Budget Frequently Asked Questions (FAQ)

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2022 Budget Adjustment

How did Council arrive at a 1.9% tax increase?

In 2018, when approving the original 2019-2022 4-year operating budget, Council approved tax increases of 2.6% for each year of the budget. In light of the pandemic and the current economic landscape, Council subsequently adjusted the budgets resulting in a 0% tax increase in 2021 and a reasonable 1.9% tax increase in 2022. The 2022 tax increase is lower than what was originally approved and is lower than inflation. This increase puts the City in a strong position to respond to the financial uncertainty caused by the pandemic, results in no unintended decreases to existing programs and services, and allows the City to be able to manage its capital plan for 2022.

The City continuously drives for improvements in providing its services and programs, in making sure we are providing the services Edmontonians want and in the most cost-effective way possible. As a result, the City is implementing a priority-based budgeting approach for the development of the 2023-2026 budget. This approach will allow the City to allocate its scarce resources to those programs that best serve the needs of Edmontonians and achieve Council’s goals and objectives.

How are you dealing with the financial impacts of COVID on the budget?

COVID has had a significant impact on our revenue sources, including transit, and community and recreation facility revenues, and has also resulted in increased costs for things like personal protective equipment (PPE) and enhanced cleaning.

The estimated budget impact of the pandemic in 2020, 2021 and 2022 has been $152.9 million, $152.0 million and $96.7 million respectively. The pandemic has had a combined total budget impact on the City of just over $400 million. This is one of the most significant impacts on the City’s operating budget in recent history.

The City respects the value of Edmontonians’ tax dollars and the financial challenges faced by many residents, so Administration has worked hard to keep the property tax levy low over the past 2 years and look at other ways to manage the financial impacts of COVID-19 on the budget.

The City has been managing the impacts of COVID through management of its expenditures, using support from other levels of government, and drawing funds from reserves, including those that are used to fund the capital program. Although taxes have not been raised, managing the impacts of COVID comes at a cost.

The City realizes that the pandemic will likely have permanent impacts to the way people use and interact with City services, which will mean permanent impacts to the City’s operating budget. The City plans to address them in the 2023-2026 budget, when we have a better understanding of the long-term impact of COVID on things like transit ridership and recreation facility attendance.

Budget Process

Why do a multi-year budget?

The City budgets in 4-year cycles. This long view makes it easier to plan stable programs and services,and move our plans forward to build and maintain things like LRT, rec centres and roads, all in alignment with our long-term strategic plans. It also gives Edmontonians a better sense of what to expect with property taxes.

The 2022 budget was set in 2018 as part of a 4-year budget, which the City reviews and adjusts every year. Council will consider the 2023-2026 budget next fall.

Why do you have to adjust the budget?

Multi-year budgets typically need adjustments so the City can respond to any changes that happened since the 4-year budget was set, including:

Changes in external factors such as provincial or federal budgets or legislation
Adjustments for operating impacts of capital
Unforeseen changes to economic forecasts
Council-directed changes

Twice a year, Administration brings forward the Supplemental Operating Budget Adjustment (SOBA) and Supplemental Capital Budget Adjustment (SCBA). Council also approves adjustments to the Waste Services and Blatchford Renewable Energy operating budgets in separate reports to Utility Committee. Through these reports, Council can make changes without revisiting the 4-year budgets as a whole.

The fall supplemental operating budget adjustment process is used to make ongoing adjustments to the budget in advance of the budget year. The spring supplemental operating budget adjustment is more restrictive, and is used to respond to the release of the provincial and federal budgets, and deal with any emerging items before finalizing the property tax levy.

What is an operating budget?

The operating budget reflects the estimated cost for the City to provide programs and services, and the way in which those costs will be paid for, including property taxes and user fees.

Examples of these programs and services are:

Maintaining the roads and public transit systems that move people
Police, bylaws and fire rescue services to keep people safe
Parks, waste management and drainage to keep the city clean and healthy
Social programs and leisure activities that make Edmonton a great place to live, work and visit

What is a capital budget?

The capital budget is for the things the City builds. It pays for building and maintaining infrastructure.

Examples are:

Roads
Bridges
LRT
Recreation centres
Fire halls
Police stations
Libraries

What is a utility budget?

