Budget 2020 - Highlights and Conclusion

Last year I wrote about our 2019-2022 Budget Deliberations. It was the first time we were approving a four-year Operating and Capital Budget. We had previously approved multi-year budgets so there was a good idea of how this process would go. Typically once we have approved our multi-year budget, there aren’t usually major adjustments each year but rather smaller tweaks. But as noted in my Budget 2020 Introduction Blog, there was a major reduction in operating and capital funding by the Province in their budget that they released this October.

Before I go into detail about specific capital projects that have been impacted, I want to provide some details on the general impacts. The 2.6% tax increase that was planned for 2020 was to breakdown as follows:

Edmonton Police Service = 1.0%Valley Line (Southeast and West) Funding = 0.8%Alley Renewal Funding = 0.4%Service Changes = 0.3%Maintain Services = 0.1%If you want to understand how we settled on those numbers along with my take on the previously approved budget, please review the blog posts linked above.

While the original plan was to approve a 2.6% increase, after a number of adjustments and reductions the final increase was lowered to 2.08% which is the lowest tax increase in 23 years. If we use the average assessed value of a home in Edmonton, which is $399,500, the total increase for 2020 will be $75.46 or $6.29/month.

The breakdown for the 2.08% increase is as follows:

Edmonton Police Service = 1.0%Valley Line (Southeast and West) Funding = 0.8%Service Changes/Maintain Services = 0.28%As you will read below, some services are being reduced, many projects across the city were cancelled, and the alley renewal program is being adjusted (but not cancelled).What is important to note is how we ended up with that number and for that we have to review what happened in the provincial budget. The following changes made by the provincial budget impacted our operating budget in the following ways:

• A reduction to Grants in Lieu of Taxes currently estimated to be a $14.0 million reduction in taxation revenue for the 2020 budget.

• A decrease in the amount of revenue from fines and penalties as the provincial share will increase from 26.7% to 40% and this is expected to reduce fine revenue for the City by approximately $7.0 million in Automated Enforcement and a further $2.7 million for Edmonton Police Services (EPS).

• New increases for biological case work analysis (i.e DNA testing) is estimated to have a $2.3 million increase to the EPS operating budget.

If Council had chosen to maintain the previously approved budget and then simply add the additional costs to the property tax base, our property taxes would have been increased by 1.7% (from 2.6% to 4.3%). Understandably, we knew that would not be acceptable as the economic conditions are quite challenging.

Every year, our Administration actively works to find efficiencies and cost savings in order to either reduce the amount needed through property taxes, or to reallocate any savings to emerging priorities. Since that work was already underway, the only thing that changed about their work is what the savings went to. Instead of using the approximately $26 million in savings to decrease our previously approved tax increase from 2.6% to 0.9%, we had to use it to compensate for the 1.7% increase that was created by the provincial budget. If you apply that 1.7% that was a result of the changes by the Province, our final increase would have been 0.38%.Even though this was the lowest tax increase in over two decades, it didn’t feel as good as it should of. Approving the lowest increase in more than two decades would be something to celebrate, but the economic conditions are still challenging and there are many people who are struggling. In the end, I chose to support the budget because I believe that we did almost everything in the City’s control to keep costs to a minimum. Since we have no control over the provincial budget, I had to accept that we were not going to finish as low as we could have or that many of us wanted. People from across Alberta had to make adjustments and we were no different.

Capital ProjectsThe operating budget wasn’t the only area that we saw a reduction in funding due to the provincial budget. Unfortunately, the City saw a reduction in infrastructure funding by the Province of $183.4 million over two years. That is a significant amount of money that created a large gap in our available funding for capital projects. The City’s Debt Management Fiscal Policy sets a more strict debt limit for our city than what is permitted by the Municipal Government Act. A reduction of this size means that the available debt room is reduced and previously approved projects had to be cancelled or deferred.

While I will cover some of the specific Ward 1 projects below, I did want to note that all parts of the city were impacted by this reduction. We saw reductions in new parks, road improvements, design work for many projects including future rec centres in other parts of the city, replacement buses, and many other areas.

The impact was going to be across the city because of such a large reduction in funding by the Province. Knowing that all areas were going to see reductions, Council’s goal was to stay focused on renewal work so as to not create a situation where future Councils have to catch up on deferred maintenance. That can often happen when times are tough but all it does is create a much larger problem for people in the future. For those wondering how that impacts some of our larger projects, I will address a few of them below.

