Paying for Edmonton Part 5: A Fiscal House in Order

Last week I talked about the importance of not raising taxes for Edmonton residents and businesses in 2020. So many stories from local business owners and self identified “first time tax complainers” have convinced me this is an important stand to take at this time. Council must clearly direct administration to do what’s necessary to get us there. In this final installment of Paying for Edmonton, I summarize what I think it really means to have “our fiscal house in order” in the near term, and what some of the longer term structural struggles are for big cities and provinces working in a real partnership. 

But let’s begin with the 2020 supplementary budget.

Below is our expenditure budget for the current year. I believe that there are a number of ways for us to spend smarter while still delivering important services.

  • Right-Sizing our FTE count while protecting front-line services: Right now Edmonton has more Full-Time Equivalents (FTEs) per 1,000 people at 14.9 than Calgary (12.4), Montreal (11.2), Winnipeg (10.4), and Vancouver (12.2). Bringing our FTEs per capita closer to the national average would be a worthy cost savings strategy unless administration has a bullet proof argument to the contrary.
  • Hard scrubbing duplication: Duplication or multiple people doing the same job will inevitably occur within a big organization like the City of Edmonton. What’s not inevitable is that duplication continues without correction. For example, we have duplication in some obvious areas like Economic Development, Communications, Financial Services, GIS, and Strategy that need close examination. This work is vital to the success of our city, but duplication of this work is a waste of talent, time, and money. We have to be more intentional about eliminating it. 
  • Staying in our jurisdiction: I’ve talked about the expanding suite of challenges for big cities in Part 1 of this series. The City of Edmonton does a lot of work which is technically the responsibility of the province. These range from social services, housing, to policing for our neighbours in the metropolitan area, and offering regional citizens our local amenities and festivals. Council often asks Administration for this information but this is the year to take action. We need to stand up and say no to paying for the downloading that occurred in the most recent provincial budget and to stop funding items downloaded in the past.
  • A straighter line to infrastructure in new neighbourhoods: Our current model of building new neighbourhoods often leaves us with large expenses and no way to pay for them. What we need are more comprehensive long-term infrastructure strategies tied to Neighbourhood Structure Plans (NSPs), made for new communities. Approval of NSPs should be more closely tied to a clear line of sight to the funding to pay for infrastructure like roads, transit, fire and police stations, playgrounds, and other amenities that provide people with a complete community. 
  • Limit the operating impact of capital spending: Everyday we pay approximately $1 million in debt servicing costs. That money comes out of our operating budget and therefore it does not go towards funding front line services. We have a Debt Fiscal Management Policy to limit how much debt servicing can be tax-supported within our operating budget (capped at 15 percent). However, we need to explore a new limit on operating budget spending generated by capital projects. Every time we spend capital dollars to open a new facility, we then immediately spend operating dollars to hire the people to run it. We need to ensure our capital budgets and operating budgets are keeping each other in check. 
  • Focus on the bottom line of our citizens and businesses: One of my main inspirations for this series has been conversations with local business owners and seniors. These are people who want to invest in their communities or have already made decades of investments, yet routinely I am hearing that business owners have had to scale back operations or forego investments due to rising taxes. When the City worries primarily about our own investments we tend to forget about the crucial investments of our citizens and businesses. Raising taxes allows the City to make more investments, sure, but the consequence is that we’re taking money away that could be invested by Edmontonians themselves. Government is not solely responsible for building community. I would argue that we ought to act as supporters, not starring players in building community. We can continue to build a progressive, vibrant city with citizens and businesses playing a more prominent leadership role. 
  • Recognize other city-driven costs: Last Friday at Utility Committee we finalized investments in flood mitigation and sewer odour reduction. These investments have been long debated and are hugely important, but they also come with a price tag for ratepayers who are also our taxpayers. Utility rates will increase monthly by $1.04 in 2020, $0.55 in 2021, and $0.08 in 2022 for $1.70 total. We’ve also increased rates to implement our new waste management strategy and to support associated capital projects. These increases are modest, but they make a cumulative difference to Edmontonians and represent another reason to keep tax increases to 0% in 2020.
  • It is also worth noting the above list does not emphasize front line service reductions or reductions to funding commitments to asset management and infrastructure maintenance, such as Neighbourhood Renewal. The hard question is whether we can find $44 million dollars in savings through the initiatives listed above?

