Capital Investment Outlook: Part One
On Monday, June 13th 2022 City Council meeting, Council was presented with a 10-year forecast of incremental changes to available capital revenue and expenditures.
As Edmonton’s population continues to grow, so will the demand for City-provided services and capital investments to deliver new infrastructure and maintain the condition of existing City assets.
The City is responsible for building and maintaining capital assets and infrastructure to serve the residents and businesses of Edmonton, which the City approaches with an immediate and long-term view. The ability to construct and properly maintain capital assets is essential to ensure the provision of services and ensuring Edmonton stays an attractive, cost-effective place to live and do business.
A city is sustainable only with the right mix of capital assets maintained over the long-term. Infrastructure is expensive to build, buy, renew or replace, which means getting maximum value from every dollar spent on infrastructure is important and necessary.
Previously, the City was able to fund growth with a combination of grants from other orders of government, matched with tax-supported debt. The combination of lower funding, commitments to large transformational projects and the increased use of tax-supported debt means the City does not have the financial means to fund transformational infrastructure projects without assistance from the other orders of government and the internal debt capacity remaining will be required to match this funding.
Edmonton’s challenges are also unique given its significant economic and population expansion, large metropolitan region, challenging environmental climate, and cyclical resource-based economy.
Which is why the sound management and maintenance of over $31.6 billion (replacement cost) of capital assets—comprising of roadways, bridges, buildings, transit facilities, parks, fleet, and information technology—is both complicated and essential.
Prior to 2023-2026 budget deliberations, $4.0 billion of capital spending has already been approved, of which $3.8 billion is for growth and $207 million is for renewal. This committed growth is mostly for transformational projects like LRT expansion that extend over a large period of time, and require committed funding to match funding made available from other orders of government. Whereas, the commitment in renewal supports larger contracts started in 2019-2022 that span over into the 2023-2026 fiscal cycle.
There are numerous emerging issues that could have direct impacts on the City’s capital program. These include capital planning in a high price environment, borrowing conditions for local authorities, and uncertainty of future capital grant funding.
Funding can be classified into two main categories: unconstrained and constrained.
Unconstrained funding is available, at Council’s discretion and with no restrictions, for a variety of infrastructure needs.
Constrained funding, on the other hand, is dedicated (for various reasons) to specific types of infrastructure.
In the 10-year Capital Investment Outlook, the total projected funding is $10.8 billion, which includes $7.2 billion of constrained funding and $3.6 billion of unconstrained funding. $4.6 billion of funding has been committed to existing capital projects, leaving a combined $6.2 billion available for all remaining growth and renewal investment over the period of 2023 to 2032.
After a period of relatively little borrowing due to the high interest rates and recession of the 1980s and 1990s, the City reintroduced debt for tax-supported capital in 2002, and the result has been a significant expansion and revitalization of the city in many ways
The Debt Management Fiscal Policy allows for the consideration of long-term debt related to capital expenditures for:
Large projects with long-term benefits
Projects with benefits for the community-at-large (for tax-supported debt)
Growth-related projects
Emerging needs to support corporate priorities and approved strategic plans
Major rehabilitation of existing assets.
The 2019-2022 Capital Budget contained $2.1 billion in tax-supported debt to advance a number of new and previously approved transformational City building projects. These projects included:
Valley Line Southeast and West LRT
Metro Line LRT - NAIT to Blatchford Extension
Yellowhead Trail Freeway Conversion
Terwillegar Drive Expressway Upgrades
There is $1.4 billion in tax-supported debt approved in 2023 and beyond. This includes future debt on the projects listed above, and additional projects approved by Council during the 2021 Fall Supplemental Capital Budget Adjustment including the following:
Lewis Farms Community Recreation Centre and Library
Coronation Park Sports and Recreation Centre
Ambleside Integrated Site - Phase 1
Valley Zoo’s Nature’s Wild Backyard - Phase 2
