The City of Edmonton’s proposed operating budget has taken centre stage at City Hall, as budget season continues.
“The proposed operating budget is the City’s recommendation for funding the programs and services that Edmontonians rely on every day, as well as the property taxes needed to make those programs and services happen,” said Stacey Padbury, Chief Financial Officer at the City of Edmonton.
The operating budget is one of four financial plans that City staff (Administration) is presenting to City Council this fall. Over the next weeks, members of City Council will ask questions about, debate, adjust and approve the 2023-2026 budget.
For the first time, Administration has also developed a carbon budget, which will support City Council in its deliberations and track Edmonton’s progress against its carbon emission goals.
Budgets of whatever kind are about priorities and choices, especially in times of high inflation. It costs more these days to fuel a car, pay for heating and electricity and borrow money. The City is facing the same cost increases, but on a larger scale. It costs the City more to deliver the same services.
“We have limited resources, and we know that many Edmontonians are stretched thin,” said Padbury, who is also the Deputy City Manager of the Financial and Corporate Services Department at the City.
“Like many Edmontonians, we have to prioritize and make some difficult decisions about our spending.”
The operating budget and you
This chart shows how the proposed operating budget is allocated across different programs and services in 2023. Operating programs include roads, parks, transit, police and fire, libraries, social supports, summer pools, winter skating, recreation centres and attractions, snow clearing and repair crews, as a start. Administration is proposing annual revenues and expenditures to increase from $3.2 billion in 2023 to $3.5 billion in 2026, with an annual tax increase of 3.9 per cent each year.
The proposed budget is focused on maintaining programs and services for Edmontonians, while also keeping taxes and user fees manageable. Just maintaining existing services (including fuel and supplies, personnel and paying off the debt on construction projects) would require tax increases of 2.1 per cent in 2023, 3.4 per cent in 2024, 1.5 per cent in 2025 and 4.5 per cent in 2026.
What does the money do?
You’ll notice the top three shares are police, transit and debt repayment. Let’s walk through these items in a bit more detail.
A few years ago, the City developed a funding formula to increase the police budget based on factors like population growth and inflation. City Council asked Administration to update the formula this fall, and it’s being applied for 2023, which means a $7 million increase to the base budget of the Edmonton Police Service. This equates to a 0.4 per cent tax increase in 2023. Council asked Administration to revisit the formula again in the new year.
Community Safety and Well-Being
The proposed operating budget also includes funding for Community Safety and Well-Being. This work is funded by Council’s redirection of police funding in the last budget cycle. The proposed operating budget recommends the redirected money be used in the City’s responses to encampments and unsheltered homelessness, and missing and murdered Indigenous women and girls, and to activate the City’s response plan for Truth and Reconciliation.
The proposed expenditure budget for Edmonton Transit (budget not including revenues) would increase by $11 million from 2022 to 2023, going from $414 million in 2023 to $429 million in 2026 to maintain services while responding to rising costs like fuel.
Transit fare revenues are still recovering from the impacts of the pandemic, which creates a budget shortfall. Instead of making up the difference through property taxes, Administration is recommending funds set aside in reserves for COVID financial impacts be used to offset the shortfall allowing some time for ridership recovery to return to pre-pandemic levels.
Several potential service additions—like permanent On Demand Transit service, express airport service from downtown and additional off-peak hour (midday, evening and weekend) service—are not funded in the proposed budget. Instead, they are presented as options that Council can consider during budget deliberations in December.
On November 2, 2022, one day prior to the proposed operating budget being released, EPCOR announced an $8-million increase to the annual dividend it pays to the City. This was new information. The money wasn’t included in Administration’s proposed budget. One potential use of the $8 million is to permanently fund the On Demand Transit service. In April 2021, the City launched its On Demand Transit service with funds in place until April 2023.
The City uses debt for capital projects, including LRT network expansion and Yellowhead Trail widening. In many cases, debt is used to match funding provided by other orders of government. Funding these projects without debt would mean saving up tax dollars for decades before starting project work. This would mean many Edmontonians would pay taxes to help fund a facility, road or LRT line that they would never get to use. Tax-supported debt financing allows for the cost of long lived assets to be spread across the generations who use the service.
