Assessing the Viability of Smaller Municipalities: The Alberta Model

Small towns, villages and rural areas in Alberta face serious fiscal challenges due to economic and social trends that have seen their populations stagnate or decline while job opportunities and young people leave for bigger cities. While other provinces have opted for sweeping reorganization to local governments, including amalgamation, annexation or the establishment of regional forms of government, Alberta has chosen a case-by-case approach to its municipalities through the use of viability reviews. Besides the exodus of people and businesses, small municipalities must also grapple with low birth rates and the attraction of big cities for immigrants looking at places to settle. Among the towns the ministry has reviewed, only one grew in population between 2016 and 2021. The majority of villages reviewed saw a drop in population and in nine communities, the population’s median age was over 50. The vast majority of Alberta’s 332 municipalities are in good financial shape. Since the viability review process was instituted, 26 municipalities have undergone reviews, with 13 voting to dissolve and become hamlets in their counties or municipal districts. Dissolution, however, is not a cure-all, because it merely transfers the municipality’s problems to the entity that absorbs it. Thus, Alberta Municipal Affairs’ involvement with these communities must be an ongoing one which involves supporting and enabling communities to track and improve their viability and help them plan for improvements. The province uses a number of municipal indicators to determine which communities are struggling and the ministry needs to pay attention to those municipalities that consistently score below the minimum on those indicators but have not sought a viability review. The ministry also needs to prioritize a focus on the consequences of dissolution, especially the costs imposed on the municipality that takes over the governance of a faltering community. Smaller Alberta municipalities can be caught in a fiscal bind because their budgets are tight and their revenue is limited, given their small and often declining population base. Yet costs for providing services, maintaining roads and other infrastructure continue to rise, while increasing taxes to fund these necessary expenditures frequently spurs pushback from local taxpayers. This situation pushes communities into deficits and makes the area less attractive to residents and potential newcomers. Non-payment of taxes also contributes to a lack of revenue in smaller municipalities. One problem dissolution brings is the perceived unfairness of the municipality’s tax burden being transferred to the residents of the region or area that newly governs it. Thus, a potential solution to ward off dissolution for struggling communities could be to stanch the flow of tax revenues to the government which target education and keep that money in the municipality to pay for infrastructure maintenance. Alberta’s viability review process is an excellent way for the province to monitor and address the fiscal struggles of individual municipalities. More must now be done to fine-tune the post- dissolution process so that Alberta Municipal Affairs can equitably address the governance problems that follow.