Introduction to the Fall Supplemental Budget and Survey
Yesterday, the City of Edmonton released its fall budget adjustment reports, proposing spending cuts and revenue increases to address our ongoing budget challenges. These changes aim to support the delivery of 70 services and over 200 construction projects planned in the 2023-2026 budget.
For the reasons listed later in this blog, our city is facing a $34 million deficit for 2024. With the city proposing a 8.1% tax increase for 2025, with 7% approved in April 2024 to help manage these challenges and another 1% for the Financial Stabilization Reserve. The remaining 0.1% would fund the 2025 election.
To limit the tax increase, the City plans $8.5 million in ongoing savings, such as renegotiating phone contracts and slowing down some services like the Heritage Program. Additionally, $10 million in one-time savings will help rebuild the reserve. A $152 million capital budget increase is also proposed, mainly for neighbourhood renewal and the Terwillegar Drive Expressway.
City Council will review these proposals starting November 13th, 2024 and make decisions from December 2 to 5.
I wanted to take a moment to explain a couple things and ask for your feedback.
Where are we financially?
In terms of service cuts and reductions, what reductions would you be comfortable seeing?
How is our budget broken down?
Our City budget is decided by City Council every 4 years, our last budget cycle was decided on in late 2022 however every fall Council approves adjustments to the budget in response to financial changes.
Some of the financial challenges that our city currently faces includes:
Inflationary pressures: After a period of high inflation, we are seeing significant increases in cost. For instance, the City is paying more than expected for major expenses such as fuel, parts, and maintenance. This means it is costing more for the city to deliver the same level of service.
Population Growth: Rapid population growth is also creating more demand on our services and adding to the City’s existing cost challenges. For more information, here is a blog from earlier this year.
Evolving Service Needs: This service needs for Edmontonians have also fundamentally changed, which has increased costs and reduced revenues. Examples of this include decreases in transit ridership and responding to encampment and extreme weather emergencies.
During Fall Budget Adjustment Council will make updates to:
How much the City spends on programs and services in 2025-2026
How much the City needs to collect in property taxes
How the City moves forward with its plan to build and maintain infrastructure
How the City responds to the ongoing impacts of inflation, rapid growth and other budget pressures.
The City is facing $88 million in ongoing budget challenges which includes:
$24 million in inflationary pressures
$19 million in revenue shortfalls, including changing transit ridership
$21 million in external factors, including extreme weather response
$24 million in initiatives like snow and ice control, and encampment response
During the Spring 2024 budget adjustments to the 2023-2026 budget, Council came to property tax levy increases of 8.9% in 2024, 7.0% in 2025 and 6.3% in 2026. Before we dig into the 2025 budget, let’s take a look at the 2024 City budget.
Our City budget includes our Operating Budget and Capital Budget.
What is the Operating Budget?
The Operating Budget is about programs and services the City will deliver with half of operations costs funded through property taxes, as a city we provide 70 programs and services.
Our current operating budget is split into the following categories:
2024 Expenditures Breakdown
With the 2024 tax increase the city has been able to respond to the following budget pressures:
Higher than forecasted costs for energy, labour, and WCB insurance premiums
Lower than forecasted revenues from ATCO gas franchise fees, business licenses, and transit fares
Higher than forecasted population growth
This year, Council has improved the following service increases:
Operating the new Metro Line LRT to the new NAIT Station
Adding more bus service hours to improve public transit access
Expanding library services at Heritage Valley
Piloting an Assisted Snow Clearing program for seniors and people with mobility challenges
Increasing support for major event bidding in partnership with Explore Edmonton.
In the survey linked below, part of the questions will centre around the reductions you’d be comfortable with seeing.
What is the Capital Budget?
The capital budget is about building and maintaining our city. This includes our parks, bridges, paths, roads, buildings and LRT lines.
The $10.6 billion capital budget includes more than 200 construction projects.
Capital projects in the 2023-2026 budget include:
2.6 billion for the Valley Line West Extension
$1.1 billion for the Capital South LRT Expansion
$518 million for the Yellowhead Trail Freeway Conversion
$311 million for the Lewis Farms Facility and Park Project
$200 million for the High Level Bridge Rehabilitation
$171 million for Housing Accelerator Fund Projects
$127 million for the William Hawrelak Park Rehabilitation
In fall 2023, Council approved additional to the capital budget which included:
$15.8 million to buy 20 new diesel buses ($790,000 per bus)
$22.9 million to deliver affordable housing projects and take advantage of available funding from other orders of government
$15.3 million for critical renewal projects, including technology and equipment such as cellular service in LRT tunnels and police equipment
In June 2024, Council also approved the following additions to the capital budget:
$171 million for the Housing Accelerator Fund efforts (this funding is from the Federal Government)
$95 million for critical renewal projects such as equipment for Fire Rescue, peace officers and police
For the average household, an 8.9% tax increase means about $66 more in property taxes for every $100,000 of their assessed home value in 2024. This increase will affect individual property owners differently depending on the assessed value compared to the market.
What was done to date to reduce costs before recommending a tax increase in 2024?
Administration went through a series of budget reduction and efficiency exercises as part of the budget process to find cost savings. In this budget cycle, the OP12 amendment reduced the City’s operating cost by $15 million a year from 2023-2026, this reduced the recommended tax increases by 1%. In March, Council approved another $8.2 million in savings from OP12 that will be recommended to address future challenges.
Debt vs. Deficit?
Debt occurs when money is borrowed and must be repaid in the future whereas a deficit is when operating expenses exceed its revenues in a given year.
When it comes to our operating budget, year-end surpluses are added to the Financial Stabilization Reserve (FSR) and support the City in Deficit Years.
The City usually finishes the year with a small surplus of around 1-2% of our operating budget. This has been the case for 13 of the last 15 years.
The 2023 operating deficit, of $40.1 million, was covered with funds from our Financial Stabilization Reserve, which is designed to help deal with one-time cost pressures, including deficits.
That brought our reserve below its minimum balance ($123 million for 2023 to 99.9 million), per policy the reserve needs to restore the minimum balance within three years.
A strategy will be implemented in the 2025 operating budget to boost the balance between 2025 and 2027 that is being presented during the Fall Supplemental Budget Adjustment.
A common question that I get asked about is: would cancelling bikes lanes help reduce property taxes?
Specifically, the Active Transportation Implementation Acceleration breaks down to $347,000 in debt servicing and $747,000 for maintenance costs in 2024, which totals $1.1 million and is 0.03% of the $3.6 billion annual operating budget.
In the 2023-2026 budget cycle, debt servicing for bike lanes will be highest in 2026 at $4.0 million, and maintenance costs will be $1.9 million, for a total of $5.9 million, which is 0.15% of the $3.9 billion operating budget for the year.
This blog is part of a multi-part series and all parts will be out by November 13th.
To start gathering more of your feedback, here is a link to a budget survey so I can learn more about your priorities
