Fall 2024 Budget Adjustment
City Council spent the first week of December discussing and debating the Fall Supplemental Capital and Operating Budget Adjustment (SCBA/SOBA). While our City Budget is set every four years (our current budget is approved from 2023-2026), this process allows Council to review the budget and make adjustments as new issues and cost pressures arise, as our priorities shift, or as we see impacts to our revenue or expenditures. This budget adjustment then sets the tax levy for the upcoming year, and any additional years in the same 4-year cycle.
In past Councils, budget adjustments have not always led to substantive changes. However, as we continue to experience high inflation, rising costs of services, and growing affordability challenges post-COVID, each budget adjustment over the past few years has been difficult, and is something that I, along with my Council colleagues, do not take lightly.
During this Fall’s conversation, City Council approved a property tax increase of 6.1% for 2025, which is a 2% reduction from the 8.1% we started from at the beginning of the adjustment (and down further from the 13.1% potential increase shared back in an August Executive Committee meeting). I recognize that 6.1% is still high as Edmontonians continue to grapple with affordability. Families are seeing the rising costs of many everyday things they need to get by - food, rent, insurance. This is not lost on me, and I acknowledge the impact that this decision will have on you. I am also aware that Edmontonians of all ages and stages rely on and use core City services to support their quality of life - libraries, parks, transit, snow clearing. They want to see their infrastructure maintained in their neighbourhoods and feel safe in their communities. I believe it is Council's job to strike the right balance, ensuring we are not eroding our core services or jeopardizing the financial health of the City, all the while finding ways to reduce the tax levy burden on Edmontonians.
This blog shares more about this budget adjustment and what we are investing in, the cost pressures we are seeing like the ‘Fiscal Gap’ that you might have seen on the news or from City Council, and why I ultimately voted to support this budget adjustment, which not all of my Council colleagues did.
Decisions from the Budget Adjustment
To reach the final approved budget adjustment of 6.1% for 2025, Council approved important changes in both the Capital and Operating sides. These changes ensure that we are protecting our core services and keeping them affordable, maintaining our large inventory of infrastructure, while also investing in new ways to generate revenue and increase our tax base. For this budget it was also vital to replenish our rainy day fund, the Financial Stabilization Reserve, which we have been depleting the last few years.
A few key decisions and investments I want to highlight:
Increasing the servicing levels for turf maintenance and tree pruning. Tree pruning in particular is vital, now more than ever, as Edmonton has seen its first cases of Dutch Elm disease in the City which has the potential to devastate our urban canopy.
Funding the Ride Transit program, which supports low-income riders with a reduced-cost Arc card to help them move around the City. This program has seen a staggering amount of growth in the last few years as more people and families struggle with affordability, resulting in a budget shortfall. We voted to ensure this program continues to be available to as many Edmontonians as possible.
Improving Downtown Cleaning and Vibrancy through continued funding for Centre City Optimization, which improves Downtown public spaces with proactive maintenance (e.g. graffiti removal). While our ward is located on the southside, a safer and attractive Downtown benefits us all.
Actioning our Industrial Investment Plan, including funds for an Industrial Growth Hub. We need to move away from our over-reliance on residential property taxes - one key way is by attracting more businesses to Edmonton. Even if this package did not invest as much as I would have liked, it is a milestone, and increasing our revenue is critical to supporting our financial health.
The Financial Stabilization Reserve supports the city when we experience revenue instability and unforeseen costs, like what we saw during the COVID-19 pandemic. We cannot predict the future, which is why having a healthy reserve is vital to ensure our services can continue even in difficult times. Over the next few years, we will be replenishing this reserve to its required minimum balance, to maintain long-term financial health.
Reductions to the Tax Levy. In order to support reductions in the tax levy, there were important decisions made. Back in November when the budget adjustment was introduced, Administration identified $8.5 million in ongoing savings through efficiencies (including savings in contracts, materials and equipment, along with service changes and reductions) to support lowering the tax levy. We also saw an $8 million increase to the EPCOR dividend, and a $9.7 million increase to the EPCOR Franchise Fee (discussed here at Utility Committee) which were both used to reduce the tax levy. Finally, after thorough debate and reviewing all alternatives, we voted to reduce the annual transfer from the operating budget to fund capital projects, also known as Pay-As-You-Go, by $15 million. Next year, we will be developing a long-term plan to restore these funds along with a Dedicated Universal Renewal Fund.
Even with a 2% tax levy reduction, we were still able to ensure continued and new investment in a few key areas which I hear about from Ward Karhiio regularly. Many of these items were funded through reallocations of existing resources identified through OP-12 (read more about OP-12 in past budget blogs), or from the strategic use of some of our reserve funding like the LRT Reserve Fund, or the Planning and Development Reserve Fund. This limited impacts to the tax levy.
A Breakdown of City Expenditures for 2024
Outside of these specific items discussed and debated, our 4-year budget is still being implemented. So we will continue to see growing investments in Snow and Ice Control (as we are seeing this winter), Emergency Services like Edmonton Police Services (who continue to receive stable funding aligned with population growth and inflation), Affordable Housing including investments in permanent supportive housing of which the need continues to grow, and infrastructure maintenance like Neighbourhood Renewal. And we will continue to focus on service optimization and efficiency to support continuous improvement and the most effective use of tax dollars.