Lewis Farms Rec Centre and Library

I’m going to start with the bad news because I know many people in the West have been eagerly awaiting a recreation centre and library. Last year in my budget blog post I wrote the following in regards to approve setting aside the money for this critical project:

“So now you might be asking, “Does this mean it will absolutely get built?” The answer is no. If the economy were to get significantly worse or if the price of the project came back even higher than the amount currently set aside, Council could decide not to proceed with construction. But I’m feeling quite optimistic that the project will receive final approval next year. While the ideal situation would have been to approve the entire budget without a need to report back, that was not the realistic way forward. This gives us that final check-in point on what is going to be a significant project.”

Approximately six months later, Council received a report which showed that we had examined a variety of methods to keep costs to a minimum. Upon receiving that report, Council formally approved the funding which triggers the requirement to pass a borrowing bylaw. That step is typically a formality but prior to passing that bylaw, the Province released their budget and the large decrease in funding referenced above, became our new reality. Although Edmonton’s economy hadn’t drastically changed, the funding that we rely on to help build many of our infrastructure projects did change.

That leads to the question of what actually happened during our budget deliberations. The motion that was approved requires that the existing work is completed and that the project be deferred. That means that all of the design work and land acquisition will be finished as originally planned and it ensures that this project is ready to be tendered without any additional work.

What does that mean for the timeline? At the moment, it’s hard to say. Since the current work was supposed to wrap up in a little under a year, there is still another opportunity to discuss this project during our 2021 budget deliberations. Now I don’t want to create a false sense of hope, with the reduction in infrastructure funding, moving forward with the project this time next year is still unlikely. But because we will have completed our final design work, we will have new information to help inform that conversation.

For example, we currently have a $55 million contingency built into this project in part because of the soil conditions in the area. Once the final design work is completed later next year, we will have a much better idea if that contingency funding is actually needed or if it can come off the total projected price.

We could also consider a phased approach for certain parts of the project. While I’m not suggesting this as a final approach, if the economic conditions don’t shift, we may need to consider alternatives because I’d much rather see this project built with most of the programming needed and the ability to add in the remaining parts then not build the project at all. An example of what that could look like is the twin arenas. All of the servicing could be put in place but the structure could be built at a later time and that would result in a $32 million savings today.

It’s fair to point out that anything we phase-in will cost that much more in the future but it’s something we may need to consider if the choice is between building something that does not have everything or building nothing and waiting many more years for something that is already needed.

Upon completion of the final design work, there will be a formal report back to a committee of Council. This will likely come back in the Fall and will be a public meeting at City Hall where residents will have the opportunity to speak to the information in the report. Prior to that, I’d like to host some meetings to talk about this process in greater detail and gather more feedback from residents. Although I’m not sure the Province would reconsider their cuts, it may also be worthwhile to reach out to Edmonton’s UCP MLA (Minister Kaycee Madu). If they hear from a lot of residents regarding their large cuts to infrastructure funding, maybe they would make a change in their Spring Budget.

This is easily the biggest disappointment of the budget for me and I know that feeling is shared by many residents in Ward 1, particularly those west of the Henday. Some residents of Lewis Estates have been waiting more than two decades for this and there are many other residents in Secord, Rosenthal, Westview Village, and Big Lake who would like access to the same type of facility that can be found in the southwest, southeast, and northeast.

While every part of the city saw reductions in capital projects, this was the largest project that was impacted. I believe this is something that will need to be revisited next year after the completion of the existing work to try and keep this as close to the originally planned schedule as possible. My commitment is to work with each of the communities prior to the report back so we have a chance to reflect on what actions we might be able to take.

Valley Line West LRT

If the deferral of the Lewis Farms Rec Centre and Library was the biggest disappointment, the final confirmation of the Valley Line West LRT was the greatest success. After more than a decade of debate and analysis, the Valley Line West LRT is moving forward. This is one of the most transformative projects, not just for the west end, but for the entire city.

I won’t repeat what I wrote a few weeks ago but I would encourage you to take some time to learn more about the proposal that was suggested to switch from LRT to a bus rapid transit (BRT) system.

The reason why this was even allowed to be debated was that a member of Council who previously voted in favour of it had brought forward a motion to rescind Council’s previous direction. After another lengthy debate, Council once and for all has agreed to build the LRT out west. While you have all likely seen that there is some work underway by EPCOR to relocate utility lines, the contract to build the line itself has not yet been approved. That process to sign a contract is underway and will be completed next year. No further motions to revisit this can be made and therefore this project is now set in stone.

I know there has been a lot of demand for this particularly from younger families who are thinking about what they will do when their children are ready to attend high school/post-secondary. Buying a second, third, or fourth car is not practical for everyone and this will provide residents with reliable, efficient, and quick transportation across the city. It will also create opportunities for redevelopment along locations like Stony Plain Road. This will help with ongoing revitalization efforts which is a common goal for many of us.

