Budget 2021 Part 1: Efficiencies
This time of year is when City Council starts preparing for budget deliberations. To keep Edmontonians in the loop on any upcoming changes, I wanted to start this blog series to talk about the proposed budget cuts that were brought forward to us in regards to the Supplemental Operating Budget.
“The Supplemental Operating Budget Adjustment (SOBA) report is part of the City Council approved multi-year budgeting approach to setting the 2019-2022 Operating Budget. This report provides Council with an opportunity to adjust the 2021-2022 Operating Budget in response to changes in external factors such as provincial or federal budgets, changes imposed by legislation, adjustments to reflect operating impacts related to completion of capital projects, unforeseen changes to economic forecasts affecting costs, service demand volumes, revenue projections, and/or Council-directed changes to priorities, policies and programs.”
The tax increases initially approved by Council in 2018 were 2.6 percent for each year over the period of 2019-2022. During the Spring 2020 SOBA, Council approved tax increases of 3.2 percent for 2021 and 2.4 percent for 2022. The recommendations in this report reflect ongoing budget adjustments to achieve a zero percent tax increase in 2021 and a 1.6 percent tax increase for 2022.
The recommended tax increase of zero percent for 2021 includes a decrease of 0.5 percent for civic departments from the 2020 base budget, a decrease of 1.0 percent as a result of lower than expected assessment growth, an increase of 0.6 percent for Edmonton Police Services, an increase of 0.6 percent for the Valley Line LRT (0.3 percent for Valley Line Southeast and 0.3 percent for Valley Line West and Metro), and an increase of 0.3 percent for Alley Renewal.
This report is specific to ongoing budget reductions strategies impacting the 2021 and 2022 operating budgets. Consistent with the approach previously discussed with City Council, the 2021 budget impacts of the COVID-19 pandemic are being treated as one-time, and will be addressed with one-time budget strategies discussed separately in report FCS00181 COVID-19 2021 Financial Impacts and Funding Strategy being presented to City Council on December 7, 2020.
Reduction strategies included as recommendations in the Fall 2020 Supplemental Operating Budget in order to achieve a zero percent tax increase in 2021. Additional details in the Department & Branch Summary Tables.
Economic Outlook
Edmonton’s economy is expected to experience a sharp contraction of 6.4 percent in 2020 as a result of the COVID-19 pandemic and measures to contain the spread of the virus. Since measures began to ease in the summer, economic indicators such as employment have shown signs of recovering. However, recovery is expected to be inconsistent and long, with an expected return to pre-COVID levels of output by 2022. Over the medium term, growth projections for real gross domestic product (GDP) are in the range of 3.1 percent annually between 2021 and 2024.
Prior to the COVID-19 pandemic, Edmonton was still recovering from the 2015-2016 recession with estimated real GDP per capita in 2019 around nine percent lower than what was estimated in 2014. Fall 2019 economic growth projections for Edmonton over the medium term were also expected to be moderate compared to pre-2014 rates, adding pressure on governments to exercise fiscal restraint in light of slower economic growth.
The future effects of the virus remain unknown, which means continued uncertainty for households and businesses alike. This uncertainty tilts risks to the downside for Edmonton’s economic recovery and for the City’s revenue sources.
Guided by the City’s Multi-year Budgeting Policy (C578) the supplemental budget adjustment process categorizes adjustments to the four-year budget as follows:
External Factors/Changes in Legislation: allows the City to respond to external factors such as provincial or federal budgets or changes imposed by legislation;
Operating Impact of Capital: incorporates the operating impacts related to the implementation and completion of capital projects;
Changes to Economic Forecast: includes adjustments that affect costs, changes service demand volumes, or revenue projections; or
Council-directed changes to priorities, policies and programs.
Recognizing that the City of Edmonton is operating in a very different economic environment than existed in late 2018 when Council set the four-year budget, this report also recommends net tax levy adjustments of $56.5 million to achieve a zero percent tax increase.
To develop the fall supplemental budget adjustment, Administration identified a comprehensive list of strategies for reduction using the following lenses:
Safety - The public’s safety is a top priority
Long-Range Focus- Mindful of impacts on the municipal corporation’s long-term financial sustainability
Local Economy - Continue to support stabilization of the local economy
Honour Relationships - Workforce and partnership funding strategies will be fair and respectful
City Building - Consider how to align resources to focus on the City’s objectives
Demonstrate Empathy - Limit tax increases for Edmontonians
Combination of Tools - Use a range of budget reduction strategies, such as efficiencies, expense reductions (e.g., reduction in consulting and contractor services), facility closures, funding to partners, revenue/recovery generating opportunities, service level reductions, and workforce strategies, including vacancy management. Reduction strategies balance impacts to front line and support services.
