Fixing Edmonton's Broken Fee System

Later today, Council will discuss a report on the business licensing fee waiver that was provided to some Edmonton businesses last year, and also debate how best to help businesses this year.

The report on last year's program was presented to Council's Executive Committee a couple of weeks ago, and with it coming to Council today, we spent some time during our long weekend analyzing it for you.

In May 2020, after the economy had started to re-open, Council passed a motion to offer a 50% reduction in Business Licence Fees for the period June 1, 2020, to December 31, 2020.

While well-intentioned, the program had two major problems.

First, the program was very unfair to any business that had already paid their 2020 fees prior to the waiver, because they missed out on the waiver entirely!

Second, the program was not automatic.

In total, only 976 businesses out of a possible 36,281 businesses in the City took advantage of the program.

Is it any surprise that only 2.7% of eligible businesses received a waiver, though, when even the City admits that business owners weren't aware of the program and, in a classic example of City bureaucracy, each business had to manually request the waiver?

City staff might appreciate all the overtime required to process all those manual applications, but the make-work nature of the program and the inequity of the result is just yet another example of why lower flatter taxes for all businesses, not political handouts that pick winners and losers, are the better public policy solution to help businesses.

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The City has vowed to do better this year, so what exactly is the City proposing for 2021?

City staff have proposed four options - a 50% fee waiver, a 40% fee waiver, a 25% fee waiver, or no fee waiver.

Importantly, all these waivers would be applied automatically, rather than by application only.

Similarly, any business that has already paid their 2021 fees will receive a discount on their 2022 fees - not ideal, but definitely an improvement.

Overall, we agree that the proposed 2021 program is vastly better than last year's.

But, if the goal is to help out all Edmonton businesses during a difficult time, the City still has a very long way to go.

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Here's what we'd do instead...

First, it's important to realize that the City's Business Licensing program only brings in a tiny fraction of the City's revenue.

Without any discount for 2021, the program was projected to bring in just $9.3 million, while costing more than $2 million to administer.

With the most likely outcome of a 50% discount (plus some caveats and other calculations), revenue will drop to approximately $5.5 million, but the administrative cost to run the program will remain at just over $2 million.

Instead of a one-off fee waiver, we think the Council should focus on reforming the business licensing system entirely, simplifying the process, and reducing the cost for all businesses.

Our neighbours in Calgary have a much simpler system of business licensing.

The City of Calgary charges almost all businesses the same low fee ($172 for a new licence and $131 for renewal), making a new licence a whole $70 less than even the most basic licence in Edmonton (usually $244).

Edmonton also doesn't discount renewals, meaning a renewal in Edmonton costs $110 more than Calgary. 

To make matters worse, while most Calgary businesses pay this low fee, only a relatively small portion of businesses fall into this lower-fee category in Edmonton.

In fact, there are 62 different categories of business licences in Edmonton that pay 13 different fee amounts ranging from $0 to $19,183 and, in many cases, the categories seem arbitrary.

Notably, a second-hand store's business licence costs more than twice that of a minor retail outlet.

Why does the city need to break down businesses into 62 different categories?  

City Council is currently undertaking a business licensing bylaw review, with the findings scheduled to come back to Council for debate this summer.

Now more than ever, businesses need the City to get out of the way and let them get on with business, not throw more and more complicated licensing requirements and paperwork at them.

Instead of considering another one-off fee reduction that does nothing to address the underlying inequity and over-complication of the system, Council should accelerate their review of the entire system, focus on keeping fees as low and simple as possible.

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We do have one more radical proposal that we think Council should consider, too.

With revenue of just $5.5 million and an administrative cost of more than $2 million, the City will actually only pocket about $3.5 million from business licences.

That means that the revenue from this program will total less than 0.1% of the entire City budget in 2021.

Note, that's not less than 1%, that's less than 0.1%!

Put another way, if the City could cut less than 10 cents out of every $100 they spend, then they wouldn't need this money at all.

Perhaps, to the shock and horror of the City bureaucrats, Council should consider abolishing the licensing system entirely?

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Here at Common Sense Edmonton, we think the City spends far too much time and far too much money on things that are not the proper responsibility of a municipal government, preferring to focus on shiny objects or pet projects that only appeal to a very narrow interest group.

Worse, all that time and money spent on these distractions has also jeopardized the quality and effectiveness of the services the City is actually supposed to be delivering.

We think that it's time to focus City spending on the core role of our municipal government, stop with the wasteful spending on distractions, and cut taxes for all Edmonton residents and businesses.

If you agree, we encourage you to sign up as a volunteer to help with this and our many upcoming campaigns:

If you're in a position to be able to help fund more work like this, would you also please consider chipping in $5, $10, or even $50 to help fund more research, analysis, and outreach like this?

Common Sense Edmonton doesn't accept any government funding, and never will.

We believe you can decide, for yourself, which organizations to support.