“What does a 6.1% tax increase mean for you? An average Edmonton household would pay about $813 in property taxes for every $100,000 of their assessed home value in 2025. This is an increase of $47 more than in 2024.”
What is the Fiscal Gap?
Back in October, Administration presented a thorough report outlining a fiscal gap that had been accumulating over years, and due to many factors, some in and some outside of the City’s control. A fiscal gap happens when our capacity to raise revenue is not aligned with our spending needs, leading to a deficit. While the City is in a stable financial position, it is important to begin to tackle the fiscal gap to ensure financial sustainability for years to come.
So what is causing the fiscal gap? There are numerous factors which are cumulatively leading us to our current position. These factors have grown over decades, not just a single Council:
Rapid population growth that is unprecedented. Edmonton has been the fastest growing large city in Canada, with 100,000 people arriving over the last 2 years.
Increasing inflation and infrastructure costs. Similar to Edmontonians who are experiencing this in their own households, we are also seeing the impacts of post-COVID inflation at the City. This includes rising costs for everyday services like snow clearing and transit, along with infrastructure maintenance and construction which are seeing higher inflation than other goods.
Taking on more responsibilities not in our jurisdiction, including in health and social services. Over the years, the City has stepped in to fill gaps in critical areas outside of our traditional jurisdiction. This includes investing in affordable housing, social services, Drug Poisoning Prevention, supporting the Province with a Shigella response (which we have not been paid for to-date), and Fire Rescue Service responding to medical calls to supplement EMS response. Without the funding or action from other levels of Government to tackle these issues, the cost has been ultimately downloaded on cities.
Stagnating non-residential tax base. In the Edmonton region the growth of non-residential/business properties has disproportionately happened outside of Edmonton, in our neighboring communities. This non-residential tax base is key for reducing the reliance on residential property taxes.
User Fees have not kept pace. Recently, we have been talking about a user fee gap, which means that the revenue from things like transit fees and recreation fees have not kept pace with the spending. Re-evaluating adjustments to user fees will be a difficult but important conversation as part of reducing the fiscal gap and ensuring ongoing viability.
To remain a City that is competitive and welcoming to all, and attract more growth, we need to close the fiscal gap. This involves reducing expenses and increasing our revenue, municipal service prioritization, reviewing our policy requirements, advocacy with other levels of government, and many more actions and policy levers. The Fiscal Gap Report outlines 11 actions we will be taking as a City to do just that. We have a plan, and as we move forward it will be critical to focus on it’s execution, including investing our budget strategically. For example, actioning our Industrial Investment Action Plan through an Industrial Growth Hub to attract business to YEG - which we approved during this budget adjustment.
Addressing the pressures from the fiscal gap will not happen overnight - it will require time to undo what took decades to create. However, some strategies are already underway, and we will continue to tackle this further at Committee and Council in the new year. I am committed to helping advance these critical conversations and actions for narrowing the fiscal gap.
Voting to support the budget adjustment
Last Spring, Council unanimously approved a 2025 tax levy increase of 7%. While we started our conversation at 8.1% due to escalating cost pressure, through the process over the last few weeks, we were able to reduce the levy to below what we unanimously agreed to less than 1 year ago.
While I have outlined key reasons why I supported the current budget, including the 2% reduction to 6.1%, the critical investments this budget makes to maintain our infrastructure, and the improvements to core services we will be supporting (without increasing the tax levy), I also want to highlight an important point that might not be as well known: If we were unable to successfully pass the budget adjustment due to enough Councillors voting against it, it would mean the tax levy reverting back to what we originally agreed last Spring upon which is 7%. I did not want to see this happen after all of the efforts to bring it down to 6.1%
Once again, there were Councillors who voted against the Capital and Operating Budget Adjustments, effectively leaving the rest of us to shoulder the responsibility to pass it. No budget is perfect, and every budget has something that we voted against in the past or do not support. However, using this rationale to vote against a budget that we have all had the opportunity to work on, to amend and adjust is not a solution, and is not the job I signed up for as a governer, particularly when it would result in a higher tax bill for Edmontonians.
I hope that this blog helps to provide more information about our latest budget adjustment and some of the decisions made at the Council table. As we find ways to course-correct and fix the structural issues that impact our budget year after year, I want to thank the City Administration and staff for their efforts in reallocating funding, identifying savings (which come with hard decisions), and finding solutions to tackle challenges like the fiscal gap.
As I end, I also want to thank Edmontonians who continue to connect with me to talk and share feedback on City finances. Whether or not we agree, you have taken the time to reach out and I appreciate and have considered your feedback. I recognize that 6.1% is still a difficult increase and no increase is one I take lightly. I remain focused and committed to maintaining what we have, investing in and protecting core and public services, restoring confidence in service delivery, and ensuring Edmonton remains a competitive place welcoming to all.
If you have further questions and feedback, don’t hesitate to reach out to my team and I at keren.tang@edmonton.ca or 780-496-8142.