West Edmonton Mall Footbridge

Many of you have been closely following the updates on the West Edmonton Mall (WEM) replacement footbridge. There was a large town hall organized by the West Meadowlark Community League who is directly impacted by the loss of the footbridge. Generally speaking, the majority of people I speak with want to see the bridge reconstructed as soon as possible. This bridge often serves as a lifeline for seniors and people with limited mobility to access a variety of services in the mall. For those same people, trying to cross 170th Street at street level is unsafe because it’s such a wide arterial road and for those who move a bit slower, it’s hard to make it across before the light changes which creates significant safety concerns for all.

It is worth noting that there are some residents who live a short distance from the bridge that had concerns around safety and saw a decrease in the crime rate once the bridge was demolished. For these residents, a rebuilt bridge in the same location would not be ideal because it would create ongoing concerns. At the same time, we know that moving the bridge all the way to 87th Avenue would be very challenging for those with limited mobility.

One of the permanent designs being considered is a bridge somewhere in between the previous bridge and 87th Avenue. This would address the safety concerns of the local residents while ensuring those with limited mobility are not travelling much further. It would also allow us to build a more accessible bridge than the previous bridge. While the final location will be determined in the coming month, Council did agree to fund the next stage of design work so that the project will be ready to build in Spring 2021.Funding for the construction of the bridge would be approved after the final design work but considering a majority of the funding will be coming from a local improvement levy (ex: an ongoing payment from WEM), it is very likely this will proceed so that a permanent bridge can be completed by Fall 2021.I’ll be sure to keep providing updates on this project but at least we now know that the final design work can start early in 2020 to ensure we can get the permanent bridge in place as soon as possible.

Alley Renewal Program

As mentioned earlier in this post, the Alley Renewal Program is being adjusted for 2020 which is why the 0.4% increase is not needed. Thankfully the program is not being changed at all because as many west end residents know, the condition of our alleys is terrible and they need full reconstruction. 2019 was the first year of the program and two Ward 1 communities (Belmead and La Perle) had their back alleys reconstructed.

The original plan was to scale up further in 2020 to do even more communities. Based on the feedback from the companies doing the work, scaling up in 2020 was not going to be possible as the companies needed more time to get to the point where they can do even more work. What that means is that the funding needed for 2020 can be pushed back by a year and that we were able to reduce the tax increase by another 0.4%. To be clear, the program will scale up further in 2021 and then each year until 2023 at which point the program will be fully funded.

Reconstruction of our back alleys is something I first raised with Council in my first term and I’m happy to see this program permanently in place.

Summary

I recognize that there were a lot of references to the provincial budget in this blog post. Those mentions aren’t meant to blame them but rather explain why so much of our budget had to change this year. I realize that the current government was elected with a mandate to address the financial concerns of many Albertans and so I appreciate that they were going to make a number of adjustments that impact many different groups, including municipal governments.

The reality is that municipal governments in Alberta are created by the Province and the existing relationship means that we are dependent on their funding in a variety of areas. The significant reduction in capital funding created a situation where all parts of the city saw the elimination or deferral of much needed projects. Having to make those changes was one of the hardest things I’ve done in my time on Council because I know that it means that Edmontonians across the city will be negatively impacted.

At the same time, I also realize that large property tax increases are not easy in our current economic environment. I’ve heard from seniors across the city about the pressure they are under. When operating on a fixed income, every increase is not easy to absorb.

The final increase of 2.08% is still an increase at a time when some wanted us to approve nothing higher than a 0% increase. This may be the lowest tax increase in 23 years and the average household will only experience a $6.29 per month increase but that is still challenging when some people are losing their jobs.

I supported the budget because I believe this found the right balance. Had the changes in the provincial budget not occurred, we would have been discussing a 0.38% increase. But that wasn’t what was before us and we had to decide if we want to make further capital and operating cuts beyond what was already approved to make up for the additions in the provincial budget. That would have included areas like closing some of our smaller community recreation centres, pool, and arenas. It also would have meant layoffs and additional service reductions.

Going into 2020 we are going to continue to look at different ways to find value for money. For example, our City Auditor is completing a productivity audit which includes a detailed analysis of our staffing levels. We are also moving into Priority Based Budgeting which will allow us to better align the programs and services we offer with the strategic goals of our city. Similar to every other year, I expect that our Administration will continue to look for efficiencies and find savings that can be applied to future years.

Thank you for taking the time to read through this longer post and please feel free to provide any feedback in the comments below.