An audit was recently released that provided our current financial position as a city. The audit clearly shows that Edmonton’s financial position today is not as good as it was 20 years ago. That may lead you to ask, why is that the case?
During our Audit Committee meeting today, there was an excellent slide presented that shows why our debt is much higher today compared to where we were in 2000. In short, we had a major infrastructure deficit. We weren’t adequately maintaining existing infrastructure, and our outward growth created pressures for various services (ex: rec centres, libraries, fire halls, police stations, roads, bridges, transit).
In 2005, the council of the day started borrowing at a much higher rate to build out much of this infrastructure and to start catching up on some of the infrastructure maintenance (ex: Neighbourhood Renewal in 2009).
The slide above shows a number of very important projects. I often hear the term ‘pet project’ used when talking about large projects. Looking at the list, I’m not sure I see many projects that I would define as a ‘pet project’. The main project I didn’t support at the time it was discussed was the arena deal. Even though I may have minor complaints about a few others, I would find it hard to say that the majority of those projects were not needed.
While it is hard to argue about the merits of most of those projects, we also have to recognize that our economic climate in our city and province has changed and our approach to budgeting cannot be the same. Therefore, we have to understand that while we don’t want to stop investing in critical infrastructure, we can’t keep increasing taxes at the same rates.
Thankfully, there has been a downward trend that started a few years ago. In 2017, we saw the lowest tax increase in a decade. Two years later in 2019, we had the new lowest tax increase in a decade. For 2020, we saw the lowest increase in 23 years and for 2021, we are likely to see no tax increase (0%) for the first time in 24 years.
What is different from the last few years compared to the approach in the mid-90s is that we haven’t sacrificed our investment in renewal to achieve those lower tax increases or the upcoming 0% tax increase. In fact, as you may have read in my Investing in Infrastructure blog series, we have seen major increases to programs such as our Arterial Road Renewal program and Back Alley Renewal program.
One final point to raise is the importance of our Debt Management Fiscal Policy. This policy sets out far more strict debt limits than what is permitted by the provincial government through the Municipal Government Act. This strict policy ensures that unlike the provincial and federal governments, we are not able to put ourselves into unmanageable debt. For more information on this policy, please review this paper from a few years ago.
It’s very easy to pull out a specific number from the audit and post it to social media without context. It is true that our debt has grown over the last 20 years. But providing that type of information without this context does not allow us to have a proper conversation about what debt has been used for in the past, our current policy around debt, and how we manage our finances in the future. I thought our discussion today provided that critical context and I would encourage you to review the report, listen to the discussion, and review the Administration response to the audit so that you can fully understand all the details about Edmonton’s financial position.