How Municipal Budgets Actually Work in Edmonton
Image of City Hall
From my conversations with constituents and chatter on social media, it’s clear that many misconceptions exist. Some folks think the city is broke, while others believe we’re wasting money. So, let’s break it down with some facts about how the city manages its budget, where the challenges come from, and what we’re up against.
1. Edmonton Must Balance Its Budget Every Year
First, Edmonton cannot run a deficit — by law! Our budget must be balanced each year. We’re not allowed to spend more than we earn.
If we were actually “broke,” it would mean that services stop, and that’s clearly not happening. What we do have is a fiscal gap — this means that our revenue (money coming in) is not keeping up with our expenditure (money going out). The gap is widening due to factors both within and beyond our control. You can find more information about the City’s Fiscal Reports here.
2. Financial Stabilization Reserve: The City’s Safety Net
Edmonton has a Financial Stabilization Reserve to protect against economic shocks. This reserve is a key financial tool — like a rainy-day fund – designed to help cover unexpected costs or shortfalls in revenue. But it’s not limitless — it needs to be carefully managed and used only in genuine emergencies.
Drawing on these reserves is a strategy that helps the city maintain operations during downturns but doesn’t eliminate the need for other financial adjustments and strategies.
There are also other specific reserves, such as the Financial Services Reserve, which can be used for addressing short-term operational gaps or offering temporary tax relief. These reserves play a strategic role in stabilizing the city’s finances, but they cannot cover every gap we face. For further details, visit the City’s Budget Process and Financial Strategy.
3. Why Property Taxes Are Not Enough
A lot of people ask why we keep raising property taxes. The simple answer is that property taxes make up a huge part of Edmonton’s revenue — about 59% as of 2024, and we don’t have many other ways to generate income.
Over the past two decades, property taxes have grown faster than any other revenue source because things like non-tax revenues (user fees, fines) haven’t kept pace with inflation and growing demands. More on this can be found in the Operating Budget.
Edmonton is expanding rapidly, but property tax revenue alone won’t keep up with the infrastructure and service demands. No city in Canada can survive or grow sustainably based solely on its local revenues.
The property tax system simply wasn’t designed to fund cities dealing with rapid growth, complex social challenges, and the need for modern infrastructure. We’re expected to fill in the gaps left by higher orders of government, whether it’s in public health, social services, or even housing. You can learn more about Edmonton’s fiscal challenges in the Capital and Operating Shortfall Analysis report.
4. Funding from Other Orders of Government: Differing Priorities
Edmonton depends on grants from the provincial and federal governments, which often come with specific conditions. While these funds are essential for projects the city couldn’t afford on its own, they often reflect the priorities of higher levels of government rather than Edmonton’s immediate needs.
This misalignment can be challenging. Turning down funding is rarely an option, even when it doesn’t match Edmonton’s top priorities. While the funds provide significant resources, they may not always address our most pressing local concerns.
For example, sometimes the city may receive targeted funding for specific projects, such as purchasing electric buses or other green initiatives, when local needs might focus on different areas like road maintenance or increasing public safety measures. These investments, though important for long-term sustainability, might not always reflect what residents or city council see as the most urgent need at that time.
This dynamic can lead to frustration when people see investments in areas they don’t feel are priorities. For instance, some residents may feel that funds are being wasted on public art or bike lanes, while others view these as essential investments in Edmonton’s future and identity. On the flip side, some people may prioritize policing, road expansions, or community safety measures, while others question whether those areas receive disproportionate focus at the expense of climate initiatives or public transit improvements.
Differing priorities exist across the city, and balancing these needs is part of the city’s complex budgeting process. Read more about this in the City’s Budget Adjustments.
5. Revenue Diversification and Strategies
Edmonton is working hard to diversify its revenue sources. While property taxes are the largest source, the city also collects:
User fees/fines for services like transit, recreation facilities, and parking
franchise fees from utilities like ATCO Gas and EPCOR.
These revenues help reduce the reliance on property taxes, but they aren’t enough to fully offset growing expenses.
In addition, the city continually looks for efficiencies in operations, with a policy of identifying 2% efficiencies across every branch every year. This approach helps the city provide services more efficiently, but it’s getting harder to find more cuts without impacting essential services.
6. How Does This Affect You, and What Can We Do About It?
Left unaddressed, the fiscal gap will lead to higher taxes, reduced services, or both. Infrastructure will deteriorate without enough funding to maintain or expand it. And remember, Edmonton can’t run a deficit, so we must find ways to bridge this gap every year.
But there are solutions on the table:
We need to diversify our revenue sources, as relying on property taxes is not sustainable. We need to explore new ways to bring in non-tax revenues, such as expanding user fees where appropriate, growing our non-residential tax base, and finding ways to ensure that large, untaxed institutional properties contribute to the services they benefit from.
We need more predictable funding from higher orders of government. Long-term, stable infrastructure funding from the provincial and federal levels is crucial for future planning.
I’ve developed a Municipal Fiscal Independence Strategy — what I’m calling The Money Plan. It focuses on growing revenue sources that are under direct municipal control, reducing our dependence on provincial and federal grants. This includes expanding municipal land sales, taking equity stakes in businesses that benefit from city grants, and leveraging assets like the EdTel Endowment Fund.
By increasing our financial independence, we can make long-term investments in infrastructure, services, and economic development without being as vulnerable to the political shifts of other governments.
It will take a few different motions to fully develop The Money Plan – but it will set the stage to a future where Edmonton can fund its growth and priorities more sustainably.
But it won’t be easy. This work will involve tough choices and conversations about service expectations, costs, and priorities. We also need to streamline city services and focus on areas within our jurisdictions, such as exiting social services that are provincial responsibilities. While these decisions will have impacts, the city cannot afford to continue operating in areas that strain our budget.
If we address the fiscal gap with diverse revenues, strong government partnerships, and The Money Plan, Edmonton can continue to grow sustainably, without sacrificing the services.
