The City is moving into a new capital budget cycle that will see available funding reduced from the record levels of spending witnessed over the previous two capital cycles. The City invested $7.5 billion in capital projects between 2009 and 2014.
The City was able to make this considerable investment in its infrastructure by taking advantage of a post-boom economy, which resulted in lower interest rates, increased competition, greater industry capacity to deliver on projects, and lower prices in the construction trades, These favourable conditions allowed the City to stretch its capital spending while ensuring citizens received the best value for their taxpayer dollar.
Edmonton also benefited from several major federal and provincial capital grant programs that were instrumental in advancing a significant amount of City infrastructure work, which otherwise
would have been deferred or not undertaken. This ability to leverage a healthy economic environment and new grant dollars helped boost capital investment.
This was combined with the City’s decision to make the most of low interest rates by using debt to finance major new projects, and to fast track others by borrowing against committed grant dollars to bridge the gap between construction and receipt of funding.
Today, this unprecedented level of spending holds the City in good stead as we begin to move into a period of more constrained funding over the next four years and beyond.
The draft Capital Investment Agenda 2015-2024, reviewed by City Council on April 30 and May 14, 2014, projects that the City will be able to spend $7.4 billion over the next 10 years on infrastructure projects; about half that amount - $3.35 billion - is projected for the next Capital Budget cycle (2015-2018).
Funding sources for infrastructure
The main funding sources to build and renew the infrastructure required for a progressive and modern City are:
- grants from provincial and federal governments,
- the City’s investment income,
- developer fees,
- local improvement fees,
- debt financing,
- the dedicated tax levy to fund the Neighbourhood Renewal program.
- a portion of utility fees fund capital projects in Waste Management Services and Drainage Services.
In terms of the City using debt to finance infrastructure projects, by the end of 2014 the City’s total debt is estimated to total $3.56 billion. Borrowing allows the City to spread the payments for infrastructure over a portion of the life of the facility. Taxes would jump substantially in any one year if the total costs of an infrastructure project needed to be funded outright in that year. It is similar to how an individual does not usually pay for a house or a new car in one lump sum. Instead, a mortgage or loan is used to spread payments over a longer time frame.
Projections for next Capital Budget cycle
The total Capital funding over the 2015-2018 period is projected to be $3.35 billion. Of this amount, more than one third ($1.34 billion) has already been allocated through prior Council decisions. The current Council will be making decisions on how and where to allocate the remaining $2.01 billion. City Council is scheduled to make decisions on the 2015-2018 Capital Budget in late fall 2014.