 

The Fiscal House in Order Checklist

The suggestions above will all make a significant contribution to our fiscal health as a city. Ultimately, we need to think more broadly if we’re going to get our fiscal house in order for the long-term. Below I have developed a checklist of how to do that. Each item on this list matters and requires leadership and strong partnerships to succeed. So, let’s get into it.

◻ A Regional Jobs Plan: We need to start with a regional vision for our economy that reflects all the strategic economic assets in the Edmonton Metro Region, and is targeted at making this city and region and the established home and destination for young educated professionals and entrepreneurs. This vision can’t be based on existing silos. Edmonton and our regional partners are already investing into a forward-looking regional vision through our regional economic development organization, Edmonton Global.

◻ Regional Growth Plan: Our Regional Growth Plan guides the way we shape the region as we continue to grow through an all for one, one for all approach to land use planning and more. This directs the region to grow responsibly by setting density targets that save approximately 250 quarter sections of farmland – and requires $5 billion less in infrastructure.

◻ A City Plan to Make Us More Compact: The City Plan is the strategy that will determine where the next 1 million Edmontonians will live, and will determine if we continue to grow outward at the same pace and cost to the municipality, or build a more compact and efficient city. Low urban density is one of the biggest cost drivers for a city, so the City Plan needs to help us attract significant real estate investment to the core and support increasing density in new communities in order for Edmonton to achieve fiscal sustainability. 

◻ A Modernized and Expanded Offsite Levies Policy: Our infrastructure growth needs to align with our planning decisions. Why should we approve new area and neighbourhood structure plans without the necessary tools to pay for the required infrastructure? There is a critical need for collaboration with our development industry in the coming months to address this. 

◻ Productive Partnerships with other orders of Governments: Once we know where our infrastructure investments will be made, we need to explore partnerships for funding – be that cross-boundary funding for regional projects or inter-governmental collaboration for investments that span jurisdiction and benefit the provincial treasury through economic growth. We also have to move past the culture of lecturing each other – from city hall, to the legislature, to parliament, and back again. 

An Eternal Struggle: The Tools We Need to Fight For in the Long-Term

In order to get where we need to be in the long term, it’s crucial that we explore new tools as I’ve detailed in each of the previous blogs. Implementing strategies like priority-based budgeting, looking at education tax reform, implementing a sales tax, new assessment tools and policies, and continuing to explore regional strategies to services like transit and waste are important. Additionally, we need to take a serious look at our partnerships with business and begin to consider far more private industry participation in services like waste management, as one example.

Cities are the lifeblood of the economy, in Canada and across the world. Cities bring with them a rich diversity of people, ideas, and skills allowing for new markets to open up, creativity to flourish, and industry to take advantage of economies of scale. As our economy shifts toward knowledge, innovation, technology, and service industries, the advantages of urbanization will be amplified. Cities are already the drivers of the world economy, and their importance will only increase as we transition forward. The chart below was inspired by the book The Industries of the Future by Alec Ross.

EraPrimary EconomyPrimary ResourcePrimary Risk Factor
PastAgrarianLandHuman Health
PresentIndustrial Fossil FuelsClimate Stability
FutureTechnologicalDataPrivacy/Individualism

Cities are our economic engines for the same reasons that people move to them. People move to cities because they see opportunities for better lives. In cities people see innovation, vibrancy, inclusiveness, and a rich culture. That’s why we’ve seen such a massive population shift to cities throughout history and still today. For the most part, once people have the means to move to a city, they do so.

Simply put, nearly 70 percent of Alberta’s total GDP is generated in Edmonton and Calgary. Cities matter. But they are expensive and can in turn make life expensive for residents and businesses through regulation, taxes, utility rates and user fees. 

As much as we have to be mindful of the long term economic and structural opportunities for cities, we need to be mindful of the short term economic challenges facing our property tax base, job creators, vibrancy purveyors and all residents who are living in a reality of financial uncertainty. 

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Thank you to Sam Goertz for the tremendous effort in co-researching and co-writing this series. It is a wonkish series that we tried to make accessible. Our goal was to create a deeper understanding of the realities facing cities as constitutionally subservient to provincial governments who have historically underprivileged the value and the role of cities.

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