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Proposed Budget Holds Tax Increase at 3% for City Services in 2012

November 09, 2011

City Council has received the proposed 2012 Operating Budget for civic services, boards and authorities, starting their process to finalize the level of services Edmontonians will see in 2012 and the municipal taxes to pay for the services.

The proposed budget meets City Council’s guideline identified in June to achieve a balanced budget with a 3% tax increase for civic services and 1.5% to continue the Neighbourhood Renewal Program.

For a typical Edmonton home assessed at $365,000, the budget would result in a tax increase of almost $77 for the year or about $6.42 per month for households that pay on the monthly plan.

“We have worked hard to draft a balanced budget that manages cost increases and limits the tax increase, while delivering the services Edmontonians need and use every day,” said Simon Farbrother, City Manager. 

“All services—police, fire rescue, recreation programming, parks maintenance, public transit, libraries, roadway maintenance, and a range of other services—are provided for under $5 a day in property taxes for the typical household.”

Costs for operations are forecast to increase in 2012 due to a number of main factors. The city’s developed area and population are increasing, requiring an expansion of services such as transit, police and road maintenance, to service a growing community. The city faces inflation for salaries as well as materials such as pothole fill and fuel for buses, police and parks vehicles.

In addition, a number of new facilities coming on stream in 2012 such as the Commonwealth Community Recreation Centre and the Southwest Division Police Station will now start to incur operating costs as staff are required.

Other cost increases include operational increases such as enhanced snow removal services and debt servicing for capital projects. At the same time, revenue will increase from new properties being taxed and increases in fees, permits, fines, and dividends.

“The total amount required to cover the increased costs of growth, inflation and the impact of previous Council decisions is $98 million, said Lorna Rosen, Chief Financial Officer and Treasurer. “For 2012, the increase in tax revenue from growth and the 3% Council target, plus other non-tax revenues is estimated at about $64.5 million. We also needed to allocate almost $10 million for Council to dedicate to emerging priorities and strategic goals.”

“To achieve the Council target, we reduced internal costs and identified additional revenue, amounting to $44 million to balance the budget,” said Rosen.

The proposed budget includes internal reductions of $18.7 million and new revenue of $25 million. The reductions include reallocating or reducing staff by the equivalent of almost 79 positions.

“We definitely want to minimize the impact on front-line services, and we have capitalized on efficiencies and doing things differently, but after three years of internal cost controls each year, we may have some impact on service levels as well,” said Farbrother. “Council will certainly have tough decisions in the budget process as we focus on priorities for Edmontonians.”

Background

The presentation of the proposed budget is the beginning of the City Council budget deliberations. Council may change programs and service levels, and the final budget may change the tax increase.

The City is not permitted to plan a deficit on its operating budget and it does not plan for a surplus; the total taxes identified in the budget are only enough to support operations.

The Operating budget relies on property taxes for 54% of its revenue. Other sources include user fees, fines, permits, investment earnings and dividends, and grants. The proposed operating budget includes spending of $1.86 billion.

The three-year Capital Budget and the City utilities of Waste Management Services and Drainage Services are discussed in separate budgets.

Cost increases

Demand for City services continues to grow as Edmonton expands, including transit coverage and emergency protection for new neighbourhoods, and greater focus on community safety as our urban centre grows. Service enhancements are also in demand across the city.

City expenditures are increasing as it provides the services in many new facilities and infrastructure that have been developed in the last few years and the year ahead – including new libraries, fire halls, police stations, pools and recreation complexes, transit stations and an expanded LRT line.

Costs are escalating in areas such as materials for road repairs, fuel for buses and police cars, and salaries for the city staff who deliver services on the front lines. The costs for providing City services are increasing faster than the costs for an average consumer’s “basket of goods,” such as groceries, electronics and household needs.

Alberta is a competitive economy with the lowest unemployment rate in Canada, the highest average weekly earnings and a growing economy. City wages are competitive with the Province or the Federal Government to help reduce the costs of recruitment and training. Personnel costs account for 58% of the city budget.

The costs for city services and programs are increasing more than the City’s limited revenue. Revenue does not grow automatically with growth in service or even population – the City has to increase the few revenue streams in our control such as taxes and user fees. The budget sets the total taxes needed. A property’s assessed value determines that property’s share of the total taxes needed.

A typical Edmonton household pays the federal and provincial governments income and education taxes. When combined with municipal taxes, six percent of these total tax dollars go to the City to fund the range of services from transit, roads and park maintenance to police, firefighters, libraries and recreation.

Budget Strategies

A number of strategies were employed to balance the proposed budget at a targeted tax increase of 3% for services plus 1.5% for Neighbourhood Renewal, including:

  • Increase in revenue (about $25 million) from 2011 education tax room for operational costs in new capital projects, increased interest for late payments, transit fines and transit fare increase (moving from $2.85 to $3.00) and Right-of-Way Management License Fees.
  • Decrease in internal expenditures (over $5 million) from changing business delivery, branch reorganization and efficiencies, reduced internal maintenance schedules and reduced consulting services. Police also identified a net reduction of $2.3 million through efficiencies.
  • Additional proposed cost reductions involving services ($10.5 million) include reduced street cleaning in summer months, alley cleaning, litter removal, streetscape maintenance, parks servicing, and winter maintenance on trails and in parks. The proposed cost reductions also include transit hours 311 service response time, and elimination of annual flowers, shrub replacements, tree lighting throughout the city, and a gradual bulb replacement program on streetlights.

The budget strategies would free up $8.2 million to advance projects associated with Council’s 10-year goals. Additional funds not allocated in the proposed budget are available for Council to designate while still remaining within the 3% tax target.

Neighbourhood Renewal

Council initiated a designated tax levy for Neighbourhood Renewal in 2008, and it is proposed for continuation in 2012. The program benefits multiple neighbourhoods every year, with work that renews roads, sidewalks and streetlights.  The program involves total reconstruction in some areas and preventative maintenance in others. The proposed 1.5% tax increase dedicated to this capital program leverages infrastructure funding from the Province and local user fees. 

Next Steps

The City will hold a Public Hearing on the budgets November 23 in Council Chambers. To speak at the hearing, residents should call the City Clerk at 780-496-8178 or register online.

Council discussions will start on November 25 and continue through to the middle part of December, when the final tax increase will be determined for 2012. The final tax bill for individual property owners is set in the spring after the Education Tax is announced by the Province.

 

For more information:

Lorna Rosen

Title Chief Financial Officer & Treasurer
Telephone

780-944-5524