On Thursday, City of Edmonton administration released the proposed 2023-2026 operating budget, which is the second of four budgets council will consider in the coming six weeks.
The operating budget covers day-to-day expenses such as maintaining roads, pathways and public transit, staff wages, budgets for Edmonton Fire Rescue Services and the Edmonton Police Service, and operating facilities such as rec centres, parks and other city properties.
The city said the proposed budget balances the needs and wants of Edmontonians within the current economic uncertainty, high inflation, rising costs, reduced revenues and pandemic recovery.
It calls for annual revenues and expenditures to range from $3.2 billion in 2023 to $3.5 billion in 2026 and includes:
- $14.3 million over four years to grow existing services, including funding for the next municipal election
- $92.8 million over four years for new or enhanced services, including the Downtown Vibrancy Strategy and the Chinatown Strategy
- $57.2 million over four years to fund operations for new fire stations, improvements to 911, implementation of the safe mobility strategy, new LRT lines, improved air and surface purification systems on public transit, another phase of Nature’s Wild Backyard at the Edmonton Valley Zoo and the planning needed to open the Lewis Farms recreation centre in the west end
- $7 million increase to the base budget for the Edmonton Police Service in 2023, which the city said equates to $28 million over four years. The city said the increase is based on an updated funding formula, which accounts for the impacts of inflation and population growth
If the proposed four-year budget is passed, annual property tax rate increases of 3.9 per cent are required each year.
That is a jump from 2022, where homeowners paid 1.9 per cent and in 2021 paid nothing due to the impacts of the COVID-19 pandemic.
The city said the increase means a household would pay approximately $718 for every $100,000 of their assessed home value in 2023 — an increase of $27 compared to 2022.
That means for a typical single-family, detached home assessed at $400,000, the 2023 property taxes would be about $2,872.
Stacey Padbury, chief financial officer and deputy city manager of finance and corporate services, described it as a “prudent” budget that focuses on maintaining existing services but also takes into account the rising costs the city also faces.
“For a number of years we have been carefully watching the impact of the budget and trying to come in lower than inflation, because we know and understand the impact that has on Edmontonians,” she said.
“But in an environment of increasing inflation, to continue to come in lower than inflation would ultimately impact service delivery — so this is the level that we needed to levy in order to maintain the current levels of service.”
She said of the 3.9 per cent tax increase, about 2.1 per cent is going towards maintaining existing services.
Mayor Amarjeet Sohi said he wants to see tax increases stay under the rate of inflation.
According to Statistics Canada, the Consumer Price Index (CPI) in September of this year (the most recent data available) rose 6.9 per cent on a year-over-year basis.
“I know inflation is high at this time. It is coming down, but we would never go above — or I would say not even close to the rate of inflation,” Sohi said.
Sohi said the average household assessment comes in at $415,000 and that breaks down to $8 a day in municipal taxes.
“With those $8, Edmontonians get the roads, they get police service, they get fire service, they get recreational facilities, they get beautiful parks and a well-maintained river valley and other infrastructure that we have, and they get quality public services.”
Sohi said he thinks the city delivers good value for the taxes collected but seeking efficiencies is the focus of the budget.
Padbury said the city used the remaining funds from its COVID reserve to help offset the impact of lower user fees as transit and recreation center revenues continue to recover to pre-pandemic levels.
“As a result, we don’t anticipate big impacts on user fees for Edmontonians — most are staying the same or anticipated to go up only slightly over the four years,” she said.
When the city uses debt to finance the cost of new capital projects, the cost to service it is added to the operating budget.
While the city said it borrows at a fixed rate of interest over the term of the loan, the borrowing happens at the time construction expenses are incurred — the city doesn’t take out money in advance. For that reason, the city said operating budgets are adjusted annually to take current interest rates into consideration.
Included in this budget is debt servicing for large capital projects under construction, such as the Yellowhead Trail freeway conversion and expansion of the city’s LRT lines.
“Those projects, on the capital side, are large,” Padbury said.
“The interest in principal payments associated with the debt we incur are what show up in the operating budget.”
The city said it will also leverage debt to deliver the Lewis Farms Community Recreation Centre and Library.
“Those large-scale transformational projects also come with significant federal and provincial dollars, so they’re projects that we fund our portion with debt servicing — which absolutely impact the operating budget — but they are projects that are almost two-thirds funded by other orders of government,” Padbury said.
Debt will also be taken on for large renewal projects such as the High Level Bridge rehabilitation and the replacement of the city’s original LRT cars.
The impact of paying back debt within the 2023-2026 operating budget is significant: Padbury said the increase for debt servicing from 2022 to 2023 alone is around $30 million.
In the draft recommended operating budget, the city said the budget increases are a result of:
- Identified pressures in the existing budget, including personnel increases for wage progression
- Higher debt servicing costs as a result of new debt-financed capital projects and rising interest rates for debt-financed projects that are currently under construction or yet to commence
- Operating impacts of capital related to new capital
- Higher energy prices, which increased natural gas and utility costs
- Higher fuel costs resulting in increased program costs from operating vehicles
- Mitigation of the continuing impact of the pandemic on certain revenue streams through the use of reserves in the early years of the budget, allowing time for transit and recreation facilities revenue to return to pre-pandemic levels
- Funding for the Edmonton Police Service through an updated formula for 2023
For the first time, on Thursday the city also released a carbon budget. The city said it allows council to weigh climate change impacts when they’re making decisions about the city’s budget for the next four years.
The capital budget was released two weeks ago and presented to council this past Monday.
City council will meet on Nov. 14 to discuss the operating budget.
The proposed utility budgets will come out on Nov. 10 and be discussed at council on Nov. 25.
Budget deliberations will begin Dec. 1 and are scheduled to go for two weeks.
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