As identified in the Reimagine Report, the City has two options to manage its financial challenges. One path contains traditional, “easy” and potentially anticipated decision making where municipal spending is realigned to provide ‘back-to-basic’ services. The other path, moving 'forward with focus', consciously aligns services and service level within the new fiscal constraints and toward the strategic direction established in ConnectEdmonton and the City Plan.
The City is pursuing the latter path, which is lined with difficult decisions and choices to prioritize long-term outcomes over short-term priorities. The goal is that Edmonton emerges as a healthy, urban and climate-resilient city that supports a prosperous region. Although impacts to front line services, staff, service levels, and the City’s partners were limited as much as possible, each was affected to some extent to achieve a zero percent tax increase in 2021.
A total of $56.5 million in net budget reductions strategies are being proposed and are divided into seven different sections.
Efficiencies
Expense Reductions
Facility Closures
Funding to partners
Increased Revenue/Recovery
Service Level Reductions
Workforce Strategies
Efficiencies
$9.7 million - Efficiencies represent Administration’s effort to optimize, re-align and re-design the delivery of a service. These efficiences include adjustments to the way a service is delivered internally within the Corporation or externally to citizens and reflect a commitment to continuous improvement and the efficient use of taxpayer dollars.
The Efficiencies section includes changes in Assessment & Taxation, Community and Recreation Facilities, Corporate Expenditures and Revenues, Fleet and Facility Services/Edmonton Transit Service, Fleet and Facility Services, Office of the City Clerk and Parks and Road Services.
Changes that are relevant to the experiences and services that Edmontonians receive are in the following areas.
Assessment and Taxation
Reduction in postages related to expected uptake in property owner subscription for electronic notices for tax assessments and tax notices. Savings of approximately $2 per property registrant
To see these savings through it is important to make sure that residents sign up for electronic notices for their tax assessments and notices in place of physical copies that come in the mail.
Community and Recreation Facilities
Transitioning select on-site rental services. Centralized model of rental services
Optimizing and adjusting existing programming and scheduling to maximize participation. Programs adjusted will include group fitness, Kids Den scheduling and equipment loan program
Fleet and Facility Services/Edmonton Transit Service
Complete a review of cleaning processes in Transit to identify efficiencies
An important part to review especially during the COVID-19 pandemic
Fleet and Facility Services
Efficiencies related to fleet optimization, private-sector alternatives and service level changes
Parks and Roads Services
Optimal mix and amount of sand and salt to be put on the roads has been identified, resulting in less material needing to be picked up in the summer
Cost savings in parks, roads and sidewalks operations through optimization of fleet usage and enhanced shift scheduling
Increase use of chemical weed control in shrub beds to target regulated weeds, and use chemical control in exempt areas (e.g. City wide high profile parks). Both are permitted within the current herbicide exemption. Efficiencies from reduced mechanical control (i.e. hand pulling of weeds) in shrub beds
Power consumption savings due to conversion from high pressure sodium bulbs to LED lighting
Net Impact in 2021 ($000’s): $9,706
Net Impact in 2022 ($000’s): $4,550
We are all aware of the new realities and challenges we are facing, this budget will set the tone on how we will recover economically due to the financial impacts of the COVID-19 pandemic. This is why it is also crucial to inform and hear from Edmontonians on the services that are of the utmost importance to them to inform any potential cuts. These cuts are not finalized and can be influenced by the feedback of Edmontonians. If you have any questions, concerns or general comments please send them my way.
Part 1 https://www.andrewknack.com/budget2021part1/
Part 2 https://www.andrewknack.com/budget-2021-part-2-expense-reductions/
Part 3 https://www.andrewknack.com/budget-2021-part-3-facility-closures/
Part 4 https://www.andrewknack.com/budget-2021-part-4-funding-to-partners/
Part 5 https://www.andrewknack.com/budget-2021-part-5-increased-revenue-and-recoveries/
Part 6 https://www.andrewknack.com/budget-2021-part-6-service-level-reductions/
Part 7 https://www.andrewknack.com/budget-2021-workforce-strategies/
Part 8 https://www.andrewknack.com/budget-2021-part-8-staffing-changes/
Part 9 https://www.andrewknack.com/budget-2021-part-9-conclusion/
