Expenditure Pressures
The following blog is a summary of the section “Expenditure Pressures” from the fiscal gap report put together by City Administration. The full report can be found here:
https://pub-edmonton.escribemeetings.com/filestream.ashx?DocumentId=236515
Edmonton has been the fastest-growing large city in Canada since the turn of the century. From 2001 to 2023, Edmonton’s population grew by 65%, from 0.7 million to 1.1 million. When compared to other large Canadian cities, Edmonton’s growth rate was significantly higher. From 2001 to 2023, Vancouver grew by 28%, Winnipeg grew by 28%, Toronto grew by 20%, Ottawa grew by 38%, and Montréal grew by 16%.
Edmonton’s population growth rate was more than 2.2 times the national growth rate, and was significantly higher than all other large Canadian cities, except for Calgary.
Population growth is one of the biggest drivers of the City’s expenditure budget. Population growth requires the city to provide more services to maintain service levels. Virtually all aspects of the City’s expenditure budget grow in response to population pressures. When population growth occurs at rapid levels, budgetary pressures become amplified.
The City’s population forecast indicates that Edmonton’s population was almost 1.2 million as of July 1, 2024. This translates to 200,000 new people in seven years of whom 100,000 were added over the last two years.
An estimated 71% of overall population change between 2001-2023 was from domestic and international migrants. Domestic migration includes migration from other parts of Alberta and other parts of the country.
From 2001 to 2023, net international migration accounted for 43% of overall population change, domestic migration accounted for 28%.
The relatively high inflation experienced by the City in 2022 placed immense pressure on its expenditure budget.
A 4.4% inflation rate on expenditures significantly drove up City operating costs. At the same time, the City must consider the impact of high inflation on residents. This creates a narrower fiscal path to continue delivering quality services while being able to respond to emergent issues.
The City of Edmonton also provides various services and infrastructure projects for a metropolitan area population of 1,563,600 while only generating property tax from its resident population of 1,128,800. When people and businesses from surrounding municipalities rely on these services and infrastructure, an unintended free rider problem is created.
A “free rider” benefits from resources, goods, and services, without paying for their full costs. Here are some examples:
Road Network: The largest asset category for our city was roads and related infrastructure, with an asset replacement value of $14.2 billion. The average annual renewal requirement over 2024-2032 to maintain the City’s road network is $296.5 million. The yearly operating expenditures to service Edmonton’s roadway network in 2023 (including bridge and road maintenance, snow clearing, street cleaning, traffic control, on-street parking, and traffic safety) were $165.6 million. 68% of per-capita Vehicle kilometers traveled on City roadways is driven by Edmonton residents, while 32% is driven by regional residents.
Freeways and Expressways: The City also builds and maintains freeways and expressways. For example, the city is funding 50% ($500 million) of the Yellowhead Trail Freeway Conversion project that services most of the Edmonton region.
Regional Demand Pressures on Policing Resources: With the additional population surrounding Edmonton regionally (434,800), EPS resources become strained with the extra responsibility of protecting and administering enforcement services for this larger population, who are not contributing toward Edmonton’s policing costs via property taxes.
Major Cultural Commitments That Serve A Regional Clientele: Edmonton hosts a wide variety of large-scale cultural facilities and events beyond the scope of a smaller municipality. While these events and facilities serve residents and businesses across the Edmonton region, the costs are shouldered specifically by the City of Edmonton.
Recreation and Attraction Facilities: In 2023, there were over 8.5 million total visits to City recreation and attractions facilities. Of these individual users who sign up for regular programs, roughly 14,000 to 223,000 were from outside Edmonton based on postal code data. The cost of delivery of recreation services is covered in part by user fees and tax support. While regional attendees can pay the user fee, the property tax portion is not supplemented.
Transit: Similar to recreation services, transit operates by generating part of its revenue through user fees. An estimated 11% of ETS riders live in regional municipalities surrounding Edmonton. These riders pay user fees to the City but pay their property taxes elsewhere.
Social Services: Within the metropolitan region, Edmonton has a concentration of social services meant to provide a wide range of support including emergency shelters, transitional housing, and basic needs services. Edmonton’s hospitals, universities, and non-profits also support the wider Edmonton region, but all these properties are tax-exempt.
The following table shows the responsibilities of the different levels of government:
The lines drawn between the responsibilities of orders of government are blurring for many public services as large cities like Edmonton seek to respond to the demands of residents, as well as urgent social issues that concentrate in urban centres.
A number of services that have traditionally been provided by higher-order governments have seen responsibility to municipalities increase with no corresponding fiscal changes. The growth in responsibilities has meant increased expenditure responsibilities for big cities like Edmonton and limited tools to respond.
Municipal governments have seen “downloading” of federal and provincial responsibilities, delivering services that have traditionally been under federal or provincial jurisdiction. For certain public services, when their federal and provincial counterparts do not keep pace with spending responsibilities municipalities step in and take on the responsibility of delivering these services.
The Government of Alberta is responsible for healthcare, social services, and education, despite this, the City continues to address a number of these major service areas.
As the closest order of government and the last potential responder at the community level, municipalities seek to be responsive to emergent issues within their local communities. Failing to address issues of expanding municipal responsibilities into service areas that have overlap between orders of government can produce government waste, and insufficient use of public dollars, ultimately impacting residents.
As a city, we’ve responded with funding in the following areas:
Homelessness
Addictions
Mental Health Funding
Affordable Housing
Support for Community Organizations
There are many other expenditure pressures we are facing as a city that were outlined in the fiscal gap report including:
Unique Policing Pressures
Cost of Infrastructure
Our Urban Form Driving Capital Costs
Ambitious Strategic Goals
Recreation Service Levels Driving Capital Costs Beyond Revenue
Infrastructure Design Requirements Driving Costs
Early Engagement on Capital Projects Driving Capital Spending Responsibilities
These are all important elements that factor into the expenditure pressures we are facing as a city. And as a city, as we acknowledge these pressures, our work requires us to be efficient, strategic, and innovative to sustain our municipal operations while ensuring fiscal responsibility.
