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2024 Budget Adjustment

Updated: Dec 4, 2023

This week, Council passed the 2024 Capital and Operating Budget Adjustments. After thorough debate, and a number of key amendments, Council was able to reduce the proposed increase from 7.09% to 6.6%.

Going into this adjustment, I was committed to exercising restraint while still investing in the core programs, services, and infrastructure Edmontonians expect to see as our city continues to grow. Affordability and livability was top of mind throughout this adjustment, as was maintaining focus on delivering on the key priorities outlined in Council’s four-year budget.

I was not surprised when we were presented with a proposed 7.09% tax increase (up from 4.96%). Much of this increase was driven by decisions made earlier this year to adopt a new police funding formula. Arbitrated police salary settlements, rising utility costs, and lower than expected transit revenue added to the increase as well. See the full breakdown here.

Nonetheless, seeing the proposed increase was alarming, especially given the financial pressures Edmontonians are already facing. While it may seem like a small reduction, I was pleased Council was able to reduce the increase as much as possible. It took collaboration, a great deal of discipline, and a commitment to continuing to find efficiencies and cost savings as we move forward with exercises like OP12.

An increase of this size is far from ideal. Beyond the cost drivers listed above, it’s worth taking a step back to look at why Edmonton, like other major Canadian cities, is facing compounding budgetary challenges at this time.

At a high level, the following cost drivers are straining our fiscal sustainability:

  • Unstable macroeconomic conditions

  • Deferred investment that has lagged behind growth

  • Downloading from other orders of government

The financial pressures we have been facing in Edmonton are not unique. Other major municipalities in Canada are facing the same challenging conditions, and in most cases they have responded with higher increases to their residential property taxes.

Unstable Macroeconomic Conditions

The economic fallout from the Covid-19 pandemic continues to negatively affect Edmonton’s finances. Between our depleted Financial Stabilization Reserve, the dramatic increase in costs due to inflation, and rising interest rates, the buffers the City had in place to weather storms have been exhausted.

Households and businesses have been struggling with dramatic inflation, and the City of Edmonton is no different. Since 2020 our purchasing power has decreased 19.6%. We have experienced population growth of approximately 7.6%, and in that time, taxes have risen by just 8.3%, resulting in a staggering 18.9% gap by 2023. This should help explain why so many Edmontonians are wondering why service quality has declined, and why 2024’s taxes must be increased by such a substantial amount.

Our Financial Stabilization Reserve is below its minimum balance after being appropriated during the pandemic, and a substantial $52 million deficit has emerged throughout this past year. The cost of servicing debt has increased as well, due to both rising interest rates, as well as the decision by the provincial government to raise the premium it charges municipalities on debt.

In sum, these pressures are challenging our ability to smooth tax increases and action must be taken if we are going to continue to operate in the way Edmontonians expect.

Deferred Investment

After several years of 0% or near 0% tax increases, we are now facing the consequences of deferred investment in the core services, programs and infrastructure Edmontonians rely on and expect. While years of running tax rates well below inflation might have been justifiable throughout the pandemic, these decisions simply kicked the can down the road, leaving future Councils to pick up the pieces.

The result has been an erosion of services, and a growing gulf between expectations of residents and the City’s actual financial capacity to deliver the same quality of services. The combination of Edmonton’s $470M annual infrastructure renewal deficit, and the 18.9% annual operating funding gap can no longer be ignored. I understand that Edmontonian households and businesses are feeling strained, but we will no longer be able to deliver basic services and infrastructure maintenance if we continue passing artificially low tax rates year after year after year.

Unfortunately, these issues cannot be solved simply through efficiency exercises. These are systemic challenges that require serious changes to how we plan, manage, and pay for the growth and renewal of our city.

During our budget debate, the Deputy City Manager for Integrated Infrastructure Services warned Council that “we will hit a point where each [Councillor] will receive calls about too many potholes; what are we going to do about them? I predict that will happen during this budget cycle. There will be facilities where we will have to duct tape and binder twine and adjust to make sure that we are keeping them operational. That will continue to happen because not only are we underfunded, we have a plethora of assets that we need to maintain as a city.”

We cannot continue kicking the can down the road and expecting a different outcome. We have hit the end of that road and the consequences of pretending we haven’t would be dire.

