Edmonton budget deliberations: 1.8 per cent tax increase, lingering effect of COVID-19

As city council begins budget deliberations and considers a 1.8 per cent property tax rate increase, administration says there are positive signs of economic recovery in the Edmonton region — with a full recovery not expected until 2022.

While the city plans budgets on a four-year cycle, there are opportunities for budget adjustments for new projects, priorities, or necessary items.

This week council will consider the fall supplemental budget adjustment. When the budget cycle was initially voted on in December 2018, the city projected a tax increase of 2.6 per cent for 2022.

Now, city administration is recommending a tax increase of 1.8 per cent. If approved, an Edmonton household would pay on average $714 for every $100,000 of their assessed property value — representing an increase of $14 from last year's average.

"This increase will allow the city to maintain service levels and build and maintain infrastructure and puts the city in a strong position to respond to future financial uncertainty, including the longer-term impacts of this pandemic," said Andre Corbould, city manager.

Corbould added that the proposed property tax rate increase still falls below the inflation rate.

"We are committed to finding a balance between managing property taxes, while still offering the services that Edmontonians count on and continue to move our infrastructure plans forward."

City administration says that $14 would break down to:

  • $9 to municipal services (including snow removal, recreation centres, and fire rescue);
  • $3 to the Edmonton Police Service;
  • $1 to neighbourhood alley renewal; and
  • $1 to the Valley Line LRT project.

Administration added that it is already preparing the 2023 to 2026 budget proposals for council to consider next fall.

LINGERING EFFECTS OF COVID-19

According to administration, the pandemic will continue to affect the city's finances into fall 2022.

The city anticipates continued revenue reductions due to lower transit ridership, less demand for recreation centres and programming, smaller parking and photo radar revenues, and fewer construction permits.

Those factors are alongside increased costs of operating city services in a pandemic environment, including funding enhanced cleaning protocols, PPE, the city's homeless response, and IT redeployment for employees working from home.

The total pandemic funding impact for the city last year was $152.9 million, including $143.2 million in revenue reductions and additional COVID-19 associated costs of $9.7 million.

In 2021, the city predicts the total funding impact of the pandemic to be only $9 million less, with revenue reductions of $121.5 million and COVID-19 associated costs of $30.5 million.

For 2022, the city forecasts incurring an impact of $96.7 million, including $16.1 million in additional COVID-19 costs.

City council heard that administration projects ridership for the Edmonton Transit System is not expected to fully recover to pre-pandemic levels until fall 2022, at minimum. That means a loss of $53.7 million in revenue.

Rec centres are forecasted to have 30 per cent less demand, resulting in a $13 million loss in income for the city.

Lower traffic volumes are projected to create $8.6 million less in parking and $2.6 million in photo radar revenue.

City administration says the impact of those revenue reductions and increased operating costs could be offset by a combination of one-time funding strategies drawing from endowment dividends, use of reserve and strategy funds, and targeted expense management strategies.

According to administration, there have been no offers of funding support to offset the impact of the COVID-19 pandemic from other levels of government. Should the province or Ottawa decide to provide additional grants to support the city, administration said it would use that before drawing from reserve funds.

POSITIVE OUTLOOK FOR POST-PANDEMIC RECOVERY

City administration says it has a positive outlook when it comes to Edmonton's post-pandemic recovery.

While Edmonton experienced significant unemployment last year, administration says the labour market for the greater capital region of the province rebounded faster than initially expected when considering both full- and part-time employment.

In August, the employment rate surged beyond pre-pandemic levels. By October, the unemployment rate for the region fell to eight per cent — where the figure was before the pandemic.

City economists said that while overall employment levels are growing, pockets of the labour market have yet to see full recoveries, including the goods and services, agriculture, construction, and manufacturing sectors. Additionally, full-time employment rates still lag behind pre-pandemic levels.

In terms of inflation, the city expects high rates to persist in the near term, with an average of three per cent.

The inflation rate for the region is forecast to be 2.8 per cent next year as price pressures like supply chain issues and energy supply site constraints lessen.

City council is set to continue budget deliberations Tuesday and could last until mid-December.