Covid-19 & Edmonton's Road to Recovery

By now you have a new routine.  You’re working from home, your kids are home with you, you want to get back to work, to see your parents or your grandkids, to have a glass of wine on a patio or get back in the gym.  Maybe you’re a little anxious or a lot worried.  Chances are that you’re concerned about your job, your mortgage, your business, your finances, your bills, your taxes.  

As of today (April 24), your property taxes would go down 0.8% on average from 2019.  Part of that decrease is from provincial education taxes, some of it is from the City’s deferred expenses.

As of today, the City is $136M over its 2020 budget.  This is partly due to lost bus fares, recreation centre admissions, parking charges and other lost revenue.  It includes some savings from reduced operations, like lower fuel costs for buses since fewer of them are on the roads.

The City is also allowing residents to defer property taxes. I can’t help but wonder how many people won’t be able to pay at all?  Our property tax revenue in 2018 was $1.6 Billion - a 10% drop would be a further $160M in lost revenue.

Remember, the City cannot run a deficit - it must collect a dollar for every dollar it spends.  If we are short $136M or more then we need to find the money somewhere.

So what can we do?  

Transfer, Borrow or Cut

We can transfer some of the money we spend on maintenance projects to everyday operations.  That doesn’t mean we stop the work, it means we end up borrowing more. 

We could borrow money.  But borrowing money to spend today just creates a bill we have to pay back tomorrow.  Borrowing for operating costs is like using your credit card to pay your rent:  It might help in the short term, but it is a recipe for disaster in the long run.

And we can cut costs. I believe this is where we need to focus.  

The City spends roughly $3 Billion in operating costs a year. Of that, $455M goes to the police, $226M to the fire department and $305M goes to debt repayment.  These are costs that we can’t or shouldn’t cut back.

There are also other costs we can’t cut completely: heating and maintaining our buildings; maintaining City vehicles; cutting the grass and filling potholes.  We can reduce those costs, but not to zero.

The Hard Road Ahead

Approximately 60% of our annual budget is spent on salaries, wages and benefits.  Given the current financial and economic situation, the City must minimize its costs and that means reductions to labour costs.  

The City has already issued layoff notices to some workers.  How much we will save from that first wave of layoffs is not yet clear.  There will be a need for further reductions.  Layoffs are one way to achieve these reductions and there may be others like job sharing, salary reductions, furlough days, etc.

It can seem easy to talk about job cuts or salary reductions when just talking about numbers.  I have had to lay off long-term employees simply because the organization could no longer afford them.  It is not an easy experience.

But every organization, business and household in Edmonton has been affected by the Covid-19 pandemic.  There are a lot of people that have lost their income, or who own businesses that cannot meet their obligations.  

As your Councillor, I need to balance the pain that is inflicted through staff reductions with the pain already felt by all taxpayers.

Property Taxes & Infrastructure Spending

It has been suggested that we cut everyone’s property taxes 5% right now.  Giving a cut to everyone means some get a cut they don’t need, while others don’t get enough relief.  I believe we need to be more strategic than that.  

Some have suggested that the City cancel infrastructure projects.  This sounds sensible. Does it make sense to borrow money today to build a project, knowing that the debt repayment adds to the operating cost problem we already have?  Should we borrow money to build a project that will cost a lot to operate in a year or two from now, when we will still be digging ourselves out of a financial hole?

However, there has been discussion of infrastructure investment funding coming from the federal and provincial governments to help stimulate the economy during this unprecedented economic downturn.  Should we shut down projects today that might receive additional funding a month from now?  

Clearly we need thoughtful analysis and planning.  And we need the input of business owners, academics, industry leaders, and most importantly, the ones paying the bills.

In advance of Council’s Capital Budget adjustment discussion on May 25, I invite you to share your thoughts on infrastructure spending with me. 

What are the future operating costs?  What are the future borrowing costs?  Will residents still want to travel on crowded buses?  Will more of us work from home, meaning we won’t need some road widening projects?  Do we still need more recreation centres, or will the ones we have be enough for now? Should we look at partnering with private companies to build and operate some city owned facilities?  

Please join me for my next Virtual Ward 9 Community Meeting on Tuesday, May 5 at 7:00pm. Click this link to join the meeting.

I hope to see you for this important conversation. Please contact my office if you have any questions or assistance with Zoom

Tim