outpacing that of inflation plus population growth (a sustainable rate), and have higher than average operating spending per capita.

The report shows none of the provinces’ 20 largest cities managed to maintain spending levels at a sustainable rate. The Township of Langley, Abbotsford and Delta performed worst (see table below). Maple Ridge, Port Coquitlam, and Kelowna were the top three performers of the group.

“While a few of the largest cities have been a bit more fiscally sustainable, it’s troubling to see none were even close to keeping their spending in line with the reasonable benchmark of inflation plus population growth,” says Aaron Aerts, BC Economist.

BC’s ten-year municipal spending trend is a serious concern. While the BC population in 2014 was 12 per cent higher than in 2004, the total inflation adjusted municipal operating expenditures rose 48 per cent, four times faster than population growth.

Over the past decade, the cumulative spending over inflation and population growth was $8.6 billion. Over this period, only five of the 152 municipalities managed to keep operating spending at or under the rate of inflation and population growth.

“Had municipalities kept their operating spending at the rate of inflation plus population growth over the past ten years, the BC family of four could have saved, on average, around $7,400 in municipal taxes,” adds Aerts. “Spending growth of this magnitude is simply unsustainable.”

“The vast majority of municipalities continue to spend at unsustainable rates. Thankfully, a few mayors and councils have attempted to get on a better path. The rest appear to ignore the reality that excessive growth in spending will result in higher taxes on businesses and residents”.

The CFIB report makes a series of recommendations to enable municipal governments to better control growth in operating costs, including: limiting spending increases to the rate of inflation and population growth, conducting formal core service reviews, increasing fiscal transparency, and adopting sustainable wage growth policies.