Tax-supported debt servicing (paying back the principal and interest on a debt over a period of time) will go from $347 million in 2023 to $469 million in 2026. This increase is a result of previously approved capital projects including those recommended in the proposed budget to be funded from tax-supported debt and the impact of higher interest rates on previously approved capital projects in progress.
The proposed operating budget also includes new debt for critical renewal projects, including High Level Bridge rehabilitation and some original LRT car replacement.
Here’s how debt servicing contributes to the proposed 3.9 per cent tax increase:
The proposed operating budget has some recommendations for new spending including:
• Growing existing services
The budget recommends $14.3 million over four years to grow current services in response to Edmonton’s population growth. This includes funding for the next municipal election, which will have more voters.
• New and enhanced services
The budget proposes $92.8 million in new or enhanced services. This includes funding for traffic safety, and funding to respond to emerging needs like the Downtown Vibrancy and Chinatown strategies.
• Operating new infrastructure
Administration proposes $57.2 million to operate programs and services from previous capital budgets. Over the next four years, this will include the people and things needed to operate two new fire stations, improvements to 911, new LRT lines and to expand the Nature’s Wild Backyard exhibit at the zoo. It also includes the preparations needed to open the new Lewis Farms Recreation Centre and Library.
Where does the money come from?
Fifty-eight per cent of the City’s proposed operating budget comes from property taxes. This diagram shows the source of all revenues.
In the City’s 2019-2022 operating budget, property tax increases of 2.6 per cent annually were initially approved. Over the last three years, however, property tax increases were reduced to support Edmonton households and businesses through the economic challenges of the COVID-19 pandemic. Across the cycle, property tax increases were 2.6 per cent (2019), 1.3 per cent (2020), zero per cent (2021) and 1.9 per cent (2022), which brought property tax increases, on average, below consumer inflation over the 2019-2022 period.
“While this was necessary in the short term, it isn’t sustainable in the long term without adjusting our service levels,” said Padbury.
Administration is proposing a 3.9 per cent increase to property taxes in each of the next four years. This increase means Edmontonians would pay about $718 for every $100,000 of their assessed home value in 2023, an increase of $27 compared to 2022. On a $400,000 house, this would be a $108 increase in 2023.
The table below breaks down the proposed 3.9 per cent increases.
Budgeting for carbon
The City of Edmonton is among the first municipalities in North America to present a carbon budget with its proposed financial plans.
The carbon budget shows the greenhouse gas impacts of budget requests. This allows City Council to weigh climate change impacts when making budget decisions. The carbon budget is a tool, and not, like the capital, operating and utility budgets, a plan that is debated over on the way to approval.
The carbon budget also allows the City to track progress against goals for carbon emissions. Forecasts show the city of Edmonton as a whole is on track to deplete its carbon budget of 176 megatonnes of carbon dioxide equivalents (CO2e) by 2037. Instead of being carbon neutral by 2050, Edmonton would have a carbon deficit of 12.95 megatonnes CO2e a year.
The City of Edmonton is actively working to reduce its own emissions from municipal buildings and the municipal fleet. The City’s corporate emissions make up about two per cent of overall emissions in Edmonton. That means that 98 per cent of emissions come from the community. The City has a role in reducing community emissions, but it will take a larger collective effort, including support from other orders of government, private investment and the actions of all Edmontonians, to be carbon neutral by 2050.
You can follow the budget process at City Council or sign up for a public hearing by visiting edmonton.ca/meetings.
The proposed Utility Budgets and Rate Filings (Blatchford Utility and Waste Services Utility) were released on November 10, and were presented to Council on November 25.
You can submit your input through Council Correspondence. Budget deliberations start December 1 and are scheduled to run until December 16.
This budget is the Administration’s proposal. It will be debated, adjusted and, ultimately, approved by City Council.
Learn even more about all things budget at edmonton.ca/budget.
Editor’s note: the pic at the top of the post is a file photo of skaters enjoying the rink in front of City Hall in Edmonton.