Municipal Financial Viability

MunicipalFinancial Viability

MunicipalFinancial Viability

Theavailability of enough finances is one of the important determinantsof success for local governments. According to Diamond (1999) localgovernments are hard-pressed in the same way as national governmentsto identify and make use of financial resources with the aim ofattracting, developing and retaining capable well-trainedbureaucracies. As such, financial viability is a crucial variable inthe success of municipalities and other local governments. Theprovince of Alberta has a total of 357 municipalities and as per the2011 statistics, it is the 4thmost populous province in the country. The town of Athabasca is oneof the 357 municipalities in the province (Masson&amp LeSage, 1994).This paper seeks to investigate the financial viability needs of thetown of Athabasca municipality and identify the major financialissues faced by the municipality and others around the country. Themain question the paper answers is “why is financial viabilityimportant for the town of Athabasca municipality?”

Thefinancial viability of Canadian municipalities is of great importanceas it ensures that the people at the grass root levels get access tothe public services and goods that ensure their welfare is well takencare of. Just like most of the institutions of governance around theglobe, emerging external and internal stress factors continue to pilea lot of pressure on Canadian municipalities. This is because themunicipal governments have the mandate to provide to deliver a widerange of services that are required by the local taxpayers. Theprovision of these services requires financial resources, which areusually sourced from the central government as well as from withinthe municipalities themselves (Masson&amp LeSage, 1994 Tindalet al., 2013).Changes in the global financial trends have had both direct andindirect impacts on the financial health of most municipalitiesincluding the town of Athabasca municipality. These changes haveaffected the municipalities by impacting the traditional fundingpartners at both the territorial and provincial levels. As a result,Canadian municipalities are increasingly moving towardsself-evaluation and fundamental transformation as a way of overcomingthe negative effects of these changes (RodríguezBolívar, Navarro Galera, Alcaide Muñoz &amp López Subirés,2014).

Overthe past few years, most Canadian municipalities have beenexperiencing fluctuating economic trends including the level ofinvestment. This in turn has had an adverse impact on themunicipalities’ tax bases. The effect of lower levels of commercialand industrial investment, as well as a decline in the resourcetransfers from the central to the local governments, has over thepast few years been felt by most municipalities including Athabasca.Since such changes directly affect the capacity and capabilities ofmunicipalities to deliver services, analysis of the issues affectingthe financial viability of the municipalities is very important(Tindalet al., 2013).

Dolleryand Grant (2011) investigate the financial sustainability andviability of local governments in Australia. They opine that forcontemporary public policy, the issue of sustainability has becomevery important. They argue that given the dual role of localgovernments as a local service provider and a local democraticinstitution, there are tensions as well as difficulties in adequatelydefining the fiscal sustainability. Dollery and Grant point out thatfinancial sustainability can be more accurately described asfinancial viability within the local governments and thatsustainability within the local governments covers the actions ofthese governments directed at global sustainability. On the otherhand, Craythone (2006) is of the view that municipal financialviability has to do with the municipal’s ability to generate enoughincome to meet the debt commitments as well as operating expenseswhich in turn facilitates growth while maintaining service levels.

Asa municipality, the main functions of the town of Athabasca includethe provision of infrastructure, maintenance of currentinfrastructure as well as the provision of municipal services thatdepend on this infrastructure. All these actions require financialresources and for the municipality to ensure that its operationspertained to the provision of these services and infrastructure aresustainable, it has to ensure that it had adequate financialresources. Apart from that, municipalities have the mandate to ensuretheir finances are managed within the established legal framework andthat the municipality as an entity is a sustainable one. Knowledge ofthe municipal’s sources of finance, as well as the different areasin which the finances are directed to, is thus important (Devas,Blore &amp Slater, 2012).

Kanyane(2011) is of the view that the viability of a local government isstrongly determined by public finance. He points out thatmunicipalities require sound financial management systems in order tomaintain their operations. This means that the management of financesis among the important components of financial viability. Amunicipality that is financially viable will have a sound financialmanagement system (Tindalet al., 2013).Such a system will not only allow for loopholes that may lead to theimproper utilization of funds to be sealed, but it will ensure thatthe financial resources are adequately allocated. Apart from that,municipalities that are financially viable are able to identify themost appropriate sources of financing. The main sources of financeavailable for local governments include external funding sources,grant funding sources as well as surplus income. Analysis of themunicipal’s financial viability will allow the municipal leaders toidentify the most affordable and sustainable funding sources(Gianakis&amp McCue, 1999).

The2013 Town of Athabasca Municipal Corporate review reveals that thetown’s financial position as indicated in the financial statementsas well as the financial indicator graphs were relatively strong. Thereport points out that the municipal’s financial shape during thattime was good, with the budget deficit being very minimal (Sykora,Sheridan &amp Nosko, 2013).The report states that most of the budget deficit was attributed torecreation, wastewater as well as infrastructure. Apart from that,the report reveals that the municipal’s long-term debt isrelatively low and that the town has utilized only 13% of itslong-term debt limit. However, it is reported that the debt servicingis relatively high compared to the accessed long-term debt limit,with short-term lines of credit as well as demand loan payments beingthe main drivers of the higher rate of debt servicing. The reportconcludes that the town of Athabasca is financially viable and thatmost of its services are running as planned and within the town’sbudgetary capabilities (Sykora,Sheridan &amp Nosko, 2013).

Inconclusion, financial viability plays a crucial role in the successof a municipal government. Financial viability allows localgovernments to provide the services the governments are mandated toprovide to the ratepayers without any risk of running out offinancial resources, which in turn could jeopardize all theoperations of the local governments. The Athabasca town municipalityis financially viable, a fact that has allowed the municipality torun its operations and projects successfully. The financialviability of Athabasca municipality and other Canadian municipalitiesis thus important as it ensures that the people at the grass rootlevels get access to the public services and goods that ensure theirwelfare is well taken care of.


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