How Does Rate of Inflation Impact the Budget?

The rate of inflation is a good indicator of the costs required to maintain operations.  However, the rate of inflation for a municipality is different from the standard rate of inflation, referred to as the Consumer Price Index (CPI).  The CPI is based on a basket of goods for the average consumer, who is maintaining a household and buying, for example: groceries, clothing, furniture, personal electronics, and more.

Building a budget for a municipality involves a much heavier basket of goods, one that includes the products and services to maintain and develop a city.  This includes: heavy construction products and services to build and maintain roads and sewer systems; labour to run programs and services; buses for the transit system; specialty equipment and vehicles for emergency services; and more.  All of this is factored in to what is known as the Municipal Price Index (MPI).

Due to the types, variations and quantities of purchases required by a municipality, the MPI is understandably different, and typically higher, than the CPI.

The City has developed a St. Albert-specific MPI that takes into account our targeted needs and the corresponding financial implications.  While this is the case, the City used the MPI strictly as a benchmark for reference and not as a development tool for the 2010 base budget.

At the time of the projected budget, the CPI was sitting at -1%, while the St. Albert MPI was at around 3%.