The City has 2 budgets for public utilities: one for Waste Services and one for Blatchford Renewable Energy.

Monthly utility rates (and not property taxes) pay for all residential waste services, including:

Garbage collection
Blue bag and blue bin recycling
Recycling depots
Reuse Centre
Eco stations
Big Bin events
Assisted waste collection

Blatchford Renewable Energy charges a customer rate as well, including a component to cover operating costs and infrastructure.

Blatchford Renewable Energy owns and operates the Blatchford community’s District Energy Sharing System (DESS). This system will provide heating, cooling and hot water services to Blatchford residents and businesses through monthly utility rates.

What are the operating and capital financial updates?

The City’s operating and capital budgets plan for investment in programs, services and infrastructure over four years. This means keeping the lights on, plowing snow, and building sidewalks and bridges. Three times a year, Administration reports to Council through the financial updates on how operating and capital project spending compares to those plans, including where the City will be at the end of the year.

The capital financial update also provides updates on major capital projects as well as on the City’s debt position. The operating financial update also provides an update on the City’s larger reserves and an update on the economy.

Knowing the current state of City spending against the operating and capital budgets can help Council make choices about where to stay the course in the previously approved 4-year budgets and what to change in the budget for 2022.

What is a non-statutory hearing? Why do we have it?

The Budget Non-Statutory Public Hearing is typically held in November or December. These annual hearings are a chance for residents to speak directly with Council about the budget.

This isn’t the only way Edmontonians influence the budget. From electing a representative to Council to speaking at regular public hearings, attending public engagement events, participating in surveys, or reaching out to Council and Administration directly, Edmontonians speak up all year about what matters most to them and where tax dollars should go.

How does Council choose between different projects?

There are limits to what cities can afford to provide. Setting or adjusting a budget is about making choices.

When it comes to making decisions about Edmonton’s future, everything flows from the City Plan. It reflects Council’s vision, which in turn comes from intensive public engagement. Our budgets show how we will shape and direct our work to bring the City Plan to life. The City Plan’s priorities should be clearly reflected in where we’ve placed our resources, from dollars and cents to the staff, programs and infrastructure they fund.

That’s easy to say, but prioritizing 73 services and all the work the City does is a complex task. Council will factor in social and safety considerations; impact to the economy and the environment; potential savings and risks; demand for services and the level of service now available; and public feedback of all kinds. Sometimes Council acts to take advantage of limited-time grants from the provincial or federal governments and/or debt at low rates that are locked in for the term of the borrowing to advance key transformational projects, like LRT expansion.

For ongoing projects or services that may need to be adjusted, Council will look at costs versus savings of every decision, as well as the impact on Edmontonians who rely on a service, or who are looking forward to the benefits of the project once it’s complete.

Funding Sources/Taxes

How does the City pay for its programs and services?

Alberta’s Municipal Government Act limits municipal taxation powers, so there are only a few ways the City can raise money to pay for the operating programs and services it provides, like:

Property taxes: These make up more than 50% of operating revenues and are the main funding source to pay for City services and programs.
User fees: The City charges user fees to partially recover costs from direct users of the service. Examples include recreation facility admissions, transit fares, City parking fees or fees for building and other permits.
Utility rates: The City's utilities charge customers a utility rate to cover the operating and capital costs required to sustain the utility operation.
Franchise fees: ATCO Gas and EPCOR provide gas, power, water and wastewater services to Edmontonians. The City charges these operators franchise fees for related costs and land access.

For more see Operating Budget Overview.

How does the City pay to build and maintain its infrastructure?

The City raises money for its capital projects (building and maintaining roads, bridges, building rec centres, fire halls, police stations, LRT, libraries) through, but not limited to:

Grants from provincial and federal governments. Many of our capital projects are funded 60% or more by grants from the Province of Alberta and the Government of Canada.
Tax-supported debt. The City uses debt in order to take advantage of lower interest rates and move priority infrastructure projects forward.
Reserves.
Investment income and the EdTel Endowment fund divident. These two items make up the larger portion of what the City refers to as Pay As You Go (PAYG) capital funding.

How do you set property taxes?

