Fiscal impact of municipal annexations in Alberta, Canada: A prolific growth strategy

Abstract

This study examines the financial implications of municipal annexations in Alberta, where annexation rates are among the highest in Canada. Many academics have attempted to draw conclusions about the fiscal impacts of annexation, finding that population and density growth drive fiscal outcomes. This study provides another viewpoint by focusing on those municipalities within Alberta, Canada, where abundant farmland is available for annexation, with relatively little provincial control. Consequently, annexation is pervasive across municipalities with varying growth trends, including those with declining populations and density loss. Theoretically, this calls for greater expenditure from costly low density development. Using local financial, annexation, and population data of 240 municipalities, we confirm that fiscal effects of annexation vary with local populations and density growth trends. However, study results contradict theoretical expectations, suggesting that annexation in high growth municipalities is associated with expenditure expansion and revenue contraction, while nongrowth municipalities face no fiscal consequences.