Downloading and Cuts

As I have discussed many times before, municipalities are increasingly stepping into areas outside of their jurisdiction to make up for inadequate investment from other orders of government. This has real ramifications for municipal budgets, and our fiscal viability.

The homelessness and opioid crisis continue, and the number of unhoused Albertans trying to survive on the streets in Edmonton has doubled since the pandemic. There has not been a commensurate increase in provincial funding. Municipally, this has resulted in higher resource demands for EPS, Fire Rescue Services, Peace Officers, Transit Security, encampment supports, and other municipally funded emergency response workers. Provincial police funding has also seen reductions as a result of cuts to photo radar.

We are not well positioned to address these systemic issues alone, and many tools like healthcare are simply beyond our jurisdictional powers. We are working hard to mitigate the symptoms, but need all orders of government to work together to achieve the results I hear Edmontonians demanding. Not only is it the right thing to do, it’s the fiscally responsible thing to do.

Further worsening the situation, downloading has occurred alongside municipal disinvestment. The level of support that was once offered from the Province to support municipal infrastructure has fallen off a cliff since 2017. This means a smaller share of provincial revenues are funding infrastructure, and a greater share of property taxes are being levied to make up the difference.

At the end of the day, Edmontonians expect services to be delivered, problems to be addressed, and action to be taken. Homelessness may not technically be the jurisdiction of the City, but we cannot sit idly by while 3000+ people struggle to find a home. Similarly, while the provincial government may be underinvesting in our infrastructure, we cannot allow our city to crumble.

I understand this means a greater share of our property taxes are required, but the alternative is even less palatable.

Investing in Core Services, Transit, & Public Safety

A significant portion of this budget is dedicated to enhancing public safety. Police funding is the major driver behind the deviation from the planned four-year budget (4.96%). Of the 1.64% increase, 1.63% is associated with increased police funding.

Notably, 1.02% is from an arbitrated police salary settlement. One of the reasons I was unable to support the funding formula several months ago was because of the risk and uncertainty it exposed us to associated with arbitrated settlements. We are now seeing the consequences of this decision. That being said, I respect the decision that was made by Council, and I am committed to moving forward.

We are also investing in urgent priorities like affordable housing and encampment response, as well as core services like fire response, snow and ice, and library services.

Public transit is also seeing a boost in funding, which will help us respond to growth pressures. Bus service is an example of a line of service that has been chronically underfunded for many years, with service stretched thin, amounting to a 260,000 annual service hour deficit.

This year we are taking important steps to reverse that trend. By redeploying the Valley Line South East service hours, and investing in a satellite bus facility, we are making a timely investment that is our only realistic opportunity between now and the opening of a new transit garage in 2030 to increase service for Edmontonains.

It’s these kinds of investments that have compounding benefits. Public transit not only gets people where they need to go from a transportation perspective, but it is a vehicle for economic growth, prosperity, affordability, access, and climate action.

Beyond these highlights, Edmontonians will continue to benefit from 70 City of Edmonton lines of business for $8.71 per day. Even if you are not personally accessing them, in a city of 1 million people, growing to 2 million, you are likely encountering people who are.

Ongoing Work

Work continues on OP12 - a Council directed efficiency and prioritization exercise. This body of work will reduce annual operating expenditures by $60 million and reallocate an additional $240 million toward core services and key priorities.

This exercise will force Council to make some difficult decisions, and I look forward to these conversations. These exercises have real value, however, I want to be clear that in the face of the current macroeconomic headwinds and growth pressures, efficiency alone is insufficient to support the city and services that Edmontonians expect.

When we ask our administration to do more with less, often they are able to find ways to achieve reductions. However, efficiency is not a cure-all and you can not simply efficiency your way to service delivery and infrastructure maintenance infinitely. Digging too deeply will compromise service delivery.

I also look forward to finding ways to fund items that did not make it into this adjustment. This adjustment was full of compromises, and I am optimistic that through future adjustments we will be able to accommodate these needs.

As we move forward together, I am committed to achieving the vision outlined in our four-year budget. As unsatisfying as this budget may feel, it is a reflection of the very real pressures the city is facing right now. It strikes a balance of keeping the increase as low as it can be at this time without compromising our ability to deliver the core programs, services, and infrastructure Edmontonians expect and that will attract and retain people for years to come.



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