City Spending Precariously High Says Auditor
One of our goals at Common Sense Edmonton is to raise awareness of what’s happening at City Hall. That’s why we want to let you know about an alarming new report recently released by the City Auditor.
The report, innocuously entitled “City Financial Condition Review”, examined various expenditures and debt ratios over the past 20 years and makes for some very concerning reading.
On the revenue side, the City is relying on transfers from other levels of government more than ever before. In 2000, 11% of City expenditures were funded by federal or provincial transfers. In 2019, it was 18%. This is alarming because this is a revenue source that is entirely out of the City’s control. If any type of crisis came along (say, for example, COVID-19) the province or federal government may face financial problems of their own and be forced to abruptly reduce or cancel these transfers. This, in fact, happened on a smaller scale recently when the provincial government cut some small transfers to help close their own budget gap.
On the expenditure side, both operating spending (the City’s day-to-day running expenses), and capital spending (buildings, infrastructure, and other long-term investments) have skyrocketed.
Operating spending has grown 36% above what could be attributed to population growth and inflation alone in the past 20 years. This is an additional $680 million in spending this year and, because Edmonton’s debt policy does not allow it to take on debt, this $680 million in extra spending each year must be made up by every Edmontonian paying higher taxes.
Capital spending, meanwhile, has increased from $361 million in 2000 to more than $1.4 billion in 2019. Approximately two-thirds of that spending goes towards new builds, with only 32% being allocated to maintenance. As a direct consequence of this spending growth, Standard and Poor’s downgraded Edmonton’s debt rating from AA+ to AA in July 2019.
All this spending has made it harder for Edmontonians to make ends meet as the tax burden keeps increasing both in absolute terms and as a percentage of household median income. Edmonton’s average municipal property tax levy increased from an average of $910 in 2000 to $2,586 in 2019. That’s an increase from 1.6% of household income in 2000 to 2.4% of household income in 2019. When other fees like drainage and waste disposal are included, the increase is even more dramatic - from 2.2% to 3.4%.
Tax-supported debt has also increased by over 2,000% over this period and will have to be paid back, primarily through future property taxes. In other words, future Edmontonians will be on the hook for this debt for a long, long time and there are limited options available to reduce this debt. You can’t “unbuild” a building and get a refund if you decide it's no longer required.
At Common Sense Edmonton we know that everyone leads very busy lives and that City reports aren’t exactly page-turners. Heck, even if they were, kids, jobs, and other commitments usually take priority.
That’s why we read these reports so you don’t have to and keep you informed about what’s going on at City Hall.
If you’d like to help support our work, so that we can keep providing you with this kind of detailed information – and perhaps even start working to resolve some of these very challenging financial problems, please consider making a donation by clicking here or signing up to volunteer with us by clicking here.
Together we can send a message to Edmonton City Council that it’s time for them to stop wasting money on vanity projects, get spending under control, and put our City back on a solid financial track.