The amount of property taxes the City collects each year is set when Council approves the annual operating budget. The operating budget is the amount of money the City needs to run our programs and services in a given year, including fire rescue services, parks, police, recreation centres, road operations and maintenance, and transit.

The City first considers its other revenue sources (fines and permits, user fees, franchise fees, grants, and other operating revenue sources) to cover the costs to run the program and services, and then looks to property tax to ensure revenues meet expenditures. In accordance with the Province’s Municipal Government Act, the City must have a balanced budget, and cannot use debt to balance the operating budget. The City has limited options to fund the balance of the cost to provide these services, so more than 50% of the operating budget is funded through property taxes.

Once the operating budget is set, the City divides the tax levy (how much money we need to collect through property taxes) among Edmonton property owners. The assessed value of your property determines the share of the total tax levy that you will pay through your property tax bill.

For more information, visit: edmonton.ca/taxes.

What do I get for the property taxes I pay? How much does the average household spend?

Based on the 2021 assessed housing values and the 2021 operating budget, the average Edmonton household, with an assessed value of approximately $380,500, pays around seven dollars a day in property taxes. (2022 home assessment values are not yet available.)

Imagine life without roads, parks, police and fire services, libraries, summer pools and winter skating, snow clearing and repair crews. Now imagine your household could buy a pass, for $7 a day, that would give those things to everyone in your household. That pass would also help support recreation facilities and attractions, transit, the City’s local partners in everything from sports to social work, and dozens of other things you rely on. That’s the work that $7 a day gets done.

Why does the City use debt?

The City of Edmonton uses debt only for capital projects, such as building roads, facilities and other infrastructure or doing major renewal when needed. The City does not use debt for day-to-day operations, like fire rescue, parks, police, rec centres, snow removal or transit.

Building and maintaining the City’s infrastructure is expensive. The City’s 2019-2022 capital budget is over $11 billion. In order to fund these projects without the use of debt, the City would need to save up tax dollars for decades before starting project work. Capital plans would not advance on a timely basis and we would be taxing many Edmontonians who would never get to use the facility, road or LRT they paid for. Making sure those who benefit from a service contribute to costs is called generational equity. Debt allows us to build now and spread the cost out more fairly, to all users over time.

As well, unlike most homeowners, the City can lock interest rates in for up to 35 years with its debt. That means the City can take on debt at the current low interest rate, while paying for labour and materials at today’s costs instead of tomorrow’s. That can save tax dollars over time.

At times, federal and provincial governments offer grants that let the City build needed infrastructure without paying the entire cost. Certain projects are only affordable with this kind of support and some of these grants can cover approximately 66% of total project costs. However, these grants require the City to pitch in for a certain portion of the total cost as well. Using debt to pay for the City’s portion of the project, in order to secure the external grant funding, is a responsible choice. In the cases where the federal and provincial government cover around 66% of the total cost of the project through grants, the City is essentially paying $1 for every $3 in capital cost. This is a good deal.

How the City Uses Debt - white paper

For how long is the City going to be in debt?

After decades of infrastructure work falling behind, the City took on debt to catch up and build for the future. But that debt level is about to drop.

The City has always used debt carefully, and it is only used for financing capital projects. It’s one of the tools in the City’s toolkit for building infrastructure efficiently, for taking advantage of grant dollars and for paying today’s prices, not tomorrow’s, for supplies and labour. It also allows the City to share costs of infrastructure among more of the people who will use that infrastructure over time (generational equity).

However, even at the low interest rates available to the City, having too much debt can be a burden on taxpayers. That’s why debt must be used appropriately.

Under the Province’s Municipal Government Act, the City has limits for both debt and debt servicing, which is repayment of both debt and interest. Right now, the City is at 59% of the limit for borrowing and 29% of the limit for debt servicing. The City’s own self-imposed debt servicing limits are more strict than the Province’s and we are well below those limits as well.

As major projects that are partially financed through debt move toward completion, such as the Valley Line LRT and Yellowhead Trail Freeway Conversion, we can expect to see debt levels peak in 2024 and drop after that. Based on the current approved capital budget, the levels are expected to continue dropping after 2024, but infrastructure decisions in the next budget cycle could impact future debt levels.