City of Edmonton stares down $74-million budget deficit

City facing multi-million dollar deficit Edmonton is facing a projected $74-million deficit. Jeremy Thompson has more on what that means for taxpayers.

Edmonton city council is faced with a $74-million deficit by the end of 2023, and while the city's reserve fund can help weather the financial storm, tax increases could be on the horizon as a result.

City staff advised dipping into reserves on Wednesday to pay for unexpected costs, which would bring the balance of the reserve fund from about $136 million down to $62 million, well below what's supposed to be the account minimum of $124 million.

The city would have to make a plan to replenish that reserve within three years.

Last December, city council budgeted funding for core services such as transit, recreation centres and maintenance work, saddling residents with five-per-cent annual tax increases until 2026. As of the end of June, however, the city is now on track to spend even more.

"People expect us to balance our books at the end of the year, which we will try to, but there are pressures that are beyond the municipality's control," Mayor Amarjeet Sohi said Wednesday in an interview.

The bulk of the $74 million in overruns comes from a few culprits:

Sohi said the city will "try to grapple with" deficit figures mostly caused by "external pressures that we have to have to manage."

"Municipalities all over Canada and North America are facing these pressures," Sohi said. "These are not unique to Edmonton. Some municipalities last year raised taxes by up to 10 per cent and we settled around 4.97 per cent."

He said these challenges speak to a bigger question: the limits of a municipality's options when it comes to raising revenue.

"This speaks to the bigger question and the challenge about how limited municipalities' options are when it comes to raising revenue," Sohi said. "We only raise revenue through property taxes, user fees, franchise fees or Epcor dividend. Other orders of government have more robust and flexible revenue sources such as corporate tax, personal taxes, consumption taxes and other varieties of taxes."

Ward papastew Coun. Michael Janz said Edmonton's budget shortfall presents an "opportunity" for the province to "come to the table" to help address financial pressures municipalities face, using the city's recent police budget increase as an example.

"You've heard Council talking about trying to take steps to bend that (police funding) curve through a funding formula or to be more predictable, but ultimately, we're in a province with a $13-billion surplus right now," Janz said.

"Most of the policing and most of the drivers of crime in our community are due to provincial underfunding, provincial reductions, provincial cutbacks ... And this isn't just Edmonton. It's other smaller municipalities like Peace River and others in Alberta, too. We need a fair deal for cities. Not a special deal, just a fair deal. You see that in Edmonton's budget, where we're hitting more and more variances, not because of any action of the city, but because of drivers outside of our control."

Tim Cartmell said he would rather not see property taxes rise as he sees residents' capacity to take on more increases as "virtually zero."

"We have other pressures that are coming our way — we, too, as a city have the same inflationary pressures that you have in your household," said the councillor for Ward pihêsiwin in the city's southwest. "Our power bill went up, too. It's costing more for our materials, too. It costs more for a contractor to come and do repairs for us as well. All of that together means a lot of pressure on the budget to increase it ...

"We're in a crunch. We've got to figure something out."